HOW TO TURN RESTAURANTS AROUND PART 4: "BRAND POSITIONING"

Part 4 of BrandTrip Partners Restaurant Chain Turnaround Series

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2017 continues to be one of the most challenging years ever for restaurant chains.  Hundreds of locations have closed with more on the way.  The majority of casual dining is in a seemingly never ending spiral of downward sales and lost transactions, and consumers have been fleeing multi-unit brands for locally owned favorites.

BrandTrip Partners has been publishing a series of articles on turnaround strategies for restaurant chains seeking inspiration and opportunities that can change their fate for the better.  The first three installments included "How To Turn Restaurants Around Part 1:  Exponential Leaps Through New Revenue Channels," "How To Turn Restaurants Around Part 2:  Throughput Acceleration," and "How To Turn Restaurants Around Part 3:  Daypart Expansion." 

BRAND POSITIONING

The fourth edition in our "How To Turn Restaurants Around" series will review historically successful examples of brand positioning by restaurant chains that were once in decline.  However, before we embark on this discussion, it would seem appropriate to define the term "Positioning," assuming not all reading this chapter are marketing scholars or have watched all the episodes of Mad Men where Don Draper drops those incredibly well-distilled ad pitches on clients after getting some sort of magical inspiration during an all night Scotch and cigarette bender.

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Modern day positioning owes itself to one of the best selling business books of all time called Positioning: The Battle For Your Mind by Jack Trout and Al Ries, published in 1981.  However, the concept was published by Trout as early as 1969 in an article titled Industrial Marketing.  In that article, he stated that positioning is a mental device used by consumers to simplify information inputs and store new information in a logical place.  He said this is important because the typical consumer is overwhelmed with unwanted advertising, and has the natural tendency to discard all information that does not immediately find a comfortable (and empty) slot in their mind.  If that was the case then with only a few local radio stations, just three major television networks, and generally only one local newspaper, it is certainly even truer today.

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A MEATY POSITIONING

How Arby's found the answer in the most primal section of our minds

For years, Arby's scrambled trying to find a strategy to communicate who they were after various management teams expanded the menu with a confusing array of bolt-on categories complicating operations and further confusing consumers.   Arby's marketing positioning statements (some call them taglines) like these attempted to explain this unfocused brand with complimentary unfocused messaging:

  • What Are You Eating Today?
  • I'm Thinking Different, I'm Thinking Arby's
  • It's Good Mood Food!
  • Slicing Up Freshness

There are many sarcastic endings that we could write for these positioning statements like "What Are You Eating Today?  Probably Not Arby's," or "Slicing Up Freshness.  Just like Subway, Jimmy Johns, Jersey Mike's, Quiznos, Firehouse Subs, and all the other sandwich places?"  However, we will save you the time and get to the point.  They didn't find a compelling place in the consumers' mind, and whatever menu strategy it was supporting had plummeted them to the lowest value scores in the quick-service category by 2011 as shown below.

In 2014, someone with true vision was able to see the "tree" through the forest.  We say "tree" because that is what you are trying to accomplish when it comes to brand positioning.  You aren't selling a forest, you are selling a type of tree in the forest.  The Arby's forest was filled with many species of trees, if not forests inside of the forest.  Sub sandwiches, roast beef on buns, a Market Fresh sandwich line on sliced bread, sliders, and even gyros.  One might say that they could play the bakery card, but when the majority of the bread comes in frozen the story gets thin and frost-bitten fast. 

What Arby's always did stand for was certainly roast beef.  A home for carnivores.  When all else failed, they could always pull out a promotion on their Beef 'n Cheddar.  It would prop up sales for a time before profits eroded after discounting their signature item.  It was always a short-term decision to buy time until they could find the answer that rarely came.

Fast forward to 2014.  Across the still valuable television screen, ever more valuable Facebook feed, and onto our mobile screens through other various social media and digital feeds came "We Have The Meats!"  Four simple words, one simple message using a bold font with a slight serif on a white background after long shots of the meat and ultimately the sandwich over similar simple white backgrounds.  No bite and smile footage by a group of seemingly happy millennials, no complicated storyline between two people trying to pick each other up, and no talking oven-mitt character/spokesperson.  Just meat with a white background and an unapologetic voiceover celebrating that savory fact.  If you like really flavorful unique cuts of meat, go to Arby's. 

"We Have The Meats" found that comfortable slot in the consumers' mind.  Arby's has been executing this position flawlessly with strong products like Triple Thick Brown Sugar Bacon, 13 Hour Smokehouse Brisket, Smokehouse Pork Belly, and most recently Smoked Italian Porchetta.  The results include 25 consecutive quarters of positive same-store sales and average unit volume growth of 25% over the past four years.

A POSITIONING SHAKEDOWN

A rare move down the positioning ladder drives up revenue double digits

In 2008, Steak 'n Shake had experienced negative same-store sales trends as high as 7.25% annually for the previous three years in every quarter.  However, even more alarming were the transaction losses which were hidden behind the same-store sales reports.  There were quarters where traffic declines exceeded 10% showing drastic loss of overall marketshare.  Consumers were fleeing the brand en masse.

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For those who have never visited a Steak 'n Shake, it is a unique restaurant model, somewhat in the vein of an old-fashioned diner.  When you enter, there is a host that will seat you or you can sit at a counter for an up-close and personal view of the grill.  Guests are waited on by a server.  The big twist is the classic Steak 'n Shake model also has a drive-thru that immediately positions them in the quick-service consideration set whether they like it or not.  The obvious questions begin to come at a rapid pace at this point.

  • Are they a casual dining restaurant? 
  • Are they a quick-service restaurant?
  • Are they something else?  How do you communicate that?
  • In each case, is there a position that has enough scale to drive substantial revenue that isn't already being served by another major brand?

