According to the attached article, please answer the following:

1) Introduction - Describe the case. What happened? When did that happen? Who got involved?

2) Identify the link between the case and global market changes?

HARVARD BUSINESS SCHOOL 9-921-017 SEPTEMBER 16, 2020 FRANCESCA GINO JEFF HUIZINGA &pizza: Leading an 'Employee-First' Company During a Period of Societal Challenges On the morning of June 1, 2020, Andy Hooper, President of &pizza, the Washington D.C.-based quick-service restaurant chain, received a phone call from the company's Co-founder and CEO, Michael Lastoria. Hooper was in the makeshift office of his D.C. home, and could hear his wife and four children laughing in the adjacent room. Manhattan-based Lastoria was where he felt he did much of his best creative thinking- out for a long walk through the streets of New York. Though they often spoke multiple times daily, the two still had many topics to discuss. Among them were future phases of the company's COVID-19 pandemic response, the aggressive expansion plans that the crisis had forced them to reevaluate (23 new shops in 2020 had been the target), and the decision whether to pursue a round of venture capital later in the summer. Another question felt Authorized for use only by Roman Dinn in MGMT 5370 at Texas A&M University-Kingsville from 1/16/2023 to 3/23/2023. Use outside these parameters is a copyright violation. suddenly urgent, too. Should the company - which had always taken a firm and progressive stand on a range of social justice issues, now, with the recent killing of George Floyd and several other Black Americans inspiring widespread demonstrations-grant its employees additional paid time off specifically for activism-related endeavors? &pizza was co-founded by Lastoria and Steve Salis in 2012. The company quickly became known locally for its hip trendy shops that served (for dine-in or takeaway) custom-made, oblong pizzas crafted with high-quality ingredients in often unusual combinations. In 2015, Lastoria stepped into the role of full-time CEO (while retaining his duties as Creative Director). Between 2015 and 2020 the company expanded to approximately 40 locations in six states and the District of Columbia, with concentration on the Mid-Atlantic Coast and into the Northeast. Along the way, &pizza has raised over $80 million in growth capital (including four significant financing rounds since 2016) and has received widespread praise for its commitment to hourly employees (a.k.a. 'The Tribe") and the communities in which the company operates. Many also recognized &pizza's innovative approach in areas such as digital marketing, data analysis, and mobile kitchens. By early 2020 company-wide revenue was averaging approximately $1 million weekly. In mid-March 2020, as the U.S. was coming to grips with the significant implications of the COVID- 19 pandemic, Hooper and Lastoria had responded differently than most business leaders, especially in the restaurant industry. Rather than make immediate cuts to Tribe-related expenses as shops either closed their doors completely or transitioned to takeaway only, &pizza pledged to expand wages and Professor Francesca Gino and Senior Researcher Jeff Huizinga (HBS California Reserach Center) prepared this case. It was reviewed and approved921015" &pizza: Leading an 'EmployeeFirst' Company During a Period of Societal Challenges benefits, at least through May 31. Said Hooper, "Our top priority was to address the issues our employees were likely to face: financial, health, food, and transportation insecurity." Added Lastoria, "In order to support communities, we also immediately launched a campaign to provide upwards of 100,000 free pizzas to frontline workers in hospitals and elsewhere. " During the initial phase of the pandemic, &pizza kept 80% of its shops open, retained around 90% of its hourly workforce. Its revenue for the last week of May was approximately 50% of pre-pandemic weekly averages. \"It s interesting," Lastoria said to Hooper. "The coronavirus crisis, and the tide of activism unleashed by the Black Lives Matter movement, seem to have taken changes that would have otherwise unfolded graduallybetter treatment of essential workers, as well as heavier reliance on digital infrastructure and mobile production capabilitiesand forced businesses to adapt much more rapidly." Hooper agreed, "That we had prior investment and experience in these areas allowed us to weather the storm better than most, and it gave the future a sense of clarity and promise, as well as suggests we'll be in a better position to serve as a role model for other businesses." Which was not to say that there would not still be challenges. Lastoria, for example, would need to continue articulating a vision capable of attracting top talent and loyal customers, while removing himself from some of the day-to-day functions that nearly a decade into his &pizza journey still consumed much of his energy. Meanwhile, Hooper, no less idealistic than Lastoria but admittedly more of a traditional operator, would have to continue implementing structures and processes that would minimize the dilution of that vision as the company continued to grow. \"Lofty Objective, Rebellious Spirit\" Lastoria grew up in a small community in upstate New York, about 60 miles from Buffalo, in a county that was often the poorest in the state. All of his early schooling, from kindergarten through high school, happened in the same building, and his senior class numbered 35 students. "Spending a great deal of time with blue collar and minimum wage workers," he said, "taught me a lot about how far a dollar can be stretchedor can't be. It provided my sense of how I wanted to contributeby lifting up the lowest wage workers and helping to redefine the company-employee relationship." In 2002, immediately after finishing college, Lastoria moved to New York City and founded his rst company, Innovation Ads, a marketing and media services firm. He sold the company to a private equity firm in 2006, and spent the next three years as CEO before cofounding his second venture, a full- service creative agency called JWalk that specialized in beauty, fashion, and hospitality. He would maintain a leadership role at the agency until 2017, when it was sold to skincare company Shiseido. \"Mere can I have the greatest impact?" By 2010, Lastoria felt drawn to a new challenge. "I was still inspired by the opportunity to break down barriers in terms of how companies think about their workers," he said. "And I wanted to do something to promote the ideas of unity and doing the right thing. That's what the \"(SH meant to me it was in my mind before pizza ever was." Around the same time, Lastoria learned that the foodservice industry employed approximately 10% of the US. workforce, and that the restaurant industry was the second largest employer, trailing only the government. This narrowed his focus, and informed how he would measure the success of his next project. "I wanted to prove that in the restaurant industry you could pay people