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An open sign of the times

How a pizza shop is building itself into a franchise in one of the country’s worst economies


October 25, 2011
By John McNeil

Topics

Over the past two decades, many pizza shops on Nova Scotia’s Cape Breton
Island have served their last slice and flipped the sign in their
window to “Closed” for the last time.

Over the past two decades, many pizza shops on Nova Scotia’s Cape Breton Island have served their last slice and flipped the sign in their window to “Closed” for the last time.

p16_michael_kenny_1_copy 
Micheal Kenny says owners considering opening a second or third location should be ready to move from pizza sauce to spreadsheets.


 

It would be easy to see the closure of these and other businesses as the result of a poor local economy that has never recovered from the collapse of its three biggest industries – fishing, coal mining and steel production in the 1980s and ’90s.

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But in an area with an unemployment rate more than twice the national average, one local businessman has forged ahead, turning his single pizza shop into a chain with seven locations – more than Domino’s, Little Caesars, Pizza Pizza, Vanellis or Panago in Nova Scotia.

“In university, I opened a convenience store near what’s now Cape Breton University,” says Michael Kenny, owner of Kenny’s Pizza in Sydney, N.S. “The guy who owned the building used to be in the pizza business and he offered to teach me how it worked.”

In 1986, the Kenny family opened the pizza shop as part of their convenience store and ran it there for five years, before purchasing a building in Sydney’s Whitney Pier neighbourhood and opening Kenny’s Pizza as a stand-alone pizza shop in 1991.

After two years of increased sales at the new location, the Kennys had been thinking about how to attract business from outside the neighbourhood. They opened a second shop on Sheriff Avenue in the residential neighbourhood of Ashby, next to the city’s largest high school and one block from a main commercial street.
“We just felt there was an opportunity,” Kenny said. “We knew we were missing out on some of the business available in the city.”

Kenny operated the two pizza shops with increasing sales numbers for six years. Then he was offered the chance to purchase a building in the neighbouring community of Sydney River.

“I said to myself, can I really put three locations in the area? We’re in a small city, but on the other hand, our sales continued to grow each year and we were gaining more market share. It was a big decision,” Kenny said.

But he went for it, and opening a third store became a real turning point for his business. Since firing up its oven in 1999, the Sydney River store has been Kenny’s busiest location and has shown an increase in sales every year. In fact, the expansion went so well, it was an easier decision to open a fourth location in North Sydney in 2002.

Kenny said even by that point, the business had come a long way from the days when he cooked the pizzas himself in a section of his convenience store.

“As we opened new locations, we began creating our own brand, and that has its challenges,” he said. Vibe Creative Group, a local marketing agency, was brought in to create a cohesive design of everything from pizza box artwork to store layout.

In the kitchen, Kenny had to ensure staff could cook a pizza that would look and taste exactly the same at each location, which required organization and attention to detail.

He realized having multiple locations put him in a better bargaining position with equipment manufacturers and food suppliers, which enables him to ensure each of his kitchens looks and runs exactly the same. Achieving quality control and brand consistency are directly tied to the uniformity of equipment and supplies at each location, he says.

“In the early days, we would sometimes buy used equipment, but we realized using brand new equipment gives us a better finished product,” he said. “Years ago, with our old pizza ovens, you’d have a pizza in for 15 to 20 minutes, and you’d have to really be careful with it. The new conveyor belt ovens take out the margin of error.”

After his fourth location opened, Kenny and his staff worked hard to develop and refine their internal systems to have each location and the overall business running as smoothly as possible.

Over the next six years, pizzas flew out of the oven at each restaurant as business continued to grow. Then, between 2008 and 2011, Kenny’s opened three more locations in two and a half years – one in the core of downtown Sydney, one in the neighbouring community of Glace Bay, and one in Antigonish, the chain’s first location on mainland Nova Scotia.

Kenny said each time he opens a new store, he carefully examines the business case for that location. He said he hasn’t pursued an aggressive expansion plan; he just considers every opportunity and proceeds only if he knows it will work.

“Before you consider opening even a second store, you need to have the first one running properly,” Kenny said. “Have a model that’s going to work. If you don’t know your first operation, it’s hard to run a second or third. When I do a business plan, I know every line of the operation.”

