These Struggling Pizza Chains Are on a Major Rebound
The past few years have been tough for companies of all kinds, but the restaurant industry was hit especially hard. The coronavirus pandemic forced businesses to close, led to labor shortages, sporadic ingredient scarcity, and more issues that are still lingering nearly three years later. But it looks like at least one pizza purveyor is back on the upswing.
Rave Restaurant Group, Inc. reported a net income of $6.8 million for the fourth quarter of 2022 on September 23. That's a marked improvement over the $0.9 million net income the company showed for the same time period in 2021. Moreover, Rave has been seriously busy on Wall Street as of late, buying back $500,000 worth of its shares last quarter, and another $1.1 million worth this quarter.
The Dallas-based company owns pizza chains Pie Five and Pizza Inn. Specializing in personal pizzas served in a fast-casual environment, Pie Five boasted 33 locations across 11 U.S. states in 2021. Pan pizza and pasta-focused Pizza Inn, meanwhile, had a whopping 252 locations in the United States, and 38 internationally, as of 2020. Both brands were trending downward before the pandemic and experienced major instability in 2020. Now, however, Rave's pizza chains appear to be doing much better.
"After nine consecutive quarters of profitability, we are transitioning from a turnaround to a stable company primed for growth," said Brandon Solano, CEO of RAVE Restaurant Group, Inc, in a press release. "Our fourth quarter and fiscal year show significant same-store sales growth at both Pizza Inn and Pie Five, net income growth, EBITDA growth, and strong operating cash performance."
Pizza Inn's domestic comparable store retail sales increased by 13.5% during the fourth quarter in comparison to last year. According to Restaurant Business, Pizza Inn's same-store sales are up 13% on a three-year basis as well. Another positive sign: The brand opened new buffet locations for the first time in years in 2021.
Rave also recently invested in a new, modernized Pizza Inn logo to go along with a fresh new retail design. All of these updates are intended to prioritize and improve the dine-in experience for customers.
"While the restaurant industry abandons dine-in, we continue to lean into our differentiated strategy, focusing on the value and variety of Pizza Inn's buffet while opportunistically capturing delivery and carry-out. We know our customers are hungry for a connection and an 'experience' with their family, not just Covid-esq functional feeding, and we are well positioned to deliver that need," Solano explained.
When it comes to Pie Five, things are a bit more complicated. The brand has experienced more than a few setbacks in recent years. Since 2018, the Pie Five chain has shuttered about half of its locations. Rave is taking a long, hard look at Pie Five's menu, preparing to make changes in the hopes of drawing in new customers and wowing those it already has. Those changes will largely be "operational and hospitality improvements." For example, the brand plans to ditch large pies and make investments in other menu alterations.
"Similarly, Pie Five is undergoing significant investment and changes. After six months of testing, we are currently launching the most significant menu transformation in the brand's history, focusing on differentiated pizzas made for the individual and eliminating large pizzas," says Solano. "We are also making operational and hospitality improvements to personalize consumers' dine-in experience while reducing third-party delivery friction."
Despite being a work in progress, things are looking up for both Pizza Inn and Pie Five. Investors certainly appreciated Rave's fourth-quarter earnings report, as their stock increased by 15% in morning trading on September 23. Today, the stock is trading at around $1.35 per share.