THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, May 25, 1996 TAG: 9605250681
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY NANCY LEWIS, SPECIAL TO BUSINESS WEEKLY
LENGTH: 172 lines
Jerry Channell talks in tons.
Sixteen hundred tons of flour, 644 tons of sauce, 967 tons of cheese, 201 tons of pepperoni.
The heft of the wholesale ingredients that the Virginia Beach pizza parlor tycoon will toss this year into tens of thousands of pies is one measure of the success of Chanello's.
The take-out and delivery store chain Channell launched eight years ago is expanding in Hampton Roads and venturing into other Virginia cities as well. An offshoot corporation in Nashville is doing a replay in Tennessee.
It's a family business whose story will sound familiar to any entrepreneur who started from scratch with little more than an idea and endurance.
Channello's was founded by Jerry Channell, a 45-year-old patriarch who came up the hard way, learning how to make pizza as a child in his parents' Tallahassee, Fla. shop, then opening his own parlor in Auburn, Ala., at age 16.
Later he moved to Texas and carved out a Chanello's Pizza franchise chain that sprawled across six states. But Channell was young and, face it, inexperienced. The business slumped with the late '80s oil patch economy and snagged on legal problems with franchisees.
Channell, living in Texas, decided to try it all again. Realizing military towns in the Southwest had been his best customers, he picked Hampton Roads. He arrived in 1988 with no job and just enough money in his pocket to start again from scratch.
Of his first weeks in Virginia, Channell remembers, ``I sat in a one-bedroom apartment in Willoughby, thought about all the mistakes, said, `I'm not ever again going to make those mistakes.' ''
The biggest errors he'd made, he concluded, were loosing his hold on outlet stores through franchising and putting more emphasis on profits than on product quality and service.
Franchisees, Channell said, frequently come to consider the company that sells its name and secrets to them as competition and try to cut into the percentage of profits they have agreed to pay. This makes adversaries of people who should be pulling together.
Channell also decided that a key ingredient to any successful business is a motivated employee - one whose needs are met and who is selling a product so good that he or she is proud to be part of the company that makes it.
With these insights buzzing in his head, Channell opened his pizza shop on Hampton Boulevard near the gates of Norfolk Naval Base. He began selling a product backed by a guarantee - money back plus another pizza on the house for any dissatisfied customer. It's a promise that he says he's never failed to make good on - and never will, he says.
Channell rolled up his sleeves, dipped his hands into the flour and began turning out the spicy-sauce-topped pizza pies.
Determination and 17-hour work days paid off, and the following year Channell opened several more shops. The rousing business done at the infant company's fifth store in Ghent was the catalyst for rapid expansion.
Today, 31 Chanello's outlets employ 1,200 people in 10 Virginia cities.
New Chanello's Pizza outlets are opening at a rate of one every six weeks with gross sales expected to top $25 million this year.
Overall sales have shot up at a rate of 40 percent each year - from an average $3,000 weekly per store in the chain's early years to an average $12,000 today. Four months into 1996, the rate of growth stood at 20 percent.
The pizza chain is steadily widening its sphere of gastronomical influence - bulging outward from its Hampton Roads hub with the centrifugal force of a mound of spun dough.
By mid May there were 18 outlets in South Hampton Roads, seven on the Peninsula, one in Charlottesville, one in Williamsburg and four in Richmond.
Channell plans to open more pizzarias to close the service gap that he believes exists in some areas in an all out effort to wrest an even bigger market share from his major competitors - the nationally franchised Domino's and Pizza Hut stores.
A plan that Channell recently hatched, after returning from a pizza-tasting tour of California, would see sit-down pizza superparlors scattered throughout Hampton Roads and perhaps throughout Virginia. The restaurants would serve gourmet pizza - with such exotic toppings as shrimp and artichoke hearts - in addition to Chanello's regular fare.
Just now, Channell's far-ranging expansionist dreams are held in check by a set of old family values - his firm belief that he must keep a finger in the pie, so to speak.
Instead of franchising, Channell's vision includes his children and grandchildren: The family patriarch wants to spin off family-supervised Chanello's Pizza chains in other states.
In fact, Jerry Channell's ambitious plan recently became reality, in part at least, when the parent corporation spawned its first autonomous chain in another state.