The largest contributor to sales comes from their iconic Steakburgers that are made with thin patties from little pucks of ground beef smashed and seared on a grill to order until a slight crispiness is achieved.  Because of the thinness of the finished patty, the burgers are not particularly large like the "Better Burger" competitors emerging at the time such as Five Guys and Smashburger.  Furthermore, they were not what you would expect from a casual dining experience like Chili's, where the patty is generally 1/3 to 1/2 pound on a premium bun.  Steakburgers were much more in-line with the portion size and appearance of a fast-food burger on a simple white bread bun.

Their fries and shakes are their other heroes even though the menu had crept up to several pages over the years.  The shakes have long been considered the quality leader on the menu with a large portion size, hand-made with a mixer, and served in-store in a tall shake glass.

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Drive-thru orders are slow due to the made-to-order format of the brand.  If you are in a hurry, the drive-thru is not for you.  However, if you had some emails to get through, or a novel to work on, the drive-thru is a great place to multitask while you wait for your order.

In summary, the brand was a sit-down full-service diner with a slow drive-thru on the side that had jacked up prices beyond the perceived value of their more fast-food sized items to try and cover up massive transaction losses.

Remember, this was 2008.  Bankruptcies, the housing crash, and massive unemployment made it a generally overall sad time for a large number of Americans, especially in the Mid-West where the bulk of Steak 'n Shake stores were located.  Dining out for a sit-down, full-service experience was getting crossed off the list as a non-essential need, causing casual dining to take a hit in sales and traffic across the category.  In this darkness, came the light for Steak 'n Shake.

Management took aggressive action to reposition the brand as the everyday-affordable casual dining experience by initially launching "4 Meals For Under $4."  It offered almost any American hit hard by the economy an opportunity to have a quality, sit-down, casual dining experience waited on by a server at a price they could afford on a frequent basis.  Steak 'n Shake provided guests dignity to be with their families around a meal again like they enjoyed before The Great Recession negatively impacted their lives.  Though many would consider this a discount strategy, in reality, it was a very strategic permanent move down the positioning ladder to fill an unmet need.

This long-term strategic brand positioning could be reasonably defended.  TGI-Chili-Bees (TGI Fridays, Chili's, and Applebee's) would not/could not survive on a business model that included such low pricing.  The fast-casual burger players that survive on the mystique of 1/3 pound quality burgers, would not abandon their successful position by lowering prices/margins and adding cost to their model with full table service and increased food costs.  This left the everyday-affordable casual dining position open to Steak 'n Shake, as long as the numbers could work in their favor by stealing sales from casual dining, fast casual and fast food categories.

To make the math work, two things had to happen.  First, commodity costs would need to be lower.  Second, transactions would have to increase significantly, because even though the improved commodity costs would be helpful, "4 Meals Under $4" would likely decrease the average check substantially.

The plan worked.  With a baseline offering of "4 Meals Under $4" including versions of their famous Steakburger or chicken fingers and fries starting at $3.99 every day, transactions steadily grew to an amazing 20% increase by the fourth quarter of 2009.  They also attained an equally impressive 10% increase in same-store sales. 

Steak 'n Shake has continued this positive streak to date with 27 quarters of same-store sales and traffic growth.

 
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THE STRENGTH OF THE LEADER IS THEIR WEAKNESS

Del Taco leverages an underdog strategy to steal share from the Goliath in the category Taco Bell

Del Taco had emerged from bankruptcy in the early 90's and employed a "market follower" strategy, happy to ride the coattails of the giant market leader Taco Bell.  Often, whatever Taco Bell sold, Del Taco would follow by selling a similar item for a slightly less within just weeks.  This strategy worked well with their limited budget as they exited bankruptcy, posting sales gains each consecutive year thereafter.  However, by the time 1999 rolled around the magic of that strategy had worn thin.  Del Taco was headed for negative territory with no compelling/differentiating story to tell consumers to steal them away from the 800 pound category gorilla Taco Bell, let alone fast food category leaders such as McDonald's or Burger King.

In 1999, BrandTrip Partners CEO Tim Hackbardt joined Del Taco to head up their marketing department and work with the management team to get the brand back on the winning track.   Recognizing that the "market follower" strategy had run it's course, Hackbardt and team dove into the brand to discover if any valuable differences existed between these two restaurant concepts headquartered literally just a few miles away from each other in Southern California.  A simple notepad tally quickly revealed a variety of key brand pillars that spoke to the emerging consumer value for fresh ingredients.  Additionally revealed was a solid list of well-performing products already on the menu that did not exist at Taco Bell.  It was enough ammunition to begin to tell a solid story of brand differentiation.

The trick would be how to tell the story.  How to leverage those brand differences to make the message memorable and clearly define why Del Taco was different and better than Taco Bell.  The answer came quickly during the next drive up the 405 freeway.  As Hackbardt rode past the Taco Bell headquarters, he saw the perfect backdrop to shoot a series of compare and contrast "David vs. Goliath" commercials for a hard hitting challenger brand campaign.  What better set could he hope for than a monolithic tower of cold corporate glass and steel with the Taco Bell sign mounted atop it for his convenience.  No post production after effects graphic work required. 

In 1999, Taco Bell did virtually nothing fresh.  Shredded cheese came in a bag, pre-cooked chicken came in a bag, pre-cooked steak came in a bag, dehydrated beans received hot water to make them beans again.  All this was part of the much celebrated "K Minus" program rolled out years before, to decrease kitchen labor costs and improve consistency.  "K Minus" was modern day big-brand food engineering at its finest.  This would be the weakness of the Taco Bell "Goliath" brand that would be attacked over and over again by the much smaller Del Taco "David" brand. Additionally, Del Taco would regularly feature signature menu items that could not be found at Taco Bell. 

Key Del Taco freshness pillars included:

  • Chicken grilled fresh every hour.
  • Slow cooked beans made from scratch for 2.5 hours.
  • Aged 40 pound blocks of cheddar used to freshly shred cheese throughout the day.
  • Salsa made fresh every day.
  • Steak grilled fresh every hour.

