September 28, 2023 • 39 mins
Blaze Pizza’s new, smaller format stores are half the size of existing units and cost 25-35% less to build, CEO Beto Guajardo tells Bloomberg Intelligence. In this episode of the Choppin’ It Up podcast, Guajardo sits down with BI’s senior restaurant and foodservice analyst Michael Halen to discuss the chain’s US and international development plans and alternative store formats including drive-thrus. He also comments on issues like finding quality real estate, tighter financing for franchisees and his approach to finding great employees.
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Speaker 1 (00:20):
Welcome to Chopping It Up. I'm your host, Mike Hallen.
I'm the senior Restaurant and food Service analyst at Bloomberg Intelligence.
Today we're joined by Bette Guahardo, CEO of Blaze Pizza.
Thanks for doing this, Beto.
Speaker 2 (00:32):
Hey, Mike, thanks for having me. I really appreciate it.
Speaker 1 (00:34):
So can you start out by telling us a bit
about your career background and then what attracted you to
Blaze Pizza.
Speaker 2 (00:41):
Yeah, thanks for the question. You know, coming out of
graduate school at Northwestern, I ended up spending about ten
years in professional services with Deloitte and McKenzie, and that
actually then kind of led me into this track of
being a corporate strategist. I led corporate strategy for some
of the world's most iconic brands, Levi Strauss, Avon Cosmetics,
(01:07):
and Starbucks Coffee Company. While I was at Starbucks, one
of my mentors, actually the CFO, said to me one day,
you really need to go run a company, and that
actually led me to an opportunity with Focused Brands to
be the president of Schlatsky's and eventually the president of
the International division. And while I was with the International Division,
(01:28):
you know, I thought that well, maybe I won't be
a CEO. Maybe I'm meant to be a president of
a division. And of course, as soon as you think that,
the phone rings. And I've always loved Blaze Pizza. I
love the experience that you get inside a Blaze Pizza's store.
I love the fact that you can make it your own.
It was always one of my favorite pizzas. And so
(01:51):
when I met the team, you know, it was a
relationship made in the stomach. Very cool.
Speaker 1 (02:00):
Can you give the audience a little bit of history
about Blaze, you know, talk a little bit about the
service model and the menu.
Speaker 2 (02:08):
Yeah. So, Blaze was actually founded in twenty eleven by
Rick and Lice Wetzel here in Pasadena, and their idea
was basically, for lack of a better word, create the
subway of pizzas, right, and that for one price, you
can make your own pizza and have as many toppings
(02:29):
as you would like. As you know traditional pizza experiences,
you pick the size of your pizza and then every
topic that you want is going to cost you another
two to five dollars. Right, Well, Blaze introduced this idea
that for a build your own pizza, you could pick
the proteins you wanted, You could pick the vegetables that
(02:51):
you wanted. You get to pick a crust, you get
to pick a sauce, you get to pick your cheeses,
and you're truly making your own pizza as a matter
of fact, when it works really well. And I hope
to make this happen someday. I want Mike to be
able to come into a Blaze Pizza and say, hey,
I want the Mike Special, and that's a pizza that
(03:11):
you created. We like to say anybody who has an
enjoyment for great flavor can be a pizza artist and
at Blaze that specialty experience of making it your own
and doing so Mike doing so in an experience that's
(03:32):
under one hundred and eighty seconds. So when it's done right,
it almost feels magical that you've just created a pizza,
it's been fired up in that oven and it's being
handed to you by the time you got your own drink.
And that's Blaze.
Speaker 1 (03:49):
Yeah, that's that's very cool. How many restaurants does Blaze
own operator franchise right now? And where you strong geographically?
Speaker 2 (03:58):
Yeah, we have about three hundred and thirty stores. Mike
and our biggest markets are actually in Florida and California,
but you know, don't tell that to Texas, if you
know what I mean. And then we've got stores essentially,
I believe in thirty five different states, and we also
(04:20):
have several international markets as well.
Speaker 1 (04:23):
So what's the what's the mix of company owned versus
franchise and where do you think the sweet spot is
for Blaze?
Speaker 2 (04:29):
Yeah, great question, you know, it's it's an interesting financial
analysis to do based on store profitability and cost to
build a new restaurant and what your investors are seeking
with regards to annual growth. You see in a lot
(04:50):
of concepts. You know, McDonald's is a great one, right
where they basically held on to about thirty percent of
their company owned stores and eventually went down to twenty
and eventually down to ten and now it's like almost
all franchise. Right then you look at someone like Chipolte
and it's all company owned stores because the stores are
so profitable. What I learned in this industry mic is
(05:12):
that if you can deliver four wall profitability of above
sixteen to eighteen percent based on your cost of capital,
you're probably better off actually owning that store. Versus being
in a franchise model. But if the four wall profitability
is going to be less than that, then you let
someone else invest their capital who doesn't need as high
(05:34):
of a return. Currently, we've got about ten company owned stores,
and I believe the sweet spot's going to be somewhere
in the neighborhood you know of around fifteen to twenty percent.
Speaker 1 (05:46):
Okay, okay, So how are you going to hit the
fifteen to twenty percent. Are you looking to buy out
some franchisees, are you gonna build your build them yourself?
What's the plan right now?
Speaker 2 (05:54):
Yeah, it's a combination of things. I can't get into
the specific details, but suffice to say we have been
approached by a number of developers with opportunities to actually
build our own stores that would be company owned, and
that includes some non traditional locations as well, by the way,
which is a lot of fun. And though we do
show up in several airports, it's definitely a place that
(06:17):
we want to be more as well as you know,
what I like to think of as locations where we
might not necessarily have access to the real estate. Right
So if we can, you know, partner with the developers
and get access into that real estate, then we can
operate them ourselves. It's one example. Two, the system is about,
(06:37):
you know, twelve years old, right, and industry best practices
is that you are improving your location every three to
five years with a modest remodel and then probably a
massive remodel, you know, in the seven to ten year
(06:57):
time period. Some of our franchisees find themselves now at
that threshold of do I want to invest additional capital
and remodel the store. It's interesting because those franchisees that
really see themselves as operators with an investment want to
be operators with an investment, and those franchisees who are
(07:19):
investors who have other operators oftentimes are like, well, now
I want to try something else, And so they're approaching
us with an opportunity to say, hey, would you guys
like to take over? And it's happening in two different ways.
So we are actually in the process of acquiring some
of our franchise stores, but we are also in the
(07:40):
process of helping some of our franchisees sell to new investors.
Speaker 1 (07:45):
Cool and so can you talk a little bit about
where where the locations are, you know, and a little
bit about the box and if there's been any you know,
discussions about maybe changing the box or the way you
get customers their food based on you know, the proliferation
of off premise and the popularity of drive throughs over
(08:06):
the last couple of years. But you know, i'd imagine
that you assemble and bake these pizzas, you know, fast
enough that it gives you some options.
