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Famoso Neapolitan Pizzeria: A Case of Restaurant Marketing1 Marketing decision making is a collaborative process in Famoso Inc., comprising the marketing department and Famoso partners Jason Allard, COO; Justin Lussier, CEO; and Christian Bullock, Chief Business Development Officer. The commercial name of Famoso Inc. is Famoso Neapolitan Pizzeria or simply Famoso Pizzeria or Famoso. The headquarters of the company used to be located in Edmonton, Alberta, but is now located in Richmond, British Columbia. The company currently has several plans and challenges. It plans to continue to expand in Canada, particularly in Ontario and British Columbia. Management is also currently investigating the market potential for Famoso in the United States and management plans to start considering which other countries could provide opportunities for the Famoso business model. One of the company’s current challenges is the increase of year-over-year labour cost. From a marketing perspective, how can Famoso and its leadership seize those opportunities and minimize those challenges? Figure 1: http://www.famoso.ca/

1 Dr. Fernando Angulo-Ruiz ([email protected]), assistant professor at MacEwan University, wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. The author thanks Jason Allard, COO of Famoso Inc., for providing critical information to develop the case, as well as Ray Ho, Marketing & Communications Manager of Famoso Inc. for providing very insightful comments and additional information to enrich the content of this case.

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Chapter 1: How Marketing Discovers and Satisfies Needs Company Background2 In the summer of 2005 Famoso Inc.’s co-owner Justin Lussier travelled throughout Italy and Naples and fell in love with the mouth-watering fire-roasted pizzas. Naples is the birthplace of pizza, where eating a margherita pizza is a daily ritual and where culinary traditions in pizza making have gone unchanged for 200 years. After eating at Pizzeria Sorbillo in Naples, Lussier looked for a payphone and called his friends and future partners, Jason Allard and Christian Bullock. He convinced them that they needed to bring authentic Neapolitan pizza to Canada. Training with the Association Verace Pizza Napoletana, an organization preserving the standards of authentic Neapolitan pizza,3 Famoso’s owners learned about the unique ingredients and cooking process required. Whether you eat it on the streets of Naples, or inside Famoso Neapolitan Pizzeria, experiencing authentic Neapolitan pizza is an unforgettable experience. The business concept was originally a franchised fast-casual pizzeria that offers authentic Neapolitan pizzas, fresh salads, espresso, and gelato/desserts in a counter-ordering format with added service. The company transitioned to a full-service model in 2015 and now falls into the casual dining or premium casual segment.4 The stores provide atmosphere and style allowing for a comfortable meal whether it’s a quick lunch or a wine-filled evening.5 The Famoso pizza is made of “00” Caputo flour, Campania tomatoes imported from Italy, and other fresh ingredients. These ingredients help form a beautiful pizza that is cooked in authentic bell ovens. This is the same way that Italians have been doing it for centuries.6 The “00” in the flour refers to highly refined, low-gluten flour that produces both a soft and a crispy crust, and because of the low levels of high quality gluten, it allows the consumer to easily digest the pizza and feel great. Famoso pizzaiolos stretch each pizza dough by hand; no rolling pins or machines are allowed because an authentic Neapolitan pizza is about not only the ingredients but also the methods used. Tomatoes from the Campania region of Southern Italy contain lower acidity and a natural sweetness that helps them caramelize in the intense heat of the fire oven. Famoso uses fior di latte (fresh, whole milk mozzarella), the larger version of bocconcini on all its pizzas. This cheese was invented in Naples and has a rich creamy texture. Famoso also uses fresh basil leaves. Famoso imports bell-shaped fire ovens from Italy that cook the pizza at 900º F in 90 seconds.7

2 Excerpts from Famoso.ca (2014). Inspiration, May 28, 2014: http://www.famoso.ca/inspiration.php 3 For a history of Neapolitan Pizza and Pizza in Naples, see http://www.famoso.ca/history.php 4 Based on the comment from Jason Allard, Famoso’s COO, April 2016 5 Excerpts from Famoso.ca (2014). Authenticity, May 28, 2014: http://www.famoso.ca/authenticity.php 6 For a history of Neapolitan Pizza and Pizza in Naples, see http://www.famoso.ca/history.php 7 Excerpts from Famoso.ca (2014). Authenticity, May 28, 2014: http://www.famoso.ca/authenticity.php

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Questions 1. What are the needs and wants of Famoso’s consumers? 2. 3. Marketing helps create value: How does Famoso provide value for consumers? By using fresh and authentic ingredients and providing a good location 4. 5. What orientation of marketing does Famoso potentially follow? What are the company’s challenges in following that orientation?

