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Do IT this week: Layering
CEO of Stow-based Hallrich Inc. is no stranger to economic challenges
By Paula Schleis
Beacon Journal business writer
Published on Monday, Dec 22, 2008
When the first Pizza Hut opened in Northeast Ohio 40 years ago, the owners were driven by one thought:
Survival.
Early customers took one look at the strange thin-crust pizza with its myriad of foreign toppings, and promptly rejected it.
The entrepreneurs responded by adjusting the recipe and opening new restaurants, unwavering in their confidence that the tide would turn.
Tony Szambecki managed that first store and is now chief executive of the Stow-based Hallrich Inc. It's a franchise that has grown to 81 area Pizza Huts — and he faces a similar challenge today.
The slumping economy, rising labor costs and skyrocketing food prices have his enterprise fighting to stay alive again.
And just like last time, the answer has been to adjust the product (a new value menu to keep budget-minded families coming in) and to seek out new markets (a restaurant opened in Brimfield Township last week).
''The first goal of business is to survive. It's not to make a profit,'' Szambecki said. ''A lot of businesses have forgotten that.''
Victory, he said, comes from outlasting the competition. It means being around when the economy recovers, so the company can begin to recover, too.
And while the road might be a difficult one, Szambecki's been there before.
He's drawing on lessons learned in 1968, when he said he lasted nearly two years without drawing a paycheck by keeping his eyes on the horizon.
Starting at the bottom
Szambecki was a teen-ager in Wichita, Kan., when he joined the young Pizza Hut chain in 1965. The dishwasher made 50 cents an hour.
''Today, I'm lucky. I get more hours,'' he said, revealing a colorful sense of humor that won't be suppressed.
There were just 99 Pizza Huts in the country at the time (compared to some 5,000 today) and he climbed the ladder to store manager in a couple of years.
He entered Wichita State as an art student but was reconsidering his career goals when he met William Halls and Scott Ritchie, a pair of Wichita geologists who were rethinking their own professions.
The men — who merged their names to create ''Hallrich'' — con Please see Pizza Hut, A8
Continued from Page A1
sidered the available territories and settled on Youngstown because Halls had grown up in nearby Cleveland.
Szambecki was offered a deal: Take a 50 percent pay cut and move to Youngstown to manage the first Hallrich restaurant with the hopes of someday reaping greater rewards.
''Moving 1,200 miles away from my mother in Wichita was enough to seal the deal,'' he chuckled.
After all, he added, ''if you're ever gonna shoot craps in your life, you do it at age 19, 20, 21.''
The first Hallrich Pizza Hut opened in December 1968, and was a ''total failure,'' he said. ''The end of the first year, we had done maybe $54,000 in sales and were losing our tails.''
People in this part of the country were used to 2-inch-thick bread squares slathered with tomato sauce. No cheese. No toppings.
The young pizza chain was a much looser organization back then, so the restaurant was free to tinker with the recipe and ''develop a thicker crust to get it more acceptable,'' Szambecki said.
But it would take five years for Youngstown to truly accept the Pizza Hut brand.
In the meantime, Hallrich was focused on growth. The team opened a second store, in Kent, one year later and found immediate success with the college crowd.
Then five months later, in May 1970, ''the armored personnel carrier went down the street and said, 'We're declaring martial law. Everybody get off the streets,' '' Szambecki recalled.
For two months after the anti-war riots and deaths of four Kent State University students, the town's businesses were required to close at 5 p.m. No beer was sold in Portage County for nine months.
''So our business, which was going great, went absolutely into the crapper,'' Szambecki said.
Hallrich forged ahead. The next stores in Alliance and Painesville struggled. The fifth restaurant, on Akron's Tallmadge Avenue, did well.
''That became the pattern. About every third or fourth one would be good. The others would take three or four years to get going,'' Szambecki said.
From September 1968 to May 1970, he didn't collect a paycheck. His bosses gave him enough money for his car payment and kept him in an efficiency apartment with a pull-out bed.
''It was the fear of having to go home on our shields that kept us going,'' he said.
Continuing to grow
By 1976, Halls, Ritchie and their young protege were finally breathing easier.
''It was the year we actually got some money out of the business,'' Szambecki said.
Hallrich continued signing new franchise agreements for new territories, reaching 93 stores in 19 counties at its peak.
They also learned to roll with changes implemented by the parent company.
Where once employees grated their own cheese and sliced their own pepperoni, toppings started arriving prepackaged.
Pizza crusts, once flattened with a rolling pin, were also made, sealed and shipped.
''We want a pan pizza in Kent to taste like one in Indiana, or California, for that matter,'' Carol Magazzeni, marketing director for the Hallrich stores, chimed in.
As America's melting pot population became more mobile, restaurants that once served homogenous communities or dominant ethnic groups had to diversify their menus.
While northern Ohio still favors the thick and chewy pan pizza, there are plenty of transplants who demand thinner dough. Today, the restaurant offers nine pizza styles — from hand tossed to stuffed crust — as well as many other menu offerings.
