Sbarro is more than just a quick and easy bite at the mall — it's a thoroughly American story of success, downfall, and redemption in one extra large pizza slice.
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00:00Sbarro is more than just a quick and easy bite at the mall. It's a thoroughly American
00:05story of success, downfall, and redemption — in one extra-large pizza slice.
00:12In 1956, Italian immigrants Gennaro and Carmela Sbarro opened the first Sbarro in the Brooklyn
00:18neighborhood of Bensonhurst. This wasn't strictly a pizza joint, but instead an Italian grocery
00:24store named Sbarro's Sala Maria. Carmela, who was known as Mama Sbarro, handed out slices
00:30to workers passing by the store. Those were eventually in such high demand that the family
00:34opened a second location in the 1960s, this one dedicated to just selling pizza.
00:40As the company continued to grow, Mama Sbarro continued making pizza in the original location,
00:44until she retired and the shop closed in 2004. An article published in The New York Times after
00:50her death described her as a woman who knew her way around the kitchen and held her employees to
00:55high standards. A nearby shop owner recalled,
00:58"[She was military almost, a little, tiny, petite thing.] Mama Sbarro also held her
01:03customers to the same high standards as she refused to add the wrong condiments
01:08to particular sandwiches."
01:10Nowadays, Sbarro is pretty much synonymous with mall food courts. And that all began in 1970,
01:15when the company opened a store in King's Plaza Shopping Center in Brooklyn.
01:19This would be the first of many mall locations, and in fact, it's still open today.
01:24Modern shopping malls started cropping up in the suburbs sometime after World War II.
01:29Early malls typically didn't have elaborate food courts, as they instead offered quick snacks like
01:33ice cream and soft pretzels. But the Sbarro family had a different strategy, as they saw
01:38an opportunity to deliver their product to a growing market. They wanted to offer restaurant
01:43quality food to busy shoppers. As Anthony Sbarro, son of Gennaro and Carmela, once told PMQ Pizza,
01:49we had a concept that we believed would get them to stop and walk in and grab a bite.
01:54"...PIZZA!"
01:56The food was displayed behind plexiglass so that shoppers could see what was offered.
02:00Originally, the Sbarros kept a tight control over their product. In the early years,
02:04everything was made in the original location in Bensonhurst, including the cheesecakes that
02:08were all prepared by Mama Sbarro. But when demand grew to the amount of 1,000 cheesecakes per week,
02:14her son Joseph had to convince her to let their supplier take over.
02:18The Sbarro's strategy to sell pizza by the slice to mall shoppers was a resounding success. People
02:24all across the country could now get a taste of authentic New York-style pizza, or at least as
02:30close to the real thing that they had ever seen. Sbarro opened the company to franchising in 1977
02:36and then went public in 1985. Before going public, Sbarro had 97 stores. Just a few years later,
02:42they had expanded to 220 locations, including in Canada and Puerto Rico. And the company
02:48continued to expand even more. By the late 80s, Sbarro was opening around 70 restaurants per year.
02:54In 1990, the first European Sbarro opened in England. By the mid-90s,
02:59the total count reached 729 locations. Decades later, pizza lovers now look back on the 80s
03:06and 90s heyday of the mall food court with plenty of nostalgia. As one Redditor reminisced,
03:12Back around 1990, the local mall Sbarro was the busiest corner of the food court.
03:17By the late 1990s, the Sbarro family was seemingly regretting their decision to
03:21take the company public. So in 1999, they bought back shares from public shareholders,
03:26turning the company once again into a private, family-owned affair.
03:30The deal cost the Sbarro's $28.85 per share for a total of $389.5 million.
03:39However, purchasing those shares reportedly also resulted in the company acquiring a lot of debt.
03:44It ultimately took three tries for the family to obtain 100 percent of the shares from investors.
