Grab a Slice of the Pizza Business

The growth of "craft pizza" is hot, but can it survive for very long?

Jan 21, 2014 at 5:15PM

The build-your-own, fast-casual pizzeria niche is a relatively new, fast-growing concept that is getting backing from some big names in the business -- and a bunch outside of it, too. And while I think it will ultimately prove a short-lived fad, we're likely to see a lot of news about it in the meantime.

PizzaRev recently announced that it signed agreements with four franchisee groups to build out restaurants in California, Nebraska, both Dakotas, and Utah. This would be in addition to the five original Cali shops and the first franchised restaurants it built in Minnesota last year, where partner Buffalo Wild Wings (NASDAQ:BWLD) is domiciled. The wings-and-beer pub took a minority stake in the pizza shop last year and planned to have two stores operational by early 2014.

The hallmark of the build-your-own pizza is the use of fresh ingredients and the specially designed ovens that cook it in minutes. Not that your corner pizza place isn't really offering most of that already, but there's no standing in the way of a craze, and the biggest industry chains are making sure they cash in on it, or at the least blunt the impact the new restaurants will have on their own performance. Taking a cue from the local pizzerias, both Pizza Hut and Domino's Pizza (NYSE:DPZ) are offering "hand-stretched" dough in a bid to give their crust an imperfect appearance and make their prepared pies look more artisanal. 

The Yum! Brands (NYSE:YUM) chain is going the extra step by offering pizza-by-the-slice and testing out a new restaurant model that will feature an open seating environment evoking the fast-casual style, along with digital menu boards and deck ovens. New chef-inspired menu items will also be available. Similarly, Domino's wants to renovate its entire 11,000-store chain globally by 2017 to reflect a more upscale dining ambiance at a cost of up to $50,000 per existing restaurant and as much as $350,000 for new ones.

The concept has been styled after Chipotle Mexican Grill (NYSE:CMG), which pioneered the fast-casual, "better food" style of cooking, so much so that it decided to do for pizza what it did for burritos by partnering with the small fast-casual shop Pizzeria Locale.

In short, we're see the quick-serve pizzerias moving toward the more structured operations of the industry stalwarts who, for their part, are seeking to make available more quick-and-ready products. Because the fast-casual space has been the fastest-growing, least affected by the recession niche in the restaurant space, there's a rush to a great muddle.

There's a battle being waged for the consumer's palate among traditional pizza joints; the large, established restaurants represented by Domino's, Pizza Hut, and even mall denizen Sbarro; and the trendier venues like PizzaRev. If I were to make a bet on who will be most successful, I'd still wager on Domino's. Ever since it began its turnaround, I've found CEO Patrick Doyle's forthright manner refreshing. I mean, how do you not like a guy who said his product was horrible and set out to change that perception by making a better-quality pizza?

But we're likely to see more such nouveau shops pop up and competing concepts try to tie in to the trend before it's all over. Unlike craft beers, I don't see craft pizza as having much staying power.

Make mine to go!
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Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Buffalo Wild Wings and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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