This Pizza Pays a Living Wage

(Bloomberg Businessweek) -- Michael Lastoria, chief executive officer of &Pizza, a Washington, D.C.-based chain with 36 locations up and down the East Coast, is tall, slim, and serene, with a full beard and brown hair that falls past his shoulders. When I meet him, on a warm spring day inside an &Pizza location in Manhattan’s NoMad district, he’s wearing a black silk shirt, a black cape, cropped black pants with long black socks, and a pair of black Wu Wear Wallabee boots: what Jesus might look like if he walked in a Yohji Yamamoto show..Lastoria, 39, committed to an all-black wardrobe around the time the first &Pizza store opened, seven years ago (the name is pronounced “and pizza”—the ampersand chosen, Lastoria says, to convey values of unity and inclusivity). The uniforms at &Pizza stores are black, and black is the dress code for corporate staffers, too, meaning anyone can jump behind the counter. “It’s about making sure we’re not losing that connection to employees in pizza shops,” he says. Around us, the restaurant is mobbed by a Generation Z crowd, hunched over pies topped with spicy chickpeas or arugula while songs by Grimes and Drake boom over the sound system. From time to time, a customer holds a phone aloft, capturing the moment when they lift the lid of an eye-catching black-and-white rectangular pizza box to reveal their just-baked, personalized creation..The menu at &Pizza has eight options. There’s a classic margherita pie, but the big draws are the offbeat flavor combinations such as the Pineapple Jack, with pineapple, salami, pickled red onion, and barbecue sauce (against all odds, it’s tasty). Most customers create their own, choosing from a stable of 48 ingredients, including mushroom truffle sauce, shrimp, ranch dressing, and scrambled egg. The dough is stretched to form a skateboard shape and run through a TurboChef conveyor oven that cooks it in less than two minutes. The final product tends to be light but filling, with a thin, crispy crust almost like a flatbread: daintier than a dollar slice, but sturdier than a Neapolitan pie. Pizzas cost $10 to $11 and feed one person generously. The restaurant also sells its own line of branded iced teas and craft sodas, as well as cookies by Milk Bar, the New York-based bakery known for nostalgia-sweetened treats such as Cereal Milk soft-serve and confetti birthday cake..Although &Pizza sits squarely in fast-casual territory—quality food, made for you, with prices a level above fast food—the brand has eschewed the category’s dominant aesthetic of reclaimed wood, warm lighting, and earth tones, favoring a younger, urban vibe. Shops are decorated in a bold, graphic black-and-white motif, and the walls often feature work by street artists admired by Lastoria. The shops tend to be open late—in some cases, until 4 a.m.—and are known to churn out pies right up to closing time..&Pizza uses premium ingredients, but unlike many of its peers, it doesn’t fixate on the details. If pressed, Lastoria will share that the dough is made from five ingredients (flour, water, yeast, salt, and sugar) and with no preservatives at a production facility in D.C. The mozzarella comes from a century-old cheesemaker in Wisconsin, the tomato sauce from a family-owned operation in California. But Lastoria doesn’t want to get precious with sourcing narratives. Milk Bar founder Christina Tosi says this is one of the qualities that drew her into a partnership with the brand. “They don’t TMI you about the history of your pizza.”.What Lastoria does want to talk about to anyone who will listen is his ambition to turn &Pizza into the most progressive fast-food employer in the nation. That starts with pay: Store employees, whom the company calls “tribe members,” are among the best-paid fast-food workers in the nation. At &Pizza the mean hourly wage is $14, compared with an industry average of $9.84, according to the market research firm TDn2K. The company uses input from tribe members to inform everything from store music choices to uniform fabrics to the decision to pay extra for late-night shifts..So far, Lastoria says, the approach is working. A recent store opening in Washington drew 1,000 job applications, and in a sector where job tenure is measured in months, &Pizza estimates that around 100 of its 750 employees have gotten the company’s ampersand logo as a tattoo..Over the past two decades, the rise of the fast-casual market, now worth about $40 billion annually, has proven that American consumers are willing to pay more for food they can feel virtuous about eating. But despite the progressive rhetoric on such topics as animal welfare and personal health, fast-casual leaders have been slow to speak up on the subject of labor. Twenty years after Chipotle Mexican Grill Inc. began advertising humanely raised pork and local produce, workers employed by quick-service restaurants are still among the lowest-paid in the country. Industry groups such as the National Restaurant Association and the American Pizza Community actively lobby against increasing the federal minimum wage, which has been stalled at $7.25 for a decade. If Lastoria has his way, &Pizza will do for the American fast-food worker what Chipotle has done for its ingredients: persuade customers to pay a little more for food that supports their values..A few weeks later, in Washington, Lastoria is eager to show off &Pizza’s newest digs: a rectangular kiosk, fashioned in black-and- white acrylic, in the middle of Union Station’s subterranean