Hungry Howie’s IT Gamble

THE CHALLENGE
The year is 2008 and the economy is tumbling off a cliff. You’re the CEO of Hungry Howie’s, a pizza restaurant chain with more than 500 company- and franchise-owned stores. Pizza usually fares well in a recession, but your Michigan-based company is coping with consumer belt-tightening as the state’s auto industry falters. Instead of following suit, even as sales flatten and customer counts drop, you decide it’s time to lead the company and your franchisees through a technological transformation.

THE BACKDROP
“I’m not a tech guy,” says Hungry Howie’s CEO Steve Jackson, who dropped out of college to partner with a former boss to start a pizza venture back in 1976. “When I opened my first store, we literally kept the money in a cigar box behind the counter and our barometer for profitability was our checkbook. If we had money in it at the end of the month, we were doing okay.”

Hungry Howie’s expanded steadily during its first decade. In the 1980s, a push into franchising accelerated the growth pace and prompted the company to open distribution centers to serve its ever-expanding network of restaurants. Still, Jackson remained enough of a Luddite that when his tech team first broached the idea of spending $1,400 to build a website, he said no. “I said, ‘I don’t think we need that,’” he recounts. “Why would anyone sit down, turn on the computer and find a website when they could just pick up the phone?”

Despite his doubts, Jackson kept a close eye on how forays into Internet sales fared for Papa John’s and Domino’s and jumped right in as soon as he felt online ordering had reached a tipping point. For the concept to work, the company had to invest in a unified POS system that would route orders to the appropriate stores. That, in turn, meant selling its network of franchisees (only 18 of its 549 restaurants are company-owned) on buying into the new system. Fortunately, the effort paid off.

“The average online spend is 25% more than orders placed by phone,” says Jackson. “That was the preaching we gave to our franchisees, that it would be more profitable.” Little did they know; that was just the beginning.

THE HURDLE
By the time the downturn hit, Hungry Howie’s had already updated its POS system twice, selling franchisees on each new iteration as a way to stay current in the marketplace. So veteran franchisees were understandably skeptical when Jackson decided to combat tough times with a reinvention of the brand and updated IT and operating procedures that would give its entire network real-time access to every aspect of the business from anywhere its owners and managers happened to be.

“We had to educate [our franchisees] that technology isn’t like a pizza oven, where you buy it and it lasts for 25 years,” he says. “POS systems and computers probably have a five-year shelf life. You have to think about the fact that you probably haven’t had the same home computer or cell phone for five years.”

Like many CEOs, Jackson also struggled to decide whether to buy an off-the-shelf system or develop a proprietary system, ultimately opting to invest “six figures” to develop its own internal system using Microsoft’s SharePoint platform. The result: Howie’s Online Management Exchange—HOME—is an enterprise-wide reporting module capable of pulling data from all locations so that the company and its franchisees can look at all the data necessary to monitor performance, including the percent of its sales made online, the number of complaints received and what percent were resolved, same-store comparables, average ticket amounts, average delivery times and sales by product.

“Every morning at 9 a.m., I get a full report, and we send individualized reports to all franchisees so they can see exactly what took place,” says Jackson. “It’s a unified platform for information storage and communication. Our franchisees can go right in and place orders for their stores on their smart phones and tap into a central library to access training videos and store inspection reports—anything they need.”

THE RESOLUTION
Hungry Howie’s IT investment “enabled us to literally change our regional brand into a national brand overnight,” asserts Jackson, who explains that access to consistent data across its network of stores has changed everything from how franchisees find and develop territories to how they procure ingredients. “HOME has become a growing, living and breathing part of our business. It’s to the point where we rely on it the way we rely on our hearts as human beings because it controls everything and helps keep the organization in contact with every department and every aspect of our business.”

THE LESSON
While taking the technology plunge has paid off handsomely for Hungry Howie’s, the ride was not always smooth. “Like any big business decision—distribution, trucking or whatever it might be—the final decision is always a gamble,” points out Jackson. “You have to understand that you might not get it right; and when that happens, it’s important to be able to cut bait quickly.” He urges CEOs considering an IT initiative to be open-minded and to surround themselves with “smart people” in every category of the business when weighing options and designing a system.

Because the possibilities that technology can offer are endless, it’s also critical to be strategic about your IT investment, says Jackson, who has seen his technology spend climb from 2% of sales seven years ago to close to 7% today. “It opens the door to ask, ‘If you can do that, can you do this?’ And usually, you can, but you need to prioritize and focus on what’s worth doing.”

Finally, while HOME is at the heart of everything Hungry Howie’s does, Jackson is also quick to point out that his is not entirely a technology story. “We could not have delivered the 24 quarters of same-store sales increases that we’ve had without it, but our profits are as good as they are for a lot of reasons,” he says. “Technology gives you the ability to measure the things that drive your business, but you still need to know what do with that information.”