Pita Pit – Case Study

Pita Pit History

Nelson Lang and Johnson Sotiriadis started Pita Pit in 1995 in the college town of Kingston, Ontario. They wanted to find a fresh and healthier alternative to the greasy foods that were seemingly the only late-night options available to students. Their solution, a Lebanese-style pita sandwich garnished with fresh toppings, was a hit. By 1997 the company began franchising across Canada and in 1999 they headed to the US.

Today, Pita Pit has over 650 stores across the globe. Lang continues to operate the original Pita Pit in Kingston, Ontario and the company has started partnering with other types of businesses to lend its franchising expertise.

Quick Service Restaurant (QSR) Industry

The Quick Service Restaurant (QSR) (or Fast Food Restaurants) industry is a $781.3 billion industry that has grown at an annual rate of 2.6% over the past 5 years. Growth has been driven by rising consumer income, leading to more people dining out. Consumers have grown more health-conscious and in response, QSRs have expanded their menu to include healthier options. Despite this effort, this consumer shift has hurt the QSR industry as most of its revenue is driven by burger establishments.

Over the next five years, the industry is expected to continue growing at an annual rate of 2.6% to reach $886.2 billion by 2025 . Growth in the industry will come from a continued increase in consumer income. Large QSR players will seek growth from global expansion into East Asia, where incomes are rising and where there is a low concentration of QSRs.

North America will continue to lead in market share by revenue, however, businesses are expected to consolidate operations to manage and maintain existing profit margins. This will drive competition in the form of price and product innovations. Businesses will continue to evolve product offerings in response to health-conscious trends. This will impact single-product operators, such as Pita Pit, as the need for variety, e.g. paleo and gluten-free offerings, will be a key competitive factor.

Customers and Competition

The QSR industry boasts customers from all demographics, however, younger demographics tend to frequent fast-food restaurants more often than others. Pita Pit’s strategy aligns with this as its target customer is young college students who value a healthy lifestyle and quality food.

Competition in the industry has been fierce due to the saturation of QSR businesses in North America. Increases in single-location operators and franchising have driven this trend and businesses now compete on price and product innovations. As a result, businesses will be looking to optimize their North American business unit through consolidation while seeking growth through global expansion into emerging economies, such as India and Russia.

Large incumbents with strong branding will lead this trend. The industry is led by McDonald’s, with 12.7% of the global market share by revenue, followed by YUM! Brands with 10% . The remaining 77% of the market is made up of many different players including Pita Pit’s immediate competition, Subway and Quiznos.

Pita Pit Business Model

Pita Pit’s franchise business model focuses on operating a regimented system in high-traffic locations, particularly in college towns. Their value proposition to end customers is a fresh and healthier fast food option that is open till late. They offer one type of food, the pita sandwich, and allow customers to customize their order.

In many respects, Pita Pit was ahead of its time by focusing on s customer segment that valued healthy lifestyles, which is a trend that is now driving the market. However, over the past few years existing and new businesses have adopted similar approaches in both offering healthy options and having highly customizable offerings. As a result, competition is high in the QSR industry.

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Pita Pit Success Factors

One of Pita Pit’s success factors is its commitment to serving only one type of food, namely pitas. By doing this, the company built a system that allows for economies of scale and operational efficiency. Employees need only to create variations of the pita sandwich out of prepacked proportions, enabling quick service for customers.

Another success factor is Pita Pit’s training. Every franchisee is required to attend training at the Pita Pit corporate training center in Kingston, Ontario. The 6-7-day training is composed of theoretical learning for running a business as well as practical hands-on training where franchisees are placed in an actual Pita Pit store to operate. From here, they learn all the skills from preparing and serving food to inventory management. This immersive training provides franchisees with the backbone for understanding how to operate with the Pita Pit System.

Pita Pit – Looking Ahead

As consumers become increasingly health-conscious, Pita Pit will need to diversify its menu to meet new tastes. Diet-based offerings, like paleo and gluten-free, will need to be added to the menu in order to attract customers. This may require Pita Pit to break from their commitment to only serving a pita offering; notably, Pita Pit recognized the need to pursue variety and in 2019 began offering a salad replacement option.

Given that growth in the QSR industry will be driven by geographic expansion, Pita Pit will need to build its brand awareness in emerging markets to compete with large incumbents. Brand equity will play a factor in attracting new franchisees in emerging economies; potential investors may pick a McDonald’s over lesser-known brands since its success is highly visible. Pita Pit should improve its brand awareness at the end customers in these markets to drive brand equity and demand.

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