To complete the "David vs. Goliath" storyline, the advertising agency developed a Del Taco spokesperson named "Dan From Del Taco."  Dan was the "everyman" character.  A little guy trying his best to compete against the big corporate giant.  The underdog you can't help rooting for.

The results were immediate and changed the perception of the brand.  Without any additional media spend, the creative and messaging alone drove the brand from being a small regional player to advertising awareness levels equal to the national competitors.  Del Taco brand awareness rose an amazing 100%.

Sales improved as well, driven primarily by transactions, but also increased average check as the brand now had grown the credibility to offer more expensive quality based menu items.  During the time that Hackbardt and team led the brand with this strategy, Del Taco enjoyed breaking all historical sales, transactions, average check, and profit records.  Every month featured positive same-store sales for 44 consecutive months and average unit volumes increased 33% or $330,000 to $1,200,000.

a hard look in the mirror

If your brand is stuck in a slow (or fast) death spiral, re-positioning your brand might be a serious consideration.  Here are a few questions you might want to ask yourself as you take a good, long, honest look at the brand in the mirror.

  • Results Today - Does your brand truly have a unique and compelling slot in the mind of the consumer obtaining the results your company desires today?
  • Results Tomorrow - Does your brand truly have a unique and compelling slot in the mind of the consumer that will secure the results your company desires tomorrow?
  • Potential Better Position - If it doesn't, is there a space available that is not claimed by another brand that can drive those desired results, or even better?
  • Level of Change - How much will you need to adjust/change your brand to claim that space?
  • Resources - Do you have the resources, or can you get the resources, that are needed to claim that space in the mind of the consumer?
  • Support - Will your team/company do what it takes to claim this space?
  • Competitive Claim - If you don't claim the space, will a competitor or emerging competitor claim it and how will that impact your business?
  • Non-Claim Results - If you don't claim the space, what will be the short and long term results for your brand?
  • Employee Plan B - If those "Non-Claim Results" were predicted to be negative, is your resume and LInkedIn profile up to date and optimized? 
  • Ownership Plan B - If those "Non-Claim Results" were predicted to be negative, have you consulted with a bankruptcy firm in recent months or brokerage advisor to sell your company?

MORE RESTAURANT TURNAROUND RESOURCES

Additional articles in the BrandTrip Partners "How To Turn Restaurants Around" series that you might enjoy can be found below:

HOW TO TURN RESTAURANTS AROUND PART 3: "DAYPART EXPANSION”

Part 3 of BrandTrip Partners Restaurant Chain Turnaround Series

2017 has delivered more of the same tough times to restaurant chains as were likewise bestowed upon them in the second half of 2016.  The store closures have accelerated to a level not seen since The Great Recession in 2009, the C-suite continues the revolving door and shuffling of chairs, and the negative same store sales trend has not discriminated against any category.  Additionally, activist investors are swooping in to feed on the bones of public companies in the midst of the chaos as well as private equity firms bottom feeding for deals.

BrandTrip Partners has been publishing a series of articles on turnaround strategies for restaurant chains to provide inspiration, and opportunities, that can calm the seas at restaurant brands in need of a new navigational heading.

The first article, "How To Turn Restaurants Around - Exponential Leaps Through New Revenue Channels," provided insights on how to look outside your current business model and find new sales streams.  Successful new revenue channels are able to grow the value of your brand with exponentially accelerated results, significantly improving the overall valuation of your enterprise with long-term sustainable growth.

Our second article, "How To Turn Restaurants Around - Throughput Acceleration," explored the powerful advantages of attaining more transactional behavior in a given amount of time.  The innovation tends to be accomplished through technology enhancements, process improvements, or physical plant alterations.

DAYPART EXPANSION

This third edition will cover the opportunity to expand your revenue through adding sales in a daypart that you currently do not offer, do not normally excel in, or believe you can gain significant share in well beyond your current volume.  However, it is important to point out this strategy can have substantial risk and winning is less than guaranteed.  We will not only share successes but also some failures by major restaurant chains in their efforts to achieve Daypart Expansion enlightenment and prosperity.

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JACKED UP LATE NIGHT

Embracing the darkness

For those who don't live in a Jack In The Box market, this brand has held a strong position in the consideration set for late night drive-thru dashboard dining for well over thirty years.  Those getting off of second shift, students studying late, and partying/questionably under the influence grazers hungry to re-balance their chemical state have supported the cause ordering burgers, fries, shakes and their infamous "greazy" deep fried Jack In The Box tacos.  Late at night there is truly nothing that hits the spot better than the Jack in The Box deep fried taco.  The shell, and meatish paste like filling, is pre-frozen and together deep fried upon receiving an order.  It is then garnished with shredded lettuce and a slice of American cheese before being inserted into a comfortable paper sleeve for your heart-stopping pleasure.

However, with the ever important need of additional sales, strong competitors such as Carl's Jr., McDonald's and Taco Bell began to rapidly expand locations that were open 24 hours in the heart of Jack In The Box core Western U.S.A. markets.  The result for Jack In The Box was a gradual erosion of sales that mounted up to something significant in an industry that can define winners, and losers, by only a few percentage points of same store sales performance.

Few competitors, other than Taco Bell, put little more marketing behind their extended hours other than signs in the windows.  Jack In The Box decided to double down to regain their lost footing in the late night zone with not only a well-targeted marketing campaign, but also a smart product strategy.

Although the company will not publicly admit it, the launch also coincided with the Colorado Amendment 64 which legalized recreational marijuana use in the state in 2014.  Jack In The Box clearly spoke to this consumer with their creative and their product strategy.  Television commercials featured storylines of half-baked youth interacting with a mind altered puppet version of their famous spokesperson CEO/clown Jack.