Speaker 2 (08:16):
Great question. Since the pandemic, the guest experience in a
restaurant has dramatically changed, especially in QSR and fast casual,
more and more orders and this is nothing new. Everyone
knows this right coming in online, I want to place
my order ahead of time, I want to come into
(08:38):
the store and pick it up, or I want to
deliver it to me. At one point in time, let's
go back to twenty eighteen, we were closer to ninety
percent of all of our orders were placed in the
store for an in store dining experience. Fast forward through
the pandemic. Now we're down to about sixty five or
(08:59):
seventy percent, right with thirty to thirty five percent of
our orders being placed through the app or web to
be picked up or to be delivered. And so the
size of our box doesn't need to be as big
if it's not going to be utilized as much, not
to mention with the cost of development, particularly interest rates,
(09:25):
seeking smaller locations and a new store format where we
can actually lean in faster, more cost effectively into the
off premise experience. We just recently opened up a store
in Florida that's down to seventeen hundred square feet and
it is doing great, actually beating our expectations for its
(09:49):
first three weeks of sales, and so we're going to
be trying that more and more and more. I love
your question on drive through, by the way, and I
actually do believe that with the speed of our equipment
and our service levels and our capabilities, that there is
an opportunity for us to lean in to being your
drive through piece experience.
Speaker 1 (10:12):
Yeah, that'd be cool. Seventeen hundred square feet. How does
that compare to how big this the units were historically
and how much cheaper is it to build these smaller units.
Speaker 2 (10:24):
It's about half the size, and half the size equates
to anywhere from twenty five to thirty five percent less
expense to build it.
Speaker 1 (10:33):
That's great. And are you like in typically located in
shopping malls or you and things that the strip malls
and things of that nature.
Speaker 2 (10:44):
So the vast majority of the Blaze locations are either
in standalone buildings themselves or in line in strip malls,
but we also have locations within traditional malls as well.
You know, I do believe that we can win in
(11:07):
any one of these type of real estate plays. Uh.
The most important thing is that we are focusing our investments,
you know, on a maybe be real estate, and we
don't get greedy with c and oftentimes, you know, the
(11:29):
development partners that we are in business with, they have
ideas of where the traffic patterns are going to be
in a year or two years from now. And so
based on the you know, software that we have and
the tools that we use and the insights that we
have with some of our development partners, I think you're
going to see us continue both in line and standalone
(11:50):
locations going forward.
Speaker 1 (11:53):
Okay, cool, By.
Speaker 2 (11:55):
The way, if it's if it's in line, I want
to be on the end so I can open that
drive through window.
Speaker 1 (12:00):
Yeah, I like it. Is there any any other unit
economic data that you'd like to share?
Speaker 2 (12:07):
You know, I think the important thing for someone who
would want to consider having a Blaze Pizza if we
can get the development cost you know, to seven hundred
and fifty thousand dollars or less, and we can run
you know, an average unit volume up to a million
and a half on that investment, even in the first year,
(12:30):
where you're still learning to be really efficient. Right, if
you're capturing you know, fifteen percent, let's say, in profitability,
you're doing a really really good job, right, and now
you're looking at what twenty four month eighteen month payback
you know on your investment. But even on a lower
(12:50):
AUV call it a million two and you know, a
twelve percent four wall profitability, you're still looking at, you know,
twenty four to thirty six months if you're running and
operating correctly. That being said, my team and what we're
seeking is to continue to develop operating models and find
(13:15):
locations where we can actually drive above that sixteen percent.
Now I told you what my percentage of company and
stores I want to have. But the more we can
find opportunities to drive fifteen to twenty percent four wall
profitability with that level of investment, that's just going to
drive continued individual seeking to invest with Blaze. And by
(13:40):
the way, I should share with you. Part of our
plan is international expansion. And as I mentioned, I ran
eight brands internationally before I came to Blaze Pizza. And
so we are in the process, Mike, of talk to
(14:00):
potential investors in the Middle East, in North and South Asia,
and even in Western Europe. And I'm hoping that we'll
have some good news next year around some opportunities that
we're seeking as we discuss investments with these individuals.
Speaker 1 (14:19):
Very cool. So you're looking at that kind of like
a master franchise model overseas.
Speaker 2 (14:23):
That's exactly right, That's exactly right. Sell the entire territory,
give them an opportunity, you know, with their knowledge and
their capability to find the real estate. And you know,
as I know, you know when you're talking Middle East,
when you're talking you know in Asia, it's in the mall.
(14:45):
I mean, it's in the mall. And oftentimes your investors
are actually the mall owners themselves who are going to
build with you. So yeah, a lot of excitement on
the Blaze Pizza team right now for what is happening internationally.
Very cool.
Speaker 1 (15:02):
And how are how are you identifying the countries that
you're kind of targeting and the partners that you're targeting.
Speaker 2 (15:09):
Yeah, great question. We actually conducted a rather sophisticated analysis
on market opportunity uh and penetration capability. So it really
starts with, you know, looking at what is the population's
acceptance of Western brands, and then it is you know,
(15:31):
what is their disposable income right for a consumer level.
And then it's looking at the pizza market you know itself,
and then it's assessing also risk associated with operating in
that market, you know, political, economic, financial, et cetera. And
(15:52):
then based on all that, we identify the markets that
would have put it simply ease of getting into with
the most opportunity, right, ease of getting into with the
most opportunity, And that actually came to roughly fifteen international
markets for us that we're seeking as our first Now
(16:15):
that being said, if an opportunity presents itself with the
really powerful developer, we're not going to walk away. We're
not going to walk away. It's just that we're going
to focus our sales efforts into those top fifteen markets.
Speaker 1 (16:32):
Yeah, I can tell you've worked in international before.
Speaker 2 (16:35):
Yeah.
Speaker 1 (16:37):
Now, it's a great answer, and you'd be surprised how many,
you know, public companies. I asked that question and I
don't get nearly as detailed an answer.
Speaker 2 (16:44):
No, thank you, So that that's very very cool to hear.
Speaker 1 (16:48):
So how fast are you looking overall to build the
store base from here and out? You know, excluding international?
You know, where are you looking to build new stores
in the United States? Are you going to continue to
build out Florida and California? Are there other markets that
you're you're really targeting right now?
Speaker 2 (17:05):
So, you know, one of the challenges that a lot
of brands have when they're in their early days of
growth is that they do accept smaller developers and consequently
you end up with a store to stores and it's
not enough to actually gain the leverage, and so you
(17:27):
have no economies of scale with your marketing dollars spend,
and you're spending a lot more for distribution. You know
how it goes. And so you know, the philosophy that
we've adopted as a team is when where you're winning,
When where you're winning, right and we're winning in Florida,
and we're winning in California, and we're winning in Texas,
(17:49):
and we also have significant opportunities in the northeast and
the Midwest, but it's not going to be you know,
winning in you know, small towns and trying to be
the only player in town. Blaze Pizza is a concept
and a model that actually works best in higher density
urban areas when people are looking for something different for
(18:15):
either lunch or dinner that's convenient to get to, that's
going to be fast in service and a good experience. Right.
That's not to say that you can't come to Blaze Pizza,
you know, with your family and sit down and have
a nice casual you know, dinner, even have a couple
of drinks. But the truth of the matter is we
know who our customer is, right, and we do almost
(18:36):
as much lunch business as we do dinner business. And
so it's people looking for a great, healthy pizza. I mean,
we have you know, fresh ingredients in everything that we do,
and people appreciate the fact that they have gluten free crust.
