Click to Print

Extreme Expansion

Extreme Pizza, a Bay Area favorite, makes the leap from regional to national chain.
November 12, 2001
URL: http://www.entrepreneur.com/article/46252

Inspired by his love of skiing and snowboarding, Todd Parent named his take-and-bake pizza concept Extreme Pizza in 1994. Two years later, the San Francisco-based company, whose stores feature benches made from recycled skis and snowboards, added hot pizza to their menu.

Last year, Extreme began franchising, a choice that would bring the chain from its Bay Area roots to a national audience.

Franchise Zone spoke with Jimmy Ryan, Extreme's 33-year-old vice president of sales and marketing, about the excitement and anxiety that go along with growth.

Franchise Zone: How did your company grow?

Jimmy Ryan: Our revenues quadrupled in the last couple of years. Sales have gone up 1,000 percent since 1996, when we add the hot, delivered pizza to our business. Take-and-bake is maybe 1 percent of our business now. So the response has been huge. This also allowed us to expand the menu-we can do a deep-dish pizza, hot or cold submarine sandwiches, calzones, salads. After we started offering the baked product, we were voted best pizza in San Francisco, so the exposure helped.

We had just one store in '94, and about the end of '96 we started to bake pizzas. In the first half of '97, we opened a second location on Union Street. From that moment on, we saw this start to take off, so we decided to build a commissary at a third location, which would prep all our food items in one location. Then we would transport the prepped items-our dough, cheese or sauce-to the other satellite locations. In 1999, we opened our third, 2000 we opened our fourth with an additional licensee agreement to make it five, and this year we opened our sixth.

Why did you decide to franchise?

The public demanded it. As we were building our second [location], customers would come up and say, "When are you going to open up here?" and "Why can't this be in our town?" So that got us thinking we needed to develop really good systems and policies, so if we ever do decide to take off, [franchising] would be an avenue to choose. Then it came to the point where we had four locations, and our systems were really good, our policies were great and the training manual was set up so you could almost do this business cookie cutter.

As I drove to San Francisco, down to San Diego, out to Colorado, I kept seeing towns where you could plop an Extreme Pizza in. The vision was there that it could succeed almost anywhere.

Where was your first franchise?

The first franchise is in Fresno, California. Then we signed one in Colorado Springs. It went from a regional company to an interstate franchise. I've gotten interest in Nevada, Arizona, Texas, Florida, so this little company might be a medium- to large-sized company in the near future.

After we opened our second location on Union Street in San Francisco, people vacationing from around the country would ask if we were franchising or if we ever thought about opening in ABC city or XYZ state, [and] we started to consider ways to meet these demands. Should we take the Starbucks approach and raise money to open additional corporate stores, or take the franchising route? Building a franchise system means national growth without worrying about managing locations across the country, [and we] can concentrate on marketing and brand building for both the company stores [and] the franchise system.

What's nice about the early stage of franchising is you attract a lot of people who have that entrepreneurial spirit, who say, "I could do it on my own, but I like your product and your systems. What will you give me for joining your team at an early stage?" Of course, we want those people to succeed as much as we want to succeed.

Do you have any fears about expanding?

The main fear is quality control. And the run-before-you-walk theory definitely applies. We don't want to grow so big or so fast that it either drains the cash flow or it spreads our staff so thin that everyone who joined the company early isn't having fun anymore. When that happens, the entrepreneurial spirit will probably die as well, so we want to make sure as we expand, either through company stores or franchising, that we are properly staffed as a company and can handle almost any situation.

How selective are you on where the franchises go? Do you have a certain profile of what kind of place you want to expand in?

We are very competitive, and our product is toward the upper end of the scale. If we see there's a need, we'll go for it. But we're selective when choosing territories. Since about 60 to 70 percent of our business is delivery, we want to make sure there's a delivery base there as well.

The candidate also has to be financially sound. If this does fail, we want to make sure it won't crush a person monetarily.

Our expansion strategy is to open multiple restaurants in a particular market. When developing a territory, we consider many factors: competition, demographics and population trends, costs of real estate and the size of the market. By opening multiple units, our franchisees can take advantage of advertising, operational and pricing efficiencies.

What are you looking for in your franchisees?

They have to be really enthused. Everyone we've spoken to so far has been so psyched to put this in their town-to us, that's the main thing. Also, an owner/operator [is more appealing than] someone who just wants to do this as an investment, because a lot of hands-on things need to be done on a day-to-day basis.

Some kind of managerial or restaurant experience helps. Money definitely helps; they have to be financially fit to do this. A lot of our candidates call or e-mail and say, "We love your store; we see where you're going with it. I ski and snowboard, and this will fit in our town because those are the demographics here."

What kinds of things does the company do in new areas to let people know Extreme Pizza is coming?

From day one, during the construction phase, we try to get in people's faces right away, with huge signage in front. We also do a lot of giveaways-we've given away snowboards and mountain bikes as promotional items.

We've also done a lot charitable work as we enter a new town. We were part of The Leukemia Society's Light the Night walk, where we donated a few hundred pizzas as their members walked around the cities of Berkeley and San Francisco. So right off the bat, we were part of the community.

We do a lot of handouts, so we hire different street teams who hand out coupons to people, like get your first pizza free. Of course if it's free, someone's going to try you.

Do any changes need to be made to the concept when you go into other cities?

In San Francisco, we have really small locations, from 1,100 to maybe 1,500 square feet. As I was driving around Colorado Springs looking at a location for our newest franchisee, the towns are laid out a bit differently, so we need to realize as we expand outside city limits that while someone may hate to drive in San Francisco, people in other cities enjoy the restaurant experience.

So, while we do 70 percent delivery in San Francisco, it will probably turn into 50 percent delivery, 50 percent in-store as we move [to other territories]. I do think the take-and-bake concept will increase to 10, 15 percent as we grow outside San Francisco, but the main concept will be the same-great pizza, great service, an upbeat atmosphere and just a fun experience.