03:50With the Sbarro family once again at the helm, the company continued its expansion,
03:54with 800 restaurants in 1999 and over 900 by 2001. In 2004, Mama Sbarro retired,
04:01and the original Sala Maria closed in Bensonhurst.
04:05This year was also a bit of a peak moment for the restaurant, with sales reaching $465 million.
04:11However, the Sbarro business model of positioning itself in malls
04:15would also ultimately be its downfall. Jerry Sbarro, the grandson of Carmela and Gennaro,
04:20told The New York Times in 1995,
04:23"'Our traditional marketplace is shopping malls. Shopping malls are a captive audience market,
04:27where we are the number one player. No one competes with us in a shopping mall,
04:31no one.'"
04:32But it wouldn't be long before the traditional
04:34indoor mall was no longer the bustling place of business it had once been.
04:38In 2007, Gennaro and Carmela Sbarro's sons were running the company and decided to sell it to a
04:46private equity firm. That deal with MidOcean Partners was for $450 million, and included
04:52a new management team and a new CEO, Nicholas McCrane. At the time of the sale, Sbarro had
04:571,000 stores in 34 countries and managed 11,000 employees. Locations were mainly in malls,
05:04airports, casinos, and universities. Then, in 2009, Moody's added Sbarro, Inc. to its
05:10bottom-rung list, which consists of companies that Moody's believes are the most at-risk for
05:15defaulting on loans while also facing limited cash flow. At the time, the United States was
05:19in the midst of the Great Recession, so consumer spending was down and people were more frequently
05:24eating at home instead of going out. Food court restaurants and malls were really struggling at
05:29this time, and Sbarro was no exception. Although the Great Recession was officially
05:34over by June 2009, retail and dining-out establishments didn't exactly bounce back
05:39immediately. The term retail apocalypse was used to describe the loss of sales from physical brick
05:45and mortar stores to a certain online behemoth. In 2005, Amazon launched its Prime service,
05:51which was a major turning point in an era that saw consumer habits shift to the internet rather
05:56than heading to the mall. And with shoppers staying home more and more, food courts sat empty.
06:02By 2011, Sbarro was drowning in debt. Perhaps if mall traffic had rebounded to its earlier levels,
06:08the company could have reversed its debt issues. But with online shopping resulting
06:11in less frequent mall visits, Sbarro simply couldn't keep its head above water.
06:16The company's debt was $487 million, while assets only came to $471 million.
06:23So in April 2011, Sbarro declared bankruptcy.
06:27I'm so freaking upset about this. You touch a Sbarro, I break your face.
06:33The hardship of decreased mall traffic wasn't the only problem for Sbarro during this period,
06:38as the inflated cost of rent in malls also contributed to the company's financial woes.
06:42Dave Begley, who was a principal at financial turnaround firm Morris Anderson,
06:46told QSR Magazine in 2012,
06:49If you look at what real estate costs were and construction costs in that 2005 to 2008 time
06:55period, they were extremely inflated. These malls that Sbarro was placed in were in geographic areas
07:01where there was a lot of continued growth during that period of time. They were based on continued
07:05growth. And as we know now, some of those things didn't come to fruition. Real estate costs were
07:11high, as were the prices of important ingredients like corn, cheese, and flour. Sbarro struggled to
07:16make ends meet with these high costs and decreased sales. The debt was too much to overcome,
07:21which all contributed to the company declaring bankruptcy in April 2011.
07:26But this wouldn't be the end of Sbarro. By filing bankruptcy and restructuring,
07:30the company was able to reduce its debt. And by the end of the year,
07:33Sbarro was in much better shape with less debt and a cash infusion of $35 million from lenders.
07:40Bankruptcy gave Sbarro a second chance with that serious cash infusion. Driving its new
07:44business strategy was a management team led by President and CEO Jim Greco. Greco was no
07:50stranger to bringing companies back from near collapse. Under his leadership, the national
07:54bagel chain, Brugger's Bagels, went from stagnant sales to a growth rate of 20% per year from 2004
08:01to 2008. After his stint at Brugger's, Sbarro hired Greco to make some much-needed changes.
