Little Caesars - The Rise and Fall...And Rise Again

[Music] based on the number of stores added each year Little Caesars is the fastest-growing pizza chain in the United States there's a lot of Pizza chains out there but I think we can all agree that there's four that stand out above the others in terms of size their Pizza Hut Domino's Little Caesars and Papa John's their rankings have shifted around over the years but those are always the top four Pizza Hut and Domino's have been neck and neck Domino's recently obtained the number one spot in terms of sales Little Caesars and Papa John's have always been competitive with each other but as of right now Little Caesars is the third largest pizza chain in the US I feel like they're actually bigger than most people perceive them to be in 2017 they had three point seven two billion dollars in sales which is three and a half times larger than they had 10 years ago they have over 5,000 locations that are located in every US state they sell a lot of pizzas and of those four restaurants I mentioned I'd say they stand out the most and by that I mean they have a very different business model I don't mean to insult the quality of their pizza or offend any of their loyal customers but we all know what this is it's good pizza for the price right if I were to set out to buy the highest quality pizza in town I'm not going to Little Caesars I'd probably sooner go to Pizza Hut or one of those other three but if I want something quick and cheap well that's a different story and that's saying something the idea behind fast food in general is to be quick and cheap and to be so far ahead of their fast-food competitors in both areas I'd say they found their spot in the industry so I got all this large pie and the crazy bread and the sauce for $6 that's unbelievable have you ever found yourself in a position where you need like five or ten pizzas for a kid's birthday party or to celebrate after a softball game it's perfect for that but despite finding their place in the market they've had some troubles particularly in the late 90s and early 2000s I would separate the existence of this company into three separate phases it's beginning in the 1950s all the way until the early 90s I'd group all that together into an expansionary period things weren't always perfect but they were almost always growing then from the early 90s into the mid 2000s that was shaky declining sales through most of it and any increase they saw was minor and didn't really last the final period was from the mid 2000s up until today which again they're back to expanding in fact to success I think we've outlined our rise and fall and rise again now what I'd like to do is try to provide some reasoning behind all of this the first rise going all the way back to the 1950s there was a minor league baseball player named Mike Ilitch who after four years in the league experienced a leg injury and was forced to quit professional baseball a few years later he and his wife Marion had saved up about ten thousand dollars and used it to open a restaurant Mike wanted to call it Pizza treat Marion wanted to call it Little Caesars and they compromised by calling it Little Caesars Pizza treat now that names a little long and it's easy to see how people would neglect to say the pizza treat part of it obviously that part was eventually dropped but that was the first Little Caesars after three years they franchised the second location and by the end of the 1960s they were up 250 of them by the end of the 1970s it was over 200 and this was a big part of their plan just open up a bunch of new restaurants make them available to everyone and get the name out there the plan was put into full effect in the 1980s over doubling their locations to 500 by 1984 and doubling again by 1986 and throughout the 1990s they were hanging around 4,000 locations even made some big deals with Kmart to add restaurants and hundreds of their locations to help add to their plan of getting their name out there they use some heavy advertising as a rule they would spend five percent of their annual sales on advertising and they had a bunch of gimmicky catchy campaigns none of it was too serious they had this crazy-looking mascot is a little Cesar makes sense in the 1970s they started offering two pizzas for the price of one which started this whole campaign Little Caesars Pizza Pizza the very large bag the whole beats a pizza thing sounds like a joke and I guess it was but it was a very successful campaign it became the thing that people thought of when they thought of Little Caesars all of that led to high sales but they also did a great job in managing costs if you're going to sell two pizzas for the price of one you better be cutting costs somewhere and hopefully it's not just in the quality of your ingredients they did it by making their restaurants carryout only you can't dine inside of a Little Caesars you walk in pick up your pizza and get out of there it saves money in so many ways they don't have to pay servers or wash dishes their buildings are smaller which makes them cheaper but also makes it easier for them to open up so many so fast Little Caesars saves a lot of money by not allowing you to eat there all of these things combine to make a successful restaurant and I would say to helps explain the rise of Little Caesars now on to the fall let me give you a few figures to help illustrate it in 1992 there US sales reached an all-time high at that point they were at 2 billion dollars in 2002 their US sales were down to 650 million about a third of what they were also from 1992 to 2000 their total sales dropped