American Pie
Canada-based Boston’s relies on a big menu, sports bar and dining room, and franchising support to expand in the United States.

By Maya Norris

When The Boston Pizza and Spaghetti House opened in 1964 in Edmonton, Alberta, Canada, no one anticipated its future. Known as Boston Pizza in Canada and Boston’s The Gourmet Pizza in the United States, it has evolved over the last 40 years from pizza joint to casual-dining restaurant. The chain has saturated Canada with 200 units and expects to expand in the United States at a pace of 30 to 40 a year.

CEO and President Jim Treliving is betting that the chain’s broad menu, combined sports bar and dining room, and franchising support will let it succeed south of the border. “We knew the competition down here would either make us or break us,” says Treliving.

Since 1998, Boston’s has signed franchising agreements with 43 groups to open 125 units throughout the Atlantic Seaboard, Midwest, Southwest and West Coast. Franchisees have opened 25 units in Alaska, Arizona, Colorado, Iowa, Minnesota, Nebraska, New Mexico, Pennsylvania, South Dakota, Texas, Washington and Wisconsin, including 10 units last year. They will open 25 to 30 more stores this year in current markets as well as Florida, Michigan and Tennessee.

Since 2000, systemwide sales and unit counts for the pizza and pasta concept have increased approximately 14 percent annually. In 2004 Boston’s posted $450 million in systemwide sales and expects to generate $600 million in 2005. With average unit volume tracking between $2.5 million and $2.8 million, Boston’s same-store sales increased 3 percent in U.S. restaurants in 2004 and 7 percent in Canadian units.

“We’re going to more than double our revenue stream this year,” says Chief Financial Officer Ted Beaman. “That’s the result of increase in restaurant openings, same-store-sales increases across the chain and also the large increase in the number of franchise deals that we have sold.”

Two for One
The company says its sports bar and dining room is key. Unlike chains such as Chili’s and Buffalo Wild Wings, Boston’s has a sports bar and dining room that is divided by a wall, thereby creating two distinct rooms under one roof. They draw a variety of customers: businesspeople at lunch, early evening and late-night bar patrons, sports fans, families and late-night diners.

The company chooses sites near office buildings, restaurant rows and shopping malls in areas with above-average household income. The cost to build and equip a unit without land runs from $1.3 million to $1.8 million. The acre or more equired for the freestanding restaurants varies from $400,000 to $1.3 million.

Boston’s created a new decor package in 2004 that features softer colors and more intimate spaces to attract more couples to the 5,700-square-foot, 200-seat units. Stone accents and muted greens and blues replace the red brick and primary red and yellow color scheme used in the previous design. Woven-wood partitions and a drop ceiling provide guests with more privacy and a dinner-house effect. Future restaurants and franchisees in operation for seven years will use the new design (franchisees are required to renovate every seven years). The cost to convert an existing unit is $650,000 to $700,000.

While the decor has changed, the extensive menu remains the same. It is made up of more than 160 items including soups, salads, sandwiches, entrees and bar food like chicken wings and nachos. Half of the menu is dedicated to the chain’s signature pizzas and pastas, which account for 48 percent of sales.

The hand-pressed, medium-thick-crust pizzas feature a variety of traditional and gourmet toppings such as artichoke hearts, sun-dried tomatoes and banana peppers. Popular selections include Zorba, The Greek, $9.65 for 8-inch to $23.75 for 15-inch, with mozzarella, olives, onions and green peppers topped with diced fresh tomatoes and feta cheese; and Jambalaya Fettuccine, $12.95 full order and $8.95 half order, fettuccine tossed in spicy Cajun tomato sauce with chicken, shrimp, spicy sausage, tomatoes, green peppers, green onions and olives. Food costs average 25 percent, while labor costs run 31 percent.

According to Ron Paul, president and CEO of Chicago-based foodservice consultancy Technomic Inc., the breadth of Boston’s menu sets it apart from other casual-dining concepts. “It’s a fairly differentiated concept because of their menu—pastas, sandwiches, salads, obviously pizza—but it’s not just pizza,” he says. “And I think by positioning themselves in this ‘quasi-gourmet’ category, that probably helps as well.”

