Telepizza

TP has grown from a single store in 1988 to the largest pizza chain in Spain. At the end of 1997 they had 399 stores and an estimated market share of 62% in Spain. But what made it so successful? There are several reasons for that in the TP concept:

• Management philosophy: TP only hires the best people and puts a lot of effort on development. This leads to an outstanding commitment and high flexibility. People who prove to be capable climb up or become even franchisees (Franchisees are therefore capable and skilled as well)

• Human resources: TP has a modern three step approach with recruiting, training and evaluating. They try to match the managers’ mentality to the TP strategy.

• Workforce Challenges: Unlike the competitors TP did not try to make pizza delivery as easy as possible. In order to cope with a high employee replacement, TP instead sought to upgrade both its entry-level employees and the responsibilities they handled. Together with performance measurement systems, employees could be evaluated.

• Growing sales through service: TP came up with new methods to satisfy customers. Furthermore, employees got trained on acting in customers favour.

• Brand building and quality: TP builds up a distinct identity in the customers’ mind by consistent clothes, mopeds and pizza names. Furthermore TP sells side dishes as well. TP offers promotions and a Kid’s Club. They are centrally producing their dough in Spain and buy the other ingredients from two or three manufacturers in order to ensure consistent quality and taste.

Apart from the new and appropriate management concept, market features were in favour of TP, because the pizza delivery market in Spain was fairly underdeveloped.

2. Assessment of growth options

Telepizza has an almost obsessive commitment to growth. At the moment, they have three possibilities, namely expansion within the domestic pizza market, international expansion or introducing new concepts as TeleGrill.

• Domestic Expansion: Growth has been at 20% p.a. during the last years and Telepizza is positive for an ongoing growth by comparisons to the US-market. TP knows on the other hand that market penetration is going to be a tough job since there is already a TP in every Spanish city with more than 20.000 inhabitants,. Hence, domestic growth can mainly be obtained by upsizing the volume per order.

In my opinion, domestic growth should be pursued but not as a primary means of expansion. The exhibit 7 in which European and US average pizza spending is shown makes clear that approaching Spanish pizza demand to US demand is not a sound way for estimates. Unlike the US, Spanish people still have a traditional food culture and will not eat this much pizza. Therefore it can be expected that the Spanish market will be saturated at a certain point.

• International Expansion: International Expansion is primarily orientated at market size, cultural proximity, language and geographic proximity. Telepizza wants to acquire possible targets and grow organically when no targets are available.

International expansion seems to be the main reasonable source of growth to me. Even if TP sticks to the expansion policy, they can easily further expand in South America and penetrate more European markets that a quiet similar to Spain.

• New Concepts: Telepizza wants to introduce new concepts in markets where TP had proved successful. TP has recently opened TeleGrill which offered chicken and Rips. TP hopes to introduce a new concept each year.

Even though it seems to be easy to repeat the TP success it is highly questionable in my eyes if TP does not cannibalize itself. Due to their strong brand and the similarities between TG and TP, people might think they still eat at TP when eating at TG (and even if they do not, they still eat fast food). Since people like variety, it could be a hard task to keep up with growing expectations by establishing new brands.

пÑ" In my opinion and because of the above named reasons, TP should try to further grow domestically but especially intensify foreign growth by taking the concept to other countries with really вЂ?new’ growth opportunities.

3. Implications of recommendations for franchising strategy

As we have seen, the TP success is largely due to the family-style management and the franchising strategy that often made good and trustable employees to franchisees afterwards. This is more or less a success guaranteeing factor because the people that run the store are familiar with the Telepizza strategy and are furthermore reliable people. Hence, further growth in the domestic Spanish market is completely

...