every year that's eight straight years of declining sales which is as bad as it sounds they were struggling and I have three pretty solid explanations for it for one increasing competition things were getting pretty tough in that market Papa John's was exploding on the scene and taking sales away from all the existing chains there wasn't really any higher demand for pizzas and now there was more supply which was not good for Little Caesars and then their advertising they let up on it and they changed it in 1996 they spent 53 million dollars on advertising in 1997 and they spent 35 million by 2001 and they spent under 3 million and right around this time they went with a new agency to handle all their advertising the one that they left they had been with for over a decade and they were the ones you can say are responsible for popularizing the Pizza Pizza slogan remember at this point they've already had a few years of declining sales and we're likely looking to try something new to help revive things maybe get away from the goofy humor and start some serious advertising that emphasizes the value that they provide I wouldn't necessarily say that's a bad decision I actually think it's a pretty good idea placing emphasis on the thing that separates them from the competitors but here's the issue they were known for those silly ads it was their entire image it's one of the things I identified as making them successful in the first place if they were going to drop all of it they needed to replace it with something really good start a new campaign that the public now identifies with them but it never happened they didn't follow through with anything and sort of lost their identity the franchisees didn't care much for this either which leads me to my third reason for their fall these are the people that run the restaurants but paid Little Caesars so that they can use their name and sell their stuff obviously the franchisees and the company need to work together well during this time they were not getting along as I said the franchisees didn't approve of all the inconsistencies in the advertising and elsewhere here's a quote from one of them they say part of the problem is how corporate has made 180 degree turns we got into spaghetti and they dumped that they told us to dump the fountain service and get rid of the equipment then they told us to bring it back and they abandoned the Italian kitchen meanwhile our competition keeps getting more and more fierce it was just costly for them to keep up with all these changes when the people running the restaurants are unhappy with the people telling them how to run the restaurants and that leads to trouble further evidence of this is in the year 2000 250 of them filed a class-action lawsuit they claimed that the company was forcing them to use low quality ingredients that were far too expensive as well as to the advertising and they were being forced to pay four percent of their sales toward national ad campaigns that they just didn't think were effective enough to justify the cost there was a 350 million dollar settlement and by the end of it the franchisees would have more of a say in these matters you can see how nobody was getting along here and held that can be counterproductive for business and finally the happy part the part where they rise again that brings us to the most recent period I already expressed how well they're doing here's the sales graph so I'll get right to the reasoning to put it simple they fixed a lot of their issues that ad agency that was inconsistent and seemingly hurting them they got rid of it they started some pretty effective new promotions like their deep-dish pizza in 2002 and in 2003 that was when they started their $5 one topping large pizza remember how they almost eliminated their advertising budget by 2001 well they brought it back in 2011 it was back up to twenty-two point four million dollars in the next year they brought back their old slogan Pizza Pizza after abandoning it for over 15 years I don't want to put too much emphasis on that slogan but it's been good to them I mean they brought it back in 2012 just saying as far as their issues with the franchisees things seem to be better today the settlement of that lawsuit helped resolve some issues they started a managed to own program where someone can start as a manager and work their way into becoming an owner they also started a program that provides discounts for veterans that want to become franchisees to summarize they've successfully identified many of the things that were holding them back and they addressed them before I end the video I feel like I should follow through with the story of Mike and Marian Ilitch the couple that opened that original restaurant the first restaurant was located near Detroit Michigan and the entire company is heavily associated with the city in 1982 the couple bought the NHL team the Red Wings from Detroit and in 1992 they bought the MLB team the Detroit Tigers Mike died in 2017 but Marian is still alive and her company owns all of it now the Red Wings the Tigers and Little Caesars let me know in the comments do you agree with my reasoning behind the rise and fall and rise again did I cover all the main points or is there something I neglected to mention and what are your thoughts on Little Caesars in general is it good pizza or good pizza for the price or is it just bad pizza I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 2,935,524

Rating: 4.8927689 out of 5

Keywords: Little Caesars, Business, Pizza, Company Decline

Id: U7dFjgihLIc

Length: 11min 40sec (700 seconds)

Published: Wed Nov 28 2018