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Chapter 2: Famoso’s Marketing Strategy Famoso Neapolitan Pizzeria was founded on the passion for authentic, fire-roasted pizzas from Naples, Italy. Whether you eat it on the streets of Naples, or inside Famoso Neapolitan Pizzeria, experiencing authentic Neapolitan pizza is an unforgettable experience. The business concept was originally a franchised fast casual pizzeria that offers authentic Neapolitan pizzas, fresh salads, espresso, and gelato/desserts in a counter-ordering format with added service. The company transitioned to a full-service model in 2015 and now falls into the casual dining or premium casual segment.8 The stores provide atmosphere and style, allowing for a comfortable meal whether it’s a quick lunch or a wine-filled evening.9 The competitive advantage of Famoso is the following: its pizza-making process adheres, passionately, to the strict standards of the Associazone Verace Pizza Napoletana. Famoso imports flour and tomatoes directly from Naples, and every pizza is topped with fior di latte (fresh whole milk mozzarella). Famoso imports bell-shaped fire ovens from Italy that cook the pizza at 900ºF in 90 seconds. After being cooked in the fire oven for 90 seconds, the final thin-crust pizza cannot be compared to any pizza available on the market today. The pizza is light, both soft and crispy, and because of the low levels of gluten in the flour, allows consumers to easily digest the meal and feel great.10 Famoso’s marketing strategy focuses on guest experience in the restaurant, or what the company calls “four-walls marketing.” It emphasizes marketing inside the restaurant, as the hour-and-ahalf to two-hour consumer experience in the restaurant is critical to the success of Famoso. It is a company priority to provide an excellent guest experience when it comes to food quality, excellent service, and a memorable atmosphere. The ultimate goal is that the guest leaves happy, something that seems easier said than done. Some of the key marketing metrics Famoso uses to measure effectiveness are word-of-mouth, willingness to recommend, and return on investment (ROI). To date, Famoso Neapolitan Pizzeria has been ranked as one of Canada’s fastest-growing companies, by the PROFIT 500 guide.11 Famoso’s revenue growth in 2014, compared to 2007, was1250 percent, with approximate 2014 revenue of $2 to $4.9 million. Famoso’s owners have taken the Famoso franchise across Canada; there are currently over 25 franchises, in Alberta, British Columbia, Saskatchewan and Ontario. Famoso also has plans to open restaurants in the United States. Because of its results, Famoso received media attention from the Canadian Broadcasting Corporation (CBC). Also, Famoso’s pizzas have been ranked the best pizza in Edmonton by Avenue magazine12; one of the most popular new restaurants in Toronto, Vancouver, and Edmonton by Urbanspoon 2012; and one of the five best gourmet pizzerias in Calgary by Where Alberta 2013.

Questions 8 Based on the comment from Jason Allard, Famoso’s COO, April 2016 9 Excerpts Famoso.ca (2014). Authenticity, May 28, 2014: http://www.famoso.ca/authenticity.php 10 Excerpts from Famoso.ca (2014). Atmosphere, May 28, 2014: http://www.famoso.ca/atmosphere.php 11 For more information, see http://www.profitguide.com/microsite/profit500/2015/ 12 See note at Avenue Edmonton http://www.avenueedmonton.com/articles/best-restaurants-best-pizza

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1. What are Famoso’s goals or objectives? 2. Conduct a situation analysis for Famoso. 3. What skills, technologies and/or resources distinguish Famoso Neapolitan Pizzeria from competitors? 4. Which metrics does Famoso use to assess the success or failure of its marketing programs?