The product strategy similarly featured a set of boxed "Munchie Meals" that were smartly only available after 9:00 p.m..  The messaging was supported across all marketing elements with the tagline "The Party Starts At 9PM" including execution at the restaurants with staff wearing special t-shirts and even music playing in the drive-thru lanes to change the environment/experience.  Notice also that the price of the Munchie Meals is $6.00 which is greater than their average guest check.  When in the mood for munchies, the bet was that price was less of a deterrent that satisfying the need.

Through the haze, the stoners took notice and drove positive same store sales for the brand.  Previous to instituting this strategy, Jack In The Box was in a downward spiral for same store sales.  As you can see below, this was the start of an impressive turnaround for the brand noting that the program began in late September of 2013.

Investors got a contact high from the performance of the strategy and subsequently drove the stock price up over 100% by the end of 2014.  Interestingly, with all this success, no other brand came out to challenge them and take a piece of this clearly valuable market.

Jack In The Box Stock Performance 2012-2014

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TACO BELL WAKES UP & SMELLS THE MONEY

A failure in the 90's, Taco Bell finally rings up sales with breakfast

There is a risk you take when embarking on tapping into the Daypart Expansion strategy.  Jack In The Box had at least a reputation for being open late/24 hours.  Thus, if they decided to expand their marketing focus into that daypart, there was some credibility.  However, if your brand decides to have the doors open for the first time during a particular daypart, it can be much more difficult to convince your audience you are a believable provider that deserves their dollar. 

The breakfast daypart has taught this valuable lesson to more than one restaurant chain over the years.  Wendy's tried it in 1986 and failed miserably (Read:  How Wendy's Botched Breakfast LA Times October 5th, 1986) vowing to never go down that path again because of the memorable pain it left throughout the franchise organization.  How could it have gone wrong?  McDonald's was a burger place successfully selling breakfast, so why not Wendy's?  They even had a television commercial with singing eggs!  Even with the Madison Avenue singing egg creative that likely won an award for stop motion animation, founder Dave Thomas pulled the plug and called it a "mistake."

Never say never in the restaurant industry.  Wendy's once again threatened to roll breakfast out in 2013 only to cancel that plan and retreat to their happy place filled with square shaped burgers, baked potatoes, and dairy treats.

Taco Bell also received a fatal blow to the bottom line with breakfast in the early 1990's.  The idea was simple.  They would take their extremely successful value menu strategy of 59, 79 and 99 cent items that were producing 10% to 15% same store sales increases annually and apply it to breakfast.  However, the consumer did not view the quasi-Mexican concept Taco Bell as a place they would go for breakfast.  Salsa had not become more popular than ketchup yet.  Back then it was still a meat and potatoes kind of world.  The lackluster sales and low prices never produced enough volume to cover the additional labor and extra expenses required to open earlier.  Plus, they diverted so much of the marketing budget to the breakfast campaign, they had to cut back media to promote their bread and butter lunch daypart.  That decrease in focus hurt their overall sales as their competitors' share of voice stole Taco Bell's lunch money.

Fast forward 20 years later to March 27th, 2014.  Most of the United States has eaten a breakfast burrito at some point. McDonald's has a breakfast burrito on their menu along with packets of salsa they will gladly hand you out the drive-thru window.  The scary idea of Mexican fare for breakfast no longer exists.  Taco Bell is also considered less of a Mexican brand at this stage in their history, serving a wide variety of quasi-Mexican and gimmicky handheld concoctions of all shapes, colors, and fillings.  Use of the breakfast daypart has also increased substantially by consumers so there is plenty of share to be had if you get up early enough to take it.

The results were substantial.  They immediately turned around a negative same store sales pattern to lead the major fast food chains in growth.  They had the credibility, they were able to take advantage of the upswing trend in consumer away-from-home breakfast, and they had the marketing muscle to drive it without losing share of voice supporting their core dayparts.

2014 Taco Bell Same Store Sales Trend

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STARBUCKS EVENINGS

These are not the drugs you are looking for

A few years ago, Starbucks rolled out "Starbucks Evenings."  BrandTrip Partners was asked by an adult beverage firm to check out the program as they were thinking of bringing us in with them to help Starbucks with the program.  Since it was likely that a glass of wine was in our future the next few evenings, we shifted our venues of choice to the local Starbucks locations that had been offering the program for beyond a year so we could see if adoption had taken place. 

Over the course of our sipping and observing, we predicted that this program would likely fail.  During each visit, we were the only people drinking wine or beer.  Concurrent discussions with Starbucks managers confirmed that adult beverage product mix was low.  The food portion of the program seemed to have a little merit, but the adult beverages were not selling enough to warrant the cost of the permits, storage, menu space, training costs, glassware, etc..

What was clear was the fact that consumers come to Starbucks to get caffeine.  Students studying, small club meetings, frazzled locals sharing their woes with supporting friends, and wary online dating first-time meetings in a bright public place all required them to be alert and engaged.  Adult beverages were contrary to the drug of choice for getting the job done.  Coffee, coffee, and more coffee was why they were there.  As you could imagine, after reviewing our report, the adult beverage firm did not invite us along for the presentation.

Starbucks evenings died a slow death, and it was announced earlier this year the plug on beer and wine at the caffeine filling station had been pulled.

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PANERA + PIZZA DOES NOT = DINNER

An expensive failure to expand into the dinner daypart

In 2006, Panera attempted to break into the dinner daypart with a special pizza that was only offered in the evenings.  If successful, the strategy would drive sales with a higher average guest check and any new transactions in the dinner daypart would be all incremental since traffic was typically extremely low due to their heavily sandwich based menu.

The Crispani pizza featured a selection of six recipes including Tomato & Fresh Basil, Pepperoni, Roasted Wild Mushroom, Sweet Sausage & Apple, Peppered Chicken & Rosemary, and Three Cheese.  It was made with fresh dough, brushed with olive oil and baked in special Panera stone deck ovens creating a thin, crisp crust.

