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Is There Life After the Mall for Sbarro?

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The pizza chain is inextricably linked with weekends at the food court; but it’s not going down without a fight

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Chances are the last time you ate at a Sbarro restaurant, you were at the mall. For many in Generations X and Y, the weekends meant window shopping at mall chain stores —€” KB Toys, Waldenbooks, Sam Goody, Aeropostale — and then hitting the Sbarro at the food court. What was significant about a restaurant like Sbarro, for many mall-goers, was its limited location: There might be a McDonald's or Burger King at the food court, too, but Sbarro was a special mall-only treat, intrinsically linking the brand with that specific shopping experience.

But the days of "going to the mall" are over. "Premature obituaries for the shopping mall have been appearing since the late 1990s," writes Nelson D. Schwartz in a New York Times piece entitled "The Economics (and Nostalgia) of Dead Malls." "But the reality today is more nuanced, reflecting broader trends remaking the American economy. With income inequality continuing to widen, high-end malls are thriving, even as stolid retail chains like Sears, Kmart, and J.C. Penney falter, taking the middle- and working-class malls they anchored with them." Tellingly, Waldenbooks, Sam Goody, and those other nostalgia-inducing mall stores are all gone, with Aeropostale filing for bankruptcy earlier this week; Sbarro, which has already filed for bankruptcy twice in the past decade, might be the next casualty.

In 2014, Sbarro announced restructuring efforts that would lead to the closing of over 300 unprofitable stores and remodeling of the stores the company wanted to keep around. Currently, Sbarro has 318 locations in the US (187 company-owned and 131 franchisee-owned), fewer than half its tally 12 years ago. Sbarro's fall from grace is tightly linked to mall closures and can be tracked through the QSR 50, an annual list by quick-service restaurant industry publication QSR Magazine that tracks the nation's top restaurants by systemwide sales.

Could Sbarro’s comeback really work in a world where most people aren’t going to the mall?

Sbarro's peak was in 2004, at position 34, with a reported $465 million in systemwide sales at 762 locations. But its position fell steadily: In 2005, it dropped to #39 with $2 million fewer sales at more locations, and even in years when sales figures increased, the brand was being outpaced by its competitors. By 2013, Sbarro was off the list entirely. The chain reported making $420 million in 2011 with just 611 units.

But Sbarro isn't going down without a fight. The company is making changes in an effort to regain significance, and perhaps, most importantly, it's thinking outside the mall. Part of that branding will involve re-emphasizing the chain's little-known history, including the fact that it started as a family-owned Italian deli in Brooklyn. So how did Sbarro end up in so many malls across the country? And could its comeback really work in a world where most people aren't going to the mall and are shopping online?

Courtesy Sbarro

Courtesy of Sbarro

The first Sbarro, opened in 1956 by Gennaro and Carmela Sbarro, a married couple who immigrated from Naples in the 1950s, was an Italian grocery in Bensonhurst, Brooklyn. Carmela "Mama" Sbarro started making pizza slices for shift workers walking by her store looking for something quick to eat. Customers raved about her pizza, so in the mid-1960s, the Sbarro family opened a second location, also in Bensonhurst, that focused solely on pizza.

Mama worked in the original Sbarro, running the kitchen until the early aughts; the store shut down when she was no longer able to work. "Few dared to challenge Mama Sbarro," wrote the New York Times after she died 2012. "In the salumeria, as the family saying went, ‘Mama runs the kitchen.'"

As the shop grew into a chain, Gennaro and Carmela's sons, Mario, Anthony, and Joe, worked on the expansion. Sbarro opened its first mall location in 1970 at Kings Plaza Shopping Center in Brooklyn, which at the time, was New York City's first large regional shopping center —” the perfect place for a growing brand. Further mall expansions occurred "based on the success of Kings Plaza as well as the growing popularity of malls and quick-service concepts," says Anne Pritz, Sbarro's current chief marketing officer. Sbarros began to open in malls across the country.

In 1985, vice president Joe Sbarro, Gennaro and Carmela’s son, said ‘Sbarro’s dream is to be another McDonald’s.’

In 1985 when the company went public, it seemed a bright future was in store for the brand. Michael J. Esposito, a restaurant analyst, predicted Sbarro's growth "will range between 20 percent and 25 percent a year for at least the next three years," according to an October 1985 Newsday. The same article quotes Joe Sbarro, vice president of operations at the time, saying that "Sbarro's dream is to be another McDonald's."

In late 2006, MidOcean Partners, a private equity firm, announced they would acquire Sbarro, and by 2007, the founding brothers were no longer involved in the company. But Sbarro's growth followed the rise and fall of shopping malls in the US and around the world. In 2011, Sbarro filed for bankruptcy and later emerged from Chapter 11 without the backing of MidOcean. In 2014, after the company's second bout with bankruptcy, many of the restaurants Sbarro closed were mall-based.

The downward shift reflects a cultural change in what consumers ostensibly want from their shopping and dining experience: Today, when stores and restaurants do get together, they're moving away from the food court model and often catering to high-end clients. In the case of URBN, whose outlets include Urban Outfitters, Anthropologie, and Free People, chef Marc Vetri's restaurant group became an official part of the company in an effort to cater to diners looking for a complete "lifestyle experience." "They're creating the counter to the demise of the mall," WDSN editor Aria Hughes told Racked of the URBN restaurant concepts. "They're creating a lifestyle space that attracts people who are likeminded, giving them services that they'll like."

