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Ilitch Holdings Inc.

Ilitch Holdings Inc.

2211 Woodward Avenue
Detroit, Michigan 48201-3400
U.S.A.
Telephone: (313) 983-6000
Fax: (313) 983-6494
Web site: http://www.ilitchholdings.com

Private Company
Incorporated:
1999
Employees: 12,000 (est.)
Sales: $1.5 billion (2005 est.)
NAIC: 551112 Offices of Other Holding Companies; 711211 Sports Teams and Clubs; 722110 Full-Service Restaurants; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses); 711320 Promoters of Performing Arts, Sports, and Similar Events Without Facilities

Ilitch Holdings Inc. was created in 1999 to manage the business interests of Mike Ilitch, whose Detroit-based private holdings include: Little Caesars Enterprises, Inc., the pizza chain that remains the familys core business; the Detroit Red Wings hockey team; the Detroit Tigers baseball team; Olympia Entertainment, devoted to management and concessions at sports stadiums; and Olympia Development LLC, which focuses primarily on real estate interests in downtown Detroit. The Little Caesars chain, begun with a single take-out store in 1959, grew rapidly over several decades but experienced debilitating blows during the 1990s and early 2000s. As of 2006, although Little Caesars was in fourth place among national pizza chains, it had enjoyed several years of sustained growth and was poised to continue that trend.

ILITCH BUILDS AN EMPIRE

Michael Ilitch, a Detroit native and aspiring baseball player who played for a Tigers farm team until injury forced him to retire, founded Little Caesars in 1959 with $10,000 in capital. He and his wife, Marian, opened their first business one year after Frank and Dan Carney opened the first Pizza Hut. Ilitch, then 29, started the establishment as a take-out restaurant in a strip mall in a Detroit suburb. In a style unusual for the time, the Ilitches restaurant had no tables; it was purely a pick-up operation. His wife is credited with creating the new businesss name, according to a 1995 Los Angeles Times article. She recalled: We were just married, and he was my hero, my Caesar. But he hadnt accomplished anything yet, so he was my little Caesar.

In the late 1950s, pizza was considered a fad, much like hula hoops and coonskin caps, and few in the business world saw much potential for growth beyond mom-and-pop operations. They were wrong. A few years after Ilitch created Little Caesars, another Detroit native, Tom Monaghan, founded Dominos Pizza. Each of the these future pizza magnates unknowingly carved out a unique share of the future market. Pizza Hut pioneered sit-down restaurants; Dominos was first with home delivery; and Little Caesars initiated carryout. In the future, Ilitch and Monaghan would become rivals on another stage as well.

The Ilitches were ahead of their time in discounting, anticipating the pizza price wars of later years, as they undercut the price of their mom-and-pop competitors by 50 cents. Two years after opening the first Little Caesars, where Marian ran the counter and kept the books while Michael made the pies, the Ilitches opened a second outlet. In 1962 they began to expand by selling franchises of Little Caesars throughout the Detroit metropolitan area. They opened 50 franchises in the next ten years and went on to experience explosive growth in the 1970s.

1976: PIZZA! PIZZA!

An economic slump caused by the Arab oil embargo of 1973 sent more married women into the workforce. One result was that families had less time to cook meals and needed a cost-effective solution that would replace some home-cooked meals. The Ilitches, with seven children, knew how expensive it was to feed a family. Their offer of two pizzas for one price found a ready market. Because a carryout pizza operation was about 4 percent less expensive than home delivery, Little Caesars could undercut delivery rivals, such as Dominos.

In 1976 the Ilitches turned to Madison Avenue to pitch their one-price concept. Cliff Freeman, already famous for his Wendys Wheres the Beef? ad campaign, created the Pizza! Pizza! ad campaign, backed by the slogan, Two Great Pizzas! One Great Price! Always! Always! As a regional company, Little Caesars had only 200 outlets in 1981. At that point, the Ilitches took the business nationwide, and by 1984 they had 500 outlets, a figure that had doubled within two years. Michael, a high-school graduate, and Marian, whose education stopped after one year at a junior college, were now extremely wealthy entrepreneurs.

Michael never forgot his love for sports. In the mid-1970s he formed a local pro softball team, called the Caesars, and recruited the best players in the country. Although he lost $500,000 in three years, his team won two American Slo-Pitch titles. Ilitch was so successful that the other team owners changed the rules to restrict the Caesars, precipitating a row that ended up in court. Ilitch also sponsored numerous other amateur hockey, bowling, and softball teams. He encouraged his store operators to follow his example.

When his beloved Tigers came up for sale in the early 1980s, Ilitch was eager to purchase the team, but was thwarted when his crosstown rival, Tom Monaghan of Dominos, was given an exclusive bid and purchased the team for $53 million. Still eager to own a major professional sports team, Ilitch turned his attention to the local National Hockey League (NHL) club, the Detroit Red Wings.

Once a proud and winning franchise, four-time Stanley Cup winners from 1948 to 1955, the Red Wings had hit bottom after a long, slow decline. Only once in the previous 13 seasons had the team made the playoffs, at a time when 16 of the leagues 21 teams qualified. Despite the attraction of watching games in three-year-old Joe Louis Arena, Red Wings games were poorly attended. The season ticket base was reported to be a paltry 2,500, and according to Michael Ilitch, Jr., the number was actually closer to 1,500. Moreover, the team was saddled with debt and bereft of talent.