You have a coliflower crust, we have a vegan crust,
we have vegan cheese, I mean, and so on and
(18:59):
so forth. So, yes, we're gonna win where we're winning.
As mentioned, we will evaluate and maybe even decline areas
that we know are going to be too challenging for
the investors to make more money. Mike, I know what
my job is. It's super simple. It's to help my
franchisees make more money, right, And if I do that,
(19:24):
they're gonna want to grow with us. And if we
do that together, more people are gonna hear about it
and want to be a part of the Blaze Pizza family.
Speaker 1 (19:34):
My mentor always taught men money flows to where it's
treated best.
Speaker 2 (19:38):
So absolutely it's a good phrase.
Speaker 1 (19:41):
Yeah, yeah, great. Are you or your franchisees have any
any issues finding quality real estate right now?
Speaker 2 (19:49):
Who is not having issues finding quality really now? Right?
One of the big challenges, as everyone knows, because of
current interest rates and bank's willingness you know, to lend
money under their current conditions, is creating an atmosphere that
we haven't seen, you know, in ten years, right, And
(20:13):
so you know, for the individuals, for lack of a
better word, the rich get richer in environments like this,
you know, as they've got the dollars back to create
these investments. We're actually looking right now at exploring some
non traditional financial support for potential investors who want to
(20:36):
be a part of Blaze. It's still early days, Mike,
and I can't share it with you all the details,
but you can begin to imagine how an individual who
might have been very successful in becoming a Blaze franchisee
when we had real estate interest rates less than three percent,
now finds himself at seven percent going. I don't know
if I can afford this now, there might be a
(20:57):
way for us as a corporation to help.
Speaker 1 (20:58):
Them, right, good stuff. Yeah, And you have companies, competitors,
other fast casual chains that have gotten equity money, you know,
so they're getting the pressure from Wall Street to expand,
and they're paying rents that I'm sure you know most
franchises wouldn't want to match.
Speaker 2 (21:18):
That's right, That's right.
Speaker 1 (21:22):
Have you seen financing tighten up at all?
Speaker 2 (21:24):
We have as a matter of fact, you know, when
I look at the pipeline that I walked into, you know,
back in January of this year. We have a model
that we use that based on where we are in
the stage of negotiations and contracting, we have a percentage
(21:45):
of viability that we believe will close in the deal. Right,
And I've used this for like ten years and it
really helps you, you know, plan for what you believe
your development schedule is going to look like over the
past year, Needless to say, some of those percentages that
(22:06):
we had in the middle negotiation aspect where we're identifying
real estate and investment have declined significantly as we can't
count on them making it through the end of the pipeline,
so you know it's not going to last forever. I
believe the Fed is announcing that they are not raising
(22:28):
interest rates, though they maintain the opportunity to do so
in the future. We're seeing inflation coming down. The UK
just reported that its inflation is down for three consecutive months.
People are talking about a soft landing as opposed to
going into recession, and I'm not the economist, but I
remain optimistic.
Speaker 1 (22:49):
Good. How's your staffing in turnover levels right now compared
to pre pandemic?
Speaker 2 (22:59):
I guess the way I would describe it again back
to what we've seen. Let's first talk about pre pandemic
and pandemic right because that's when everything fell apart and
our turnover rate probably was up, you know, forty fifty
(23:19):
pandemic versus pre pandemic. Okay, now let's take a look
at where we are post pandemic and things have improved significantly,
but there remains an open market. I like to say, Mike,
your guest will never have a better experience than the
(23:41):
employees are having in the store right for sure. And
I believe that we have a lot of opportunity to
continue to improve our employee experience so that it's joyful
for them to want to be a part of the
Blaze team. We're not where I want us to be yet,
(24:03):
but we are working on programs to improve benefits for
our franchise and their employees, our own store owned employees
and helping them, you know, seek the types of workers.
I know this sounds crazy, Mike. I've used all kinds
of tools to identify great hospitality resources, but one of
(24:28):
my mentors once told me, better hire for a smile.
Nothing beats it hire for a smile. And so I've
been sharing and teaching my franchisees about this philosophy of
seeking the hire for a smile. And then, also, Mike,
and this is this is this is where not only
(24:50):
Blazed Pizza, but the entire industry I believe is missing
an opportunity, and that is when you hire employees, don't
think of it it as a job and a paycheck,
but spend the time with the people that you hire,
asking them what is it that you really want out
of this job? And if they say a paycheck, say no,
(25:12):
But why do you want that paycheck to pay the rent,
to have some extra spending money to buy a car,
to save it for college. And then we have the
opportunity to help those employees learn how to build their
savings solutions to make their dreams come true, not just
collect a paycheck.
Speaker 1 (25:33):
Yeah, it's important and and you know it's seen and
it bears itself out in the results. Right companies treat
their employees well, treat their franchise as well, tend to outperform,
So you know, that's really good stuff. And Danny Meyers
talked about a bit about you know what you're talking about, right,
Like the emotional intelligence is what you hire for. The
(25:55):
skills can be taught basically to anyone, right.
Speaker 2 (25:58):
You know, I mean, Danny's my hero, to be honest
with you. And of course, you know, I worked with
Howard Schultz for six years and and and he had
a lot, you know, to teach and to learn about that.
And I like to think that you know, between those
two guys. The books have been written. We just have
(26:21):
to learn how to adapt them. It's great.
Speaker 1 (26:25):
What's your biggest opportunity for top line growth? Is it,
you know, building more stores? I mean, or do you
feel like there's significant room to grow same store sales?
What are you looking at right now?
Speaker 2 (26:36):
So? I think there's a couple of things. Look without
a doubt. I mean, we're in the franchise business first
and foremost, and and and I told you about my
company owned store plan. I mean, yes, adding more units
is definitely gonna, you know, be an accelerator, especially at
our size with three hundred and thirty stores, right if
(26:59):
we can get back to forty fifty sixty new units
per year, I mean, that's tremendous opportunity for us. But
let's talk about in store top line growth. You know
a lot of folks, you know, are looking at the
fourth quarter here and believing that based on the current situation.
(27:21):
And by the way, do not dismiss what's going to
happen with the student loan repayment programs that are coming up.
It is going to significantly diminish the amount of available
spending dollars for that generation. And they may choose to
(27:42):
eat out less. Right, there's a striking balance between between
the equations of opportunity and value, and Blaze has not
traditionally been a brand that has done a lot of
discounting because of the value of what we're offering, but
(28:06):
the opportunity to increase the number of visits for our
customers and our fans if we can show them opportunities
to come to Blaze when they haven't traditionally. So that
probably means Mike looking at things like, you know, something
that we're offering special on Tuesday. We recently ran a
(28:28):
kids eat free on Tuesday, and suddenly Tuesday Night became
a family event right in all of our stores. We
only ran that in August, but we're learning and we're
going to continue to seek opportunities to create new value
for customers to come to us in non traditional moments.
(28:50):
In addition to that, we've got some menu expansion opportunities, right,
new reasons to add attachment onto the pizza that you're buying,
and new reasons to come to Blaze Pizza because we
have non carb oriented product offerings. I can't tell you anymore,
(29:13):
but it's going to be exciting.
