I recently received an email from a graduate student at a university in the Aegean region asking if I could help with an academic study on “Factors Driving Retailers to Implement Sustainability Practices.” In the correspondence, I shared that we had “opened the first LEED-certified KFC restaurant in Turkey and Yum International” and recommended that he read the article at https://www.serhansuzer.com/tr/gida-perakendesinde-enerji-ve-su-verimliligi .
As I write this, dozens of memories from that period flash through my mind. As I’ve stated in other articles before, “Sustainability is my philosophy of life, and one of my life’s goals is to make everything human sustainable.” Beyond that, during my time as a manager, I introduced many operational and financial innovations to the retail sector. Some were very successful, bringing new perspectives to the sector; some weren’t, but at least we tried; and some were over before they even began.
A turning point in history
I wanted to dedicate today’s article to an interesting memory. I’ll tell you about an event that could perhaps change the course of history for the pizza industry in Turkey. I’m sharing the story:
In 2010, when I was CEO of KFC and Pizza Hut Turkey, the KFC brand was very successful. Wherever we opened, there was huge demand; every shopping mall and street vendor wanted KFC, and we continued to build on it with planned growth. Thanks to our brand perception, products, and most importantly, our successful operations, we were generating at least three times the revenue of our closest competitor, and in some locations, this difference was as much as ten times. While this was the case at KFC, Pizza Hut was a different story.
When Pizza Hut first opened, it revolutionized the pizzeria industry in Turkey. In fact, it was said of Pizza Hut at that time, “We used to go to the restaurant dressed up and feel like a holiday.” Due to increased competition, the proliferation of imitations, rising rents, declining purchasing power, and many other factors, the business went from that successful restaurant to offering unlimited pizza. Unlimited pizza was the lifeblood of a struggling market. Here’s the brochure and commercial for the “eat, baby, eat” campaign we had to implement with the unlimited pizza concept from those days:
The unlimited pizza program, launched by the previous administration, also diminished Pizza Hut’s brand perception. Revenue would surge during the unlimited pizza days, then dip again, but monthly revenue didn’t increase significantly. And of course, pizza began to be perceived as a commodity. In other words, the public began to perceive foods like pizza and pita as easy to prepare and readily available. This perception was changing not only in Turkey but globally. Yet, for years, our team, under Ertunç Kafa’s leadership, successfully operated Pizza Hut despite all the challenges. But we needed to break the cycle of perception, somehow, and we found a way.
At the time, I predicted that home delivery would grow at an increasing rate. We began making every effort to improve ourselves in this area. We changed the call center system. I even personally chose the call center numbers Pizza Hut still uses today: “444 6 555” and KFC’s “444 3 555.”
Our Development Prescription
We presented the following recipe to headquarters to reverse Pizza Hut’s downward trend:
1) Let’s make the restaurants offer the best service.
2) Let’s expand the product range.
3) Let’s also open a home delivery channel from the same restaurants. In other words, let’s continue with hybrid restaurants that offer both in-house and home delivery, making it the model for all Pizza Hut restaurants (some restaurants didn’t offer home delivery).
4) Let’s rapidly expand the number of restaurants through franchising, dominate every region, and increase our market penetration.
A Persistent Resistance
We were having a very difficult time getting our proposed strategy accepted by both our Dubai region and our headquarters in the United States. They just didn’t seem to understand. They kept insisting that everyone should implement the decisions emanating from the US without compromise. For example:
1) You can’t open a hybrid restaurant. You must separate restaurant and home service.
2) We don’t grant franchise rights. You should continue opening your own restaurants.
We constantly reminded them:
“Every country’s dynamics are different. For a restaurant with very high rents, offering home service in addition to restaurant services is essential for its feasibility. Otherwise, the restaurant won’t be able to sustain itself with these costs. Moreover, home service contributes to the restaurant’s promotion.”
We also constantly questioned, “Why don’t you grant us franchising rights?” Domino’s Turkey quickly reached 180 restaurants through franchising (as far as I remember at the time). We said, “If we’re going to compete, we need to have the same strength.”
After months of discussion, a new idea emerged from headquarters, supporting our ambitions: They were preparing to compete globally with Domino’s with a new Pizza Hut concept, PHD (Pizza Hut Delivery), a home-based delivery brand.
