The go-to pizza shop of mall food courts across the country started as a small Italian grocery in Brooklyn run under the strict eye of "Mama" Sbarro. Read on for 10 facts about the company Michael Scott once called his "favorite New York pizza joint.
Carmela grew up in Italy working in a Naples butcher shop. In , she moved her husband, Gennaro, and three sons to Brooklyn; Gennaro and two of the boys went to work in local Italian shops. Mama, with needle and thread in hand, saved the money she made sewing doll's clothes in order to open their own "salumeria"—an Italian grocery store.
As the Sbarros were developing their growth strategy, real estate developers were building shopping centers at a furious pace to serve the expanding suburban customer base. In the 20 years from to , the number of shopping centers nationally grew from about 10, to 37,, according to the International Council of Shopping Centers.
Shopping at malls became a leisure-time activity, and mall developers incorporated food courts into their plans to keep customers within the facility. For the Sbarros, food courts appeared to offer the perfect opportunity to combine their dine-in focus with quick service while reaching a dependable flow of customers, and they took it. Under the food court concept, shoppers were able to select their meal from a variety of restaurants and take the food to an open, common dining area.
Sbarro's food court restaurants were small, occupying about to 1, square feet, and contained only enough space for kitchen and service areas. The menu was more limited than at the larger, sit-down units, and there were fewer staff, usually between 6 and 30 employees. The decor of all Sbarro units incorporated the green, white, and orange of the Italian flag, and many had replicas of cheeses, salamis, and prosciutto hams hanging from the ceiling, harking back to the company's origin as a delicatessen.
Mario headed the company as chairman and CEO. Tony became president and chief operating officer, and Joe was named senior executive vice-president.
Carmela was vice-president and continued to make her cheesecakes. Mario used the money to pay down bank loans made to finance the expansion and to develop the franchising side of the business.
By mid, Sbarro had grown to company-owned restaurants and 63 franchises, with units in the United States, Puerto Rico, and Canada. Business Week ranked Sbarro 21st on its list of America's hot-growth companies, and the company agreed to let Marriott Corporation open 20 franchises on selected highways, testing the Sbarro concept beyond the shopping mall.
The company was opening between 65 and 70 restaurants a year. Wanting to increase the number of franchise operations, Mario started a program in offering managers with three years' seniority the opportunity to buy their own franchise with percent company financing. During the first year, four managers took advantage of the program.
In the first Sbarro restaurant opened in Europe, in the London suburb of Woking. The company was growing by nearly 16 percent a year but was still operating much as it had 20 years earlier. When a problem arose at any outlet, the manager could pick up the phone and call Tony. The brothers needed better information systems and operating controls for the more than restaurants the company owned if they were to reach their goal. They hired several computer specialists familiar with the restaurant industry to set up new information systems.
To improve operations, they established a new regional and district structure and brought in 20 managers from such larger chains as McDonald's and Roy Rogers.
Problems quickly developed as resentment grew among longtime Sbarro managers and employees toward new forms and rigid rules. Sales per restaurant began to drop. Earnings for the first quarter in were one-third lower than expected. The Sbarros realized they had made a mistake going outside and not promoting their own employees. Mario and his brothers corrected the situation; during the second quarter of they fired 14 of the new managers and began promoting Sbarro managers to district and regional positions.
How did it transform into just another victim of the suburban shopping mall decline, alongside KB Toys, Waldenbooks, Sam Goody, and Aeropostale? And is there anything the company can do to fight back, and reemerge a stronger, cheesier, saucier version of its former self? These are the reasons Sbarros are slowly vanishing nationwide. The biggest problem Sbarro faces is the changing way in which Americans are doing their shopping.
Sbarro's entire strategy was intrinsically tied to its shopping mall-only locations; while you could visit a Domino's Pizza or a Pizza Hut restaurant anytime you felt like, Sbarro locations tended to be located strictly in food courts. The strategy worked fine, in the days when people would spend hours of their lives aimlessly wandering around gigantic, sprawling shopping malls, peeking in windows, throwing coins in the fountain, avoiding eye contact with pimply members of the opposite sex, and committing petty acts of vandalism.
A stop at Sbarro fit into a day spent shopping quite naturally, since the mall was the only place to eat Sbarro's unique combination of slowly congealing cheese and oil-pooled pepperoni, and no trip to the mall would feel complete without a pit stop in the food court for a slice of pizza.
However, with overall mall traffic on the decline , and Americans doing more and more of their shopping online, in big box stores, or in smaller specialty boutiques, Sbarro's sales are also faltering.
Most major corporations carry some amount of debt, as a means of managing their balance sheets and maximizing the potential return for investors. Under normal conditions and when applied carefully, a company carrying a debt balance isn't always, in itself, a bad thing. However, when that debt load gets too high, and when it coincides with several unlucky years of declining sales, a company can get in real trouble due to its decreased ability to move nimbly in response.
Sbarro's debt load was as unhealthy as much of its product. When business was booming, it wasn't an issue, but as sales started to slip, the company began a free-fall that ultimately landed it in bankruptcy court, twice. Your local pizza joint has some of the best profit margins in the restaurant business, which can reach as high as 20 percent. After all, the ingredients are cheap: A little flour, yeast, water, cheese, and toppings are all that you need to get started.
Even after the owner of a pizzeria pays for rent, heat, propane, insurance, and a few mildly interested staff members, those are still great numbers. But what happens when the cost of these core ingredients starts to creep upward? Let's look at cheese, for example, since it can be one of the costliest ingredients for a pizza chain.
In , the cost of mozzarella cheese suddenly spiked by 16 percent , with cheddar cheese rising by about 25 percent overall. That may not seem like much, but for a massive chain like Sbarro or Papa John, for whom cheese cost represents percent of their overall food cost, this can have a dramatic impact on profitability. In order to stay in the black, many pizza places have little choice but to raise prices, which can be tough for customers to swallow when sales are already in decline.
In the s, one of the things that gave Sbarro cachet was the exclusivity of its product. If you wanted to get down on some greasy pizza, you had to find a pizza place — or, you know, your local food court.
Since then, however, pizza has become so ubiquitous that it's almost impossible to get away from. Grab a tank of gas at the local gas station, and you can probably add a slice of pizza to the experience for just a buck or two. The frozen food section of the supermarket is clogged with heat-and-serve pizzas, emblazoned with the faces of celebrities like Oprah Winfrey or Rachael Ray. And coming back from subpar pizza is tough.
By Mura Dominko. Read more. Read This Next.
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