The Sizzling Success Of Naked Pizza

Jeff Leach wasn't avoiding talking to Entrepreneur. The co-founder of Naked Pizza simply wasn't spending much of May or June in his New Orleans office. The week I'd hoped to interview him, he was riding a Harley across Arkansas with someone hoping to land the Naked Pizza franchise in Dubai. Two days later, Leach arrived in Denver and caught a plane for Chicago to speak at a pizza industry conference. In the meantime, the company was preparing to announce the construction of more than 300 franchise locations across the country.

Not bad, considering the entire business at the time consisted of a single test kitchen in a 496-square-foot building that suffered heavy water damage in Hurricane Katrina.

The buzz surrounding Naked Pizza may seem disproportionate for a 4-year-old company that just started offering franchises less than a year ago, but it's proof of a plan in action. Leach, 43, and co-founder Randy Crochet, 47, both say that they aren't running a pizza business, they're running a social media operation that happens to sell pizza. It was conceived that way from the start, and everything has grown from that decision.

As of early August, Naked Pizza had more than 8,600 followers on Twitter and more than 1,700 Facebook fans--many of them nowhere near New Orleans. The New York Times recently dubbed Naked Pizza one of 11 companies worth emulating in its use of Twitter--and in fact, Twitter itself uses them as a case study. Crochet claims Naked Pizza is currently the most blogged-about business in the world. Billionaire Mark Cuban invested in the company as much for its audacious message as for its tasty product.

And that message? Simple: fast food doesn't have to be the cause of the global obesity epidemic. It can even be part of the cure.

Leach and Crochet started developing that message from their first meeting in 2006. At the time, they were both in the midst of Hurricane Katrina-induced career changes. Crochet, a New Orleans developer and mortgage banker, had just concluded that the local real estate market was moribund for the foreseeable future. Leach had put off completing his PhD in anthropology in order to move to the city and help rebuild. They discovered they shared three passions: the desire to revive the local economy, the entrepreneurial urge and a deep concern about the typical American diet.

Leach, whose studies focus on how ancient people ate and how the modern diet affects human development, also has a daughter with Type 1 diabetes. He talks, often intensely and with several well-chosen expletives, about the obesity epidemic and the ubiquity and low cost of salty, fatty fast food. Crochet, too, makes earthy comments about the way fast food culture seduces people into making bad nutritional choices. They both say they immediately realized that if they could build a business at the intersection of nutrition and fast food, they could spread the word that healthy eating can be delicious and affordable--and create meaningful jobs at the same time.

The two quickly opted to build a pizza pickup and delivery business because, as Leach likes to assert, everyone loves pizza. More important for the fledgling company, Leach says, the pickup and delivery business is "the most boring restaurant format in the world," honed to 30-minutes-or-less efficiency and proven success by the likes of Domino's and Papa John's. Such a tested formula appealed to them.

Leach and Crochet also decided from the start to make their company entirely franchised, with just one company-owned store serving as a laboratory. Their goal, essentially, was to grow the business as quickly as possible so they could focus on their larger mission.

Nonetheless, pizza has to taste good--so after working out their business plan, the partners began to develop recipes that didn't sacrifice taste for health. Leach drew on both his own background in nutrition and the advice of then delivery driver Brock Fillinger, who combined a passion for pizza with an avid interest in plants as medicine. (Fillinger, 25, rose quickly through the company; today, he's a partner and the director of systems and supply.)

The company's 26 toppings include all the classics--tomato sauce, pepperoni, sausage, black olives, artichoke hearts--plus a few unexpected ingredients like black beans, cheddar cheese and white sauce. Pizzas come in three sizes, with regular or thin crust. Popular combos like the Sonoran (red onion, chicken, fire-roasted red peppers, and mushroom) and the Omnivore (pepperoni, hamburger, ham, bell pepper, mushroom, and black olive) make it clear: this is not "diet food."

So what's different? Start at the bottom with a high-protein multigrain pizza crust that's high in prebiotics, a type of fiber that improves digestion by stimulating the probiotic bacteria living in everyone's guts, and low on the glycemic index, making it acceptable for diabetics. It's topped with skim milk mozzarella and sauce made without transfats, butter, added sugar, or high fructose corn syrup. The meat comes from animals raised without growth hormones or antibiotics. Nothing in the kitchen contains additives, chemicals, or preservatives. It's traditional pizza, only healthier--and, not coincidentally, with about half the calories.

In 2007, the company opened as "World's Healthiest Pizza," offering takeout and delivery from a hurricane-damaged building near the Tulane University campus.

"Everything is wrong with that location," says Robbie Vitrano, who is both a partner in Naked Pizza and the CEO of the marketing and branding agency that represents it. "It's tiny, it took on six feet of water in the hurricane, it leans a couple of degrees to the right, and it's within a stone's throw of the sixth most successful Papa John's franchise in the country."