With his father's blessing, Shannon Channell, Jerry's 28-year-old son, planted the seeds for his own Chanello's Pizza chain this year with two Nashville stores and is preparing to open a third.
Before the branch-off took place, though, father and son locked horns on Virginia turf, going head to head in a battle for control of the Richmond and Williamsburg markets.
The tiff was resolved amicably, Jerry Channel said, when he bought Shannon's Virginia business interests for $70,000 and gave him exclusive rights to the trademark Chanello's name for use in Tennessee, Alabama and Kentucky.
``Dad should go public and franchise,'' said Shannon Channell from his Nashville office. ``There's a whole United States out there.''
No matter how you slice it, says Jerry Channell, there's enough pieces of the pie to go around.
Around the family, that is, for it is his tactical plan to assure the continued quality of product and service by maintaining a blood-line pulse on the business, no matter how big it gets.
The lion's share of the 3 percent in net sales is pumped right back into the business - to build yet more satellite stores, to bolster the company's employee benefit package, and to reach out to the community.
Part of the secret of his success, Channell says, is an attractive management compensation package that includes full medical coverage, salaries of $30,000 to $50,000 a year and a soon-to-be offered stock option plan.
Following the lead of some of the more progressive Fortune 500 firms, Channell says he will soon open a day care center for employees' children.
To promote his product, and to bolster his relationship with the community, Channell says he gives away ``lots of free pizzas'' to church youth gatherings, to kids attending school-sponsored activities.
Channell cites such owner-employee and company-community relations as a prime reason for his continued growth in a well-saturated market.
Channell says that his secret weapon in besting the Big Two competitors is offering a better pizza for less money. To do that, he explains, Chanello's must sell more pies than the others, a driving factor that fits in nicely with his plans for expansion.
One market in which he is behind the eight ball is the Oceanfront resort area of Virginia Beach.
There, the franchised pizza places sop up a lot of the business because their names are readily recognized by vacationing tourists, to whom the name Chanello's is unknown. Channell hopes to change that.
The secret's in the sauce, though the sauce is a secret known only to three people in the organization. One of them is 25-year-old Juliet Channell Midkiff, Jerry's youngest daughter. She mixes the special spices that go into Chanello's fresh-simmered sauce.
Susan Channell, Jerry's wife, helps keep all the numbers in the right columns.
A second daughter, 27-year-old Nicole Channell Wooten, is an accountant and lives, with her husband, in Tennessee.
Jerry Channell, who lives in the Witchduck area of Virginia Beach, has three grandsons, all born within the past year. He likes nothing better these days than to babysit them. He didn't get much time to spend with his family back when he worked to build the business.
He doesn't have to get his hands white with flour anymore, but he sometimes does. And, while he's at it, he folds and dips a slice of his personal favorite, a large pepperoni, just to make sure, of course, that it's up to par.
Channell doesn't really have to pop into his shops on a daily basis either, but he likes to keep personal track of such things as employee morale and customer satisfaction - likes to make sure that the people that make up the company called Chanello's are a happy bunch.
It's clear the 45-year-old high school dropout has a contented view of life. He's not a millionaire, not yet anyway, and he's doesn't mind not being on a rapid-fire pace to ring up seven figures.
He recently tipped back in his office chair reflectively, locked his fingers behind his head and said, ``How much damn money do you need, anyway.'' ILLUSTRATION: Color photos by L. Todd Spencer
Jerry Channell
Volume Ingredients: Heather Fabian mixes pizza dough at the new High
Street Store in Portsmouth. Each of the stores has one of the huge
mixers. Chanello's will go through 1,600 tons of flour this year
-adding it to 644 tons of sauce and 967 tons of cheese -for an
expected gross sale of $25 million. But only three people in the
company know the recipe for Channello's sauce.
Volume Business: Dawn McCarthy manages the phones at the Birdneck
store in Virginia Beach at 11:30 p.m. Catering to late-night pizza
demands keep workers busy, but Jerry Channell says the key to his
success is keeping employees happy and motivated. Chanello's offers
a management compensation plan that includes full medical coverage,
and the company plans to open a day care center for employees'
children.
KEYWORDS: COMPANY PROFILE by CNB