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Twilight of the Pizza Barons


Domino s Little Caesars Pizza Founders Contrasting Legacies Businessweek

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Mike Ilitch and Tom Monaghan are Detroit’s unlikely pizza barons, and their stories are drawing to a close. Detroit is never confused with Chicago or New York as a pizza town, but Domino’s, the nation’s No. 2 pizza chain behind Pizza Hut (YUM), and No. 3 Little Caesars together claimed 20 percent of the $34 billion in sales at U.S. pizza restaurants in 2013, says research firm Technomic.

Monaghan and Ilitch barely know each other. The Domino’s founder says in an interview he can’t recall ever tasting a Little Caesars pizza, “though I must have a long time ago.” A sculpture hanging in the archives at Little Caesars’ headquarters makes fun of a Domino’s slice as having “hard, tasteless crust, topped with artificial, flat, and runny cheese.” It’s a fluke that the chains emerged from the same corner of Michigan at roughly the same time more than 50 years ago. Yet, in different ways, Domino’s and Little Caesars changed the way Americans eat pizza, helping to make it one of the country’s most popular foods. The pizza barons were great at selling pies. Now one wants to save Detroit, and the other wants to save everything else.

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As if we needed another reason to dislike the Detroit Tigers.

Tom Monaghan was once a billionaire. He owned 244 classic automobiles, including a rare Bugatti Royale. He built a $30 million resort on a Lake Huron island. He hopped helicopters from the headquarters of the company he founded, Domino’s Pizza (DPZ), to watch the Major League Baseball team he owned, the Detroit Tigers.

The Tigers, the resort, and the cars are gone. The man who invented 30-minute pizza delivery sold Domino’s and eats less pizza these days because he’s gluten-free. He spent most of his fortune creating a foundation, a university, a law school, a mutual fund, and a radio station that embrace his Roman Catholic beliefs. At 77 years old, he rises each day at 1:50 a.m. After prayer, reading, exercise, and Mass, he goes to work in his cubbyhole of an office in the building that houses his old company, surrounded by milky glass statuettes of the Virgin Mary. Monaghan says his ultimate goal is “to get into Heaven and take as many people as I can with me.”

Mike Ilitch is still very much a billionaire. The founder of the privately held Little Caesars takeout pizza chain owns the Tigers, which he bought from Monaghan, the National Hockey League’s Detroit Red Wings, Detroit’s ornate Fox Theater, and tracts of vacant downtown land littered with rocks and broken glass. The man who drove rivals crazy by selling two-for-one pizzas now is being called batty for committing $292 million to Tigers superstar Miguel Cabrera. At 84, Ilitch is desperate for his team to win its first World Series since 1984. From his 10th-story office in downtown Detroit, he can see Comerica Park where the Tigers play near the lots he plans to develop into a commercial and residential hub revolving around a hockey arena. Ilitch declined to be interviewed.

Dominos and Little Caesars changed pizza forever.

Monaghan and Ilitch barely know each other. The Domino’s founder says in an interview he can’t recall ever tasting a Little Caesars pizza, “though I must have a long time ago.” A sculpture hanging in the archives at Little Caesars’ headquarters makes fun of a Domino’s slice as having “hard, tasteless crust, topped with artificial, flat, and runny cheese.” It’s a fluke that the chains emerged from the same corner of Michigan at roughly the same time more than 50 years ago. Yet, in different ways, Domino’s and Little Caesars changed the way Americans eat pizza, helping to make it one of the country’s most popular foods. The pizza barons were great at selling pies. Now one wants to save Detroit, and the other wants to save everything else.

share of 2013 USA pizza restaurant sales pie chart

Wow that's a lot of online sales:

More than 40 percent of orders at Domino’s 4,986 U.S. stores today originate online, but the key to the company’s success remains the same as when Monaghan started selling pizzas in 1960 with a used oven and a rotary dial phone: the car. Monaghan’s first was a 1959 Volkswagen Beetle. He and his fellow workers used it to ferry pizzas to customers no more than 30 minutes after they ordered. Other pizzerias offered delivery, but Domino’s was the first to make delivery a differentiator. The trick, Monaghan says, wasn’t in stepping on the gas but in making pizzas fast. Believing more choices meant more chances for screwed-up orders, Monaghan insisted on a bare-bones menu: only small and large pizzas and Coke to drink. “We had to beg on our knees to get Diet Coke in,” says Harry Silverman, a former Domino’s chief financial officer.

Little Caesars has a good origin story:

Mike Ilitch didn’t do delivery. The autoworker’s son and his wife opened a takeout store in a suburban Detroit strip mall in 1959. Marian Ilitch thought of her husband as a Caesar, albeit a small one, and the company was born. The original Little Caesars sold 296 pizzas in its first week, according to Marian’s handwritten record in a spiral notebook. Large pies sold for about $2.30 apiece, the equivalent today of about $18.50. An article in a local newspaper said Ilitch, shown in a black-and-white photo with his prominent nose and curly hair, had “big plans for the future.”

Marian handled finances while her husband oversaw pizza making and concocted ways to sell more pies. The couple had done some scraping by, prompting Ilitch to think he could entice families with low prices. He embraced coupons. An early one offered a five-quart plastic pail and a beanbag ashtray with the purchase of a medium or large pizza. Little Caesars grew slowly until the mid-1970s, when Ilitch started promoting two-for-one pizza deals. “Pizza! Pizza!” worked so well that he installed conveyor-belt ovens to keep pies coming.

At Little Caesars, dough was to be made fresh daily. Cheese had to be fresh, never frozen. Pepperonis had to lie flat. Crust—thicker than New York-style, thinner than Chicago deep-dish—had to be golden brown. “People don’t realize what he’s done with the pizza industry,” says Mike Scruggs Sr., a former Little Caesars executive who runs franchises in Colorado. “He’s the equivalent in my mind of Colonel Sanders or Ray Kroc.”

Dominos dude is super religious:

Monaghan began to dabble in Catholic causes. He established Legatus, an organization for Catholic chief executive officers, and donated $50,000 to support a Michigan ballot proposal to ban state-funded abortions. After the National Organization for Women responded by calling for a boycott of Domino’s, Monaghan told the Ann Arbor News, “It made me realize why martyrs die with smiles on their faces.” He was equally busy giving interviews about his $40 cashmere socks, his obsession with the actress Debbie Reynolds, and his growing pile of pricey toys. He could afford them. In 1985, Domino’s opened 954 stores, bringing the total to 2,841. The year before, the Tigers, which Monaghan bought for $53 million in 1983, won the World Series. Today a replica of the trophy stands in a glass case down the hall from Monaghan’s office.

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