well, treat people well, and still have high margins. Furthermore, I wanted to achieve these goals not only to establish a competitive advantage and a justification for the expansion of my own business. I wanted to be able to CWU :1chqu AFAM Urtivcrilv Kinds-ville: 'rur't 1;"1 01'2023 [0 332312023. Ll Authorized 'ur uric: Urtlv bv Human Dirtrt in MGMT Szpizza: Leading an 'EmployeeFirst' Company During a Period of Societal Challenges 9211117 share the 'how?' and the 'why?' so that others could follow, so that everyone could win, so that income inequality would decline, and so that better ideas could one day become policy." He conceded that his interest in pizza was more opportunistic. "You had the big four pizza companiesDomino's, Pizza Hut, Papa John's, and Little Caesar'sdominating this $45 billion in annual revenue segment while engaged in very little innovation in areas I believed were important. Their business models seemed built on efficient delivery and aggressive marketing and discounts. They also had low levels of social consciousness, by which I mean they lacked transparency, used low- quality ingredients and provided low quality jobs, including very low wages. I believed with several improvements in key areas we could enjoy outsized results." Up and Running Lastoria began to fine-tune his concept as early as 2010, yet it was not until 2012 that he and Salis opened their first shop on the H Street Corridor in NE Washington DC. The significance of the location was important - it was what most real estate brokers and industry veterans would consider bad real estate, yet it felt right to the guys as the neighborhood embodied the spirit of the &. Said Lastoria, \"The aim was to pay as close to a living wage as possible, and to use as high-quality ingredients as possible, while operating under a socially conscious umbrella." He elaborated on other ways &pizza set out to do things differently: We eschewed phone orders and delivery we wanted people to visit the shops, experience them, and engage with us. The shape of our pizza was differentoblong rather than circular. The packaging was different rectangular rather than square. The pricing model was different, too. For a at price, we offered unlimited toppings. There were two theories behind this idea. One, people hate doing the math when they are charged extra for adding ingredients. Two, charging extra prevented people from trying new toppings and new combinations. Next, because of our convenience, cost, and serving size, we made pizza traditionally a dinner item in much of the US. lunch accessible. Beyond that, we used healthy, fresh, responsibly- sourced ingredients. Because of the size and quality of our pizzas, a person could consume an entire one and not feel lethargic. And, we committed to designing all of our shops uniquely by leaning into our creative spirit and the personality of neighborhoods in which we opened. Lastly, we committed to radical transparency in every aspect of the business. Lastoria recalled the challenges of those early days, as well as his mindset: Out of the gate, it didn't seem to be working. Our labor and ingredient costs were through the roof. But here's the thingour revenue was close to double of a typical pizza shop. They say revenue cures all. It' s not entirely accurate, but there's truth in it. The philosophy I had was: this is my vision of what a pizza shop should be; we're going to keep working at this, but what we're not going to do is pivot towards what everyone expects, or how other companies are operating. We were either going to succeed on our terms, or fail on them. I don't know if I'd say I'm inspired by naysayers, or that I thrive on people doubting me. Maybe I have a chip on my shoulder that dates back to my childhood in a small, struggling town? Maybe I'm drawn by the intellectual challenge of trying something new? Whatl can say is that the conversations I enjoy the most, and that I find the most valuable, are with people who have different personalities, experiences, and ideas, including about how to run a business. Authorized 'or use only by Human Dirtrt in MGMT 537'0 at Texan AlM University Kirtgavillc 'ror't 15162023 to 33232023. ll-zrw nIIt-zirtn tho-art nammntnrc i-: a nnnvrinht l.nnlatinn 921017 kpizza: Leading an 'EmployeeFirst' Companyr During a Period of Societal Challenges During the course of the first year, Lastoria spent the majority of his time working in the shops. "I played every role," he said, "but the one that resonated with me the most was cashier because I could interact with colleagues and customers, have honest conversations, and gauge satisfaction." Expansion and Establishing Company Culture As Lastoria and his team continued to refine the business model and improve the unit economics, consumers continued to appreciate &pizza's food, value, convenience, and vibe. Between 2012 and late 2016, &pizza opened more than 20 shops between Northern Virginia and Philadelphia. In November of that year, they secured a second major private equity investment which Lastoria planned to use for aggressive expansion into New York City and Boston markets. 8zpizza was also able to cultivate appreciation from its employees. "The compensation component was big," said Lastoria, who often paid Tribe members $2 or more per hour above minimum wage, and was a vocal proponent of the move to legally increase minimum wages to $15 per hour by 2020. Additionally, &pizza offered benefits and perks that were superior to most restaurant companies. These included: paid time off, health coverage (medical, dental, and vision), 401 (K) retirement programs, free training and pizza (to take home), and even free tattoos. \"That one requires some explanation," said Lastoria. "A member of our Tribe liked the '86 symbol and what it stood for so much that he asked if he could get it tattooed on his body. I said sure, and that we'd even pay for it. From that point on, we had a tattoo artist on hand at nearly all of our store openingsCambridge, MA was an exception due to health codes. It was organic, and there are no expectations, but the option is there if someone feels that strongly about the symbol or what it represents." By late 2016, more than 100 customers and nearly 20% of the workforce had taken Lastoria up on the offer. Along the way, language became both a result of and a driver of company culture. "I came from the ad agency world," said Lastoria. "I had thought a lot about things like brand, and the role mission, culture, and values play at a purpose-driven company. But in terms of the restaurant industry I was starting from zero, questioning everything. I consider it an 'inexperience advantage.' An example was that we employed a different vernacular. We called our employees rThe Tribe,\" and our leadership team 'the Cabinet.' I believe using these types of terms helped connect people to the brand and culture; using them represented inclusivity. I also believe using different language gets people thinking differently and often more creatively about even familiar things. This all falls