CASE BSB, INC.: THE PIZZA WARS COME TO CAMPUS

Renee Kershaw, manager of food services at a medium-sized private university in the Southeast, has just had the wind taken out of her sails. She had decided that, owing to the success of her year-old pizza service, the time had come to expand pizza-making operations on campus. However, yesterday the university president announced plans to begin construction of a student center on campus that would house, among other facilities, a new food court. In a departure from past university policy, this new facility would permit and accommodate food-service operations from three private organizations: Dunkin’ Donuts, Taco Bell, and Pizza Hut. Until now, all food service on campus had been contracted out to BSB, Inc.
CAMPUS FOOD SERVICE
BSB, Inc., is a large, nationally operated food-services company serving client organizations. The level of service provided varies, depending on the type of market being served and the particular contract specifications. The company is organized into three market-oriented divisions: corporate, airline, and university or college. Kershaw, of course, is employed in the university or college division.
At this particular university, BSB, Inc., is under contract to provide food services for the entire campus of 6,000 students and 3,000 faculty, staff, and support personnel. Located in a city of approximately 200,000 people, the campus was built on land donated by a wealthy industrialist. Because the campus is somewhat isolated from the rest of the town, students wanting to shop or dine off campus have to drive into town.
The campus itself is a “walking” campus, with dormitories, classrooms, and supporting amenities such as a bookstore, sundry shop, barber shop, branch bank, and food-service facilities—all within close proximity. Access to the campus by car is limited, with peripheral parking lots provided. The university also provides space, at a nominal rent, for three food-service facilities. The primary facility, a large cafeteria housed on the ground floor of the main administration building, is located in the center of campus. This cafeteria is open for breakfast, lunch, and dinner daily. A second location, called the Dogwood Room, on the second floor of the administration building, serves an upscale luncheon buffet on weekdays only. The third facility is a small grill located in the corner of a recreational building near the dormitories. The grill is open from 11 A.M. to 10 P.M. daily and until midnight on Friday and Saturday nights. Kershaw is responsible for all three operations.
THE PIZZA DECISION
BSB, Inc., has been operating the campus food services for the past 10 years—ever since the university decided that its mission and core competencies should focus on education, not on food service. Kershaw has been at this university for 18 months. Previously, she had been assistant manager of food services at a small university in the Northeast. After three to four months of getting oriented to the new position, she had begun to conduct surveys to determine customer needs and market trends.
An analysis of the survey data indicated that students were not as satisfied with the food service as Kershaw had hoped. A large amount of the food being consumed by students, broken down as follows, was not being purchased at the BSB facilities:
Percent of food prepared in dorm rooms 20
Percent of food delivered from off campus 36
Percent of food consumed off campus 44
The reasons most commonly given by students were (1) lack of variety in food offerings and (2) tight, erratic schedules that didn’t always fit with cafeteria serving hours. Three other findings from the survey were of concern to Kershaw: (1) the large percentage of students with cars, (2) the large percentage of students with refrigerators and microwave ovens in their rooms, and (3) the number of times students ordered food delivered from off campus.
Percent of students with cars on campus 84
Percent of students having refrigerators
or microwaves in their rooms 62
Percent of food that students consume
outside BSB, Inc., facilities 43
In response to the market survey, Kershaw decided to expand the menu at the grill to include pizza. Along with expanding the menu, she also started a delivery service that covered the entire campus. Now students would have not only greater variety but also the convenience of having food delivered quickly to their rooms. To accommodate these changes, a pizza oven was installed in the grill and space was allocated to store pizza ingredients, to make cut-and-box pizzas, and to stage premade pizzas that were ready to cook. Existing personnel were trained to make pizzas, and additional personnel were hired to deliver them by bicycle. In an attempt to keep costs down and provide fast delivery, Kershaw limited the combinations of toppings available. That way a limited number of “standard pizzas” could be preassembled and ready to cook as soon as an order was received.
THE SUCCESS
Kershaw believed that her decision to offer pizza service in the grill was the right one. Sales over the past 10 months had steadily increased, along with profits. Follow-up customer surveys indicated a high level of satisfaction with the reasonably priced and speedily delivered pizzas. However, Kershaw realized that success brought with it other challenges.
The demand for pizzas had put a strain on the grill’s facilities. Initially, space was taken from other grill activities to accommodate the pizza oven, preparation, and staging areas. As the demand for pizzas grew, so did the need for space and equipment. The capacities of existing equipment and space allocated for making and cooking pizzas now were insufficient to meet demand, and deliveries were being delayed. To add to the problem, groups were beginning to order pizzas in volume for various oncampus functions.
Finally, a closer look at the sales data showed that pizza sales were beginning to level off. Kershaw wondered whether the capacity problem and resulting increase in delivery times were the reasons. However, something else had been bothering her. In a recent conversation, Mack Kenzie, the grill’s supervisor, had told Kershaw that over the past couple of months requests for pizza toppings and combinations not on the menu had steadily increased. She wondered whether her on-campus market was being affected by the “pizza wars” off campus and the proliferation of specialty pizzas.
THE NEW CHALLENGE
As she sat in her office, Kershaw thought about yesterday’s announcement concerning the new food court. It would increase competition from other types of snack foods (Dunkin’ Donuts) and fast foods (Taco Bell). Of more concern, Pizza Hut was going to put in a facility offering a limited menu and providing a limited selection of pizzas on a “walk-up-and-order” basis. Phone orders would not be accepted nor would delivery service be available.
Kershaw pondered several crucial questions: Why had demand for pizzas leveled off? What impact would the new food court have on her operations? Should she expand her pizza operations? If so, how?
Questions
1. How would you describe the mission of BSB, Inc., on this campus? Does BSB, Inc., enjoy any competitive advantages or core competencies?
2. Initially, how did Renee Kershaw choose to use her pizza operations to compete with off-campus eateries? What were her competitive priorities?
3. What impact will the new food court have on Kershaw’s pizza operations? What competitive priorities might she choose to focus on now?
4. If she were to change the competitive priorities for the pizza operation, how might that affect her operating processes and capacity decisions?
5. What would be a good operations strategy for Kershaw’s operations on campus to meet the food court competition?
Source: This case was prepared by Dr. Brooke Saladin, Wake Forest University, as a basis for classroom discussion.