In addition to declining mall foot traffic, the changing appetites of customers could also be to blame for the chain's decline. "Sbarro has been stuck with an outdated business model," restaurant consultant Michael Whiteman told Reuters in 2014. "Its biggest shortcoming is that it sells food that has been sitting out for a while and more people want food made to order."

Photos: left, Sbarro's redesigned stores; right, the brand's new fast-casual concept Cucinova. Photos courtesy of Sbarro.

So what's Sbarro to do? Today, Apollo Global Management, Guggenheim Investments, and David Karam, Sbarro's CEO, own a majority of the company, and in 2014 the company moved its headquarters from Long Island to Ohio. But the company is taking what it calls a "pizza-centric" approach in a bid to make it relevant again: It's revamping older stores, opening non-mall locations, and has debuted a fast-casual concept called Cucinova. Although the Sbarro family has not been a part of the company for nearly a decade, a big part of the reinvention of Sbarro is to remind customers about Sbarro's history.

Perhaps the most noticeable change for Sbarro is the logo. The company has replaced the thick lettering over the Italian flag for an outline of a slice in red and green. "Sbarro" cuts through the center, and "NYC. 1956" is written on top, an homage to the first restaurant. Focusing on the New York slice meant getting rid of a lot of other dishes. In the late ‘90s and early aughts, when Sbarro grew quickly, so did its menu: chicken dishes, potatoes, and lasagna filled the steam counters at Sbarro restaurants. But consumers weren't there for the chicken Vesuvio, Pritz says. "We realized as we were going through the reposition effort that we were playing in a very obtuse place in the market €— a very non-relevant space, which was called 'the Italian eatery space,' and we're famous for that extra large slice of pizza," says Pritz, who previously worked on branding at Tim Horton's.

While Domino’s offers customers the ability to Tweet and order, Sbarro is still working through the basics of delivery.

The streamlined menu focuses on pizza, salads, and breadsticks, and the easy upsell. Rather than trying to be all things to all people, Sam Oches, editor of QSR Magazine, suggests the brand "just do pizza, and do it well." "You're going to get loyal customers by doing your product well amidst all these competitors. If they choose yours as tasting best, they're going to come to you."

Pritz and other executives argue that once they get consumers in the door, the pizza speaks for itself. In a very similar recipe to the one Mama Sbarro used to make in the '50s, the company uses mozzarella and sauce made with San Marzano tomatoes. But consumers didn't realize that Sbarro used fresh ingredients and made their food in-house, Pritz says, calling it the "best and worst kept secret." As part of its redesign, Sbarro puts its ingredients front and center, with phrases like "100 percent whole milk mozz" written on soda cups and serving items. Consumers are increasingly choosing fresh ingredients, Oches says. So, "if you're doing it, get credit for it."

But another difference between Sbarro and its competitors is delivery: With its mall locations, Sbarro was missing out on its slice of the $70 billion delivery pie. Even with the launch of new delivery startups, traditional pizza delivery has remained strong: Domino's, Pizza Hut, and Papa John's accounted for about 45 percent of the total food delivery sales in the United States, according to 1010Data.

While Domino's offers customers the ability to Tweet and order, Sbarro is still working through the basics of delivery. "We're learning a lot," says Pritz. "It's a very challenging business. We had never done delivery or carryout before. And there's a lot of nuances. You have to master online ordering. You have to master customization. You have to master new products. And you have to make sure, ultimately, that you are not sacrificing the quality of your product when you're making those deliveries that are 20 miles or 20 minutes from your store."

Although Pritz stresses it has not given up on mall and travel center locations, Sbarro plans to open more stand-alone locations in the next few years. In less than a year, Sbarro has opened four off-mall locations, all in the Columbus, Ohio, market, where the company moved its headquarters after years in New York. The stand-alone restaurants have sleek designs and menu boards that emphasize freshness. Sbarro is also venturing into the fast-casual space, with a concept called Cucinova. There are currently four Cucinova locations also in Ohio; the first opened slightly over two years ago. The restaurants have gone through a few iterations, but the final product offers customers the option of pizza, pasta, or salad with various toppings.

According to Pritz, Cucinova's target demographic is millennials, and its look features wood, brick accents, and trendy metal chairs: Customers probably won't know they are in Sbarro restaurant. But that might not be a bad thing, Ochs says. "People mostly know Sbarro being in airports and malls, and if they want to make these big sexy footprints that are fast-casual, maybe it's actually a plus that they're detaching it from the Sbarro brand," he says.

Unfortunately for Sbarro, the fast-casual pizza space is crowded with chains like the Chipotle-backed Pizzeria Locale, Blaze Pizza, Pieology, and MOD Pizza. "It seemed like all at once you had restaurant operators all over the country realizing that if you applied the Chipotle model to pizza, you would be very successful — and they have been, but there's a bunch of them," says Oches. "There's no doubt that the task ahead [for Sbarro] is tall."

But Pritz believes Sbarro's pizza expertise will help give the brand a leg up. Sbarro's "foundation is built off of pizza," she says. "Our guests are telling us to get out of the mall and deliver." And like other brands, Sbarro sees "the next vertical leap" is the fast-casual market. Sbarro is doing it all to see what sticks. "But we're staying with pizza."

Gloria Dawson is a curator on the Facebook news team and a freelance writer whose work has appeared in the Wall Street Journal, Modern Farmer, Mashable, and Eater.
Editor: Erin DeJesus