Uno Restaurant Holdings Corporation Business Information, Profile, and History

Company Perspectives:

Uno is well positioned for continued growth. We have established a distinctive niche in the restaurant industry, as the only full-service, casual dining restaurant with a signature product--Chicago deep-dish pizza. We have built on the widespread popularity of this product to broaden the appeal of our concept, while leveraging our expertise to create additional opportunities through retail sales, new initiatives, and an expanding franchise system.

History of Uno Restaurant Holdings Corporation

Uno Restaurant Holdings Corporation is the controlling body for a group of companies that operate and/or franchise a chain of casual dining restaurants known as Pizzeria Uno ... Chicago Bar & Grill. Specializing in Chicago-style deep-dish pizza, Pizzeria Uno restaurants are full-service establishments that also offer a broad range of other menu items, including pastas, appetizers, salads, and desserts. In addition to its responsibility for approximately 150 restaurants around the United States, Canada, Puerto Rico, and Korea, Uno Restaurant Holdings Corporation also controls a consumer food products division that produces and distributes Uno food items for retail sale in supermarkets and convenience stores.

Deep-Dish Pizza: A New Concept for the 1940s

The Uno concept dates back to 1943, when Ike Sewell decided to open a pizzeria in Chicago with his friend, Ric Riccardo, founder and owner of Riccardo's Restaurant. Riccardo had just returned from a trip to Italy and was hoping to capitalize on a relatively new item on the American scene: pizza. The two men utilized space in the basement of a Chicago mansion to create Pizzeria Uno, where they began showcasing a pizza creation that came to be known as Chicago-style deep-dish.

For 12 years, Sewell and Riccardo's establishment continued to perfect its pizza, which was a thick-crusted version baked for almost an hour in a deep pan. While Sewell continued at his position as an executive for Standard Brands and Riccardo managed his other restaurant endeavor, their deep-dish pizza product gained immense popularity throughout Chicago. In 1955 they opened another restaurant just blocks away from the original, naming it Pizzeria Due.

Ten years later both restaurants were undeniable successes, and Sewell retired from his position with Standard Brands at the age of 62. He decided to open a third restaurant in the Chicago area, this time with a different focus. Su Casa began operating in 1965 and was regarded by many to be the first upscale Mexican restaurant in Chicago.

Nationwide Expansion in the 1970s and 1980s

In 1975, a man by the name of Aaron Spencer was in Chicago on business and ate dinner at Pizzeria Uno. As the owner of 24 New England Kentucky Fried Chicken units, Spencer was well versed in the restaurant industry, and recognized that Sewell and Riccardo possessed a product capable of success on a national level. He contacted them with an offer to purchase franchise rights for Pizzeria Uno, but was rejected initially, as had been all other franchise offers throughout the years.

Three years later, however, Spencer was still interested in expanding Pizzeria Uno nationally. He finally convinced Sewell to allow one test unit to be opened in Boston, and it was an immediate success. Based on that unit's proven prosperity, Sewell agreed to sign a full franchise deal giving Spencer complete expansion rights, and by 1979 the deal was set. Sewell maintained control of his three restaurants in Chicago, while Spencer created a company called Pizzeria Uno to manage his new restaurants in Boston, and Uno Restaurants, Inc. to manage all other franchised units. Although Sewell never took an active part in the management of the newly formed Uno chain, he continued to manage his own restaurants and served as a director for Spencer until his death in 1990.

In 1984, Spencer decided to sell his Kentucky Fried Chicken units in order to concentrate solely on strengthening his blossoming Uno business. Three years later, Uno had expanded so much that Spencer formed a new body called Uno Restaurant Corporation to preside over the two existing divisions housing the company-owned and franchised operations. Stock in the new Uno Restaurant Corporation was offered to the public, helping to earn approximately $6.2 million to fund future expansion efforts.

By 1988, Uno Restaurant had grown to include 15 company-owned restaurants and 26 franchised units, with a strong concentration in the Boston area. Prospective franchisers were continuing to make offers to Spencer, whose company made efforts to select new owners based mainly on the potential of the location. After choosing new sites, Uno Restaurants collected a one-time $40,000 fee from new franchisees and then offered them support in starting operations and implementing the Uno concept program. The program, known as "Going for the T.O.P.," (an acronym for Train, Operate, and Promote), was created in an effort to ensure a consistent level of service and management throughout the rapidly growing chain. The program was instituted by a committee known as the Number One Club, composed of three of the top franchise operators and three company owners.

