Pizza is one of the most popular foods in the U.S.
While this food originates from Italy, America’s love for it seems to rival only that of the Italians.
Pizza, however, isn’t just a culinary icon. It also serves—and has served—as a symbol of entrepreneurial prowess.
No one embodies this more than Dan and Frank Carney, the founders of Pizza Hut.
Photo from Unsplash
The pizza chain’s rise doesn’t just present an inspiring entrepreneurial story; it also reveals just how powerful a well-thought out business model can be.
Becoming One of America’s Most Popular Culinary Dishes
Pizza had already been introduced in America by the Italians in the late 19th century. However, its surge to popularity only began in the late 1940s to 1950s.
Many soldiers who fought at or were stationed near Italy during World War II developed a love for pizza.
So, when they went home after the war, there existed a demand for pizza.
… and you know what?
This presented an opportunity for the Carney brothers!
Both realized there was an untapped market for pizza lovers in Wichita, Kansas. As a result, they opened a pizza parlor in 1958. They even borrowed USD 600 from their mother to make this possible.
Thus, Pizza Hut was born.
Photo from Wichita State University
The Carney brothers didn’t run Pizza Hut like a typical mom-and-pop pizzeria. Instead, they wrote manuals for things such as how many pepperoni slices to include, how to welcome customers, and how to mop floors the right way.
They did this to ensure every customer had an identical experience at every Pizza Hut location.
Within 20 years, the standards the Carney brothers established would serve as the foundation for every Pizza Hut across the globe.
That said, this wasn’t Pizza Hut’s true growth driver (although those standards certainly helped).
The company’s secret?
The franchising business model!
Letting Others Do The Heavy Lifting
The Carney brothers grew Pizza Hut by allowing people to franchise their own Pizza Hut locations.
Instead of using their own capital to expand rapidly, the Carney brothers let franchisees do most of the work for them.
By doing this, the brothers didn’t have to foot the bill for each Pizza Hut location, from startup costs to operating expenses.
Of course, this wasn’t a one-sided business deal. In exchange for franchising rights, franchisees were given a roadmap for success. As mentioned above, the Carney brothers developed manuals for how Pizza Hut restaurants were run.
Back to Pizza Hut…
It was only a matter of time before Pizza Hut’s success caught someone else’s eye.
In this case, it was PepsiCo.
PepsiCo was the second-biggest beverage firm in the 1970s, just behind Coca-Cola.
Since PepsiCo was behind Coca-Cola, it made attempts at closing the gap. This included a big marketing campaign… and an expansion into the fast food market.
Pizza Hut was an ideal candidate, so in 1977, PepsiCo acquired it from the Carney brothers for USD 300 million.
Frank Carney stayed as president to aid in the transition. After three years, he left to focus on his own business goals.
In 1994, Frank used his capital to become one of Papa John’s—a Pizza Hut rival—biggest franchisees globally, opening over 130 locations.
The RDS Connection
The Carney brothers’ success is best viewed through two of Return Driven Strategy’s (RDS) tenets—Ethically Maximize Wealth and Target and Dominate Markets.
-
Ethically Maximize Wealth
According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven”:
“In order to achieve wealth goals, management must first define those goals explicitly. Even the idea of “making more money” requires definition. One firm may require higher stability of cash flow streams. Another might accept higher volatility with the promise of higher future returns.”
The Carney brothers built a successful business by defining how it made money and created wealth for them in the first place.
By leveraging the franchising model as their business’ economic engine in the first place, they were able to “align all of their activities toward the goal of wealth-creation as defined.”
Identifying which business model to use early also enabled them to target their markets more effectively.
Speaking of targeting markets…
-
Target and Dominate Markets
Professor Litman and Dr. Frigo said that “Return-driven businesses dominate customer groups that support the wealth-creation goals as they have been defined.”
The Carney brothers targeted an underserved and untapped customer segment.
By building their business around this customer group, they were able to create a high-performance firm that not only delivered strong returns but also grew rapidly.
Clearly, Pizza Hut’s success wasn’t simply a matter of finding an underserved customer group. The Carney brothers built something that could scale quickly while delivering strong profits.
Their story points to a deeper lesson: Spotting a promising market is just the first step of any successful business endeavor. The real challenge is figuring out how exactly the business will generate money in the first place.
—
If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo.
Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm.
About The Dynamic Marketing Communiqué’s
“Tuesdays: Return Driven Strategy”
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo said that the goal of every long-term successful business strategy should incorporate the combined necessity of “making the world a better place” and “getting wealthy.”
That is why they created Return Driven Strategy and Career Driven Strategy―frameworks that were built to help leaders and professionals plan and evaluate businesses so they can also help others achieve their organizational goals and career goals.
The frameworks describe the plans and actions that drive returns for anyone in an organization such as independent contractors, marketers, brand managers, communicators, and other people in any field. These actions lead to the creation of wealth and value for customers, employees, shareholders, and the society.
Every Tuesday, we’ll highlight case studies, business strategies, tips, and insights related to Return Driven Strategy and Career Driven Strategy.
In planning, building, or managing brands and businesses, these strategies, case studies, and guidelines will help you choose what specific actions to take and when to take them.
Hope you find this week’s topic interesting and helpful.
Stay tuned for next Tuesday’s “Return Driven Strategy!”
Cheers,
Adrian Kyle Vergara
Content Writer
Valens Dynamic Marketing Capabilities
Powered by VX Dynamic
www.vxdynamic.com
