The big mistake at collapsed pizza and pasta chain Criniti’s

Pizza chain Criniti’s has collapsed, shuttering stores. But if it weren’t for one bad decision the family company might have stayed afloat.

The collapse of popular pizza chain Criniti’s was due to “hubris” and a rapid over expansion that saw the Italian eatery open branches thousands of kilometres from its spiritual home of Sydney.

That’s one conclusion of restaurant industry watchers who said the middle market chain was under pressure as wallets tightened.

Customers have also chimed in with their reasons for its downfall with one saying they weren’t surprised a restaurant with, “substandard food for an exorbitant price,” had gone under.

The restaurant, founded in 2003 by the Criniti family, had at its peak 13 branches in Melbourne, Perth, Brisbane, Wollongong and Newcastle as well as Sydney.

The appetite for its signature “three metre pizza” made the family a motza with a multimillion-dollar home in Sydney’s Hills District.

But the chain began shutting some stores on Wednesday as the company collapsed into administration.

Scores of jobs have already been lost.

Like the litres of salted water Criniti’s cooks its pasta dishes in, the company’s coffers have drained away as consumers headed elsewhere.

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On Wednesday, Worrells solvency and forensic accountants were appointed to try and turn the business around and sell it on.

“Criniti’s is a well-known, well-liked chain, but like all hospitality businesses carries high overheads and is susceptible to any weakening in retail spending,” Worrells partner Graeme Beattie said.

He said branches had to shut immediately because the firm was in such dire financial straits, “we don’t believe the group as a whole can trade indefinitely while a buyer is found”.

“There is never a good way to deliver this kind of news and we understand the shock, disappointment and trepidation felt by Criniti’s loyal staff.”

Criniti's now closed store in Manly. Picture: Jim O'Rourke

The iconic three metre pizza at the Criniti's' in Brisbane that is now closed. Picture: Lachie Millard.

Criniti’s joins a growing list of restaurant chains that have succumbed.

Last month, celebrity chef Shannon Bennett’s Melbourne burger chain Benny Burger was also placed into administration followed by seven Red Rooster outlets in Queensland just days later. In 2018, Jamie Oliver’s Jamie’s Italian chain went to the wall in Australia with just four branches still open.

RECENT EXPANSION

Cosimo Criniti told News Local this week that five stores – Manly and Kirrawee in Sydney and branches in Wollongong, Brisbane and Perth – would close immediately.

Many of the now shuttered restaurants opened relatively recently; Perth and Brisbane a little more than a year ago while the Wollongong outlet welcomed its first customers in a blaze of glory just four months ago.

At the time, the firm said it was getting an “excited response” from locals ahead of the opening.

Not excited enough, it seemed.

One of the big mistakes Criniti’s appears to have made is expanding too fast and too far beyond its core Sydney market.

“It was always an ambitious project to take on sites that were high exposure but high expense in premium locations,” said Brian Walker of retail consultants Retail Doctor.

“The costs would have been astronomical. They would have had huge rents on stores like Manly (on Sydney’s expensive northern beaches) and they had a location strategy that was questionable.”

Criniti's has opened branches across Australia with expensive Italian themed fit outs.

Motorbike hang from the ceiling of Criniti's in Woolloomooloo, Sydney.

Branches in tourist areas may have turned a profit but he doubted enough penne Al Pacinos and tropicale pizzas were being ordered in the suburbs to cover costs.

“The cumulative effect meant costs outweighed revenue,” Mr Walker said.

When his clients were looking to expand, his guidance was to “test and tweak” constantly to get the offer right before a big roll out.

“I don’t think Criniti’s did that. They just banged them all out,” Mr Walker added.

News.com.au has contacted Worrells for comment on whether over expansion was a factor in the firm’s collapse. But in a statement on Wednesday the administrators said, “Our first priority will be the preservation of value by identifying and closing the poorer (performing stores), of which we expect there to be several.”