Diversifying and Regrouping in the Early to Mid-1990s

After ten years of building Pizzeria Uno into a strong presence across the Eastern Seaboard, Spencer began to widen the restaurant's scope. A diverse assortment of new items designed to satisfy a wide variety of customers was added to the Uno menu. The decision also was made to begin selling Uno's prepackaged deep-dish cheese pizza in supermarkets and convenience stores throughout the New England area.

Entering the 1990s, the restaurant industry was hit especially hard by a weakened economy, which meant less money was available for consumers to spend on dining out. Pizzeria Uno, however, fared extremely well in comparison with its competitors, which had come to be other full-service chains such as Chili's and Applebees, rather than other pizza makers. Uno and its prospects looked so good, in fact, that it began to attract other important players in the restaurant industry as franchisees. New owners included Art Gunther, former Pizza Hut president; J. Jeffrey Campbell, former Pillsbury Restaurant Group chairman; Jeff Grayson, former president of General Mills; Louis Neeb, former chairman of Burger King; and Stanley Nippon, a former executive at McDonald's.

By mid-1990, Uno Restaurant was responsible for the operation of 75 restaurants, after experiencing a remarkable 84 percent increase in profits over the previous four years. Average per-unit sales were significantly more than $1 million, and the demand for Uno's retail pizza product was rapidly increasing. The company made attempts to keep pace by purchasing a processing plant near Boston, which enabled it to expand its retail pizza offerings to include pepperoni and sausage varieties as well as the cheese pizza already being sold. Prior to that acquisition, all retail production had been done out of the kitchen of one of the Boston restaurants. This new division began operating as Uno Foods, Inc.

Meanwhile, in response to a recession brought on by the Gulf War, Uno tried to counter the downturn in sales within its major markets of Boston and New York by offering different specials and promotions. It advertised specially priced deals during the lunch hours, and lowered prices on its children's menu in an effort to capture more families as patrons. Furthermore, the restaurants continued to expand their menu items, serving pizza, pasta, sandwiches, and salads, in addition to a full array of appetizers and desserts. One popular addition to the menu was the plizzetta, a light, thin-crusted gourmet pizza that accounted for 15 percent of the chain's sales by 1992.

Based on the success of the Uno pizza retail line following the purchase of the new production facility, the company decided to test a new takeout concept in selected restaurant locations. It began offering fresh, refrigerated unbaked pizzas for customers to pick up and take home, which allowed people to enjoy the product at home without Uno having to implement a delivery service. Another benefit of the takeout pizzas was the availability of all topping combinations, as compared with the limited offerings available in supermarkets.

In 1992, almost 50 years after Sewell and Riccardo entered the pizza business, Uno Restaurant acquired all of the outstanding shares of the three original restaurants in Chicago. The Pizzeria Uno chain had grown to include 109 restaurants throughout the United States, Canada, the United Kingdom, and Australia. Uno also was experimenting with the hotel foodservice market by offering its pizzas as room-service items at selected Hiltons and Marriotts in the United States.

Unfortunately, the chain's push to expand its menu beyond its pizza roots had not yet proved as successful as had been anticipated. While Uno's signature deep-dish pizza was a unique high-quality item, many of the restaurant's additional items did little to set Uno apart from other restaurants. Therefore, in 1993 Uno launched a $2.5 million effort to upgrade its units' kitchens, adding saute stations, charbroilers, grills, and fryers, enabling them to produce dishes of the same high quality as the pizza. The menu shifted slightly from its "Italianized" base, and the chain's restaurant units took on the name Pizzeria Uno ... Chicago Bar & Grill.

Meanwhile, franchise expansion slowed for a short time while Uno tried to deal with an unsolicited $100 million acquisition bid by Morrison Restaurants, owner of the successful Ruby Tuesday restaurant chain. When Morrison originally initiated the offer, Uno's yearly sales were approximately $84 million; by the time Morrison backed away a year later, Uno's sales figures had far surpassed the $100 million mark for the first time in the company's history. In addition, Uno Foods, Inc. had just landed a contract with American Airlines to put its pizza aboard selected flights, and was benefiting from increased distribution into supermarkets in the East.

