Growth Strategies: Upper Crust
Joey Crugnale, founder of Bertucci's Inc., started assembling his 14-store restaurant chain while still in his twenties. After five years of grabbing lucrative turf from national outfits, he still has the insouciant air of a person more into Play-Doh than real dough. Bertucci's 3,157% five-year growth rate has been guided by an innate intelligence that any food server would do well to attend -- particularly because Crugnale sold his first chain, begun as Joey's Ice Cream, when he was 23, for $4.5 million.
Crugnale's recipes for fiscal distinction call for taking a familiar product, boosting it to homemadelike quality, pushing it with a touch of pizzazz, then charging a lot for it. The show this time around is a huge open oven ablaze with a real fire. That inspiration struck when Crugnale was in Italy visiting his grandmother, one of a long line of family bakers. But Grandma's outdoor beehive device didn't require costly roof fans and carbon scrubbers, as Crugnale's do. Even after having erected some 30 ovens (and knocked several back down), Crugnale is still fine-tuning his. Stubborn, perhaps; but without attention to such details, there would be no Bertucci's -- an appellation Crugnale made up to distinguish his customized, all-fresh fare from the standardized semolina of the fast-food set.
Crugnale believes the key to healthy margins (Bertucci's '88 net before taxes was a robust 14%) is not to stray too far from center. He was thus delighted when one national franchiser, known for thick pizza, recently announced it was expanding into fajitas. Crugnale immediately tacked on a thick-crust variant to Bertucci's narrow-gauge selections. And in contradiction of competitors' period-piece interiors, the decor of each Bertucci's Brick Oven Pizzeria is kept strictly nondescript "so it will last forever." He bans TV and snacks from all Bertucci's lounges on the theory that customers won't linger over their beers and will spend more at an $8-a-head table.
To get them to treat his customers well, Crugnale's philosophy is to treat his employees well. "I view them not as paid workers, but as volunteers, since they can leave tomorrow." By the same token, Crugnale figures, a well-treated customer makes for a well-treated employee. Managers are given cost-of-food targets to aim at for bonuses. Crugnale pays off only if they hit the numbers precisely. "If they're low," he calculates, "it probably means customers got cheated out of the right amount of pepperoni."
Until now, Bertucci's has grown "by trial and error -- we just opened stores," Crugnale admits. Because he dismisses franchising as "last-resort financing," each has been company owned and operated. That Bertucci's is 6 behind the 20 stores in five years called for in the original business plan can't be attributed to a cautious nature, however. "I love leverage!" crows Crugnale, who insists that "when you're fast growing, you don't want to tie up cash in property." His controller insists otherwise. Following the acquisition of a small candy manufacturer and retailer in which Crugnale squandered several million dollars, Bertucci's cash is now conservatively directed toward buying up sites, one by one.
To expand much beyond the 25 or so that, Crugnale estimates, would saturate the Greater Boston market will require setting up in locales where population density is rarefied and volume predictably lower. But there are no bargains in the hinterlands, "and the cost of getting things approved is worse." Therefore, he has to find a way to make the units cost less. One inspiration: he's been searching for a regional dairy to purchase to churn out mozzarella for pizza toppings. "Everyone thinks I'm crazy, but if I find it, I'll buy it. When business isn't fun anymore," he threatens, "I'll quit."* * *
Niche: Gourmet pizza restaurants
Strategy: Take a familiar product, boost its quality and price, and ignore the fads
Headquarters: Woburn, Mass.
1988: $1,250,000 to $1,710,000 (est.)
Scope: Regional (New England) -- Robert A. Mamis