ZPizza International Inc. said it will add 50 “tap rooms” at some of its current locations and all new restaurants expected in a franchising push that comes as the 28-year-old chain responds to competition from fast-casual and build-your-own competitors that have blossomed in recent years.
The Newport Beach-based company plans the tap rooms—dining rooms with alcohol service—through the end of next year, said Chief Executive Chris Bright.
“It’s ZPizza, plus appetizers, plus beer and wine,” said Bright, “and our main focus going forward.”
The planned expansion would grow the chain by 40% to 50%.
ZPizza has 104 locations—96 in the United States, and eight overseas spread over Vietnam, South Korea, and the United Arab Emirates. It recently signed a deal to add five locations in Bahrain, Bright said.
All but eight of the 104 restaurants are franchised.
Three of those eight are company-owned. The other five are owned by Sid Fanarof, who founded ZPizza in Laguna Beach in 1987.
There are 23 locations in Orange County with 276 employees combined.
The chain posted annual systemwide sales of about $50 million last year, up about 1% from 2013, according to Bright. Orange County performed much better, with a 10.4% increase.
Sacramento, Other Markets
The first tap room is open at a ZPizza in the Sacramento market, and three more are planned there.
Others are slated for Tucson, Ariz.; Los Angeles; Silver Spring, Md., and Columbus, Ohio.
The first wave of tap rooms will be a mix of existing restaurants and newly franchised locations.
The one in Los Angeles is planned for inside a Residence Inn, Bright said.
Bright and a business partner are the new Sacramento franchisees. He owns part of the parent company, in addition to his role as chief executive.
All new tap room locations will be franchisees, most of them new locations, he said. Of the 50 tap rooms it projects through 2016, a maximum of just 10 are likely to be expansions of current restaurants.
The franchise fee for the new units is $30,000, with a 5% royalty and 2% marketing fee.
Total startup costs are $400,000 to $500,000—about 40% more than the older units were.
Average unit volumes for current locations are about $540,000 systemwide and $675,000 locally.
The target for restaurants with tap rooms is $1 million, Bright said.
Newer, Older Chains
The flood of fast-casual pizza has challenged the industry—several chains, including Rancho Santa Margarita-based Pieology Pizzeria Inc., are nearing 50 locations after just a few years of operation.
Older OC-based chains such as John’s Incredible Pizza Co., also in Rancho Santa Margarita, and Oggi’s Pizza and Brewing Co. in San Clemente showed flat systemwide sales for three years, Business Journal data show.
“Pizza has been a stable, mature segment, and with fast-casual and [other trends], you now have disruptive elements in pizzerias,” Bright said.
Size, Design
New locations will be two-thirds larger than the old-style sites and incorporate the fast-casual component into the chain’s lunch, takeout and delivery focus.
Current stores are about 1,200 square feet and draw a strong lunch crowd, but “at dinner, we’re empty,” Bright said. “We’re in affluent areas, and diners want full service.”
The new tap room locations are about 2,000 square feet and aim to attract young families with children.
“They wouldn’t take the kids to a Buffalo Wild Wings, but they like the general atmosphere,” Bright said.
The design has a “modern industrial look”—think reclaimed wood—and exploits the chain’s reputation for good ingredients.
“We can’t be healthy pizza—nobody can—but we can do taste.”
Bright also plans to capitalize on the growth in the popularity of craft beer.
The new locations are using a self-serve beer system from Lake Forest-based iPourIt Inc. The equipment and software lets ZPizza swipe a customer’s card to open a tab, charge customers by the tenth of an ounce, and rotate products at any time.
“When we drain a keg, we can put a new beer in,” Bright said.
The company plans to add ordering through smartphones, but not with an app.
Instead, it plans to integrate a mobile-optimized website with restaurants’ point-of-sale systems and a quick-response, or “QR,” code that identifies which table is the source of the order.
Bright said it means ZPizza doesn’t have to develop a full-blown app or buy tablets for its tables.
