Business Spotlight: Rolling out the Dough

On the evening before their 1981 grand opening, Art Hurteau and Marty Prather spent the night on the floor of their new joint business venture, waiting for an oven to be delivered. It eventually arrived, and Domino’s Pizza opened as Springfield’s first franchise food delivery operation.

Domino’s Pizza Inc. (NYSE: DPZ) has become a major franchise force, delivering 1 million pizzas worldwide each day and generating sales of $7.4 billion in 2012. In the United States, 1,100 independent owner-operators run nearly 5,000 stores, generating $3.5 billion in domestic sales for the company, which is 95 percent franchise-owned.

Organized under A&M Pizza Inc., Hurteau and Prather have held on to their brand in a market where old-guard franchises Burger King and Shoney’s have faltered. The partners currently operate five stores in Springfield and one each in Nixa, Ozark, Republic and Bolivar, as well as two seasonal operations at Hammons Field and White Water amusement park in Branson.

Branding the brand
Beyond that first uncomfortable night in the store, the two overcame or ignored many other obstacles while launching their pizza startup. They met and began their careers as delivery drivers, as do 90 percent of all Domino’s franchise owners. However, they discovered being twenty-somethings with vision and drive didn’t go very far, given that era’s recession. With $23,000 in cash and seeking another $46,000 to cover franchise and startup costs, they were turned down by three banks before securing a U.S. Small Business Administration-backed loan through Boatmen’s National Bank.
.
“This is not a business for the faint of heart,” says Hurteau, who like Prather quit college in Ohio to enter the pizza business. “That first store loan was 22 percent interest. At the time, that was prime, plus two, and we wanted to lock it in because we were afraid the rates might go higher.”

As only the third franchise in the state after Columbia and Warrensburg, the Domino’s name was not yet a recognized brand, and food delivery was in its infancy.

“Pizza delivery was not something that happened regularly – it was usually for a special occasion,” Hurteau says. “Today, it’s almost a necessity.”

During the years, the business partners have purchased, started, operated and sold nearly 30 Domino’s franchise units, including 10 in the St. Louis area. An expansion into Carthage and Joplin only lasted two years before supervisory proximity produced subpar store performance.

“Our job is to service the customer to the best of our abilities, and out west we just weren’t doing it,” Prather says. “We ended up selling the stores to a [married] couple who worked for us, who lived there and would be present full time. They have ended up being very successful.”

Trial and error has allowed the owners to fine-tune operations, which sustained profitability during the Great Recession’s darkest hours.

“A lot of restaurants went under in 2008–09,” Hurteau says. “Sales were only off by about 5 percent for us during those years, compared to systemwide sales which were down 11 percent in 2008.”

While declining to disclose revenue, Hurteau says A&M Pizza has increased same-store sales every year but one since 2000 and posted double-digit gains roughly half those years. At 50 percent higher than Domino’s national average, Hurteau says the franchisee’s per-store sales are the highest in the Midwest region and among the top 15 nationwide.

Dynamic duo
Hurteau and Prather follow the bifurcated leadership model that has been the hallmark of such American companies as Sears, Hewlett-Packard and Ben & Jerry’s. Hurteau is the finance guy, while Prather handles operations.

Prather has a P.T. Barnum marketing streak that surfaces as he colorfully recounts the user-generated viral photo campaign that supported Domino’s massive brand, menu and recipe overhaul in 2009. The company asked consumers to post pictures of bad pizza.

“Even if it was 80 percent negative and 20 percent positive, it got people talking,” he says. “It got people to try it out who maybe hadn’t eaten Domino’s in the past few years.”

With a heavily advertising-driven product and nominal latitude concerning TV ads, Domino’s franchisees are left to locally leverage their message via radio, print, direct mail and online promotion. While A&M uses all of those tools, Prather credits relationship marketing, including discount partnerships with local large employers and Springfield Public Schools, where students will benefit from $20,000 in free product and coupons in 2014.

The “Art and Marty approach” is applicable regardless of the business environment, says Brian Ranft, the 2004 Domino’s Supervisor of the Year working for A&M Pizza.

“Art and Marty dropped out of college to start the business, and now they’re one of the most successful franchisees in the company,” he says. “That story is played out time and again at Domino’s stores throughout the chain.”

With an average manager tenure of 15 years – twice as long as Domino’s comparable companywide figure – two national and five regional Manager of the Year awards hang in the unassuming A&M Pizza corporate office above Domino’s at National Avenue and Cherry Street.

Now, as co-owner of Creative Outdoor Lighting, along with another former Domino’s employee, Ranft considers the franchisee’s decidedly hands-on and open-book management the difference-maker, noting even in today’s automated world store managers physically call in each day’s numbers.

“Running a store is hard, but the system is simple,” says Ranft, who worked his way up from driver to store manager before moving on to Domino’s corporate as a regional franchise manager.

Ranft had responsibility of various groups of up to 150 stores, including A&M Pizza’s franchise units, which he says was ironic. The Domino’s irony continues given he and Creative Lighting co-owner Joe Lomosi first met in 1998 working as Domino’s drivers.

The Ann Arbor, Mich.-based chain is now driving for online orders.

After reaching the $1 billion online sales milestone in 2012, Domino’s orders from digital platforms has climbed to represent 40 percent of U.S. sales, according to Forbes Magazine. Prather says local online growth has followed the trend, doubling during the past three years. He cites the quarterly online special that ran the first week of December, triggering four record weeks of sales to close out 2013.

“From Domino’s standpoint, we’re not a large company, in terms of number of stores,” he says, gesturing to the walls lined with awards and certificates. “For us to continue getting this kind of recognition is unusual, and really says a lot about our people.”[[In-content Ad]]