Kenny said owners considering opening a second or third location should be ready to move from pizza sauce to spreadsheets.

“Once you expand, in a real hurry you’re going from head pizza cook to running a business, and that’s a big change,” he said. “The one thing that helped the most in our growth was understanding the financial side of the business. Being able to set costs – food costs, labour, controllables – for every store, and understanding how to rely on that information to make decisions. You can’t fix it if you don’t know what the problem is.”

Kenny said learning to run the business while staff runs the kitchen has been essential to his success. He relies on a dedicated core of loyal employees, which includes general manager Darryl MacMullin, who oversees day-to-day operations and has been with the business for over 20 years.

“If you spend most of your time working in the kitchen, you won’t have the time or energy to run the business properly, and you won’t be able to consider new ways to grow and expand,” he says.

Kenny’s recent expansion from four stores to seven more than doubled the number of employees from 50 to 110. It takes three hours to drive one way between the Glace Bay and Antigonish locations. Kenny said that with a staff that size and such a large area to cover he is faced with the challenge of how to handle future expansion. 

“Over the next couple of years, we’re looking at doing some franchising,” he said. “It will have to be a part of the business if we’re going to continue to expand.”

Kenny said he has already been considering several spaces in Halifax and is just waiting for the right opportunity to arise.

“I get calls from Cape Bretoners who have moved away, asking why I don’t open a store in Alberta or somewhere else, or interested in buying a franchise and opening the store themselves,” Kenny said. “I like to explore every opportunity, so I never rule anything out.”

It appears the “Open” sign will hang in Kenny’s windows in Cape Breton – and beyond – for years to come.


John McNeil is a freelance writer and editor living in Fredericton, N.B. His work has appeared in the Globe and Mail, the National Post and publications across the country.

Around the world

Here’s a look at what’s making headlines in pizza around the globe.

San Diego, Calif.: A pizza delivery woman helped end a counterfeit money ring after she noticed the $10 bills she was handed at her last address were fake. The savvy Papa John’s employee was so certain the money was fake that she called the police. “Investigators say inside the apartment was a printer, sheets of fake money and some $1,600 in phony bills,” reported KGTV/CNN.

Taipei: “A little girl thanked social workers at Taiwan Fund for Children and Families (TFCF) for fulfilling her dream of eating pizza for the first time in her life. “So this is how good pizza tastes. I am happy to be finally eating my dream food,” said the six-year-old girl, surnamed Chang.” – Focus Taiwan News Channel
Ireland: “The holders of the master franchise for Pizza Hut’s delivery services throughout Ireland have secured High Court orders preventing Pizza Hut’s U.S.-based parent terminating the franchise agreement. The orders apply pending the outcome of full legal proceedings. Q Co Franchising Ireland Ltd, owned and operated by brothers John and Patrick Cronin, secured the injunctions yesterday from Mr. Justice Michael Hanna against Pizza Hut International LLC, with an address in Texas.” – Irishtimes.com

Brisbane, Australia: Domino’s is launching an outdoor digital campaign in Brisbane, where billboards will show current store delivery times, reports Franchising. The national average for Domino’s in Australia is 24 minutes.

Yuma, Ariz.: A real pizza craving can stop a bank robber in his tracks. Such is the case of a man who robbed an Arizona bank and proceeded to stop for pizza and a beer on the very same street as his hold-up. Needless to say, cops were on the scene shortly thereafter.

U.S.: A former pizza boss is turning into a darling of the right wing in the Republican presidential nomination, reports The Guardian. Herman Cain, 65, is perhaps best known for his stint as chief executive of the fast food chain Godfather’s Pizza but is a fast rising star of the right.

China: The allure of China has shown a darker side for Yum Brands Inc., parent company of Pizza Hut. “Yum Brands Inc. said it expects food inflation in the mid-teens and labor inflation of 20 per cent in China for the current quarter. The result is that Yum, whose KFC and Pizza Hut casual-dining chains are booming in the country, must struggle to balance low-price appeal with the need to offset the chain’s higher costs.  Yum said Wednesday that it didn’t anticipate the inflation, when the company began promoting its low prices,” reported the Wall Street Journal on Oct. 6.