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Struggling Pie Five closes 5 units, plans new prototype

Struggling Pie Five closes 5 units, plans new prototype

Parent Rave says ‘right-sized’ design, new menu items show promise

Rave Restaurant Group Inc., parent to the Pizza Inn buffet chain, continues to struggle with its 7-year-old Pie Five Pizza concept, closing five more units in the most recent quarter and seeing same-store sales decline 6.4 percent.

Dallas-based Rave was on the leading edge of the fast-casual pizza expansion, debuting its first Pie Five in 2011, but the brand has faced sales headwinds, closures and franchisee lawsuits over the past two years.

The segment has seen increased competition from such fast-growing brands as Pasadena, Calif.-based Blaze Fast-Fire’d Pizza and Bellevue, Wash.-based MOD Pizza. Blaze increased unit count 37 percent, to 237, in 2017, and MOD Pizza grew its unit base by 58.8 percent, to 297, in same period, according to Nation’s Restaurant News Top 200 data.

“The Pie Five brand faced many challenges in the past year,” said Scott Crane, Rave CEO, in a Monday call with analysts, “but the recent quarter show the trends are improving.”

The 73-unit Pie Five concept has introduced new options, such as a low-carb cauliflower crust, 14-inch shareable pizzas, calzones in one location, and sandwich melts. Crane said the new products have increased guest frequency.

Bob Bafundo, who was promoted last week to Rave president, said, “We have been very encouraged by the recent response to new menu offerings.”

“We believe the sales will improve in future quarters, as these new revenue streams continued to expand,” Crane said. The company has been selling off company-owned Pie Five restaurants. At the end of its 2018 fiscal year, Rave owned one Pie Five as compared with 13 at the end of its 2017 year.

Bafundo said the company recently introduced a new Pie Five prototype that it calls the “Goldilocks” layout.

“It’s a right-sized model that factors in current labor and real estate costs in the fast-casual industry,” Bafundo said. “It offers reduced startup costs and a competitive return for franchisees at the unit level.”

The prototype is aimed at speed and simplicity, he said, with “a limited menu and an emphasis on building off-premise sales through carry out, online ordering and third-party delivery.”

The first such location is expected to open in Garden City, Kan., in October, he added.

For the fourth quarter ended June 24, Rave’s net income swung to a profit of $3.3 million, or 21 cents a share, from a loss of $1.1 million, or 11 cents a share, in the same period last year. Revenues declined about 47.2 percent, to $2.8 million, from $5.3 million in the prior-year quarter.

Pizza Inn domestic same-store sales increased 2.5 percent in the quarter. Rave total same-store sales increased 0.4 percent in the fourth quarter.

The company opened three new Pizza Inn Express, or PIE, units in the quarter, including a kiosk at the Fort Lauderdale, Fla., airport. The express concept was introduced in December as an option for convenience stores, airports, shopping malls and other nontraditional locations.

“PIE was introduced as a complement to the existing Pizza Inn model and is quickly gaining traction with our guests due to its convenience and with our operators due to its low startup costs,” Bafundo said. “It also now gives Rave a business model for virtually every footprint between 50 and 5,000 square feet.”

Rave, founded in 1958, has more than 280 restaurants.

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless

TAGS: Finance
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