STRONGBRANDS    Professor Tim Calkins, Kellogg School of Management

This week HomeMade Pizza abruptly shut down.

The Chicago-based company sold fresh pizzas through retail outlets. People stopped by the store, picked up a fresh pizza and then baked it at home.

My wife loved the product so we had it a lot. The pizza was delicious; the cheese bubbled in a highly satisfying manner and the crust was crisp and tasty. We miss it already.

I’m not surprised HomeMade Pizza didn’t make it. As the Chicago Tribune’s Phil Rosenthal noted in his column today, HomeMade faced tough competition and didn’t have a particularly strong value proposition: it wasn’t cheap, it wasn’t convenient and it was modestly (at best) better than other pizzas.

You can Phil’s article here:

https://www.chicagotribune.com/business/columnists/ct-homemade-pizza-rosenthal-0604-biz-20140604,0,7176451.column

The astonishing thing is that HomeMade survived for seventeen years and managed to grow as much as it did. This week the company apparently closed 22 outlets.

How could this be true? Why grow so much and then shut down? If the concept didn’t make sense, why expand it? If the idea worked, what happened?

I suspect the story of HomeMade Pizza is one of limited success.

HomeMade’s first few outlets must have been successful. Perhaps the locations were perfect. Perhaps there were few competitive offerings. Perhaps the demographic mix of the neighborhood was just right. For some reason, it worked.

Based on the initial results, the owners expanded and eventually sold the business. The new management team continued to grow.

Unfortunately, the chain was not able to consistently replicate its initial success. The new locations didn’t perform as well, so as the company grew losses accelerated and debt piled up. Eventually it collapsed.

There are two important learnings in the story.

First, be careful about expanding a business.

There is no guarantee the initial success will continue. It is important to study what is working before moving forward. If the key driver is location, for example, only expand when you find a perfect spot.

Second, remember that a bit of success can be a problem.

When results are good, people get confident. They move forward. They assume they know what is happening. Often, a little success sets the stage for a much larger setback in the future.

This is true for careers, too. Be careful when things go well; it may lead you to think you enjoy or are gifted in a particular area when that just isn’t the case.

This is not to say that doing well is a bad thing. A bit of success is wonderful. Just don’t read too much into it.

 

---