In Search of Growth As the overall restaurant industry experienced a 3.8% revenue increase during 2015, total US pizza restaurant sales were essentially flat, a 0.05% decrease to $38.50 billion for the year ending September 30, 2015. Average store sales for the same one-year period declined 2.34% to $514,679, although chains (10 or more units) increased their average store sales 3.82%, to $655,846. (See slide #4 for details about independent pizzerias.) Despite 2015 being a good year for restaurants, the National Restaurant Association’s August 2016 Restaurant Performance Index declined 1.0% from July. Only 30% of restaurants reported a same-store sales increase from August 2015 to August 2016.

Fast-Casuals in the Fast Lane The fast-casual sector of the restaurant industry is often defined as offering fresher ingredients, customization and a higher price point; and this approach appears to be working, as Technomic reports the sector increased sales 11.4% during 2015. Fast-casual pizzerias’ target audience is the lunch crowd, competing with Chipotle and Panera Bread, while the traditional pizza segment, especially the national chains, target dinner, group and delivery customers with their emphasis on digital ordering. Pieology is one of these fast-casual pizzerias. Not only is it the first to appear in Technomic’s 500 largest restaurant chains (2015), but also its sales increased 67% and the number of units 180% from 2014 to 2015.

Independents Implosion Although total US 2015 pizzerias’ revenues declined a fraction of a percentage point, total revenues for independents, or those with fewer than 10 locations, declined 5.01% to $14.97 billion, which is a 38.87% share, or approximately 2% less than 2014. Independents may still represent the majority of operations for the year ending September 30, 2015, or 52%, according to CHD Expert, but there was a 1.85% decrease in the number of independent stores, to 38,924. Independents also experienced a 3.21% decrease in average sales per store, to $384,524. Even including small chains, or those with fewer than 250 units, still resulted in a 3.21% decrease, to $461,757 in average sales per store.

Beverage of Choice with a Slice Generating a CrossTab report from The Media Audit’s Fall 2015–Winter 2016 survey results for multiple US markets reveals that 49.6% of adults 18+ who usually drink non-diet soft drinks ate at any pizza restaurant during the past 4 weeks. Of those adults 18+ who ate at any pizza restaurant during the past 4 weeks, just 17.2% usually drank diet soft drinks and 13.2% were frequent wine drinkers. Although only 10% of frequent beer drinkers had eaten at any pizza restaurant, they were 12% more likely to have done so than non-diet soft drink drinkers, 55% more likely than diet soft drink drinkers and 45% more likely than frequent wine drinkers.

Tech Trends A 2016 Deloitte restaurant patrons survey found that 40% of those surveyed preferred online ordering, and when they do, they spend 26% more at QSR restaurants and 13% more at casual and fast-casual restaurants. Online ordering may be what is causing a contraction among independent pizzerias. During 2014, for example, independent and small chains accounted for 44% of all pizza deliveries, but only 18% of online orders. Big national chains have a definite online ordering advantage. Domino’s charges its franchisees just 21 cents per online transaction while an independent would have pay a delivery service with online ordering, such as GrubHub, a 10% fee per order.

The Path Ahead The good news for pizzerias is that one industry analysis forecasts $45 billion in 2016 sales, which would be a 16.9% increase from 2015. Plus, Technomic reports that consumers are averaging 4.0 pizza occasions per month, compared to 3.4 for 2014. The 2016 Technomic Pizza Consumer Trend Report also found that 39% of consumers said they are drawn to pizzas with new and innovative toppings, compared to 32% in the 2014 report. A 2016 Tillster study found that consumers favor restaurants with ordering kiosks. Only 36% of customers are willing to wait in line behind 5 other customers; however, 80% would be willing to wait to order from a kiosk if they were behind 5 or more customers.

Advertising Strategies Although it is difficult for independents to compete against the big chains and growing fast-casual pizza restaurants, independents can promote that they have been using the freshest ingredients for years and offer a lunchtime coupon to attract fast-casual pizzeria customers. Since adults who eat pizza and follow professional basketball on TV/radio have the highest index of all major sports, independents may want to advertise during NBA games or sports reports, and let the big chains focus on professional football and the Super Bowl. Since there is a significant percentage of Latino Americans who eat pizza, independents may want to feature a weekend with Hispanic-cuisine inspired pizzas and toppings to attract Latino Americans as well as Millennials who like specialty toppings.

New Media Strategies Independents can draw distinctions between their pizzas and the big chains by giving 5 of their customers a free pie and one from a big chain and doing the same with 5 big chain customers, and then asking each to complete a survey and/or upload video comments. It’s important for independents to make sure they are listed on all sites, such as Yelp and Foursquare, and to respond quickly both to positive and negative comments. Independents may want to promote and stream a 2-hour live event on Periscope or similar live-streaming apps, to show consumers the fresh ingredients they use, interview their local sources, demonstrate how they make their pies and introduce their staff.