In 1994, as Uno was completing its restaurants' kitchen renovations and beginning to see success from marketing Uno as an eatery with a diversified menu, the company made an acquisition that coincided with the new focus. Uno Restaurant purchased all rights to three Bay Street Seafood restaurant units in Illinois, New Jersey, and Pennsylvania. A far stretch from Uno's early beginnings in pizza, the restaurants further diversified the company's offerings in the dining industry.

Entering the late 1990s, Uno Restaurant was well positioned for continued growth in each of its divisions. The company was composed of 150 full-service restaurants, including 86 company-owned and 64 franchised establishments, and was finalizing plans to enter new markets. In 1996, as it entered into negotiations with franchisees overseas, the company created Pizzeria Uno International and hired Bruce Raba to act as president of the division. Later that year, Spencer passed down his duties as CEO to Craig Miller, who had been president since 1986.

New Dishes, New Partners, New Growth in the Late 1990s

In the second quarter of 1996 Uno's comparable store sales, an important measure of a retail business's health, dropped 1.2 percent compared with the second quarter of fiscal 1995. The company lost $2.64 million on sales of $40.29 million. At the end of March 1996, the company posted a loss of $2.10 million for the first six months of fiscal 1996, despite the fact that revenue was up 10.6 percent to $80.85 million compared with the first half of fiscal 1995. The loss included a pretax charge of $3.94 million taken to write down the value of certain assets. Among these assets were the three Bay Street Seafood outlets opened in 1994 and three Uno Pizza Takery carryout operations. These ventures had lasted three years in all at a loss of $3.3 million and delayed rollout of Uno's efforts at kitchen and dining room remodeling and menu revision.

In 1996 the company began in earnest to change over from pizza parlor to full-service casual dinner house. The word "pizzeria" was shrunk and finally eliminated from the restaurant's logo. The look of Uno outlets was changed from a traditional pizzeria décor to what the company described as a "Chicago warehouse look." Modeled on old industrial buildings converted to restaurant use, the new design incorporated rough-finish brick veneer walls, exposed pipes and ductwork overhead, and low-hanging Tiffany-style lamps on chains. Service-station-type doors were used to divide smoking and nonsmoking sections and as storefront windows, adding to the industrial look. A comprehensive beverage program aimed at marketing premium beers and liquors in larger portions--15-ounce beers and 20-ounce frozen cocktails--was implemented. New training for bartenders was instituted and showy four-color comprehensive beverage menus for each table were introduced to spur sales. In 1998, the company experimented with opening a microbrewery under the name Pizzeria Uno Restaurant and Brewery to add to the perception of its beverage menu's emphasis on premium quality. Randy Clifton, formerly franchise system developer for the restaurant chain T.G.I. Friday's, was brought in during 1998 to move Uno away from urban outlets with high rents and small spaces to suburbia. He was charged with finding franchisers willing to open multiple suburban Uno restaurants and weeding out franchisers who were unwilling to commit to the chain's new look and suburban focus.

The repositioning efforts broadened Uno's customer base from its former "20-something" clientele to 25- to 40-year-olds with children who visited at least twice a month. Nonpizza items comprised 65 percent of sales, and by 1999 check averages were up 4 percent to $11.80. Higher traffic and larger check averages resulted in steady sales growth. Net income reached $9.8 million in 1999, up 63 percent from the previous year, on revenues of $214.23 million, a revenue increase of 12 percent over 1998. From 1996 to 1999, however, the company's stock valuation continued to suffer. Despite Uno's strong comeback in 1996, stock prices hovered around $7 per share. Small cap stocks in general experienced the same difficulties at the time because Wall Street investors perceived smaller companies as poor risks. Concerns about the economy drove buyers away from the restaurant trade. In an interview quoted by Paul Frumkin in the November 15, 1999 issue of Nation's Restaurant News, Bank of America securities analyst Stacey Jamar commented: "[R]estaurant stocks have performed fairly poorly over the last several months. ... I think there is a concern in the marketplace that the economy will slow either from rising interest rates or pressure from inflation, and that will hurt consumer spending and subsequently hurt restaurant sales and restaurant stocks. ... I think it's a little overdone ... eating out in the U.S. has become less of a discretionary expenditure and more sort of a way of life. ... I think the stocks have been pressured unduly."

