Jacmar Companies

NEW MILLENNIUM, NEW IDENTITY, 2000–04

FORGING AHEAD WITH A NOD TO THE PAST, 2005 AND BEYOND

IN THE BEGINNING

The Jacmar Companies’ primary claim to fame is its Shakey’s Pizza chain, with several dozen restaurants sprinkled throughout the United States. The original Shakey’s Pizza concept was created by Sherwood “Shakey” Johnson and “Big Ed” Plummer in 1954. Sherwood Johnson earned the nickname “Shakey” after contracting malaria during World War II. Like everything else in life, Johnson treated his “shakes” with humor and did not let the infirmity keep him down. Partnering with Plummer, the two opened a small hole in the wall at 57th and J Streets in Sacramento, California, serving beer and providing live entertainment. The entertainment was mostly Johnson, who loved to play Dixieland jazz on his piano.

With the profits from the first few nights, Johnson bought pizza makings for his patrons. The beer, pizza, and jazz went over big and word of “Shakey’s” spread beyond the Sacramento area. As more money rolled in, Johnson expanded the menu and Plummer furnished the parlor with an eclectic mix of items from old-fashioned checkered tablecloths to goofy, irreverent signs on the walls.

As the popularity of Shakey’s grew, Johnson and Plummer opened a second pizza parlor in Portland, Oregon, in 1956, then decided franchising was the way to go. The partners began selling franchising rights in 1957. A few years later, as Shakey’s Pizza locations began opening in cities up and down the West Coast, a young entrepreneur named William “Bill” Tilley, was looking for an opportunity to get into the burgeoning foodservice industry. He had created a company called Jacmar in 1960 to oversee his interests and was looking for opportunities. Tilley set his sights on opening his own Shakey’s franchise and signed on with Johnson and Plummer, opening his first Shakey’s Pizza in 1964.

As Tilley got his Shakey’s off the ground, so did hundreds of others. In 1967, by the time Johnson decided to retire, there were more than 250 Shakey’s locations in the western United States. Johnson sold his half interest in Shakey’s for $3 million to Colorado Milling and Elevator Company, and Plummer reportedly sold his interest a year later for triple the price. As the founding fathers of Shakey’s rode off into the sunset, Tilley’s fortunes were rising and Shakey’s seemed unstoppable. The first Shakey’s outside the United States opened in 1968, in Manitoba, Canada.

MAJOR COMPETITION

By the 1970s Shakey’s “old-tyme” appeal had attracted the interest of the oil-rich Hunt family. The Dallas-based Hunt Resources International bought Shakey’s Pizza, Inc., in 1974. The chain had more than 300 locations throughout North America and had spread from the California coast all the way into the Midwest. The following year Shakey’s went global with new restaurants opening in Asia. The concept proved wildly popular as new Shakey’s pizza parlors popped up along the Pacific Rim.

Stateside, the foodservice industry, and the pizza segment in particular, had become hugely profitable. Shakey’s enjoyed major success and was, for a time, the nation’s largest pizza franchise with over 400 units. It was also the first pizza restaurant of its kind, offering fun, food, and music, and appealed to kids and parents alike. Yet the very aggressive Pizza Hut, owned by soft-drink giant PepsiCo, became a powerhouse, rolling out locations nationwide. Smaller, regional chains began popping up, and some started cutting into Shakey’s bottom line: Round Table Pizza, a fellow West Coast chain, and two Texas-based franchises, Mr. Gatti’s and Pizza Inn, gathered momentum and planned to open new locations in and around California.

With its corporate parent concerned about little more than the cash Shakey’s was generating, the chain soon found itself in the midst of a serious pizza war. Mr. Gatti’s and Pizza Inn were gaining popularity, as was newcomer Godfather’s Pizza out of Omaha, Nebraska. Pizza Hut, too, continued to build new restaurants across the country. By the time Pizza Hut tested a new product called “pan pizza” at the end of the decade, Shakey’s was still holding its own, but its foundation had begun to crumble. The Hunt brothers, much more interested in minerals than pizzas according to some, had seemingly neglected the restaurant chain and provided little if any corporate guidance.

The 1980s brought a new double-edged threat: the advent of delivery and two direct competitors for Shakey’s family-friendly fare. Delivery was less dangerous to Shakey’s than ShowBiz Pizza Time and Chuck E. Cheese. While most pizza parlors offered carryout and some provided neighborhood delivery, Domino’s turned the industry on its ear by delivering its pizzas anywhere and fast. Shakey’s had always been about relaxing and enjoying a meal in a comfortable, eclectic atmosphere. Sales were not severely impacted by the wildly popular Domino’s Pizza, but ShowBiz and Chuck E. Cheese were attracting kids in droves.

To ward off competition, Shakey’s updated its restaurants, added more menu items and buffets, and increased the “fun” quotient for kids with more games and amusements. Unfortunately, ShowBiz and Chuck E. Cheese were newer and bigger, and became the rage. Shakey’s did, however, offer something ShowBiz and Chuck E. Cheese did not have, parent-friendly perks such as alcohol and jazzy music. Shakey’s was also fortunate in another way: ShowBiz and Chuck E. Cheese were busy competing against each other, giving the older pizza chain a little breathing room.

