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Little Caesar Enterprises, Inc.

FOUNDED: 1959

Contact Information:

HEADQUARTERS: 2211 Woodward Ave.
Detroit, MI 48201
PHONE: (313)983-6000
FAX: (313)983-6494

OVERVIEW

Little Caesars Pizza is one of the world's largest pizza chains and a widely recognized brand name. The company is well-known for its "Little Caesar" character, which is used on the company's award-winning, humorous television commercials. It is also used in youth-oriented community programs sponsored by the firm.

As of 1997, Little Caesars was the third-largest pizza chain in the United States, with more than 4,700 retail stores and estimated sales of $2.1 billion. The chain trailed only Pizza Hut (owned by Tricon Global Restaurants) and Domino's Pizza. About two-thirds of all Little Caesars units were franchised to independent operators. In its marketing and advertising, Little Caesars emphasizes the quality of its pizza, which includes Grade A cheese, selected California tomatoes, and high-gluten flour as the main ingredients. As of 1997, Little Caesars was continuing a long-standing promotion of offering two pizzas for the price of one. The slogan for this campaign was "Pizza! Pizza!" In addition to its regular pizzas, Little Caesars offers deep-dish pizzas, individualsized pizzas, submarine sandwiches, breads, and salads.

Since the beginning, the company was owned by the husband and wife team of Michael and Marian Ilitch, who hold key executive positions in the company. The couple also owns Blue Line Distributing, which distributes food and non-food products to Little Caesars' pizza franchisees on a weekly basis. Outside of their pizza operations, the Ilitches own the Detroit Tigers Baseball Club—American League, purchased in 1992 from Domino's Pizza founder Tom Monaghan for a reported $85 million; the Detroit Red Wings National Hockey League team, purchased in 1982 for a reported $8 million; Olympia Entertainment, a local arena management company; two arenas in Detroit and one in Glen Falls, New York. The Ilitches also own the Fox Theatre in Detroit. In 1996 Little Caesar Enterprises was ranked number 171 in the Forbes magazine Private 500 listing.

COMPANY FINANCES

As a private company, Little Caesars does not make public its financial records. Industry estimates put annual sales in 1997 at $2.10 billion, the same as 1996. Sales for 1995 were estimated at $2.05 billion, a slight increase from 1994's $2.00 billion, but down from 1993's $2.15 billion.

ANALYSTS' OPINIONS

Advertising and marketing has been a strong point most commentators agree. The company has gotten exceptional mileage from its two-for-one offerings, dubbed "Pizza! Pizza!" Most of the advertising is light-hearted, using humor to dramatize strong points. The ads do well in "most memorable campaign" surveys and have won several industry awards.

Over the years Little Caesars has been criticized by some of its franchisees as being too strict and having too many rules to follow. For example, franchisees must purchase products from Blue Line Distributing. However, company supporters claim that the rules are necessary to preserve the company's proven method and keep franchisees from cutting corners.

HISTORY

In 1959 Michael and Marian Ilitch, who grew up in Detroit, opened a carryout pizza restaurant west of the city. They called it Little Caesars Pizza Treat. Two years later, they added a second unit. From this small beginning, the Little Caesars chain began to grow. In 1962, the company began to franchise Little Caesars restaurants to independent owner/operators. As it did for other fast food chains, the franchising concept helped Little Caesars grow rapidly. By the late 1990s, Little Caesars had become an international chain with restaurants in all 50 states, Puerto Rico, Guam, Canada, South Korea, Honduras, the Dominican Republic, Turkey, the Philippines, Ecuador, and the Czech and Slovak Republics.

Other milestones in the company's history include opening its first restaurant outside the United States in 1962 in Canada, and introducing the first two-for-one offer in 1974, later called "Pizza! Pizza!" It also introduced flavored crusts in 1990. National delivery was introduced in 1995, and the first Little Caesars in a hotel was opened in 1995 in Orlando, Florida.

STRATEGY

The growth of Little Caesars was driven by franchising, in which the company licensed the Little Caesars name to local owner/operators for a standard fee. Little Caesars then provided advertising, marketing, services, and products to the owner/operators in exchange for additional fees. In the early 1990s, Little Caesars received 5 percent of its franchisees revenues as royalties and an additional 4 percent for advertising. In 1991 Little Caesars spent $45 million on advertising in the United States. In 1996 it spent $32.7 million on network television advertising and $10.3 million on cable.

When selecting new franchisees, Little Caesars looks for individuals who are able to develop multiple restaurant locations. Before approving a franchisee, the company examines several factors, including overall experience, personal and financial qualifications, and business experience. As of 1997, Little Caesars' franchise fee was $20,000 for the first unit and $15,000 for each additional unit. The company offers third party financing to its franchisees.