''I don't spend a lot of time trying to understand the 'whys,' '' Szambecki said. ''As soon as someone explained the rules to me, then I played by the rules. I may not understand why God in her infinite wisdom did this, but she did, so I just go by the program.''
Tough times again
While Hallrich has celebrated a lot of highs in its 40 years, it is currently fighting through one of the low points.
Like other restaurants, it has to find a new balance between staying affordable for families who are suffering through their own financial hardships and paying rising operating costs.
''Two years ago, when the state mandated a new minimum wage, we closed 10 percent of our stores,'' Szambecki said.
The voter-approved wage increase gave all the cooks a 33 percent raise and servers a 67 percent raise in January 2007, he said.
Then there was a sudden jump in food costs — 8 percent last year and nearly 8 percent expected again next year.
''Those two things hitting together have just been a killer,'' Szambecki said.
While revenue has actually grown in the past two years, it can't increase fast enough to keep up with the other side of the ledger.
''If we passed on our added labor and food costs, we would have had to raise our prices 50 percent in each of the last two years,'' Szambecki said.
Instead, Pizza Hut has been doing just the opposite, adding lower-cost items to the menu.
And last week, Hallrich opened a Pizza Hut/Wing Street in Brimfield, a modern concept that banks on America's proven love of chicken wings.
The plan, Szambecki reiterated, is to outlast the competition. Every time a pizza shop closes, Hallrich picks up ''$500, $1,000, $2,000 a week,'' he said.
Szambecki added that he has great confidence in Scott Bergren, the chain's president, who ushered in the Wing Street brand and the popular Tuscani pastas as ''a catalyst to get people to look at us differently.''
''There are periods where we've had positive leadership, periods where we were void of leadership . . . and periods of bad leadership,'' Szambecki said. ''Now it's as good as it's been in 20 years.''
It would seem the feeling is mutual.
Kathy Nelson, senior director of franchise development for the parent Pizza Hut company, said Hallrich has led its peers in embracing new concepts, like Wing Street.
And Szambecki, she said, has made his mark on committees that developed operational standards for the brand and as past director of the International Pizza Hut Franchise Holders Association.
''The Hallrich team has been actively involved in shaping and influencing the direction of the Pizza Hut brand for many years,'' she said.
And Szambecki's track record suggests he'll be around for many more.
Paula Schleis can be reached at 330-996-3741 or pschleis@thebeaconjournal.com.
When the first Pizza Hut opened in Northeast Ohio 40 years ago, the owners were driven by one thought:
Get the full article here.
Comments
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east of Akron, AA
Posted 07:40 AM, 12/22/2008
Pizza Hut Pizza Is the Best!
Posted 10:38 AM, 12/22/2008
As a consumer I view this article as the leader of my own business (my household).
When cost were raised regarding labor and supplies, it states that Hallrich responded by closing stores and pursuing lower cost solutions.
I'm sure that many companies are doing this, and have been.
That is why I run my household the same way. I see what businesses are doing in response to the economic conditions of our time.
Costs MUST be reduced! Do I NEED to spend for:
1. The daily newspaper? No. Clearly no.
2. Pizza on Friday night? Food in general? Yes. But do I really NEED to spend $35 to feed my family at a sit-down restaurant? No. If I feel the need to dine out for pizza it can be at CiCi's, which will cost me significantly less than Pizza Hut or elsewhere. Not as nice atmosphere, but I'll at least have funds remaining to pay the vehicle expenses for making the trip.
Posted 10:38 AM, 12/22/2008
...
3. $300 per month to heat my all-electric home this winter? Keep the heat at a comfortable level? No. At bedtime, the heat setting goes down to 64 degrees. In the morning, when through with the bedrooms, they are closed off and the heat registers are closed. Same for any rooms not being used. Reduce the cubic footage being heated! Reduce those bills! When I first moved in and was not energy aware, my bills were at the $300/month level in this 2400 sq. ft. home. Last month's bill was $146. Anything under $200 is a major victory!
4. Need a new vehicle? No. Repairs on the old one aren't all that expensive, when considering those $250 - $450 monthly payments on a new one. A new engine would cost $2500 - $3500, less than a year's worth of payments on a new car (and will last 10 years or more). I'm far ahead in the long run, and I keep my car while minimizing expenses. Hey! GM & Chrysler are cutting back and reducing expenses... I am just following their example.
It goes on and on. Evaluate your expenses. Are there less expensive alternatives? Do you REALLY need that pack of cigarettes? The bottled water?
The wealthiest are those who need the least. Reduce your needs. Become happier and less stressed when your expenses are reduced!
Posted 10:40 AM, 12/22/2008
Excellent story.
Seminole, FL
Posted 06:16 PM, 12/22/2008
Should not have read this story.....hungry for pizza....
Don't want to ruin my diet. I haven't had pizza since March...shees....
akron, oh
Posted 12:01 PM, 12/23/2008
Have not been to a Hut in ages. Must be a reason..