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Chapter 3: What Are the Opportunities and Threats for Famoso? An Environmental Scanning Industry and Competitive Analysis The industry group that Famoso Inc. belongs to is North American Industry Classification 72251 —full-service restaurants and limited-service eating places. Full-service restaurants (NAICS 722511) are “establishments primarily engaged in providing food services to patrons who order and are served while seated and pay after eating. These establishments may sell alcoholic beverages, provide take-out services, operate a bar or present live entertainment, in addition to serving food and beverages. This Canadian industry includes drinking places that primarily serve food.” Limited-service eating places (NAICS 722512) are “establishments primarily engaged in providing food services to patrons who order or select items at a counter, food bar or cafeteria line (or order by telephone) and pay before eating. Food and drink are picked up for consumption on the premises or for take-out, or delivered to the customer’s location. These establishments may offer a variety of food items or they may offer specialty snacks or non-alcoholic beverages.”13 Famoso Neapolitan Pizzeria transitioned to a full-service model in 2015 and now falls into the casual dining or premium casual segment. The company also transitioned to tabletbased ordering system from the traditional pad and pen service. Euromonitor International provides some of the key trends and developments in the consumer food service in Canada (NAICS 72251) as follows14: Foodservice consumer spending continues to increase. “Consumer foodservice in Canada registered positive value growth in 2014. While the category developed overall, improving on 2013’s growth, the foodservice types did not perform equally. For instance, chained Asian fast food was one of the top performers, whilst independent convenience stores fast food posted a decline in value sales. The industry continued to reflect a number of prevailing consumer trends in Canada, such as the rise of ethnic cuisines due to increasing immigration and travel, health and wellness tendencies and a preference for higher-quality “gourmet” food and customization.” Eating culture. “The industry continued to face challenges due to persistent consumer concerns over spending on foodservice as well as a highly saturated marketplace. Many price-conscious Canadians prefer to prepare meals at home more frequently. Despite the gradual rebound of the Canadian economy, consumers continued to dine at home. Following the wellness trend, many Canadians pay attention to the food they are eating. Canadians tend to prepare their own meals at home, benefiting from the lower cost and healthier food.” Canadians are looking for new flavours. In 2014, Canadians were turning to ethnic cuisine and more exotic flavour profiles more frequently than before. Consumers who had previously preferred European or North American cuisine are now choosing Chinese, Thai, Indian and Korean. Ethnic cuisines continue to sustain interest and value sales growth in full-service 13 Visit Statistics Canada for more information regarding North American Industry Classification System in Canada at http://www.statcan.gc.ca/pub/12-501-x/12-501-x2012001-eng.pdf 14 Excerpts from Passport (2013). Consumer food service in Canada. Euromonitor International, November. Accessed May 28, 2014: http://www.portal.euromonitor.com.ezproxy.macewan.ca/Portal/Pages/Magazine/IndustryPage.aspx