Ilitch purchased the Detroit Red Wings in June 1982 for $11 million. He improved every aspect of the organization, not only investing money in the recruitment of players from all over the world, but also upgrading the arena. Although the teams record did not improve much, attendance soon reached record levels, helped in part by Ilitchs marketing efforts that included giving away free cars during games. Season ticket holders swelled to 16,000, and after the team reached the Stanley Cup semifinals in 1987 and 1988, the Red Wings had become one of the leagues most valuable franchises. Ilitch was also one of the most respected owners, legendary for treating his players like family, often giving out spontaneous bonuses for good play.

COMPANY PERSPECTIVES

The Ilitch Holdings family of companies is dedicated to creating extraordinary and memorable entertainment and sporting experiences in the heart of downtown Detroits thriving Sports and Entertainment Foxtown District; along with providing the value, taste and spirit that makes a meal special and brings families together. We are committed to generate growth and opportunity for our colleagues and for our community; to remain a leader in the international restaurant industry; and to promote the City of Detroit as an exciting and profitable place in which to conduct business.

EXPANDING THE EMPIRE

The Ilitches became heavily involved in real estate in the mid-1980s. Their first major purchase was the Fox, an ornate 1920s-era 5,000-seat movie theater, once a jewel in a downtown Detroit that had seen decades of decline. Countering a 30-year trend of businesses fleeing the city, the Ilitches moved their Little Caesars headquarters from the suburbs to a ten-story office building adjacent to the Fox. Elected officials, eager to spark downtown development, helped them with the deal. The city council approved $18 million in city funds for the project.

After the Ilitches spent millions of dollars in renovations, the Fox reopened in 1988, offering a mix of concerts, theater, family shows, and restored classic films, and it was quite profitable within a year. By the end of the 1990s it trailed only Radio City Music Hall in sales receipts among large theaters. Also in 1988 the Ilitches purchased a sports management company, Olympic Arenas, to handle events not only for the Fox, but also for Detroits Joe Louis Arena, Cobo Arena, and other entertainment venues. In partnership with other businesses, the Ilitches helped to open restaurants and clubs in the revitalized theater district. The Ilitches also purchased the Detroit Drive arena football team and the Red Wings farm team in Adirondack, New York.

To help run their businesses, the Ilitches enlisted the help of their grown children. All seven worked for the family concerns in some capacity at some time, and five became company executives. Often business would be hashed out around the kitchen table. According to Detroit Free Press columnist Doron Levin, the Ilitches were a famously private clan. No one but their bankers and accountants know the inner workings of their companies. Since stock in their enterprises isnt publicly held, the family has no obligation to disclose sales figures or how much money their companies are makingor losing.

In 1990, however, there was no talk about losing money. Little Caesars and another Detroit-based corporation, Kmart, struck a deal to create Little Caesars Pizza Stations in more than 400 Kmart stores. Nationwide, pizza sales were so strong that the National Restaurant Association predicted in 1991 that within a few years pizza would supplant hamburgers as Americas leading fast foodand attempts by McDonalds and Burger King to break into the pizza business never panned out. Little Caesars boasted more than 4,000 outlets and sales continued to rise. Its rival, Dominos, was at the same time experiencing a number of reversals. Founder Tom Monaghan had taken a two-year leave of absence in 1989, and his business suffered as a result. In 1988 Dominos systemwide sales were double that of Little Caesars, but by the end of 1993 Little Caesars, with revenues of $2.3 billion, surpassed Dominos to become the second largest pizza chain in the country, trailing only Pizza Hut and its $4.2 billion in U.S. sales. Monaghan, forced to retrench, began to sell off assets including the Detroit Tigers.

MAKING THE BIG LEAGUES

Ilitch finally realized his dream of owning the major league baseball team for which he played in the minor leagues. He purchased the Tigers from Monaghan for $85 million in July 1992, then gave up day-to-day control of Little Caesars to devote more time to his sports teams. The result was back-to-back Stanley Cups for the Red Wings, a new stadium for the Tigers, and costly neglect of the core pizza business.

After several frustrating seasons during which the team failed to live up to its potential, the Detroit Red Wings finally returned to its former glory. Ilitch hired the NHLs most successful coach, Scott Bowman, in 1993. In 1995 the Wings reached the Stanley Cup Finals, losing to New Jersey. Two years later the team won its first Stanley Cup in 42 years, sweeping the Philadelphia Flyers in four straight, then backed it up the next season with another sweep, this time over the Washington Capitals. By the end of the decade, under Ilitchs ownership, the Detroit Red Wings were worth $184 million, according to Forbes magazine.

KEY DATES

1959:
Michael and Marian Ilitch open the first Little Caesars pizza restaurant.
1962:
The Ilitches establish Little Caesars as a franchiser.
1982:
The company purchases the National Hockey League (NHL) Detroit Red Wings team.
1986:
The number of Little Caesars outlets reaches 1,000.
1987:
The company purchases the historic Fox Theater in downtown Detroit and relocates Little Caesars headquarters to a building adjacent to the Fox.
1992:
The company purchases Detroit Tigers baseball team.
1997:
Red Wings win their first Stanley Cup in 42 years.
1999:
Ilitch Holdings Inc. is formed.
2000:
Denise and Chris Ilitch become copresidents of Ilitch Holdings.
2004:
Denise Ilitch leaves the company; Chris Ilitch is named president and CEO.

