Little Caesar International, Inc.

views updated

Little Caesar International, Inc.

2211 Woodward Avenue
Detroit, Michigan 48201
U.S.A.
(313) 983-6000
Fax:(313) 983-6197

Private Company
Incorporated: 1959
Employees: 90,000
Sales: $2.05 billion
SICs: 5812 Eating Places; 6794 Patent Owners & Lessors

Using the same pizza recipe it started with in 1959, this family-run business has grown to become the third largest pizza chain in the United States. Little Caesar International, Inc.’s interests include Little Caesar Enterprises, Inc.; Olympia Arenas, Inc.; the Detroit Red Wings hockey team; Blue Line Distributing; the Detroit Tigers Baseball Club; and the historic Fox Theatre. The primary business, a chain of carry-out pizza restaurants, has been built on the concept of “two pizzas for the price of one” and other innovative production and marketing techniques. Little Caesars has over 4,500 franchise units in the United States, Canada, England, and Puerto Rico.

The business was established in 1959 in Garden City, Michigan, by Michael and Marian Hitch. Born during the Great Depression, Michael served in the United States Marine Corps from 1947 to 1951 and played on the Detroit Tigers baseball club’s farm team from 1951 to 1955; a leg injury cut his professional sports career short. Hitch sold awnings for the next four years, then founded Little Caesars in 1959.

At the time, the restaurant offered spaghetti, fried chicken, and frenen fries, as well as pizza. Little Caesars found a niche in retail pizza by offering quality at low prices, and opened a second restaurant in just two years. In 1962 the first franchise was opened in the Detroit metropolitan area.

By the end of the 1960s, Little Caesars had built or franchised over 50 restaurants, including one in Canada. During that decade, delivery was a service of most Little Caesars restaurants, but in 1971 the chain moved to carry-out only. The restaurant set itself apart from many competitors by using only natural ingredients, including high-gluten flour in the pizza dough, specially grown California tomatoes, and grade A cheese. Little Caesars still prides itself on the use of all-natural spices, as opposed to the synthetic flavorings used throughout the pizza industry.

The 1970s were years of innovation and phenomenal growth for Little Caesars. In 1971 the company began its two-for-one “Pizza! Pizza! (Two Great Pizzas! One Low Price.)” concept and made it a permanent feature of the company’s marketing campaigns in 1975. The marketing strategy has forced competitors in some heavily saturated areas to mimic the two-for-one offer. In 1977 Little Caesars also introduced drive-through windows at its quick-serve locations, and in 1979 developed a pizza conveyor oven that sped up the production of pizza and other baked items.

During the 1980s Hitch continued Little Caesars’s rapid growth and marketing innovation. In 1980 the chain had 226 units with sales of $63.6 million. By mid-decade annual sales had grown more than five-fold to $340 million. The company achieved successful expansion through an emphasis on several simple concepts: market saturation, two pizzas for the price of one, and carry-out only. Approximately 98 percent of Little Caesars units were 1,200- to 1,800-square-foot units offering take-out only—overhead and maintenance on these shops is considerably lower than that of competitors who offer sit-down or even delivery-only service, because the restaurants don’t require waiters, waitresses, busboys, dishwashers, or delivery personnel.

In 1984 the company built its 500th restaurant, then saw the 1,000th Little Caesars just two years later. By that time, the company was not only well established in 38 states and parts of Canada, but had also built an outpost in Great Britain. Marketing innovations included the first college campus restaurant, at the University of Oklahoma, and the first hospital restaurant, in Detroit at Mt. Carmel Mercy Hospital.

The Ilitches also began to develop peripheral interests in the 1980s. They purchased the Detroit Red Wings hockey club in 1982. Then in a slump, the Red Wings club improved markedly after the Hitch family acquired it. The team captured the Norris Division Championship in the 1986-87, 1987-88, and 1991-92 seasons. In 1992 Financial World magazine reported that the Red Wings were the most valuable franchise in the National Hockey League (NHL). The percent of capacity attendance at Joe Louis Arena (the Red Wings’ home ice) has been among the highest in the NHL.

The Ilitches also own the Red Wings’ farm team, the Adirondack Red Wings of Glens Falls, New York. The family’s sports/ entertainment holdings were augmented in 1988 with the purchase of the Detroit Drive arena football team. The team won three out of four Arena Football League championships between 1989 and 1992.

The family acquired the Red Wings’. home ice as well in 1982. Olympia Arenas, Inc., the management company for Joe Louis, Cobo, and Glens Falls arenas and Detroit’s Fox Theatre have been successful business ventures for the family. In the 1980s Olympia established itself as a trend-setter among arenas when it brought in Little Caesars and Everything Yogurt concessions and separated beer service from all other concessions for speedier service. In 1992 the Meadow Brook Music Festival, an outdoor entertainment center at Oakland University in Rochester Hills, Michigan, was added to the Olympia Arenas group. The Fox Theatre has become a special Hitch family project. They purchased the 5,000-seat historic theater in 1987 and invested $50 million in its restoration. The theater was reopened in November 1988 and was ranked the nation’s top grossing theater—in sales and attendance—by Performance magazine that year. The theater’s schedule includes a variety of concerts, the annual Variety Broadway series, and restored classic films. The Fox expects to reach the 4-million-patron mark during the 1992-93 season. The theater’s success is also measured by the other businesses its restoration has drawn to the formerly declining area of Detroit in which it is located.