under my philosophy that you get the best out of people when they have a north star, and they feel like the work they do matters." The FightJr Living Wage The commitment to getting the best out of people ex tended beyond the walls of the &pizza business and into the community. Lastoria became a member of the advocacy network Business for a Fair Minimum Wage (and the fight for $15), which included executives from chains like Ben S: Jerry's, meeting with former President Obama's Secretary of Labor, Tom Perez, to discuss the business advantages of increasing the minimum wage. l-Ie lobbied locally with newly elected DC Mayor Muriel Bowser as well, even hosting the signing of the landmark minimum wage bill outside the newly minted pizza shop in the Columbia Heights neighborhood of Washington DC. Even after the election shifted the balance of power in late 2016, Lastoria remained committed to the cause on behalf of the tribe, and introduced the Raise the Wage Act on Capitol Hill with Snr. Sanders, Pelosi and Schumer. "We've been on the forefront as one of the few restaurant chains that has put a stake in the ground and said this is really important for us," Lastoria told Business Insider in April of 2017, "I think change can happen there. It will just have a massive impact on society." Authorized 'or use onlv bv Florian Dinn in MGMT SSFO at Texas Adm Uriivcritv Kinuavillc 'rur'l 1;"101'2023 Lu 3323:2023. Grinning Pains at HQ While Tribe members in the pizza shops showed high degrees of loyalty and satisfaction, the same could not always be said for those working at Expizza headquarters in D.C. "Every startup and high- growth business is somewhat dysfunctional," said Lastoria. However, some within the team, as well as those who joined later, believed that aspects of Lastoria's leadership style, while positive in some ways, actually amplified frustration among the workforce. "My mind is a hamster-wheel," said Lastoria. \"Every conversation I have or thing that I read seems to lead to new ideas for the company." In the early days especially, Lastoria instructed members of the team to pursue them often without detailing how they fit into &pizza's broader priorities or timeline. It was not uncommon, therefore, for &pizza employees to invest time and effort into a project, only to see the product shelved because Lastoria was now too distracted with other ideas. Employee churn was relatively high, and posed a challenge for the company. \" Michael was always compelling," said one employee. "He put in so much effort, and he was so undeniably charismatic, visionary, and well-intentioned (he wasn't even taking a salary!), that iScpizza could attract talent and retain it for longer than it could have otherwise, given the chaotic environment. People liked the company, but felt like they were drowning." Lastoria agreed. \"Externally, we were winning: the brand and the business were moving in the right direction. Internally, we were not. It' s not uncommon, but that became the big goal, to win internally while we were winning externally." To accomplish this, Lastoria doubled-down on his commitment to professionalize the leadership of the company. A New Partnership for the Next Phase In 2016, Andy Hooper was the Chief Concept Officer at the Utah-based Mexican quick-service restaurant chain Cafe Rio, providing leadership for the company's technology roadmap, culinary innovation and other line functions directly supporting the restaurants. Previously, the Miami transplant had served as the Chief People Officer for four years, after spending nearly a decade having risen through the HR ranks at Burger King, eventually leading the HR function at the global HQ in South Florida. In October of 2016, Hooper attended a restaurant industry convention in Southern California. He recalled: I was there reluctantly, but I was eager to check out the culture presentation by Michael. I knew a little about him, and some of his ideas regarding &pizza's employee-first approach. I wanted to hear more from Michael himself. My feeling going in was: this is either going to be amazing, or it' s going to be all show and no substancemuch more likely the latter, given that from my experience these talks are usually BS. I walked away feeling like he was the real deal, in part because so much of what he said could be seen as offensive. l-le effectively chastised these restaurant industry leaders for not building sustainable business that valued the welfare of their workers. Hooper kept tabs on &pizza and its development. By late 2017 he and Lastoria were in talks for him to join the company as Chief People Ofcer, a role he began in January 2018. Between then and 2020, he added the roles of Chief Operating Officer and, eventually, President. Said Lastoria, "I looked under every rock to find the right leaders. It's rare for early-stage consumer growth companies to have an HR professional in such a prominent role, but for us it made sense. He has the sensitivity, empathy, and humanity to understand the people at the heart of this companythe Authorized 'or use only by Human Diriri iri MGMT SEWO at Texas esm University Kirigeivillc: 'ror'i 'If'l 01'2023 to 3323:2023. Use outside these parameters is a copyright violation. 9J'.1t'.)1'i'r &pizza: Leading an 'EmployeeFirst' Company During a Period of Societal Challenges Tribe. He also, thanks in part to his experience as an operator, understands what it takes to execute ideas. " Added Hooper: At Burger King I held a number of roles, including ones that had me working with franchisees. I wondered things like: how could one location be so different from the one on the other side of town? And I saw firsthand in some of these locations how culture could have the power to unlock value even for something that was commoditized. Cafe Rio gave me the opportunity to continue to learn, to experience more on the operations side, to lead more from an HR function. By 2016 I was expecting that I would eventually plan to start my own restaurant company, but as it happened, &pizza represented the intersection of my personal and professional dreams: the chance to help lead and grow a truly people- and purpose-driven company. For the first three months, all I did was spend time in our shops. Michael was eager for me to jump into my new role, but I was still trying to figure out what was real and what wasn't. The way to do it is to get people to open up. [learned that for the most part The Tribe believed the culture was positive and genuine, but there was a gap (which was common, in my past experience) between the aspirational values of the company and how they 'showed up' in the shops. I also learned how desperately the company needed people leadership. Michael is a great person, a visionary, and a great collaborator, but people didn't always enjoy working directly for him. I asked for an org chart early on, and it was like an astronomy project with Michael as the sun14 of the 32 people at HQ reported directly to him. The business ran similarly to a creative services agency, which wasn't particularly