The Tigers, on the other hand, regressed. After challenging for a division title in 1993, the club finished last in its division in 1994, and by 1996 posted the worst record in baseball. On another front, however, Ilitch succeeded, accomplishing something which the previous owner had failed: building a new baseball stadium to replace the venerable, yet decaying, Tiger Stadium.

Ilitch had to overcome both political and community obstacles to reach his goal. He began his push for a new stadium by pledging to spend $175 million of his own money. Years of currying favor with local politicians, as well as the good will he had earned by moving Little Caesars from the suburbs to the city, paid off. The city council repealed an ordinance banning the use of city funds to build a new stadium, pushed through by activists who wanted to preserve and renovate Tiger Stadium. When the matter became a ballot initiative, Ilitch and his political allies won an overwhelming victory, garnering 86 percent of the vote. A later vote authorizing the county to finance the stadium by a 1 percent tax on taxicab fares and hotel rooms was also approved by voters, this time by 82 percent of the countywide vote, as Ilitch and his allies outspent their opponents by about $700,000 to $20,000. Michigans Governor John Engler then provided $55 million to cover the cost of clearing the land and providing infrastructure.

Comerica Park opened for the 2000 season, and the value of the Tigers franchise increased by a dramatic 32 percent, to $200 million, according to Forbes. The play of the team, however, continued to disappoint the fans, and attendance suffered accordingly; it was not at the level that other teams in the major leagues enjoyed with new ballparks.

PIZZA TROUBLE

While Ilitch devoted his time to running the Red Wings and Tigers, as well as shepherding through the stadium deal, his pizza business began to deteriorate. With a recession in the early 1990s, the relationship between Little Caesars and its franchisees turned confrontational. Members of the Association of Little Caesars Franchisees were unhappy with the high cost of ingredients charged by Little Caesars subsidiary, Blue Line Distributing. What ensued was a lingering lawsuit that alleged the company violated antitrust laws. Franchisees also complained that the corporate parent lacked foresight and planning, changing from one strategy to the next in an attempt to spur flat sales. When pizza sizes were enlarged by two inches in the chains Big! Big! Pizza initiative, franchisees were only given two weeks notice of the change and were encouraged to get rid of their 12-inch pans. Later the 12-inch size was brought back by popular demand, and many of the franchisees were caught short.

Other failed marketing attempts included football-shaped pizzas and spaghetti, frozen and heated in the ovens, which some owners said they could not give away. Little Caesars move into the delivery business in 1996 also proved problematic. Franchisees complained that they did not receive proper training and that the $1 delivery charge alienated many customers. The taste of Little Caesars pizza, baked on a conveyor belt system, also came under criticism. Consumer Reports found it low in flavor, and the cheese can be so chewy its almost rubbery. Cost-cutting efforts brought lower-grade ingredients to the product, according to franchisees.

Advertising budgets were slashed as sales slipped. Rather than challenging Pizza Hut for supremacy in the market, Little Caesars fell behind Dominos in systemwide sales. By the end of the decade, the company found its number-three position strongly challenged by newcomer Papa Johns, with its emphasis on quality ingredients. By 1997 Ilitch was forced to refocus his attention on his pizza business. He eliminated 27 corporate management positions, followed a year later by a 25 percent cut of the chains headquarters staff. In 1999 he closed 400 poorly performing restaurants to either remodel with drive-through windows or to relocate. Little Caesars Enterprises looked to expand its overseas operations, totaling about 250 outlets in 18 foreign markets, by announcing in late 1999 that it planned to open hundreds of restaurants in Japan and Latin America.

ILITCH HOLDINGS: A NEW ERA

Getting on in years and suffering from heart problems, Ilitch, along with his wife, had to face the task of transferring assets to their heirs. In 1999 Ilitch Holdings, Inc., was formed, and two outside executives were brought in to run it: Richard Peters, a Penske Corp. executive, was named CEO, and Jim Weissenborn, from National Mortgage Corp., was made CFO. They lasted only six months before resigning. In June 2000 it was announced that two of the Ilitch children, Denise and Chris, would share the newly created job of president. While Denise and Chris would oversee day-to-day operations, Michael and Marian Ilitch would continue to serve as chair and vice-chair and assist in running the family businesses.

More than family interests were at stake. A big part of downtown Detroits future depends on the fate of the Ilitch businesses, wrote Detroit Free Press columnist Doron Levin, who then elaborated: Detroit can benefit greatly from a smooth transfer of poweror suffer from a misstep. The next generation has lots of tough issues before it, chief of which is what to do about the faltering Little Caesars pizza chain. While the Ilitches have substantial non-pizza interests, Little Caesars has served as the linchpin for the whole empire.

