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The Sbarro Saga and the lessons to be learnt

The Sbarro pizza chain went into bankruptcy for the second time in less than 4 years, First time writing of over $ 400 million in debt, last week trying to write of $170 million. For about 591 stores in the US, this is equivalent to nearly $ 1 million per store, Probably twice as much as each store cost to build

In a New York Times article last week entitled “This is the real reason Sbarro went into bankruptcy” they addressed the food quality issue (not good) and the real estate issue (mall traffic decreasing). which are the consequences of the issue, but then not all chains in malls are going broke, and many of them serve food that is not very good, and we will probably see more store closings in the near future. Similar issues are been faced by other restaurant chains, including Red Lobster (not very good food), KFC (decreasing average store sales), TGIF USA ( not cool or hip anymore), and so on. On the other side you have the Chipotles, Paneras, Chik-Fil-A, Bojangles and Five Guys succeeding.

Back to Sbarro. last week was waiting for the train at 2:30 pm in Secaucus Junction, where there is a Sbarro. Below is a photo of there hot holding. Sixty portions of pizza holding with a customer rate of about 12 per hour at that time. Not very good.

Was involved briefly with Sbarro when they were coming out of the first bankruptcy, saw their operations. Sbarro makes their own doe in house every day, but how many customers know this and does it matter if you are going to precook and hold the pizzas for hours.If you ask  potential customer who has better pizza, CPK or Sbarro, majority choose CPK, and they buy in their dough frozen…

The capital company that ended up owning Sbarro didn’t really want to own a pizza company, but thought they saw the opportunity of doing a quick revamp, turning it around and making a good profit selling it off. Didn’t happen that way. They called in consultant groups to present turn around the company, all who went and presented their plans. The one we did, I believe could have succeeded with the right management. But they chose to hire a President and management team that had fast food experience, and never really did change it, except they created a couple of other pizza brands/concepts, of which they have built the first ones, but will take 5 to 10 years before it could have a significant impact.sbarro line 300x225 The Sbarro Saga and the lessons to be learnt sbarro pasta 300x225 The Sbarro Saga and the lessons to be learnt

One of the most visible problems is that they create the 8 ft of hot pizza holding, and the teams in the restaurants will come in at 8 am and feel that their job is to fill that hot holding area with a dozen or more pizzas as soon as possible. At 10 am it will be full, only problem is that the customers come after 12. The pasta station is even worse, with pasta and sauces holding all day. Sbarro Team, your job is to serve good food, not fill up the line…

Can Sbarro be saved, probably, but it will need a complete change in the mind set, and to remember that they have some great real estate, but need to make great food to make it a success.



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