Boston Pizza International Inc.

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Boston Pizza International Inc.

5500 Parkwood Way
Richmond, British Columbia V6V 2M4
Canada
Telephone: (604) 270-1108
Fax: (604) 270-4168
Web site: http://www.bostonpizza.com

Private Company
Incorporated: 1978 as Boston Pizza International Ltd
Sales: CAD 645 million ($553 million) (2006 est.)
NAIC: 722110 Full-Service Restaurants; 551112 Offices of Other Holding Companies

Boston Pizza International Inc., of Canada, together with its U.S. counterpart, Boston Pizza Restaurants L.P., is the franchiser of pizza restaurants that incorporate full-service casual dining and sports bar in one building. While pizza is a chain specialty, the company’s menu also includes burgers, sandwiches, soups, salads, appetizers, and desserts. Boston Pizza locations typically accommodate 180 to 250 patrons, including their 80-seat sports bars; seasonal outdoor patio space seats an additional 50 to 75 guests. Families and young adults between 25 and 49 comprise the primary customer base, which is divided into three restaurant industry segments: business lunch, casual dining, and late-night patrons. In 2006, there were more than 300 franchised or companyowned locations throughout Canada, the United States, and Mexico, and systemwide sales topped CAD 645 million.

When Greek immigrant Gus Agioritis arrived in Vancouver, Canada, in 1958, he had little more to his name than the clothes he was wearing and less than $50 in cash. In 1964, after several years spent working in a variety of jobs, he opened the Boston Pizza and Spaghetti House in Edmonton. Agioritis had never visited Boston, but, he explained later, he chose to name his restaurant after the American city because he thought the fame and popularity of two sports teams at the time (the Boston Bruins and the Boston Red Sox) would make his establishment stand out to customers. Long after the Boston Pizza name outgrew its original location, Agioritis was quoted in Maclean’s describing his early business as “a Canadian company with an American name operated by Greeks serving Italian food.” Within four years of opening his restaurant, Agioritis began franchising the name and concept to friends and family members. From a single familyoperated business in Edmonton, the Boston Pizza name began to spread throughout Alberta and British Columbia and would soon be found in 17 locations in western Canada, most of which were franchised.

EARLY YEARS OF GROWTH: 1968–83

One of the earliest nonfamily member franchisees was Jim Treliving. As an officer with the Royal Canadian Mounted Police, Treliving was also a customer who observed firsthand the early success of Boston Pizza’s expansion, and he decided to get into the business for himself. In 1968 he left his career as a Mountie—much to the disappointment of his own family—to open a Boston Pizza location in Penticton, British Columbia.

Soon afterward, he met George Melville, manager of the local Peat Marwick office. Melville became Treliving’s accountant and business consultant, helping him develop his business. In 1973 Melville joined Treliving’s company as a partner. Melville and Treliving spent the next ten years building a chain of more than a dozen Boston Pizza restaurants throughout British Columbia.

Meanwhile, the modest enterprise founded by Gus Agioritis had grown to more than 40 restaurants. A frugal business owner with a generous spirit who believed in helping family and friends establish their own successful businesses, Agioritis was also a family man who was ready to retire and spend more time with his loved ones. Accordingly, he made plans to sell the bulk of his business to an employee and longtime friend, Ron Coyle.

In March 1978 Coyle bought the rights to the Boston Pizza name, along with franchising rights to 31 of the existing 42 restaurants. Agioritis family members retained ownership of 11 of the original restaurants, operating them under different names. More than three decades later, Maclean’s reported that the founder did not regret retiring and selling his company after being at the helm of 14 years of continuous growth. As quoted in Maclean’s, Agioritis remarked, “It was a good thing we sold; new blood can do a better job.” He also spoke with pride about the company he started, saying, “It’s my creation, like a kid. … You always love your kid.”

Under Coyle’s leadership, the company became Boston Pizza International Ltd. New growth initiatives included further franchising, plus the establishment of the Annual Franchisee Conference, a yearly opportunity for Boston Pizza franchisees to gather and talk about their common business interests and concerns. Boston Pizza continued to expand throughout western Canada. Among the most active franchisees were Treliving and Melville, whose holdings reached 16 locations by the early 1980s. Their enthusiasm and vision for the Boston Pizza brand would soon lead to dramatic growth for the company as a whole.

