When Sid Fanarof opened his first zpizza in 1986 in Laguna Beach, he never imagined he’d be sitting atop a 95 restaurant franchise.
The self-described bohemian started a pizzeria to incorporate the health-conscious living he partly picked up at a holistic teaching center in Big Sur, but he never intended to start a franchise.
“Having a restaurant is one business,” Fanarof said. “Having a chain is another business.”
Today zpizza’s franchised stores include one that just debuted in Saudi Arabia, and the chain has plans to open 300 more during the next five years.
This year, Zpizza International Inc., which recently moved its headquarters from Newport Beach to Irvine, plans to open franchises at John F. Kennedy International Airport, Marine Corps Base Camp Pendleton in San Diego and a Houston airport.
Zpizza is opening the airport locations with Virginia-based SSP America Inc.
The chain does about $50 million in annual sales. Last year, sales increased 35% for the zpizza stores that were open for more than a year. Fanarof and his partners collect a franchise fee and a percent of sales.
The company began franchising in 2001, when Fanarof had four restuarants. He now wholly owns seven, most in Orange County, including the original in Laguna Beach.
The franchised stores are a partnership with Fransmart LLC in Irvine. Chris Bright, founder of Fransmart, is president of Zpizza International. Fanarof is chairman.
Fransmart typically takes a smaller chain, grows it and sells it to a larger company.
It grew Qdoba Mexican Grill from one restaurant to 85 and then sold it to San Diego-based Jack in the Box Inc. It also grew Chesapeake Bagel Bakery from 12 to 180 and sold it to AFC Enterprises Inc. in Atlanta.
In five years, zpizza could be worth nine figures, Bright said. Then it could look for a suitor, he said.
Before Bright approached Fanarof, he was a zpizza customer, which is how the company gets many of its franchisees.
Creative Pizzas
Bright said he was attracted to the creativity of the offerings.
Among other duties, Fanarof develops the menu, which consists of gourmet-style pizzas, traditional pizzas, pasta and salads.
“Sid loves to be creative. He loves to break the mold and start over,” Bright said. “He’s also pragmatic.”
Fanarof experiments with ingredients to create pizzas such as gorgonzola cheese and pears and chicken curry sauce with roasted yams.
Fanarof has breads in the works and offers a gluten-free pizza.
He also attends major food shows to find unusual ingredients to play with for his pizzas.
Fanarof said he tries to keep costs down.
“I don’t want to do pizza where people have to pay $30 for their pizza,” he said.
Fanarof used to use a large distributor that had only two different kinds of artichokes, one at $56 a case, the other at $40 a case. He found artichokes from Peru that are $30 a case.
He tries to use organic ingredients, such as tomatoes for his sauce and flour, when it’s cost effective.
Zpizza uses brick ovens to cook its pizza.
“Our best paid and our most skilled employee mans the oven,” Fanarof said. “There’s an art to cooking on bricks.”
The company also is adopting a more “green” business approach, from store construction to its carryout bags.
“We’re in the process of reshaping our image to be greener, to match the food,” Fanarof said.
Fernando Vargas, a former world champion boxer who owns a zpizza in Los Angeles, has the first green certified restaurant.
The company also is working with Newport Beach-based CDM Co. to come up with a reusable and dishwasher safe pizza tray, Bright said.
To improve business during the busy times, zpizza is testing call center ordering. Instead of a zpizza worker answering the phone, a call center, Mission Viejo’s Restaurants on the Run Inc., will take the order and send it to the appropriate store.
Good Locations
The downturn hasn’t been all bad for business, but it has slowed expansion, Fanarof said. Zpizza was opening four restuarants a month. Now, it’s opening two a month. It closed about four last year.
But the new franchisees are more credit worthy and the locations are better and cheaper, according to Fanarof.
“We’ve gotten locations that are unbelievable,” he said. “We’re in very affluent areas. We market to affluent, upscale, educated areas.”
He recently scouted locations in Hollywood. What used to go for $8 a square foot now is $4, he said. For him, it’s a happy consequence of a slower commercial real estate market. One of the restaurants it’s opening on Bleecker Street in Manhattan is renting for half the price it did a year ago, he said.
Early on, Fanarof wasn’t as keen on franchising as he now is.
“Chris (Bright) made it sound easy,” Fanarof said. “It was very hard.”
The company had problems with a few of the franchisees.
In the beginning, some stores opened in the wrong locations, Fanarof said.
“We allowed some franchisees to open against our better judgment,” he said.
Also, some of the franchisees weren’t good managers. They wanted to buy a store and not run it themselves, Fanarof said.
“They think they’re just going to collect money,” he said. “There isn’t a business that doesn’t take work.”
The company doesn’t disclose annual sales for each store, but Fanarof said the restaurants he solely owns do about $600,000 a year in sales.
His own restaurants’ sales dipped in the first two months of the year but were up in March, he said. The company is down about 1.5% for the year through February, he said. The fast casual restaurant industry, zpizza’s segment, is down about 20%.
“It’s taken a while to get to the point where we’re good at what we do,” Fanarof said.
