Moe’s co-founder turns focus to pizza

Premium content from Atlanta Business Chronicle - by Lisa R. Schoolcraft , Staff Writer Date: Friday, January 28, 2011, 6:00am EST

Custom pizza: Matt Andrew, of Uncle Maddio’s Pizza Joint, took the idea of making food in front of the customer and applied it to pizza.

One of the founders of Atlanta-based Moe’s Southwest Grill is bringing the same custom order idea to pizza. Matt Andrew, owner of Uncle Maddio’s Pizza Joint, admits he built his concept around the Moe’s model of a custom burrito made in front of the customer. Only in his case, it’s a pizza. Andrew has just a single location in the Toco Hills area of Atlanta, but he’s rapidly expanding via franchising and has 30 stores in development.

By the end of 2011, he hopes to open at least 11 more stores, at least five of which will be in metro Atlanta, and have 100 units in development. In 2012, he expects to open another 25 stores.

Andrew is not shy about calling Uncle Maddio’s “the Moe’s of pizza.” “We combined the fun of Moe’s with [the] fresh, made-from-scratch ingredients of Chipotle,” he said. Andrew was president of Moe’s in the last couple of years before Raving Brands Inc. sold Moe’s to FOCUS Brands Inc. in 2007. Andrew then began looking at what he wanted to do next. The idea struck him, he said. “Why hasn’t anyone done pizza like the Moe’s model?” Andrew thought perhaps someone had, but some research, and a lot of pizza eating, found no one had “and there was no good reason why not.” The concept of a custom-made meal is not new. Subway has been doing that in the sandwich category for years, he said. Chipotle Mexican Grill Inc. (NYSE: CMG) is another quick-serve restaurant, or QSR, that has been successful with the made-to-order burrito, and Five Guys Burgers and Fries is doing the same to burgers, Andrew said.
“You can even get custom coffee [at Starbucks Corp. (Nasdaq: SBUX)], but we hadn’t seen that in pizza,” he said. Andrew spent most of 2008 testing pizza product and working on his concept before opening Uncle Maddio’s at 3027 North Druid Hills Road in January 2009.

“Maddio” was the nickname his brother gave him as a kid, he said. His plan was “to open, understand it for a year, and then put a franchise program together.” In May 2010, he began the franchising process and ended 2010 with 10 franchise partners and 30 stores in development, most of which are in metro Atlanta. Other franchise agreements are for Columbia and Greenville, S.C.; Raleigh and Charlotte, N.C.; Jacksonville, Fla.; and Louisville, Ky. Andrew estimates it costs about $300,000 to open one of his restaurants, which includes a $15,000 franchise fee. He did not disclose the revenue for his restaurant. A nice slice of the industry

Pizza continues to be a top QSR category. The pizza industry has about $38 billion in annual sales, according to Pizza Today, a trade magazine of the Louisville, Ky.-based National Association of Pizza Operators. There are roughly 65,000 to 70,000 pizzerias across the United States, with the top three companies, Pizza Hut Inc., Domino’s Pizza Inc. and Papa John’s International Inc. controlling 15,208 of those units, Pizza Today said. Those same three companies generate $18.7 billion worldwide, with an estimated $11 billion in the United States, according to Pizza Today data.

Pizza Hut, which ranks No. 8 as a top QSR brand, is a subsidiary of Yum! Brands Inc. (NYSE: YUM), which does not break out the individual financials of its brands, which also include KFC, A&W and Taco Bell. However, the company reported $2.5 billion in sales and $357 million in profit in the quarter ended Sept. 4, the most recent filing. That compares with $2.4 billion in sales and $334 million in profit in the same quarter in 2009, the company stated.

Domino’s Pizza (NYSE: DPZ) reported revenue of $347.4 million for the quarter ended Sept. 12, the most recent filing. That is up from $302.7 million in revenue during the same quarter in 2009. Net income stood at $16.6 million in the quarter, a 6.7 percent decline compared with $17.8 million in net income during the same time in 2009, the company reported. Papa John’s International (Nasdaq: PZZA) reported revenue of $273.1 million for third-quarter 2010, up 6.5 percent from revenue of $256.3 million for the same quarter in 2009, the company reported Nov. 3. Net income was $7.8 million for the third quarter, compared with $11.7 million in the same quarter in 2009, the company stated. Winning concept?

Uncle Maddio’s isn’t the only Atlanta-based pizza company expanding through franchising. Matthew Loney, president of Marietta-based Stevi B’s Pizza Buffet, has also been growing his company that way. Founded in 1996 and franchising since 1998, Stevi B’s has 41 stores, with the next one opening Feb. 3 in Stockbridge. The company also just opened its first restaurant in Wisconsin, its eighth state, Loney said. Loney expects to open nine restaurants this year, but said his business model and Andrew’s business model are different. “Most people grow [first] through corporate stores and when you hit a certain number of stores, you start franchising,” he said. From a business perspective, a company can grow faster through franchising, Loney said. “We’ll grow nine stores this year and we didn’t have to put up $500,000 times nine.”

The downside to growing through franchising is the company doesn’t make as much profit, collecting a royalty fee from a franchise, he said. Some challenges to franchising a concept with only one store is, “How do you know what the average store does [in sales]?” Loney said. “How do you know about locations?” Moe’s grew rapidly with only one store open, so it can be done, he said. “Great franchising people need something to franchise and once they find the next hot thing, they can franchise it through the roof,” Loney said. “The question is will [Uncle Maddio’s] be that concept?” Andrew is confident it is. But unlike Moe’s, he does not plan to grow Uncle Maddio’s only to sell it a few years down the road. “We’ve already done that once and I didn’t get to make that decision,” he said. “I would like to hand this down to my kids.”