Chris and Denise Ilitch did indeed focus on the Little Caesars chain. In 2001 the lawsuit brought by franchisees was settled, and the company put a plan into place to improve relations with franchisees and rebuild the brand. However, just as the franchisee situation began to improve, Little Caesars was dealt another blow. The bankruptcy proceedings of KmartLittle Caesars largest franchiseeled to the closing of hundreds of Kmart stores, many of which included Little Caesars Pizza Stations. The closings represented a loss of millions of dollars for Little Caesars. Waiting in the wings, however, was a new promotion for the company that would help revive its fortunes and make its competitors, both national and local, cringe.

During the summer of 2003, Little Caesars introduced a $5 pizzaa large, one-topping pizza that required no advance ordering. While some pizza chains tried to compete by offering similar deals, most found that they could not produce a $5 pizza without losing money or sacrificing quality. Little Caesars could make money on the deal, which came to be known as Hot-N-Ready, because of the high volume of pizzas sold and the tendency of customers to order other items with the $5 pizza. The Hot-N-Ready promotion contributed substantially to renewed success for Little Caesars.

While business was on the upswing, in the spring of 2004 turbulence visited the front office as rumors began to circulate that conflicts had arisen between Denise and Chris Ilitch, and that Denise had stopped coming into the office. In July, the family announced that Denise had left the company and Chris had been named president and CEO of Ilitch Holdings. From the time of the siblings appointment as copresidents, many analysts had speculated that the situation was doomed to fail, especially as sources within the Ilitch organization suggested that the arrangement came about because Mike and Marian Ilitch could not agree on which child should run the business.

Upon taking the reins of Ilitch Holdings, Chris continued to focus on the Little Caesars chain, prolonging its success by launching a push to significantly expand the business to new markets throughout the United States and internationally. By the end of 2006 the chain had enjoyed six straight years of healthy sales increases; during that year the company opened more than 200 new stores throughout the United States and in eight other countries. Chris expressed a desire to do more than run a successful business, however; he intended to continue his parents lengthy tradition of supporting charitable organizations and the revitalization of the city of Detroit.

SPORTS DEVELOPMENTS IN NEW CENTURY

While the Little Caesars chain constituted the largest segment of the Ilitch empire, the sports franchises usually captured the most media attention. One of the big stories surrounding the Red Wingsaside from numerous winning seasonswas the impending end of the teams lease at Joe Louis Arena, set to expire in 2009. Speculation about the possibility of a new arena for the Red Wings began to heat up in the early 2000s. Some analysts projected that a new arena, which would sell naming rights and include more luxury suites and restaurants, would earn an additional $10 million for Ilitch Holdings. The Ilitch family initially stated that it did not wish to build a new arena and would explore the option of renovating Joe Louis, though many observers pointed out that renovations of that arena would cost nearly $200 milliononly about $50 million less than a new arena. When rumors arose about possible locations for a new Red Wings home, the Ilitches, in typical fashion, kept mum.

The Detroit Tigers players and fans suffered through several excruciating seasons in the 1990s and early 2000sincluding 119 losses in the 2003 season but in 2006 the team experienced a reversal of fortune. With a new manager, veteran leader Jim Leyland, and an infusion of new talent in the bullpen, the Tigers had a spectacular season, with a regular-season win-loss record of 95-67. The team won the American League pennant, losing the World Series to the St. Louis Cardinals. Rejuvenated Tigers fans flocked to Comerica Park, with total attendance topping 2.6 million for the season. With its winning 2006 season, and sunny prospects for coming years, the teams value was boosted to $365 million, an increase of more than 53 percent from two seasons earlier. The success of the Ilitches sports teams contributed mightily to a positive outlook for the company. After years of turbulence in the 1990s and a bumpy entry into the 21st centurycomplete with a succession dramaIlitch Holdings found itself on steady ground by mid-decade.

Edward Dinger
Updated, Judy Galens

PRINCIPAL SUBSIDIARIES

Little Caesars Enterprises, Inc.; Blue Line Distributing; Olympia Entertainment; Olympia Development LLC; Detroit Tigers, Inc.; Detroit Red Wings.

PRINCIPAL COMPETITORS

Detroit Lions, Inc.; Live Nation, Inc.; Palace Sports & Entertainment, Inc.; Pizza Hut Inc.; Dominos Pizza, Inc.; Papa Johns International, Inc.

FURTHER READING

Abelson, Jenn, Pizza! Pizza! Boston Globe, October 11, 2006.

Ankeny, Robert, The $73M Pennant, Crains Detroit Business, November 13, 2006, p. 3.

Benezra, Karen, Caesars Fall, Brandweek, January 26, 1998, pp. 2125.

Berss, Marcia, A Tale of Two Strategies, Forbes, November 8, 1993, p. 198.

Bodipo-Memba, Alejandro, Little Caesars Grows for 6th Straight Year, Detroit Free Press, February 21, 2007.

Carlino, Bill, 75 Years: The Odyssey of Eating Out, Nations Restaurant News, January 1994, p. 11.

Diamond, Dan, et al., Total Hockey. Kingston, N.Y.: Total Sports, 1998.

Gave, Keith, The Owners: Perseverance Pays Off for Ilitches, Detroit Free Press, June 9, 1997.

Henderson, Tom, Profile: Mike Ilitch, Owner, Little Caesars, Detroit Red Wings, Detroit Free Press, August 9, 1982.

