Are Big Name Pizza Companies Hurting Small Pizza Stores?

Joe Marz

Mr. Reuter

Economics

8 May 2017

Are Big Name Pizza Companies Hurting Independent Pizza Stores?

Without question, pizza is one of the most popular foods that exists today. It comes as no surprise, then, that the top pizza chains consistently bring in a great deal of revenue year to year. While these pizza chains flourish, however, they leave other, lesser known pizza suppliers in the dust. Due to these top name pizza companies bringing in so much in the way of earnings and continuously creating so many improvements in technology, local, independent pizza companies are starting to suffer.

There is no denying that pizza chains bring in a large amount of money each year. As demonstrated by the chart above -- delineating the sales of the 100 best selling pizza companies along with the individual stores of each company that bring in the most money -- the top 5 pizza producers -- all of which are big name brands -- make inconceivable amounts of money each year, with the top 4 companies all ending 2016 with their sales numbers in the billions. These companies are showing no signs of slowing down either. As this video explains, Domino’s has seen monumental increases in stock value, and sales projections only foreshadow continuous growth for the company. While this is certainly impressive, Domino’s is not the only company looking at improvements in its future.  According to a recent sales report on the first sales quarter of 2017, Papa John’s has seen a large 60% increase in digital sales from its previous sales quarter. Furthermore, despite selling better than any other pizza chain in 2017, Pizza Hut’s mother company -- Yum! Brands Inc. -- plans to make a $130 million investment in its pizza brand sometime later this year -- due to Pizza Hut seeing a slight decline in economic growth this past year.

As these big name pizza companies continue to flourish, their success has an unfortunate negative externality on local and independent companies. According to Wall Street Journal, due to the ability of these pizza chains to improve their brands and keep up with the latest and greatest technology, smaller, lesser-known pizza companies are starting to see their sales suffer. When a large-scale pizza company has the ability to keep up to date on its internet sales like Papa John’s, or has the ability to invest hundreds of millions of dollars into its brand without making a dent like Yum! Brands Inc. with Pizza Hut, it becomes hard for these smaller names to compete. While top pizza chains are constantly correcting any errors in their companies and are constantly refining their brand through advertisements and internal improvements, smaller pizza stores that only locals would know can’t keep up the pace-- as they accumulate nowhere near the amount of money that pizza chains like Pizza Hut or Domino’s make on a yearly basis to have such regular refinements or improvements, causing these companies to fall behind as a result. Additionally, the ease of access to big name pizza companies puts further stress on smaller pizza stores. While independent companies may taste more authentic and may have the ability to provide that home-town feel, when given a faster and generally cheaper option in top name pizza companies, most consumers will gladly take the opportunity cost of losing that ambiance that smaller pizza places provide for a more efficient alternative. As a result of losing customers on both of these fronts, smaller pizza companies deteriorate more with each passing day.

Despite how much we all may love our Papa John’s or our Little Caesar's, the success of these companies unfortunately makes other, lesser-known companies pay the price. While there’s no doubt that such pizza stores earned their success, it’s hard not to feel pity for the independent companies that are experiencing difficulties on their behalf-- with one brand’s success meaning another’s failure.

Works Cited

Jargon, Julie. "Big Pizza Chains Use Web Ordering To Slice Out Bigger Market Share." The Wall Street Journal. Dow Jones & Company, n.d. Web. 08 May 2017.

Jonathan Maze | May 03, 2017. "Yum to invest $130M in Pizza Hut." Nation's Restaurant News. N.p., 04 May 2017. Web. 08 May 2017.

"New York Attorney General Doesn't Like Pizza." Economics21. N.p., 25 May 2016. Web. 08 May 2017.

"Papa is pleased: Papa John's digital sales hit 60%." Www.pizzamarketplace.com. N.p., 03 May 2017. Web. 08 May 2017.

"Pizza Today's 2016 Top 100 Pizza Companies." Pizza Today. N.p., n.d. Web. 08 May 2017.