Sbarro: In Strategy, You Have to Choose

The Wall Street Journal reports today on yet another reorganization at Sbarro, the operator of Italian eateries in malls throughout the US.  Sbarro has already experienced two bankruptcies in its history.  What's the new plan for turning around the company?  They will open neighborhood pizza shops with dine-in, take-out, and delivery options for consumers.  They will focus on pizza.  The firm argues it has suffered in recent years due to substantial declines in mall traffic.  Ok, the strategy sounds readonable so far.  However, then you read that the CEO believes that there is still an opportunity to add mall food court locations.  Huh?  He says, "There are 900 malls in the US with food courts, and we're in a third of them.  But instead of them representing 90% of our sites, I'd like them to represent less than half."

The question, though, is whether a company with limited resources and a history of financial troubles can do multiple things at once. Are the two business models (malls vs stand-alone) fundamentally different? Can you optimize both?  Many companies fail because they simply cannot make tough choices about what to do and what not to do. Sbarro may succeed, but it might increasing its odds by making a choice about what it really wants to be.  Instead, it appears to be falling into the trap of seeing a large market (malls) and not being willing to walk away.  However, it shouldn't fixate simply on the size of that market.  It should consider whether it can run mall and stand-alone businesses efficiently together.