Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland speak with former Papa John’s CEO Steve Ritchie about his bet on the restaurant industry amid COVID-19.
BRIAN SOZZI: Former Papa John's CEO, Steve Ritchie, is making a big bet on the restaurant industry's recovery after the pandemic. He just launched his own restaurant holding company called, Endeavor Holdings, with his wife Melissa. And they have already made their first acquisition. Steve Ritchie, joins us now for more on this.
Steve, good to speak with you again here. You don't see a lot of folks, out there right now, starting or launching a restaurant holding company. What are you seeing in the market? It's been very challenging for the restaurant space. Is this you saying that, perhaps this space is nearing a bottom?
STEVE RITCHIE: Well first off, thanks for having me on, Brian. It's great to see you again. Yeah, you know, I love the industry. I've been in the restaurant industry for I guess coming up on 30 years. So you've got to have a passion, a love, a belief that this thing is going to turn. You know, and I really believe it is. I think we're seeing great things on the health front with the rollout of the vaccines.
And I'm just looking for restaurants that are really differentiated, that make a difference. And I think consumers are looking to get back into restaurants as we get through hopefully, spring and summer. And you know, I think we've found a great concept as we launched The Endeavor Restaurant Group last week, as you, as you said.
A concept that is a great start for us, my wife and I actually dined at this restaurant quite frequently over the last four or five years. And they got five units now and across the tri-state area and. You know we're really excited to grow this specific concept but also looking to, to spread our wings a bit across multiple segments. Again, because we really believe in the resilience of the restaurant industry.
BRIAN SOZZI: So this concept that you did buy, it's called, Louvino. I believe what, four, four restaurants, it's a, it's a craft wine bar concept. A little different than, than the Papa John's model. But what are your what are your plans with this, what are your plans with this brand?
STEVE RITCHIE: Yeah, quite different, huh. But you know, I think restaurant industry really there's some, there's more similarities than there are differences. It's actually five that they have today. And I think it's really proven itself in the tri-state area with the five initial units. Looking for something that's very differentiated in food, this one focuses more on small plates and big wines, as we'd like to say it. Differentiated also and that it has over 50 glasses of wine by the glass, so that's really cool. The ambiance is neat, it's a great experience. But most importantly, the culture.
So we're looking to, you know to build out a purpose driven company based on the culture, which is really what I learned over the last 25 plus years in the industry, that people matter the most. So, so look for this concept to potentially grow in that tri-state area as we get through the pandemic. And we look to potentially expand this along tho, along those lines, as things kind of turn post the pandemic.
BRIAN SOZZI: You know Steve this, this kind of wine bar concept, obviously here in New York City where, where we're based, extremely popular. They've been everywhere forever. But these are the kinds of restaurants that are closing right now, and I don't know what the other side of this pandemic looks like for them. What do you see, what do you see playing out nationally, I guess? And in the big cities where you have higher costs and you've seen bigger impacts on closures, are these kinds of concepts going to come back on the other side of the pandemic?
And we've seen national chains, delivery really, thrive here. Do you think that people really did want that sort of communal Tapas style dining that really was so popular in the 2010s?
STEVE RITCHIE: Now great question. And I really believe they do. But I think there's a tremendous pent up demand. People are looking to get back out, and gather, and join, and have fun, and have a great meal with friends and company alike. This specific type of a concept I think is going to be a winner. Will there be behavioral changes based on what has occurred during the pandemic, in terms of takeout and delivery? Yes. But I think that's a supplemental opportunity for those concepts.
You know long overdue, great, great to see the bill signed, I guess as of this morning or last night officially. So there's much needed funds to get back into the restaurant industry so that we can continue to mitigate some of these challenges. But it's been fun to watch the innovation, the entrepreneurial spirit of the industry across the country, to figure out how to mitigate through some of those challenges.
But there have been a tremendous number of losses in the restaurants, which means more importantly frankly, is employees. There's 13 million employees in this industry across the country. So we saw this as a way for us to oppose to you know going where we have been in the, the corporate side of the business as an executive, lean in to small independent businesses and try to grow those concepts to be able to save an industry that is, is so needed. Not only by the employee base but I really believe the population wants to get back into restaurants. And that spirit is there and we look we look forward to having the opportunity to do that.
JULIE HYMAN: Steve, to your point, what this pandemic has revealed, which we already you know knew to some extent, is that a lot of restaurants, particularly independent restaurants, really operate on the knife's edge, right? Their margins are thin, their rents are already high and increasing in many cases, particularly, that's how it's been in urban areas.
So as we move through this, even when people come back right, that's still the case frequently. So how do you fixed that or how do you widen those margins? What lessons have you learned that you can apply to the restaurants that you're acquiring to hopefully make them more robust businesses?
STEVE RITCHIE: Now that's great, great question, and it's yes, you're right. It's always been a very thin margin business. It's, it's always about the experience, and what I've found, that if you can create a great culture and experience at the restaurant level, you can translate that into an awesome consumer experience. It's all about traffic and frequency of that traffic.
So opposed to always trying to spend money on marketing and bringing in new customers, you know what we'll be focused on, and certainly I encourage all restaurateurs out there, is that every single solitary guest that comes into your restaurant, they must have an amazing experience. They used to have it, have to have a good or great experience, now they have to have an amazing experience, so that you can ensure that you're holding on to those guests.
As far as my experience and what we got to bring to this restaurant group, is you know Papa John's is in that sweet spot, right. It's in delivery, it's in technology, it's in digital. So leveraging some of those tools and resources to be able to put that into play in this restaurant group to ensure that the connection points with where a customer is, in terms of accessibility, rolling out loyalty programs, driving real brand differentiation and communicating that to a consumer, and making certain that experience when they do give you a try at the restaurant again, is amazing.
BRIAN SOZZI: Steve, I'm sure you've been watching this, but the gains, the sales gains for the pizza players, have been through the roof this year. Papa John's, Domino's, Pizza Hut has kind of dabbled in those sales gains a bit. Are those gains sustainable? And what is it about pizza, why is it been so popular during the pandemic?
STEVE RITCHIE: Almost like it was generated for the pandemic, right. I mean the portability. I mean, this is a business that's 95 plus percent carry out and delivery. On the global side of the business there are a number of restaurants they're more dine in, but in the US it's virtually almost 100% carryout and delivery. So which obviously, that's the businesses that are focused on that area are optimizing the potential right now.
You know I think there are as you look at brands across the pizza delivery segment, they have gained a tremendous amount of trial and new customers. Once you get new customers again, if you give them a great experience you're going to hold on to some of them. Is all of it sustainable? Unlikely. You know post the pandemic again, I think people want to get back out into restaurants, as opposed to just depending on carryout and delivery. So there will be a shift. A shift, which I believe, getting into the upscale casual dining business, that will go back to that business.
While you know, companies like Papa John's, will be able to maintain and hold on to as many customers as possible and hopefully they have developed a new base that they can build off of. While restaurants across the broader segment looking forward to that shift, which I hope will happen at, at some point later this year.
BRIAN SOZZI: All right, we'll leave it there. Steve Richie, good to see you. Good luck with Endeavor Holdings, and when you make your next acquisition, come on back.
STEVE RITCHIE: I certainly will Brian. Thanks, thanks for having me on. Great to see you guys.