Numero Uno Pizza Hopes to Grab Slice of Foreign Markets

Take off the cheese, hold the tomatoes and ladle on the seafood. No matter how you make it, it’s still pizza, and it’s conquering the world.

Van Nuys-based Numero Uno Franchise Corp. is one of a handful of American companies now peddling this emblematic food of Western youth to the denizens of South Korea, Kuwait and China.

Asians aren’t as fond of tomatoes and many avoid cheese, but they’re buying pizza like crazy anyway.

“Pizza will become the most popular food in the world,” predicts Ron Gelet, the 52-year-old CEO of the chain’s parent, N.U. Pizza Holding Corp.

Numero Uno is hoping to stage a turnaround on the belief its sweet pizzas--topped with shrimp, catsup or regional Chinese vegetables--will win over palates in Asian cities.

The chain is under a lot of pressure to make Asians believe they like Numero Uno pizzas. For one thing, it faces competition from much larger firms.

The big three pizza makers--Pizza Hut Inc., a division of PepsiCo; Domino’s Pizza Inc., and Little Caesars Pizza--have all stepped up their activities in overseas markets in the last two years.

More than a third of Domino’s 1995 revenues came from international stores in 46 countries. Domino’s pizzas are delivered on specially designed scooters in Japan, Pizza Hut has had success with sardine pizza in Russia and Little Caesars is producing menus in Czech. “International expansion is going to be a very big growth area for us in the next couple of years,” said Little Caesars spokesman Al Sebastian.

Numero Uno has licensed two franchises in the Middle East, six in South Korea and one in China. An Indonesian outlet is scheduled to open this fall, and development agreements for more than 50 other restaurants in these countries have been signed. Deals for Malaysia, Hong Kong, Puerto Rico and Canada are also in the works.

Competition from bigger rivals isn’t the chain’s only problem. A year ago, Numero Uno was nearly bankrupt, reeling from riots, earthquake and the recession in its home turf of Southern California.

The publicly held company had guaranteed leases and loans, so franchisees who went under dumped their restaurants back into the company’s lap. Losses in fiscal 1995 were $3.2 million on revenue of $4.2 million.

On paper, things looked ugly--the company was reporting negative working capital and massive losses both on franchised restaurants and company-owned ones.

But they looked even worse from inside the Van Nuys offices: “The phones were nonstop with creditors yelling and screaming,” recalled Dan Rouse, 45, the chain’s vice president of operations. At one point, the company remained in business chiefly because it didn’t have enough cash on hand to pay a deposit to a bankruptcy attorney, he said.

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Since then, the picture has changed. Numero Uno sold off company-owned restaurants and closed others. It still has 45 franchised outlets in the area, mostly in the San Fernando Valley, where Gelet founded the chain 23 years ago.

The company set up payment schedules with creditors, received an infusion of equity capital from Wall Street and began selling international franchise development agreements. And in the fiscal second quarter ended Dec. 31, Numero Uno posted its first small profit in years: $85,000 on revenue of $330,700.

A successful turnaround for Numero Uno “is a long shot,” said Gary Mitchell, president of A.R. Weber & Associates, a Denver stockbrokers’ information service. “But that doesn’t mean it isn’t going to work.”

Numero Uno’s Rouse concedes, saying, “It’s not all over yet. We still have creditors and monthly payments. . . . But, hey, I’m cash-flowin’, I’ve got a bottom line. If I sound like I’m excited, I am.”

Gelet has embarked on a rapid expansion to help build the company back up. He said he plans to have 150 outlets in Southern California in the next few years, and the firm is aggressively seeking acquisitions. In addition, Numero Uno has begun an expansion plan outside California--as many as 20 may open in Florida starting next summer if a pending deal goes through.

But the biggest potential for growth is overseas, Gelet said. “The international marketplace is similar to the one in the United States back in the late 1980s,” he said.

Foreign franchisees buy rights to the name under various agreements. They pay upfront licensing fees and an ongoing royalty of around 2.5% of sales thereafter.

Numero Uno seems an unlikely emissary of global capitalism. Its low-key Van Nuys headquarters consists of just a few rooms. Dirty coffee cups compete for counter space with an open jar of nondairy creamer next to Rouse’s office.

And Rouse himself, a Long Island transplant dressed down in an open-collar shirt showing a gold chain, is not your typical multinational exec. He pronounces China “Chiner,” has been there several times and likes it enough to have considered staying.

While pizza has become old hat in the U.S., he said, it is still a novelty in places like Shenzhen, the southern Chinese city where Numero Uno’s first overseas franchise opened.

There, people “don’t look at pizza as Italian. It’s American,” said Rouse.

Rouse, the point man for global franchise operations, got his education as a Western businessman in places like the Peoples’ Republic the hard way.

In China, authorities arrested an employee parading with a sandwich-board sign to lure customers into the new restaurant. Advertising, Rouse learned, is not allowed without permission.

In Kuwait, Rouse learned all his ingredients had to be blessed by an Islamic cleric, and menus were stripped of all pork and alcohol products. The restaurant’s employees, meanwhile, had to be imported from the Philippines, since no Kuwaitis could be found for the low-wage work.

And in South Korea, Rouse’s franchisees are now instructed to do the unthinkable--they’re going easy on the cheese and putting catsup on the tables.

Whatever it takes to advance the cuisine.

Pizza has already come close to overtaking hamburgers as the most popular fast food in the U.S., Gelet notes with pride. With a little effort, he says, it could crowd out curry, even noodles, overseas.

“Pizza will transcend time,” he said.