Howard, Theresa, Attention, Shoppers: Retail Giant Hails Caesars as a Big Buy, Nations Restaurant News, January 1998, pp. 9496.

Kapner, Suzanne, Fifty: Profiles of Power, Nations Restaurant News, January 1995, p. 105.

Krupa, Gregg, Tale of this Tiger in Motor City, a Committed Owner Wins Out over Beloved Ballpark, Boston Globe, May 2, 1999, p. C1.

Lam, Tina, Ilitches Gives Reins to Daughter, Son, Detroit Free Press, June 20, 2000.

Levin, Doron, Ilitches, 2 Top Execs Sever Ties, Detroit Free Press, September 16, 1999.

, Smooth Power Transfer Vital to Detroit, Detroit Free Press, June 20, 2000.

Little Caesars to Open 400 Stores in Japan, Wall Street Journal, December 9, 1999, p. 1.

MacArthur, Kate, and Jean Halliday. More Changes Ahead for Post-FCB Little Caesars, Advertising Age, June 2000.

McGraw, Bill, Fox Captures Little Caesars, Detroit Free Press, July 8, 1987.

, Ilitchs Local Success Is Legendary, Detroit Free Press, June 20, 2000.

Morath, Eric, Is It Time for the Joe to Go? Crains Detroit Business, June 17, 2002, p. 3.

Nauss, Donald W., Pizzas Humble Giant Reaches for a Bigger Slice, Los Angeles Times, September 3, 1995, p. D1.

Pepper, Jon, The Big Cheese, Detroit Free Press, February 26, 1984.

Snavely, Brent, A Bigger Slice, Crains Detroit Business, February 26, 2007, p. 3.

Snavely, Brent, and Robert Ankeny, Renovate Joe or Build Rink? Crains Detroit Business, June 19, 2006, p. 1.

Stodghill, Ron, II, A Tale of Pizza, Pride and Piety, Time, October 26, 1998, p. 66.

Strong, Michael, Caesars $5 Pizza Has Competitors Scrambling, Crains Detroit Business, December 15, 2003, p. 1.

, Christopher Ilitch, 39, Crains Detroit Business, September 27, 2004, p. 20.

Strong, Michael, and Brent Snavely, Kmart Woes Could Bake Up Trouble for Little Caesar, Crains Detroit Business, July 15, 2002, p. 3.

Strong, Michael, and Robert Ankeny, Chris Ilitch Named CEO, Crains Detroit Business, July 26, 2004, p. 1.

Templin, Neal, New Pizza King Set to Swallow Detroit Tigers, Wall Street Journal, July 30, 1992, p. B1.

Thorn, John, et al., Total Baseball, Kingston, N.Y.: Total Sports, 1999.

Zuber, Amy, Little Caesars Cuts Staff, Fires 100+ Workers, Nations Restaurant News, October 5, 1998, p. 1171.

, Sub Contracted: Little Caesars, Subway Try 1-Unit Marriage, Nations Restaurant News, April 10, 1998, p. 6.

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Ilitch Holdings Inc.

Ilitch Holdings Inc.

2211 Woodward Avenue
Detroit, Michigan 48201-3400
U.S.A.
Telephone: (313) 983-6000
Fax: (313) 983-6494

Private Company
Incorporated:
1999
Employees: 8,000 (est.)
Sales: $800 million (1999 est.)
NAIC: 551114 Corporate, Subsidiary, and Regional Managing Offices; 722211 Limited-Service Restaurants; 711211 Sports Teams and Clubs; 722310 Food Service Contractors

Ranked 284 on the Forbes list of largest private companies, Ilitch Holdings Inc. was created in 1999 to manage the business interests of Mike Ilitch, whose Detroit-based private holdings include: Little Caesar Enterprises, Inc., the pizza chain that remains the familys core business; the Detroit Red Wings hockey team; the Detroit Tigers baseball team; Olympia Entertainment, devoted to management and concessions at sports stadiums; and Olympia Development LLC, which focuses primarily on real estate interests in downtown Detroit.

Ilitch Builds an Empire

Michael Ilitch, a Detroit native and aspiring baseball player, who played for a Tigers farm team until injury forced him to retire, founded Little Ceasars in 1959 with $10,000 in capital. He and his wife, Marian, opened their first business one year after Frank and Dan Carney opened the first Pizza Hut. Ilitch, then 29, started the establishment as a take-out restaurant in a strip mall in a Detroit suburb. In a style unusual for the time, the Ilitchess restaurant had no tables; it was purely a pick-up operation. His wife is credited with creating the new businesss name, according to a 1995 Los Angeles Times article. She recalled: We were just married, and he was my hero, my Caesar. But he hadnt accomplished anything yet, so he was my little Caesar.

In the late 1950s, pizza was considered a fad, much like Hula Hoops and coonskin caps, and few in the business world saw much potential for growth beyond mom-and-pop operations. They were wrong. A few years after Ilitch created Little Caesar, another Detroit native, Tom Monaghan, founded Dominos Pizza. Each of the three future pizza magnates unknowingly carved out a unique share of the future market. Pizza Hut pioneered sit-down restaurants; Dominos was first with home delivery; and Little Caesar initiated carry out. In the future, Ilitch and Monaghan would become rivals on another stage as well.