surprising. There were new ideas every day in various stages of engagement and completion. Creativity is important for companies, but it can be difficult to scale without structure and some elements have to be regimented. You just create the process and execute. One of my first priorities, it became clear, was to build my relationship with Michael so that he would come to trust menot feel like I was trying to steal his spotlight or the company from him. Dening Rates 8 Responsibilities Hooper soon emerged as a leader on par with Lastoria in terms of inuence within the company. Their radically different skillsets, and their ability to collaborate and complement one another, allowed the company to function more smoothly while continuing to experiment with new ideas. " When Andy arrived, most of his work was what you might call cleaning," said Lastoria, referring to the structures and systems Hooper embarked on implementing. Hooper provided additional context: The business was not at the stage where it could afford to operate without the strong vision of a founder. Ibelieve that during the formative stage, vision and scaling are two sides of a scale, and you must maintain a balance between them. You can't be all scaling, looking only for the path of least resistance, because then you'll never differentiate yourself. Yet you cannot be all vision, because in that scenario you wind up only iterating and iterating and iterating. We balance each other, and each have empathy for the other person's role. We try to, anyway. It' s difficult for me to imagine being a founder watching his vision being diluted an unavoidable consequence of scaling. Lastoria elaborated: Increasingly people understand the value of a founder/ CEO is different from the value added by an expert operator. The former is there to set the vision, provide inspiration, make sure there is money in the bank, and make sure there is a stellar management team to handle the rest. For that last part, trust is as essential to success as performance, and it' s a two-way street. Andy and I have that. He trusts the vision, and I trust that he can enact it. A key component of that process was for Hooper to help Lastoria remove himself from many of the day to day activities, meetings, and decisions, especially in areas where Lastoria had always been deeply involved (e.g. creative, design, and marketing). Said Jenkins, "My team and others were responsible for certain targets, but it felt like we didn't have the necessary tools or the authority. In essence, we were asked to be evaluated based on a third party's work, and it was frustrating.\" In these situations, as well as many others, Hooper found himself in the role of filter, blocker, or mediator. Said Rivest, "A quarter of Michael's ideas are brilliant, another quarter are brilliant yet in some way run counter to something we're already doing, and the rest you could call outlandish. Andy's role is to say 'these are the several ideas that we should rally around,' explain the reasoning, and gure out how to execute against those ideas. He's great at it because of his knowledge, his empathy, and his ability to communicate, but there are times I can't imagine how challenging and stressful his job must be." Occasionally Hooper and Lastoria had disagreements, which Hooper characterized: Fortunately, I don't feel that we are ever in true opposition. Often times when we disagree it's about the nature of the solution (as opposed to the need for a solution), or about laws of timing. He'll have four ideas, I'll say let's pick one for now. We'll decide, and I'll tell him it will take four months to implement. He'll say, 'This isn't so complicated that it will take that long.' I'll say, no, it's not that complicated, but that I know from experience in the restaurant world that four months is how long it takes. He'll keep pushing. 'There must be a hack.' Typically, after a bunch of conversations we'll agree on a plan that will shave a week or two off. It can be frustrating, but that's the nature of it-- he always forces me to think of ways to be better, I give him a more realich sense of how things work and help set those expectations. Lastoria agreed. "Andy forces me to have these great conversations. We deliberate, kick the tires on all sorts of ideas, and come back to the best ones. I get impatient sometimes, but when I take a step back I always see that he has helped us get closer to the nish line, not further." Said Lastoria, "Andy might not use this term, but he needs to fire me from all of my other roles. I shouldn't be sitting in on every director-level meeting, or running the marketing team, or having my hand in every creative product. Andy's strategy is to rdelegate and elevate.\" It' s imperative that we hire the right people, and give them the space to perform. Even my very presence in a meeting can change the dynamic in the room. It can prevent people from speaking up, and that can chip away at a person's confidence." Noted Hooper, "Removing Michael from the daily grind also unlocks the best of Michael. If he's running a marketing meeting, he's being overpaid and under-utilized. The Michael that is the most 7 powerful, and that has the best chance of helping the brand reach its potential, is the Michael who is in full creative mode, the way he was in the days leading up to the opening of the first shop. If he is worrying about what accountants and controllers are doing, he's not thinking about what' s waiting for the company around the bend. I can do the former, but the company isn't ready for me to do the latter." Matt Higgins, CEO of RSE and investor and board member for &pizza, added, "Michael could be mired in day to day operations - he's great at it - but his talent is better used to be the visionary at the top of the brand who embodies our entire brand. He is our north star. Any founders are insecure when it comes to scaling, they resist deputizing an operator and it becomes a limiting factor for the business. I find most creative types are reluctant to cede that territory for fear of being judged. Michael, being self-aware, knows that while he could effectively operate every aspect of our business, and has done so from day one, it would be better if somebody who also has the skills does that operator work full- time at his discretion. It frees up his bandwidth so he can do the one function nobody else but him can do. He's truly one of one." Both leaders expected their dynamic to evolve over time, however. Said Lastoria, "I predict two changes will occur. The first is that at some point all the basic systems and structures will be sufficiently in place. Second, the nature of the business will change. In time, it' s possible that everything about the business will change except the purpose. As these things happen, Andy will become more like a cofounder, in that we will co-author the future of the company. It will allow him to scratch more of that creative itch he has." Assembling a High-Caliber Team at HQ After Hooper joined, Lastoria continued to live what he called a \"backpack-light existence" on the Amtrak corridor, traveling between New York, D.C. and other &pizza shops without even a permanent desk at HQ. Between 2018 and 2020 two of Hooper s top priorities were to assemble a team at HQ composed of high-caliber performers and then to increase the retention of those employees (see Exhibit 1 for information about some of the key individuals who joined after Hooper and Exhibit 2 for more information about the business) Higgins noted, "Michael is deliberately hiring people who are best in class at key functions: a President, an Operator, and a CFO. These people provide guardrails against poor decision making. We know that if anybody' s making a really bad decision, the others will sound the alarm. But they're in on the mission, too." "For companies of similar size," said Rivest, \"&pizza was definitely punching above its weight in terms of quality of people. That is, for a comparable business, look at anyone with a given position, and I'd say our person at that level is probably better." She credited much of this to Lastoria's infectious passion, adding, "It still takes a certain type of person to thrive here. You should have a bias for action there aren't a lot of meetings or planning sessions or documents just for the sake of having them. You should have a reasonable tolerance for chaos, both because of Michael's style and because we're at the stage where you have a relatively small team trying to do a lot of new things and constantly reinvent itself. lt' s unlikely you'll have a plan in January and measure against it in December. Your priorities will probably change several different times in that period." Added Masterson, "When recruiting, we look at culture fit and personality as much as we look at competencies. Turnover is still higher than we would like. The people who stay are the ones you can tell right away are gelling with the culture." Tribe First By early 2020, &pizza counted approximately 700 Tribe members across its shops and mobile kitchens. According to Hooper, the average age was approximately 21 years old, and between 30 and 40 percent of Tribe members worked 30 hours per week or more for &pizza. Most had some other Authorized 'ur use only by Human Diriri in MGMT 537'0 at Texas ASiM University Kirigsville 'rur'i 1;"1 61"2023 to 3."23J"2CI23. occupation or side-hustle (e.g. student, caregiver, or delivery or rideshare driver). Most lived with either family or roommates. A high percentage were members of families who depended at least partially on government assistance. For entry level employees, there were several basic roles in shops, including 'cashier/ greeter,' 'dough,' and 'pizza production.' Experienced individuals could apply to become trainers in any of those key areas. Additional hourly, in-shop positions were Shift Leaders, Managers On-Duty, Assistant Shop Leaders, and Shop Leaders. Shift leaders and above often worked 40 hours per week. Above Shop Leaders were District Managers, who were typically responsible for 5 to 8 stores in an area. Lastoria noted, \"We have always believed that our businesses, all of them, every one, are built on the shoulders of our employees. Not from the magical genius of our ideas. An idea is a great starting place, sure, but a business thrives and fails because of the people within it." He continued, "The objective was always to turn :Szpizza into something that its workforce would be proud to be a part of, that stands for something more than our pizza, that says something about who we are as people and what they believe in, like the music we listen to and the clothes we wear. This was our definition of Tribe -First." Said Hooper, \"For a company that worked so hard and spent so much on cultivating an 'employee- first' ethos, &pizza still sometimes felt like it was not getting full value from those investments. We were trying to be good do well by doing good, but we were not weaponizing our efforts, or our values, for purposes such as retention. " The company made a commitment to reaffirming its values. They were: Celebrate Oneness was a call for individuality, and for Tribe members to embrace and display their personalities rather than conform to fit in with the crowd or meet expectations. Unite the House was a call for teamwork, and for Tribe members to remember to strive together towards a common purpose, and to listen to, support, and uplift one another. Make Your Mark was a call accountability, and for Tribe members to take pride and initiative in their work, to embrace challenges, and lead by example. Change the Game was a call for innovativeness, and Tribe members to constantly be looking for ways to improve themselves and the way the business operated. Beyond these four core values, another key component of &pizza's culture was what it deemed 'The Path.' This referred to the company's commitment to the growth of its employees and their advancement in the organization. The company described 'The Path' as follows: We employ a strict 'no ceiling' policy. That means you can start at the bottom and.r gojust as high as your wings will take you. No restrictions. No limits. No preconceived judgment about your proper place. We take you for you. Become a part of the revolution of Tribe that have carved their own path. From working the line to shop leader, from hourly to salaried, from iushop to a support role in headquarters, it is all therefor the taking. Show us your path, and we'll get you there}l Said Hooper, "We acknowledged that strengthening culture required us to provide examples of values in-action in materials, and focusing on behaviors in performance reviews. We want people to know what it feels like when things are going well, and when things are broken. The company's purpose should be present in every aspect of the business." Higgins noted, \" If you're in love with, say, the Shake Shack burger, you'd delighted that the company you love has the values you aspire to have for yourself - for &pizza, it' s the other way around." To increase engagement and better realize Lastoria's vision of truly democratizing the business, the pair held quarterly \"all-tribe" meetings in each market, hosting all tribe members for an hour-long town-hall format meeting, where they provided brief updates on the business and conducted open forum Q+A sessions with attendees. Tribe were encouraged to use the company's text messaging platform to submit suggestions and questions in real time. Furthermore, all shop leaders and tribe members had Hooper and Lastoria's phone numbers, and were encouraged to text them with pressing concerns. \"Big results come out of these conversations," said Hooper, "including the idea for our partnership with Lyft." He elaborated: At one of our town hall meetings, Tribe members raised the issue of commuting home at the conclusion of late-night shifts. Late-night shifts often ended after public transit had stopped running. lvlany Tribe members then faced a choicewalk home alone through rough neighborhoods, or spend a potentially hefty amount on a cab. We went to work on a