See more of the story

On a recent Friday afternoon, the parking lot at the Davanni’s in Edina was three-fourths full. Customers in the shop known for pizza and hot hoagies included construction workers, business types and families. Things appeared normal.

But they were not.

Davanni’s, the Twin Cities-based collection of 21 casual restaurants, is going through a major transformation as it attempts to recapture its original niche as a neighborhood pizza joint while capturing a new generation of customers who don’t like bland and who discard the overtures of national brands.

The Edina location is ground zero for the rehab. Right now, it’s still a work in progress but nearing the end of its $200,000 makeover.

As Davanni’s approaches its 40th anniversary this fall, the family-owned business is attempting to refurbish the brand with changes in the store and on the Internet. There’s a new logo, its website is mobile-friendly, a revised menu has new foods paired with old standards and there soon will be a bar.

Yes, a bar. Davanni’s has embraced the craft beer phenomenon and believes customers will be comfortable saddling up to a bar on a stool for a glass of tap-pulled specialty brew, rather than the weaker 3.2 beer that Davanni’s used to serve. Beer sales already are on the rise.

“Our consultants said you need beer — craft beer,” said Davanni’s founder and CEO Mick Stenson. “They said if you are not going to sell strong beer then don’t sell it at all. Millennials want craft beer.”

Davanni’s is a Minneapolis-St. Paul institution. Yet many locals think it’s part of a national chain.

It was originally known as Pontillo’s Pizzeria when it opened in 1975, modeled after a similar pizza and hot hoagie concept of the same name in upstate New York. The Pontillo family helped Stenson and his partners set up the business and were investors until the early 1980s.

The first location was at Cleveland and Grand streets in St. Paul. That restaurant — called Davanni’s since 1983 — remains in the same location today. Twenty more have opened elsewhere in the Twin Cities, and a 22nd will open in Chanhassen in ­September.

Davanni’s is known for its loyal customers and loyal employees — store managers have been with the company for 24 years on average. Executives insist that the company’s balance sheet is solid and that sales are steady.

But the recession seven years ago sent a wake-up call to management.

“When the economy hiccupped, people started to go out to eat less,” said Davanni’s President Bob Stupka. “Since then, they’ve been slow to come back and more competition has moved in. Sales were holding their own, but status quo doesn’t cut it. You can’t wait for people to come to you. You have to go out for them.”

Last summer, Davanni’s retained the services of Shea Inc., the Minneapolis interior design firm that also provides brand development services.

Shea sent teams out in the field to study the Davanni’s dining experience from the customers’, as well as the employees’ perspective.

“There was no brand personality,” said Tanya Spaulding, Shea’s point person on the project. “People love it and are very loyal, but it didn’t feel like a family-owned restaurant with a story to tell. It felt like a chain.”

Shea recommended more room at the front of the restaurant, lower counters, different seating arrangements, a more prominent dessert menu and beer and wine sales.

“The consumer today is not just going out to eat and put food in their face. They want an experience,” Spaulding said. “With national chains coming in, the question was how do you differentiate yourself and the answer was in their history.”

“Over 40 years, we’ve had to make adjustments. This is just a bigger step,” Stenson added.

Key to Davanni’s successful transition is to complement its baby boomer customer base with the millennial generation, the largest demographic segment since the boomers.

“Millennials admire and support brands that ‘get them,’ ” said Rose McKinney, owner of a Twin Cities-based reputation management firm called Pineapple RM. “It’s more than a brand promise. It has to be a consistent brand action that delivers time and again.”

Brand experts say Davanni’s is taking the right steps to make that happen.

“The local homegrown aspect is important to millennials,” said Jennifer Johnson, an advertising and branding professor at the University of Minnesota. “They also want to eat something that tastes good. Appeal to value, but do not ­sacrifice quality.”

The new logo contains the phrases “legendary pizza” and “original hot hoagies” and notes that Davanni’s has been “Local since 1975.”

Gone from the menu is the BLT and sausage hoagie, both low sellers. New to the mix is an artichoke pesto flat bread pizza. There also are gluten-free options — and more changes are planned.

Not all of the Davanni’s locations will get the same physical makeover underway in Edina.

“Every store will get something. Some more than ­others,” Stenson said. “Our location on Cleveland and Grand is our golden goose. We’re not going to modernize that one.”

As Davanni’s goes through a rehab, it is also experiencing an evolution in ownership.

When the last of Stenson’s three original partners decided to sell his interest, Stenson’s two daughters, Kristy and Katie, stepped up to the plate and each took a 25 percent stake in the company.

Kristy Stenson Silva, 31, is already at work in the company doing marketing. Katie Stenson, 29, will join Davanni’s in September.

“We’re going to try and go another generation,” Stenson said.

David Phelps • 612-673-7269