Nonetheless, "World's Healthiest Pizza" took off, though not without bobbles. Their initial approach, which amounted to "our pizza takes longer to get to you, but it's worth the wait," was a disaster; customers cared more about fast, hot, and fresh more than whole grains and probiotics. Sales shot up when they cut delivery times, persuading the company in 2008 to open a second location, a full-service pizzeria. After just a few months, though, the high overhead led them to shut it down and return to their original goal: small takeout-and-delivery-only stores with lower costs, more choices of locations and an undistracted focus on getting hot, fresh pizza out the door.

2008 also brought a name change. "Naked Pizza" captured the feeling the partners wanted: natural, healthy, fit, and simple, but also fast and convenient. Under the new name, they established a presence on Twitter and Facebook to attract attention from both investors and future customers.

With the groundwork laid, the company was bringing in more than $500,000 a year, as much as the franchise competition's average store. Naked Pizza was ready to grow.

The company started looking for investors in 2009 with an unusual sense of urgency. "Our competition has had 25 years to build their business," Leach explains today. "We don't have 25 years. We have maybe three to five years to prove ourselves, because the health of the country is in freefall." Yet the economy, too, was falling fast and investment money was hard to find.

Then, as luck would have it, Mark Cuban, owner of the Dallas Mavericks football team, announced a competition to win his financial support by submitting a worthy business plan. Naked Pizza was one of thousands of applicants for the "Cuban Stimulus Package," but one of only two winners. Cuban explained by email, "I loved the product and the passion, knowledge, and conviction of the founders."

Leach recalls that Cuban showed up at their tiny kitchen, not in a limousine but in a battered taxi and immediately started giving them advice. "He jumped out, ate a whole pizza and said 'I get it,' and as soon as we had that connection, we had rocket fuel," Leach says. "His brand is worth 100 times more than his money."

Cuban brokered an introduction to The Kraft Group, owners of the New England Patriots and other businesses. "We expected to taste some pizza, hear a story and move on," says Jonathan A. Kraft, president and COO of The Kraft Group. "But my brother, dad and I tasted the pizza and the three of us just looked at each other and with our eyes we said, 'Wow, this is unbelievable.'" After a month of negotiations, The Kraft Group also agreed to buy into the business, signing the papers during a pre-season game just before Patriots quarterback Tom Brady threw a touchdown.

"Owning corporate stores doesn't tell you how your franchising operations and relations will work," Leach says. "We've skipped straight to launching the franchise business, and we can tell potential franchisees, 'We know it will work, because we're in business with billionaires.'"

In September 2009, Naked Pizza moved its executive offices out of its test kitchens and completed the legal paperwork making them a franchise company. Then they hired consultants to help them develop their franchise plan. Crochet uses a descriptive profanity to describe the results.

"You hire franchise consultants because you're scared to make a wrong decision, but their instructions lack nuance and detail," Leach says. "You think they're selling you a fully furnished home, but all they're doing is putting up the walls and the roof. And if you put the couch in the wrong place, you go from feng shui to f--shui."

Naked Pizza turned instead to pizza delivery consultants with experience in issues like minimizing the amount of time needed to go from ingredients to hot meal and maximizing the number of deliveries a driver can take on a single run. After that, the company announced franchises were available--and the inquiries started pouring in, more than 4,000 by May 2010.

By August, the company had awarded franchises in 16 markets totaling more than 300 stores. Unlike many other restaurant franchises, Naked Pizza is not open to mom-and-pop operators; only multi-unit developers need apply, and then only if they have restaurant experience and the funds to develop and manage multiple locations in their territory.

The average franchise so far includes 5 to 10 stores, but some area developers have taken on many more. In Miami, for example, Naked Pizza awarded a 50-store franchise to a developer who was formerly one of the largest Domino's Pizza franchisees in Mexico. Another prospective franchisee is a former president of Papa John's.

The first Naked Pizza stores opened late this summer in Miami Beach and Louisville, with a total of 12 scheduled to open by the end of 2010. In keeping with its plans for rapid growth, the company plans 100 stores across the US (and two in Dubai) by 2012 and 1,000 by 2015. Big goals? Possibly--but Naked Pizza's plans are far bigger: "We're trying to get people to understand what optimal health is and to do that you have to have a conversation with people," Leach says. "Our end goal is to create the AARP of fast food so we can mobilize people to action, to demand truly better choices."

To that end, Naked Pizza keeps adding to its technological toolbox. They've customized their point-of-sale system so they can track orders related to Twitter promotions and individualize special offers. Each store will be equipped with a custom iPad kiosk where customers can place carry-out orders, tweet to the company on the spot and sign up for email newsletters and special offers. A Naked Pizza iPhone app is in the works, too.

Leach has also joined the International Franchise Association, hoping to influence prospective franchisees to choose to open healthier businesses. At the very least, he wants the IFA to form a nutritional task force. At the moment, he says, he's not making much headway--but, he proclaims confidently, "when we have 500 stores and a few million customers, they'll form it."

After all, he says, "On June 14, I told a conference of pizza executives that their food is killing people, and the conference attendees voted it 'best talk'."

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This article was originally published in the September 2010 print edition of Entrepreneur's StartUps with the headline: The Sizzling Success Of Naked Pizza.