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Published: Sunday, 11/28/2010

Going for a bigger slice: Toledo-based Marco's Pizza expanding aggressively

Marco's Pizza wants to become America's next big pizza chain.

Driven by the vision of Jack Butorac, Jr., the Toledo company has grown to 228 stores in 17 states and the Bahamas, up from 146 stores five years ago. The company expects to have 293 stores by the end of next year.

Mr. Butorac, chief executive of Marco's Franchising LLC, said that's just the beginning of an aggressive growth strategy for Marco's, founded in 1978. Franchisees have committed to help open more than 1,200 stores within the next 10 years, and the company aims for thousands more.

"I'd be happy at 3,000," said Mr. Butorac, whose company, which has its headquarters at 5252 Monroe St. in Toledo, had systemwide sales of $102 million last year. "I'm not greedy."

Marco's is the 23rd-largest pizza chain in the nation based on 2009 sales, according to PMQ Pizza Magazine, a leading trade journal. Mr. Butorac wants the firm to become the fourth-largest in the nation by 2017. That spot now is held by Detroit-based Little Caesars Pizza, which had 2,600 stores and sales of $1.13 billion last year.

The largest U.S. chain is Dallas-based Pizza Hut, with $5 billion in 2009 sales and nearly 7,600 restaurants. Domino's Pizza of Ann Arbor and Louisville-based Papa John's are in second and third place, respectively.

Mr. Butorac knows it will be a challenge to overtake larger pizza companies. But he is confident Marco's can gain momentum as more people become familiar with the company's food through its newer stores. "It's just a matter of time," he said.

Andrew Abernathy, associate editor of PMQ Pizza Magazine, said such ambitions are lofty, but not impossible to achieve.

Bill Meier moves a pallet of supplies to be shipped out of the company's distribution center on Holland Road in Maumee. Bill Meier moves a pallet of supplies to be shipped out of the company's distribution center on Holland Road in Maumee.
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The number of pizzerias nationwide has grown steadily in the past two years to nearly 65,000 in March, 2010. That could be because pizza is a wallet-friendly food, he said.

"In this economy, when consumers have less disposable income, pizza's price point fits," he said. "No doubt Marco's has found this too and [they] are running with it."

Marco's Pizza was founded by Pasquale "Pat" Giammarco, who owns all 20 Toledo-area Marco's Pizza restaurants. In 2004, Mr. Butorac led an ownership change that formed Marco's Franchising, the parent company for the brand. Mr. Giammarco originally was a shareholder in the franchising firm, but he sold his shares to Mr. Butorac in 2007. Mr. Giammarco now has an advisory role within the company.

The company had about 130 stores when Mr. Butorac joined it. Both men said the challenges of franchising made Mr. Giammarco reluctant to open more stores during the years he ran the company.

"I was very picky," Mr. Giammarco said. "Jack is obviously more confident in being able to train the newcomers to a level he expects."

Mr. Butorac previously was the chief executive of Tumbleweed Inc., a chain of Southwestern restaurants based in Louisville. He was part of an investment group that bought the chain from its founder in 1995. He also was as an executive with the former Chi-Chi's Mexican restaurants and the Fuddruckers burger chain.

Considering Mr. Butorac's background, Mr. Giammarco said he is confident in the expansion strategy.

"I want to sell more pizzas than anybody in any market, and Jack wants to sell more franchises," Mr. Giammarco said. "Our philosophies merge together in a way that's beneficial to all of us."

Mr. Butorac said Marco's is ripe for growth because the company has two critical elements: quality food and operating procedures that allow its products to be made consistently throughout its stores.

The company operates a distribution center on Holland Road in Maumee that provides ingredients for most of the company's franchises, mainly in Ohio, Michigan, and Indiana.

Mr. Butorac said Marco's success will hinge on the company's determination to maintain the original values and procedures that Mr. Giammarco set forth.

“I've just taken what [Mr. Giammarco] created and built more of them,” he said.

Marco's growth has come through such franchisees as Remi Tessier of Valdosta, Ga. He opened a store in Warner Robins, Ga., in April and plans to open two more in the next year.

Mr. Tessier is what the Toledo company calls an area representative — a person who is responsible for overseeing franchises in defined territories while helping to open more stores.

In this role, Mr. Tessier also makes sure operations run smoothly at two other Marco's franchises opened by other owners in central and southern Georgia.

“I'm basically the eyes and ears for the franchise, and I get compensation for doing that,” said Mr. Tessier, who receives a portion of the franchise royalties from other stores in his territory.

Because the chain didn't exist in his area before this year, attracting customers has been a challenge, he said.

Still, he said, the store's sales have exceeded projections.

“We offer a high quality with a fair value price,” Mr. Tessier said.

“We're not going to be the cheapest on the block as far as our pricing, but you're going to get excellent quality for what you're paying for.”

Marco's Pizza has about 35 area representatives nationwide who are responsible for most of the company's planned 1,200 store openings.

Mr. Butorac said this model has allowed Marco's to plan for rapid growth in such areas as Cincinnati, Texas, Virginia, northern California, and Oklahoma.

The expansion also has been spurred by efforts to help franchisees with financing, something Mr. Butorac said was critical when the credit markets tightened in 2008.

Marco's has partnerships with such banks as Main Street Bank in San Antonio and Bancorp Bank in Delaware, which provide financing for Marco's franchisees.

Opening a Marco's store costs between $174,000 and $369,000, including a franchise fee, equipment and supplies, and owner training. Franchisees also pay a royalty fee of 5.5 percent on gross sales.

Marco's has created additional programs to ease franchisee financing. For instance, it set up a fund that will give $50,000 to a franchisee's lender if he or she defaults on the loan. The fund, which is derived from royalty payments and has not been used, has made some banks feel more comfortable with lending to franchisees, Mr. Butorac said.

Franchisees who join the rapidly expanding network learn that they need to stick to the chain's recipe for success.

Owners who follow Marco's standard procedures find that the company will go above and beyond to help them, Mr. Butorac said.

But if a franchisee deviates from policies? “I have the hammer if someone doesn't follow the procedures,” Mr. Butorac said.

One unidentified franchisee learned that lesson when he used his own seasoning blend on pizzas at three stores.

That's a faux pas because Marco's aims to maintain Mr. Giammarco's recipes at all of its franchises.

Then, that franchisee stopped offering pizza delivery, so Marco's closed and then bought out the stores and sold them to someone willing to follow the rules, Mr. Butorac said.

Such emphasis on keeping Marco's principles consistent will help the company gain ground against larger, better-known pizza chains, the company leader said.

“What Pat created is special,” Mr. Butorac said.

“I want to make sure our employees believe it. If they believe it, the consumer will know it.”

Contact Sheena Harrison at:

sharrison@theblade.com

or 419-724-6103.



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