Mazzio'S Corporation Business Information, Profile, and History

Company Perspectives:

Over the years, Mazzio's and Zio's have continually received consumer awards for "Best Tasting Pizza" and "Best Italian Restaurant" from r estaurant, news and city publications. This performance is testament to Selby's commitment to use only the finest ingredients in his resta urants.

History of Mazzio'S Corporation

Mazzio's Corporation is a privately-owned Tulsa, Oklahoma-based holdi ng company that operates two regional Italian casual restaurant chain s, Zio's Italian Kitchens and Mazzio's Pizza, as well as a pizza deli very service. The 17-unit Zio's is the more upscale of the two concep ts, offering brick-oven pizzas and traditional Italian cuisine. Mazzi o's Pizza numbers nearly 200 units, about half of which are franchise d operations. Mazzio's restaurants are located in Oklahoma, Texas, Ar kansas, Mississippi, Georgia, Tennessee, Missouri, Illinois, Kansas, and Iowa. The company is headed by its founder, Ken Selby.

Selby Meets Pizza in Mid-1950s

Ken Selby was born and raised in southern Oklahoma, then earned a tea ching degree from Northeastern State University in 1958. Two years ea rlier, while on a trip to Chicago, he visited a pizza parlor for the first time in his life. "I had never even heard the word 'pizza' befo re," he told the Tulsa World in a 2000 profile, adding, "I tho ught it was the best food I'd ever eaten." It was an experience that would eventually change his plans to make teaching a career.

Selby's introduction was not that unusual for the time. Although pizz a had been available for decades, it was mostly limited to major citi es, primarily the East Coast and its large population of Italian Amer icans. However, a pizza craze swept the country after World War II, r esulting in a large number of mom-and-pop pizza parlors. Pizza soon a ttracted entrepreneurs in America's Heartland with bigger plans. In 1 958 Frank and Dan Carney opened the first Pizza Hut in Wichita, Kansa s, and a year later opened their first franchise unit in Topeka, Kans as. While Pizza Hut was devoted to a table and chairs environment for pizza, Detroit native Tom Monaghan founded Domino's Pizza in 1960 an d pioneered the delivery concept. A short time later Michael Ilitch, also from Detroit, founded Little Caesars, which focused on the carry out of inexpensive pizza. While each man would take his concept to a national stage, the demand for pizza was so strong that there remain ed a place for small pizza shops and regional chains. In 1960, for ex ample, Pizza Inn was launched in Dallas to compete in the pizza resta urant category, and a short time later Ken Selby planted the seeds fo r his own regional chain in Tulsa, Oklahoma.

After graduating from Northeastern, Selby taught high school chemistr y in Missouri before moving to Tulsa to take a position in a local ju nior high school. To supplement his income he worked part-time as a c ook at a small pizza shop. In 1961, at the age of 24, he launched his own pizza business, renting a tiny vacuum sweeper shop in Tulsa for $150 a month, and cobbling together the rest of the operation. He found a used stove, moved in some old tables and chairs, and had a s ign that read "Used Cars" repainted to read, "The Pizza Parlor." Usin g his own recipe for sauce and mixing the dough in a No. 2 washtub, S elby opened for business on Saturday, November 11, 1961. With a ten-i nch pepperoni pizza selling for $1.50, he rang up $35.25 in s ales that first day.

The Pizza Parlor was a hand-to-mouth business for several months, as the till was raided each day to pay for ingredients. Selby continued to teach chemistry from 8 a.m. to 4 p.m., then baked pizzas until mid night. He hired his first employee, an art student at the University of Tulsa named Bill Williams. For the first three months Selby was un able to pay him, although he did help the young man with his rent and car payments until the Pizza Parlor was generating enough cash flow to allow for a regular pay check. Not only did Williams help make piz zas, he used his art talent to paint a mural of an Italian village on the restaurant wall and even designed the placemats and a pizza man logo that Selby used for several years.

