You received the following letter for your advice column in the local paper: Dea

Question

You received the following letter for your advice column in the local paper:

Dear Dr Accountant,

What do you think about this situation? My boyfriend refuses to meet me for lunch until I admit I am wrong about this, which I’m NOT. The other day, when we went to lunch at the Pizza Place on campus, he noticed that they had raised the price of Hawaiian pizzas. He got mad because he thinks the only reason they raised the price is to increase their profit. I told him that, first of all, their profit might not increase. And second, he was basing his conclusion on some assumptions that might not be true and if he would just open up his mind, he might see how those assumptions are affecting his conclusion. Well, the he got mad at me. I’m really upset because I know I’m right and because now I have to buy my own lunch. Will you please explain why I’m right? I know he’ll listen to you (he reads your column daily). Until you answer, I’ll be…

‘Starving’

Write a response to ‘Starving’.

Explanation / Answer

My Response to Starving:

Pizza Industry in 2016 at a Glance

If Americans could choose to eat only one food for the remainder of their lives, it would have to be pizza. According to statistics from Franchise Disclosure Documents, Americans eat on average 100 acres of pizza daily or 350 slices per second. In addition, 93 percent of Americans eat at least one pizza per month, easily making pizza the number one dinner choice in the United States. With such mass appeal, it is no surprise that this $40 billion industry (measured by sales per year) makes up approximately 17 percent of all restaurants in the nation.

Pizza was first introduced in the early 1900s near Chicago and in New York when Italian immigrants first arrived in the United States. Then in the mid 1900s, GI’s from WWII began streaming back from Italy, bringing with them a renewed craving for pizza. Although the pizza industry was highly expansive at this time, all of the pizzerias were still individually owned restaurants. It was not until 1958, when the Pizza Hut franchise launched, that this industry truly began to escalate. In 2012 there are approximately 65,000 pizza franchises in the country.

A Sizzlin’ Comeback!

During the recent economic recession, the price of key pizza ingredients like cheese and wheat began to skyrocket, elevating the costs of production and making a large hit to the pizza industry. In an attempt to restart sales, pizza franchises offered a variety of promotions, altering their marketing strategies through websites and other forms of social media. For instance, in 2009 Pizza Hut launched a deal which allowed customers to choose any set of toppings and crust for $10 per pizza. Innovative trends like this one soon proliferated across the pizza industry, reviving the industry after its decline during the recession.

Additionally, Americans have started to trend away from dining out and towards take out and fast-delivery foods. These quick-service pizza concepts allow people to take advantage of the new technologies that are available at home, all the while subtracting the extra fees from tips, drinks, and gas.

What could feed a hungry family better than a heaping stack of hearty pepperoni pizzas? Amongst the population of American families with children 18 and under, 68% of their occasions with pizza involve children. In fact, a recent Gallup Poll demonstrates that children of ages 3 -11 claim to prefer pizza out of all lunches and dinner selections. However, despite this concentration on American families, pizza has proved to be popular among people of all ages up to 65.

One of the greatest highlights of the pizza industry is its high versatility and customization for consumer preferences. A survey conducted by the PMQ Pizza Magazine indicates that 86% of pizza lovers would choose their own toppings rather than order a pre-customized pizza.

Four BIG Opportunities!

The “Big Four” pizza franchises, Pizza Hut, Domino’s, Papa John’s, and the Little Caesars franchise, reign over the U.S. pizza industry. According to the NPD Group, nearly fifty percent of pizza sales in 2009 came from franchise chains, 64 percent of which were attributed to sales from these top four franchises. During this year, fourteen percent of total sales came from Pizza Hut, compared to seventeen percent from franchises out of this “Big Four,” illustrating the impact that these popular franchises have on the overall industry.

Innovation

Pizza franchises are always inventing new innovations to the traditional pizza concept, consistently keeping their business up to date with current trends in the food industry. For instance, frozen pizza has become increasingly popular in American households. Approximately two thirds of American households have at least one frozen pizza in their refrigerator. Overall, sales of frozen pizza increased to $5.3 billion in 2009, as franchises like Kraft Food and Schwan Food Co. adapt their products to the most popular trends (i.e. breakfast, Mexican, and healthier foods).

America’s social media network is more involved than ever before, and pizza franchises are taking advantage of this recent trend in their marketing strategies. For example, nearly one half of pizza eaters will search for recommendations on blog sites or Twitter before deciding on their purchase. Additionally, ordering online and through text messaging is a youth-targeted trend that is expected to continue to expand in the future. In fact, it is estimated that only sixteen percent of people in the United States have ever placed a pizza order online.

All in all, pizza franchises are constantly on their toes, revamping their business strategy to maintain long term profitability. As long as this sense of innovation never runs dry (and so far, there is no evidence that it will) the pizza industry will continue its success in the future.

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