Obit: Pizza Chain's Blockbuster "Deal" Ends in a Bust
The business: Pizza-store franchiser
Closed: April 2000
Cause of death: Aborted joint venture
Tony Riviera, by all accounts, made one hell of a pizza. His thick-crust pies slathered with toppings like roasted garlic, artichoke hearts, and goat cheese were a big hit in the Seattle area. His company -- dubbed Tony Maroni's Pizza in honor of his childhood nickname -- started as a pizza-by-the-slice shop in Kirkland, Wash., and grew into a franchise operation with 17 outlets in Washington and Southern California.
But Riviera had even grander ambitions. To catapult Tony Maroni's from a regional to a national business, Riviera pursued a joint venture with Blockbuster video stores that would have allowed him to sell pizza at 1,500-odd U.S. locations. In early 1997, Riviera thought Blockbuster had agreed to, well, a blockbuster deal. "I was on cloud nine," Riviera remembers. "They basically said, 'Your life is set."
Preparing for a nationwide rollout, Riviera revamped his company's strategy. However, when the giant video chain decided, in July 1999, against a joint venture, Riviera discovered that he didn't have a blockbuster deal in hand after all. What he had was merely a bust.
A former amateur boxer from Brooklyn, Riviera moved to Seattle in 1979 and worked for eight years in restaurants, first as a waiter and then as a manager, before opening his first pizza store. After a false start -- the company filed for Chapter 11 protection in 1990 -- Riviera reorganized the business and created Tony Maroni's Franchise Systems Inc. in 1995. Its recipe for success was simple, featuring fast delivery and quality ingredients. But the pizza wasn't cheap. A large thick-crust pizza with gourmet toppings, for example, cost close to $21.
Riviera expanded by opening 4 more stores under his company's ownership and adding 12 more with franchisees, who paid an up-front fee of $20,000, plus 5% of sales. By 1997, the chain's same-store revenues were expanding at a double-digit clip, reaching more than $3 million that year, although Riviera acknowledges that the company wasn't profitable.
The fast growth caught Blockbuster's eye. After overtures to several owners of regional pizza chains about a possible joint venture, Blockbuster zeroed in on Tony Maroni's, going so far as to discuss store locations and redesign, Riviera says. He jetted off to Dallas to meet John Antioco, Blockbuster's CEO, who is also a Brooklyn native. Riviera figured that he'd passed the "due diligence test," as he puts it, although Blockbuster did not commit itself in writing. "We're Brooklyn boys, and a handshake means everything," Riviera says. As a way of cementing the deal, as Riviera saw it, Blockbuster lent $300,000 to Tony Maroni's.
Intent on a future with Blockbuster, Tony Maroni's spent $1 million preparing for the rollout and stopped signing up franchisees, according to Riviera. "He got carried away with something that was beyond his own control," says George Naddaff, an experienced franchiser and a former adviser to Riviera. "It was a very intoxicating idea."
If the intoxication was mutual, Blockbuster sobered up abruptly, and the discussions with Riviera ceased. Now Blockbuster declines to explain why it soured on a Tony Maroni's deal. "They said they had to stick to their core competency," says Riviera, quoting Blockbuster officials' statements to him.
Hobbled by the loss of new-franchise income and plagued by a large tax debt, Tony Maroni's filed for Chapter 11 bankruptcy protection last August. (Its liabilities of $2.2 million dwarfed its assets of $250,000.) In April the bankruptcy court ordered the company to liquidate. Although Riviera, 43, lost his company, he hasn't given up. He aims someday to hook up with a Blockbuster-scale partner. "Whether it's Tony Maroni or Tony Baloney," he says gamely, "Tony Riviera's pizza will be in stores on a national basis."
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