Pizza Now!'s larger pizzas cost about the same as Domino's, and the $1.59 individual-sized pizzas run about 40¢ cheaper than Pizza Hut's and, for that matter, about the same as a McDonald's Quarter Pounder. Although the local Pizza Hut franchise has been meeting Goldman's prices during special promotions, it still doesn't offer the mini-pizza all day at his price, or in three minutes. Nevertheless, Goldman's mailings don't hammer away on price or time. Instead, he touts quality, characterizing Pizza Now! as The Fresh Choice and extolling the virtues of its "zesty" tomato sauce and "handmade and freshly baked dough." In doing so, he hopes to earn some pricing flexibility, heading upmarket from his pizza peers.
The design of Pizza Now!'s tiny 600-square-foot structure itself constitutes a marketing tool. Goldman's generous description of the copyrighted shape is "asymmetrical," but the modular structure looks more like a breakfast-cereal prize that the assembler got too frustrated to finish. The eyesore is also an eye-catcher: some 49% of the customers Goldman has surveyed say they just happened to be driving by when the structure caught their attention (in contrast, about 36% were lured through direct mail).
The unit currently conducts about 1,400 transactions a week, up from its earliest days, but far from its peak of more than 2,000. Goldman expected the figure would drop 20% after six weeks or so as a novelty. It dropped more, he says, because renovations to the mall surrounding his unit have cut down on parking -- bringing fewer of the harried young families, hurried students, and ravenous businesspeople he hopes to attract.
But as hard as Goldman works at enticing consumers, he seems almost to discourage potential franchisees. Drop him an inquiry, and he shoots back a detailed three-page questionnaire. To gain market penetration swiftly, Goldman intends to target only experienced restaurateurs. Pizza Now!, he stresses, is not for the retired car mechanic.
Given the price tag, even a retired auto executive might have difficulty coughing up the required capital. Pizza Now! may be a cheap undertaking compared with the arched enemy -- a McDonald's unit can chomp through about $1.6 million, Goldman claims, before anybody eats -- but it still requires an investment of around $325,000, not including the land.
Goldman counters sticker shock by claiming that franchisees can look forward to a speedy payback. By investing $325,000, a franchise can generate sales of $520,000 or so. Because the cost of the facility is so much less than a standard fast-food unit, the net margin before depreciation and taxes rises to a robust 15% (see "Financials," page 4). That translates into a four-year payback, probably half the payback period of a major-chain fast-food unit.
Not that Goldman expects franchisees to open just one unit; he wants franchisees to commit to at least five. "Instead of spending $1.6 million to open one giant fast-food restaurant, they can open three Pizza Now! units," says Goldman. "That way, they spread the risk."
But the relatively bare-bones entry fee isn't the only way Goldman minimizes downside risk. The prefabricated modular unit offers two clear advantages. First, it allows the unit to get up and running within 30 days from the time permits are issued, cutting by about one-third any carrying costs. And if the unit should fail, the operator can tow the entire structure to a new location or to a new owner and can probably recoup some 85% of the original investment -- including $75,000 in equipment, a $13,000 point-of-sale system, and the $135,000 modular unit itself.
Obviously, each unit's location is crucial to its performance. Goldman plans to retain approval of every site, checking that such factors as the traffic count meet his strict guidelines. When a big hamburger chain locates at a mall, its lease often precludes the developer from flirting with another burger flipper. But few leases mention drive-through pizza. "That creates a lot of opportunity for us," says Goldman.
While Goldman claims that he is counting on industry word of mouth to attract franchisees, he has already approached and signed up two franchisees on opposite ends of California. Both are former colleagues from Arby's and are busily scouting sites.
It is 11:10 a.m., and the five-member Pizza Now! crew is carrying out its duties like a drill team. During a yearlong tryout in Indianapolis in 1988, Goldman spent $175,000 figuring out how to make pizza quickly. He broke the process down into simple, repetitive tasks. "This is how you do it in a small space," he says, pulling a pizza from the oven. "A large space lets you be sloppy."
Working space consists of a stingy 425 square feet. The standard Pizza Now! formation includes one or two cooks stationed at the pizza table, an order taker at each of the two cash registers, and a puller who boxes and cuts the pizzas as they emerge from the conveyer oven. In the next room are a dispatcher and a handful of drivers, practically sitting on four phones and a fax machine.
Ohio restaurateur Gregg Pancero, a minority investor in Pizza Now!, introduced Goldman to conveyer ovens. Unlike traditional deck ovens, where pizza needs frequent shifting to compensate for hot and cold spots, these ovens feature preset and preprogrammed temperatures and times. After receiving an order, the pizza maker builds the pizza and then simply places it on the appropriate conveyer belt.
As a trade-off to provide speedy service, Pizza Now! offers only three kinds of six-inch pizzas within the three-minute pledge: cheese, pepperoni, and a five-item deluxe. The pizzas actually emerge from the oven in about a minute, but, says Goldman, "we're easing consumers into believing that. If you say 'pizza in a minute,' it sounds like it's something other than freshly baked." Custom concoctions, such as a classic anchovy-pineapple combination, require a couple of minutes to build and nearly six to bake.