The illiquidity of Uno stock hampered plans to expand the business to 1,000 units, a number Uno executives felt was easily possible given the necessary capital. The company was able to grow a certain degree using internal funding. In 1997, Uno went international, concluding agreements with franchisees in Korea, Indonesia, Pakistan, and the United Arab Emirates (U.A.E.). The Korean firm Kolon Express & Tour Co. signed a ten-restaurant deal that included first refusal rights for Japan and Singapore. Pt. Nadya Vincent Indotama signed on to build ten units over ten years in Indonesia, with the first to open in Jakarta, and Jason Foods LLC agreed to open 12 outlets in Pakistan, starting in Lahore. Al Bannai Enterprises in the U.A.E. completed a deal to open 22 restaurants over seven years in the U.A.E., Saudi Arabia, Egypt, Kuwait, Jordan, Oman, Qatar, Bahrain, and Lebanon. As the 21st century approached, it became apparent that Uno could not look to Wall Street to keep expansion plans rolling. In April 2001, Uno Chairman Aaron Spencer and four of the company's executive officers took the company private, purchasing stock for $9.75 per share from shareholders, an approximately $41 million deal. Four years later, Uno found the backing for which it was looking. It sold a controlling interest in the company to the New York investment firm Centre Partners Management LLC for an undisclosed sum. According to Paul Frumkin, writing in the January 24, 2005 issue of Nation's Restaurant News, Centre Partners managing director David Blatte cited Uno's potential for growth as an important element in concluding the sale, and Aaron Spencer remarked, "I would expect [the number of units] to double, at least." At the same time, Uno welcomed Frank Guidara as its new chief executive, replacing Craig Miller, who left Uno in 2001. Guidara, formerly president and CEO of Au Bon Pain, was known for his successful turnaround of that company. As CEO at Uno, Guidara was expected to focus on improving the chain's food quality. As of 2005, Uno had systemwide revenues of $500 million, drawn from 203 outlets, 123 of which were company-owned.

Principal Subsidiaries: Uno Foods, Inc.

Principal Divisions: Mid-Atlantic Division; New England Division; Western Division; Metro & Upstate New York Division.

Principal Competitors: Darden Restaurants Inc.; Rock Bottom Restaurants Inc.; Carlson Restaurants Worldwide Inc.; California Pizza Kitchen Inc.; Pizza Inn Inc.

Chronology

• Key Dates:
• 1943: Ike Sewell and Ric Riccardo open Pizzeria Uno in Chicago.
• 1955: A second restaurant, named Pizzeria Due, is opened.
• 1965: Sewell opens a third restaurant in Chicago, an upscale Mexican restaurant named Su Casa.
• 1979: Aaron Spencer signs a full franchise deal with Sewell and creates a company (Pizzeria Uno) to manage his own restaurants in Boston and Uno Restaurants, Inc. to manage all other franchised units.
• 1987: Spencer forms Uno Restaurant Corporation to preside over the company-owned and franchised operations.
• 1992: Uno Restaurant Corp. acquires all of the outstanding shares of the three original restaurants in Chicago.
• 1993: Uno launches a $2.5 million effort to upgrade its units' kitchens to make possible more high-quality diversified menu items; the chain's units take the name Pizzeria Uno ... Chicago Bar & Grill.
• 1994: Uno Restaurants, Inc. purchases the rights to three Bay Street Seafood restaurant units in Illinois, New Jersey, and Pennsylvania.
• 1996: The company creates Pizzeria Uno International and hires Bruce Raba to serve as president of that division; Craig Miller replaces Spencer as CEO of Uno Restaurant Corp.
• 1997: Uno completes agreements with franchisees in Korea, Indonesia, Pakistan, and the United Arab Emirates.
• 2001: Uno Chairman Aaron Spencer and other executive officers take the company private.
• 2005: A controlling interest is sold to New York investment firm Centre Partners Management LLC; Frank Guidara becomes Uno's new CEO.