Hungry Howie’s Pizza and Subs, Inc.

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Hungry Howie’s Pizza and Subs, Inc.

30300 Stephenson Highway, Suite 200
Madison Heights, Michigan 48071
U.S.A.
(248) 414-3300
Fax: (248) 414-3301
(800) 624-8122

Public Company
Incorporated: 1981
Employees: 6,000
Sales: $154 million (1997)
SICs: 6794 Patent Owners & Lessors; 5812 Eating Places

Hungry Howie’s Pizza and Subs, Inc. began in 1973 as a single carryout pizzeria located in Taylor, Michigan, a suburb of Detroit. By the end of the decade it had 12 stores. During the 1980s it began offering franchises and concentrated on opening new locations in Michigan and Florida. It established a niche for itself in a crowded pizza market when it introduced flavored crusts on its pizzas in 1985. In 1990 the company opened its 150th store, and by 1995 it had 300 locations. Only 25 years after the first Hungry Howie’s pizzeria opened, the chain had 375 locations and was ranked the ninth largest pizza franchise operation in the United States.

Early History

Steven E. Jackson (born November 1953), president of Hungry Howie’s, had his first experience in the pizza business in 1972, when as a teenager he worked as a delivery driver for a local pizzeria owned by James R. Hearn. He worked for Hearn for about a year before taking a job with Ford Motor Company while attending Eastern Michigan University (EMU). Jackson was studying to be an elementary school teacher, but as graduation approached in 1976, jobs for teachers were scarce. Looking for other opportunities, he contacted Hearn, with whom he had remained in touch.

Hearn had opened a successful pizzeria, which he called Hungry Howie’s, in 1973 in Taylor, Michigan, making him the founder of Hungry Howie’s. It was located in a former hamburger shop that Hearn had converted into a pizzeria. He described it as a “greasy 24-hour hamburger joint.” Hearn would later become Hungry Howie’s vice-president, secretary, treasurer, and director at various times.

Second Hungry Howie’s Opened in 1976

In 1976, just before he was about to graduate, Jackson approached Hearn and proposed they become partners and open a second store. In September 1976, Jackson left EMU, quit his job, and together with his wife Sarah opened the second Hungry Howie’s in Southgate, Michigan. The initial investment in the second store was less than $25,000.

Within the next five years, 12 more stores were opened in the metropolitan Detroit area. Many of these were opened by former employees of Hearn or by friends and family. Hearn and Jackson were involved as partners in some of the new stores, but not all of them.

During the late 1970s Hungry Howie’s experimented with offering ribs, chicken, shrimp, spaghetti, and ravioli. Jackson later described Hungry Howie’s in the late 1970s as a “shoot-from-the-hip” operation. “If somebody wanted to test a new product, we did. And we tested just about anything,” he said.

Hungry Howie’s was incorporated in 1981. By then, the company was focused entirely on pizza, subs, and salads. The trend in fast food restaurants was toward specialization. Hungry Howie’s found that other stores specializing in ribs, chicken, seafood, or pasta could do them better than Hungry Howie’s could, so the company returned to its specialty.

Began Offering Franchises in 1983

In 1982 the decision was made to start offering franchises. In January 1983 the first Hungry Howie’s franchise was awarded. Jackson was the driving force behind the decision to franchise. He perceived it as necessary for the company to grow. The Hungry Howie’s franchise package cost $50,000 to $65,000, which included a $5,000 franchise fee. Franchisees also had to pay a regional advertising fee of three percent and a graduated royalty fee, which started at two percent of sales in the first year and rose to five percent in the fourth year.

Around this time Hearn moved to Florida and began developing Hungry Howie’s there, leaving Jackson to develop the rest of the country. Hearn became president and director of Hungry Howie’s of Florida, Inc., a sub-franchise that oversees store operations and development in Florida. Hearn eventually developed 140 Hungry Howie’s locations in Florida.

Pizza Became Fastest Growing Fast Food Segment in 1984

In 1984 pizza passed hamburgers as the fastest growing segment of the fast food industry, according to a Restaurant Business survey. In 1985 franchise pizza sales totaled $5.7 billion and were expected to top $6.7 billion in 1986. Hungry Howie’s had 1984 sales of $11 million. In 1985 Hungry Howie’s posted sales of $16 million. It projected sales of $22 million in 1986.