The marketing spin included in their press release was as follows: "Panera's foundation is in artisan bread, so it was a natural fit for us to create a pizza that is distinguished by its fresh-baked, handcrafted crust and enhanced by select, high-quality fresh toppings," said Dan Kish, director of product development for Panera Bread and former dean of the Culinary Institute of America.

Unfortunately, consumers who are interested in having pizza for dinner usually go to a pizza place or order it for delivery to their house.  They don't go to a sandwich place.  The program was discontinued a year and a half later with this quote from their CEO:  "As with everything, we took great learning from the failure of this product," he said. "We know that despite a great product, we simply did not have the marketing muscle or the staying power to engage the customer such that they saw Panera as a place for pizza."

DAYPART EXPANSION TAKES A VILLAGE

When successful, Daypart Expansion can be a powerful sales driver.  If not, it will be a painful and expensive exercise that could be a major distraction to improving your business as it requires multiple departments to invest time and money towards marketing, culinary, equipment, construction, training, and all the meetings that are connected to any large initiative.  Before embarking down the Daypart Expansion road, here are a few areas of concern for your organization to discuss:

  • Size of The Prize - Is there a large enough market to warrant the multi-departmental investment of time?
  • Brand Cred - Will the target market be convinced that your brand has the credibility to deliver in that daypart?  Can it fit with/enhance your brand story and positioning?
  • Marketing Power - Do you have the marketing resources to drive trial and repeat business?  Just opening the doors and hoping guests will find you is usually a sure failure.  Daypart Expansion needs care and nurturing over time, but the C-suite in our industry tends to have little patience for that.  Results will be required early to convince management that the exercise has merit to continue to feed it with resources.
  • Development Resources - Does your brand have the internal resources that have the time/experience to develop the plan or do you need temporary outside professional help to drive the program forward while everyone continues to keep focused on their day jobs?
  • Supply Chain - Can you deliver a sustainable supply of product needed to execute the new Daypart Expansion?
  • Financial - What is the outcome needed to cover the costs of supporting the program?  Daypart Expansion efforts often have new costs associated with them such as increased labor, utilities, equipment, permits, signage, insurance, etc..
  • Execution - Will your brand be able to execute a Daypart Expansion?  Will the various departments in your organization support the program, or are they non-believers out to make a point?  If you have franchisees, will they participate?
  • Sustainability - Can your brand sustain support for the Daypart Expansion?  Or, is it something that will become invisible once a new shiny object is presented in front of your management team?

MORE RESTAURANT TURNAROUND RESOURCES

Additional articles in the BrandTrip Partners "How To Turn Restaurants Around" series that you might enjoy can be found below:

HOW TO TURN RESTAURANTS AROUND PART 2: "THROUGHPUT ACCELERATION"

Part 2 of BrandTrip Partners Restaurant Chain Turnaround Series

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The past few months of 2016 have delivered even more gloomy news for restaurant chains.  The store closures continue to mount, a new crop of bankruptcies have been filed, the C-suite is rotating like a centrifuge, and same store sales declines are affecting all categories including the industry darling fast casual segment. 

To help navigate these stormy waters, BrandTrip Partners is publishing a series of articles exploring turn around strategies for restaurant chains.   The first article, “How To Turn Restaurants Around – Exponential Leaps Through New Revenue Channels,” provided insights on how to look outside your current business model to find new sales streams.  Successful new revenue channels are able to grow the value of your brand with exponentially accelerated results, significantly improving the overall valuation of your enterprise with long term sustainable growth.

THROUGHPUT ACCELERATION

In this second installment we will examine strategies to improve throughput.  “Throughput Acceleration” simply allows the movement of more transactional behavior in a given amount of time.  The innovation tends to be accomplished through technology enhancements, process improvements, or physical plant alterations.  In their most successful implementations, Throughput Acceleration can be as highly impactful as the double-digit exponential leaps found through new revenue channels explored in our previous article.  A more typical result drives solid single digit results.

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DRIVING-THRU MORE TRANSACTIONS

One of the secrets behind Starbucks amazing record of sales growth

Everyone is aware of the amazing growth story of Starbucks.  However, just before The Great Recession, they slowed down substantially in the United States with negative sales and transactions in addition to store closures.  Their stock naturally reacted with a huge dive. 

To make matters worse, there was a little company called McDonald’s that overnight opened their McCafe platform in approximately 14,000 locations throughout the United States instantly becoming the largest provider of lattes in the country.  If you look at history with McDonald’s, they do well when they identify a major trend and offer a decent product at a lower price delivered more conveniently.  McCafe was the text book example. 

A critical component of the McCafe platform that stole market share from Starbucks was the drive-thru.  Back then, you were required to wait in that painfully long slow line at most Starbucks locations.  However, at McDonald’s you didn’t even have to get out of your car. 

Eventually, Starbucks did make a comeback.  It wasn’t because of the infamous seasonal PSL (Pumpkin Spiced Latte) and it wasn’t because of some other new chocolatey, caramely, creamy coffee concoction.  It was because of a number of initiatives, but the one that clearly put big money in the bank was the drive-thru.  Why?  Because it drove double digit sales with Throughput Acceleration.  In 2006, as reported in the Wall Street Journal, Starbucks reported that their locations with a drive-thu did 30% more volume than stores without them.  Fast forward to a 2012 Motely Fool interview with Starbucks CFO Troy Alstead where he shares learnings from the culling of locations in 2008 and the plans to increase their portfolio from 40% of all locations featuring drive-thrus to 60%.  The next year, Starbucks CEO Howard Schultz was quoted in a Nation’s Restaurant News report with these insights:

“Drive-thrus create incremental revenues and profits compared to traditional stores and represent a fast-growing and highly profitable format for Starbucks, comprising just over one-third of our U.S. company-operated stores but contributing nearly 45 percent of our U.S. retail profit,” Schultz said.

With these kinds of numbers, Starbucks could simply use this single tactic to continue to scale substantial positive volume and profits for years to come as long as the real estate sites allowed it.

