Pizza’s Pivotal Moment: Swinging Towards Ghost Kitchens and Brands, Diversifying Portfolios
How two of Columbus’ most recognizable names in pizza are meeting the pandemic head-on.
When it became clear that COVID-19 was not a fleeting event, the vice president of operations for Mikey’s Late Night Slice brought a flag into the office that said, “Don’t Give Up the Ship.” The U.S. Navy rallying cry became one of the mottos that the company used when they realized that they would have to act quickly to stay afloat during the pandemic. The other set of guiding words was, “The best thing we can do is to be here [for our customers and employees] when this blows over,” says Mikey’s founder Mikey Sorboro.
The pandemic is not over, but Mikey’s has not only kept the ship afloat, it has become a stronger company with a more diverse portfolio of assets this side of 2020. And Mikey’s is not alone. While it may seem obvious that one of the country’s most beloved comfort foods has thrived in times of nationwide turmoil, Mikey’s and Donatos Pizza quickly pivoted to embrace new opportunities and do some self-examination over the past 21 months. Both companies look much different than they did in 2019, but not without challenges. Let’s grab a slice and dig deeper.
Find more from Columbus' food scene:Subscribe to Monthly's weekly dining newsletter, Copy & Taste
From Edge to Edge to Coast to Coast
Donatos has doubled its number of franchises since the pandemic started, and there’s no sign of it slowing.
It started in 2018, when CEO Tom Krouse got a call from a former colleague. With the skills of an expert soothsayer, the chief operating officer of the burger chain Red Robin asked if Donatos would be interested in growing its pick-up and delivery business. A consultant for Red Robin researched 50 pizza chains and knew of Donatos founder Jim Grote.
Donatos previously danced with the burger industry after being bought by McDonald’s in 1999. The Grote family bought it back in 2003. “At first we thought, ‘Here we go again,’” says Krouse about the call from Red Robin. But then he remembered a Donatos internal philosophy: “The answer is ‘yes’ until there’s a reason to say ‘no.’”
And there wasn’t a reason to say no. First, Krouse says, burgers and pizza are the most frequently ordered items at restaurants. And Donatos’ operational platform—including a commissary that produces all the dough here in Columbus—allowed for a low-labor and high-output product for Red Robin. After testing the concept in Colorado Springs, Phoenix, Raleigh and Cleveland, Red Robin now sells Donatos pizza in 171 locations across the country, with a majority out West.
The real win for Donatos was access to Red Robin’s distribution centers. Every product on a Donatos pizza is customized, from the pepperoni to the sauce, and the company cannot rely on readily available, mass-produced ingredients from the supply chain. “You can’t sell a truckload of ingredients for a single location,” explains Krouse. “So before, if someone from Idaho says they want to franchise [with Donatos], we would have to say no.” With the Red Robin partnership, Donatos went from having six distribution centers on the East Coast to 27 across the country. “For the first time ever,” he says, “we are able to franchise nationwide.”
The Red Robin partnership also solidified the fact that Donatos pizzas can be made consistent to brand standards in just 250 square feet, allowing the company to become bolder with its ghost kitchen strategy. In turn, Donatos has partnered with Reef Technology, a parking solutions company that has begun providing shipping container-based ghost kitchens in urban parking lots. Third-party delivery platforms, such as Uber Eats and Grubhub, now transport Donatos pizzas to customers in Nashville, Denver and New York City—all places where the company wouldn’t have brick-and-mortar locations due to high rent. And this is just the beginning. Donatos plans on operating 12 locations with Reef, says Krouse.
Mikey’s Late Night Slice tells a much different story. Although the company is down 10 percent in sales when comparing 2019 to 2021 (“2020 doesn’t count,” says Sorboro), the company is stronger. “Hard decisions forced us to be leaner,” he says. “But we are much more profitable than we were pre-pandemic, because we are forced to be better [at business].”
