Slicing Into New Territory

(Monday, December 06, 2004) - Jim Minidis, the founder of RedBrick Pizza, based in Palmdale, Calif., has his sights set on growing his nearly 40-unit company into one of the largest pizza chains in the world — a chain with more than 12,000 units.

And he says he hopes to do it quickly. Though the fast-casual gourmet pizza chain was born just 4 years ago, its early growth indicates that Minidis, who now is RedBrick’s president and chief executive, may get his wish.
A year ago there were four RedBrick Pizza locations open in California and North Carolina. By the end of 2004 there will be 40, Minidis predicts. By the end of 2005, more than 100 units will exist in six states. “We’re averaging about one or two a week,” he says.
For RedBrick Pizza the growth plan involves signing on master developers across the country, a method some consultants say is becoming less popular for domestic expansion but more popular for franchisors looking to go overseas. While some point out that master developers can dilute the relationship between franchisors and franchisees, knowledgeable developers can be invaluable when embarking into unfamiliar foreign markets. For example, another growing pizza chain, Louisville, Ky.-based Pizza Magia International, is working with a master developer to open an estimated 100 restaurants in India over the next five years. Still, other growing chains prefer a more conventional “concentric circle” method, like the one used by such operators as Southern California-based Mexican quick-service chain Del Taco as it expands That method allows for advertising and other efficiencies that are lost when single units open in previously untapped terrain.
For Minidis, a former Little Caesars pizza franchisee in the Los Angeles area, the success of the RedBrick Pizza concept is the result of a combination of innovative product design and identifying a clear market niche: a gourmet, fire-roasted pizza that cooks in three minutes. Using his background in product design, Minidis has developed a proprietary bake system that has allowed for a streamlined process, permitting the restaurant’s “pizza ambassadors” to go from dough ball to gas-fired hearth oven to table in five to six minutes overall.
Guests can wath their food being prepared. The dough, created with olive oil, is made on site, as are all salads, sandwiches and even the signature gelato. All stores have limited seating to create a casual “neighborhood pizza cafe” atmosphere, and guests also can pick up pizzas to take home, Minidis says. But RedBrick does not deliver, and Minidis discourages the practice because it does not fit the market niche and the pizzas are best served hot from the oven, he says.
A version of RedBrick first was launched in 1999 after Minidis’ franchise agreement with Little Caesars was severed. Under the terms of a 1998 settlement Minidis says the larger chain gave him 45 days to create a new brand for the 10 stores he operated in northeastern Los Angeles County.
It probably would have been easier to start from scratch rather than convert the former Little Caesars units, Minidis says. Most who attempt such conversions are “doomed to fail,” he notes. Minidis was able to build the new brand – though soon he learned that the former Little Caesars locations, which were designed for carryout and delivery only, would not work for the pizza cafes he had in mind. So he closed the original 10 locations and focused on opening RedBrick Pizza restaurants in areas with suitable limited-seating options. Now the company targets new, upscale shopping centers with high-volume traffic and with such established tenants
as Starbucks and Jamba Juice. “If you walked into any one of our stores, they wouldn’t be presented as [part of] a 50-store chain,” Minidis says. “People think we have 3,000 stores out there.” Most of the nearly 15 master developers the company is working with in California, Arizona, Nevada, New Mexico, North Carolina, Florida and Texas have come back to buy a second territory, Minidis says. As of mid-November, RedBrick had agreements with master developers to open more than 1,800 stores.
“We set up the system to grow rapidly so it could be replicated easily anywhere in the world,” says Minidis, who also is looking into expansion in Europe and Asia. Vendors, distributors and suppliers are lined up to meet expected growth, he adds.
Most master developers operate at least one store in their respective territories, although they also receive a portion of franchise fees, advertising and royalties, he explains. Territories are purchased based on population multiplied by 10 cents per person, with a minimum investment level of $200,000 plus applicable training fees. While the master-developer approach is working for RedBrick, consultant Kay Ainsley, managing director for Michael H. Seid & Associates, a franchise consulting firm based in Atlanta, says she is seeing more franchisors move away from that method of growth.
Using a master developer weakens the control the franchisor has over franchisees, she says. And when royalties are split between a master developer and a franchisor, the franchisees may not get the support they need to succeed. However, the master-developer approach is beneficial for U.S. franchisors looking to go overseas, Ainsley says. But it is crucial that the U.S. franchisor finds partners who fully understand the foreign markets that are targeted, she says.

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