Industry News | August 5, 2010

Fazoli's Banks on Two Markets for Expansion

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Though four Fazoli’s recently shuttered in Florida, the company’s chief exec is confident that expansion plans in St. Louis and Kansas City have the brand on the right path toward success.

Fazoli’s, which already has nine stores in the St. Louis area and six stores in the Kansas City area, announced plans to open seven company-owned stores in St. Louis and an undisclosed number in Kansas City.

Carl Howard, president and CEO of Fazoli’s, says St. Louis and Kansas City present markets that “are typically outperforming the system average by roughly 10 percent in sales.”

“They’re both pretty vibrant markets that we’re doing above system averages in and that are under penetrated,” Howard says.

In St. Louis, where he personally visited potential sites for the stores, Howard says the right crew is already established to make Fazoli’s a success.

“We’ve got general managers that have been around for 10 years and an area supervisor that has been with the brand for 17 years,” he says. “They’re really well run businesses. So I feel good in investing money in these areas with the supervisors in place.”

Howard says the new Fazoli’s units in St. Louis could take a couple of years to roll out because the company wants to make sure the sites are right.

“In this economy, with a chain on the cusp of its turnaround, we cannot pick locations that don’t perform well,” he says.

“The opportunities to get the resources needed to grow the company will dry up if these aren’t successful, and I know that. That’s why I personally go out and [look at sites], because we have a lot at stake with these locations.”

Though Howard believes Fazoli’s is a national concept—potential markets the company is looking to break into include Cleveland, Pittsburgh, Baltimore, and Oklahoma City—he acknowledges that the expansion into St. Louis and Kansas City does not mean the company is looking for big growth further west.

The closing of four company-owned Florida stores, Howard says, was not because the brand doesn’t work in that part of the country. He chalks it up to poor positioning, and says the company has been trying to close the stores for the last couple of years.

“I do believe the brand would work in Florida if it was positioned correctly, and that wasn’t necessarily the case,” he says. “We didn’t have great real estate.”

By Sam Oches