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restaurants. Asian full-service restaurants and Asian fast food restaurants saw the fastest growth of 5% and 7% in foodservice value sales respectively. Demographic trends reinforce the increasing preference for ethnic cuisine in fast food. However, immigration alone no longer determines the growth potential of ethnic food. Ethnic food appeals to consumers who seek diversity in food. Many consumers, particularly millennials, are looking for spicy, bold flavours, a trend characterized by the increasing popularity of sriracha sauce. The sauce has seen a rapid rise in popularity and distribution in the past few years and is now a common feature on restaurant menus. As a part of this trend, fast food restaurants are launching new, ethnic, spicy items on their menus. For example, Subway launched its sriracha steak or chicken melt at the end of 2013, and it was the first major fast food chain to have sriracha on its menu. Another fast food outlet, Wendy’s, is offering chicken strips with creamy sriracha sauce. Full-service restaurant Boston Pizza in 2014 launched new menu items including Sriracha chicken pizza topped with sriracha sauce, mozzarella, sriracha chicken and sesame seeds, green onions, cilantro and a sriracha mayo drizzle. The rise of fast casual dining in Canada. Increasing demand for gourmet food and healthier options pushed the development of “fast casual” restaurants in Canada. Fast casual is an emerging and growing concept, which straddles both the fast food and casual dining categories. In short, it takes the “fast” from fast food, the quality and ambience of casual dining, and adds a focus on health and freshness in addition to modern, stylish décor. Fast casual restaurants – the healthier, more affordable middle ground between quick-service and full-service establishments – are still relatively underdeveloped in Canada. Fast casual dining concepts target a positioning that is based on the idea of offering “better fast food,” and a higher-quality dining experience with the convenience and value of a traditional fast food purchase, making it very attractive. Fast casual dining concepts mean that customers generally order their meals from a main counter, wait for the food to be prepared and then have it served at their tables by staff. Usually menu items are priced at a premium to fast food, but are perceived to be of a higher quality. Fast casual restaurants are targeting millennials and young professionals but are also loved by older people. Fast casual restaurants are represented by Chipotle Mexican Grill; the burger chains Hero Certified Burger and Five Guys Burgers & Fries, and bakery products fast food Panera Bread and Freshii. Informed dining. Educated consumers are the main reason why restaurants are changing marketing strategies as they are responsible for trends in the foodservice industry. As a good example, gluten-free, which was discovered by a consumer several years ago and consequently affected the whole industry. Educated consumers are forcing today’s restaurateurs to provide greater transparency on menu ingredients, create healthy menu items as well as offer insight into the origins of the food included on their menus. Consumers want to know and understand more about the food they’re eating. In 2013, a national program, Informed Dining, was launched in British Columbia. The program is supposed to provide a more transparent picture of restaurant food and is being slowly adopted by restaurants in other provinces like Manitoba and Ontario. According to foodservice industry representative organization Restaurants Canada, 92% of Canadians feel it is important to know the nutrition breakdown of the foods they eat. Calories are number four on the list of the most important nutrition information Canadians want from restaurants – behind total fat, sodium and trans fat. Sugar content rounds out the top five. Better informed about healthier food choices, consumers tend to shift away from traditional fast food

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restaurants. In order to increase the traffic and bring consumers back, fast food restaurants are launching information campaigns about the ingredients used to prepare food. As an example, McDonald’s has launched an information campaign called “Our Food. Your Questions” in Canada, which is about how its food is made. The company is working to get rid of its “junk food” image and is working very actively on improving the overall quality of its menu. Street food kiosks continue to gain market share. After years of legal hurdles and bans and protracted health inspections, Canadian street stalls/kiosks are finally taking off across many major cities. In 2014, street stalls/kiosks posted increases of 5% in current value sales, and 2% in both transactions and outlets, which is an improvement compared with the review period, supported by the changed regulations in the main Canadian cities that increasingly allow street food vendors. Growth continued to come from independents as established chains experienced strong competitive pressure from newly-rising independents. In foodservice value terms, independent street stalls/kiosks registered healthy growth, while chained street stalls/kiosks saw only a slight increase of 1% and are experiencing a 1% decline in transactions and outlet numbers. New cities are joining the food truck culture by changing bylaws surrounding food trucks. Street food festivals, which become more common in Canada, help to develop the industry by bringing more vendors and raising consumer awareness. StrEAT Food Truck Fest in Vancouver is the biggest festival in Canada. Street food legislation differs from city to city. Whilst in Charlottetown P.E.I, street vendors are allowed to operate in certain parts of the downtown 24/7, food trucks in Toronto are allowed to park for five hours in every 24-hour period, and Ottawa’s street food vending program established street spots for vendors to sell meals between 11.00hrs and 17.30hrs. The growing street stalls/kiosks category and demand for street food supports the development of technologies. Numerous sites and applications have appeared to provide consumers with information about street food vendors in the area. For example, www.torontofoodtrucks.ca, www.streetfoodapp.com provides the list of street food vendors, their current locations, schedules, operation times, menus, reviews and pictures. With the popularity of food trucks, new concepts of food carts are also beginning to appear. Food bikes or scooters appeared in Montréal in 2014. Third-party online ordering/delivery services are growing in Canada. With the development of technology, third-party online ordering/delivery services are becoming more popular among Canadian consumers, especially the young population. Online sites, such as Orderit.ca, Tasteaway.com, Just-eat.ca and skipthedishes.com, are making it easy to order food online. Websites are also offering mobile applications. Consumers prefer third-party services as they allow them to search for restaurants in the area by cuisine type, see and compare menus and prices, read reviews and find coupons and other special offers. Tables 1, 2 and 3, below, provide statistical information about the size of the industry in Canada. Table 1 shows d...