Marco's Pizza makes push for Minnesota amid competition for franchisees

by Evan Ramstad
Star Tribune

Marco’s Pizza, an Ohio-based pizza restaurant chain, is making a push on the Twin Cities market next year, joining a handful of other prominent restaurant franchisers that are now targeting Minnesota.

Dunkin’ Donuts, the country’s biggest doughnut chain, and Tim Hortons, the Canadian coffee powerhouse, also are rapidly expanding in the state by seeking local entrepreneurs and investors to be franchisees. And Chick-fil-A, the chicken sandwich chain that is prominent in the southern U.S., has opened nine locations in the Twin Cities since 2013 and continues to look at other spots in the region.

The arrival of Dunkin’ Donuts, which left the state in 2005 after an effort at market expansion, has been closely watched not just by doughnut lovers and coffee drinkers but by investors. The Canton, Mass.-based firm has a 60-year track record of turning franchisees into millionaires and is now one of the world’s largest restaurant names with about 12,000 locations globally.

While Toledo-based Marco’s has a lower national profile, it is stepping into the competition for Minnesota entrepreneurs with an offering positioned between delivery-focused pizza chains and neighborhood boutiques. The firm, which has about 700 locations in 35 states, has three in Minnesota and is seeking franchisees with a goal of having 60 locations in the metro area within five years.

“We have a very sophisticated market-planning tool and, right now, Minneapolis scores No. 1 for us in the whole country,” said John Ramsay, vice president of franchise development for Marco’s. “That has to do with family size, income and education levels.”

He said the company typically enters a metropolitan area in the suburbs, building up recognition with families who have kids involved in sports and other school activities, before heading into more densely populated areas. The chain distinguishes itself from delivery-focused chains like Domino’s, Papa John’s and Pizza Hut by operating dining areas in most of its locations. Even so, delivery is a particularly competitive issue for pizza chains and a key to the rollout strategy as it works with franchisees.

“Every time you put in a new location, you shrink your delivery zone,” Ramsay said. “We’ll build very strategically at first, then adding more and filling in the gaps to lower delivery times.”

Its current locations in Minnesota — in Anoka, New Hope and Shakopee — are run by Family Video, a family-owned, Illinois-based firm that also operates a chain of video and game rental shops. It is the largest franchisee in the Marco’s Pizza system.

But Ramsay said Marco’s is now seeking a broader set of franchisees in the Twin Cities area.

The company has already identified opportunities in the southern suburbs and farther-out communities of Farmington, Lakeville, New Prague and Savage.

For a unit with seating, a franchisee will need to invest in a range of about $260,000 to $550,000, less than is typical for restaurants in a stand-alone location because the model is based on locations in malls and retail strip centers.

“From an investment standpoint, we’re quite attractive from a Dunkin’ or Burger King because we’re able to go into existing spaces,” Ramsay said.

The investment range for a Dunkin’ unit is much wider, from $94,000 to $1.6 million, according to disclosure documents filed with the Minnesota Department of Commerce. For a Tim Hortons, the investment range can go from $33,000 to $1.7 million, for a standard shop, its filings show.

Marco’s Pizza also is planning significant expansions in Milwaukee and Madison, Wis., next year. But Ramsay said the Twin Cities will play a key role as the company heads to 1,000 locations in the next two to three years.

“We have a product that is made from scratch in restaurants,” Ramsay said. “Part of our appeal is the product, but we pair with franchisees who live in the marketplace. We rely upon people reaching out and making connections.”
December 28, 2016