How Pizza Hut stopped innovating its pizza and fell behind Domino’s

How Pizza Hut stopped innovating its pizza and fell behind Domino’s
In the late ‘90s, Pizza Hut was an innovation powerhouse, with creations like Stuffed Crust and BigFoot. Today, the chain has been forced to shift focus from food to technology.

MARK DENT

Twenty years ago, Pizza Hut was an innovation powerhouse.

It employed food scientists who patented crusts that didn’t break down when mixed with garlic and trotted out blockbuster products like BigFoot, the Edge, and the Triple Decker. When the chain launchedStuffed Crustin 1995, the stock for Pepsi, its then-parent, increasedabout 50%over the next year; theBig New Yorker, released 4 years later, led toa 9% risein same-store sales.

Wild, innovative pizzas made markets move.

But today, Pizza Hut rarely offers new items. In recent years, the best it’s managed to do is change the cheese in its Stuffed Crust from mozzarella tocheddar, or trot out an occasional, ill-fated appetizerlike the Stuffed Cheez-It.

In 2017, Pizza Hut’s parent company, Yum Brands, spent ~$22m in research and development — $10m less than it spent in the pizza golden age of the ‘90s, accounting for inflation. That same year, Yuminvested $130mfor pizza delivery technology and related marketing.

In a country where a new chicken sandwichcan break the internetand where Taco Bell can sell 100m Doritos Locos Tacosin 10 weeks, culinary innovation in fast food pizza has been stagnant. Can Pizza Hut thrive when people only care about the convenience of ordering?

The rise of the Hut
Growing up, I was chain pizza’s perfect customer.

I was a landlocked Kansan who wouldn't visit New York City (where far tastier pizzas exist on nearly every street corner) until after my 18th birthday. My family ordered pizza almost every Wednesday night, mostly from Pizza Hut, occasionally from Domino’s (in the days before theyadmitted their pizza sucked), rarely from Papa John’s, and perhaps once from Little Caesars (it was cold and the pepperoni was undercooked).

25% market share of nearly the entire pizza restaurant industry.

Pizza Hut was founded in 1958, in Wichita, three hours from my hometown in the Kansas City suburbs. Brothers Dan and Frank Carney pooled together $600 toopen the first restaurantin a modest brick building not far from Wichita State University. They soon established rapport with inebriated college students.

At the time, pizza restaurants were uncommon in much of the US. But there was an underserved need — and the Carneys started franchising elsewhere in Kansas within a year.

When they settled on their trademark look of brick restaurant with a red roof in the 1960s, Pizza Hut grew even further. By 1973, the brandwas selling $225m in pizza annuallyat nearly 1,800 stores.

The Carneys were touted as business savants, and, in a pre-tech world, franchisees were considered daring entrepreneurs.

In 1961, TheArizona Republicgushedabout Chuck Misfeldt, an engineering student at Arizona State who decided to open a Pizza Hut instead of opting for a traditional career path: “He’s proving that the American pioneering spirit isn’t dead. Misfeldt is an exception to the rule these days that youth seeks job security and comfortable pensions rather than taking a chance.”

Smashburger. Patty Scheibmeir, two weeks after graduating from Kansas State University, started working with the new product development team in January 1990. She was the third hire.

in an interview with the food website First We Feast. “It made me the good kind of angry.”

The new product team dug further. They patented a crust recipe to prevent garlic from breaking down pizza dough in the Sicilian Pizza. For The BigFoot, Pizza Hut introduced one of the largest pizzas ever seen: 2 feet long and 1 foot wide, with square slices.

It was a phenomenon: A young Haley Joel Osment appeared ina BigFoot ad, and a $4m BigFoot blimp was deployed to win over the tough East Coast. (Alas, itcrashedinto an apartment building in 1993; a Pizza Hut VP deadpanned that the disaster had probably “heightened brand awareness.”)

$1Bin the first year, helped in part by a commercial featuring Donald Trump and his first ex-wife, Ivana.

“After that everybody was waiting for the next innovation from (Pizza Hut),” Scheibmeir says.

spike in frozen pizza popularity.

Sales at Pizza Hut declined by12% in the fourth quarter of 2009compared to the same period the previous year. Winning back customers was less about taste and new products and more about making pizza reliable — and easier than the Tombstone tempting customers in the frozen goods aisle.

Convenience was never Pizza Hut’s strong suit. Although the chain beat everyone to the internet (the company claims to have sold the first physical good online, in Santa Cruz, CA), Domino’s has long offered better technology.

In 1994, Domino’s was developing a website that let customers drag virtual toppings toward an onscreen pie. Pizza Hut’s service merely transmitted typed orders to a center in Wichita before routing them back to Santa Cruz. But what did it matter? As Stanford economistNathan Rosenbergopined that year, the push to bring pizza delivery online was an instance of “sophisticated technology being put to trivial use.”

He was wrong: Online delivery is now the most important part of the pizza business.

Post-recession, in the 2010s, Domino’s outdid Pizza Hut and everyone else with a superior delivery app and website. Then it introduced ordering via Twitter and Facebook Messenger and a fleet of DXP cars. Domino’s didn’t have to use food to entice customers. Technology was enough.

Last year, Domino’s, which made about $13.5B worldwide, surpassed Pizza Hut as the pizza industry leader for the first time, with15% of market share.

~100%year-over-year sales growth. Blaze expects to have1,000 storesin the next seven years. Scheibmeir now works for Pie Five as vice president, research & development & product innovations. One of her most recent innovations was a pizza with cauliflower crust that, she says, “has been selling like crazy.”