Speaker 1 (29:16):
Sounds great. Yeah, we just wrote a pretty big piece
about industry sales and the economic indicators that we follow,
and you know, we were talking about student loans and
it's you know, I think there's thirty million people paying
on average four hundred dollars a month. I mean, you
do that math. That's a lot of money getting sucked
out of discretionary spending. So yeah, that's something we're watching
(29:39):
pretty closely. And you know, I think what you're doing
makes a lot of sense. Leveraging the box and the
labor that you already have in the store at slower
days or times of the day has been successful for
so many of the restaurant chains that we've covered over
the years.
Speaker 2 (29:57):
Yeah, those are all good points. And feel free to
send me any analysis that you have, by the way,
on what we just talked about with the loan situation.
Speaker 1 (30:05):
Yeah, I'll be sure to do it. And what about
margin expansion opportunities.
Speaker 2 (30:12):
You know, we have actually been quite fortunate this year.
We have an outstanding procurement organization and we have actually
saved for the entire system more than seven figures in
costs of goods sold. You know, and obviously there are
(30:34):
things that are cyclic o. Bacon right now is getting
really expensive. What was a year ago chicken wings were
really expensive and don't even I'm so glad we weren't
in the egg business, you know, eighteen months ago. I
mean that was just nuts.
Speaker 1 (30:49):
And they're starting to poke their head up again.
Speaker 2 (30:51):
I know, I know. Pork prices you know, are are up.
Cheese is actually come down, right, very strong tomato harvest,
but prices on tomatoes for the last several years have
been increasing. And so look rent, labor, cost of good sold, right, Okay,
(31:21):
rents getting more expensive, cost of good sold. It's going
to be cyclical, and I actually believe that we can expect,
you know, patterns of the last ten years to repeat themselves.
But labor is not getting cheaper, right, Labor is not
getting cheaper. And the way you expand margins is by
(31:44):
creating greater operational efficiencies eliminating non value added labor in
your stores. What are you doing that the customer doesn't
want to pay for? Right? What kinds of you know, Oh,
we hand wash our dishes. Customer doesn't want to pay
for you to hand wash your dishes. Just use a dishwasher, right,
(32:08):
But that also includes you know, the experience itself. And
so right now, you know, every Blaze Pizza you go to,
if you're not placing your order online, you're talking to
a greeder, you're talking to several employees down the line.
Are there new ways to do that? Right? Of course,
kiosks are here and here to stay, and we are
experimenting with that. But even in the pizza production right
(32:32):
and tying loyalty back to you know, remember when I
mentioned to you, Hey, welcome back to Blaze Pizza. Mic,
would you like the Mic Special? Yes? I would. Well,
guess what if Mike wants the Mic Special, I've got
the recipe. I don't have to hand him off to
four or five people down the line asking him what
protein he wants, what vegetable he wants, what Saucy wants, Right,
(32:55):
I take the order all at once, and that's going
to create efficiency for sure.
Speaker 1 (33:01):
Are there any other tech upgrades that you're testing and
implementing right now?
Speaker 2 (33:05):
Oh? Yeah, you know, I obviously have a lot of
experience with loyalty, having been the head of strategy for
Starbucks and their app and their world class and they're
one of the best.
Speaker 1 (33:20):
Yeah, nobody does it better.
Speaker 2 (33:22):
Nobody does it better loyalty apps are often when you
have a high frequency of customer visit. Right. Where loyalty
struggles is if your average customer only comes to you
two or three times a year, and when the value
of that loyalty and by the way, you know, seven
(33:42):
to twelve percent is pretty much industry average of what
the discount value is from a loyalty program. So just
to make the math easy, let's call it ten percent. Okay,
So that means one out of every ten visits I
earn enough to get something free. Well, if that's something
free is only worth ten dollars, Do I want to
hold on to an app for three and a half
(34:04):
to four years so that I get a ten dollars value?
Doesn't make any sense, right, And so companies that don't
have high value in their rewards and have low frequency
a visit are not the ones who are winning in
loyalty programs. They're the ones who are struggling with it.
And so we have to seek opportunities to make it
(34:26):
a more frictionless loyalty program, right, and that may mean
a loyalty program that does not require you to have
the app downloaded on your phone. I know who you
are through other means, and every time you come to Blaze,
I'm not waiting for you to tell me you're a
loyalty member. I get to tell you that you are.
And here's the reward for being that right and surprising
(34:49):
to let you each time. So, yes, we are seeking
that out. We're also seeking new operating equipment. Right. Yes,
we are at one hundred and eighty seconds to make
a pizza. Want to be faster. I want to be
faster than that, right, I want to be able to
produce more. I want to be able to produce more
product with greater consistency. Looking at new oven technology. We
(35:17):
are also looking at new technology in the stores to
help track customer experience. Are they loving it? Are they
liking it? Are they going to leave it? Or do
they hate it? Right? What does that look like? On
our web? We are looking at new web capabilities that
(35:42):
will allow us to engage more personally with guests who
come and visit us. New technologies in sharing with you
information about the status of your order when you place
it for either pickup or delivery. And it's not that
we are creating anything new. We know what the great
experiences look like. Right, Just look at Dominoes as an example,
(36:05):
it's actually fun to know where your order is and
they actually tell you the name of the person who's
putting it in the oven. So yeah, we've got a lot.
We've got a lot. In twenty twenty four is going
to be a big year for Blaze Pizza in the
IT department.
Speaker 1 (36:21):
Let's just say that all exciting stuff. Yes, sir, So,
I got one last question for you. What are your
biggest concerns right now?
Speaker 2 (36:29):
My biggest concerns, you know, it's not my controllables, Mike.
It's not the things that I know I can do.
It's the things that concern me that I can't control,
and that includes you know, we talked about soft landing
(36:51):
in a recession, I hope, so we talk about continued inflation.
Most recent data is showing that in inflation is slowing
faster in grocery stores than it is in the restaurant industry. Right.
We've seen this in the past, where consumers choose to
do more at home versus do more in the restaurant,
(37:14):
continued guest experience in store versus out of store. I
still think Blaze Pizza its best winning formula is when
you come into the store and you create Mike's specialty, right,
and you get to watch that pizza being made and
fired up in one hundred and eighty seconds and added
to you, and it's joyful. If we end up, you know,
(37:37):
with another two thousand and twenty situation and customers and
guests decide that they don't want to have that in
store experience, we have to be able to adopt even faster.
So it's the non controllables, Mike that concern me the most.
Speaker 1 (37:57):
For sure. All right, thanks again, Bettal. That was fun.
Where can the audience go to find a nearby Blaze Pizza?
Find some information, financial information maybe for franchisees, and what
social media platforms is Blaze big on?
Speaker 2 (38:11):
Absolutely okay? So www dot Blazepizza dot com. You can
go in there and actually find our store locator so
that you can find a store nearest to you. You
can also place your order directly on the web, or
feel free to go to the Apple or Google app
store and download our app and then you'd have it
on your phone. In addition, onto the Blaze Pizza website,
(38:32):
there are links to actually go into franchising opportunities, and
so I encourage Anyone who has any interest, please do
so reach out to us. We'd love to have you
as part of the family.
