There are five major competitors:
•Fazoli's
•Spaghetti Shoppe
•Little Caesar's Italian Kitchen
•Sbarro, the Italian Eatery
•Papa Romano's Pizza and Pasta
Fazoli's currently operates 104 units. Eighty of these are company-owned and operated, and 24 are franchised units. The strength of the Fazoli's concept is its stress on opening free- standing units, which offers immediate visibility and credibility to the consumer. Despite their adequate funding, rapid growth, and free-standing store concept, they are vulnerable to the competition on three fronts. (1) Food Quality. The menu items and prices listed are nearly identical to ours, but the portions are smaller. (2) Start-Up Costs. The start-up costs for Fazoli's are projected between $400,000 and $795,000 per store, as opposed to $80,000 to $100,000 for Pasta Express. This enables us to qualify more potential franchisees, which enable faster development. (3) Name Recognition. One of the most important factors in establishing a company as a leader in any new industry is developing brand name and brand identity among potential customers. While it is not impossible to use an unfamiliar brand name, establishing the brand name and linking it to the product identity takes a significant amount of marketing funds. Companies that have been able to use a brand name to automatically link them to the target market (Coca-Cola, Boston Chicken, Subway, Burger King, Taco Bell, Pizza Hut, etc.) have a leg up on the competition in establishing brand identity. This is why Pasta Express has chosen its name. The name instantly informs the consumer that we are a fastfood Italian enterprise. Fazoli's does not have this advantage. Fazoli's is leading the fast food Italian trend, but has not established itself as the runaway leader.
Spaghetti Shoppe With the exception of Sbarro, Spaghetti Shoppe has been in the fast food Italian franchising
business the longest. Its menu is similar to Pasta Express, but the prices are a little higher.
Spaghetti Shoppe, with both inline and free-standing stores, has 40 franchised units and one
Fazoli's
FAST FOOD
Business Plans HandbookLittle Caesar's Italian Kitchen
Sbarro, the Italian Eatery
company store. The company has struggled recently, selling no franchises and closing one company store. This stagnation seems to be related to the high cost of opening a Spaghetti Shoppe.
The projected opening costs are between $200,000 and $800,000. If a franchisee spent even the minimum $200,000 on an inline store, it would bedifficult to operated profitably for the first 3-5 years.
Unless they can trim costs, strengthen their brand, and step up expansion, Spaghetti Shoppe will have difficulty becoming a market leader.
Although nationally known as a pizza chain, Little Caesar's has shifted its focus toward the pasta market in the last 12-16 months. This new concept is called Little Caesar's Italian Kitchen. The Little Caesar's Pizza chain currently operates 4,500 units in all 50 states and several foreign countries.
Unlike Pasta Express, Little Caesar's does not offer the customer a made-to-order option for pasta;
the pasta is pre-cooked, pre-sauced, and sitting under a food warmer waiting for the customer to order. The menu offers only limited kinds of noodles and sauces, and very few of the locations offer dine-in options. The strategy and placement of the Italian Kitchen within Little Caesars's Enterprises is extremely limited at this point. With the Little Caesar's Pizza chain adding delivery (in an attempt to cannibalize the market share of Domino's Pizza) and adding new menu items (i.e., stuffed crust pizza) to compete with Pizza Hut, marketing and strategy has focused on strengthening the position of Little Caesar's Pizza in the pizza market. This renewed focus has come at the expense of research, development, and marketing of Little Caesar's newest concepts, especially Italian Kitchen. Although the pizza market has been flooded for years, competitors continue to pour into this lucrative segment. Unfortunately, this market is beginning to mature and all parties are positioning themselves to compete with each other for a stagnant number of consumers. This does not bode well for the Italian Kitchen concept, which still faces major developmental and marketing challenges and needs capital to strengthen their competitive position. Little Caesar's Italian Kitchen has two enormous strengths but, as with many mature companies, its greatest strengths can also be their major weaknesses: (1) Brand Recognition. Millions of consumers already know and love Little Caesar's Pizza Pizza. A decision to offer pasta in every location will make Little Caesar's a major competitive force. However, having to live down a reputation as a "pizza"
restaurant is a major competitive disadvantage for the Little Caesar's Italian Kitchen concept. The brand identification with the pizza is so strong that an enormous amount of marketing would be needed to make pasta a major contributor to their sales revenue. At this point in development, the revenue generated from pasta is so small that the franchisees are less likely to invest in food equipment, remodeling costs, marketing, and food and labor costs to change to the Italian Kitchen.