The Road to Expansion in Mid-1960s

For four straight years, Selby taught school during the day and ran h is business at night. Finally in 1965 he was able to quit teaching, l aunch a second pizza parlor in Tulsa, and devote himself to his resta urants full time. He also changed the name of his stores to something slightly less generic than The Pizza Parlor, adopting the name Ken's Pizza Parlor. He also became interested in franchising Ken's, an ide a that was gaining currency in the fast food industry with the succes s of McDonald's and others. In 1966 he sold his first franchise, whic h relied on his special sauce and thin crust pizza dough. The chain e njoyed steady, although not meteoric, growth over the next decade. By 1975 the Ken's Pizza chain totaled 100 company-owned and franchised units and had spread beyond the Oklahoma borders.

Along the way, Selby began to have regrets about using "Ken's," feeli ng it was a name more appropriate to an auto repair shop than an Ital ian eatery. He recalled reading From Here to Eternity during c ollege and an Italian-American character named Maggio. "If I had just thought," Selby told Oklahoma City's World Reporter, "I would n't have named those places Ken's. I would have named them Maggio's." In the late 1970s he decided to create a second, larger, more upscal e restaurant format that would include the increasingly popular thick -crust pizza and a greater variety of Italian fare and a large salad bar. Selby planned to call it Maggio's, but his attorney soon discove red that a Philadelphia food processor had already appropriated the n ame. One of Selby's employees suggested he replace the two G's in Mag gio's with the two Z's from pizza and call the restaurants Mazzio's. Thus in 1979, Mazzio's Pizza premiered and proved to be an immediate hit with customers. He set a goal of opening 145 company and franchis ed Mazzio Units in five years, a number he easily surpassed. A major factor in the company's success was advertising. Until the late 1970s , before Mazzio's, Ken's spent no money on advertising beyond direct mail. Selby hired his first employee with marketing experience and be gan to try running television spots. He told Restaurant Hospitalit y in a 1988 article: "It was very effective for us. We bec ame real believers because it really moved the needle for us. From th at point, we evolved, moving away from direct mail/newspaper advertis ing to television when we had the option."

In 1982 Selby changed the name of his company to Ken's Restaurant Sys tems. Two years later he launched a pizza delivery operation called S cooter's Pizza Delivery, electing to use the Scooter's name until the bugs were worked out. In 1987 it became Mazzio's Pizza Delivery. By now, Mazzio's was the company's key brand. The old Ken's Pizza units were now converted to the Mazzio's concept, with only a handful of st ores in Tulsa retaining the Ken's name because of long-term market lo yalty. Because of this conversion to a single name, Mazzio's increase d its buying power in such areas as logo goods (pizza boxes and napki ns) as well as advertising. Ken Restaurant System also changed its na me to Mazzio's Corporation in 1987. At this stage the company operate d 133 company-owned restaurants to go along with 148 franchised units , spread across 17 Sun Belt states. It also began to diversify its me nu, adding a number of pasta entrees.

Mazzio's again changed directions in the early 1990s, as it became cl ear that it was losing dinnertime business to a new breed of casual r estaurants, including the likes of Bennigans, Chili's, and TGI Friday s, which offered an extensive menu and a full bar. Selby and his mana gement team decide in 1992 to develop their own Italian cuisine entry in this category, the goal to offer quality food in ample portions a t affordable prices, serviced in a comfortable atmosphere. The result of 14 months of effort was the 1994 opening of the first Zio's Itali an Kitchen in Tulsa, a 5,000-square-foot-freestanding structure model ed after an Italian villa, capable of seating 250 guests. The concept proved immediately popular and led to larger units opening in Oklaho ma City, Kansas City, and Springfield, Missouri. In March 1998 a Zio' s opened in Houston and appeared to be well on its way to enjoying su ccess but on the third night of operation, with the restaurant packed , smoke was detected. It quickly became apparent the attic was on fir e. Everyone was quickly evacuated and within a matter of minutes the structure burned to the ground. Not only did Mazzio's rebuild on the same location, before the end of the year it opened a second Houston location.

At the time Zio's opened, the Mazzio's chain totaled more than 230 un its generating $130 million in sales. However, as Mazzio's was up grading its menu and Zio's was going more upscale, the company felt t hat it was forgetting about it's long-term customer base, the value-o riented family market. To appeal to this segment, Mazzio's launched t he Pizzetti's $2.99 all-you-can eat concept. It was supposed to a ttract large families, the members of which would eat varying amounts . Over time the restaurants simply attracted big eaters, and a high v olume, low-margin business to begin with became even less profitable. The parent company preferred to invest its money on its other concep ts. Pizzetti's units outside of Tulsa were sold, and the handful loca ted in Tulsa were converted to Mazzio's.

