Adding more links to the chain

Meanwhile, though officials would like to keep mum, the three major domestic pizza players are enjoying salivating margins, higher than what pizza chains earn in other countries. Their studied silence juxtaposed with their ambitious expansion plans speak volumes of the handsome margins they make.

The Rs. 24-crore equity-based Pizza Corner, owning 25 outlets, plans to add another 16 regular ones by this year-end. The company has two formats – dine-in and delivery outlets.

According to Mr. Bakhache, a dine-in restaurant would need an investment of Rs. 80 lakh, while a delivery outlet would cost half of that. "As a company, we will break even on opening our 29th outlet," he adds, while exuding confidence that the chain will close the year with a turnover of Rs. 23 crore.

In order to expand their network fast but at a lower capex, Pizza Corner and Domino's Pizza are opening smaller outlets in places frequented by high net worth families.

Pizza Corner is setting up what it calls ‘Pizza Corner Express’ outlets – an 11 ft x 11 ft outlet manned by two persons to deliver pizzas in less than five minutes. The outlay for each outlet will be in the range of Rs. 7 lakh. Similar outlets are planned along the highways. As per plans, the company plans to open 100 such outlets in three years.

On its part the country's largest pizza chain, Domino's Pizza is planning to add more outlets to its existing 100. The company has tied up with the Indian Oil Corporation (IOC) to set up pizza outlets in the latter's petrol bunks and in the process save on real estate costs.

The pizza chain will open such drive-in-drive-out outlets in around 100 IOC petrol stations in 16 different cities. It intends to invest around Rs. 40 crore to expand its network.

"We have tied up with a real estate consultancy firm, C. B. Richard Ellis, to locate space for opening outlets", remarks Mr. Pavan Bhatia, chief executive officer of Domino's Pizza. The opening of outlets in petrol bunks has made the company to revise its current year turnover target from Rs. 72 crore to Rs.100 crore.

In addition to domestic expansion, Domino's Pizza, according to Mr. Bhatia, will be floating two wholly-owned subsidiaries in Bangladesh and Sri Lanka with an investment of around $ 4 million.

While Domino's Pizza follows the concept of own outlets – except the one in Coimbatore belonging to a franchisee – Pizza Corner, apart from owned ones, has around six franchisees.

However, the first entrant, Tricon Restaurants, which owns the world's largest pizza chain, Pizza Hut (around 12,500 restaurants in 90 countries), is surprisingly slow in its Indian operations despite its head start in the sub-continent. The company also owns two other popular chains, Kentucky Fired Chicken (KFC) and Taco Bell, which dishes out Mexican fare.

It may be recalled that Tricon Restaurants' earlier fast food venture, KFC, got mired in controversies. With the two other pizza chains making good money selling pizzas, Tricon Restaurants decided to focus its attention on Pizza Hut.

However, unlike the other chains, Tricon Restaurants follows the franchisee model to spread its pizza brand in the country. The company has so far opened 18 Pizza Hut outlets in nine cities and has plans to open 30 more by this year-end and 80-100 more in the next three years.

On its part, Tricon Restaurants involves itself actively with its franchisee while getting six per cent of the latter's turnover as brand royalty. "We invest in supply chain, marketing and training of franchisees' personnel," explains Mr. Pankaj Batra, senior marketing manager, Indian sub-continent.

With a presence in all the major cities, Pizza Hut is conspicuous by its absence in Mumbai. But the chain has plans for Mumbai too. Mr. Batra, says, "We will open our first restaurant in Mumbai this year. The city has the potential to have at least 30 outlets. In the next fifteen months, we will have about 10 outlets there." The franchisee for Mumbai city is Wybridge Holdings, Indonesia, and housing finance major, HDFC has a small stake in the franchisee company.

Contrasting strategies

Contrasting the Pizza Hut format with the other two chains, Mr. Rajesh Shah, managing director of Pizzeria Pure Foods Restaurants - the franchisee for Maharashtra (excluding Mumbai), Chennai and Pondicherry - says, "Unlike Domino's Pizza and Pizza Corner, ours is a full-fledged restaurant with our own kitchen."

Though, the marketing strategy of the three chains differs, the credit should go to Pizza Corner for bringing in some interesting concepts that are now being followed by others.

Pizza Corner is the only chain that started operating with a call-centre concept. In Chennai and Bangalore, it got an easy-to-remember telephone number, common for all its outlets. An outlet that is nearest to the customer’s place executes the booked order.

Domino’s tried to introduce the toll-free concept. However, this was not very attractive as that of Pizza Corner’s, since it had a ten-digit number, difficult to remember and connect.

Again, Pizza Corner was the first chain to use the Internet to take orders and have a play zone for kids in its dine-in restaurants. "Our marketing strategy is to reach every Corner of the Indian market by supplying a WOW product and a WOW service, where WOW, for us, is to exceed the expectations of the guest. We want to reach families through kids and we are continuously trying to implement lots of very interesting strategies to attract kids and their parents in our outlets," says Mr. Bakhache.

In order to attract kids and to run down competition, it also started publishing a comic book with the hero character, Zzapi Nercor (anagram for Pizza Corner). He triumphs over evil aliens called Paz Thuzi and Minodos (anagrams for Pizza Hut and Domino's). Pizza Hut, for its part, has added play zone for children in its restaurants.

With all things remaining more or less equal, the clinching factor for pizzas to become like rotis and dosas or at least like ‘Maggie Noodles' is the price. Currently, pizza prices are as high as the ‘Leaning Tower of Pisa’, restricting frequent purchases.

According to Mr. Bhatia, fast food chains succeeded by offering the price-performance proposition. Domino's Pizza decided to offer ‘Cheezwala hunger’, a regular hand-tossed pizza for Rs. 39. Though Pizza Corner offered one pizza free with every purchased pizza for some time, it is still reluctant to slash its prices.

"Pure food cost is around 35-40 per cent of the selling price. Promotion and overhead are also to be taken into account," argues Mr. Bakhache. But two years down the line, prices are likely to go southwards, he adds. Mr. Shah of Pizzeria Pure Foods also had a similar view on the pricing aspect.

Probably what they don't want to admit is the lesser bargaining power they have with their suppliers due to lesser number of outlets compared to that of Domino's Pizza.

The other marketing strategy adopted by Domino's Pizza and Pizza Hut is Indianisation of the Italian dish by introducing regional varieties like Chicken Chettinad, Channa Batura, Chicken Tikka, spicy Korma, etc.

However, Mr. Bakhache rubbishes such tactics, saying, "Would you eat dosas with a strawberry jam? A dosa should be eaten with sambar and chutney or with the specially-made chilly powder."

Inquiries at one of the Dominos India's Chennai outlet reveals that the demand pattern for regional flavoured pizzas is unpredictable and the outlet is not able to indent its requirements properly.

Adding further, Mr. Bakhache says, "Tinkering with original tastes will affect the whole industry. In the long run, we will survive. Our guests would continue to eat the real pizza while my competitors would be eating dust."

Such brave words apart, what is clear now is that the pizza chains have developed an insatiable appetite for growth. And they are pumping in money. With prices coming down coupled with market growth, it is just a matter of time for pizza chain owners to taste their success recipe.