The Ilitches were ahead of their time in discounting, anticipating the pizza price wars of later years, as they undercut the price of their mom-and-pop competitors by 50 cents. Two years after opening the first Little Caesar, where Marian ran the counter and kept the books while Michael made the pies, the Ilitches opened a second outlet. In 1962 they began to expand by selling franchises of Little Caesars throughout the Detroit metropolitan area. They opened 50 franchises in the next ten years and went on to experience explosive growth in the 1970s.

The 1970s and Pizza! Pizza!

An economic slump caused by the Arab oil embargo of 1973 sent more married women into the workforce. One result was that families had less time to cook meals and needed a cost-effective solution that would replace some home-cooked meals. The Ilitches, with seven children, knew how expensive it was to feed a family. Their offer of two pizzas for one price found a ready market. Because a carry-out pizza operation was about four percent cheaper than home delivery, Little Caesars could undercut delivery rivals, such as Dominos.

In 1976 the Ilitches turned to Madison Avenue to pitch their one-price concept. Cliff Freeman, already famous for his Wendys Wheres the Beef? ad campaign, created the Pizza! Pizza! concept, backed by the slogan, Two Great Pizzas! One Great Price! Always! Always! As a regional company, Little Caesars had only 200 outlets in 1981. At that point, the Ilitches took the business nationwide, and by 1984 they had 500 outlets, a figure that had doubled within two years. Michael, a high-school graduate, and Marian, whose education stopped after one year at a junior college, were now extremely wealthy entrepreneurs.

Michael never forgot his love for sports. In the mid-1970s he formed a local pro softball team, called the Caesars, and recruited the best players in the country. Although he lost $500,000 in three years, his team won two American Slo-Pitch titles. Ilitch was so successful that the other team owners changed the rules to restrict the Caesars, precipitating a row that ended up in court. Ilitch also sponsored numerous other amateur hockey, bowling, and softball teams. He encouraged his store operators to follow his example.

When his beloved Tigers came up for sale in the early 1980s, Ilitch was eager to purchase the team, but was thwarted when his crosstown rival, Dominos Tom Monaghan, was given an exclusive bid and purchased the team for $53 million. Still avid to own a major professional sports team, Ilitch turned his attention to the local NHL hockey club, the Detroit Red Wings.

Once a proud and winning franchise, four-time Stanley Cup winners from 1948 to 1955, the Red Wings had hit bottom after a long, slow decline. Only once in the previous 13 seasons had the team made the playoffs, at a time when 16 of the leagues 21 teams qualified. Despite the attraction of watching games in three-year-old Joe Louis Arena, Red Wings games were poorly attended. The season ticket base was reported to be a paltry 2,500, and according to Michael Ilitch, Jr., the number was actually closer to 1,500. Moreover, the team was saddled with debt and bereft of talent.

Ilitch purchased the Detroit Red Wings in June 1982 for $11 million. He improved every aspect of the organization, not only investing money in the recruitment of players from all over the world, but also upgrading the arena. Although the teams record did not improve much, attendance soon reached record levels, helped in part by Ilitchs marketing efforts that included giving away free cars during games. Season ticket holders swelled to 16,000, and after the team reached the Stanley Cup semifinals in 1987 and 1988, the Red Wings had become one of the leagues most valuable franchises. Ilitch was now also one of the most respected owners, legendary for treating his players like family, often giving out spontaneous bonuses for good play.

The Ilitches became heavily involved in real estate in the mid-1980s. Their first major purchase was the Fox, an ornate 1920s 5,000-seat movie theater, once a jewel in a downtown Detroit that had seen decades of decline. Countering a 30-year trend of businesses fleeing the city, the Ilitches moved their Little Caesar headquarters from the suburbs to a ten-story office building adjacent to the Fox. Elected officials, eager to spark downtown development, helped them with the deal. The city council approved $18 million in city funds for the project.

After the Ilitches spent millions of dollars in renovations, the Fox reopened in 1988, offering a mix of concerts, theater, family shows, and restored classic films, and was quite profitable within a year. By the end of the 1990s it trailed only Radio City Music Hall in sales receipts among large theaters. Also in 1988 the Ilitches purchased a sports management company, Olympic Arenas, to handle events not only for the Fox, but also for Detroits Joe Louis Arena, Cobo Arena, and other entertainment venues. In partnership with other businesses, the Ilitches helped to open restaurants and clubs in the revitalized theater district. The Ilitches also purchased the Detroit Drive arena football team and the Red Wings farm team in Adirondack, New York.

To help run their businesses, the Ilitches enlisted the help of their grown children. All seven worked for the family concerns in some capacity at some time, and five became company executives. Often business would be hashed out around the kitchen table. According to Detroit Free Press columnist Doron Levin, the Ilitches were a famously private clan. No one but their bankers and accountants know the inner workings of their companies. Since stock in their enterprises isnt publicly held, the family has no obligation to disclose sales figures or how much money their companies are makingor losing.

