November 10, 2012
Rob Garcia, MBA
Before a company can enter into a business marketplace it must first develop an operating system in order to have a method of providing goods and services. Many companies that are in the same field tend to share some of the same operating systems, however it is the differences that can give them a specific competitive advantage. The way a company controls its operations and material management, which according to Jones (2007) comprises of the way a company controls the input, operations (value creation), and output of materials will determine their overall success in their respective markets.
When looking at the pizza industry, Pizza Hut is the largest pizza chain in the country. With 7,566 locations worldwide, according to Adragna (2011), they were the base model for successful pizza franchises. Founded in 1958 by Dan and Frank Carney, Pizza Hut is now a fully owned subsidiary of Pepsi Co.’s, Yum Brands. Pizza Hut at one time was a dine in or take out concept, but has since started to change its stores operations, designs, and menus in order to not only stay competitive, but ahead of the competition.
Looking at Pizza Hut’s OMM they have put in place some major cost savings initiatives. The first being the way they receive their products. According to Catlett (2010), Yum Brands signed a master distribution deal with McLane Foodservice to handle the warehousing and distribution of products for all of Yum Brands restaurants. This agreement benefits Pizza Hut as they share distribution costs with other companies such as KFC and Taco Bell, also under the Yum umbrella. The large amount of restaurants under this umbrella also gives Yum Brands the ability to get products needed at a lower cost as they buy in larger quantities to fulfill the needs of multiple restaurant concepts.
Operations are another are where Pizza Hut can, and does, save some money. Much of the products at Pizza Hut are made at the store everyday such as making their dough and chopping their own vegetables. By doing these things in house they save some additional money in costs of goods, however they do lose some on the labor required to do these things. As the Pizza Hut brand is known for quality, being able to make fresh dough and chop fresh vegetables daily helps ensure that they are always working with the freshest ingredients possible. In addition, the use of a point of sale (POS) computer system helps Pizza Hut not only control, but manage costs such as labor and food on a daily basis along with receive orders at the individual store.
As competition has grown in the pizza industry new menu items along with delivery has changed the landscape for Pizza Hut. While still dominated by the original “Red Roof” restaurant model, they have also opened many Del/Co (Delivery/Carry Out) units. As these are much smaller, and have no area for customers to sit and eat, it has allowed Pizza Hut to compete with the companies that have focused on the delivery market. They have also rolled out a much wider line of products such as pasta, side items, and multiple other pizza like products. Their innovation in their product line has allowed them to continue to add value for their franchise, as well as company stores.
When it comes to finding a niche, Domino’s Pizza did just that. When Tom Monaghan and his brother bought DomiNicks Pizza in 1960, in Ypsilanti, MI, they started delivering pizzas to the local college and town. In 1965 they changed the name to Domino’s Pizza and started their focus on delivering pizzas in less than 30 minutes. This goal of 30 minute delivery affected the entire not only the internal store operations, but the entire OMM as the business model had to be streamlined to allow for super fast service.
Because the focus of Domino’s Pizzas business model was speed of service and delivery, they could...