NEW OWNERSHIP AND EXPANSION: 1983–98

By 1983, Coyle had more than replaced the number of Boston Pizza outlets that were dropped from the chain in his original purchase from Agioritis in 1978. There were 44 Boston Pizza locations in operation when Treliving and Melville approached Coyle about buying him out. They acquired the company from Coyle in 1983 in a CAN $3.8 million transaction that relied fully on funding from outside investors and a loan from the seller. Shortly after taking ownership of the entire company, Treliving and Melville turned over 15 of their restaurants to new franchisees. They turned their remaining location into a corporate training restaurant, and began developing standards and business systems that would allow them to turn an already-successful franchise model into a high-growth business that would support more rapid expansion.

Within three years of taking over the company as co-owners and cochairs, Treliving and Melville made a successful bid to be the official supplier of pizza to Canada’s Expo 86 in Vancouver, British Columbia. The company’s prominence alongside established fast-food and restaurant names like McDonald’s led to increased investor interest, and by 1988, Boston Pizza had launched 17 new franchised locations.

In 1992, the corporate headquarters of Boston Pizza International Inc. was established in Richmond, British Columbia. During the 1990s, Boston Pizza outlets evolved into full-service casual dining restaurants with menus that included appetizers, salads, nonpizza entrees, desserts, and the separate—but same-space—sports bar concept was added as a component in every location. By 1995, the company’s size had reached nearly 100 restaurants, all in western Canada, and sales exceeded CAN $110 million for the year. Continued growth would require moving beyond the boundaries of the western provinces, so the corporate management team began to look to the east.

COMPANY PERSPECTIVES

The company’s mission is to be a world class franchisor through selecting and training people to profitably manage an outstanding foodservice business. To achieve this goal we are innovative and responsive in our approach to business. We work as a team providing attention to detail but never losing sight of the larger picture. We recognize the need to provide leadership in all areas of operations, marketing and restaurant development.

In 1997 Boston Pizza International opened its first regional office, in Mississauga, Ontario. Treliving relocated to Toronto to oversee the company’s entry into eastern Canada. The regional corporate staff included some Boston Pizza senior managers from Vancouver as well as newly hired foodservice management professionals and business development specialists. In September 1998, the first Boston Pizza location opened in Ottawa. Less than a decade later, there would be more than 60 Boston Pizza restaurants throughout eastern Canada, including nine in the Maritime Provinces. At the outset of its eastward expansion, Boston Pizza International also had its eye on growth south of the country’s border.

CROSSING NEW BORDERS: 1998–2005

As a first step toward establishing a presence in the United States, Boston Pizza International opened a regional office in Dallas, Texas, in 1998, for its U.S. franchising authority, Boston Pizza Restaurants, L.P. In December of that year, the first U.S. restaurant opened, in Tempe, Arizona, under the name “Boston’s The Gourmet Pizza.” Five years later, nearly a dozen such outlets were in business. Nearly identical to their Canadian counterparts, the stores featured the same dual focus—casual dining and sports bar—and the same signature menu items. As in Canada, the sports bars’ décor and memorabilia reflected local and regional sports fan favorites. By May 2005, 25 franchised units had opened in a dozen states (Alaska, Arizona, Colorado, Iowa, Minnesota, Nebraska, New Mexico, Pennsylvania, South Dakota, Texas, Washington, and Wisconsin) and restaurants were slated to open the following year in Florida, Michigan, and Tennessee.

In 2002, when eight U.S. restaurants were in operation with others on the horizon, Mark Powell, chief financial officer of Boston Pizza International, had this to say in CMA Management: “The business model for Boston Pizza in Canada has been successfully transported to the U.S. and the economics are basically the same. … the unit economics are affordable, so our business model works south of the border. A lot of Canadian companies have gone south and struggled, but even in the face of a softer economy, we’re still looking at growth.” One year later, CEO and co-owner Jim Treliving acknowledged that certain American economic factors, including a weak restaurant economy and heavy competition from all segments of the casual restaurant industry, might deter some companies from trying to penetrate the United States as a new international market. However, in an interview published in Pizza Today in August 2003, he remarked that the timing had actually benefited Boston Pizza’s plans, saying, “It’s easier to get locations. It’s easier to get people and staff. These days, we have developers coming after us, instead of us having to go after them.”

Four years after Boston Pizza entered the American market, the company signed its first franchise agreement to open a location in Mexico. In Nation’s Restaurant News, in November 2002, Boston Pizza vice-president of operations Ron Jones noted, “The deal really was not a part of a planned process, but in the act of selling franchises in the U.S. we attracted some attention there.” The restaurant, located in Merida, Yucatan, opened in early 2003.

