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

Part 4 of BrandTrip Partners Restaurant Chain Turnaround Series

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Here, we 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 market share.  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, our 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, his 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, surprisingly 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 he 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 shoot set could he hope for than a monolithic tower of cold corporate glass and steel with the Taco Bell sign mounted atop it.  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 my 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

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:

QSR MAGAZINE ASKS BRANDTRIP CEO TIM HACKBARDT ABOUT HOW TO EXECUTE A BRAND REFRESH

As an expert on restaurant turnarounds, QSR Magazine asked our CEO Tim Hackbardt to share his experience on how to execute a successful brand refresh.

BRANDTRIP PARTNERS PRESENTS “THE EVOLVING MOBILE RESTAURANT TECHNOLOGY” AT SPLICKIT/ONOSYS USER CONFERENCE

Restaurant mobile solutions leader SplickIt recently acquired Onosys to provide multi-unit restaurants access to a proven mobile and online ordering system, integrated loyalty and catering programs, and technology support from one single company.  To fully showcase their new platform, and new marketing automation capabilities, they invited restaurant brands from around the country to join them at their offices in Boulder, Colorado on November 3rd.

Given our extensive experience in this area, BrandTrip Partners CEO, Tim Hackbardt, was asked to provide the group deep insights into how mobile restaurant technology has evolved and what the future has in store for our industry.  BrandTrip Partners has been a leader in the restaurant industry consulting with chains to help them develop their future technology strategic roadmaps that include integrated mobile platforms, new media strategies, loyalty programs and connected CRM/Big Data systems. 

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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In this first article, we will explore examples of one of the most explosive ways to increase sales at your restaurant chain.  The ability to execute a successful strategy that adds additional revenue channels can drive the business far above almost 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 large of a leap if not impossible.  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 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 their 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 it’s 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.  Just think about this.  Cooper’s Hawk 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 proprietary brand 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 was $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 had over 20% less volume at $717,000 and $709,000 respectfully according to the same report.  Quiznos trailed all with only a $308,000 average unit volume and little to help it climb up to the others as it didn’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 additional revenue channel provided them with a superior business model that drove best-in-class revenue. 

Yes, these other brands have jumped on the third-party delivery bandwagon by now with services like Doordash, GrubHub, and Uber Eats.  However, none of those are Freaky Fast.  Even after adding those services to their business models, Jimmy Johns still is the sales volume leader not missing a step in increasing sales or losing market share.

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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 in reality 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 a competitor 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:

Mobile Payments Today "5 Tidbits You Need To Know" At CONNECT Mobile Innovation Summit Include Quote From BTP CEO Tim Hackbardt

Following the CONNECT Mobile Innovation Summit, Mobile Payments Today published an article on the "5 Tidbits You Need To Know" from the conference.  #3 was contributed by our own BTP CEO, Tim Hackbardt while speaking while sharing vision and learnings from our work with restaurant chains developing new mobile Technology, big data and media strategies during the session titled "Personalized & Relevant:  Cracking The Code On Mobile Success."

In the Mobile Payments Today article, his counsel included the following quote from the session:  "Adoption works really well when [consumers] utilize an app and the staff knows what to do. That's the area where people are falling behind.  We see everything falling down right there [with untrained staff].  Adoption isn't going to happen unless that experience at the restaurant is good."

Here is a summary of all 5 tidbits from the article.

  1. Douglas Kwong, digital director, Cicis Pizza: "The mobile industry right now is like [search engine optimization] in the mid-2000s. We know it's important, we're trying to figure out how to prioritize its importance against the other channels." Kwong made the statement during a panel discussion about the mobile marketer's dilemma of how best to reach consumers on smartphones. Cicis launched its mobile app in December and saw 100,000 downloads in the first five weeks.
     
  2. Graham Gunst, associate partner of interactive experience and digital strategy, IBM Interactive Experience: "I'm going to get a better experience if I exchange it for some data. Obviously, I want my data protected. [But] it's the trade-off of a better experience for privacy." Gunst shared this view during a panel discussion about how different connected devices are becoming more prevalent in the shopping experience. And with that comes questions about whether consumers are willing to share private information in exchange for an incentive or service.
     
  3. Tim Hackbardt, CEO, BrandTrip Advisors:"Adoption works really well when [consumers] utilize an app and the staff knows what to do. That's the area where people are falling behind. We see everything falling down right there [with untrained staff]. Adoption isn't going to happen unless that experience at the restaurant is good.” Hackbardt brought up this longstanding issue during a panel about cracking the code on mobile success.
     
  4. Joe Scartz, managing director of digital commerce and integration, TPN: "[Mobile] is an extension of the consumer. If you want to create great user experiences, mobile is going to be a central part." Scartz reiterated a common theme at the summit during the mobile marketer's dilemma panel.
     
  5. Rick Ruskin, marketing and product of online commerce, General Motors:"The traditional buying model is dead. It's not there anymore. As we look at this customer journey changing, the buying process is done before you talk to the customer." Ruskin's view on the current shopping experience is probably one of the best you'll hear at a conference and he made this comment as he moderated the "Going Beyond the Phone" panel.

CEO Tim Hackbardt Presents At CONNECT Mobile Innovation Summit In Chicago

On August 16th, BTP CEO Tim Hackbardt presented at CONNECT Mobile Innovation Summit to a room full of mobile technology, retail and restaurant professionals at the Sofitel Water Tower Hotel in Chicago.  Christopher Gumprecht from Lettuce Entertain You Enterprises and Prem Kiran from Fishbowl also joined him on the panel.

Covering the topic "Personalized & Relevant:  Cracking The Code On Mobile Success", Mr. Hackbardt shared vision and learnings from our work with restaurant chains developing new mobile technology, big data and media strategies.