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Yum! Brands Inc
Pesos for pizza? In the U.S.? Yep, and that’s just a part of Pizza Patron’s efforts to bring in more Hispanics.
While Pizza Patron certainly isn’t the first restaurant chain to target Latinos, it may well be the most extreme. Owner and founder Antonio Swad is unapologetic about the eatery’s tactics to draw diners -- pay in pesos and get your change in dollars, order in Spanish and get a free pizza -- and the chain requires most of its employees to speak both English and Spanish.
“We’re not interested in being a broad brand,” Swad, wearing jeans and a black Pizza Patron T-shirt, said during an interview at his yet-to-be-opened store in Cicero, Illinois, about 8 miles southwest of downtown Chicago. While some of the closely held company’s recent promotions have upset “a lot” of people, Swad said that’s fine because “they’re not our core customer.”
The 101-store chain, based in Dallas with almost all locations in the U.S. Southwest, will open its first Midwest eatery next month in Cicero, where 87 percent of the population is Hispanic, according to data from the U.S. Census Bureau. Swad is targeting 30 shops in the greater Chicago area and said the brand can have 1,000 U.S. locations in the long term.
What Swad stumbled upon by accident 26 years ago in Dallas’s Pleasant Grove neighborhood is the same thing that other restaurant chains have recently zeroed in on as the U.S. economy struggles to recover: Hispanics are an increasingly important group politically and powerful drivers of consumer spending.
The buying power of that demographic, the largest minority segment in the U.S., with about 52 million people, is projected to jump by 50 percent to $1.5 trillion by 2015 from $1 trillion in 2010, according to a Nielsen Co. report from March. While McDonald’s Corp. (MCD) has long been one of the only chains to successfully market to Latino consumers -- Nielsen says the company spent about $131.2 million on Spanish-language marketing last year -- others, including Denny’s Corp. (DENN) and Wendy’s Co. (WEN), are revving up Hispanic advertising.
“There’s a lot of folks who are sort of waking up,” Cristina Vilella, director of marketing at McDonald’s USA, said in an interview. “The ethnic consumer, and Hispanics specifically, has influenced the culture in ways that have changed what we listen to, what we eat and has made things more mainstream.”
McDonald’s recent Latino-focused ads for mango pineapple smoothies, which show a woman sipping a drink and being transported back to her childhood, “really tapped into sort of latent emotion of growing up with these fruits,” Vilella said. The ads are shown in both English and Spanish.
Denny’s, which has more than 1,500 U.S. units, has recently created ads to appeal to Hispanics, who make up more than one- fifth of its customers. In May, the Spartanburg, South Carolina- based company introduced a national TV commercial and online video advertising $4 chicken wraps -- the spot shows a Hispanic father at Denny’s confusing his children’s request for a chicken wrap with a rap. He proceeds to deliver a rap song about chicken in Spanish.
Denny’s plans to spend a larger percentage of its total media budget on ads targeting Latinos in 2013, chief marketing officer Frances Allen said in an interview.
The Hispanic demographic is “a very big focus for us,” Allen said.
“This is a very value-oriented customer” she said. “They are generally parents with two or more children in their households. They value eating out as a family.”
Wendy’s, which has a Latino ad campaign called Sabor de Verdad, which translates as “real taste,” also is stepping up.
“We have long underserved the growing market of Hispanic consumers,” Emil Brolick, chief executive officer of Dublin, Ohio-based Wendy’s, said during a conference call on Aug. 9. This demographic “represents an important sales opportunity,” and Wendy’s “will have a more consistent presence in Hispanic media,” he said.
That makes sense because Hispanics have increased their restaurant spending faster than the rest of U.S. diners. Their expenditures on food away from home grew by 33 percent from $1,865 in 2000 to $2,474 in 2010, while all American consumers boosted restaurant expenditures by 17 percent from $2,137 to $2,505 during that decade, according to data from the Bureau of Labor Statistics in Washington.
Swad, who grew up in Columbus, Ohio, founded Pizza Patron -- Patron roughly translates to “boss” -- in 1986 in Dallas. He expanded the company through franchising and still is the sole owner. Sales at Pizza Patron have jumped 77 percent during the past five years to about $42.5 million in 2011, while Pizza Hut (YUM)’s U.S. revenue has increased 4.9 percent during the same time, according to Chicago-based researcher Technomic Inc.
Pizza Patron attracts Hispanics, who make up about 65 percent of its customers, by selling chorizo-topped pizzas, QuesoStix breadsticks, lime-and-pepper chicken wings and churros for dessert. The chain, which doesn’t advertise in English and doesn’t deliver, also sets up “tienditas” -- 5-by-5 tents that serve as little shops to hawk pizza outside apartment complexes. Large pepperoni pies go for $4.99 to help Pizza Patron compete with value-focused brands such as Little Caesars, the fourth-largest U.S. pizza chain by sales, according to Technomic.
Splashed with bright reds and yellows, the Pizza Patron eateries also play contemporary Latin music both inside and outside the store. In Cicero, the unopened restaurant’s windows last month were covered with a giant print of a 200-peso bill that said “Get ready to pull out your money” in Spanish.
Still, the chain has stumbled a few times with its Spanish advertising. In Florida, it had to change the name of its caramel churros filling to “dulce de leche” because Cuban customers there found the original wording sexually suggestive, while Mexican Americans weren’t offended, said Andrew Gamm, Pizza Patron’s brand director. In Chicago, the menu and ads may require tweaking in neighborhoods primarily populated with Puerto Ricans, he said.
Pizza Patron has a “fighting chance” of making it in Chicago, which already is crowded with pizza joints, said Bob Goldin, executive vice president at Technomic.
“The products are somewhat different,” he said. “They’re not just saying we’re going to give you a Pizza Hut approach and put salsa on one of our pizzas and say that’s our Mexican pizza.”
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