While Boston Pizza’s expansion into both the United States and Mexico was underway, further expansion into eastern Canada continued, as well. In 2004, a regional office was established in Laval, Quebec, followed by the first restaurant in the city in July of that year. Less than three years later, the province was home to 15 additional restaurants with an eventual goal of 50 total outlets provincewide.

KEY DATES

1964:: Greek immigrant Gus Agioritis opens the Boston Pizza and Spaghetti House in Edmonton, Alberta, Canada.
1968:: Jim Treliving opens a Boston Pizza franchise in Penticton, British Columbia.
1970:: Agioritis’ company consists of 17 Boston Pizza locations in western Canada, most of which are franchised.
1973:: Treliving and George Melville become partners in a chain of Boston Pizza franchises throughout British Columbia.
1978:: Ron Coyle buys the Boston Pizza name from the founder and operates the company as Boston Pizza International Ltd.
1983:: Treliving and Melville buy the company from Coyle.
1986:: Boston Pizza becomes the official pizza sponsor of Expo 86 in Vancouver, British Columbia.
1992:: A corporate headquarters office is established in Richmond, British Columbia.
1998:: Company enters the U.S. market with offices in Dallas and a restaurant in Tempe, Arizona, called Boston’s The Gourmet Pizza.
2002:: Boston Pizza brand and trademark is transferred to a licensing agreement with the Boston Pizza Royalties Income Fund.
2003:: A franchise opens in Mexico.
2005:: Canadian restaurants number 200, with sales in excess of $393 million.
2007:: The 50th U.S. location opens in Fort Worth, Texas.

In July 2002, the legal structure of the company was altered, at least in Canada, when Boston Pizza International established the Boston Pizza (BP) Royalties Income Fund, which operated as a limited purpose, open-ended trust. The BP Royalties Income Fund owned the trademarks and trade names used by Boston Pizza International in Canada. The fund licensed the use of the trademarks to Boston Pizza International, and in turn the company paid the BP Royalties Income Fund 4 percent of all franchise sales for the Canadian restaurants. Although Boston Pizza International remained a privately held company, shares of the BP Royalties Income Fund were traded on the Toronto Stock Exchange. The value of the shares was determined by the financial performance of the company’s Canadian franchised stores.

In August 2002, Boston Pizza International began to pursue trademark infringement action against the Boston Market Corporation (BMC) and its parent company, McDonald’s Restaurants of Canada Limited, related to BMC’s entry into the Canadian restaurant market at the beginning of the decade. Boston Pizza charged that the Boston Market name infringed on the long-established identity of the Boston Pizza name, logo, and restaurant concept. The BMC group filed a countersuit seeking to undermine the validity of the Boston Pizza trademarks, challenging their registration history, citing the change in trademark ownership to the BP Royalties Income Fund. Federal court action in 2003 dismissed some but not all of the counterclaims against Boston Pizza, ostensibly allowing litigation to proceed from both sides. At the time, it was expected that legal proceedings would occur during 2005, but in its first quarterly report for 2007, the BP Royalties Income Fund indicated that trademark litigation had not yet been resolved. The lingering trademark issues did not have any potential impact on the company’s restaurants in the United States, in part because the trademarked restaurant name in that country is “Boston’s The Gourmet Pizza.”

POISED FOR GROWTH: 2006 AND BEYOND

Boston Pizza’s growth strategy relied on adding franchisees and increasing revenues per location. The company worked to keep the brand fresh and appealing to customers and franchisees alike through continuous improvement and strong corporate support. Emphasis was on protecting and improving franchise profitability, enhancing the Boston Pizza brand through menu innovation and community visibility, and keeping customer satisfaction high.

The placement of a new Boston Pizza or Boston’s The Gourmet Pizza store was carefully researched in order to find the optimum combination of geography, demographics, real estate costs, and even the right competition and complementary businesses. To succeed financially in this industry niche, a restaurant had to attract customers in three distinct time periods: lunch, dinner, and late night. The ideal “neighborhood” for a Boston Pizza store would include businesses that provided steady lunch customers, youth-friendly entertainment options such as a movie cinema that supported a late-night crowd, and proximity to suburban shopping and residential areas to attract guests for dinnertime casual dining and happy hour or weekend sports bar patronage. Having other casual dining establishments nearby could also be a favorable part of the placement mix, since higher volumes of consumers were drawn to an area where multiple options created the atmosphere of a dining destination. The placement process also involved locating stores carefully so that new restaurants did not siphon business away from the company’s existing franchisees.