In 1990, however, there was no talk about losing money. Little Caesars and another Detroit-based corporation, Kmart, struck a deal to create Little Caesar Pizza Stations in more than 400 Kmart stores. Nationwide, pizza sales were so strong that the National Restaurant Association predicted in 1991 that within a few years pizza would supplant hamburgers as Americas leading fast foodand attempts by McDonalds and Burger King to break into the pizza business never panned out. Little Caesar boasted more then 4,000 outlets and sales that continued to rise. Its rival, Dominos, was at the same time experiencing a number of reversals. Founder Tom Monaghan had taken a two-year leave of absence in 1989, and his business suffered as a result. In 1988 Dominos systemwide sales were double that of Little Caesar, but by the end of 1993 Little Caesar, with revenues of $2.3 billion, surpassed Dominos to become the second-largest pizza chain in the country, trailing only Pizza Hut and its $4.2 billion in U.S. sales. Monaghan, forced to retrench, began to sell off assetsincluding the Detroit Tigers.

Key Dates:

1959:
Michael and Marian Ilitch open the first Little Caesar pizza restaurant.
1962:
The Ilitches establish Little Caesar as franchise.
1986:
The number of Little Caesars outlets reaches 1,000.
1982:
The company purchases the National Hockey League (NHL) Detroit Red Wings hockey team.
1987:
The company purchases the historic Fox Theater in downtown Detroit and relocates Little Caesar head-quarters to a building adjacent to the Fox.
1992:
The company purchases Detroit Tigers baseball team.
1997:
Red Wings win their first Stanley Cup in 42 years.
1999:
Ilitch Holdings Inc. is formed.

Making the Big Leagues in the 1990s

Ilitch finally realized his dream of owning the major league baseball team for which he played in the minor leagues. He purchased the Tigers from Monaghan for $85 million in July 1992, then gave up day-to-day control of Little Caesar to devote more time to his sports teams. The result was back-to-back Stanley Cups for the Red Wings, a new stadium for the Tigers, and costly neglect of the core pizza business.

After several frustrating seasons during which the team failed to live up to its potential, the Detroit Red Wings finally returned to its former glory. Ilitch hired the NHLs most successful coach, Scott Bowman, in 1993. By 1995 the Wings reached the Stanley Cup Finals, losing to New Jersey. Two years later the team won its first Stanley Cup in 42 years, sweeping the Philadelphia Flyers in four straight, then backed it up the next season with another sweep, this time over the Washington Capitals. By the end of the decade, under Ilitchs ownership, the Detroit Red Wings were worth $184 million, according to Forbes magazine.

The Tigers, on the other hand, regressed. After challenging for a division title in 1993, the club finished last in its division in 1994, and by 1996 posted the worst record in baseball. On another front, however, Ilitch succeeded, accomplishing some-thing at which the previous owner had failed: building a new baseball stadium to replace the decaying, however venerable, Tiger Stadium.

Ilitch had to overcome both political and community obstacles to reach his goal. He began his push for a new stadium by pledging to spend $175 million of his own money. Years of currying favor with local politicians, as well as the good will he had earned by moving Little Caesars from the suburbs to the city, now paid off. The city council repealed an ordinance banning the use of city funds to build a new stadium, pushed through by activists who wanted to preserve and renovate Tiger Stadium. When the matter became a ballot initiative, Ilitch and his political allies won an overwhelming victory, garnering 86 percent of the vote. A later vote authorizing the county to finance the stadium by a 1 -percent tax on taxicab fares and hotel rooms was also approved by voters, this time by 82 percent of the countywide vote, as Ilitch and his allies outspent their opponents by about $700,000 to $20,000. Michigans Governor John Engler then provided $55 million to cover the cost of clearing the land and providing infrastructure.

Comerica Park opened for the 2000 season, and the value of the Tigers franchise increased by a dramatic 32 percent, to $200 million, according to Forbes. The play of the team, however, continued to disappoint the fans, and attendance suffered accordingly; it was not at the level that other teams in the major leagues enjoyed with new ballparks.

While Ilitch devoted his time to running the Red Wings and Tigers, as well as shepherding through the stadium deal, his pizza business began to deteriorate. With a recession in the early 1990s, the relationship between Little Caesar and its franchisees turned confrontational. Members of the Association of Little Caesar Franchisees were unhappy with the high cost of ingredients charged by Little Caesars subsidiary, Blue Line Distributing. What ensued was a lingering lawsuit that alleged the company violated antitrust laws. Franchisees also complained that the corporate parent lacked foresight and planning, changing from one strategy to the next in an attempt to spur flat sales. When pizza sizes were enlarged by two inches in the chains Big! Big! Pizza initiative, franchisees were only given two weeks notice of the change and encouraged to get rid of their 12-inch pans. Later the 12-inch size was brought back by popular demand, and many of the franchisees were caught short. Other failed marketing attempts included football-shaped pizzas that never caught on, and spaghetti, frozen and heated in the ovens, which some owners said they couldnt give away. Little Caesars move into the delivery business in 1996 also proved problematic. Franchisees complained that they did not receive proper training and that the $1 delivery charge alienated many customers. The taste of Little Caesars pizza, baked on a conveyor belt system, also came under criticism. Consumer Reports found it low in flavor, and the cheese can be so chewy its almost rubbery. Cost-cutting efforts then brought lower grade ingredients to the product, according to franchisees.