In recent months, many other chains have announced joining the drive-thru club.  Friendly’s reported that they can generate more than 25% in additional sales when they have a location that includes a drive-thru.  They are simply leveraging the physical plant to serve more guests.

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DISCONNECTING THE PHONE TO ACCELERATE SALES

Domino's relentless focus on any device ordering

There really is no better technology driven Throughput Acceleration example than what Domino's has done over the past few years with their “AnyWare” ordering obsession.  They championed the virtually unlimited capacity to take online orders so much that they even produced advertising telling customers not to call them anymore to place orders.  Domino's literally admitted they are bad at taking orders, thus offsetting their labor costs to strictly a production and delivery force in the restaurants.

Additionally, their relentless focus on attaining as close to a zero click transaction as possible is keeping them ahead of their competitors and crushing the independent pizza players.  They are mastering ordering opportunities across everything from the mobile app to message bots delivering the ability to order their products with whatever communication device you may be near.  Ordering pain points have almost vanished for Domino's customers. 

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This Throughput Acceleration technology innovation has produced 22 consecutive quarters of same store sales increases and has raised the value of their stock over 500% in the past 5 years!  It wasn't because of a new pizza, a discounted "2 Fer" deal, or a movie release tie-in.  The primary innovation was Throughput Acceleration through ordering technology supremacy.

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R.I.P. TO WAITING

How Panera eliminated waiting, lines, and competition

How beautiful is the Panera 2.0 dine-in platform?  You walk in, sit down at any table you want, order on your phone, input the table number, send the order, and food magically appears at your table moments later.  No standing in line.  Isn’t that what we all want?  Isn’t this how life should be?  We are shocked that no other significant quick service or fast casual brands have done this yet!

Hello restaurant industry!  It’s almost 2017!  Do this and you achieve nearly 100% order accuracy, 100% happy guests, 100% the correct change, 100% etc.  The technology exists.

Why should I stand in that line at Shake Shack, IN-N-OUT, or any other restaurant line?  There is absolutely no reason for this pain point to exist anymore at any restaurant chain.  Just bring me what I want to where I am, already pre-paid.  This is, of course, is not to mention that this same technology at Panera Bread allows for take-out orders and delivery orders too.  You can also otherwise skip the line and use a kiosk ordering tablet. 

Case in point is a quote from Blaine Hurst the EVP and Chief Transformation and Growth Officer in a Nation’s Restaurant News interview earlier this year.  “One, it is more at [customers’] pace. Some people like to browse; some people want to go faster. In addition, at a busy peak I can get more people through a busy café with the same number of cashiers. Our 2.0 cafés have a disproportionate amount of sales because we’ve freed up capacity at lunch.”

In other words, Blaine is lovin’ his transaction drivn’ and sales climin’  Throughput Acceleration platform.

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THE PROCESS HACK

BJ's mobile app redefines casual dining ordering and payment process with streamlined technology

In 2014, BrandTrip Partners CEO Tim Hackbardt was part of the team at BJ’s Restaurants that launched the first casual dining restaurant chain mobile app and online ordering platform that allowed you to order your meal for a dine-in occasion.  The cumbersome process of placing your order and paying for it in a sit-down environment can be fraught with a long list of pain points depending on how efficient your staff is during that shift.  The BJ's team focused on those irritations and applied the appropriate pressure to the age old casual dining ordering and payment wounds.

The new process allows you to place the order on your phone, show up (all mobile orders automatically get you placed on the preferred seating waitlist by the way), get seated and the food starts coming right out.  More importantly, when you want to leave, press a button on the mobile app and your bill is paid.  Done and done. 

Note:  The fact that the CEO of BJ’s was also a board member at Domino’s should not be lost in this conversation.

No longer did you ask the server for the bill, wait for the server to come back, wait for the server to come back to get the credit card and bill, and wait for the server to finally bring back the credit card and bill for you to sign.  That entire exchange was eliminated, providing a more pleasant check out experience for the guest and faster table turns that results in more sales volume and also more tips for the servers at the end of the night.

CEO Greg Trojan explained it well in an interview with Nation's Restaurant News during the rollout in 2014, “It’s really a paradigm shift” for casual dining, he said. “If you take out the front-end time (when people peruse the menu and order their meals) and take out the time spent waiting for a check, our experience becomes more of a 35-minute experience, as opposed to close to an hour. But you don’t feel rushed.”

Fast forward now to almost 2017 and still no other casual dining chain has introduced that speed or convenience for their dine-in guests.

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A FASTER PHYSICAL PLANT

Johnny Rockets clamps down on the slow flat top grill to speed up hamburger production

Like Starbucks, Johnny Rockets was interested in adding on those double digit drive-thru sales.  However, since the inception of the brand they had been flipping burgers the old fashioned way on the classic flat top grill.  This equipment was not conducive to the expectations of a customer that the drive-thru is the high speed lane to getting fed.  They needed to evolve their physical plant to take advantage of the expansion opportunities they wanted for the brand both domestically and internationally.

The answer was blowing up the kitchen.  The new high efficiency kitchen now features a clamshell style grill that reduces the cooking time down to only one minute.  They also made changes to be able to make shakes faster and other process improvements. 

The brand can now grow around the world with many more real estate opportunities than ever before and achieve higher revenues than the previous business model, thanks to their new Throughput Acceleration based kitchen design.

THROUGHPUT THROUGH TIME

Much of restaurant history is littered with successful Throughput Acceleration milestones that took market share away from competitors or launched new categories and brands.  Fast food, fast casual, Domino's 30 minute delivery guarantee, the drive-thru, and online ordering are just a few examples that have delivered substantial financial rewards for these type of improvements. 

Less well known are the countless programs behind the doors of restaurant chains that have simplified operations shaving seconds, and sometimes minutes, off of cook/preparation times to drive more transactions.  Fast food knows that just a few more cars through the drive-thru can result in significant sales comps.  Casual dining knows that table turns do the same. 