Speaker 1 (38:43):
Very cool and big thanks to the audience for tuning in.
If you liked the episode, please subscribe and leave a review.
Check back in a couple weeks for a discussion with
Justin Rosenberg, the founder and CEO of Honey Grow
Welcome to Chopping It Up. I'm your host, Mike Hallen.
I'm the senior Restaurant and food Service analyst at Bloomberg Intelligence.
Today we're joined by Bette Guahardo, CEO of Blaze Pizza.
Thanks for doing this, Beto.
Speaker 2 (00:32):
Hey, Mike, thanks for having me. I really appreciate it.
Speaker 1 (00:34):
So can you start out by telling us a bit
about your career background and then what attracted you to
Blaze Pizza.
Speaker 2 (00:41):
Yeah, thanks for the question. You know, coming out of
graduate school at Northwestern, I ended up spending about ten
years in professional services with Deloitte and McKenzie, and that
actually then kind of led me into this track of
being a corporate strategist. I led corporate strategy for some
of the world's most iconic brands, Levi Strauss, Avon Cosmetics,
(01:07):
and Starbucks Coffee Company. While I was at Starbucks, one
of my mentors, actually the CFO, said to me one day,
you really need to go run a company, and that
actually led me to an opportunity with Focused Brands to
be the president of Schlatsky's and eventually the president of
the International division. And while I was with the International Division,
(01:28):
you know, I thought that well, maybe I won't be
a CEO. Maybe I'm meant to be a president of
a division. And of course, as soon as you think that,
the phone rings. And I've always loved Blaze Pizza. I
love the experience that you get inside a Blaze Pizza's store.
I love the fact that you can make it your own.
It was always one of my favorite pizzas. And so
(01:51):
when I met the team, you know, it was a
relationship made in the stomach. Very cool.
Speaker 1 (02:00):
Can you give the audience a little bit of history
about Blaze, you know, talk a little bit about the
service model and the menu.
Speaker 2 (02:08):
Yeah. So, Blaze was actually founded in twenty eleven by
Rick and Lice Wetzel here in Pasadena, and their idea
was basically, for lack of a better word, create the
subway of pizzas, right, and that for one price, you
can make your own pizza and have as many toppings
(02:29):
as you would like. As you know traditional pizza experiences,
you pick the size of your pizza and then every
topic that you want is going to cost you another
two to five dollars. Right, Well, Blaze introduced this idea
that for a build your own pizza, you could pick
the proteins you wanted, You could pick the vegetables that
(02:51):
you wanted. You get to pick a crust, you get
to pick a sauce, you get to pick your cheeses,
and you're truly making your own pizza as a matter
of fact, when it works really well. And I hope
to make this happen someday. I want Mike to be
able to come into a Blaze Pizza and say, hey,
I want the Mike Special, and that's a pizza that
(03:11):
you created. We like to say anybody who has an
enjoyment for great flavor can be a pizza artist and
at Blaze that specialty experience of making it your own
and doing so Mike doing so in an experience that's
(03:32):
under one hundred and eighty seconds. So when it's done right,
it almost feels magical that you've just created a pizza,
it's been fired up in that oven and it's being
handed to you by the time you got your own drink.
And that's Blaze.
Speaker 1 (03:49):
Yeah, that's that's very cool. How many restaurants does Blaze
own operator franchise right now? And where you strong geographically?
Speaker 2 (03:58):
Yeah, we have about three hundred and thirty stores. Mike
and our biggest markets are actually in Florida and California,
but you know, don't tell that to Texas, if you
know what I mean. And then we've got stores essentially,
I believe in thirty five different states, and we also
(04:20):
have several international markets as well.
Speaker 1 (04:23):
So what's the what's the mix of company owned versus
franchise and where do you think the sweet spot is
for Blaze?
Speaker 2 (04:29):
Yeah, great question, you know, it's it's an interesting financial
analysis to do based on store profitability and cost to
build a new restaurant and what your investors are seeking
with regards to annual growth. You see in a lot
(04:50):
of concepts. You know, McDonald's is a great one, right
where they basically held on to about thirty percent of
their company owned stores and eventually went down to twenty
and eventually down to ten and now it's like almost
all franchise. Right then you look at someone like Chipolte
and it's all company owned stores because the stores are
so profitable. What I learned in this industry mic is
(05:12):
that if you can deliver four wall profitability of above
sixteen to eighteen percent based on your cost of capital,
you're probably better off actually owning that store. Versus being
in a franchise model. But if the four wall profitability
is going to be less than that, then you let
someone else invest their capital who doesn't need as high
(05:34):
of a return. Currently, we've got about ten company owned stores,
and I believe the sweet spot's going to be somewhere
in the neighborhood you know of around fifteen to twenty percent.
Speaker 1 (05:46):
Okay, okay, So how are you going to hit the
fifteen to twenty percent. Are you looking to buy out
some franchisees, are you gonna build your build them yourself?
What's the plan right now?
Speaker 2 (05:54):
Yeah, it's a combination of things. I can't get into
the specific details, but suffice to say we have been
approached by a number of developers with opportunities to actually
build our own stores that would be company owned, and
that includes some non traditional locations as well, by the way,
which is a lot of fun. And though we do
show up in several airports, it's definitely a place that
(06:17):
we want to be more as well as you know,
what I like to think of as locations where we
might not necessarily have access to the real estate. Right
So if we can, you know, partner with the developers
and get access into that real estate, then we can
operate them ourselves. It's one example. Two, the system is about,
(06:37):
you know, twelve years old, right, and industry best practices
is that you are improving your location every three to
five years with a modest remodel and then probably a
massive remodel, you know, in the seven to ten year
(06:57):
time period. Some of our franchisees find themselves now at
that threshold of do I want to invest additional capital
and remodel the store. It's interesting because those franchisees that
really see themselves as operators with an investment want to
be operators with an investment, and those franchisees who are
(07:19):
investors who have other operators oftentimes are like, well, now
I want to try something else, And so they're approaching
us with an opportunity to say, hey, would you guys
like to take over? And it's happening in two different ways.
So we are actually in the process of acquiring some
of our franchise stores, but we are also in the
(07:40):
process of helping some of our franchisees sell to new investors.
Speaker 1 (07:45):
Cool and so can you talk a little bit about
where where the locations are, you know, and a little
bit about the box and if there's been any you know,
discussions about maybe changing the box or the way you
get customers their food based on you know, the proliferation
of off premise and the popularity of drive throughs over
(08:06):
the last couple of years. But you know, i'd imagine
that you assemble and bake these pizzas, you know, fast
enough that it gives you some options.