Advertising budgets were slashed as sales slipped. Rather than challenging Pizza Hut for supremacy in the market, Little Caesar fell behind Dominos in systemwide sales. By the end of the decade, the company found its number-three position strongly challenged by newcomer Papa Johns, with its emphasis on quality ingredients. By 1997 Ilitch was forced to refocus his attention on his pizza business. He eliminated 27 corporate management positions, followed a year later by a 25-percent cut of the chains headquarters staff. In 1999 he closed 400 poorly performing restaurants to either remodel with drive-thru windows or to relocate. Little Caesar Enterprises looked to expand its overseas operations, totaling about 250 outlets in 18 foreign markets, by announcing in late 1999 that it would open 400 restaurants in Japan by 2003 and hoped to complete an agreement for 300 new stores in Latin America. In April 2000 the company also announced a co-branding arrangement with the Subway sandwich chain and the opening of a test unit that would offer the full menu boards of both restaurants.

Getting on in years and suffering from heart problems, Ilitch, along with his wife, had to face the task of transferring assets to their heirs. In 1999 Ilitch Holdings, Inc. was formed, and two outside executives were brought in to run it: Richard Peters, a Penske Corp. executive was named CEO, and Jim Weissenborn, from National Mortgage Corp., was made CFO. They lasted only six months before resigning. In June 2000 it was announced that two of the Ilitch children, Denise and Chris, would share the newly created job of president. While they would oversee day-to-day operations, Michael and Marian Ilitch would continue to serve as chair and vice-chair and assist in running the family businesses.

More than family interests were at stake. A big part of downtown Detroits future depends on the fate of the Ilitch businesses, wrote Detroit Free Press columnist Doron Levin, who then elaborated: Detroit can benefit greatly from a smooth transfer of poweror suffer from a misstep. The next generation has lots of tough issues before it, chief of which is what to do about the faltering Little Caesars pizza chain. While the Ilitches have substantial non-pizza interests, Little Caesars has served as the linchpin for the whole empire.

Principal Subsidiaries

Little Caesars Enterprises, Inc.; Blue Line Distributing; Olympia Entertainment; Olympia Specialty Foods; Olympia Development LLC; Detroit Tigers, Inc.; Detroit Red Wings.

Principal Competitors

Pizza Hut Inc.; Dominos Pizza, Inc.; Papa Johns International, Inc.

Further Reading

Benezra, Karen, Caesars Fall, Brandweek, January 26, 1998, pp. 2125.

Berss, Marcia, A Tale of Two Strategies, Forbes, November 8, 1993, p. 198.

Carlino, Bill, 75 Years: The Odyssey of Eating Out, Nations Restaurant News, January 1994, p. 11.

Diamond, Dan, et al, Total Hockey. Kingston, N.Y.: Total Sports, 1998. Gave, Keith, The Owners: Perseverance Pays Off for Ilitches, Detroit Free Press, June 9, 1997.

Henderson, Tom, Profile: Mike Ilitch, Owner, Little Caesars, Detroit Red Wings, Detroit Free Press, August 9, 1982.

Howard, Theresa, Attention, Shoppers: Retail Giant Hails Caesars as a Big Buy, Nations Restaurant Ne\vs, January 1998, pp. 9496.

Kapner, Suzanne, Fifty: Profiles of Power, Nations Restaurant News, January 1995, p. 105.

Krupa, Gregg, Tale of this Tiger in Motor City, a Committed Owner Wins out over Beloved Ballpark, Boston Globe, May 2, 1999, p. C1.

Lam, Tina, Ilitches Gives Reins to Daughter, Son, Detroit Free Press, June 20, 2000.

Levin, Doron, Ilitches, 2 Top Execs Sever Ties, Detroit Free Press, September 16, 1999.

Smooth Power Transfer Vital to Detroit, Detroit Free Press, June 20, 2000.

Little Caesars to Open 400 Stores in Japan, Wall Street Journal, December 9, 1999, p. 1.

MacArthur, Kate, and Jean Halliday. More Changes Ahead for PostFCB Little Caesars, Advertising Age, June 2000.

McGraw, Bill, Fox Captures Little Caesars, Detroit Free Press, July 8, 1987.

Ilitchs Local Success is Legendary, Detroit Free Press, 20 June 2000.

Nauss, Donald W., Pizzas Humble Giant Reaches for a Bigger Slice, Los Angeles Times, September 3, 1995, p. D1.

Pepper, Jon, The Big Cheese, Detroit Free Press, February 26,1984. Stodghill II, Ron, A Tale of Pizza, Pride and Piety, Time, October 26, 1998, p. 66.

Templin, Neal, New Pizza King Set to Swallow Detroit Tigers, Wall Street Journal, July 30, 1992, p. B1.

Thorn, John, et al., Total Baseball, Kingston, N.Y.: Total Sports, 1999. Zuber, Amy, Little Caesars Cuts Staff, Fires 100+ Workers, Nations Restaurant News, October 5, 1998, p. 1,171.

Sub Contracted: Little Caesars, Subway Try 1-Unit Marriage, Nations Restaurant News, April 10, 1998, p. 6.

Edward Dinger

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