Combined with its food and labor costs, Boston’s return on investment should also make it viable for franchising, according to Mark Siebert, chief executive officer of Homewood, Ill.-based iFranchise Group Inc. “One of the things we would look at typically is sales-to-investment ratios, which is favorable in this case,” he says. “The cost to build and equip a unit is between $1.3 and $1.8 million, and they’re generating $2.5 to $2.8 million. They’re coming in almost 2 to 1, which is a real strong number.”

Support Group
Boston’s recognizes that its success depends on franchisees executing well. “The reasons that we are poised for aggressive U.S. growth can be attributed to several factors: a strong partnership relationship with our franchisees, great training and a top-notch corporate staff ready to advise our franchisees,” Treliving says.

Franchisees and their managers undergo six weeks of hands-on and classroom training at the corporate store in Irving, Texas. The franchisees must also attend a weeklong business-management program that covers how to set up and manage the financial structure of their restaurants. Corporate sends a crew of trainers to help hire and train employees two weeks prior to the store’s opening and monitor its first few weeks of operation.

While franchisee Joe Loftgren considers the initial six-week training standard, he says Boston’s strength lies in how it assists franchisees with store openings. Boston’s training crew helped Loftgren with his first store in Vancouver, Wash., staying for about four weeks.

“These guys work anywhere from 12 to 16 hours a day in the restaurant. They motivate the staff, and they do just a terrific job,” says Loftgren, a former new concepts manager for PepsiCo, who owns another unit in Vancouver with his wife, Karen, a former Taco Bell franchisee. “And we can’t say enough of how that has impressed us in that aspect of store opening. ...That training has been invaluable to us.”

However, once franchisees open four stores, they must handle the store openings and training with limited corporate support. The company will only send one or two trainers for no more than two weeks to assist the franchisees. So Boston’s has developed programs to teach them how to train. “We’re planning for large growth down the road by starting these restaurants out with the idea that they will be responsible in part for their growth,” say Cathy Gainey, director of training and development.

Franchisees can access lesson plans and guides that cover operations and training on the company’s intranet called Boston’s Link. Corporate trainers often work with franchisees by phone to alter the lesson plans to suit the trainees’ individual strengths and weaknesses.

The company also offers ongoing training at its three corporate stores in Irving, Lewisville and Killeen, Texas. Participants can take tracks for various managerial and hourly positions as well as specific courses such as troubleshooting food and labor costs, marketing and computer skills.

“Because we do our training in our corporate location and we utilize a dedicated franchise trainer, they’re not trained side by side with hourly employees,” Gainey says. “They actually train with a corporate employee. It creates a better foundation for what they are receiving because someone is not distracted by the everyday operations of the restaurant. They’re completely focused on that person in training.”

Field service managers visit each unit twice a year unannounced as part of Boston’s quality-assurance program to help address any issues. Monthly mystery shoppers gauge food quality and service. The scores for all units are e-mailed and faxed to every franchisee monthly; franchisees can see their own scores any time on the company’s intranet. “We’re trying more and more to share information with our franchisees not only in how they fare performing but how they stand up to other Boston’s,” says Bill Hancox, director of operations. The company says U.S. units averaged 90.6 percent over the last six months of 2004.

Loftgren praises the field service manager and mystery-shopper programs as “another set of eyes. One of the big flaws franchisees have is, they’re enclosed in their box. They don’t have anyone from the outside looking in,” he explains. “This allows people who have been to other restaurants to give us their little tips, ideas, changes in performance, changes in execution that will make us better.

“What concerns us is that as they grow more stores, are they going to have enough staff to be able to sustain this type of intensity of training?” Loftgren wonders.

In the Works
Boston’s plans to hire more field service managers as necessary so each handles no more than 15 restaurants.

The company is also looking into more satellite and regional training initiatives. It will continue to update its library of training CDs, binders and videos to cover not only the basics of restaurant operations but also the details of teaching training classes. It plans to set up regional training centers throughout the country to reduce franchisees’ travel. Online testing through Boston’s intranet is also in the works to help corporate trainers better tailor the education for franchisees.

“Sometimes to get better, you don’t have to reinvent the wheel,” says Gil Aragona, vice president of operations. “You just have to make sure that you’re supporting and enforcing the standards that exist.”