Pizza industry remains solid, but some chains struggling

The Sbarro restaurant chain has filed for bankruptcy protection, and one analyst said the company “is a stale and old brand that has not taken any steps to reignite their audiences.”

CHICAGO -- It's almost as if America was losing its taste for pizza.

Sbarro, the seemingly omnipresent pizza joint at mall food courts -- including Northwoods Mall and Tanger Outlet Center in North Charleston -- filed for bankruptcy protection this week. That follows Round Table Pizza, a West Coast chain that filed in February. And the operator of Uno Chicago Grill emerged from bankruptcy protection last summer.

Ranked among the largest U.S. pizza operators, they are numbers 5, 10 and 11, respectively, with a combined 1,700 locations and $1.6 billion in sales, according to industry publication Pizza Today.

Giordano's, one of the best-known chains for stuffed pizza in Chicago, filed for bankruptcy protection in February. Numerous smaller pizzerias also have slipped into financial trouble.

It's true that pizza chains are dealing with the effects of a deep recession, higher ingredient prices and more competition from nontraditional channels, such as take-and-bake pizza from restaurants and supermarkets.

But America still loves pizza.

Overall, the pizza business is faring OK, with flat sales of about $38 billion over each of the past three years, said Jeremy White, editor of Pizza Today. The pizza business has been treading water while overall restaurant revenue sank.

"The pizza business is really pretty solid right now," White said. "You can feed a family of four for under $30 or even under $20."

Sbarro, with more than 1,000 locations in 40 countries, was saddled with crushing debt. And unlike many strip-mall pizza shops or stand-alone restaurants, it was dependent on foot traffic in malls and airports, which saw declines during the recession.

Its financial situation is also a reflection of how Sbarro was run, said restaurant consultant James Sinclair, principal of restaurant consultant OnSite Consulting.

"This is not based on the specific product, pizza, but instead on how Sbarro ran their business, executed leases, created profitable items and managed their labor model," he said. "Sbarro is a stale and old brand that has not taken any steps to reignite their audiences."

Another big shift in the pizza business isn't what consumers are buying, but where they're buying it. The number of channels to buy pizza has increased, said Dennis Lombardi, executive vice president of food-service strategies at WD Partners.

They include supermarkets, which not only sell frozen pizzas but ready-to-bake pizza. Warehouse clubs sell very large pizzas for about $10.

"When pizza is your primary product line, you're starting to sense and feel all the substitute channels that are available," Lombardi said.

"It's not so much that people are fleeing pizza as a meal option. Their number of eatings is being spread over a growing array of different channels," he said.

Fierce price discounting and couponing by the top three players, Pizza Hut, Domino's and Papa John's, has also squeezed other pizza sellers.

One way some of the big players are competing on price is by upgrading equipment.

For example, many of the big players have upgraded to speedier ovens that use less energy and cost less to operate, said Mark Sieron, president of Middleby Corp., which makes such an oven.

Its clients include Pizza Hut, Domino's, Papa John's and Little Caesars, he said.

The Post and Courier contributed to this report.