In 1984 the Hunt brothers agreed to sell Shakey’s Inc. after the company had failed to bring in a profit on sales of $162 million for the fiscal year, which ended in September. Two of Shakey’s largest franchisees, Gary Brown and Jay Halverson, bought the ailing pizza chain of about 300 restaurants for $17 million. The new owners closed underperforming stores as Shakey’s struggled to keep even a tiny slice of the pizza market. Pizza Hut completely dominated the industry, while ShowBiz, Chuck E. Cheese, and Mr. Gatti’s all capitalized on the kid-friendly “eatertainment” segment.

COMPANY PERSPECTIVES

Our mission is to profitably provide the industry’s best quality and service to help our customers succeed, while maintaining a reputation of integrity and an appreciation of our customers, vendors, and employees.

Within five years, after many Shakey’s locations had succumbed to their rivals, the franchise company’s American holdings, which numbered about 215 restaurants and reportedly had sales of $130 million, was sold to Singapore’s Inno-Pacific Holdings, Inc. Inno-Pacific owned numerous Shakey’s restaurants in Asia, where the chain continued to thrive, and had bought a majority stake in Shakey’s International, the international franchising rights segment of the chain, the previous year.

TRANSITIONS

Jacmar’s pizza holdings, which consisted of more than a dozen Shakey’s locations clustered in Southern California, had survived the multiple ownership changes of its franchiser and continued to do well. Part of its success came from Jacmar’s other business unit, its Food Distribution Service (FDS). The distribution service was making a name for itself along the West Coast. Jacmar FDS provided a wide range of foodservice items to its clients which included four- and five-star restaurants, fast-food outlets, and delicatessens. Jacmar provided table linens, flatware, paper products, janitorial needs, as well as a variety of prepared foods (frozen, chilled, or dry), fruits, vegetables, and dairy products.

Jacmar also had its own delivery fleet and professionally trained staff available six days per week. Business had grown so much FDS had announced plans to build a new distribution center. The 82,000-square-foot state-of-the-art facility would be built in Irwindale and service a region stretching from Santa Barbara to San Diego and everywhere in between. Construction was completed on the distribution center in 1999.

For Shakey’s owners, history began repeating itself as new corporate parent Inno-Pacific Holdings was far more interested in its Asian assets than the franchisees in the United States. Former owners Brown and Halverson had closed numerous unprofitable stores and pushed new initiatives to strengthen the remaining pizza parlors. While same-store sales had stabilized, everything began sliding downward after Inno-Pacific’s acquisition. Shakey’s lagged far, far behind Pizza Hut and Domino’s, as both had thousands of locations and revenues in the billions. Other pizza chains grew by mergers or acquisitions; ShowBiz and Chuck E. Cheese became CEC Entertainment, while Mr. Gatti’s and upstart Little Caesar Enterprises bought smaller chains.

Even though Shakey’s had managed to hold on in California and a few other western states, a national identity crisis had robbed the brand of its charm. There was little cohesion among franchisees, and no one, including Inno-Pacific Holdings, seemed to know what to do. Was Shakey’s a family-friendly sit-down restaurant or an “eatertainment” unit that served pizza? As the new century approached, customers and franchisees needed answers.

NEW MILLENNIUM, NEW IDENTITY, 2000–04

The dawn of the 2000s brought Shakey’s to a critical juncture: sink or swim. Many franchises were closing or bought by rivals, but Jacmar’s restaurants, the largest franchisee with 19 locations, remained profitable. Jacmar also bought into another West Coast chain, Chicago Pizza & Brewery Inc. The Huntington Beach-based casual dining chain boasted Chicago-style pizza, sandwiches, appetizers, and a wide selection of beer.

KEY DATES

1954:: Sherwood “Shakey” Johnson and “Big Ed” Plummer open the first Shakey’s pizza parlor.
1956:: A second Shakey’s Pizza opens in Portland, Oregon.
1957:: Johnson and Plummer begin franchising Shakey’s.
1960:: William H. “Bill” Tilley forms Jacmar in California.
1964:: Tilley opens his first Shakey’s Pizza franchise.
1967:: Johnson retires and sells his half interest in Shakey’s to Colorado Milling and Elevator Company for $3 million.
1968:: Plummer sells his stake for $9 million as the first Shakey’s opens in Canada.
1974:: Hunt Resources International buys Shakey’s Pizza, Inc.
1975:: The first Shakey’s Pizza locations open in Asia.
1989:: Shakey’s domestic operations are bought by Inno-Pacific Holdings, Inc.
2000:: Jacmar acquires a majority stake in Chicago Pizza & Brewery Company.
2002:: Jacmar unsuccessfully floats a buyout offer for Shakey’s Pizza, Inc.
2004:: Jacmar buys Shakey’s U.S. operations from Inno-Pacific Holdings.
2007:: Redesigned Shakey’s Pizza restaurants open in California and other states.

