The field of players in the quick-serve hot dog market could rightly be characterized as scattered. Outside of local and regional chains, the hot dog appears mostly as an alternative to burgers on some national quick-serve chains’ menus. Dairy Queen and Sonic have always been major sellers of hot dogs, but neither concept is built around the frankfurter. The hot dog, still, has established a solid foothold as a staple of American sports and entertainment venues and back-yard parties everywhere. It is in those places that a resurgent Nathan’s Famous is making its mark.

Nathan’s Famous opened in 1916 as a hot dog stand on Coney Island in New York. The company focused on restaurants for most of its long history, but, in the late ’90s, Nathan’s introduced its Branded Product Program to allow other foodservice retailers to sell Nathan’s dogs. The company realized that although there is a market for hot dog restaurants, the market for branded hot dogs is even bigger. Today, the company’s goal is simple: If someone is eating a hot dog anywhere, at any time, it should be a Nathan’s.

To that end, Nathan’s offers its products at thousands of locations through such high-profile operations as vending company Canteen Corporation, Circle K and Exxon/Mobil convenience stores, select Subway restaurants, and Johnny Rockets. Combined with its retail program to grocery and club stores, Nathan’s is now the number one premium all-beef hot dog sold in the United States.

After Nathan’s reported record sales and earnings in all of its profit centers for fiscal year 2005, QSR magazine spoke with Nathan’s president and COO Wayne Norbitz about his company’s efforts to cover the entire hot dog market.

What is your take on how fiscal year 2005 played out?

We have, for the past recent years, been focused on brand marketing and points of distribution strategy. We’ve attempted to expose the Nathan’s brand to as many customers as possible over a wide geography over a broad spectrum of business environments and sell Nathan’s products in many different ways.

What we are doing today is continuing to operate our restaurant system—and there are about 365 restaurants in the system today—and we’re continuing to expand our restaurant system. For the year that ended March 27, 2005, we opened 28 new Nathan’s restaurants. Our restaurant system, which is comprised of company-owned as well as franchise restaurants, is just one way that we expose the Nathan’s brand and implement that points of distribution strategy.

We’ve developed other ways to advertise Nathan’s and sell Nathan’s products. We have a program in place in which others in the foodservice industry advertise Nathan’s and sell Nathan’s products in their own foodservice environment. Today, there are over 6,000 locations featuring Nathan’s hot dogs as part of their menu.

We also have a licensing program in place, where we license the right to the name Nathan’s to a company that manufactures hot dogs and sells them to retail, primarily to supermarkets, groceries, and club stores throughout the United States. Today, our products are being sold in over 7,000 locations such as that.

Between the Branded Product Program and the restaurants and the retail program, we are doing business today in 46 states and the District of Columbia and 13 countries. Clearly, Nathan’s has been transformed from a small New York regional brand to a national brand. That’s what we’ve been concentrating on. We did not want to be a company that just operated quick-service restaurants.

You’ve mentioned getting the Nathan’s brand out nationwide. What kind of spillover effect have you seen from the foodservice sales of Nathan’s into your ability to put in retail locations?

What we have witnessed—and I know that this is not always the case—is that the more expansion and the more business we do with the Branded Product Program, the more business we wind up doing at retail and vice versa. Both programs support each other, and generally, the more we advertise the brand, the better it helps both programs. What we find is that when somebody is in an airport or in a university or in a mall and they have an eating decision to make, they might decide to go to a Nathan’s rather than a Burger King. Or they might decide to have a Nathan’s hot dog when they’re eating at Johnny Rockets rather than a hamburger. But when they’re in Johnny Rockets or they’re in a mall or an airport, they don’t make the decision, “Let’s not eat here, but let’s go to retail and take food home.” It’s a different kind of eating occasion. The same thing is true when they’re shopping at supermarkets. At that point, a person is making the decision of what hot dog they should buy to bring to my house to have a barbeque. But they’re not saying, “Instead of bringing the hot dog to my house, I’m better off going to a Nathan’s restaurant.” So I think you have two different types of occasions going on, and people are not making the choice of doing one and not the other.

Going forward, how much do you expect to rely on foodservice sales as a growth mechanism?

For the past year that ended March 2005, we have realized enhanced profitability from all of our revenue centers, not just the Branded Product Program. The Branded Product Program had the largest percentage increase in top-line sales, but actually we’ve had top-line and bottom-line profitability increases from all of our revenue centers. Quite frankly, I don’t see any differences in that trend in the current year. Last year, for the first time, we became the number one selling premium all-beef hot dog in the United States, and today we are the third largest all-beef hot dog in the United States. So clearly, I think our company has become bigger and more people know about us, and I think that’s helping us expand.

Are you concerned at all about diluting the Nathan’s brand by introducing products like mustard and pickles?

No. If we are true to the fact that what the brand stands for first and foremost is quality, and if we can produce all products under the Nathan’s brand at the very high end of the quality spectrum, we think that we will not be diluting the brand. We think more points of distribution and more advertising of the Nathan’s brand helps each business.

Are you or are you planning to sell Nathan’s packaged products, like your hot dogs, buns, or mustard, through the restaurants?

Just on a limited basis. Where we think it has a place is in restaurants that are catering toward people that are tourists or people that are traveling, such as Nathan’s restaurants in airports and situations like that. By and large, that’s not going to be a focus of ours.