Speaker 2 (08:16):
Great question. Since the pandemic, the guest experience in a
restaurant has dramatically changed, especially in QSR and fast casual,
more and more orders and this is nothing new. Everyone
knows this right coming in online, I want to place
my order ahead of time, I want to come into
(08:38):
the store and pick it up, or I want to
deliver it to me. At one point in time, let's
go back to twenty eighteen, we were closer to ninety
percent of all of our orders were placed in the
store for an in store dining experience. Fast forward through
the pandemic. Now we're down to about sixty five or
(08:59):
seventy percent, right with thirty to thirty five percent of
our orders being placed through the app or web to
be picked up or to be delivered. And so the
size of our box doesn't need to be as big
if it's not going to be utilized as much, not
to mention with the cost of development, particularly interest rates,
(09:25):
seeking smaller locations and a new store format where we
can actually lean in faster, more cost effectively into the
off premise experience. We just recently opened up a store
in Florida that's down to seventeen hundred square feet and
it is doing great, actually beating our expectations for its
(09:49):
first three weeks of sales, and so we're going to
be trying that more and more and more. I love
your question on drive through, by the way, and I
actually do believe that with the speed of our equipment
and our service levels and our capabilities, that there is
an opportunity for us to lean in to being your
drive through piece experience.
Speaker 1 (10:12):
Yeah, that'd be cool. Seventeen hundred square feet. How does
that compare to how big this the units were historically
and how much cheaper is it to build these smaller units.
Speaker 2 (10:24):
It's about half the size, and half the size equates
to anywhere from twenty five to thirty five percent less
expense to build it.
Speaker 1 (10:33):
That's great. And are you like in typically located in
shopping malls or you and things that the strip malls
and things of that nature.
Speaker 2 (10:44):
So the vast majority of the Blaze locations are either
in standalone buildings themselves or in line in strip malls,
but we also have locations within traditional malls as well.
You know, I do believe that we can win in
(11:07):
any one of these type of real estate plays. Uh.
The most important thing is that we are focusing our investments,
you know, on a maybe be real estate, and we
don't get greedy with c and oftentimes, you know, the
(11:29):
development partners that we are in business with, they have
ideas of where the traffic patterns are going to be
in a year or two years from now. And so
based on the you know, software that we have and
the tools that we use and the insights that we
have with some of our development partners, I think you're
going to see us continue both in line and standalone
(11:50):
locations going forward.
Speaker 1 (11:53):
Okay, cool, By.
Speaker 2 (11:55):
The way, if it's if it's in line, I want
to be on the end so I can open that
drive through window.
Speaker 1 (12:00):
Yeah, I like it. Is there any any other unit
economic data that you'd like to share?
Speaker 2 (12:07):
You know, I think the important thing for someone who
would want to consider having a Blaze Pizza if we
can get the development cost you know, to seven hundred
and fifty thousand dollars or less, and we can run
you know, an average unit volume up to a million
and a half on that investment, even in the first year,
(12:30):
where you're still learning to be really efficient. Right, if
you're capturing you know, fifteen percent, let's say, in profitability,
you're doing a really really good job, right, and now
you're looking at what twenty four month eighteen month payback
you know on your investment. But even on a lower
(12:50):
AUV call it a million two and you know, a
twelve percent four wall profitability, you're still looking at, you know,
twenty four to thirty six months if you're running and
operating correctly. That being said, my team and what we're
seeking is to continue to develop operating models and find
(13:15):
locations where we can actually drive above that sixteen percent.
Now I told you what my percentage of company and
stores I want to have. But the more we can
find opportunities to drive fifteen to twenty percent four wall
profitability with that level of investment, that's just going to
drive continued individual seeking to invest with Blaze. And by
(13:40):
the way, I should share with you. Part of our
plan is international expansion. And as I mentioned, I ran
eight brands internationally before I came to Blaze Pizza. And
so we are in the process, Mike, of talk to
(14:00):
potential investors in the Middle East, in North and South Asia,
and even in Western Europe. And I'm hoping that we'll
have some good news next year around some opportunities that
we're seeking as we discuss investments with these individuals.
Speaker 1 (14:19):
Very cool. So you're looking at that kind of like
a master franchise model overseas.
Speaker 2 (14:23):
That's exactly right, That's exactly right. Sell the entire territory,
give them an opportunity, you know, with their knowledge and
their capability to find the real estate. And you know,
as I know, you know when you're talking Middle East,
when you're talking you know in Asia, it's in the mall.
(14:45):
I mean, it's in the mall. And oftentimes your investors
are actually the mall owners themselves who are going to
build with you. So yeah, a lot of excitement on
the Blaze Pizza team right now for what is happening internationally.
Very cool.
Speaker 1 (15:02):
And how are how are you identifying the countries that
you're kind of targeting and the partners that you're targeting.
Speaker 2 (15:09):
Yeah, great question. We actually conducted a rather sophisticated analysis
on market opportunity uh and penetration capability. So it really
starts with, you know, looking at what is the population's
acceptance of Western brands, and then it is you know,
(15:31):
what is their disposable income right for a consumer level.
And then it's looking at the pizza market you know itself,
and then it's assessing also risk associated with operating in
that market, you know, political, economic, financial, et cetera. And
(15:52):
then based on all that, we identify the markets that
would have put it simply ease of getting into with
the most opportunity, right, ease of getting into with the
most opportunity, And that actually came to roughly fifteen international
markets for us that we're seeking as our first Now
(16:15):
that being said, if an opportunity presents itself with the
really powerful developer, we're not going to walk away. We're
not going to walk away. It's just that we're going
to focus our sales efforts into those top fifteen markets.
Speaker 1 (16:32):
Yeah, I can tell you've worked in international before.
Speaker 2 (16:35):
Yeah.
Speaker 1 (16:37):
Now, it's a great answer, and you'd be surprised how many,
you know, public companies. I asked that question and I
don't get nearly as detailed an answer.
Speaker 2 (16:44):
No, thank you, So that that's very very cool to hear.
Speaker 1 (16:48):
So how fast are you looking overall to build the
store base from here and out? You know, excluding international?
You know, where are you looking to build new stores
in the United States? Are you going to continue to
build out Florida and California? Are there other markets that
you're you're really targeting right now?
Speaker 2 (17:05):
So, you know, one of the challenges that a lot
of brands have when they're in their early days of
growth is that they do accept smaller developers and consequently
you end up with a store to stores and it's
not enough to actually gain the leverage, and so you
(17:27):
have no economies of scale with your marketing dollars spend,
and you're spending a lot more for distribution. You know
how it goes. And so you know, the philosophy that
we've adopted as a team is when where you're winning,
When where you're winning, right and we're winning in Florida,
and we're winning in California, and we're winning in Texas,
(17:49):
and we also have significant opportunities in the northeast and
the Midwest, but it's not going to be you know,
winning in you know, small towns and trying to be
the only player in town. Blaze Pizza is a concept
and a model that actually works best in higher density
urban areas when people are looking for something different for
(18:15):
either lunch or dinner that's convenient to get to, that's
going to be fast in service and a good experience. Right.
That's not to say that you can't come to Blaze Pizza,
you know, with your family and sit down and have
a nice casual you know, dinner, even have a couple
of drinks. But the truth of the matter is we
know who our customer is, right, and we do almost
(18:36):
as much lunch business as we do dinner business. And
so it's people looking for a great, healthy pizza. I mean,
we have you know, fresh ingredients in everything that we do,
and people appreciate the fact that they have gluten free crust.
You have a coliflower crust, we have a vegan crust,
we have vegan cheese, I mean, and so on and
(18:59):
so forth. So, yes, we're gonna win where we're winning.