The fast-casual restaurants have cultivated a reputation for fresh ingredients, allowing them to test new ideas in a way Pizza Hut no longer can.

“When delivery, convenience, and price are your biggest concerns, you turn to one of the big chains,” says Rick Hynum, editor-in-chief of PMQ Pizza Magazine. “When you want an artisanal pizza and a real dining-out experience with a capital E, you go out to eat at a nicer casual or fine-dining place, and that's where you expect to find culinary innovation.”

One of Pizza Hut’s last wild new offerings was a pizzawith mini cheeseburgers for the crust, released outside of the US. It went over poorly.The Guardiandescribedthe product as the poster-child of an impending global food crisis.

In 2014, Pizza Hut also introduceda new menuthat declared customers could purchase a pizza with 2B possible flavor combinations, including balsamic and sriracha drizzles. The new varieties were mostly variations of well-known pizzas, except with awkward yet trademarked names like Skinny Beach and Pretzel Piggy. These pizzas or drizzles can no longer be found on the restaurant’s website.

Pizza Hut’s decline in innovation reminds Bret Thorn, senior food & beverages editor forThe Nation’s Restaurant News, of an anecdote about Applebee’s.

Against its better judgment, Applebee’s once considered selling three-cheese lasagna, introducing the dish at a focus group. At first, the participants expressed excitement. Then, when it was revealed the three-cheese lasagna was made by Applebee’s, their opinions changed. They wanted nothing to do with it.

“You have to have the reputation of being good at what you’re innovating in,” says Thorn.

Make pizza great again
Flustered by Domino’s in the delivery game and fast-casual restaurants in the quality game, Pizza Hut has tried everything the last few years.

The brand has invested in a self-driving vehicle. It took over from Papa John’s as chief pizza sponsor of the NFL. This summer, it announced it would close 500 dine-in restaurants and has also redesigned many others. Its latest delivery-related innovation isa round pizza box.

offering beer delivery. And the golden Domino’s strategy could be ending anyway. With Postmates and DoorDash bringing delivery everywhere, its same-store sales and stock growth have slowed this year.

The internet is replete with nostalgia for Pizza Hut’s better days. The hashtag#BringBackBigFootpervades Twitter, and 1,100 people have signeda Change.org petitionfor Pizza Hut to resurrect The Big New Yorker.

A Pizza Hut representative declined to make any of the chain’s leaders available for this story.

In an earnings release conference call last year, Yum chief executive Greg Creedsaid, “The opportunity for us is to bring in new customers by communicating and messaging better this compelling new proposition that Pizza Hut US has to offer, which is an operating improvement, an ease improvement, a value improvement.”

About the only thing he and other executives haven’t publicly discussed is pizza, which Scheibmeir insists is still ripe for innovation.

“There’s going to be something out there, somebody’s going to go, ‘Why didn’t we think about that before?’ And it’s going to be one of those no-brainers. I don’t know what it is, but somebody will think of it.”

 

They have to be going to McDonald's for at least something off their menu, if it's not a burger, then what is it? The stock as of this year touched historical highs and is up 100% in the last 5 years. What is driving McDonald's growth if it's not the burger and fierce competition is literally everywhere?

 

Do they still force their employees to sing when you leave a tip?

 

This way of thinking is VERY "elitist" IMO.

The difference between 2 adult burgers and fries at McDs and 5guys is almost 10 bux. 5guys has no "kids" meal( which includes beverage) so tack on another 8 vs 4 for feeding 1 child.

Same applies at Blaze and the big pizza chains... 7.99+tax for a 2 or 3 topping LARGE, vs a DIY "personal" sized where choice of dough, toppings, etc determines FINAL price... 9 bux for sure. and ONLY YOU get fed.

But premium taste and/or quality food certainly has a place.

Its not about being "price-sensitive". It's about providing food, shelter, clothing, medical, and all of life's requirements and needs, on a DAILY basis, for "working-class" families living within their means, with some adherence to a budget. IOW, NOT an ET member or founder.

 

I will never understand how pizza chains existed in NYC. However, I can understand how Domino's survived...most of their business is after midnight, with some stores staying open until 4AM. Stoners staying up that late have no other choice as most real pizzerias close their doors at @10PM. I am sure that west of the Mississippi they are probably the only game in town, but with proper marketing and innovative menu items, they would be the play to make on a National level.

 

I went to the mall after being away a year or two and saw this new place nearby called Raising Cane's Chicken Fingers. Every time I walk by, there are people lined up out the door and cars lined up around the block. I never even heard of the establishment, so I had to go online to find out what the heck was going on.

Apparently, chicken fingers is all they do, but people love 'em so much, they're willing to wait in line as long as it takes to satisfy their fix. It's hard for me to believe! I mean, just how good can a chicken finger taste?

 

When I was a teenager, Pizza Hut was the place to go on a Friday or Saturday night to hang out with friends. It's kind of sad to see it in its current state. One problem that they've always had was lack of service staff. I can't count the times that we've sat there for a long time before someone even took our order. I still prefer the taste of their pizza to Domino's and Papa Johns, but Domino's has definitely stepped it up a lot.

I have no idea why anyone would eat Little Caesars. I call it "cardboard, cardboard!" Nasty!

 

It is the "Chick-Fil-A phenomena" perhaps?

If they got a product that people with muted palates love love love, they will keep selling selling selling.