By focusing on the opportunity to achieve more transactional throughput by leveraging technology enhancements, process improvements, or physical plant alterations you too could easily exceed the industry average and set your brand up for many years of success.

MORE RESTAURANT TURNAROUND RESOURCES

Additional articles in the BrandTrip Partners "How To Turn Restaurants Around" series that you might enjoy can be found below:

BrandTrip Partners Holds Red November Wine Party @ BK Cellars Urban Winery

On November 5th, friends of BrandTrip Partners gathered at BK Cellars Urban Winery in Escondido, California for an evening featuring red wine and red attire. 

The highlight of the evening was a blind wine tasting contest.  Participants tasted four red wine pairings from masked bottles, read descriptions of each wine in the pairing and then were required to guess which wine was which.  The person who matched the most wines correct would receive a full case of any BK Cellars wine to take home while second place could choose three and third place was able to select one.

No entrant into the contest guessed all correctly, but four guests did guess six out of eight wines.  To break the tie, the guessing game continued with a challenge to determine how many M&M’s were in a sealed jar. 

Congratulations to Sharon Simmonds from Horizon Food Group as she was the most skilled oenophile and M&M guesser of the evening.  She took home a full case of BK Cellars wine of her choice.  Jeff Schroeder, of Jack In The Box and Coffee Bean & Tea fame, got particularly lucky as he placed second and his wife Ruth placed third netting them four bottles of the limited production vino.

Sharon Simmonds from Horizon Food Group wins the blind wine tasting and takes home a full case of BK Cellars wine.

Sharon Simmonds from Horizon Food Group wins the blind wine tasting and takes home a full case of BK Cellars wine.

Jeff Schroeder of Jack In The Box and Coffee Bean & Tea fame take home four bottles of BK Cellars wine as they collectively placed second and third.

Jeff Schroeder of Jack In The Box and Coffee Bean & Tea fame take home four bottles of BK Cellars wine as they collectively placed second and third.

BTP CEO CONTRIBUTES TO NATION'S RESTAURANT NEWS ARTICLE ON 2016 SALES CHALLENGES FOR RESTAURANT CHAINS

Excellent article by Jonathan Maze from Nation's Restaurant News on how consumers are making their restaurant choices today and opportunities for chains including a few thoughts our CEO Tim Hackbardt shared with him.  Click Here To Read Article >>

How To Turn Restaurants Around PART 1: "Exponential" Leaps Through New Revenue Channels

Part 1 of BrandTrip Partners Restaurant Chain Turnaround Series

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2016 has turned ugly for a large number of restaurant chains with dramatic sales declines, store closures, rising bankruptcies, and the eventual rotation of the C-suite.  Unfortunately, it appears that this pattern in the restaurant industry will not end in the near future.

In this first installment of a series exploring turnaround strategies, we will review examples of the most dramatic way to increase sales at your restaurant chain.  The ability to develop a successful strategy to add additional revenue channels can drive the business far above any other program.

Are You Mathematically Wasting Your Time?

Often, when we are working on restaurant chain turnarounds, we run into brands stuck inside their own box.  They have tried various initiatives within the confines of their current business model with little or no success.  These programs are usually targeted at an already successful daypart with heavy transaction counts.  This strategy automatically creates a barrier to success due to challenges around the ability to serve more orders through the current service model and physical plant during that time frame.  Examples include:

A casual dining brand with lines out the door at dinner tweaking their top selling pizza.

A fast casual brand packed at lunch adding a new cheese to the assembly line of their create your own burrito concept.

A quick service coffee brand that can hardly keep up with orders in the morning offering new single origin Hawaiian beans.

Yes, product quality and innovation are important.  In fact, at times they can actually be revolutionary which we will cover in a future installment of turnaround solutions.  However, will it get you a 10% or 20% leap in sales? 

If your brand is at capacity in the daypart you have targeted with product/menu initiatives, it will be mathematically challenging to make that leap.  If you are able to achieve increased consumer visits at that level, it could produce an opposite financial effect in the months to come unless you have also addressed your throughput issue with some sort of technology, equipment or service innovation.  Long waits for tables and food can easily turn guests away never to return.

Focus On Sustainable "Exponential" Value

Leadership at restaurant brands need to ask themselves if these kinds of time and resource consuming initiatives will really create exponential value for your brand?  Will they significantly increase sustainable transactions and sales?  Will they attract new investors/franchisees to help accelerate brand expansion?  Or, are these programs going to produce down, flat, single digit incrementality or short term false positives through discounting and limited time offers.  The “Limited” in Limited Time Offers is generally self defining from the start.  Should your team be focused on creating “limited” results, or sustainable exponential brand value?

One of the opportunities we look for when we receive an assignment to help craft restaurant chain turnarounds is revenue channel expansion.  We look outside their current business model to find new sales streams that will significantly improve the brand from a continuous sales, transaction share, brand awareness and unit growth perspective.  When you can successfully execute a disruption to your current structure that delivers all four, you are able to grow the value of the brand with exponentially accelerated results, significantly improving the overall valuation of your enterprise with long term sustainable growth.

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THINKING OUTSIDE THE RESTAURANT BOX

How Coopers Hawk broke the classic restaurant business model

One of our favorite industry examples of a brand that turned the model upside down is Cooper's Hawk Winery & Restaurants.  The traditional restaurants in their category like McCormick & Schmicks, Il Forniao, Del Frisco’s Grille and Brio Tuscan Grille all have their positives and unique menus, but all follow relatively the same model.  Dinner is where they make their volume, the bar is an important contributor to profit, happy hour gets in those who can’t regularly afford the main menu, and private events are critical to make their year.  With the right location, lunch can be a strong contributor and about half offer catering.  Strip away the style of cuisine, service, and ambience and you will find that the raw revenue streams inside their business models are very similar sans those who cater.