As mentioned, we will evaluate and maybe even decline areas
that we know are going to be too challenging for
the investors to make more money. Mike, I know what
my job is. It's super simple. It's to help my
franchisees make more money, right, And if I do that,
(19:24):
they're gonna want to grow with us. And if we
do that together, more people are gonna hear about it
and want to be a part of the Blaze Pizza family.
Speaker 1 (19:34):
My mentor always taught men money flows to where it's
treated best.
Speaker 2 (19:38):
So absolutely it's a good phrase.
Speaker 1 (19:41):
Yeah, yeah, great. Are you or your franchisees have any
any issues finding quality real estate right now?
Speaker 2 (19:49):
Who is not having issues finding quality really now? Right?
One of the big challenges, as everyone knows, because of
current interest rates and bank's willingness you know, to lend
money under their current conditions, is creating an atmosphere that
we haven't seen, you know, in ten years, right, And
(20:13):
so you know, for the individuals, for lack of a
better word, the rich get richer in environments like this,
you know, as they've got the dollars back to create
these investments. We're actually looking right now at exploring some
non traditional financial support for potential investors who want to
(20:36):
be a part of Blaze. It's still early days, Mike,
and I can't share it with you all the details,
but you can begin to imagine how an individual who
might have been very successful in becoming a Blaze franchisee
when we had real estate interest rates less than three percent,
now finds himself at seven percent going. I don't know
if I can afford this now, there might be a
(20:57):
way for us as a corporation to help.
Speaker 1 (20:58):
Them, right, good stuff. Yeah, And you have companies, competitors,
other fast casual chains that have gotten equity money, you know,
so they're getting the pressure from Wall Street to expand,
and they're paying rents that I'm sure you know most
franchises wouldn't want to match.
Speaker 2 (21:18):
That's right, That's right.
Speaker 1 (21:22):
Have you seen financing tighten up at all?
Speaker 2 (21:24):
We have as a matter of fact, you know, when
I look at the pipeline that I walked into, you know,
back in January of this year. We have a model
that we use that based on where we are in
the stage of negotiations and contracting, we have a percentage
(21:45):
of viability that we believe will close in the deal. Right,
And I've used this for like ten years and it
really helps you, you know, plan for what you believe
your development schedule is going to look like over the
past year, Needless to say, some of those percentages that
(22:06):
we had in the middle negotiation aspect where we're identifying
real estate and investment have declined significantly as we can't
count on them making it through the end of the pipeline,
so you know it's not going to last forever. I
believe the Fed is announcing that they are not raising
(22:28):
interest rates, though they maintain the opportunity to do so
in the future. We're seeing inflation coming down. The UK
just reported that its inflation is down for three consecutive months.
People are talking about a soft landing as opposed to
going into recession, and I'm not the economist, but I
remain optimistic.
Speaker 1 (22:49):
Good. How's your staffing in turnover levels right now compared
to pre pandemic?
Speaker 2 (22:59):
I guess the way I would describe it again back
to what we've seen. Let's first talk about pre pandemic
and pandemic right because that's when everything fell apart and
our turnover rate probably was up, you know, forty fifty
(23:19):
pandemic versus pre pandemic. Okay, now let's take a look
at where we are post pandemic and things have improved significantly,
but there remains an open market. I like to say, Mike,
your guest will never have a better experience than the
(23:41):
employees are having in the store right for sure. And
I believe that we have a lot of opportunity to
continue to improve our employee experience so that it's joyful
for them to want to be a part of the
Blaze team. We're not where I want us to be yet,
(24:03):
but we are working on programs to improve benefits for
our franchise and their employees, our own store owned employees
and helping them, you know, seek the types of workers.
I know this sounds crazy, Mike. I've used all kinds
of tools to identify great hospitality resources, but one of
(24:28):
my mentors once told me, better hire for a smile.
Nothing beats it hire for a smile. And so I've
been sharing and teaching my franchisees about this philosophy of
seeking the hire for a smile. And then, also, Mike,
and this is this is this is where not only
(24:50):
Blazed Pizza, but the entire industry I believe is missing
an opportunity, and that is when you hire employees, don't
think of it it as a job and a paycheck,
but spend the time with the people that you hire,
asking them what is it that you really want out
of this job? And if they say a paycheck, say no,
(25:12):
But why do you want that paycheck to pay the rent,
to have some extra spending money to buy a car,
to save it for college. And then we have the
opportunity to help those employees learn how to build their
savings solutions to make their dreams come true, not just
collect a paycheck.
Speaker 1 (25:33):
Yeah, it's important and and you know it's seen and
it bears itself out in the results. Right companies treat
their employees well, treat their franchise as well, tend to outperform,
So you know, that's really good stuff. And Danny Meyers
talked about a bit about you know what you're talking about, right,
Like the emotional intelligence is what you hire for. The
(25:55):
skills can be taught basically to anyone, right.
Speaker 2 (25:58):
You know, I mean, Danny's my hero, to be honest
with you. And of course, you know, I worked with
Howard Schultz for six years and and and he had
a lot, you know, to teach and to learn about that.
And I like to think that you know, between those
two guys. The books have been written. We just have
(26:21):
to learn how to adapt them. It's great.
Speaker 1 (26:25):
What's your biggest opportunity for top line growth? Is it,
you know, building more stores? I mean, or do you
feel like there's significant room to grow same store sales?
What are you looking at right now?
Speaker 2 (26:36):
So? I think there's a couple of things. Look without
a doubt. I mean, we're in the franchise business first
and foremost, and and and I told you about my
company owned store plan. I mean, yes, adding more units
is definitely gonna, you know, be an accelerator, especially at
our size with three hundred and thirty stores, right if
(26:59):
we can get back to forty fifty sixty new units
per year, I mean, that's tremendous opportunity for us. But
let's talk about in store top line growth. You know
a lot of folks, you know, are looking at the
fourth quarter here and believing that based on the current situation.
(27:21):
And by the way, do not dismiss what's going to
happen with the student loan repayment programs that are coming up.
It is going to significantly diminish the amount of available
spending dollars for that generation. And they may choose to
(27:42):
eat out less. Right, there's a striking balance between between
the equations of opportunity and value, and Blaze has not
traditionally been a brand that has done a lot of
discounting because of the value of what we're offering, but
(28:06):
the opportunity to increase the number of visits for our
customers and our fans if we can show them opportunities
to come to Blaze when they haven't traditionally. So that
probably means Mike looking at things like, you know, something
that we're offering special on Tuesday. We recently ran a
(28:28):
kids eat free on Tuesday, and suddenly Tuesday Night became
a family event right in all of our stores. We
only ran that in August, but we're learning and we're
going to continue to seek opportunities to create new value
for customers to come to us in non traditional moments.
(28:50):
In addition to that, we've got some menu expansion opportunities, right,
new reasons to add attachment onto the pizza that you're buying,
and new reasons to come to Blaze Pizza because we
have non carb oriented product offerings. I can't tell you anymore,
(29:13):
but it's going to be exciting.
