Little Caesar deal could get Chicken Shack cooking

Source: Crain’s Detroit Business
Little Caesar Enterprises Inc. founder Mike Ilitch turned a fancy for fried chicken into a business deal that could become an expansion opportunity for a local chain.

Warren-based Chicken Shack Inc. and Little Caesar are testing a dual store in Westland. Little Caesar bought a Chicken Shack franchise and folded the fried chicken operation into its pizza store on Warren Road near Wayne Road.

The store, which opened last month, sells Little Caesars pizza and Chicken Shack’s menu of fried chicken and ribs.

“This is the pilot, so in the future there’s a possibility we’d do more,” said Neil Sobeck, communications director for Chicken Shack. Neither company would elaborate on how or when they would add more joint restaurants.

“We want to make sure this works the best way possible first,” Sobeck said.

Chicken Shack has 11 stores, all in the Detroit area. The company was founded in 1956 by John and Iola Sobeck.

A franchise industry analyst said interest from a large chain such as Little Caesar can be a “bonanza” for the smaller Chicken Shack if the idea works. Detroit-based Little Caesar has about 3,700 franchised and company-owned locations, according to Technomic Inc., a Chicago-based restaurant industry research firm.

“You can really add a lot of locations either as franchises or a licensing agreement with Little Caesar,” said Don Boroian, president of Olympia Fields, Ill-based Francorp. “It may be a bigger opportunity if this pans out.”

Chicken Shack would benefit either from added royalty payments for more locations or a lump-sum payment from a license agreement, Boroian said.

Ilitch, who founded Little Caesar in 1959 with wife, Marian, has been a customer of the Chicken Shack on Woodward Avenue in Royal Oak. He thought about a joint restaurant when he saw it was a popular, family-run business, said Lisa Cosnowski, director of corporate communications for Little Caesar.

The Sobecks thought Ilitch had something else in mind when we walked into the store two years ago.

“We thought it had something to do with the new stadium, because that was the time that was coming together,” Sobeck said. “We were quite surprised and didn’t know what to expect. It turned out he wanted to do a store with Little Caesar and Chicken Shack.”

Ilitch visited John Sobeck at the Chicken Shack in Port Huron and the two later met at Little Caesar headquarters in Detroit and signed the deal, Sobeck said.

“Mike himself worked this out,” Sobeck said.

Dual-themed restaurants, known as co-branded restaurants, are becoming common in the fast-food industry, Boroian said. It gives a chain a chance to expand the menu without spending money on research, development and distribution.

Little Caesar had an estimated $1.47 billion in U.S. systemwide sales in 1999, according to Technomic.
Source: Crain’s Detroit Business