Introduced Flavored Crusts in 1985

In September 1985, at the suggestion of a franchisee, Hungry Howie’s began offering flavored crusts on its pizzas. Sesame seed, garlic, poppy seed, rye, or butter flavors were offered. These proved quite successful. Almost immediately, more than half the pizzas sold in Florida had flavored crusts. Quarterly sales rose by ten percent. The company later added butter cheese, cajun, and “original” flavors.

Hungry Howie’s grew quickly, due in part to its two-for-one offers copied from Little Caesar’s “Pizza! Pizza!” campaign. The company was the first to offer two-for-one pizzas in Florida. Jackson told Crains Detroit Business, “At first people couldn’t even comprehend the concept. They’d say, ‘But I don’t want two pizzas.’”

The Florida restaurants averaged about $350,000 each in annual sales, and the metro Detroit area stores averaged only $250,000 each. The difference was due to the fact that the Detroit area was a much more competitive pizza market, with pizza giants Domino’s Pizza and Little Caesar’s headquartered nearby.

By mid-1986 Jackson and Hearn had opened 67 Hungry Howie’s restaurants, 33 of them in Florida and 34 in Michigan. Jackson operated out of a one-man office in Plymouth, Michigan, while Hearn had a similarly small office in Clearwater, Florida.

Most of the Hungry Howie’s stores were 1,000 to 2,000 square feet. They sold pizza for carryout and delivery. About 90 to 95 percent of the stores were owner-operated. Altogether, the stores had about 650 employees.

Hungry Howie’s Distributing Established in 1986

With the company’s rapid growth, the need arose for a commissary to control product consistency and pricing. Hungry Howie’s Distributing, Inc. was created for that purpose. The first distribution center was opened in Livonia, Michigan, in 1986, and that was where the company located its headquarters. It had about 25,000 square feet of space. A second distribution center was opened in Lakeland, Florida, in 1987. At the same time that the distribution centers were opened, procedures were standardized. Store layouts, signage, promotion, and hiring and accounting procedures were established, making it easier to manage the rapidly growing chain.

In 1986 the company was experimenting with several small, heated trucks that would visit factories and offices during lunch. About half of all the pizzas Hungry Howie’s sold were home delivered. The company charged $1.50 for delivery, a charge that Jackson claimed other pizza makers passed on to customers by increasing the cost of their other products.

Sales in 1987 were $31 million, up 40 percent from 1986. In 1988 the company opened its 100th location, with 52 of them located in the metro Detroit area. Hungry Howie’s strategy in Michigan was to open franchises in all of the major cities, a strategy it copied from Domino’s. Grand Rapids got its first Hungry Howie’s franchise in 1988. About 80 percent of the stores were franchises. Although most of the stores were located in Michigan and Florida, Hungry Howie’s also had franchises in Georgia, Colorado, California, and North Carolina. By this time Hungry Howie’s was offering seven different flavored crusts on its pizzas, and it was using that feature to distinguish itself in a crowded pizza market.

In 1991 sales reached $65 million, making Hungry Howie’s the 14th largest pizza chain in the country. It was still far behind the industry’s leaders. Pizza Hut had 8,000 restaurants and $5 billion in sales, Domino’s operated 5,000 stores, and Little Caesar’s had 3,950 stores. Hungry Howie’s had 3,200 employees systemwide. During the year the company introduced a desert pizza called Fruzza.

There were 210 Hungry Howie’s locations in 1992. The company operated 85 outlets in Michigan and 105 in Florida. Its plans for growth targeted strip malls, where the Hungry Howie’s stores would average 1,200 square feet. The ideal location was perceived as being sandwiched between a video rental outlet and a convenience store. Jackson noted in 1992, “Most of our sales are discount-driven. The two-for-one pizza has been very popular.” The company also planned to computerize its stores, using computer technology to track customer preferences and record addresses for mailing purposes.

Company Perspectives:

At Hungry Howie’s, we have combined the right ingredients and years of successful experience to create a superb, growth-oriented business operation. Our delicious, high-quality Flavored Crust pizzas, oven baked subs and salads uniquely position Hungry Howie’s in the pizza marketplace, allowing us to fully capitalize on the fastest growing segment of the food service industry.

Hungry Howie’s grew to 250 stores in 1993. Sales were more than $93 million. In 1994 sales were up 15 percent to $107 million and net revenue was $1.6 million. During the year Howie Wings were introduced.

