Case Study: Assessing a start-up opportunity

The story
In the mid-1980s, Peter Cooperstein was living in northern California and felt frustrated at being unable to find the kind of high-quality, thin-crust pizza that he had grown up with on the US east coast. He even gave up eating pizza altogether.

He had the idea of opening an east coast-style, high-quality pizza restaurant, thinking that at the very minimum he would get business from other east-coast transplants who also craved thin-crust pizza.

The challenge
Mr Cooperstein felt he could analyse a restaurant’s potential because he had learnt about the business from his father, who had owned a small chain of take-out restaurants in Boston. He also had a bachelor of arts in economics and an MBA from MIT’s Sloan School of Management.

However, he lacked formal restaurant experience. He also realised he had to evaluate whether an east coast pizzeria-style restaurant would resonate with northern Californians.

Moreover, how would he put the theory into practice if he decided to proceed and open the restaurant?

The strategy
To assess the opportunity, Mr Cooperstein considered the following questions: is there a compelling unmet need; is there a large market; is there sustainable differentiated positioning; can there be a scalable business model; why us – is the team uniquely positioned; and why now – what is the timing of the opportunity?

● Compelling unmet need: His Amici’s concept passed this test because thin-crusted pizza was rarely served on the west coast. The region also lacked upscale pizza restaurants.

● Size of market: Mr Cooperstein was not sure how big the potential market was. However, he looked to the fact that the California Pizza Kitchen chain had launched successfully a few years earlier, which suggested it could be large.

● Positioning and scale: Mr Cooperstein felt he could differentiate Amici’s based on quality and service.

He also believed that the business model was scaleable, so long as the business grew in a slow and steady manner to ensure the high quality that would help distinguish his restaurants could be maintained.

● The founders/team: Because of his lack of experience, Mr Cooperstein spent 18 months researching the industry. He worked at 20 or so restaurants in San Francisco’s Bay Area as a dishwasher, bus boy, pizza prep person, pizza cook, waiter and pizza delivery man. He learnt that a traditional Italian brick oven was the commonality among his favourite pizzerias, with the 700F temperatures making the perfect crispy, airy and slightly chewy crusts.

Mr Cooperstein also kept his eyes open for a “super manager” because most of the ones he had seen seemed weak and indifferent. When he found Mike Forter, he felt that hiring such an experienced manager, who also had the same values of quality and service, would increase his chances of success.

● Timing: The moment to launch seemed right, especially as California Pizza Kitchen had not yet made a significant dent in the upscale pizza market.

What happened
Mr Cooperstein and Mr Forter became partners and launched Amici’s in December 1987. The restaurant was soon a huge success. Eventually, the business grew into a reasonably sized chain of 13 Bay Area restaurants and one in southern California. By 2011, revenues had grown to $32m and the company had more than 300 employees. For most of the past 25 years, revenue per restaurant has grown steadily.

The lessons
Before Mr Cooperstein launched his upscale pizzeria, he identified a market need and created a differentiated product, as well as assembling the right team. He also undertook an extensive apprenticeship in order to fill the gaps in his knowledge and practical experience.
- Financial Times, Apr 15, 2013