Area Developer 50: Papa Murphy's Take 'N' Bake Pizza

In some parts of the country, Papa Murphy's is still unknown. The typical reaction, according to Senior Vice President of Development Kevin King is, "You've got a thousand stores?"

For an "unknown," Papa Murphy's does pretty well in the AD50 ranking, coming in 62nd overall, and 29th in total number of multi-unit franchisees. The brand has 169 single-unit franchisees and 203 who own multiple units. Not bad for a company that started pushing its multi-unit program only two years ago.

The concept, says King, "is what our senior vice president of operations says: 'You don't have to bake it, you get to bake it.' Once you get that statement, you understand the concept--a concept, he says, that is perfect for time-crunched families. "We're perfectly situated for that trend. We could be as big as any of the national pizza chains."

Where it is known, however, Papa Murphy's (www.papamurphys.com) does very well, growing at about 10 percent a year. It is the sixth-largest pizza chain in the country, and the leader in the take-and-bake segment.

Powering the growth in large part are the brand's rising number of multi-unit owners. Papa Murphy's has formalized in the past year a different program for each of three levels of franchisee, based upon experience and capital, says King.

The basic level is the single-unit franchisee. "You come in, build a store and operate it for six months, and if you want a second one, you go," says King. "That's how we built our chain--you open one, then a second, then a third."

But there were also potential franchisees who wanted to start out on a larger scale, so the company developed a program for them. "This person is going to build a small company, have prior restaurant experience, and knows how to run three to five stores," says King. They have the capital and want the assurance they can have that number of stores.

Above that is what King calls "our true area developer program," which is 10 stores or more. "It's the only one that has specific territories and a development schedule. It's for the more sophisticated operater/investor."

The approach can vary according to the needs of the company and the area developer. In Phoenix, for example, one area is the small towns surrounding the city, which will have operators at the first level. The other three areas each were given a different area developer.

The strategy, King says, is to segment the market, but all levels typically end up operating multiple stores. "The goal is to get enough stores built in three years to have a significant presence and level of support," says King.

"I also have some area developers that started out as one-at-a-time guys, and they go out and raise some capital and they have the operational experience. We have one guy in Iowa who's doing Nashville."

"Our unique selling proposition?," says King. "An incredibly low investment: $175,000 and you're in business."

Area Developer Doug Miller

Doug Miller, who started as a franchisee in Boise, Idaho, will be the area developer of 25 Papa Murphy's in Austin, Texas. But it was kind of an accident--learning from a seatmate on a business flight. He ran into the man on the return flight, and decided to investigate the franchise.

Miller was already a successful salesman and business owner. He knew point of sale from an early career with NCR, and had learned the systems side of retail. After a stint in sales with NCR in Minneapolis, a divorce prompted him to review his options, and he took a sales job with the Boise NCR dealership.

From there, he bought into a coupon tabloid--not an expensive buy, he says, but not the best one, either. "I basically bought a sales job," he says, and found himself working twice as hard to make half money.

He investigated Papa Murphy's in Boise, discovered that the franchisee had two stores, and was able to buy out the franchisee and his partner. That led to more growth--eventually four stores, with two more in the works. Then, with two partners, he took on Austin, which he says is a whole different ballgame.

"In Boise, we have the luxury of having been here for years," he says. Everyone knows the chain. "Here, if you pick a neighborhood and go door-to-door asking people if they know of Papa Murphy's, you'd be shocked at the number of people who are aware. It's exactly the opposite in Austin." Instead of a mature market, he's facing a town that has never seen take-and-bake pizza except in a supermarket.

"I'm spending marketing money in Austin that we don't ever pay here [in Boise]," he says. "Here we try here to get a bit more market penetration and increase sales some with new products and meal deals. Down there we just have to educate on take-and-bake."

Miller says the quality of the product makes progress inevitable, but he has to make some decisions he wouldn't make in a mature market. For example, he wanted to work with a particular landlord, but the landlord did not want a Papa Murphy's near a grocery store, thinking the brand would cannibalize sales in the store.

