Pizza’s Humble Giant Reaches for a Bigger Slice : Entrepreneur: Little Caesars founder Michael Ilitch plans to overtake No. 1 Pizza Hut--and to build a new stadium in Detroit.

If there is one lesson that pizza man Michael Ilitch drummed into his children, it was to always “be humble.”

So Ilitch was in character when he downplayed his $85-million purchase of the Detroit Tigers in 1992, an event the local media trumpeted as foreshadowing the rebound of the baseball franchise and perhaps even the city.

“I’m no savior of the ball club or this city,” he said at a news conference held on the pitcher’s mound at Tiger Stadium.

Despite the disclaimer, Ilitch has become the most visible symbol of the Motor City’s upper crust, a vaunted position achieved with mozzarella and pepperoni rather than gasoline and the internal combustion engine.

Ilitch, a home-grown son of blue-collar Macedonian immigrants, and his wife and business partner, Marian, have amassed a $500-million fortune by building Little Caesar Enterprises into the nation’s second-largest pizza chain.

Little Caesars has gone from a single location in 1959 to a corporate behemoth with 4,720 outlets and annual revenue of $2 billion. Despite slow times in the pizza business, the company--which recently launched delivery service nationwide--aims to double in size by the year 2000 and challenge No. 1 Pizza Hut in the process.

Along the way, the Ilitch family has emerged--a bit reluctantly--as the prime benefactor of this troubled city, displacing the descendants of Henry Ford and other auto heirs from their traditional roost.

The Ilitches have invested more than $200 million in Detroit since 1982. Eight years ago, they moved Little Caesar headquarters from the suburbs to the center city--the first major company to relocate downtown in 30 years. Since then, they have expanded heavily into local sports and entertainment.

In addition to the Tigers--bought from rival Thomas Monaghan, owner of Domino’s Pizza in nearly Ann Arbor--Ilitch owns the Detroit Red Wings hockey team and Detroit Rockers soccer team. He renovated the historic Fox Theater, operates downtown convention center Cobo Hall and Joe Lewis Arena, and has interests in a comedy club and several restaurants.

Now Ilitch, 65, wants to build a new Tiger Stadium, a controversial project that could cost more than $200 million, require a substantial public subsidy and serve as an anchor for redevelopment of this city’s decrepit downtown.

“They [the Ilitches] have been very good citizens, both corporate and otherwise, at a time when other corporations chose not to participate in the well-being of the city,” said Mayor Dennis Archer, who backs the new stadium.

While Ilitch’s sports and entertainment activities draw most of the public attention, the *

Ilitch grew up on Detroit’s West Side with dreams of becoming a professional baseball player. Though his father, a tool-and-die maker, derisively called baseball “a bum sport,” Ilitch played shortstop in the Tigers’ farm system after serving four years in the Marine Corps.

A good hitter with above-average speed, Ilitch was hampered by injuries and never made it to the big leagues. Sidelined with a leg ailment one summer, he made extra money by selling pizzas in a bar frequented by his teammates.

He met Marian, an airline reservations clerk, on a blind date arranged by his family, and they were married within a year. Ilitch sold dinnerware and awnings door to door, but soon decided to go into business himself. He invested $10,000 in savings in a small restaurant in a strip shopping mall in Garden City, a Detroit suburb.

His wife suggested calling it Little Caesar. “We were just married and he was my hero, my Caesar. But he hadn’t accomplished anything yet, so he was my little Caesar.”

The Ilitches worked the outlet together, with Mike tossing the dough in the back and Marian running the counter out front. Like a good double-play team, their skills complemented each other: he had a flair for product development and marketing; she had a way with numbers and finance.

The restaurant drew attention because it only offered carryout food--unusual at the time. Bill Morgan, now a top executive at Elias Brothers Big Boy restaurants in Warren, Mich., recalls visiting the shop shortly after it opened in 1959.

“I told them, ‘You’d better get some tables in here or you will never succeed,’ ” he said. “It turned out that his carryout concept was new and innovative. He . . . has always been in sync with his times.”

Ilitch also is open to new ideas. He began franchising in 1962 after a Texan he met on a plane told him the best way to expand was by using other people’s money. Today, 75% of Little Caesars’ outlets are franchised.

Little Caesars grew slowly in the 1960s, but the Ilitch family was growing rapidly. The couple had seven children and involved them early in the business. All have worked for the company.

“Our childhood was a Macedonian version of Parenthood meets the Brady Bunch,” said Atanas Ilitch, 32, who overseas the family’s entertainment interests. “My parents’ energy level is endless. They are very passionate people who sincerely love the life force.”

Michael Ilitch appears painfully shy in public. He is uncomfortable with the media and refused to be interviewed for this article. But friends and family say that in private he is down to earth, enthusiastic and often funny. He is also fiercely competitive.

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“I wouldn’t characterize him as a good loser,” said Jim Devallano, senior vice president of the Red Wings. He adds that Ilitch sets high standards and gives managers autonomy--but expects results.

His competitive nature has not always endeared him to rivals. His price discounting in the 1970s had competitors complaining that he was cheapening the product and hurting the industry.

