About two weeks ago, we got the unexpected news that the Naked Pizza chain was closing shop. I sought out Ritesh, the owner, and face, of the Naked Pizza Kenya franchise to ask about what happened.
We met for coffee at one Artcaffé, and he spoke about his background as a career investment banker who had lived an “up in the air” lifestyle (see the George Clooney movie) – at Credit Suisse and HSBC. He worked in Africa, Europe, Middle East and the US.
When he stepped away from banking, he started advising a few companies that were trying to restructure their operations. One of them was in the UK health sector. In the process, he bid alongside other investors and was the top bidder. And just a few months after he restructured and re-launched it, another health company bought him out.
When he first stated scouting the food business, no pizza brands were interested in Africa. He convinced Naked Pizza executives to meet him in Dubai when they toured their operation there. He then flew them to Nairobi and won them over and they signed a deal with him for the Kenya franchise.
He then trained for a few weeks at Naked Pizza in Dubai, including in one of their pizza stores. He returned to Kenya and set out to hire a team, for which he paid above market rates for his staff. Some people working at other Nairobi pizza chains also applied, but after interviewing them, he shied away from them, as he felt they had in-built attitudes and practices. He preferred newbies to the food business.
Setting up took longer. They had to import equipment and build a supply chain with companies who would deliver quality cheese, meats, grains, and vegetables to be ever fresh.
The (Westlands) store location was not ideal for some (like me), but it worked – as 85-90% of their pizza business was deliveries. And being in that building was about 1/3 of the cost of setting up in a mall.
They had a soft launch, with a focus on product, customer, and delivery. i.e. to get fast deliveries of great pizza to happy customers.
In the early days they built their own neighbourhood mapping system to ensure fast deliveries. He also got on the bike and did deliveries with the riders, as the teams noted unique Nairobi details (“e.g. the blue gate on Parklands Road, after three bumps”), which they then added into the ordering system to ensure faster deliveries in the future.
On some days when orders came in, and all the delivery motorbikes were out, he’d sometimes grab a pizza and do the delivery with his car. They started with deliveries near the store, and slowly increased i.e. from a store radius of 5 minutes, then 10, then accepting orders to neighbourhoods with 15 minutes radius of the store. This was a challenge as people from farther would call and ask for pizza, and they would have to decline orders, as they were outside the radius.
They had opened shortly before the 2013 Kenya election, and on election day, they became an object of curiosity with their commitment to remain open and deliver pizza on election day. They also ensured that all their staff got to vote, by having them take different work shifts.
International media came to cover the pizzeria that vowed it would be open to serve customers, despite the wide international fear that Kenya’s election would again be violent. The Kenya election may also have been a turning point for him in ways that he did not realise till much later. The election news coverage was noticed in the USA – by some pizza managers who did not associate pizza with Africa, but could now see Ritesh on CNN.
They never had to market the chain. They got a lot of mileage from a fun twitter account that he ran by himself, before he handed it over to a keen staff member. They would tweet on customers, deliveries, and suppliers, and also when rival pizza owners would come to eat at Naked Pizza and see what was drawing their customers. He resisted doing promotions like the buy one get one free pizza that captivates many in Nairobi.
They had loyal customers who kept ordering more pizza. Their were also some awkward moments with the customers – like some who ordered pizza, while they were on a date somewhere, but the pizza was taken to their house (which was listed in Naked Pizza system) – and that was a surprise! Or others who ordered the smallest food item to go along with a large quantity of reasonably priced alcohol to be delivered by Naked Pizza just before 11PM.
Ritesh couldn’t talk about numbers paid for the exit (Pizza Hut bought the restaurant operations of Naked Pizza). One of the things he negotiated for in the deal, was for the buyers’ company to take on all his Naked Pizza staff to work in their different companies.
But the departure was not about the difficulty of the business, which was a success, but one full of battles that were not necessary. He had a whole wall of licenses (as does every Kenyan business, that any government inspector could walk in and ask to see any of a dozen different licenses at any given time), equipment that got stuck at the port with demands for bribes, they did well on tenders that were later canceled and re-advertised, there were phone calls, arrest and harassment of delivery motorcycle riders etc.
The decision to exit was not instant. Soon after he signed on for the franchise, an investor power shift took places at Naked Pizza headquarters that ejected the key partners who he had negotiated with. This left him without crucial mentorship and support that he needed. He got some help in Nairobi – where some food executives such as Kevin Ashley (Java) and Gavin Bell (Kengeles), welcomed him, and advised him. But others, especially in the pizza sector were not as welcoming.
As he’d grown the business, he’d scaled back the ambitions he had – his initial plan was for 15 stores, then 10, and then 5. Eventually they opened three stores in three years. Pizza’s need customers, and there are some industry numbers that are true no matter what country you are in the world e.g. one pizza store needs to serve 50,000 households in the area. Also a new store opening nearby can drop the sales of a pizza restaurant by 30–40% instantly, which they could expect and could build back these numbers over the next few months.
But the more pizza stores that are in an area, the more buyers everyone would have to find. And he really didn’t see the market, that other global brands were now chasing. Nairobi now had Pizza Hut and Domino’s Pizza. The new entrants, inspired by “Africa Rising” statistics (and his CNN and CNBC stories!) were ambitious and opened stores at a rapid clip, and had plans to open many more in locations that did not make apparent sense to him. He own findings did not show that there was a prosperous middle class, ready and able, to buy quality pizza in Nairobi.
So it was time to move on.