"My business strategy was that in order to convince the landlord what we're about, I needed to bite the bullet and show him what we could do." So he chose a location that was less than ideal. "After we were open for about a month, I had him come down. He watched people walk in, order two pizzas, and then say, 'I'll go to the grocery to get some stuff and be back in 10 minutes.' So we generate business for the other businesses. If you get Papa John's or Domino's, they are the solution for the meal; we are the supplement."

The strategy worked, says Miller. "At that meeting, the landlord said, 'Let's get these other three leases done.' They will be home runs."

The brand's strategy works, too, in Miller's opinion. "The Papa Murphy's system is phenomenal. These people have it figured out."

Area Developer Eric Scoggin

Eric Scoggin's partnership has five Papa Murphy's operating in Kansas City. "We signed an area development agreement for 16 units and have bought a couple that are separate, so we'll end with a couple dozen," he says.

Scoggin has a long history, 30 years, in the restaurant business, including a long-ago venture in Dallas in take-and-bake. He ended his career with a stint at Applebee's as an executive, then kept a promise to his wife to take some time off. He took a year and a half. But during that time, he started researching franchise opportunities. He even considered buying the Applebee's franchise in Alaska.

As it's turned out, one of Scoggin's current partners is a man he'd met in that take-and-bake venture in Dallas long ago. "He's been a Papa Murphy's franchisee for 20-something years, something like the third one they ever signed up," says Scoggin. He and I looked at a few different opportunities, and as much as it was appealing to find something else--a different segment or brand--we ended up with the idea that there's no better bet than this."

That bet, he says, has worked out as he expected. "The fascinating thing to me about take-and-bake pizza is that it's sort of a stealth market," he says. "Talking to some of the icons in the industry, I'm surprised how many are not aware of Papa Murphy's."

Still, Scoggin and his partners face the same challenges any retail operation does. With low profit margins, pay scales can't be huge, but he has managed to keep people.

"All along I have believed that our biggest challenge is people--creating and maintaining a culture where young people are enticed to come work with us and are kept happy enough and interested enough that they choose to stay with us," he says.

"I haven't found any silver bullets. I believe we're on the right track. It is always at the top of my mind throughout every day. In everything I do, our culture and our employees are somewhere in the thought process."

It seems to be working, he says. "For what it's worth, we have pretty low turnover in our management ranks so far, and I attribute some of that to good fortune and a lot of luck, but if we weren't doing some things right we would have a different result."

Eric Scoggin: Up Close

Memorable first job: Working at a local 24-hour family diner (regional chain,
similar to Denny's). I was so young, my mom still loves to tell the story
about how she would go in for lunch and "just barely see the top of a chef's
hat bouncing up and down behind the pass-through window."
Professional tip: Never compromise your integrity; never burn a bridge.
Key education: 30+ years of older, (and/or) wiser, (and/or) more experienced
people taking the time to coach and teach me
Role model(s): Numerous leaders with a style that is tough yet fair,
low-keyed yet focused, direct and candid yet respectful and tactful
Currently reading: e-mail. Lots and lots of e-mail...
Others say you are: Funny
Business news sources you regularly read: A variety of trade publications
Favorite web sites (besides your own): eBay, Newegg, and about a half-dozen
weather sites
Franchise systems (besides your own) that are creative: Creative? There are
numerous franchise systems I admire, but "creative" is not an adjective that
comes to mind for any of them...
Favorite quote: Changes frequently. Currently, "Everyone makes mistakes.
Smart people learn from their mistakes. Wise people learn from other people's mistakes."
Best advice anyone ever gave you: Play nice and share your toys.
Best advice you ever gave: Be nice to your little brother--someday he will
be bigger than you.
Biggest project for the year: Learning to play nice and share my toys
What you do to unwind: I hold my kids. For me, it's better than Valium.