food court. The space inside is configured as tightly as a ship’s galley, with prep areas, two production lines, and four ovens. Employees dredge patties of pizza dough through semolina flour, preparing for the lunch rush. Lastoria points out the ovens, which call to mind amped-up versions of the toasters found in college cafeterias..The prestige fast-casual pizza oven is either a gas-powered Wood Stone—gleaming, mammoths with flames licking the back, used by industry heavyweights Mod Super Fast Pizza LLC and Blaze Pizza LLC—or a wood-fired brick Marra Forni, the domed apparatus resembling an oversize football helmet seen at Whole Foods Markets across the country. These help market the artisan pizza image but require a restaurant space equipped with costly venting to expel the smoke and odors created by cooking at high temperature. TurboChef’s models don’t run as hot, but they’re small, cheap, electric, and most critically, self-venting, meaning they filter their own air emissions, so &Pizza can set up shop where most others can’t..Even these tie back to &Pizza’s central mission. As a company that aimed to do better by its employees, franchising was off the table as a means of growth; while it’s the fastest route to expansion, it would require ceding control of such things as pay and hiring practices. Lastoria knew he’d need to stretch whatever capital he raised to fund as many locations as possible. Building a business model around investing in labor also meant the company would need to minimize the cost of rent..Lastoria says all he needs is electricity, water, and 300 square feet to open a shop. He’s adamant that the impact on the finished product of a Wood Stone or Marra Forni vs. his conveyor ovens is minimal. “My chef friends love these things,” he says. (Among the pizzaiolos I spoke to, the consensus view was that a fancy oven can improve a pizza’s texture, but not the flavor. &Pizza’s ovens cook at 600F, producing crust that’s a little denser and tighter than one firing at upwards of 800F.).&Pizza has always favored real estate that’s small and cheap, but lately the company has economized even further with modular, free-standing “cubes,” like the one in Union Station. A cube costs half as much to build as a conventional store and can be broken down and reassembled in a matter of days, so the company can respond nimbly to changes in foot traffic patterns or co-tenants. The first cube opened in February in an alcove formerly occupied by vending machines inside the Rayburn House Office Building—where members of Congress keep their offices—as a result of overwhelming demand from congressional staffers. Each &Pizza store has its own name, and this one was dubbed the Influence. It was the first location where the starting salary for all employees was $15 per hour..Lastoria grew up in Fillmore, N.Y., a small town in the state’s western reaches where economic opportunity has receded along with manufacturing. At 22 he moved to New York City and started a digital media company called Innovation Ads Inc.; four years later he sold it to a private equity firm. By the age of 26 he had more money than he imagined he’d earn in a lifetime. Soon after, he started an advertising agency, Jwalk, but he couldn’t shake a sense of emptiness. He thought about the depressed incomes in places such as Fillmore and decided that his next business would do something to improve the plight of low-wage workers..The hospitality industry, which employs 10% of the U.S. workforce and provides some of its lowest-paying jobs, was a natural target. Why pizza? “It’s universal, it’s global, it’s a staple,” Lastoria says. “As someone who isn’t a chef, it was approachable.” Pizza was also overdue for a fast-casual reboot. In 2012, when &Pizza’s first location opened in Washington, Chipotle and Qdoba had put a premium spin on Mexican fast food, and Five Guys and Shake Shack had enlivened the burger category. Panera and Firehouse Subs sold sandwiches a cut above what Subway had offered for decades..But pizza, now a $45 billion category with steady growth, remained sclerotic, stubbornly dominated for decades by Domino’s, Pizza Hut, Little Caesars, and Papa John’s. Domino’s made waves by harnessing technology to fuel sales growth and lifting its share price from under $5 at the end of 2008 to more than $200 today. But the pizza itself has remained essentially the same: sweet sauce, chewy crust, tired toppings. It didn’t take a culinary genius to see ways of improving on the status quo. Premium pizza could command premium prices—and pay premium wages..Ever since co-founding &Pizza, Lastoria has devoted himself to advocating for legislation to raise the minimum wage, speaking at rallies, and lending his name to such efforts as Fight for $15, a group begun by fast-food workers, and Business for a Fair Minimum Wage, a network of business owners and executives. He’s twice appeared on the Senate floor in support of raising the wage and helped lead a successful campaign for a $15 minimum in the District of Columbia, which passed in 2016. D.C.’s mayor signed the bill into law in front of an &Pizza..But Lastoria sees wages as just the tip of the iceberg. One of his concerns is the cultural split in most food service companies between hourly store workers—“the people who are actually doing the work”—and the corporate echo chamber, where policies are made. Lastoria has tried to collapse that divide. Everyone from the chief executive officer down to a part-time cashier receives the same health-care