Shakey's Comes Home -- Pizza Chain Harkens Back To '60S Success

The old Shakey's pizza chain is staging a comeback.

By now, you've probably heard one of its radio spots hawking 90-cent pizzas covered with black olives. The temporary return to its original 1954 pizza menu (and prices) is part of a national $10 million revitalization campaign that positions Seattle as a test market for the chain's stores around the country.

"Seattle is our launch pad," says Gene Stone, Shakey's president, and the former chief executive officer of Bellevue-based Skippers Inc. seafood restaurants. "It's where we'll refine our concepts before expanding them to the national system." Last year, the company test marketed its hot chicken wings in the 20 Puget Sound-area Shakey's. This year, it's pan pizza.

Seattle and Shakey's go way back. "Seattle has always been an important market to Shakey's," says Stone. "It's where the birth of the chain took place."

Shakey's opened its first franchise in 1959 in Seattle, five years after "Shakey" Johnson and Ed Plummer founded the restaurant in Sacramento, Calif. The partners sold the chain, then 324 units, in 1968 to Denver-based Great Western United Corp., where it reached a peak with more than 500 units in the mid-1970s. That's when the Hunt brothers of Dallas took it over, and through neglect, ushered in a long period of decline.

"Shakey's was a stepchild," says Stone. "They never put any money into it. They used it like a cash cow."

Watching the chain falter always bothered Stone, who got his professional start swinging pizza dough at the original Shakey's as a college student and gradually climbed the ladder until he became vice president of operations and franchising. In 1969, after the company had changed hands, he left and later joined Skippers.

When he learned that Shakey's had been acquired by Singapore-based Inno-Pacific Holdings Ltd. a couple of years ago, he began talking to Gopinath Pillai, executive director. "I told him I thought Shakey's had a great past and the potential for a great future," says Stone. "Before I knew it, I was accepting a position."

At the time, Inno-Pacific was the largest foreign franchisee of Kentucky Fried Chicken, with some 100 outlets, and several Shakey's throughout the Pacific Rim. In 1988, it acquired the international division and, a year later, bought the domestic division, then separate companies. Now, Stone says Inno-Pacific is committed to reviving the chain over the long run.

Expanding the base of company-owned stores, which in 1989 consisted of just two out of 224, was the first step. Last year, Shakey's acquired Seattle-based Monarch Foods, which then owned thelargest concentration of franchises - 17 units in Seattle and three in Alaska. The acquisition boosted Shakey's company-owned stores to 20, with 16 based in Seattle.

The strategy behind the acquisitions is to lead by example. You can't convince franchisers to spend money on advertising and remodeling if you don't first make investments in the company-owned stores, says Stone.

Reluctance among franchisers to make investments runs particularly deep at Shakey's, says Don Smith, a former Shakey's president who now teaches a course in chain-restaurant management at Washington State University. They still harbor ill will that dates back to a 1969 class action suit over supplier problems. "I was one of 11 CEOs in 10 years," he recalls. "(Dealing with the residual rancor among franchisers) was my No. 1 problem."

Shakey's is also capitalizing on the good reputation that Monarch's former owner, Gordon Apker, built for his franchises. "Shakey's has a good image in Seattle because of Apker and his high standards," says Smith.

Since last July, the company has remodeled seven stores in Seattle, including its Pier 70 flagship outlet that cost $170,000 to overhaul and overlooks Elliott Bay. Remodeling can boost a store's sales to jump 35 percent or more if it's company-owned, says Smith.

"Shakey's continues to have one of the best products in the industry," says Smith. But fresh sausage and crackerlike pizza crusts aren't necessarily what the average chain-pizza customer is after. "Families (who patronize pizza chains) want a cheap, acceptable product," says Smith. Yuppie buyers looking for a better pizza generally don't believe they can find it in a chain."

Even Stone admits the chain's positioning has been fragmented. Now, he defines Shakey's as a family restaurant offering "pizza and more," citing menu diversification as one of the chain's strengths over giant Pizza Hut. But Smith disagrees.

Pizza Hut is too formidable as a competitor, towering over the market with its 30 percent share nationally. And with parent Pepsico, it has far deeper pockets for advertising, market research and real estate. It's not enough for Shakey's to be a family pizza restaurant, he says. It still needs to find a reason for being.

The company plans to grow in markets where it already has a presence, primarily in California, Washington, the Midwest and Washington, D.C. By the end of this year, Shakey's will have expanded by 15 new franchises and three company-owned stores around the country. Stone says he anticipates an annual growth rate of 20 stores domestically, and 20 percent abroad.

"We measure ourselves by how well we do in the markets we're in," says Stone, "not the number of markets we're in." When stacked up against its competitors, Shakey's ranked seventh in terms of market share and systemwide sales, but had the highest sales per unit last year, according to Nation's Restaurant News.

Last year, its systemwide sales were $200 million worldwide, with little deviation expected for 1991. "All the revenues we're generating now are being plowed back into the business," says Stone. -------------------------------

SHAKEY'S

-- Headquarters: South San Francisco. -- No. of outlets (U.S. and abroad): 379. -- No. of outlets in Washington: 20. -- No. of employees: 4,700. -- 1990 systemwide sales: $200 million.