Cooper's Hawk broke this category mold, stepped on what was left, and then drove over the remaining shards with a truck.  Here's how their model differs:

Proprietary Wine – The only wine you can purchase at the 24 Cooper's Hawk locations is….Cooper's Hawk wine.  Think brewpub on upscale steroids with wine.  Over 300,000 cases of wine was projected to be produced in 2015 by Cooper's Hawk to support the 24 restaurants and other channels of distribution.  Every penny of wine sales in the restaurant goes to Cooper's Hawk.  Not to Gallo, Constellation, Trinchero or any other wine conglomerate.  Granted, running your own winery is not as easy, or inexpensive as it looks on a strategy deck.  However, they have figured it out giving them a proprietary beverage menu that makes the brand a destination.  The wine is also not subject to commoditization or pricing pressures often experienced by operators featuring popular branded retail wines.

Napa Style Tasting Room & Retail Outlet – A business inside a business, the Cooper's Hawk tasting rooms offers just that…a taste of Cooper's Hawk.  Each Cooper's Hawk has a separate tasting room available to anyone of legal drinking age at any time during business hours.  They have created a way for consumers to frequently sample a taste of what the brand has to offer in an affordable manner as opposed to limiting guest brand interaction to only the typical infrequent full sit down experience.  Starting at just $7 for eight pours, happy hour is basically all day long and a unique experience you can’t find anywhere else in the category.  You can also purchase wine and wine supplies from the tasting room and take the experience/brand home.

Wine Club – Cooper's Hawk has one of the largest wine clubs in the country sending out monthly shipments of their proprietary vintages, varietals and blends to over 200,000 members.  This is very significant.  What other restaurant chain has guests paying them to send a reminder of the brand experience to their home every single month and drinking it?  The revenue flow is game changing and the brand awareness value is priceless.

Wine Gift Sets – Talk about exponential, they went beyond the stale gift card and created gift sets for both individuals and even a corporate gift section leveraging their massive wine club list.  Again, an exceptional way to create a non-traditional restaurant revenue stream from guests across the country.  Few other restaurant chains are lucky enough to have their consumer base pay to broaden the awareness of their core menu offering.

 
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DELIVERING RESULTS

Jimmy John's delivers higher average unit volumes through doing what others won't exceptionally well

Jimmy John's is another great example.  Let’s just list them:  Subway, Firehouse Subs, Quiznos, and Jersey Mike's.  They are all Jimmy John's competitors and none of them have delivery let alone the “Freaky Fast” delivery that baffles the minds of most operations executives trying to figure out how they do it that fast. It is simply freakin' amazing.

Jimmy John's results are in the numbers.  According to Nation's Restaurant News 2016 Top 200 Report, the average volume for a Jimmy John's is $875,700 which is more than double the $425,000 average unit volume for the big national competitor Subway.  Even their strong, but not as geographically saturated, competitors Firehouse Subs and Jersey Mike's have over 20% less volume at $717,000 and $709,000 respectfully according to the same report.  Quiznos trails all with only a $308,000 average unit volume and little to help it climb up to the others as it doesn’t even have online ordering at all their locations let alone a slick mobile ordering app and delivery system like Jimmy John's.

The bottom line:  Jimmy John's is single additional revenue channel has provided them with a superior business model that drives best-in-class revenue.

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A WHOLESALE IDEA

Rowster Coffee micro roasts a host of quality sales channels

On a smaller scale is a local coffee brand in Grand Rapids, Michigan that is showing big brands how it can be done.  Rowster is a one location brand on Wealthy Street.  Make no mistake, IT IS a brand.  When you enter Rowster, you have entered a serious coffee zen zone.  The roaster is right in front of you and there are sacks of beans by the back door.  It’s that fresh.  See previous BTP article on Rowster:  The Starbucks Killer?  Real Coffee Cred?

What Rowster has done to innovate beyond the average coffee house is to make their brand accessible through other channels, get paid for it, and reap the rewards from the expanded brand awareness through the consumer base of their partners.  They have a thriving wholesale business to local restaurants, cafes, businesses, and yes…breweries.  Elk Brewing thought so much of Rowster Coffee, that they now brew barrels of Rowster Coffee Porter year-round.  How cool is that for a coffee brand?  Take note big bean guys.  Is there a Starbucks Ballast Point Stout in the future?  Tully’s Rogue Brown Ale? Deschutes Peet's Moss Porter?

Exponential Channeling

One of the reasons you don't see brands changing their business model is their view of risk.  Adding new revenue channels is not usually easy.  It takes hard work by a team of individuals that are not distracted by the day to day current business conditions.  It also generally takes financial investment to change a business model which raises the risk in the eyes of conservative ownership. 

The question brand leadership needs to ask is "What happens if we keep doing the same thing?"  If the answer is "nothing", and your brand is perishing, then your risk has been lowered substantially.  Even if your brand is thriving, opening up new revenue channels has the opportunity to exponentially accelerate your success before another brand steps in and takes what you have away from you.

MORE RESTAURANT TURNAROUND RESOURCES

Additional articles in the BrandTrip Partners "How To Turn Restaurants Around" series that you might enjoy can be found below:

BrandTrip CEO Completes France Cycling Challenge With Big Numbers Despite Weather Setback

BrandTrip Partners CEO Tim Hackbardt finished his goal to climb 10 of the most famous Tour de France mountains in eight days with a little improvisation. 

On July 31st, as he was beginning to ascend the final switchbacks on Col du Galibier, three consecutive thunder/lightening storms took him off the road scrambling for shelter as described in his blog entry Epic Turns Ugly & Sheep Attack.  Due to the dangerous weather conditions, he was not able to complete the climb.

However, to keep his promise of 10 big mountain ascents he dug deep and went big for a "make-up" climb.  On his last day, he attacked the famous 21 switchbacks of Alpe d'Huez and did a double for a total of 50 miles, 9,306 feet of climbing and 42 switchbacks on the iconic mountain.

Final totals for training and the challenge trip are as follows: