Schafer: Punch Pizza is happy with slow, steady growth

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: January 25, 2014 - 4:22 PM
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Punch's Borgata pizza, topped with sun-dried tomato, goat cheese, eggplant, saracene olive and basil, is baked in a wood burning oven fired to 800 degrees. The pizzas at Punch cook in 90 seconds.

Photo: JENNIFER SIMONSON, STAR TRIBUNE

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A land rush is starting in fast-casual pizza, and the two owners of Punch Pizza have already come up with a very shrewd plan for what they need to do differently to respond.

Nothing.

They plan to keep getting better at doing exactly what they are doing today, with innovations such as a “PizzaCam” that captures an image of every pizza their restaurants make to help monitor and improve quality.

Punch could raise a bunch of capital and jump into the land rush, but co-owner and founder John Soranno always knew he wanted nothing to do with that kind of plan. His partner John Puckett doesn’t, either.

What’s interesting is that Puckett found that out the hard way, as the co-founder of Caribou Coffee Co.

Punch will open its ninth restaurant soon, in Maple Grove, and last week Puckett sounded as if he might be inclined to open up to three new stores in a year.

Soranno looked at Puckett, looked at me and said, “Did he say three? He meant one.”

For the companies now lining up capital to charge into the fast-casual pizza segment, one or three new stores won’t be a good year of growth. More like a good month.

Up until a few weeks ago, there were several companies talking about becoming the Chipotle of the pizza business. Of course, that was before Chipotle said it would be the Chipotle of the pizza business.

The concept that Chipotle has funded is called Pizzeria Locale, and there are others with a similar idea, including one funded in part by Buffalo Wild Wings. It’s really more like Subway than Chipotle, with build-your-own pizzas, topping by topping.

Allan Hickok, a restaurant consultant with the Boston Consulting Group, said this concept likely isn’t as easy to execute as it may look. Pizzas are a little bit tricky to cook. They won’t stay warm very long, limiting the appeal of takeout. There’s no great option for kids, either.

Hickok has a lot of respect for the way Punch has evolved, and he’s known John Puckett since the 1990s, when Puckett came into downtown Minneapolis looking for money to grow Caribou.

“It was a classic get-big-quick, rapid-rollout model similar to many other consumer concepts at the time — including Starbucks,” said Hickok, of Puckett’s ambition to get to 1,000 or more Caribou stores and lock up the No. 2 position behind Starbucks. “It didn’t work. It didn’t work for some of the same reasons these would-be pizza moguls are going to find out theirs won’t work. Many are in a big hurry, and big-hurry stories usually don’t end well.”

Caribou ran out of gas at about 150 stores. By 2000, John and Kim Puckett were out of their operating roles, talk of going public had quieted down and controlling interest in the company was sold that year.

By then, they had found Punch Pizza in St. Paul and liked it well enough to repeatedly make the long drive from their home west of Minneapolis. The day after Caribou announced its sale, John Puckett called Soranno.

Soranno learned that Puckett had no intention of reliving his Caribou experience. They came to share a common idea about keeping the company’s ownership in their hands and growing only as fast as they could develop an experienced staff and find good locations.

It’s more or less by accident that they are now in one of the hottest niches in their business.

In the restaurant business, there’s what most of us know as fast food, and then there’s a higher-end segment called fast casual. It’s also fast but suggests higher-quality food offered amid somewhat nicer surroundings.

Punch Pizza wasn’t really intended to be either. Soranno wanted to make Neapolitan pizza as it’s made in Italy, where he had lived when he was young. This style of pizza just happens to cook in 55 to 90 seconds at Punch because the wood-fired brick ovens get to over 800 degrees. If the chef pops one in and takes a smoke break, he’s made a mistake.

The original store in St. Paul’s Highland Park neighborhood had table service, and after Puckett joined the business in 2001 they opened a second restaurant in Eden Prairie that had disappointing sales. Puckett said they decided to “double down” and opened a third spot in Minneapolis, but the concept this time was tweaked to have people order at a counter.

It’s still a top-producing location, and it became the Punch model.

One of the reasons Punch is finishing its 18th year in business and has yet to get to 10 restaurants is that Soranno said it takes two years to really master cooking a Punch pizza. New hires aren’t even trusted to make one on their own for about a year.

There are other companies that have shown that slow and steady growth can work, too, and Puckett said they have come to admire a burger version in California called In-N-Out Burger. It hasn’t really changed its menu since its founding in the late 1940s.

The Punch partners plan to go back to California to visit In-N-Out again, and this time Puckett wants to see if he can talk their way into In-N-Out University, the company’s training facility, as Punch has opened its own little Punch University in St. Paul.

While the In-N-Out founding family has appeared to have had its ups and downs, the company is one of the most admired in the industry. Its 31-year-old, third-generation principal owner is said to be worth $800 million.

Thinking long-term like the Californians, the Punch co-owners have started thinking about ownership succession and the other issues family businesses face. Puckett pointed out that when the newest restaurant opens, Punch will be about a $15 million company, hardly a trivial business achievement.

Yes, but a long way to go to reach a value of $800 million.

Said Puckett: “That’ll be up to the third generation.”

lee.schafer@startribune.com • 612-673-4302

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  • Punch Pizza co-owner John Puckett learned the downside of too-rapid expansion as a co-founder of Caribou Coffee. Punch takes its time with everything, from training cooks to opening new stores.

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