Moved to New Headquarters in 1995

In 1995 Hungry Howie’s moved to a new headquarters and warehouse in Madison Heights, Michigan. With 50,000 square feet, it doubled Hungry Howie’s warehouse space and tripled the office space for its 50 corporate employees. The building was located right on 1-75 near 1-696. Jackson noted, “From a distribution standpoint, from that intersection, you can get just about anywhere from Grand Rapids to Toledo.” The 1-75 location also provided greater visibility for the corporate name. “It’s like a billboard,” Jackson said. Jackson once said the company’s growth strategy was to grow regionally along 1-75 and “then branch out slowly across the nation. That way, we’re not scattered all over.”

By 1995 the company was the llth largest carryout and delivery pizza chain. It had 282 stores in 13 states at the beginning of 1995 and planned to open dozens more. Its goal was to open 60 to 75 stores in 1995 and sustain a 20 percent growth rate. Jackson said, “The first 300 stores are the hardest. After that, it jumps—400, 600, 800.” Sales for 1995 turned out to be $125 million, with net revenue of $1.57 million.

The whole pizza industry was growing. Little Caesar’s now had 4,700 stores and Domino’s had 5,100 locations worldwide. Jackson did not believe, however, that the pizza market was saturated. He also was not counting on long-term loyalty from his customers. “You’re only as good as your next coupon,” he said. Positioning and promotion were the keys to success in the pizza business, according to Jackson. And Hungry Howie’s had done a good job of positioning itself with its array of flavored crusts.

Another element in Hungry Howie’s positioning was the fact that it charged for deliveries. That put it somewhere between Domino’s, with its free delivery, and Little Caesar’s, which did not deliver but offered a lower price. When Hungry Howie’s customers picked up their pizza, it was priced closer to that of Little Caesar’s. When the pizzas were delivered, their cost was closer to that of Domino’s.

In terms of new franchises, Domino’s and Little Caesar’s already had sold most of their prime territory. That made Hungry Howie’s more attractive to prospective franchisees, because the company had a wealth of territories available. To fuel future growth, Hungry Howie’s sold multiple-unit franchises that clustered units in a single market.

By 1995 the company itself owned none of its stores. Jackson and Hearn individually owned about 50 stores, and the rest were franchised. The company’s strong performance in the 1990s was attracting more qualified franchisees, and the company could afford to be selective. It also was achieving a higher profile through recognition awards. Entrepreneur magazine ranked Hungry Howie’s as the number two pizza carryout and delivery franchise opportunity in 1996 as well as one of the fastest growing franchises in the United States.

Opened 350th Store in 1996

At the beginning of 1996 Hungry Howie’s opened its first sitdown, buffet-style restaurant. It was located in downtown

Detroit. The franchise was owned by Jeffrey J. Rinke, Hungry Howie’s vice-president of marketing and product development, and Mark Mueller. Rinke came to Hungry Howie’s in 1987 from R.P.M., Inc., which was Domino’s largest franchise organization. Frustrated when he couldn’t acquire a Domino’s franchise, he was referred to Steve Jackson, who offered him a corporate-level position as well as the opportunity to have his own franchise. Rinke eventually opened a total of six Hungry Howie’s franchises.

At the beginning of 1996 Hungry Howie’s had more than 300 franchises in the United States and Canada. By the end of the year it had 354 in operation. Sales for 1996 were more than $140 million, with net revenue of $2.27 million. During the year Hungry Howie’s introduced its thin-crust and deep-dish pizzas.

By 1997 Hungry Howie’s had maintained a ten to 15 percent growth rate for a period of ten years. It had 375 stores by January 1, 1998. Jackson said that the company learned a lot and honed its competitive edge by growing up in the shadow of Domino’s and Little Caesar’s. After offering two-for-one pizzas for many years, Hungry Howie’s adopted a low-price marketing strategy for a single-pizza pickup.

Although most of Hungry Howie’s growth came through traditional stand-alone locations, it was exploring the possibility of future growth through nontraditional locations and co-branding. In mid-1997 it had two projects under construction with Burger King in Kentucky and California. It also had 12 nontraditional locations in convenience stores in Florida. It was negotiating to place an outdoor concession at Meadow Brook, an outdoor concert venue in Rochester Hills, Michigan.

In 1997 the company introduced a new, calzone-type sandwich that was made with fresh dough and oven-baked. The hot sandwich was offered with a choice of fillings: Italian; steak, cheese, and mushroom; ham and cheese; turkey; turkey club; pizza; and vegetarian. Hungry Howie’s called it an oven-baked sub.

Sales for 1997 totaled $154 million. Pizza Today ranked Hungry Howie’s as the ninth largest pizza franchise operation. Twenty-five years after the first Hungry Howie’s opened in Taylor, Michigan, the company was still growing.