The new agreement we reached regarding the PHD concept
They presented us with this PHD concept, which partially supported our plan to restore Pizza Hut to its leading position in the pizza sector in Turkey. Naturally, we jumped on it. After lengthy discussions, we reached the following agreement:
1) The PHD concept will be brought to Turkey.
2) First, we will open five trial PHD restaurants.
3) If we operationalize the five trial restaurants and prove they meet certain criteria, we will be granted franchise rights, enabling us to rapidly expand in Turkey.
4) We will also establish a team specializing in franchising and begin training. Initially, we will sign agreements with five franchisees for a trial, complete their training, and then open their stores.
5) Once the franchised restaurants meet the criteria, we will expand the franchise operation nationwide.
Rapid growth in every area
We have exceeded our commitments regarding all the agreed-upon areas. Accordingly:
1) We opened five trial restaurants using the PHD concept in prominent Istanbul locations such as Maslak, Nişantaşı, Kavacık, Maltepe, and Beylikdüzü. I’d like to share the news from that time:
https://www.perakende.org/pizza-hut-delivery-turkiyede
https://www.perakende.org/pizza-hut-delivery-ilk-subesini-maslakta-acti
https://www.sondakika.com/haber/haber-pizza-hut-delivery-ucuncu-subesini-nisantasi-nda-2400441/
We executed everything we did with polish and maximum efficiency. For example, we celebrated the grand opening of our Pizza Hut Delivery restaurant in Maslak with a magnificent parade of 120 motorized vehicles. Here are images from that opening:
We managed to bend some of the rules they imposed on us at these restaurants. For example, Dubai was very insistent that the sign only read “PHD.” We capitalized the “Pizza Hut Delivery” brand name on the sign and lowercase its abbreviation, PHD.
Even this, Dubai strongly objected, but we eventually convinced them that, in accordance with Turkish market culture, customers wanted to see the Pizza Hut brand. They also insisted, unnecessarily, that these restaurants would be delivery-only. Although these restaurants were smaller and more compact than standard restaurants (this provided a significant rental advantage), we managed to provide a certain number of tables and chairs and serve meals in-house. This significantly contributed to revenue.
2) They came and inspected the restaurants, confirmed that we met the criteria, and congratulated us, saying the restaurants were more stylish than we expected. 3) As General Manager of the PHD brand, we hired Banu Güney Arıduru, one of the most successful managers in the industry, a proven talent, particularly in franchised business models. At the time, we were the number two executive at Domino’s Pizza. We formed a team with Banu and developed the strategic planning to open 70-80 restaurants annually with the introduction of franchises.
As the team opened its third Pizza Hut Delivery restaurant in Nişantaşı,
3) We attended that year’s “Will You Be My Dealer?” Franchising and Branded Dealership Fair. Let me share with you what we saw at that fair, so you can better understand the situation: Domino’s Pizza’s stand and ours were side by side. While only a few people went to Domino’s Pizza’s, ours was packed at all hours. We managed to garner support through the news we gathered from the public and the positive word of mouth about us.
https://mediacat.com/pizza-hut-delivery-turkiye%C2%92de/
http://www.gazetevatan.com/suzer-den-dev-is-imkani-331800-ekonomi/?f=mobil
Record number of franchise applications!
Even though we had our entire team there, we couldn’t keep up with the demand. In total, we received approximately 2,000 applications for a Pizza Hut Delivery franchise within a day or two. Yes, you read that right, let me put it in words: 2,000. I’d like to share two news items about this:
https://www.retailturkiye.com/firmalardan/yatirimcilardan-pizza-hut-deliveryye-yogun-talep
https://www.perakende.org/pizza-hut-delivery-icin-rekor-basvuru
When we did a later analysis, we determined that this high demand stemmed from three reasons:
- a) Pizza Hut’s brand perception was still a notch above Domino’s and others.
- b) We designed our stand in a very stylish and eye-catching way. Our architect and the entire construction team worked incredibly hard.
- c) We had a full team there. We made every effort to ensure no one was missed.
If, say, 10% of the 2,000 applications received met our criteria (though the percentage is higher), we would have 200 franchises. We immediately reported this incredible figure to headquarters. They couldn’t believe their ears and congratulated us.