Focusing on the pizza customer is the option franchisees will most likely choose. (2) Financial Resources. Given their success in the pizza and franchising business, Little Caesar's Enterprises has an enormous resource pool which could be dedicated to becoming a major player in the fast food pasta industry. However, given the enormous amount of capital already spent to establish Little Caesar's as a major pizza brand name and the intense competition Little Caesar's faces in the pizza market with Pizza Hut Delivery and Domino's it seems unlikely that Little Caesar's Italian Kitchen will ever be a major factor in the pasta market.
Sbarro, the grandfather of the fast Italian pasta business, has been in business since 1959 and began franchising in 1977. It has 578 company owned units and 146 franchised units in the United States alone. In Canada and other countries, Sbarro maintains 36 franchised units. Although it bills itself as "The Italian Eatery" and is well-capitalized, Sbarro is not in the same class as Pasta Express. It offers mainly pizza and Italian pies, along with baked ziti and garlic bread. Such items as lasagna, spaghetti, mostaccoli, linguini, fettucini, and marinara and alfredo sauces are not often on the menu.
In addition, the prices are often significantly higher than ours and the market is much different, since Sbarro has dedicated itself almost exclusively to food courts in shopping malls. Finding Sbarro in a free-standing unit or an inline store is very rare, and any such units do not carry the staple menu items of a Pasta Express. If Sbarro attempted to establish itself as our competitor, it would have the advantages of capitalization and brand recognition. In addition, high start-up costs ($179,000 to
$723,000) and the highest franchise fees ($35,000 and 5%royalties) make Sbarro an expensive option
Business Plans Handbook
FAST FOOD
Papa Romano's
HISTORY
for would-be franchisees. Someone interested in competing with Pasta Express is more likely to choose Fazoli's or Spaghetti Shoppe. Thus Pasta Express regards Sbarro as only a peripheral competitor at this time.
With 66 franchises and five company-owned units, Papa Romano's Pizza and Pasta has established itself as a developing player in the pizza market. Although it has strong brand recognition in the Detroit, Michigan area, its development outside Michigan is still in its infancy.
While a limited amount of pasta products are available, Papa Romano's overwhelming source of revenue is pizza. All of the marketing currently conducted is targeted toward the pizza consumer. Their commitment to pasta appears to be only as a menu alternative. Because of their commitment to the pizza enterprise, they face an even greater challenge than Little Caesar's - -they have fewer financial resources and have not established themselves as a major player nationally. If they were to switch focus mid-stream to compete in the fast Italian market, they would face a number of developmental hurdles which Pasta Express, Fazoli's, and Spaghetti Shoppe have already conquered. Additionally, they would have to scrap all their advertising and start fresh in an attempt to develop a brand identity in the fast Italian pasta market. This makes Papa Romano's an unlikely competitor.
Several other major chains, including Olive Garden and Salvatore Scaloppini, sellpasta, but they are not directly competitive since the venues and pricing differ dramatically from Pasta Express.
These restaurants were designed for sit-down consumption of pasta in a more formal atmo- sphere. They are not easily accommodating to carry-out customers, nor can they handle the volume that a Pasta Express handles. In addition, the prices are often twice what a customer at Pasta Express would pay for a comparable meal.
Pasta Express differs from other quick serve operations in three ways. Some of our competitors may combine one or two of the following ideas, but none have all three in their favor.
Pasta Express offers more delicious menu options than any other quick serve restaurant:
•Pasta noodle: spaghetti, fettucini, linguini, mostaccioli, lasagna and many more
•Gourmet sauces: meat sauce, meat sauce with fresh mushrooms, alfredo sauce, marinara sauce, and pesto sauce
•Chicken dishes: chicken cacciatore, chicken caesar salad, chicken alfredo, chicken broccoli alfredo, chicken parmesan, chicken parmesan sandwich, and chicken primavera
•Fresh salads: garden salad, tossed salad, pasta salad, greek salad, antipasto salad, and caesar salad
•Hot sandwiches: meatball, Italian, ham & cheese, and vegetarian
•Soup: vegetable, minestrone, and chicken noodle
•Cheesecake
Pasta Express is the only quick serve restaurant offering healthy menu alternatives.
In addition to providing a low-fat marinara sauce and salads, Pasta Express has retained the services of a nutritionist to aid us in the development of a healthy alternatives menu for all locations.
Pasta Express is one of the few quick serve restaurants to offer a party menu.
We provide gourmet food at reasonable prices. Pasta Express is by far the most cost available of all the major competitors, making the pool of potential franchisees and area developers much larger that for the other competitors.
Pasta Express was created to fill an obvious opening in the fast food market. William Grumman, the founder, was operating a very successful local pizzeria. Since he was not satisfied with a local- only concept, he had only one option: find a market that is just opening and prepare to capitalize