In December 2000 Jacmar increased its stake in Chicago Pizza & Brewery and became the publicly traded company’s largest shareholder. Chicago Pizza & Brewery, like its Shakey’s holdings, were already serviced by its food distribution unit. In 2002 Jacmar approached Shakey’s corporate parent, Inno-Pacific Holdings, about buying back the pizza chain’s domestic operations. The offer was reportedly ignored and Jacmar’s chairman, Bill Tilley, vowed to let its Shakey’s franchise license expire rather than keep working with Inno-Pacific.

Two years later, in 2004, when Jacmar again broached the subject of buying Shakey’s U.S. operations, Inno-Pacific was much more receptive, since numerous franchisees had filed suit for breach of contract. Jacmar bought Inno-Pacific’s U.S. holdings, 63 Shakey’s locations, for $4.5 million. Inno-Pacific held on to its own Shakey’s restaurants, which numbered about 200 in Japan, the Philippines, and Singapore.

After the acquisition Shakey’s USA became a wholly owned subsidiary of Jacmar Companies. Jacmar President James A. Dal Pozzo announced plans to revitalize the Shakey’s brand, to straighten out the legal issues of its current franchisees, and to either lure back previous owners or attract new ones. “Generations of Californians remember Shakey’s as a place their parents brought them for food, fun, and entertainment,” Dal Pozzo told Nation’s Restaurant News (September 12, 2004). “We plan to reinvigorate the brand, refresh our menu, and update our stores so generations to come can make their own memories at Shakey’s.” While most Shakey’s locations were in California, a few survived in Arizona, Georgia, Idaho, and Washington.

FORGING AHEAD WITH A NOD TO THE PAST, 2005 AND BEYOND

Whether the once mighty Shakey’s empire could be reconstructed remained to be seen. Jacmar’s other interests continued to be successful; both its Food Distribution Service and the Chicago Pizza & Brewery (renamed BJ’s Restaurants Inc.) were profitable. Shakey’s, however, had the toughest competition since kid-friendly, entertaining pizza parlors had become very popular. The Texas-based chains Mr. Gatti’s and Chuck E. Cheese were direct competitors, building large complexes filled with games and amusements.

While Shakey’s had no plans for huge playground-like units, the chain was remodeling both the inside and outside of its eateries. A new 6,000-square-foot prototype, according to Nation’s Restaurant News (July 18, 2005), was on the drawing board. The new building provided seating for 220 patrons and would cost about $850,000 to construct. Inside, Shakey’s wanted to return to its roots, playing on the nostalgic style of the original Shakey’s restaurants with checkered tablecloths, silly signs, and staff dressed in striped shirts, black bowties, and straw hats.

Shakey’s rebirth was spearheaded by Arthur Gunther, former president of Pizza Hut, who came on board as a consultant and interim CEO in February 2005 until the chain’s new chief executive, Tim Pulido, was hired by Dal Pozzo and Tilley in March 2006. Pulido, a former executive with both Pizza Hut and McDonald’s Corporation, believed Shakey’s prospects for the future were excellent, especially with Jacmar’s solid foodservice industry experience behind it.

Nelson Rhodes

PRINCIPAL SUBSIDIARIES

Jacmar Food Distribution Services; Jacmar Pacific Pizza; Shakey’s USA, Inc.; BJ Chicago LLC.

PRINCIPAL COMPETITORS

DPI West, Inc.; CEC Entertainment Company; Pizza Hut Shamrock Foods, Inc.

Jacmar Companies

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Jacmar Companies

IN THE BEGINNING

MAJOR COMPETITION

TRANSITIONS

NEW MILLENNIUM, NEW IDENTITY, 2000–04

FORGING AHEAD WITH A NOD TO THE PAST, 2005 AND BEYOND

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

IN THE BEGINNING

MAJOR COMPETITION

COMPANY PERSPECTIVES

TRANSITIONS

NEW MILLENNIUM, NEW IDENTITY, 2000–04

KEY DATES

1954:: Sherwood “Shakey” Johnson and “Big Ed” Plummer open the first Shakey’s pizza parlor.
1956:: A second Shakey’s Pizza opens in Portland, Oregon.
1957:: Johnson and Plummer begin franchising Shakey’s.
1960:: William H. “Bill” Tilley forms Jacmar in California.
1964:: Tilley opens his first Shakey’s Pizza franchise.
1967:: Johnson retires and sells his half interest in Shakey’s to Colorado Milling and Elevator Company for $3 million.
1968:: Plummer sells his stake for $9 million as the first Shakey’s opens in Canada.
1974:: Hunt Resources International buys Shakey’s Pizza, Inc.
1975:: The first Shakey’s Pizza locations open in Asia.
1989:: Shakey’s domestic operations are bought by Inno-Pacific Holdings, Inc.
2000:: Jacmar acquires a majority stake in Chicago Pizza & Brewery Company.
2002:: Jacmar unsuccessfully floats a buyout offer for Shakey’s Pizza, Inc.
2004:: Jacmar buys Shakey’s U.S. operations from Inno-Pacific Holdings.
2007:: Redesigned Shakey’s Pizza restaurants open in California and other states.