There’s a pizza war brewing between two Dallas-based chains, Pizza Hut, and a much smaller and newer entrant, Pizza Patron. It is not a battle of equals, but it is interesting to see how competition plays out.
Pizza Patron markets directly to low-income Latinos with an eye toward low-end take-out pizza market, similar to Little Caesar’s Pizza, which is big in other parts of the country. Pizza Patron locates its franchises in largely Hispanic areas, serving a population that is growing more quickly (good growth prospects) than any other due to illegal immigration and higher birth rates. Marketing exclusively to Latinos is a bold move even in this age of rapid demographic change.
Pizza Patron was in the news recently with a program publicity stunt aimed squarely at Latinos called “Pizza por Pesos.” As expected, this generated outrage among some Americans and probably some mirth among the ascendant Mexican population here in Texas.
Interestingly, Pizza Patron seems to draw much of its identity from Pizza Hut. In the image above, notice how both the Pizza Hut roof / hat and the Pizza Patron chulo hat seem to share a similar shape. Also, notice the similar fonts and the similarities between the dotted “i” and the accented “o”.
The pizza business is very competitive because it’s such a simple model: cheap ingredients, simple kitchen prep, minimal retail space, and low labor costs. All this equals healthy margins if you make a good product and can market it.
Anyway, Pizza Patron advertises a $4.99 pizza. This is their hallmark. They call it “Pizza Lista”, ready pizza. This means low-income families can enjoy a quick, cheap dinner. Pizza is the ideal family food; you just call it in and pick it up. I’m guessing Pizza Hut is eager to make it difficult for competitors like Pizza Patron because these cheap prepared pizzas compete directly with them and their efforts to expand their franchises, which do really well in poor areas despite the premium price (Pizza Hut is not cheap). The other day I noticed that Pizza Hut launched a program called “Pizza Mia” here in Dallas. The approach is very similar to Pizza Lista: 3 one topping pizzas for $5.00 each. The part that I found really clever was the name: Pizza Mia. In Spanish, of course, this means My Pizza, but the best part is that Pizza Mia also sounds Italian. It’s a two for one phrase, although in researching, I noticed that several other restaurants already go by Pizza Mia, so maybe they saw the same angle and stole the idea for themselves.
It’ll be interesting to see if Pizza Patron keeps growing and how Pizza Hut addresses competition on their flank.
Franchise cost comparison:
- Pizza Patron – Franchise fee: $20,000 Basic royalty: 5% gross sales #. Total start up cost: $122,800 to $176,050.
- Pizza Hut – Franchise fee: $25,000 Start-up cost: $218,500 to $1.3 million Basic royalty: 6.5% #
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