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Slice of Success

[ 0 ] Jun. 1, 2008 | SBO Editor

Slow and steady wins the race…just ask Steve Jackson, president of Hungry Howie’s Pizza, one of the nation’s largest franchised pizza chains and “The Home of the Original Flavored Crust Pizza.”

Jackson is refreshingly modest when talking about the pizza chain that began in a converted 1,000-square-foot former hamburger shop outside Detroit in 1973 and today has grown to 565 locations in 23 states.

It shows what can happen when a company keeps its nose to the grindstone, concentrating on what it does best: making and delivering great pizzas and other menu items along with superior customer service while staying on top of its game with an outstanding franchise system.

All of a sudden, you look up and see what you’ve accomplished: 300 locations by 1995, 400 only four years later and 500 by 2005. Along the way, Pizza Today magazine names you its 2004 “Chain of the Year.”

“I have always set short-term goals. When I accomplish one, I set another,” said Jackson, who has been with Hungry Howie’s since 1976, when he partnered with founder James R. Hearn to open the second Hungry Howie’s six miles from the original. “We’ve always maintained a conservative, manageable growth philosophy, even today. I’ve always slept well at night. We’re neither overleveraged nor overfinanced and we never have been.”

Hungry Howie’s expects to post $271 million in systemwide sales in 2007 and is ranked 14th in Pizza Today magazine’s 2006 list of Top 100 Companies. Jackson expects to have opened an additional 20 locations by the end of the year. New markets include Oregon, Idaho, Mississippi and Wisconsin, with Utah being added in late 2007. Washington is targeted for 2008.

Jackson is used to successfully battling the competition, regardless of size, in the thriving $37 billion pizza industry. He’s been doing it since Day One. Detroit is recognized as the chain pizza capital of the country, given that Mike and Marian Ilitch (Little Caesars Pizza, 1959), Tom Monaghan (Domino’s Pizza, 1960) and Hearn all opened their first stores within 20 miles of each other.

“We’ve always had the philosophy that if you tell us where our biggest competitor’s store is in a market, we’ll open right across the street,” Jackson said. “We feel that strongly about our concept and product. Those other guys had more than a decade’s headstart. But having dealt with a competitive environment from the start gives us a leg up when we enter new markets. We’re accustomed to having tough competition.”

Coincidentally, it was a lack of success that fueled the founding of Hungry Howie’s in 1973. Jackson first met Hearn when he had opened another pizzeria where Jackson worked as a delivery driver while in high school. Hearn later invested in a small hamburger stand, which he decided to convert into a carryout and delivery pizzeria.

Hearn was the classic entrepreneur and about a dozen years older than Jackson and his friends—many of whom also worked for Hearn—when he first opened Hungry Howie’s. Hearn’s success made quite an impression on Jackson, who at the time was attending Eastern Michigan University and studying to become an elementary school teacher while also working on the assembly line at Ford Motor Company.

“Jim was kind of the guru of business to all of us,” Jackson recalled. “He was never flamboyant but we were all in awe of him because he drove a new car and lived in a reasonably new house. We were impressed.”

As Jackson neared graduation, he realized that jobs in education were scarce and even if he did get a teaching job, his salary would be half of what he was making at Ford. But he had no interest in staying on the assembly line. Jackson saw the success Hearn was having and made a difficult decision. He quit school and his job at Ford.

“It was probably a naïve, risky decision to be honest with you. It was not a popular decision with my father and mother,” Jackson said. “But I told myself, ‘Let’s try this out and see what happens.’ My wife and I had our life savings invested along with borrowed money from my father-in-law.”

With between $25,000 and $35,000 invested and Hearn and Jackson nailing two-by-fours side-by-side during the renovation, the second Hungry Howie’s opened in Southgate, Michigan, in 1976. Within five years, Hearn and Jackson had about a dozen stores in the metropolitan Detroit area—many opened as partnerships with family members and friends.

“We formed limited partnerships. Jim and I would own 50 percent and they would own the other 50 percent,” Jackson said. “That was part of our growth plan in the ‘70s.”

By that time, Jackson began dropping hints to Hearn that they should start franchising the concept. But Hearn never had grandiose growth plans and he also wanted to move to Florida, so he made a deal with Jackson: Go ahead and franchise, but give me the development rights to Florida. The first Hungry Howie’s franchise was awarded in 1983.

Today Hearn has the sub-franchise rights to the Sunshine State, where there are currently 202 Hungry Howie’s locations. Both Hearn and Jackson have come a long way from those first days of franchising when “our barometer for profitability was having money in our checking account at the end of the month,” Jackson recalled with a laugh.

This year Hungry Howie’s celebrates the 25th anniversary of the opening of its first franchised location and its dedication to franchising excellence is unequivocally high, evidenced by Pizza Today recognizing Hungry Howie’s as its 2004 “Chain of the Year.”

“It was like winning an Academy Award for us since we were going against the other big chains,” Jackson said of the honor.

As the chain has matured, so has its growth strategy. While only about 20 percent of existing franchisees own multiple stores—two have 40-plus locations and several have 10 to 20 locations—the majority of future growth is expected to come from larger-scale, multi-unit operators with the financial resources and manpower to open a minimum of five stores in a market. Opportunities are also available for single-store operators who can complement development plans in existing markets.

Most importantly, Jackson said, such opportunities to enter the ever-growing pizza industry aren’t as readily available with larger pizza chains. With a proven track record in major markets nationwide, Hungry Howie’s represents a significant investment value.

“We are soon going to be in 25 states, but that means we have 25 more to go,” Jackson said. “The pizza market can be successful anywhere so the remaining 25 states have many opportunities. And most of the new states we have entered in the past few years can hold dozens, if not hundreds more locations. The opportunities are literally endless for future growth.” •

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Category: Magazine, Start Your Own Business, Start Your Own Business Summer 2008