Speaker 1 (29:16):
Sounds great. Yeah, we just wrote a pretty big piece
about industry sales and the economic indicators that we follow,
and you know, we were talking about student loans and
it's you know, I think there's thirty million people paying
on average four hundred dollars a month. I mean, you
do that math. That's a lot of money getting sucked
out of discretionary spending. So yeah, that's something we're watching
(29:39):
pretty closely. And you know, I think what you're doing
makes a lot of sense. Leveraging the box and the
labor that you already have in the store at slower
days or times of the day has been successful for
so many of the restaurant chains that we've covered over
the years.
Speaker 2 (29:57):
Yeah, those are all good points. And feel free to
send me any analysis that you have, by the way,
on what we just talked about with the loan situation.
Speaker 1 (30:05):
Yeah, I'll be sure to do it. And what about
margin expansion opportunities.
Speaker 2 (30:12):
You know, we have actually been quite fortunate this year.
We have an outstanding procurement organization and we have actually
saved for the entire system more than seven figures in
costs of goods sold. You know, and obviously there are
(30:34):
things that are cyclic o. Bacon right now is getting
really expensive. What was a year ago chicken wings were
really expensive and don't even I'm so glad we weren't
in the egg business, you know, eighteen months ago. I
mean that was just nuts.
Speaker 1 (30:49):
And they're starting to poke their head up again.
Speaker 2 (30:51):
I know, I know. Pork prices you know, are are up.
Cheese is actually come down, right, very strong tomato harvest,
but prices on tomatoes for the last several years have
been increasing. And so look rent, labor, cost of good sold, right, Okay,
(31:21):
rents getting more expensive, cost of good sold. It's going
to be cyclical, and I actually believe that we can expect,
you know, patterns of the last ten years to repeat themselves.
But labor is not getting cheaper, right, Labor is not
getting cheaper. And the way you expand margins is by
(31:44):
creating greater operational efficiencies eliminating non value added labor in
your stores. What are you doing that the customer doesn't
want to pay for? Right? What kinds of you know, Oh,
we hand wash our dishes. Customer doesn't want to pay
for you to hand wash your dishes. Just use a dishwasher, right,
(32:08):
But that also includes you know, the experience itself. And
so right now, you know, every Blaze Pizza you go to,
if you're not placing your order online, you're talking to
a greeder, you're talking to several employees down the line.
Are there new ways to do that? Right? Of course,
kiosks are here and here to stay, and we are
experimenting with that. But even in the pizza production right
(32:32):
and tying loyalty back to you know, remember when I
mentioned to you, Hey, welcome back to Blaze Pizza. Mic,
would you like the Mic Special? Yes? I would. Well,
guess what if Mike wants the Mic Special, I've got
the recipe. I don't have to hand him off to
four or five people down the line asking him what
protein he wants, what vegetable he wants, what Saucy wants, Right,
(32:55):
I take the order all at once, and that's going
to create efficiency for sure.
Speaker 1 (33:01):
Are there any other tech upgrades that you're testing and
implementing right now?
Speaker 2 (33:05):
Oh? Yeah, you know, I obviously have a lot of
experience with loyalty, having been the head of strategy for
Starbucks and their app and their world class and they're
one of the best.
Speaker 1 (33:20):
Yeah, nobody does it better.
Speaker 2 (33:22):
Nobody does it better loyalty apps are often when you
have a high frequency of customer visit. Right. Where loyalty
struggles is if your average customer only comes to you
two or three times a year, and when the value
of that loyalty and by the way, you know, seven
(33:42):
to twelve percent is pretty much industry average of what
the discount value is from a loyalty program. So just
to make the math easy, let's call it ten percent. Okay,
So that means one out of every ten visits I
earn enough to get something free. Well, if that's something
free is only worth ten dollars, Do I want to
hold on to an app for three and a half
(34:04):
to four years so that I get a ten dollars value?
Doesn't make any sense, right, And so companies that don't
have high value in their rewards and have low frequency
a visit are not the ones who are winning in
loyalty programs. They're the ones who are struggling with it.
And so we have to seek opportunities to make it
(34:26):
a more frictionless loyalty program, right, and that may mean
a loyalty program that does not require you to have
the app downloaded on your phone. I know who you
are through other means, and every time you come to Blaze,
I'm not waiting for you to tell me you're a
loyalty member. I get to tell you that you are.
And here's the reward for being that right and surprising
(34:49):
to let you each time. So, yes, we are seeking
that out. We're also seeking new operating equipment. Right. Yes,
we are at one hundred and eighty seconds to make
a pizza. Want to be faster. I want to be
faster than that, right, I want to be able to
produce more. I want to be able to produce more
product with greater consistency. Looking at new oven technology. We
(35:17):
are also looking at new technology in the stores to
help track customer experience. Are they loving it? Are they
liking it? Are they going to leave it? Or do
they hate it? Right? What does that look like? On
our web? We are looking at new web capabilities that
(35:42):
will allow us to engage more personally with guests who
come and visit us. New technologies in sharing with you
information about the status of your order when you place
it for either pickup or delivery. And it's not that
we are creating anything new. We know what the great
experiences look like. Right, Just look at Dominoes as an example,
(36:05):
it's actually fun to know where your order is and
they actually tell you the name of the person who's
putting it in the oven. So yeah, we've got a lot.
We've got a lot. In twenty twenty four is going
to be a big year for Blaze Pizza in the
IT department.
Speaker 1 (36:21):
Let's just say that all exciting stuff. Yes, sir, So,
I got one last question for you. What are your
biggest concerns right now?
Speaker 2 (36:29):
My biggest concerns, you know, it's not my controllables, Mike.
It's not the things that I know I can do.
It's the things that concern me that I can't control,
and that includes you know, we talked about soft landing
(36:51):
in a recession, I hope, so we talk about continued inflation.
Most recent data is showing that in inflation is slowing
faster in grocery stores than it is in the restaurant industry. Right.
We've seen this in the past, where consumers choose to
do more at home versus do more in the restaurant,
(37:14):
continued guest experience in store versus out of store. I
still think Blaze Pizza its best winning formula is when
you come into the store and you create Mike's specialty, right,
and you get to watch that pizza being made and
fired up in one hundred and eighty seconds and added
to you, and it's joyful. If we end up, you know,
(37:37):
with another two thousand and twenty situation and customers and
guests decide that they don't want to have that in
store experience, we have to be able to adopt even faster.
So it's the non controllables, Mike that concern me the most.
Speaker 1 (37:57):
For sure. All right, thanks again, Bettal. That was fun.
Where can the audience go to find a nearby Blaze Pizza?
Find some information, financial information maybe for franchisees, and what
social media platforms is Blaze big on?
Speaker 2 (38:11):
Absolutely okay? So www dot Blazepizza dot com. You can
go in there and actually find our store locator so
that you can find a store nearest to you. You
can also place your order directly on the web, or
feel free to go to the Apple or Google app
store and download our app and then you'd have it
on your phone. In addition, onto the Blaze Pizza website,
(38:32):
there are links to actually go into franchising opportunities, and
so I encourage Anyone who has any interest, please do
so reach out to us. We'd love to have you
as part of the family.
Speaker 1 (38:43):
Very cool and big thanks to the audience for tuning in.
If you liked the episode, please subscribe and leave a review.
Check back in a couple weeks for a discussion with
Justin Rosenberg, the founder and CEO of Honey Grow
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