08:08In a 2017 article for Nation's Restaurant News, Greco laid out his method for helping
08:13a struggling business get back on its feet. As he advised,
08:17"...start short-term. Though a full turnaround can take years, start with a 90-day plan."
08:22While Greco only stayed at Sbarro for a year, he provided the company with a vision and future
08:27strategy. So in the next several years, Sbarro worked at revamping recipes, training management
08:32on improving hiring and teamwork skills, and listening to customer feedback. A few years
08:36after Greco's departure, Sbarro announced a rebranding and an updated menu. Ann Pritz,
08:42the chief marketing officer at the time, said in a statement,
08:44"...we've gone back to our roots with laser focus on what we are famous for.
08:48Extra-large New York-style pizza, made fresh daily with high-quality ingredients."
08:54"...I'm gonna go get me a New York slice."
08:57Sbarro's efforts at a turnaround included remodeling some locations, while closing
09:01unprofitable ones. With a focus away from the larger menu of the 90s, Sbarro streamlined its
09:07offerings and returned to its roots, the large slice of New York-style pizza that Mama Sbarro
09:12used to sell in the 1950s. Other changes included venturing into locations that weren't inside malls
09:18and launching a delivery service. In 2016, while other pizza joints were offering convenient online
09:23and mobile app ordering, Sbarro was just figuring things out. But now, Sbarro customers can easily
09:29order a full pizza and other menu offerings online or on an app, and have it delivered
09:34directly to their doors. And in 2022, Sbarro began opening locations inside convenience stores.
09:40As CEO David Karam told QSR Magazine,
09:44"...we knew that there was a limited development potential in the mall venues,
09:47and that's where we started to push harder into convenience stores and travel centers,
09:51casinos and colleges, and places where there was high foot traffic. And thank God, it's worked."
09:57A successful recent trend for restaurants and food companies has been partnering for
10:01collaborations that could potentially increase brand awareness and offer innovative recipes.
10:06In that vein, beginning in 2021, Sbarro began offering the popular,
10:10New York-based Mike's Hot Honey as a dipping sauce for its pizzas, breadsticks,
10:14and strombolis. Mike's Hot Honey is infused with chili peppers, and the company has also
10:19had collaborations with other well-known brands.
10:22Mike's Hot Honey used to only be found in pizzerias in Brooklyn,
10:29but then the brand took off in 2010, when founder Michael Kurtz was an employee at
10:33Polly G's Pizzeria. He was inspired by a trip to Brazil, when he tasted pizza
10:38drizzled with chili-infused honey. He then began drizzling pizzas with his own spicy
10:42honey concoction, and customers loved it. Soon enough, people were asking to buy the
10:46honey by the bottle, and now Mike's Hot Honey is now found nationwide.
10:51As of 2024, Sbarro has once again reinvented itself,
10:55and its latest business strategies appear to be working. With its focus on delivery and
10:59opening stores in bustling locations beyond malls, the company has been able to impressively
11:04grow once again. In the last couple of years, the company has opened 200 new stores,
11:09reaching over 700 locations around the globe. This expansion has included new markets nationwide,
11:14including countries as far-reaching as Colombia, Poland, and Denmark.
11:18It can still be found in malls and airports, while also making its presence felt in convenience
11:22stores, casinos, military bases, hospitals, and universities. Sbarro may have just positioned
11:28itself in the next big American growth trend. Convenience stores are on the rise, with over
11:33150,000 of them currently operating in the United States. In the past two years, that works out to
11:39a rate of increase of 1.5 percent per year. Clearly, plenty of people are looking for more
11:44than just chips and soda when they enter convenience stores, and so those shops are
11:48offering a higher quality level of on-the-go meals and ready-to-eat food than they have in the past.
11:53And Sbarro has positioned itself perfectly to benefit from this trend.