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

Part 3 of BrandTrip Partners Restaurant Chain Turnaround Series

Our third chapter 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 meat-ish paste like filling, is pre-frozen and 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 same-store sales percentage points.

Besides heavy marketer Taco Bell, few competitors went beyond signs in the windows to promote late-night.  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 was $6.00 which was greater than their average guest check.  The bet was that the need to satisfy the munchies was more important than the price.

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 in the chart below, the September 2013 program start date was the beginning of an impressive turnaround.

Investors got a contact high themselves 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 at least had 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, failing miserably. (Read:  How Wendy's Botched Breakfast LA Times October 5th, 1986) The memorable pain throughout the franchise organization mad them vow to never again go down that path. How could it have gone wrong? McDonald's was a burger place successfully selling breakfast, so why not Wendy's? They had a television commercial with singing eggs for goodness sake! 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.  Simply run the value playbook in the morning and undercut the competition with a category pricing advantage.

Unfortunately, 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 normally invested in promoting 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.  By then, 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 through 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.  Consumer use of the breakfast daypart has also increased substantially, 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."  I was asked by an adult beverage firm to check out the program as they were thinking of bringing in my firm to help Starbucks with the program.  Since it was likely that a glass of wine was in my future the next few evenings, I shifted my venue of choice to the local Starbucks locations that had been offering the program for over a year so I could see if adoption had taken place. 

Over the course of my sipping and observing, I predicted that this program would likely fail.  During each visit, I was the only person 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 my report, the adult beverage firm did not invite us along for the presentation.

Starbucks evenings ultimately died a slow death, and the plug on beer and wine at the caffeine filling station was 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 recipe for 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: