Staying true to its positive-social-impact strategy doesn’t come cheap for MOD Super Fast Pizza Holdings, said Scott Svenson, co-founder and CEO.
MOD’s main focus, outside pizza, is hiring people who have faced barriers to employment, said Svenson. This includes people transitioning out of homelessness, incarceration or foster care, he said.
MOD currently employs about 8500 in 433 locations in the U.S. and the U.K. He estimates that a third to 40 percent of its staff comes from this challenged group. MOD’s staffers are also younger; roughly 60 to 70 percent are 18 to 24 years old, he said.
“People need someone to believe in them,” Svenson said.
MOD also sponsors events where local communities help package meals that are put in kids’ backpacks or donated to food banks and pantries, Svenson said.
The restaurant chain funded, packed and donated nearly half a million meals to food banks and backpack programs in 2018. It plans to create another one million meals in 2019.
While MOD is “very profitable” at the store level — the company produced $398 million in systemwide sales in 2018 — such a strategy does come with a cost, Svenson said. He says it will be repaid by MOD holding onto its people longer. The company will continue to invest in growth and its infrastructure, he said.
“If our employees feel cared for, feel safe and feel loved, then they will take care of our guests,” he said.
Scott and his wife, Ally, launched MOD in 2008 in Seattle. The couple are serial entrepreneurs who previously started Seattle Coffee Co and Carluccio’s, a London deli chain. Starbucks acquired Seattle Coffee for around $90 million in 2003.
The idea behind MOD was a restaurant where customers could get a pizza topped with whatever they wanted, that was made fresh and ready in minutes. MOD offers roughly 30 different toppings including bacon, grilled chicken and pepperoni. Customers can choose original, gluten-friendly or cauliflower crust. The chain also offers hand-tossed salads.
Svenson estimated that it takes seven to eight minutes for someone to “walk in [to MOD], walk down the line and have an 11-inch artisanal pizza with any topping. In most parts of the country it’s about $8.”
Roughly 10 years after its founding, MOD on May 21 welcomed its latest high-profile investor. Clayton, Dubilier & Rice, one of the oldest PE firms, invested $150 million in the pizza chain. “Nobody sold,” Svenson said. “We brought in fresh capital to continue to fuel our growth and improve our business.”
Including the $150 million, MOD has raised just under $340 million, Svenson said. Other investors include PWP Growth Equity and Fidelity Management & Research.
The three largest MOD shareholders are the Svensons, CD&R and PWP. MOD plans to use the capital to fund its expansion plans, which include reaching about 1,000 locations in the next five years, he said.
CD&R, of New York, is a noted consumer investor that has done many food deals. MOD, however, is its first pure pizza transaction, a source said. The investment is coming from CD&R Fund X, which closed on $10 billion in 2017.
Adam Phillips, Jonathan Manor and Devin Heckman of Kirkland & Ellis provided legal advice to CD&R in the transaction. John Clark and Keith Canton of JP Morgan acted as placement agents to MOD in connection with the private placement.
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