Little Caesars also sponsors regional franchise meetings to review corporate strategies and solicit comments from franchisees. These meetings are used to help franchisees strengthen their operations and marketing programs. Little Caesars also operates a "Franchise Advisory Committee," which is made up of franchise owners and Little Caesars corporate executives who meet on a regular basis to discuss current business issues and review future strategies.

To maintain strong local franchises and ensure consistent products and services across the chain, Little Caesars provides a wide range of services and benefits to its franchisees, including training, business support, and marketing support. The Little Caesars training program covers operations, marketing, and general business information. Services are provided through the Little Caesars franchise services department.

Another key part of Little Caesars business strategy is an ongoing marketing and advertising program. The company launched its first national network television campaign in 1988. After that, the company became known for its humorous, entertaining commercials. The commercials focus on the value and quality of Little Caesars products. From 1992 to 1997, Little Caesars' advertising was ranked by consumers among the top five most memorable campaigns in Video Storyboard Tests Incorporated's annual survey. Little Caesars said that its advertising outranked some other major companies that spent 3 or 4 times more on advertising. The company cut back its media budget to $51.9 million in 1996, down 22.8 percent from 1994 levels.

In early 1997, the American Association of Advertising Agencies (AAAA) named Little Caesars Enterprises as the winner of its John O'Toole Advertiser Award, which honors outstanding advertising campaigns over a period of time. In a June 1997 interview, Little Caesars Enterprises's new vice president of strategic marketing, Ken Murray said that he was committed to retaining the company's distinctive advertising campaign, which was created by Cliff Freeman & Partners. Little Caesars also maintains ongoing communications and public relations programs in addition to its advertising program. These efforts are coordinated by a corporate communications department.

Unlike its main competitors, Domino's Pizza and Pizza Hut, Little Caesars was exclusively a carryout business until the mid-1990s. The "no-delivery" policy allowed the firm to maintain a significant price advantage over its competitors, according to one press report. However, in July 1995 Little Caesars changed this strategy when it began pizza deliveries at nearly all of its operating units in the United States. Little Caesars said it would hire and train 40,000 new employees to operate the delivery system. It also began a national television campaign to promote Little Caesars pizza and its delivery service.

The firm called its new delivery program a success, even while some observers questioned the move. One observer suggested that Little Caesars should have avoided competing in the delivery segment of the pizza business, citing cases of long waits for both delivery and carryout services at Little Caesars outlets. Instead, it was thought the company should focus on improving efficiency and customer service in the carryout business.

In the 1990s, Little Caesars and other pizza chains were exploring the use of non-traditional retail outlets. For example, in 1991 Little Caesars opened 400 Pizza Stations inside Kmart stores in order to increase customer awareness and market share for both firms. However, some existing Little Caesars franchise owners were upset by the move. They said that the new Kmart units would hurt their sales. Some franchisees banded together to form A.L.C.F. Inc., a group to represent their interests and negotiate with Little Caesars Enterprises.

In 1996, Little Caesars Enterprises and Pizza Hut both entered into strategic alliances with hotel companies. This meant that the pizza firms would provide food service on premises at hotels as well as room service. The alliances were expected to increase sales and improve room service in the hotels and also improve the pizza chains' market share and brand marketing ability. Little Caesars signed an agreement with Holiday Inn Incorporated, while Pizza Hut had agreements with Choice Hotels International Inc. and HFS.

INFLUENCES

Little Caesars has succeeded in differentiating itself from other pizza companies through its humorous advertising and its product offerings. Its 25-year-old "Pizza! Pizza!" campaign was still going strong in he late 1990s. The company also strives to maintain a cohesive franchisee network. The company has stopped bringing in new franchisees during various time periods, while existing franchise owners could open new locations.

CURRENT TRENDS

Many franchise firms, including Little Caesars Enterprises, had to deal with disgruntled franchisees who appeared to be filing increasing lawsuits against fran-chisors in the mid- to late 1990s. For example, in 1997 some Little Caesars pizza store owners sued the parent company for alleged overcharging for pizza dough and supplies. Earlier, in mid-1995, Little Caesars Enterprises was sued for antitrust violations by a group of Minnesota-based franchisees. The group charged that Little Caesars' requirement that franchisees purchase products from Blue Line Distributing, owned by the Ilitches, constituted an illegal monopoly.

