Friday, March 14, 2008

Straw Hat to expand pizza chain, launch Straw Hat Grills brand

From San Francisco Business Times.

Straw Hat to expand pizza chain, launch Straw Hat Grills brand

Straw Hat Pizza, once California's largest pizza chain before dramatically shrinking in size two decades ago, is preparing to rapidly move in the other direction.

Jonathan Fornaci, the new president of Straw Hat Cooperative Corp. of San Ramon - who said he was brought on board in January to encourage rapid growth - said the company plans to more than double in size, increasing its Straw Hat Pizza and Straw Hat Express locations from 45 to 100 by 2011. It also will debut a new-concept restaurant, called Straw Hat Grill, on April 1 in the Southern California desert town of Barstow.

The company is also negotiating to open a Straw Hat Grill in Fremont later this year, one of 10 eventual locations, according to Fornaci. He said the new restaurant, which he compared to Chili's Grill and Bar or T.G.I. Friday's, will feature typical sitdown-eatery fare such as pasta, steak, ribs, burgers and pizza. Fornaci said Barstow was chosen as the initial location because it is the halfway point in the busy travel corridor between Los Angeles and Las Vegas, it sits at the junction of busy Interstates 15 and 40, and it is a freight rail hub.

At 5,500 square feet, it will be substantially larger than the average Straw Hat Pizza location at 4,000 square feet. But it will largely retain the same emphasis on family dining as the pizzerias.
"The Straw Hat Grill will cater to both traveling families and business travelers," said Fornaci, adding that his company's pizza restaurants are geared to the nuclear-family demographic of two parents and two children, as well as gatherings of youth sports groups. And the new restaurant won't include the usual complement of party rooms and video games to be found at Straw Hat Pizza sites.

Growth will be funded by fees paid by the new franchisees, said Fornaci, who may also seek loans from banks and the Small Business Administration. He added that he hopes to open an average of one restaurant a month, starting in Sacramento next month. He would not discuss annual sales figures for the privately owned company.

Straw Hat Grills will be located exclusively on the West Coast, as will the 55 or so new Straw Hat Pizza and Straw Hat Express locations. Fornaci said the company is negotiating for its first-ever restaurant in Oregon and is also scouting sites in Washington and British Columbia, as well as in its existing strongholds of California and Nevada.

The company operates on a business model that is a cross between franchising and a traditional partnership. The core of 45 restaurants are run by franchise owners who become shareholders in the cooperative after paying a fee of $25,000.

Individual store owners are able to vote on company matters, including selecting the five-member board of directors, and share in company profits, which are distributed at the end of the fiscal year.

The 45 restaurants are what's left of a chain that once boasted about 400 locations throughout California and neighboring western states as late as the mid-1980s. Fornaci said the coop owners, who were franchisees in the original Straw Hat chain, opted out of a sale of the parent Saga Corp. to Marriott International Inc., which converted hundreds of Straw Hat locations to the Pizza Hut brand in 1986.

They have zealously held on to the Straw Hat brand in ensuing years, maintaining several dozen locations throughout California and the Reno-Sparks area of northern Nevada. Though a few new Straw Hat Pizza locations have begun opening again, including a 6,700-square-foot showcase in Sacramento, Fornaci was hired by a five-member board of directors eager to return Straw Hat to at least a measure of its former prominence.

Fornaci, a former corporate executive-turned entrepreneur who opened the first four-star restaurant in Costa Rica, loves to get out of the office at least once a month to help make pizzas in the Straw Hat trenches. He also speaks glowingly of the fresh ingredients and preparation of the "genuine California pizzas" that he contends sets his brand apart from at least some of the competition. "Many places today use dough 'balls' to make crust, or they are pre-made at another location," said the Walnut Creek resident, who oversaw a number of technology startups during his earlier career. "We make the crusts and prepare the toppings fresh in our restaurants. And we have no absentee owners. Most of the time, you can walk into a Straw Hat Pizza and meet the owner."

Despite the high energy and hands-on approach of the new president, Fornaci may have a major challenge doubling the size of the present company, according to Darren Tristano, executive vice president of Technomic Inc., a Chicago restaurant industry research and consulting firm. "The pizza segment is a very mature market and the biggest companies, Pizza Hut and Domino's, have struggled in recent years to grow," Tristano said. "Zpizza and RedBrick Pizza (Worldwide Inc.) are doing well to some extent because they are selling a better-quality product, and there are still opportunities out there, especially for regional players with from three to 25 locations. "A new or growing company has to look at saturation in the industry and they have to become a relevant brand to consumers. I think doubling the number of restaurants in three years may be a bit too optimistic. Maybe five to 10 years is more realistic." Tristano said the company's foray into the casual dining segment with Straw Hat Grills will only work if the restaurants are located in busy areas and also appeal to not only travelers, but local residents, too.

Straw Hat Cooperative Corp.
Business: Operator of pizza and casual dining restaurants
Headquarters: San Ramon
Founded: 1959


President: Jonathan C. Fornaci 
Address: 18 Crow Canyon Court, San Ramon 94583

Phone: 925-837-3400
For more information please visit: strawhatpizza.com/contactus and please follow us on Facebook & Twitter @StrawHatPizza.

dgoll@bizjournals.com | 925-598-1436

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