coverage. Lastoria provides every employee with his cellphone number and has replaced email with text as &Pizza’s primary internal communication tool. Feedback from the tribe via text has led to major changes in corporate policy. The company now pays extra for shifts late at night and on holidays, gives paid time off for activism, and is actively campaigning for extended Washington Metro hours to make it easier to get to and from work..Lastoria’s good intentions will matter a great deal more if &Pizza can transcend its status as a small but gutsy fast-casual player and hit the mainstream. To that end, the company has so far raised more than $50 million in capital from private investors including Avalt and RSE Ventures (the latter of which was co-founded by Stephen Ross, the billionaire real estate developer and fundraiser for President Trump—a curious alliance for a company espousing such progressive values). Lastoria says he plans to use the money to double &Pizza’s store count by the end of 2020. Matt Higgins, who helped found RSE and appears on ABC’s Shark Tank, says the company stood out for its labor-centered mission, but the strong economics persuaded him to invest. “&Pizza’s build-out cost is attractive, and out of our entire portfolio, Michael’s four-wall economics are at the top,” Higgins says, referring to the brand’s shop-level profitability..In recent years, &Pizza has been dwarfed by two West Coast fast-casual artisan chains: Southern California-based Blaze and Mod, which began in Seattle. Both employ a franchising model and each has grown to more than 300 locations. Lastoria insists that he doesn’t view them as threats—if anything, he says, their success validates the demand for better pizza options. “We see ourselves as a very different kind of brand, because we grew up on the East Coast, we’re company-owned and operated, and we were birthed for a very different reason,” he says. (Mod, too, has a social impact mission, which revolves around hiring candidates facing barriers to employment, such as special needs or a criminal record.).To help speed up its expansion, &Pizza has formed a partnership with ZumePizza Inc., the Mountain View, Calif.-based automated pizza delivery company that raised $375 million in funding from SoftBank Group Corp. last October. “I reached out to Zume co-founder Alex Garden on LinkedIn,” Lastoria says. “We had a conversation and realized we were spirit animals.” Together, the companies are designing trucks outfitted with all the same gear as the shops, capable of producing the same volume of pizza as a free-standing shop at a fraction of the cost. &Pizza will use them to test out potential shop locations, fulfill catering orders, or move around, like ghost kitchens, to expand the brand’s delivery coverage. The first pizza shops on wheels have already arrived in Washington D.C. Still, if the goal is to fundamentally alter how fast food thinks about labor, with just three dozen shops, &Pizza has a long way to go before it might wield that level of influence..Despite everything Lastoria has done for the tribe, turnover remains only slightly below industry average, and no one is exactly sure why. Andy Hooper, who worked as the company’s “chief people officer” before being appointed to the role of president and chief operating officer in June, thinks a more attractive health-care offering is part of the solution. &Pizza recently cut health-care premiums in half and now gives plan participants an annual lump sum of $1,200 to offset the deductible as soon as they join, which they can do as soon as 60 days into employment. It’s a costly solution, but Hooper thinks it’s worth it. “We’d rather pour money into base wage and health care than get cute with a bunch of other offerings that people don’t actually use,” he says..Lastoria wonders if more fundamental forces are at play. His goal is for 100% of &Pizza’s shop leaders to be promoted from within, which he sees as a powerful metric for how well the company moves people up in the economy. It’s been more difficult than he expected—the opportunities are there, he says, but not everyone seems willing, or able, to take advantage of them. Lastoria says he puts the onus on himself. “We don’t subscribe to the old ‘pull yourself up by your bootstraps’ mentality,” he tells me. The average age of an &Pizza tribe member is 22, so the company has hired a psychologist who specializes in adolescent development to better understand what motivates, and stymies, its young workforce..Lastoria knows none of that will matter in the long run unless the brand can continue to, at the very least, hold its own in today’s crowded restaurant market. &Pizza has taken off, but consumer tastes are fickle, and when it comes to quick-service restaurants, expectations have never been higher. Sure, today’s consumers dig a social justice mission, but is that enough to keep them coming back? “It’s about the 30 things you do well,” Lastoria says. “You have to be digitally native, there has to be a creative component, you have to be inspirational, political, willing to take a stand. You have to understand technology, understand the youth and what motivates them to work.” All of that, and pizza..To contact the editor responsible for this story: Silvia Killingsworth at skillingswo2@bloomberg.net, Jillian Goodman.©2019 Bloomberg L.P.

This Pizza Pays a Living Wage

&Pizza uses premium ingredients, but unlike many of its peers, it doesn’t fixate on the details.

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