Business

BOSTON PIZZA PARTY

A chain that began in Edmonton rules the burbs

ROB ANNANDALE September 5 2005
Business

BOSTON PIZZA PARTY

A chain that began in Edmonton rules the burbs

ROB ANNANDALE September 5 2005

BOSTON PIZZA PARTY

Business

A chain that began in Edmonton rules the burbs

ROB ANNANDALE

AH, EDMONTON. You’ve given Canadians so much: the Gretzky-era Oilers, the West Edmonton Mall and... Boston Pizza. That’s right, Boston Pizza. The name may sound as New England as the Kennedys and clam chowder, but its origins are actually as Albertan as cattle and crude. And like its native province, Boston Pizza’s on a roll.

Gus Agioritis, the company’s founder, came to Canada in 1958 as a sailor who jumped ship in Vancouver with only the clothes on his back and $26 in his pocket. He chose Canada because it had “a good reputation as being soft with refugee types like me,” he says. After six years working in various jobs for up to 20 hours a day, Gus opened the Boston Pizza and Spaghetti House in Edmonton in 1964. He says he settled on that tag for the simple reason that the fame of the Bruins and Red Sox made it easy to remember. As Agioritis once put it, his creation was “a Canadian company with an American name operated by Greeks serving Italian food.”

The combination worked like a charm. By the time he retired in 1978, the business had grown to 42 restaurants across Western Canada. It was the company’s very success, however, that had made Agioritis realize it was time to move on. “It was a good thing we sold,” he says. “New blood can do a better job.” In 1983, long-time franchisees Jim Treliving and George Melville found investors willing to put up the $3.8 million needed to take over the company. By 1997,

the two had bought out their silent partners, and today they control a business whose Canadian sales exceeded $430 million last year. “George and Jim got a helluva price for it but they’ve done an excellent job,” says Agioritis. He has no regrets about

selling, only pride in what the company has become. “It’s my creation, like a kid,” he beams. “You always love your kid.”

And there’s plenty to love: with over 200 outlets nationwide, Boston Pizza now touts itself as the largest casual sit-down dining chain in the country, bigger even than Swiss Chalet. The company’s roots may be firmly in the West (its main headquarters are in Richmond, B.C.), but much of the expansion taking place today is in less familiar territory. July saw the opening of a Boston Pizza in Laval, the first in Quebec. There are also 29 locations in the U.S., from Alaska to Texas (though none in Massachusetts), and even one in Mexico.

As for world conquest, plans are under way. Australia and Britain, “where fran-

WITH over 200 outlets now operating, it has become the largest ‘casual, sit-down dining’ chain in the country

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it took 32 years to open the first 100 stores in Canada but only eight for the next 100, with the 300th location planned by 2010—is increasingly taking Boston Pizza out of its western stronghold and into Ontario’s crowded, hyper-competitive market, prompting Silgardo to wonder if the company isn’t moving “a little too fast.” And there are also some broader economic trends that could affect Boston Pizza’s profitability over the long term. If real-estate costs continue to rise, particularly in Ontario, further expansion could become more difficult, warns Silgardo. Furthermore, he says that everrising oil costs could begin to squeeze consumers’ disposable income, forcing them to head to more downscale, fast food establishments such as McDonald’s, or even to stop eating out altogether.

But Melville feels good about the future. Even in uncertain economic times, he believes Boston Pizza’s prices—hardly at the top end, but not at the bottom—put it in a good position to catch people who are moving up or down an income bracket. As for overexpansion, he says it’s “obviously a consideration.” But he points once again to the company’s research, which is designed to ensure new locations don’t take business away from existing franchisees. After all, Canada’s a big country, and things are just getting started east of the Prairies. So, what comes after Quebec? Well, why not Boston? I?il

chising is mature and Western concepts are known,” hold obvious appeal, says Melville. Although more planning is needed for areas beyond these culturally similar countries, he and Treliving intend to have a strategy developed by the fall.

Robert Silgardo, consumer products analyst at Dundee Securities Corp., attributes much of the company’s success to a varied menu, reasonable prices and carefully researched location choices. The success or failure of a particular Boston Pizza, according to Melville, depends on three time periods: lunch, dinner and late night. So it’s essential to find an environment that will provide a market at those times. If there are no businesses in the area, lunchtime sales will suffer. The same applies to latenight business if there are no movie theatres or other youthoriented establishments nearby.

And, perhaps surprisingly, the presence of competitors can be an asset. “I’d like to think that people will eat at Boston Pizza every night, but that’s not realistic,” says Steve Clayton who, along with Anil Kapur, is the franchisee of three locations in the Toronto area and another currently under construction.

In his view, nearby competition “creates a destination” in the minds of people looking for a meal.

Boston Pizzas have traditionally been situated in the suburbs of large cities or in smaller centres. Of the 10 outlets in the Greater Toronto Area, for instance, only two are in the city itself, and both are well away from the downtown core. The lower real-estate costs help keep the overhead down, according to Silgardo, and the availability of open space facilitates the construction of stand-alone buildings that conform to the company’s image. In fact, in the U.S., where the small number of Boston Pizzas makes large-scale marketing campaigns impractical, look and location are the keys to creating brand awareness with the public, says Melville. But perhaps the company’s greatest strength is knowledge of its customers’ needs. The franchisees realize they’re “not catering to urban consumers who want a fancy meal,” says Silgardo.

The results continue to be encouraging. In the second quarter of2005, the company enjoyed a 7.3-per-cent increase in sales over

the same period in 2004. That’s close to triple the industry average of two to three per cent, according to Silgardo. Distributions to shareholders rose 8.3 per cent, and overall revenue climbed by 18.4 per cent.

Impressive numbers—but they may also hint at danger on the horizon, according to Silgardo. He sees the company becoming increasingly dependent on expansion to generate higher profits. There is a risk, in his view, of saturating the market. This expansion—

BOSTON Pizza

understands its appeal, and it’s ‘not catering to urban customers who want a fancy meal’