RESTAURANTS TOO FAR APART

Restaurant consultant Tony Eldred, who once held a senior management position at KFC, told news.com.au that “hubris” and “ego” were behind many a dinner time disaster.

“Ego drives people to expand because they are given the opportunity and are offered sites. But they get spread too thin,” he said.

“Money is not the problem or opportunity, it’s getting the key people in to run (the new branches).”

Talented staff for restaurants is always in short supply.

“If they can’t find a good team they take some existing staff and shift them. That dilutes the original business and now you have a problem in two places,” Mr Eldred said.

He was astounded Criniti’s had single branches as far away as Brisbane and Perth from its Sydney base.

“It’s folly. If you have restaurants 800 kms apart you can chew up profits in airfares and there can be a lack of attention to other parts of the business.

“An awful lot of ego drives an awful lot of loss,” he said.

Cosmo, Rosa and daughter Kathy Criniti at Criniti's in Parramatta. Picture: Angelo Velardo/AAP

Frank Criniti sold this pad in Sydney for $9m. That a lot of pizzas.

MARKET SQUEEZE

There were other industry-wide issues that had led costs to rise while customers dwindled.

“Spending is decreasing, food costs have gone up and wages have escalated as everyone is sh*tting themselves and tidying up their payroll.

“So lots of restaurants that were making 5 to 6 per cent margin are now making nothing,” said Mr Eldred.

Market analysts IBISWorld has reported the disposable income of Australians is likely to shrink by 0.7 per cent in 2019-20.

For restaurants, the good news is that spending on eating out was likely to rise by 0.7 per cent over the same period, with total profits of $342.9 million.

The bad news, said IBISWorld senior analyst Jamie Caldwell, was that very little of that was likely to head to outlets like Criniti’s.

“The decline in discretionary spending is polarising the market. So some will eat out at the same frequency but with cheaper options like fast food or Uber Eats; or they will eat out less frequently but opt for more expensive independent restaurants.”

Mr Caldwell said the middle market, Criniti’s homeland, was struggling because it was neither particularly cheap nor did it have a premium feel.

“Grill’d burgers are doing very well as they have sold themselves as premium food, but Nando’s and Hog’s Breath are struggling.”

The Criniti family has faced financial hurdles before.

In May last year the Australian Securities and Investments Commission (ASIC) disqualified the restaurant’s founder Frank Criniti from managing companies for five years.

The corporate regulator disqualified him from running a business until 2023 due to his involvement in seven failed companies that owed more than $3.5 million. These businesses were not connected to the eateries.

Burger chain Grill’d has been flourishing as other chains falter. Picture: Valeriu Campan

‘LONG WAIT FOR A TERRIBLE EXPERIENCE’

On Wednesday, Rima Criniti opined about the store closures.

“It takes more than fantastic food and hospitality to make a restaurant group a success,” she said. “There are very high costs involved in the hospitality industry.”

But some aren’t sure Criniti’s has either fantastic food or hospitality.

“I never understood the appeal,” a former Criniti’s customer told news.com.au. “I looked at the menus and it was so depressing. It’s pretty stock standard food for an exorbitant price.”

On review site TripAdvisor some diners said they enjoyed Criniti’s, but many others have said it is middling at best.

The chain gets plaudits for big portions but the service is often considered to be woeful.

“A long wait for a terrible experience,” said one disgruntled recent customer.

“Very poor in all possible ways,” said another.

Mr Walker agreed: “Having eaten there I consider it to be expensive and nothing that couldn’t be competed with.”

Cosimo Criniti was bullish about the prospects for the eight remaining stores in Sydney, Melbourne and Newcastle.

“We tried,” he told News Local. “We let the underperforming stores run for a while but that was too much. The other Sydney stores will continue in a big way.”

Mr Eldred said it was a cautionary tale to other restaurateurs that were seduced by the prospect of Australia-wide expansion.

“Be very careful. What’s the proposition, what money and people do you have behind you?

“I spoke to a restaurateur today and my advice was, don’t do it,” he added.

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