Web Exclusive | October 2012 | By Kevin Hardy

Krystal Flies South

Move to Atlanta will allow support team to be physically present in the field.

Krystal has been based in Chattanooga, Tennessee, since its founding in 1932.
The original Krystal store in Chattanooga, 1932. Krystal
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Brand heritage is important, but Krystal president and CEO Doug Pendergast was thinking about practicality when he decided earlier this month to move the hamburger chain’s headquarters from Chattanooga, Tennessee, to Atlanta.

The move, which is scheduled to take place by early 2013, is part of a strategy to redefine the Krystal corporate office as a restaurant support center. It will also help improve the performance of existing stores and facilitate future store growth, Pendergast says.

Atlanta is centrally located among the 11 Southeastern states in which Krystal operates. The Hartsfield-Jackson Atlanta International Airport will make it easier for corporate employees to travel to stores, as well as for store management and franchisees to travel to the support center.

“As we thought about the role of the restaurant support center and how we can best deliver that role, one of the big priorities is how important it is to be physically present in the field, physically present in the restaurant to see firsthand what’s actually going on,” Pendergast says. “And as we thought about that in particular, it became really obvious that Atlanta and the Hartsfield airport would be a much more efficient and effective place for us to provide that level of support. “

“One of the big priorities is how important it is to be physically present in the field, physically present in the restaurant to see firsthand what’s actually going on.”

Atlanta’s airport—the busiest in the world—offers nearly 2,500 daily arrivals and departures, moving more than 250,000 passengers a day. That’s a far cry from the Chattanooga Airport, which offers limited service to a few hub airports mainly on smaller regional jets. Pendergast says Krystal executives often make the two-hour drive from Chattanooga to Hartsfield-Jackson because it offers non-stop flights to all of the chain’s markets.

Krystal operates more restaurants in Georgia than in any other state. The 360-unit chain has about 60 restaurants in the Atlanta area, compared with about 20 stores in the Chattanooga area.

But the 120-mile move South won’t just position Krystal’s headquarters near its own stores. It will also put the corporate team near several other restaurant companies headquartered in the Atlanta metro area. The city is already home to nearly 30 restaurant chains, including quick serves like Arby’s, Chick-fil-A, and Focus Brands.

With so much of the foodservice industry calling Atlanta home, the area is becoming an asset to industry leaders, says Karen Bremer, CEO of the Georgia Restaurant Association.

“It really builds a community of professional executives for the foodservice industry,” Bremer says. “And it also builds a network of executives that can talk to each other.”

Larry Abblitt, who owns seven Krystal stores in the Atlanta area and is president of Krystal’s franchisee association, says the headquarters move is welcomed by many franchisees. He adds that he’s impressed with the company’s embrace of rapid change.

“I think it’s one of the most important strategic decisions they’ve made in the new ownership group,” Abblitt says. “It’s going to allow them to focus not so much on the heritage of Krystal starting up in Chattanooga, but really growing the brand in the Southeastern United States.”

The move is one of many adjustments made to Krystal since Atlanta-based Argonne Capital Group purchased it for about $175 million in March. Pendergast took Krystal’s helm shortly after the sale, and within the first 30 days, the new executive team had launched an expansive consumer survey to find room for improvement.

Pendergast says his team is now focused on improving sales, customer count, profitability, store cleanliness, and team-member engagement.

“Very simplistically, our initial focus is to get better,” he says. “Then we’ll be much more focused on getting bigger.”

But getting bigger is in the cards. Pendergast hopes to add 150 new Krystal units over the next five years and eventually double its total store count. There are also plans in place for a new store prototype.

He cites Krystal’s loyal customer base and employee core as critical to its ongoing success. The brand’s trademark sliders also give the brand a leg up, he says. “The core product platform is distinctly different than other brands that are out there,” Pendergast says.

Abblitt says the company’s new leadership is more supportive of franchise development, which he thinks will boost expansion in the near future.

“I think there will be a very large growth of franchisees,” he says. “It’s just got too much history and it’s got too loyal of a group of customers that have stayed with us and keep coming back.”