Restaurant Finance Monitor
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“Up & Comer” &pizza

February 20, 2019


Michael Lastoria, founder and CEO of &pizza, provides us with a current lesson in brand building, leadership by example, and “walking the talk”. This Washington, D.C. based company opened its 34th location this month. On each of my frequent personal visits to the two locations in NYC, probably ten times since the first (W.28th St.) opened eighteen months ago, the service and the product have been excellent. Most important, CEO Lastoria was front and center at each opening in NYC, involved with the customers and the staff to a degree that is admirable.


Thirty seven year old Lastoria’s background, and personal appearance (long hair, beard and casual dress) may be far from conventional, but his brand building wisdom and commitment to the task at hand are easy to discern. Raised in a small farm town in Western NY, college educated at Westmont College in California (it can be done without Harvard Business School), Michael started a marketing and media services company in NYC at 22 years of age, built it to three offices and 100 employees over four years, and sold to a private equity firm in 2006. &pizza, as he describes it, is a natural reflection of his life’s experience, but especially his desire to build a legacy not only as a successful business but a contribution, including the corporate culture, to society at large. Lastoria’s brand building vision is to “elevate everything”. The & ampersand is about connecting people through pizza, and Lastoria views the brand long term as broader than just pizza. As he puts it “the & brand represents craft products, reimagined. It’s our version of the truth”. While &pizza pursues “The Truth”, the “anti-establishment” vibe is clearly apparent in the stores, and customers are responding to an impressive degree as described by the economic results below. Many of the employees are pierced and/or tattooed. The employees are “The Tribe”, designed to unite employees in a common cause. The screening process and training is intense. Employee rewards include “swag” and tiers of achievement include designation as Troublemaker, Rebel, and Maverick.


&pizza locations are “fast casual”, serving customized pies in a manner similar to MOD, Blaze, Pieology and others.  However, the leadership, the products, the employees, the physical surroundings, and also the economic rewards are “differentiated”. The sales per square foot are over $1,000 per square foot, averaging “well above” $1.5M in only 1,500 to 1,800 square feet. Store level EBITDA margins remain over 20%, after 27-28% cost of goods and 27-28% labor, generating a cash on cash store level return of over 50%. The average investment per store is $700,000. The brand is also debuting a smaller footprint (300-400 sq. ft) concept this spring for use in transit hubs, malls, campuses and other non-traditional venues. The pies are oblong in shape, with a choice of three crusts, loaded with a broad choice of ingredients. 27-28% CGS is high in the pizza business so the price/value perception of the product is excellent. Customers are well serviced by an enthusiastic crew, since 26-28% labor is plenty when sales are over $1,000 per sq.ft. Flavor combinations, including soft drinks, cookies, water, tea, everything but craft beers are $pizza branded. Customers can choose from generous toppings or nine signature pizzas such as “American Honey” that features a drizzle of Mike’s Hot Honey, spicy tomato sauce, mozzarella balls, pepperoni, arugula, goat cheese and red pepper chili flakes. Customers can also “craft” their drinks by mixing unique house-created flavors. Some companies in this segment run Prime Costs well below the total of 56% in this case, but &pizza “makes it up in volume”, and generates a return on capital at least as high as other participants.  The lunch and dinner dayparts are about equal at 50% of total sales.

The locations are heavily concentrated in the Mid-Atlantic region: D.C., VA, MD, Philadelphia, and NYC. The first location opened in Washington, D.C. in 2012. &pizza’s first Boston shop opened in February as a joint venture combo shop with Milk Bar. Its most recent opening was within the House of Representatives’ Rayburn Office Building.


 Among the somewhat unconventional brand building initiatives have been a roller skating team handing out free pizza cards in D.C., delivering free pizza to local offices, sponsoring an all deaf rugby team and teaching sign language to “tribe” members. In terms of anti-establishment vibe, free tattoos are offered to employees and the first arriving customers at a new store (22 the 22nd location on 28th Street, 23 at Astor Place, etc. etc.). The company prides itself on paying $2.00 over minimum in all jurisdictions except one and guests can earn Loyalty tiers. There is a division of the Company called &Charity that works with community organizations.


 In terms of capital and strategic influence, $60M of funding has been provided to date. Earliest financial supporters have included Sandy Beall, founder and developer of Ruby Tuesday’s. Other investors and Board members include RSE Ventures (Matt Higgins and Steve Ross), AVALT (Mark Verdi and Ian Reynolds), Adam Eskin (CEO, Dig Inn) and Chairman of the Board,  Kevin Reddy (Chipotle, Noodles & Company).


 Expansion plans are adequately aggressive, as evidenced by 10+ new locations planned for 2019 on a base of 32 but Lastoria is more concerned about maintaining operating standards than maintaining the pace of expansion. He has raised capital well ahead of his needs, knowing that any company could have a short term stumble and then the capital would not then be available. He has wisely (in our opinion) avoided the temptation to build stores too far from the Washington, D.C. base so the Company should be able to deal with unforeseen challenges most effectively.


  &pizza trails, in terms of size, the largest participants in the fast casual pizza category. The Company, however, takes a back seat to nobody in terms of the economic success at the unit level. There is no doubt in this analyst’s mind that Michael Lastoria has the operating skills, the strategic insight, the brand building wisdom, and the dedication to the challenge, to take this Company a long way.

Roger Lipton