Ilitch adopted the risky strategy in an effort to attract more families during the economic slump caused by the 1973 Arab oil embargo. His solution: two pizzas for the price of one. It was a master stroke.

His marketing people eventually came up with the “Pizza! Pizza!” promotion (“Two great pizzas! One great price. Always! Always!”), sales took off and Little Caesars became the industry’s low-price leader, a mantle it still holds.

As pizza’s popularity spread, Ilitch took Little Caesars nationwide. The regional company had just 200 outlets in 1981. Four years later, it had 1,000. By 1992, the chain topped 4,000 restaurants.

The company made a big push into California in the 1980s. Today nearly 10% of its outlets are based in the state. In Southern California, there are about 200 Little Caesars, including 142 outlets owned by Anaheim businessman Allie Mallad, the company’s largest franchisee.

The explosive growth did not come without risks. Marian Ilitch, whose education included just one year in junior college, is credited with steering the company through the financial straits.

Named the nation’s top female business owner last year by Working Woman magazine, she is described as highly organized, demanding and detail-oriented. As secretary-treasurer, she insists that each outlet carry its own weight. She encourages franchisees to do their books by hand, saying it provides a better feel for how all segments of the business are performing.

While the company is fiscally conservative, it is known for its cutting-edge marketing. In 1988, Ilitch hired Cliff Freeman & Partners, the New York ad agency best known for the “Where’s the beef?” campaign for Wendy’s, the hamburger chain.

The agency developed a series of high-profile, funny, award-winning advertisements that established Little Caesars as the purveyor of an affordable, quality product that was enjoyable to eat.

“We know for sure that we are not selling rocket engines,” said son Chris Ilitch, group vice president of marketing. “We are selling pizza, and it’s a fun food. Thus our ads take a humorous approach.”

Ads launching its delivery service show trainees learning to balance a pizza while closing a car door and dealing with obstacles such as automatic sprinklers and a mechanical dog. A 1993 ad had the camera-shy Michael Ilitch in a convertible with escaped chickens flying about his head squawking “buck, buck, buck.” Inspired, he decided to sell “pizza for a buck.”

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Good ads are critical because pizza sales are stagnating industrywide. In the last decade, pizza sales grew at an annual 10% rate. Sales were so strong that the National Restaurant Assn. predicted in 1991 that pizza would supplant hamburger as the nation’s top fast food by this year.

Instead, the hamburger chains and other fast-food operations responded with aggressive pricing. Pizza sales were up an anemic 2.2% last year, according to Technomic Inc., Chicago restaurant consultants. With sales stalled and competition growing, the major chains are being forced to challenge each other more directly.

The Big Three pizza chains--Pizza Hut, Little Caesars and Domino’s--account for about half of industry sales. Until recently, their shares were neatly divvied up, with industry leader Pizza Hut dominating the sit-down segment, Little Caesars the carryout niche and Domino’s the delivery area.

Then Pizza Hut made a costly foray into delivery. Now Little Caesars--which delivered in the 1970s, but dropped it to keep costs down--is jumping back in, though some analysts say they are late to the party.

“In hindsight, if we were to do it again, we would do it a few years earlier,” said David Deal, president of Little Caesars.

The company claims it already is seeing an increase in sales from delivery. But industry experts said Little Caesars is having trouble with the monumental task of hiring and training 40,000 delivery personnel.

“They’ve had some problems, but they are probably short-term ones,” said Teresa Howard, who covers the fast-food business for Nation’s Restaurant News, a trade publication.

Meanwhile, the company is forging ahead with expansion and new products. Deal said the most likely areas of growth are in the Northeast, non-traditional areas such as schools and airports, and abroad. The company is expected to announce a major international expansion later this year.

Though Pizza Hut has nearly twice as many restaurants as Little Caesars, Deal says its rival can be toppled. “They can be caught in this century,” he said. “Believe me, we are going to try. We could come close to doing that in the next five years.”

Although Ilitch gave up day-to-day control of Little Caesars nearly two years ago, he remains chairman and is involved in major company decisions. But these days, he spends more time on what he characterizes as his toys--the sports teams.

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In 1982, Ilitch--described by one associate as “basically a frustrated jock”--bought the perennial loser Red Wings for $8 million. They lost money for five years. Today the team, which made it to the Stanley Cup finals this year, is valued at more than $70 million--making it the most valuable in the National Hockey League.

The Red Wings turnaround endeared Ilitch to the sports fans of this hockey-crazed city. But it was the renovation in 1987 of the Fox Theater and a connected 10-story office building that earned him greater civic respect.

Ilitch shelled out $65 million to restore the 5,000-seat movie palace, which opened in 1928 and is known for its resplendent, quirky architecture. The restored Fox has become a profitable venue for classic films, Broadway musicals and concerts, and has drawn new businesses to a run-down stretch of Woodward Avenue just north of downtown.

More important, Ilitch moved Little Caesar Enterprises headquarters from the suburbs to the offices above the Fox. Suddenly he was being compared to the late Henry Ford II, the auto magnate who in the 1970s tried to orchestrate a downtown renaissance.

