Venerable pizza chain Mountain Mike’s is rolling east. Two years ago, the company only had two restaurants outside of California, said Jim Metevier, president and chief operating officer of the company. Now, it has development deals in eight states, reaching as far east as Texas.
The expansion has come alongside record-setting sales growth for the brand. Total sales grew 24 percent year over year to over $250 million in 2021, while same-store sales grew 15 percent. Executives at the company attributed the growth to the strength of digital sales channels and promotions, such as the brand’s partnership with the San Francisco 49ers and its limited-time heart-shaped pizza.
The task, in Metevier’s eyes, is simple: Get the pizza into people’s mouths. Then, they’re hooked.
Franchisee Jim Smith said the brand’s all-you-can-eat lunch buffet provided a great opportunity for people to try the pizza. “For a very low risk of $8.50 you can try it, and then you’re paying full price on a Friday night,” he said. And the strength of the heart-shaped pizza helped make Valentine’s Day a “top five sales day.”
Smith is the Oregon area developer for Mountain Mike’s. He bought into the system in 2017, shortly before Chris Britt and Ed St. Geme acquired the company, and now operates four locations in the state.
Friends since their college days at Stanford University, Britt and St. Geme owned 43 Burger King restaurants through their Fire Grill company, selling to Tom Garrett’s GPS Hospitality in 2014. The two bought Mountain Mike’s Pizza in conjunction with Levine Leichtman Capital Partners in 2017. Levine Leichtman recently sold its stake in the brand to the two co-CEOs.
Britt said the biggest change they’ve made since acquiring the company was to “bring the brand into the current century.” That’s meant getting online, with a presence on third-party delivery apps and aggressive digital marketing.
Some franchisees balked, initially, at the high fees third-party delivery apps charge, said Britt, prompting the franchisor to pilot the service to prove it could drive incremental business. “The DoorDash customer is not necessarily the Mountain Mike’s mobile customer,” he explained, and third-party services get their food in front of a new group of potential customers.
There are some economic factors at play, too. Britt said they’ve seen less price sensitivity among third-party customers. And the pizza business is big on discounts, while DoorDash orders “have no discounts associated with them,” which makes the fees easier to stomach. It helps, too, that the company has its own delivery fleet. Mountain Mike’s isn’t dependent on third parties to meet delivery demand.
The early pivot to digital helped the brand adapt quickly to COVID-19 lockdowns, and digital sales made up 40 percent of all sales for 2021. Smith said pre-pandemic sales at his restaurants were split evenly between dine-in, takeout and delivery. Now, he’s running at about “10 to 11 percent dine-in,” with significant gains in takeout business.
While Mountain Mike’s is adapting to business realities, it isn’t giving up on dine-in. A new store design rolled out in late 2020 is 3,000 square feet and features a private party room. “We’ve discussed if we should go down that delivery/carryout model,” Smith continued, but “I think you lose your heart by doing it.”
Smith, who opened two restaurants during the pandemic, said he built both with big dining rooms. He put a temporary wall in the first one, though, to make the restaurant feel less “cavernous” and “empty.” He expects dine-in will recover in time and thinks he’ll gain more in dine-in than he loses in off-premises when it happens.
The Newport Beach, California-based chain’s customers are front running its expansion. Britt said the brand gets a lot of excited messages from California ex-pats in places such as Texas, saying they’re excited to see a hometown favorite appear near their new home. “That happens very consistently across social media, direct responses,” he said.
“We’ve always thought about this as a regional brand,” continued Britt, but given its success, “you could now say this has true national potential.” It isn’t in any particular hurry to hit all 50 states, though. Metevier said the focus is on building up Mountain Mike’s presence in existing markets.
“We want to be very careful about who we partner with in these states,” he explained. They’re looking for “proven restaurateurs,” with established businesses to build out their presence with multi-unit deals, and the odd owner-operator to help fill in the gaps.
Mountain Mike’s has 120 franchisees with an average tenure of “10 to 13 years,” said Britt. That depth of experience, coupled with franchisor support, has helped the brand weather the worst of the labor and supply chain crunches hitting the industry. Smith said corporate has been quick to shuffle ingredients between geographies, making up for shortfalls with surplus products in other states, and has been good about finding approved alternatives when no surplus can be found.
While Mountain Mike’s 2021 performance has been impressive, there was a lot of anxiety going into the year, said Britt. “When you’re coming off of COVID-19 and seeing same-store sales at 8 percent and system sales at 15 percent, you’re thinking, how are you going to comp on that?” They’re wondering the same thing, now, although the path to success is clearer.
The brand’s biggest challenge this year is labor. “We can’t plan around that,” said Britt. Beyond keeping restaurants staffed and running effectively, he said getting franchise locations open outside of California is the most important success metric.