Little Caesars moved its corporate headquarters to the Fox Office Centre, adjacent to the Theatre, in 1989. The 10-story office building houses over 500 employees, a child development center, a gift shop, a small convenience shop, and two restaurants. Both restaurants were opened in 1990. America’s Pizza Cafe, created by Michael Hitch, features thin-crust pizzas baked in a wood-fired oven, gourmet pastas, and desserts. Tres Vite, a bistro-style restaurant, was conceived by Hitch and nationally known chef Jimmy Schmidt. Hitch and Schmidt have also collaborated on Cocina del Sol, with a Southwestern menu, and Buster’s Bay, a seafood restaurant, both in the Detroit metropolitan area. Their fourth restaurant, a northern-Italian eatery called Stelline, was set to open in Troy in May 1993.

In recent years Little Caesars has experimented with the basic carry-out, two-for-one pizza concept. Variations on the basic unit include restaurants with limited seating, drive-through units, and arena concessions. In a joint venture with Kmart Corp., Little Caesars built over 400 Pizza Stations in Kmart stores in 1992. The self-serve restaurants featuring pasta and vegetable salads, soups, fresh fruits, and the standard pizza, sandwich, and hot pasta, constituted almost half of Little Caesars’s 1992 unit growth. The company has also introduced new items like Crazy Bread, Chocolate! Chocolate! Ravioli! Ravioli!, Caesars Sandwiches, and Baby Pan! Pan! lunch pizzas.

Little Caesars marketing and promotion efforts have focused on value (“Pizza! Pizza! Two Great Pizzas! One Low Price!”) and quality (“When you make pizza this good, one just isn’t enough.”). According to Roña Gindin writing in Restaurant Business, the company invests a minimum of five percent of its sales on advertising, and franchises (which constitute 75 percent of all units) spend a comparable percentage on local and corporate promotions.

In 1988 the company dropped W. B. Doner and Co. as its advertising agents and awarded the account to Cliff Freeman’s division of Saatchi & Saatchi DPS Compton. Freeman had already made a name for himself with Wendy’s International, Inc.’s “Where’s the Beef?” ads. Freeman’s seven 30-second spots constituted the company’s first network television campaign. The ads featured comical situations that have become a hallmark of Little Caesars promotions.

A spot called “Yes, But” employed a carload of non-English-speaking characters who learned the phrase “Yes, but” by discovering the hidden costs behind the competition’s two-pizza deal. Ads in the early 1990s used outrageously long, rubbery “cheese pulls” (melted cheese that stretches between two pieces of pizza) to accentuate the quality and quantity of cheese on a Little Caesars pizza. In one ad, when “big brother” hands his high-chair-bound little sister a piece of Little Caesars “Cheeser! Cheeser!” pizza that has been stretched to its limit, she’s yanked from the room, down the hall, around the kitchen table and out the door into the waiting arms of her grandparents. The ads have been credited with Little Caesars’s sales’ doubling from 1988 to 1991 to $1.7 billion.

Little Caesars’s marketing and promotion are also accomplished through community programs sponsored by the company. Hitch himself has volunteered time to such organizations as the Easter Seal Telethon, the Michigan Special Olympics, the National Association for the Advancement of Colored People, and a variety of organized children’s sports.

In 1985 Hitch established the Little Caesars’s Love Kitchen Foundation, two mobile restaurants that serve pizza to the needy. The two units travel throughout the United States and Canada feeding over 100,000 people annually. In 1988 the Love Kitchen received President Reagan’s Citation for Private Sector Initiatives, and a Presidential Citation for Volunteerism was awarded to the program under the Bush administration.

In 1992 the Hitches became the sole owners of the Detroit Tigers Baseball Club. Although some observers predict that the team will lose money for several years, the family notes that the acquisition “fulfilled a lifelong dream.”

The Little Caesars empire has strong family ties throughout. Hitch’s wife, Marian, and several of the children are involved with the family business. The Hitches say that all seven of their children have had a role in the success of the company. The family ties extend beyond the Hitches: Mike Hitch estimates that 85 percent of Little Caesars franchisees are relatives, with as many as three generations involved in the business. Hitch also claims that over half of the company’s corporate vice-presidents started out at work in the restaurants. He credits this close-knit network with Little Caesars’s rapid growth.

In the early 1990s, Little Caesars’s sales outpaced the industry’s growth by 24 percent; the company remains locked in a closely fought battle with its two largest competitors, Pizza Hut Inc. and Dóminos Pizza Inc. Little Caesars was named “Best Value in America” by Restaurants & Institutions magazine for the third year running in 1992.