The buildings themselves were expected to adhere to exacting prototype standards, which included the renovation of restaurants every seven years to keep pace with current corporate design. This not only strengthened the visual identity of the brand, it was also found to increase revenues in the renovated stores by 10 to 15 percent. Every Boston Pizza location included both a family-style restaurant and a separate sports bar. Once inside, customers would find that while there were some regional differences in menu options, certain signature items were always available systemwide.

Training, education, and ongoing support were key elements of Boston Pizza’s growth strategy. As soon as an agreement was signed with a qualified franchisee, start-up assistance from the corporate staff began. There was real estate department assistance to find a good location and negotiate a deal; the corporate office helped franchisees hire an architect; the construction department helped ensure that the location was built to the company’s specifications. Franchisees also got help with marketing and promoting their business.

New franchisees and their managers participated in mandatory six-week training sessions that included both hands-on and classroom education. The corporate office provided another week of business management training and guidance in setting up the financial aspects of the franchise. Prior to a store’s opening, another team of corporate trainers spent two weeks helping to hire and train onsite employees. The opening support team stayed on site for another four weeks, on average, to work with the new employees and get the store off to a solid start. This was considered an investment not only in the success of the location, but in preserving corporate reputation and brand value as well. Boston Pizza President Mark Pacinda noted in CMA Management, “It’s hard to recover from a bad launch. … An opening has to be strong.”

Boston Pizza International was recognized for its charitable giving at both the corporate and store level. The Boston Pizza Foundation supported a variety of causes, and restaurants in both Canada and the United States were active in charitable giving and fund-raising for local programs, especially those that benefited literacy and community youth activities. Local donations typically began even before a restaurant had officially opened for business; traditionally, a store’s employees would pool tips received during certain “dress rehearsal” meals, with the proceeds being donated to a fund that benefited a local program.

At the end of 2006 there were 266 Boston Pizza locations throughout Canada, from west to east: two in the Yukon and Northwest Territories; 58 in British Columbia; 84 in Alberta; 12 in Saskatchewan; 14 in Manitoba; 65 in Ontario; 15 in Quebec (with an additional opening in May 2007); and 16 in the Atlantic region. Boston Pizza International has been named one of Canada’s 50 Best Managed Companies every year since 1994 and it is considered one of Canada’s premier restaurant chains, with strong name recognition coast to coast.

In January 2007 Doug MacDonald was named president of Boston’s The Gourmet Pizza in the United States. In a company press release, he noted, “Boston’s is going through a major growth period and it’s an exciting time for the entire franchise organization. Our sister company, Boston Pizza, is the No. 1 casual dining brand in Canada—our goal is to be the No. 1 casual dining brand in the United States.” That year the 50th U.S. location was opened, in Fort Worth, Texas.

In May 2007 Boston’s The Gourmet Pizza added more than a dozen dishes to its already extensive casualdining menu, including baked pasta dishes featuring shrimp, sausage, ravioli, or spaghetti; pizza variations such as the Flying Buffalo Pizza and the Extreme Mushroom Neapolitan Pizza; and new salad, soup, and dessert offerings. The same month, Pizza Marketplace reported that in Canada, Boston Pizza would soon drop all “industrially-added trans fats” from items on its menu, and would also add 14 new items, six of which were to be designated with the “Health Check” symbol to help customers identify healthful food choices. A new Kids Menu would introduce more trans-fat-free choices for children, too.

Nearly four decades after the first franchised location opened in western Canada, Boston Pizza appeared poised for continued growth in locations and revenue, with more than 300 active locations systemwide, franchise agreements in place for additional restaurants in Canada and the United States, and a corporate strategy for expansion that was both deliberate and ambitious.

Pamela Willwerth Aue

PRINCIPAL OPERATING UNITS

Boston Pizza International Inc. (Canada); Boston Pizza Restaurants, L.P. (United States).

PRINCIPAL COMPETITORS

Eastside Mario’s Restaurant; Pizza 73; Rock Bottom Restaurants Inc.; California Pizza Kitchen Inc.; Red Robin Gourmet Burgers Inc.; Uno Restaurant Holdings Corporation.