solution. Uber turned us down, but Lyft was willing to work with us on a pilot program. The model was: at the end of a late-night shift Tribe members could get a Lyft home for a $5 at fee, and the remainder of any fare would be split between the employee and the company (&pizza). It turned out to be a big win for both sides. For Tribe members, it turned out to be as much about eliminating the stress of the decision as any thingthey would worry, all shift long, 'How am I going to get home?' They valued the certainty as much as the ride. For the company, the program somewhat surprisingly helped our bottom line, for we learned that some employees were staying at the shops later and later, finding little things to do, until the hourthat public transit reopened. We saved more in reduced wages than we spent on Lyft rides. It goes to show the value you can unlock by looking for ways to invest in your people. &pizza asked Tribe members to fill out surveys about their experiences working with the company. Said Hooper, "Two of the most encouraging findings we've had are 1) about 85% of employees said 'l'm proud to work here,' and 2) 83% reported that within the company they feel accepted for who they are. This is critical because I've found the old service industry adage to be true: the guest experience is never going to exceed the employee experience. The hope is that employees give everything they can to the guests. Therefore, you give everything you can to your employee." Other Innovations Not all of 8rpizza's new ideas were exclusively in the areas of HR and people management. Several of the most creative and ambitious initiatives underway were technology-related. For ex ample, &pizza transitioned away from its native app toward an all-text-message platform for communicating with the company and the shops. Said Hooper, \"It was one of Michael's ideas that I had a hard time seeing at first, but that turned out to be very prescient. It makes sense, though. Texting is increasingly becoming the most prevalent form of communications with brands these days, and its one that helped us get to know our employees, so it made sense it could do the same with customers." By 2019 customers could place and check up on orders via text message. This transition, as well as other concepts, allowed the company to gain additional insights about its customers' locations and preferences that could be used to more quickly and effectively determine where to open new shops. For example, the company used mobile kitchens (food trucks, essentially) to service areas in new cities and suburbs, and even to experiment with delivery, something the company had initially avoided, then outsourced to third party players, including DoorDash. Of &piz.za's first mobile kitchen outside of the Northeast region, in Miami, Lastoria said, \" It allows us to have the flexibility to test out sub markets within markets to understand how we perform and use that as a real estate strategy...and a cost-effective way to inform expansion."2 For the same reason, as well as 10 Authoriccd 'Ur use only by Florian Dinn in MGMT 5370 at Texas A&M University Kingsvillc 'rur't 'If'IGJ'EOECi to 3232023. Use outside these parameters is a copyright violation. Lastoria's hunch that more businesses will go the way of Starbucks (where more and more customers grab and go, rather than stay to enjoy their beverages) &pizza also began experimenting with even smaller outlets known as 'cubes' (pop-up shops, essentially, that were easy and inexpensive to stand up, take down, and relocate) in locations such as Union Station in DC. Beyond these maneuvers, &pizza was also experimenting with new pizza ovens, new digital marketing campaigns, and new promotions. Said Bates, who as Head of Technology was involved in many of these projects via either data analysis, software engineering, or strategic outsourcing, "The way that the company is thinking not just about data, but about the way it intersects with things ranging from customer engagement, to content, to mission, to even pizza itself, is exciting and often highly compelling." Government Pies To employees of &pizza, perhaps no single example represented the way the company operated better than the campaign to support employees and contractors impacted by the government shutdown in December 2018. When the federal government shut down due to its failure to pass an appropriations bill, Lastoria announced that &pizza would give complimentary pizzas to all furloughed federal employees for the duration of the shutdown. "DC and its heavy concentration of government employees and contractors is largely what had built the &pizza brand's awareness," said Lastori a, \"and it was an easy decision to return the favor during a challenging time." Said Reepmeyer, "It's not unusual for finance to come into conversations a little bit later here than it would at other companies. We often have to manage against decisions that I, as CFO, probably wouldn't make. But I respect Michael, Iunderstand that he has a vision and that sometimes his ideas may take a while to make sense or bear fruit, and that as a result our balance sheet might not look one of a typical restaurant chain." Added Rivest, "We believed in the ideathat we had the ability to really help members of our D.C. community, and that this way of living our company values could be great for the brand but it created a lot for us to deal with. For example, after a week we had to switch the offer from lunchtime to dinner time, and we had to rejig dozens of employees' shifts to meet the demand of these new guests. Eventually we had to centralize the free pizzas to a single location because the crowds were driving away paying customers." By the time the shutdown ended more than a month later, Scpizza had given away more than 30,000 free pizzas that otherwise would have had a price tag of $10.75 each, on average. Despite the cost, and the extra stress, Lastoria and Hooper believed the program was worth it. They felt they had lived up to their pledge to support communities, learned a great deal about how to run a purpose-driven campaign, and along the way gained thousands of new customers. According to one article, a "federal worker from the EPA, finishing her second free pizza of the shutdown, [said] she would return to work next week, but she wouldn't forget what &pizza stood for during the shutdown. 'lt' s not just pizza. It's and pizza...The '85 is for community.\" Lastoria was thrilled, "In an increasingly divided world, we love that pizza can be a platform to connect us all.'13 Responding to COVID-19 By early March 2020, the spread of COVID-19 was causing sufficient disruption that Hooper and Lastoria had begun to discuss the possible impact on the business. Then, on March 11, the National Basketball Association suspended its season. "That's when the severity of the crisis really began to sink in," said Hooper. "I had sketched the nuts and bolts of a shutdown response, but Michael quickly reached out and said, '1 don't think we're doing enough.