During the 1990s Mazzio's made regular changes to its menu. In 1992 i t began offering specialty pizzas that instead of a traditional red s auce used an Alfredo sauce. The chain then moved to products with muc h the same appeal as pizza. In 1994 Mazzio's introduce a calzone ring , essentially a stuffed pizza brushed with garlic butter seasoning an d served with a marinara dipping sauce. This item was followed a year later by stromboli. In 1997 Mazzio's began to offer wraps, and in 19 98 it unveiled the quesapizza, an ultra-thin-crust pizza that came wi th a salsa dipping sauce.

While the focus of Mazzio's had shifted toward the casual dining aren a and greater variety in the menu, it did not neglect pizza and the p izza delivery business. It established call centers in Tulsa and Moor e, Oklahoma, to field calls from a single advertised number of delive ry and takeout. The orders were then routed to the closest restaurant . In the late 1990s Mazzio's leveraged the power of the Internet and created a virtual private network to link units outside of Oklahoma t o the two call centers. In this way, instead of $800 a month to c onnect to the Oklahoma call centers, an amount that was cost prohibit ive, a remote restaurant could now link up at a cost of about $10 0 per month, making it worth while to join the system.

Late 1990s Upgrade of Mazzio's

By 1998 the Mazzio's Pizza chain numbered 250 units, of which about 1 10 were company-owned. The decision was now made to elevate the conce pt and establish it in the casual dining category, albeit a much smal ler operation than a Zio's. The company devoted more than two years d eveloping the new concept, which would simply be called Mazzio's, dro pping Pizza from the name since pizza would now be just a small part of what the full-service restaurants had to offer, including wine and beer, appetizers, salads, entrees, pastas, and desserts. Because the Mazzio's name was so connected to pizza rather the casual dining, th e company had to prove to franchisees as well as to itself that the n ew concept would work. Hence, it closed a successful Mazzio's unit an d converted it into a prototype. Converting a less profitable unit, t hen producing an increase in sales would not have proven the viabilit y of the new Mazzio's concept. The prototype was a success as it turn ed out, and the company began to switch the older Mazzio's Pizza shop s to the new Mazzio's casual dining restaurant concept at a cost of a bout $150,000 per unit.

As a private company, Mazzio's Corporation did not have the financial resources to quickly transform the Mazzio's chain to the casual dini ng format or expand Zio's as rapidly as management would like. In 200 0 the company began to expand Zio's beyond the Texas-Oklahoma corrido r in which they had been operating, opening eight restaurants. The ho pe was to have 24 units opened by the end of 2001, but the company fa iled to reach that number. The company had to contend with pizza pric e wars that hurt margins. If 2003 was a challenge, 2004 proved even m ore so, impacted by rising dairy and gas prices, and a faltering econ omy. Rather than the pizza category growing, companies were simply sw apping customers. Mazzio's did better than most of the competition by continuing to update its stores and upgrade its menu. The chain dipp ed below 200 units in size, but in the long run it was better positio ned than if its had stayed the course and remained Mazzio's Pizza. Al though not as widespread as management had hoped by this point, Zio's was also succeeding in its markets. Ken Selby was well into his 60s but indicated that he had no plans to step away from the business he founded on a shoestring budget in 1961.

Principal Operating Units: Mazzio's; Zio's Italian Kitchen.

Principal Competitors: Pizza Inn, Inc.; Happy Joe's Pizza and Ice Cream Parlors, Inc.; Paul Revere's Pizza International, Ltd.

Chronology

• Key Dates:
• 1961: Ken Selby opens The Pizza Parlor in Tulsa, Oklahoma.
• 1965: Selby opens a second unit, called Ken's Pizza.
• 1966: The first franchise unit opens.
• 1979: Mazzio's Pizza is launched.
• 1987: Ken's Restaurant Systems becomes Mazzio's Corporation.
• 1994: First Zio's Italian Kitchen unit opens.
• 2000: The upgraded Mazzio's format begins replacing Mazzio's P izza unit.