First, Mikey’s had to shift to a carryout operation. “[Traditional pizza places] do 90 percent of their business in carryout. They were set up beautifully for people not leaving their houses,” Sorboro says. “But for a place like us, we were practically the opposite. It was harder. We were doing 85 percent dine-in. Only 15 percent of our sales were pick-up, third party or carryout.” Mikey’s was experienced in sending out whole pizzas for carryout and delivery, but had to quickly order supplies to execute single-slice orders.
Mikey’s also became more lean operationally. The chain closed two locations that weren’t performing as well: its Ledo’s Tavern location and a second food truck. It also laid off staff, which Sorboro describes as a difficult decision. And it winnowed down its number of third-party delivery services. “At one point, we had 12 partners, with 12 separate iPads running to process orders,” Sorboro says. The company cut that number to the three most profitable delivery partners, creating ease for Mikey’s associates.
Additionally, Mikey’s reviewed the unused capacity of its restaurants. The doors were open and the lights were on, but it was utilizing the ovens and personnel only 40 percent of the time. The answer? Use the resources for spin-off ghost brands that are only available through third-party apps.
One of them, Phat Slice, failed. “We had to take that out back and shoot it,” laughs Sorboro, who says that ghost brands have low overhead to start up and are easy to shut down if they’re not working. But High Horse, the vegan version of Mikey’s, brings in a few extra thousand dollars a week. “We are actively thinking about giving High Horse its own retail space and storefront,” he says. The company is also considering selling the ghost brand franchise to pizza shop owners in other markets.
And in April of 2021, Mikey’s dipped its toes into a licensing deal with Penn National Gaming’s Hollywood Casino, a project that started in October 2020. Hollywood Casino approached Mikey’s as part of a plan to revamp its food and beverage system to include local brands. “We figured that drinking and gambling would really be on-brand with Late Night Slice,” Sorboro says.
Not Out of the Weeds
While both companies are in a better place than they were pre-pandemic, a nationwide labor shortage is dampening the celebration.
Donatos saw it coming. In 2018, the Society of Human Resource Management forecasted that there would be a nationwide people shortage, says Nikki Stead, vice president of people services at Donatos. At that point, people were retiring earlier and high schoolers were going straight into college without getting jobs. (Donatos has employees ranging from age 14 to their 80s.) Enter the pandemic, which accelerated the forecasted trends.
Stead does direct hiring for 54 company locations, the Donatos home office, its commissary and for its frozen line, Jane’s Dough Premium Food. In late October, Stead said those locations had roughly 400 open positions.
Donatos, which raised entry-level wages from $9.75 to $11 this year, is working on making it easier to hire candidates, with updates to its careers page and programs in which applicants can text or scan QR codes to apply. And Donatos is also taking a grassroots approach by working with school systems and churches. “We’re making relationships in communities where people know the managers before they start working for us,” Stead says. And from last May to July, Donatos debuted a systemwide campaign called Dinnerview. Any candidate who showed up for a job interview would leave with a certificate for a free pizza. The project increased applicants by 20 percent and helped the company bring on 179 new associates.
Mikey’s, whose employees make $12 to $15 per hour before tips, turned to incentives, as well. But instead of a hiring bonus, it chose to provide a $500 bonus to current employees who referred successful hires. “We wanted the people who already work for us to be the loudest voices of why they work for us,” Sorboro says.
The company started a social media campaign called “Humans of Late Night Slice,” based on Humans of New York. In it, Mikey’s interviewed associates that had been with the company the longest, asking them to share what it means to work at Mikey’s. “It resonated with people,” Sorboro says. “It was fun to see [our employees] open up.”
While their strategies for attracting new employees are different, both companies have a core issue at heart during the labor shortage: employee burnout. And both have taken measures to ensure folks are not overburdened. Thirty percent of Donatos stores are on reduced hours. And Mikey’s has temporarily closed its Short North trailer next to Oddfellows Liquor Bar to redistribute staff.
With Donatos’ “the answer is yes” and Mikey’s “don’t give up” philosophies, it’s likely that this pair of hometown pizza heroes will navigate their way out of the labor shortage in the same way they’ve entered 2021: bigger, stronger and a little bit wiser.
This story is from the December 2021 issue of Columbus Monthly.