\" Lastoria called a meeting for himself, Hooper, and the company's corporate counsel. "During an unprecedented time, living our values is 11 Authorized 'or use unlv bv Human Dinn in MGMT 5370 at Texas A&M Universitv Kinusville 'ror't 1;"161'2023 to 3323,2023. the first priority," said Lastoria, \" everything else is second." The meeting lasted right around an hour, during which time the team conceived the pillars of their expanded plan, which Hooper described: The overarching feeling was uncertainty no one had any idea how the coming weeks would play out. Yet we knew that for our employees that uncertainty was likely to be even greater. Our top priority was to immediately remove as much uncertainty as possible for our employees in several key areas: To address financial insecurity, we committed to keeping all Tribe members fully employed for 30 days. No layoffs, no cutting hours. Employees would be paid for scheduled hours even if they did not end up working those hours, for example due to a shop closure, or the need to run a leaner staff, or if someone was to fall ill or become exposed to the virus. We also added $1 per hour in Unity Pay to everyone's wages for the first 30 days. To address health insecurity, we expanded our health benefits so that all employees were covered (no waiting period) by a tribe health + safety pay program, and we expanded them to include time needed to care for children or other family members who were either sick or home from school. To address transportation insecurity, we expanded the Lyft partnership program. Public transit was either shut down or considered extremely risky. Now, all employees, not just those working the late shifts, could get a reliable and affordable ride to work. To address food insecurity, employees were encouraged to take cooked pizzas and raw goods home to feed their families and other members of their communitiesas much as they needed. As soon as we wrapped the meeting, we hopped on the phone with Matt Higgins and shared our plan and brainstormed how to get the word out quickly. Matt leveraged a connection, and within hours, Michael was on the phone with The New York Times, so that others might know how a purpose-driven company was responding, and with our Tribe, so that our people would know what to expect if the world was to come crashing down. About 36 hours later it did, and we were as prepared as we could be. I'm proud of our response, and we were pleased to see so many companies follow suit in the coming days, including well known national brands like Amazon and Target, by expanding protections, relaxing waiting periods, and in many cases, following suit in raising wages for their employees. Over the next several days, as more and more communities where &pizza shops could be found fell under stay-at-home orders and other restrictions, Tribe members, armed with resources provided by the HQ team, kept showing up to work. Said Hooper of the initial days of the so-called shelter-in-place lockdmvns, or quarannes, "We were using about 65% to 70% of the hours for which Tribe members had been scheduled to work. Other hours were deployed for things like extra cleaning or supporting our text line, which had seen a surge of nearly 300% overnight in conversations as the business moved to exclusively digital transactions. Some groups of employees were paid to serve as backupon call essentially, in the event that an outbreak would necessitate the closing of a shop and reopening (after a EPA-certied professional cleaning) with a new staff. Other employees, who worried they had been exposed to the virus, were paid to quarantine safely for two weeks. " 1? Lastoria, Hooper, and others from HQ kept in near-constant contact with Tribe members, in some cases working shoulder to shoulder with them in shops or mobile kitchens. \"At one virtual conference," said Hooper, "we were speaking to some of our Tribe members and, since they were working fewer hours and otherwise limited in terms of socializing, we oated that the company pay for Netflix subscriptions for employees. A lot of companies would have said no right off the bat, but for us, it triggered the same instinct as the conversation about getting home after a late-shift. I thought about it: a month of Netflix is less than one hour of wages for nearly all of our employees. Sending a message at that time that said, 'we hear you and value you,' was worth far more. So we gave everyone the monetary equivalent of a Netflix fee and said, 'use it for home entertainment, or for anything else that would help you and your family at this tinle." In the weeks that followed, IScpizza also made online exercise and mental health session available to all of its Tribe members. Hero Pies 8zpizza also stepped up immediately in terms of efforts to support communities. At the same time it shared its plan for Tribe members, and as lockdowns went into effect and as many hospitals were inundated with COVID-19 patients and scrambling to assemble the necessary manpower and equipment to deal with the crisis, &pizza announced the launch of Hero Pies. The program was similar to Government Pies in that it involved the company donating a large number of pizzas to healthcare, emergency, and other frontline workers. Sometimes deliveries were made from shops, but other times &pizza located its mobile kitchens near hospitals. In launching this program, &pizza became one of the first companies to mobilize such direct support of those risking the most on behalf of their communities. Soon, some of the company's mobile kitchens were exclusively producing pies for hospital staff. In addition to pizzas donated by 8cpizza, anyone could go online or text and through &pizza's system pay for pizzas that would be donated to frontline workers. For these customer-donated pizzas, Srpizza collected no margin. Within a few weeks the company had donated over $220,000 in combined food and delivery costs. In early April the Hero Pie program expanded further. In partnership with Citi, the company helped launch Hero Kitchens across New York and in other portions of its footprint. The goal for the Hero Kitchen program was to donate more than 100,000 pizzas. Said Lastoria, "I believe Hero Pies will be one of the branding innovations of the pandemic. It' s not just about healthcare workers. It' s about being able to show your appreciation to anyone who deserves recognition or support." Impact on the Business By mid-April it was also clear that the pandemic and associated restrictions would last longer than a few weeks. Hooper and Lastoria therefore ex tended the terms of their initial response through at least the end of May. "Again it was the right thing to do," said Hooper, "but the results were surprisingly good. Many restaurants had let go up to 80% of their work forces. Meanwhile, we were holding steady at around 90% retention rates in our shops, and those we lost were largely part of the normal attrition pattems for our shops. We reached out and tried to understand what was happening, and in some cases tried to offer more assistance, but usually there was