To preserve freshness, Goldman doesn't bake the pizzas beforehand and freeze them. The dough arrives from Cincinnati every six weeks. Based on anticipated demand, pans of sized and shaped dough are moved from freezer to refrigerator to thaw. From there they are pulled out, sauced, and baked. During slow periods the pizzas are kept in warming ovens for up to 20 minutes -- "a more controlled atmosphere than heat lamps."
To achieve crucial efficiency, Pizza Now! relies on tailored software. Among other capabilities, it keeps a tab of what is sold each hour; the operator decides how many and what kind of individual pizzas will be needed between noon and 1:00 p.m. this Monday based on demand during the same time last week. Goldman discards about 20 six-inch pizzas a day, roughly 5% of production.
Because the facility is so cheap, Goldman expects operators to spend more lavishly on food such as fresh mushrooms. Goldman admits that, at 27%, his food costs -- the silent killer of many an eatery -- are higher than he would like. As more units open up, he expects to shave a couple of percentage points, though it's unlikely he'll match the 23% range he says the giants generally achieve.
No matter how you deliver it -- through a window or by truck -- pizza's margins, like the product itself, hold up handsomely. On average, pizza provides a pretax margin of about 25%. Delivering a pizza cuts into that margin a bit, but the difference is not all that significant because most drive-through customers buy individual pizzas, which cost $1.59. The minimum delivery order, on the other hand, is $5. So, says Goldman, the gross profit may be higher with delivery, but "you can generate a lot more dollars faster with drive-through." Goldman wants Pizza Now! units to maintain a three-to-two ratio of drive-through/carry-out to delivery. "It's not just that we want to maximize efficiency," he says. "Drive-through is our competitive edge. And that's easy to communicate."
Leftovers are even more of an indigenous American culinary tradition than pizza, so it's perhaps fitting that Goldman has paid homage to the principle in financing his company. So far, most of the $1.7 million he has spent has come from savings he amassed before his calamitous foray into fast-food chicken. There was a Japanese steak house, which he sold, and there were those 15 years at Arby's. Gregg Pancero has added his own $250,000 or so for a sliver of equity. Goldman won't say how much deeper his own pockets are, but he admits, "I don't have as great an access to capital as I would like. I'm a restaurateur. I am not a financial guy."
Given that, Goldman says he will suppress his more ambitious streak and grow slowly, using cash flow to finance his own expansion and choosing franchisees very carefully. "Maybe one of the franchisees will want to become a joint-venture partner," says Goldman. "But I'm not going to start looking at their financial qualifications ahead of their experience. You can self-destruct if money starts becoming more important than the quality of the concept."
Goldman has developed the Pizza Now! concept with an eye toward fast-food history. So perhaps it's fitting to draw on the past for some insight into the challenges ahead. Back in the mid-1960s there were four fast-food restaurants in the Cincinnati area called Barney's Drive-In. Oddly enough, the owner of them was not named Barney. His name was Philip Goldman.
What happened to Barney's Drive-In stands as a cautionary tale for these early days at Pizza Now! By the late 1960's McDonald's, Burger King, and others were well-heeled enough to compete fiercely. By 1969, recalls Goldman, "I started looking for something else to do."
Now, jump ahead to the fall of 1990 -- or sooner -- when McDonald's will decide whether to roll out its own pizza nationally, adding 10,000 new pizzerias. McPizza would be available only after 4:00 p.m. and would cost more than any drive-through competitor. And McDonald's huge promotional budget would likely lift pizza sales everywhere -- for a short time. After that, well, no one who knows the business would append the word benevolent to this particular giant.
If McDonald's doesn't cut into Goldman's niche, there are plenty of others who could. After all, nothing about Pizza Now! is terribly tough to copy; the cooking technique, the siting strategy, and even the special software take simply money and ingenuity to develop. What's to prevent Pizza Hut from attacking Goldman head-on, or at least sideswiping him with an ad campaign promoting its fresh ingredients? "A lot of people may have this idea," concedes Goldman. "But the difference between me and them is that I am doing it."
True, getting there first counts for something. But getting big fast is what's required to complete the equation. And, as Goldman admits, he doesn't have much access to capital. Nor does he have reserves of experienced management. The two members of his management team were barely born when he first got into the restaurant business. "Our money has to go into building restaurants, not people," he says. It's worth noting that Rally's launched its training school even before cutting the ribbon on its 10th unit. There are other questions. Is Pizza Now! filling a market need, or is it just something new? And consumers aren't the only group Goldman has to fret about. Those who have $325,000 to invest may not want the kind of active involvement Goldman envisions.
Still, during a recent sunny -- as always, in Phoenix -- lunchtime, eight people are sitting outside, munching individual pizzas. Four more are at the take-out window. And a van is just swinging into the drive-through lane. "Tell me there isn't a market for this," says Goldman defiantly. "I'm not going to put Domino's out of business and I don't want to be the next McDonald's. But if we do what we do well, there will be room for us."