Little Caesars and Kmart Corporation reached an agreement in 1997 whereby Kmart would begin selling Little Caesars pizza in virtually all of its in-store restaurants. Numbering some 1,800 locations, K Cafes ranked among the nation's 10 largest restaurant chains with annual revenues of about $350 million. About 500 Kmart stores have carried Little Caesars pizza since 1991.

PRODUCTS

Little Caesars most recent new product was the "Big! Big!" pizzas introduced in fall 1997. As part of this campaign Little Caesars expanded the size of its pizza by 4 inches. A small pizza would be 14 inches in diameter, for example, rather than 10 inches. In addition, the pizzas would be topped with three-inch pepperoni and extra-large slices of ham.

Little Caesars was actively developing and marketing other new products during the mid- to late 1990s. In October 1996, the firm introduced Pizza by the Foot, designed to be a family meal. The launch was supported by a $10-million advertising campaign created by Cliff Freeman and Partners. The three-foot long pizza came with seasoned Italian bread for a package price of $19.99—with limited-time value pricing of $10.99. During 1997 a new Stromboli Pizza was introduced as part of the Pizza by the Foot offering. The Stromboli Pizza is a fold-over pizza stuffed with tomato, cheese, and pepperoni.

In November 1995 Little Caesars introduced a stuffed crust pizza, following the lead of Pizza Hut, which introduced its version of stuffed crust pizza in mid-1995. Little Caesars' Stuffed Crust Pizza had a suggested price of $7.99 for carryout and $9.99 for delivery. The 14-inch pizza pie had string cheese and pepperoni stuffed into the crust.

CORPORATE CITIZENSHIP

In the late 1990s Little Caesar Enterprises was involved in several community activities. It reaches out to the communities in which it operates by working with local school systems and being involved with various community and family/youth groups. The company participates in a number of "adopt-a-school" programs throughout the United States to provide a positive influence on the quality of education.

The company also supports amateur sports programs in the cities where it is located. About 50,000 children participate in Little Caesars sponsored sports annually. The company also helps sponsor youth sports through local amateur athletic organizations and local parks and recreation departments. It participates in programs that support college athletics and professional sports as well.

The company sponsors the Little Caesars Love Kitchen, a mobile pizza operation that works through soup kitchens to provide free pizza to people in need. It also provides relief to victims and relief workers when natural disasters strike.

In the Detroit area, Michael and Marian Ilitch, owners of Little Caesars, have been heavily involved in efforts to revitalize the downtown area. They own two local professional sports teams, have rehabilitated a famous local theater, and built a large office building in downtown Detroit. Individually and with his family, Michael Ilitch has received numerous awards for community service, as well as for contributions to the restaurant industry. These awards have included the "Humanitarian of the Year" award from the March of Dimes and many others.

GLOBAL PRESENCE

Little Caesars has pizza locations in the U.S. territories of Puerto Rico and Guam and in nine other countries: Canada, Czech Republic, Slovakia, South Korea, Honduras, the Dominican Republic, Turkey, the Philippines, and Ecuador.

EMPLOYMENT

Little Caesars employs about 600 people at its corporate headquarters in downtown Detroit and about 90,000 throughout its locations in all 50 states and internationally.

SOURCES OF INFORMATION

Bibliography

Benezra, Karen. "Rattling the Chains." Brandweek, 21 April 1997.

Howard, Theresa. "Pizza Hut, Little Caesars Fend off Separate Lawsuits." Nation's Restaurant News, 20 November 1995.

Kramer, Louise. "Little Caesars Arsenal Grows with Delivery Debut." Nation's Restaurant News, 26 June 1995.

Lyons, David. "Hail, Caesars!" World Traveler, April 1997.

McDowell, Bill, and Laura Petrecca. "Little Caesars' Big New Idea: Pizza by the Foot." Advertising Age, 28 October 1996.

Pittinger, Heather. "Popular and Profitable." Hotel & Motel Management, 6 May 1996.

Preddy, Melissa. "Kmart Expands Little Caesars at K Cafes." Detroit News, 24 September 1997.

Rinkel, Desiree. "Holy Moly! It's Stromboli; Little Caesars Introduces New Pizza." PR Newswire. 10 February 1997.

Stopa, Marsha. "Ilitch: Back in Pizza Biz." Crain's Detroit Business, 23 September 1996.

Tannenbaum, Jeffrey A. "Many Franchisers, Ignoring Recession, Rush to Expand." The Wall Street Journal, 27 January 1992.

Whalen, Jeanne. "Little Caesars Exec's Goal: Do More with Less." Advertising Age, 2 June 1997.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Little Caesars' primary SICs are:

5812 Eating Places

6794 Patent Owners and Lessors