But Ilitch shuns the image of Detroit’s rescuer. While he is dedicated to downtown’s revival, family members say the move into the city was mainly a business decision designed to protect their sports and entertainment investments from suburban competition.

The purchase of the Tigers three years ago had as much to do with emotion as business. It was the fulfillment of a boyhood dream--Ilitch, the local boy who never made it to the big leagues, now owns the hometown team.

But as an investment, the Tigers have been no field of dreams. The team has one of the highest payrolls in baseball, yet one of the worst records. The franchise says it lost $4 million in 1993, $20 million in 1994 and, with attendance off 25%, expects to lose at least as much this year.

These losses, magnified by baseball’s recent labor strife, have prompted Ilitch to push for a new stadium adjacent to the downtown theater district. He argues that a stadium would not only help redevelop the city, but increase Tiger revenues and boost the franchise’s value.

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Much to Ilitch’s surprise, his proposal has provoked substantial opposition. The main reason is his request for $200 million from the state to pay for roads and parking. Others argue that the stadium, the oldest in the country, is a historic property that should be renovated.

“We think it’s an unnecessary public expense in a state that can ill afford it,” said Frank Rashid, a board member of the Tiger Stadium Fan Club, which opposes a new facility. “We think it’s hypocritical for politicians to give a subsidy to one of the state’s richest citizens.”

In recent weeks, Gov. John Engler has indicated support for the project. The latest plan is said to call for the state to provide $60 million and the city $30 million.

That is certain to prompt a raucous debate, one that will bring more scrutiny of Ilitch and his investments. As painful as the process may be, Ilitch is likely to remain unruffled, self-effacing and, well, humble.

Said son Atanas, “He has always told us to be humble because you can come down as fast as you went up.”

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The Ilitch Empire

Michael and Marian Ilitch have built a financial empire with interests in food, entertainment and sports. Forbes magazine estimates their personal wealth at about $500 million.

THE ILITCHES

* Name: Michael and Marian Ilitch, chairman and secretary-treasurer of Little Caesar Enterprises

* Ages: Michael, 65; Marian, 62

* Background: Both born and raised in Detroit by Macedonian immigrants

* Education: Both high school graduates

* Family: Married with seven children

* Resumes: Michael spent four years in the Marine Corps and played minor league baseball. He sold dinnerware and awnings door to door. She worked as an airline reservations clerk. Together they open first Little Caesars restaurant in 1959. Franchising began in 1962, nationwide expansion in early ‘80s.

* Recent Activities: Little Caesars rolled out a nationwide delivery campaign in an effort to boost sales by expanding beyond its traditional carryout niche. Ilitch is spearheading efforts to build a new Tiger Stadium in hopes of spurring redevelopment in downtown Detroit and boosting the team’s finances.

* Philanthropy: Operate the nonprofit Little Caesars Love Kitchen, a pizza restaurant on wheels that travels to soup kitchens and disaster areas throughout the United States and Canada to feed the hungry and needy.

* Management Styles: He is known as a demanding executive who sets high standards but gives managers a great deal of autonomy. She is a hands-on perfectionist who is very organized and detail-oriented.

MAJOR BUSINESSES

SPORTS:

* Detroit Red Wings: Acquired the National Hockey League team in 1982 for $8 million. Since then the team has become a regular winner, reaching the Stanley Cup finals this year. The franchise is now worth more than $70 million.

* Detroit Tigers: Bought the major league baseball team from Thomas Monaghan, owner of Domino’s Pizza, for $85 million in cash in 1982. The team, with one of the highest payrolls in baseball, lost $20 million in 1994 and is expected to lose the same amount this year.

* Detroit Rockers: Purchased the professional soccer team in 1993. The team plays in Cobo Arena in downtown Detroit, which is managed by the Ilitches.

FOOD:

* Little Caesar Enterprises: The nation’s second-largest pizza chain with $2 billion in annual revenue and 4,720 outlets.

* Blue Line Distributing: A full-service distributor of food products and equipment for Little Caesar and its franchisees.

* America’s Pizza Cafe: Four restaurants that offer specialty pizza cooked in wood-fired ovens.

* Other restaurants: Operates two restaurants in the Detroit area with well-known chef Jimmy Schmidt. Also has interest in other upscale eateries.

ENTERTAINMENT:

* Olympia Arenas: Manage Joe Lewis Arena, where the Red Wings play; Detroit’s downtown Cobo Arena convention center, and the Glens Falls Civic Center, where the Adirondack Red Wings play.

* Fox Theater: Purchased the historic theater in 1987. The 5,000-seat Fox, opened originally in 1928, is the world’s largest remaining movie palace and is known for its Siamese Byzantine architecture.

* Second City: Opened the comedy club adjacent to the Fox Theater in 1993.

Sharing the Pizza Pie

Little Caesars is second to Pizza Hut in market share, with Domino’s running a strong third.

U.S. market share:

Pizza Hut: 26.1%

Little Caesars: 11.2%

Domino’s: 10.4%

Others: 52.3%

Source: Little Caesar Enterprises