some extenuating circumstance or preference that led the individual to want to leave the company. In terms of stores, we kept about 80% of locations open. The ones we closed were in city commercial areas with low residential density. However, in those areas we were often able to consolidate into a single, central store, and find new ways to redeploy Tribe members." Said Rivest, \"We hit a low point of just under 50% of revenue (weekly), but by late April even that number had picked back up and was approaching 70% of projected." Lastoria reected on the broader implications of the pandemic: 13 I believe the bold and purpose-driven decisions we made are making the company stronger. Other than in city centers, business is strong. We've increased digital sales in many of our shops by over 500%. We've acquired hundreds of thousands of new customers through our text platform and paid media. More than other companies who were caught at footed, or who didn't act because they were unsure how, we were able to respond with agility, and we now know how to succeed for at least the next 18 months and probably longer in this COVID and hopefully post-COVID environment. We feel the extra money we spent on our people in the earliest days of the crisis may end up actually saving us money, for we're now seeing some companies have to spend more to lure employees back. To sum it up, we now know how to leverage technology and marketing to drive business when sit-down dining is minimal or non-existent, and we have the people who have the know-how and are infused with the culture to carry on the torch as we reexamine our plans to grow the &pizza brand. In short, we have clarity and confidence, and that' s what the investors we're talking to want to see. Higgins added, "Because it was so firmly embedded in our DNA, this paradigm around the ampersand and employees, it was very easy to be nimble in the crisis and actually outflank the competition. We didn't even need to have a meeting. All the policies that were implemented were implemented almost intuitively. Increase salary by $1, provide the $5 car rides with Lyft, convert everything into the kitchens, provide for hospital workers - it all just worked very organic ally. It wasn't just us adopting a mission statement. The whole company was premised on it" Despite the fact that Lastoria and Hooper believed that &piz.za had weathered the first wave of the COVlD-19 pandemic relatively well, the crisis was still far from over. While infection and death numbers had begun to fall in certain parts of the country, including in the Northeast, they were beginning to climb in parts of the South and in the West. Furthermore, news reports over Memorial Day weekend had showed many Americans attending large gatherings, often without face coverings, celebrating as if nothing was the matter. As some health experts predicted more carnage and additional shutdowns, the &pizza team had to decide which response elements they should continue, discontinue, or add, and for how long. Another Opportunity to Respond Meanwhile, another crisis had gripped the nation. On May 25, 2020, police officers in Minneapolis, MN apprehended George Floyd, who was Black, on suspicion of passing counterfeit bills. One of the officers, who was white, then proceeded to kneel on Floyd's neck for nearly 8 minutes, despite Floyd repeatedly stating that he could not breathe. Floyd eventually lost consciousness and died. His death was ruled a homicide. This death, and the prominent deaths of several other African Americans at the hands of law enforcement officials and white Americans, prompted passionate and widespread demonstrations in cities across America. Perhaps at no time since the Civil Rights and Anti-War Movements of the 1960s were as many Americans speaking out and taking to the streets in the name of social and racial justice. Hooper recalled the mood at the company: For several weeks prior to the death of George Floyd we had been talking more and more about how COVID was disproportionately impacting communities of color communities to which a high percentage of our Tribe belongs. The company had a history 14 Supizza: Leading an 'EmployeeFirst' Company During a Period of Societal Challenges 921111? of using paid-time off for civic and social justice causes, most recently to support tribe interested in marching in Pride Month activities in 2019, as well as for the mid-term elections in 2018, and we were considering ways to formalize that conunitment for the upcoming election in November 2020. In the wake of George Floyd's murder that no longer seemed like enough. We heard that many of our employees were eager to participate in various marches and pro tests, to have their voices heard at this critical time. We want people to have that opportunity, and we believe it's their right. We therefore oated the idea of giving Tribe members paid time off (PT 0) so that missing work would not have to be their reason for not participating. Lastoria continued: Again we considered not just our responsibilities to our employees, but what was in our DNA, and what type of lead we wanted other businesses to follow. We knew giving activism PTO would draw backlash from some conservatives, including ones who are our customers. But it felt like another brand defining moment. In reality, the only questions that remained were: How much time is the right amount? and What else should we be doing? Should we be considering closing all of our shops on Election Day so that Tribe members would have the opportunity to vote? Should we look into turning shop locations into voter registration sites? On May 31st, &pizza announced that it would be giving all of its employees 3 days of paid time off for activism, and shortly thereafter, followed suit with an announcement that not only would it provide paid time off to vote on Election Day, it would also close all of its pizza shops on November 3"1 to further reduce variables that could impact its tribe from fully participating in the democratic process. in the weeks following, many other companies followed suit, affirming commitments for paid time off and in some cases, joining &pizza in the decision to close their business and / or offices for the day. Final Thoughts Leading with purpose had always been central to :Scpizza, making its mark "while doing well by doing good" since its inception. The company's investment in both its tribe and its communities, and the corresponding business performance during COVID-19, facilitated a successful round of growth capital financing to support continued expansion that closed in late August 2020. Said Lastoria, "Our values allowed us to act quickly and decisively, and not waste time with R01 calculations that probably wouldn't add up anyway. If we continue to lean first and foremost into the purpose of the company, especially in the tough times, which we're sure to have more of, we'll not only thrive, but change what's considered possible. We now have even more permission to live our values and, hopefully, inspire others to do the same."