Serious anxiety gripping Domino’s Pizza
Everything was now ready. The news from Domino’s also revealed their concern about these developments. The management there was in serious distress. They were constantly calling managers they knew from us, trying to get information about the PHD concept.
Aslan Saranga has been the general manager of Domino’s Pizza since its founding. He’s a friend of mine, though not a close one. He’s a good man, and we’ve always had mutual respect. I remember Aslan being under significant stress at the time. We even went to South Africa together to watch the World Cup, invited by Coca-Cola. He asked me several times, both in South Africa and in Istanbul upon our return, what we were doing. I explained to him, without giving any details, that we were preparing. Although he tried to conceal his concerns both in person and on the phone, it was clear he was worried.
Everything was ready now. It was time to reclaim Pizza Hut’s leadership and consolidate its position. According to our growth plan, we were going to surpass Domino’s Pizza in both restaurant count and revenue within three or four years.
And then a story of obstacles turned everything upside down…
Then, events took a completely different turn.
While waiting to acquire the PHD franchise, they called me from Dubai, our region, and informed me that they had unilaterally terminated our PHD contract and it was no longer valid. At first, I thought they were joking. Then, when I realized they were serious, my world fell apart.
In fact, I’ve experienced similar situations many times throughout my life. You set a vision, at first no one believes it, then you go to great lengths to make it happen, people start to be convinced, and then the business or model proves itself. Those who see business and potential either try to take it away from you or block you.
I repeatedly asked both Dubai and the US headquarters about this. I tried to explain that they had made a very bad strategic decision. I explained all the plans and how we would progress for Yum International over and over again. But each time, they made me feel like I was talking to a wall. In fact, every time I brought it up, they became increasingly aggressive and rebuffed me. No one explained why they made this decision. They simply repeated the same rhetoric: “This is what we want.” This decision made no sense whatsoever.
Following this decision, my position within the company began to be questioned. Banu Hanım came to me and rightfully asked for permission. Despite working together very effectively and successfully, with everything under our control, there was nothing left to do. My heart was broken, and we had to part ways with her, the PHD team, and the people we had trained as franchisees. Everyone was deeply saddened. It had a devastating effect on us. Thus, PHD ended before it even began in Turkey.
The real source of the problem and the reasons behind it
We later learned about the reasons behind this decision, which was irrational and, in my opinion, set Pizza Hut’s position in Turkey back 20 years. Graham Allen, then-chairman of Yum International, was behind the decision. Graham was Australian. I generally like Australians for their national character. They are sincere and well-intentioned people. Graham was the exact opposite. The top executive of an international fried chicken and pizza company was behaving like a piece of British aristocracy. This is a style that doesn’t sit well with operational managers. Despite being relatively new to the company, we didn’t really get along. As a Yum franchisee since 1989 and the most successful operation in the region (they were constantly bringing our employees to train other countries in the region), we deserved respect. But from the start, they treated us badly.
The reasons for his actions became clear from what we heard later. Graham was fired about a year or two after the PHD incident. The reason was the close relationship he had developed with the Kuwaiti-based Americana franchise in the region. I don’t need to explain what this meant. Of course, this situation affected us deeply. Americana always had its sights set on its Turkish operations. They offered us several acquisitions, but we declined. Through Graham, at the helm, they prevented us from growing, even exploding. A small company is always easier to acquire. I believe they were playing with Yum International’s future with these petty schemes. If we had been able to demonstrate how we seized market leadership from Domino’s Pizza with the PHD concept, they could have replicated the same model in other parts of the world.
Furthermore, if they hadn’t intervened, we would have become perhaps the largest restaurant chain in Turkey today, with over 700 restaurants (I’m assuming we would grant at least 70 Pizza Hut Delivery franchises annually) through our franchise system. It’s clear that Pizza Hut Delivery restaurants, which focus on home delivery, will see significant revenue increases during the pandemic. Ultimately, Yum International, the brand’s owner, has shot in the foot because of its unqualified and malicious executives. It’s a shame.
After seeing all this, I thought to myself, “If these people can become top executives of international companies, if they have the capacity for business acumen and goodwill, why hasn’t a truly international company emerged from Turkey?”
Do I make myself clear?
Tag: memoir
