Read time: 5 minutes

Good morning! It's Thursday, October 5th. Today we are looking at Ally and Scott Svenson, the founders of Seattle Coffee Company and MOD Pizza who are experts at creating new businesses by copying the strategies of industry leaders.

THE FEATURE

The Copycat Strategy Behind This Couple’s Billion-Dollar Empire

Ally and Scott Svenson aren’t a normal couple by any means.

The duo sold their UK-based company, Seattle Coffee Company, in 1998 for $90M to the business whose operations they completely copied (Starbucks).

Today, the Svensons run MOD Pizza, a fast-casual chain inspired by the likes of Chipotle and Subway that generates $460+ in annual sales!

What’s The Business?

Seeing how the Svensons have created two successful businesses by copying the tactics of food industry leaders, let’s take a look at both companies.

Seattle Coffee Company

The Svensons met in Washington but moved to the UK in 1994 to spread American coffee culture to Europe. Many believed this business decision was a blunder since the British favored tea over coffee, but the Svensons instead saw an opportunity.

The popularity of tea in Britain meant the duo wouldn’t have to deal with an entrenched coffee industry and tough competitors there. By copying just about every aspect of Starbucks, except for its logo, Seattle Coffee Company grew rapidly.

When Starbucks CEO Howard Schultz was looking to expand into the UK, he saw Seattle Coffee Company with 75 locations and an eerily familiar business model. Rather than compete against the Svensons, Starbucks purchased the company with 1.8M shares of Starbucks stock (~$90M at the time) and made Scott Svenson the president of their European division.

MOD Pizza

While Scott Svenson enjoyed working for Starbucks, he got the itch to create something new in 2008 when he saw the success of fast-casual chains like Subway and Chipotle.

At the time, consumers had access to custom-made sandwiches and burritos that could be prepared in a few minutes. However, the Svensons saw a hole in the market: Americans love pizza, but there were no fast-paced make-your-own pie shops.

Although MOD Pizza is a 15–year-old company, 80% of the company’s growth has occurred over the last 6 years. This is because it was 6 years ago when investment firms discovered MOD Pizza and its impressive profitability, resulting in $339M in funding to help the business expand.

Today, MOD Pizza’s $460M in annual sales comes from approximately 500 store locations spread across the United States. With each new funding round, MOD’s store locations and revenue have grown exponentially:

• 2016: $150M revenue

• 2017: $219M revenue

• 2018: $312M

• 2019: $393M

How MOD Wins: Charity as a Business Strategy

The Svensons are experts at copying the strategies of industry leaders and putting a new twist on them. In addition to filling the hole in the fast-casual food market with on-demand pizzas, MOD has deployed a unique competitive weapon: charity.

When a new location opens, all the money made on opening day goes to a local charity that has broad community support. Additionally, a large portion of MOD’s workforce are “impact hires”. Impact hires include “Second Chance” employees who’ve been in the penal system as well as employees with various mental and physical disabilities.

Scott Svenson acknowledges that his charity efforts are expensive, but he believes his “enlightened capitalism” provides durable results and pays for itself in the end– and so far, he seems to be correct.

With investment firms fueling their rapid expansion, MOD is creating havens of brand loyalty across the country with their charity and community involvement. MOD’s charity efforts are essentially a virtuous cycle: 1. MOD gets involved in community charity, 2. Consumers flock to the new franchise location, 3. Increased demand funds more charity efforts.

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