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Issue Date: April 2011, Posted On: 4/21/2011

More is Better

Calif. Straw Hat franchisee helps chain start co-brand

By Martin Desmarais
Top: Straw Hat Pizza has developed the Tower 27 Yogurt concept to provide a co-branding option to its franchisees. Above: Prem Dhoot, right, asked Straw Hat Pizza if he could co-brand his Walnut Creek, Calif., location with a yogurt concept. The inquiry led to the development of Tower 27 Yogurt. Photo courtesy of Straw Hat Pizza
WALNUT CREEK, Calif. — Today’s business environment is all about adjusting and taking advantage of every opportunity you have to be successful. Prem Dhoot saw the franchise industry and Straw Hat Pizza as a great opportunity for him, but he also saw a way to give business a boost by co-branding, so he pitched the chain a possibility — and corporate was quick to jump on board.

Dhoot opened his first Straw Hat Pizza restaurant in Walnut Creek, Calif., in October 2010 and this location also included the chain’s first ever Tower 27 Yogurt brand.

Combining pizza with yogurt seemed like the perfect complement to Dhoot and also a way to bring in some extra business. As Dhoot asserts, other concepts pair yogurt and salad but the pizza and yogurt duo is not common.

“I asked Straw Hat to do yogurt,” Dhoot said. “I said, ‘Let’s create our own brand.’ ... They were very open to doing that.”

Tower 27 Yogurt features six flavors of yogurt, 27 different toppings and is a weigh-and-pay concept. The yogurt is made from only real California milk.

As to what sparked him to consider co-branding Straw Hat Pizza with a yogurt brand, Dhoot said it made sense to help bring in customer traffic when pizza demand is not as high. “I thought, hey, rent is high out here let’s find another revenue stream,” he said.

Jonathan C. Fornaci, president and chief executive officer of Straw Hat Pizza, said the suggestion made perfect sense, particularly in California where restaurants either need high volume or small square footage to compensate for the high rent rates. With pizza’s traditional high-demand hours from 11:30 a.m. to 2 p.m. for lunch and then 5 p.m. to 9 p.m. for dinner, the addition of yogurt to Straw Hat Pizza helps bring in customers during the downtime, particularly in the afternoon.

According to Fornaci, Tower 27 Yogurt is drawing customers such as professionals taking a break from work for a snack or mothers bringing in kids after school for a treat.

He credits Dhoot with the great idea for launching a yogurt brand. “Prem was one of the catalysts for us doing that,” Fornaci said. “He is the reason we got this off the ground.”

After the suggestion, Straw Hat Pizza developed and tested the yogurt concept which would become Tower 27 Yogurt, but Dhoot continued to provide input. Straw Hat Pizza owns the brand.

Several months in to the Walnut Creek Tower 27 Yogurt experiment, early indicators are positive. “There is definitely a benefit to having it that we have seen in Walnut Creek,” said Dhoot.

“It has worked out very, very well,” added Fornaci. “It has given him a lot of add on business that you never would have got with just Straw Hat.”

In fact, word of Tower 27 Yogurt quickly spread throughout the Straw Hat Pizza chain and, according to Fornaci, many other franchises saw Dhoot’s co-branding efforts and want to follow suit. The chain is now retro-fitting other locations with Tower 27 Yogurt and the co-branded option is available for all new Straw Hat Pizza franchisees.

Fornaci said that approximately 65 percent of the chain’s new franchisees are choosing to co-brand with Tower 27 Yogurt.

Started in 1959, and now headquartered in San Raman, Straw Hat Pizza has long been known for being a forerunner of the California style of pizza. For the brand, this includes pizza made with a layered, crispy crust, a blend of six California, naturally aged cheeses and local vine-ripened tomatoes. The crust is the California pizza signifier, being layered, flaky and crispy on the bottom and having a “cracker-like crunch” and “never soggy or limp.”

The menu has its Genuine California Pizza line, as well as Gourmet Master Pizzas. The gourmet pizzas include: Lemon Pepper Chicken Pizza, Meat-e-or Pizza, Barbecue Chicken Pizza, California Veggie Pizza, Greek MasterPizza, Chicken Caesar Pizza, Chicken Bacon Ranch Pizza and Pizza Mexicali. Other offerings are Hot Hat Stuffed Sandwiches and a salad bar.

In its heyday and into the mid-1980s, Straw Hat Pizza had about 450 restaurants in the Western United States. However, rising pizza chain Pizza Hut made an aggressive move to expand in the Western region by buying Straw Hat and converting 400 stores to its brand. About 50 franchise stores remained under the Straw Hat Pizza flag and continued the California pizza tradition.

According to Fornaci, very little changed with the chain for the next several decades, but in 2008 — with only 38 restaurants remaining — new management was brought in with a commitment to reinvigorate the brand.

Straw Hat Pizza currently has approximately 90 locations, with California leading the charge in the brands expansion efforts. However, the chain now has locations in Florida, Illinois, Montana, New Jersey, New York and Texas. The company has targeted having 150 restaurants within two years. 

Fornaci said that new franchises are offered two options: Straw Hat Pizza co-branded with Tower 27 Yogurt or a Straw Hat Pizza with a full bar and expanded menu.

According to him, the chain’s expansion efforts have drawn strong interest from new franchisees. “Even in this bad financial times there are still a lot of people out there who have money,” he said.

Aside from Dhoot’s homerun idea of a co-branded yogurt concept, Fornaci said he also has all the franchisee characteristics Straw Hat Pizza seeks. “The most important thing in this business is the customer service and community relations,” said Fornaci. “And he is perfect ... that is what we look for in a franchisee — he understands community service, he understands community relations.

“He is very, very astute as far as how to work the system,” he added.

Dhoot’s family has a background in the service industry. They own a Holiday Inn in Lathrop, Calif., as well as a truck stop that includes a Subway restaurant, gas station and convenience store.

Dhoot grew up in the family business, but went off to college and studied business. He graduated from the University of California at Santa Cruz with a degree in business management and economics in 2004. After college he took a job with real estate development giant Toll Brothers as a project manager. He worked for the company for four years, but eventually left to pursue his own business venture.

“You work for four years for a Fortune 500 company and you get kind of tired of building things for others,” he said. “You want change, but you want to do something for yourself.”

The franchising industry seemed like the perfect opportunity for this and Dhoot said he was particularly excited to join Straw Hat Pizza because he felt that being with a growing chain would give him more opportunity to be part of the growth and even the direction of the brand, as his contribution to Tower 27 Yogurt would illustrate.

He also really liked the concept and was intrigued about joining a brand that had faded some but many people had not forgotten.

“It definitely has its own key elements that make it a good pizza,” Dhoot said. “It is a brand that people really like in California.

“The brand is still ingrained in people’s minds,” he added.

In addition to his Walnut Creek location, Dhoot is in the process of opening two more Straw Hat Pizza locations: one in Livermore and one in the Sacramento area.

He professes that prospects are bright.

“Things are pretty good. Things are not bad at all,” Dhoot said. “As far as the clientele goes they love the product and they are coming back.

“I am in it for the long haul with Straw Hat,” he added. “I think it is a brand that is going to keep growing.”

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