Special Report | February 2013 | By Amanda Baltazar

Breaking the 7 Unwritten Rules

How some operators succeed by going against the industry’s conventional wisdom.

Every industry has its unwritten rules for success, a series of dos and don’ts that conventional wisdom suggests are the path to profits.

The quick-serve industry is no exception. For decades, companies have operated under a series of assumptions that guide their business decisions and compose their operations manuals. And many of these brands would suggest they’ve been all the wiser—and richer—by playing by the rules.

Now, however, some concepts are breaking the mold, discovering that consumers will still flock to their stores if one or more of the rules aren’t followed. Seven unwritten rules in particular have been tested, tampered with, or altogether discarded by a number of companies that are out to prove the industry isn’t easy to paint in black and white.

Rule No. 1: Do Not Expand Too Rapidly

The quick-serve industry’s past is littered with examples of brands that opened too many stores too quickly and ultimately failed by doing so. The danger in growing too quickly, experts say, is that operators will lose control of their concept, dilute their brand, fall short of capital, or simply be too ambitious.

But a number of well-known brands today are speedily opening stores without experiencing any negative fallout.

Bojangles’, a Charlotte, North Carolina–based chicken and biscuits chain, is opening a new restaurant every 10 days. The company’s 37 years of history have allowed it to learn from its mistakes, says president Eric Newman, especially since the early years, when it only grew modestly. It has also taken advantage of the greater availability of real estate and lower building costs during the recession, he says.

But limiting Bojangles’ growth to specific markets has also been key for the brand’s expansion. This helps with brand equity, Newman says.

“It’s easier to justify [buying the roll] when you’re in this unique location and you want to try this unique thing,” she says. “We’re building regular customers who can actually come and visit us once a year.”

“The increased base of restaurants in those markets creates more marketing dollars to increase further customer awareness,” he says. “Market penetration, marketing awareness, and increasing sales volumes and profitability are all linked.”

Los Angeles–based Fatburger is using a similar tactic. The chain’s unit count increased by 55 percent in 2012 over 2011, and the company will expand by hundreds of stores over the next few years, both within the U.S. and abroad. This year, it plans to open 50–60 new restaurants.

This kind of growth is essential to gain brand momentum, says CEO Andrew Wiederhorn. “Otherwise, you don’t build your brand awareness or your brand equity in a marketplace for consumers to realize you’re present or convenient,” he says.

“You advertise that the brand is coming to the city and the visibility of those units while they’re under development, and the buzz of the openings works together.”

The Big Salad, a Grosse Pointe Farms, Michigan, chain, says it plans to open 200 mostly franchised stores in the next 10 years. The company today has four stores: two franchised and two company owned.

CEO John Bornoty credits the big expansion plans to the brand’s simplicity.

“Most franchises focus on sales before they expand, but I focus on operations,” Bornoty says. “You have to have good procedures and processes. It’s cookie cutter and you don’t deviate.

“We’re not trying to do something new with each store,” he adds. “We keep it simple.“

 

Rule No. 2: Do Not Change the Recipes of Signature Dishes

Toying with a proven recipe is seemingly counterintuitive to succeeding in the foodservice industry, but some brands have gambled on an ingredient shake-up. Domino’s, for example, famously changed its pizza recipe in 2010, to great acclaim.

Coralville, Iowa–based Panchero’s Mexican Grill similarly succeeded when it altered the ingredients in its coveted chicken marinade last year. Panchero’s executives wanted to make the chicken marinade gluten free, and also hoped to make the marinating process simpler at the restaurant level—changes they had to go about carefully, considering the chain’s fresh-grilled chicken accounts for more than half of its menu mix.

“Now it comes pre-made, making the marinating process easy to execute with virtually no chance for a mistake,” says Barry Nelson, vice president of operations.

“But, at the same time, we wanted customers to not notice any difference in the flavor. People come to us for consistency.”

McAlister’s Deli, meanwhile, did let customers know when it made changes, using POP, social media, e-mail and outdoor advertising, and TV commercials to inform them about its upgrade in proteins and breads, which it did in 2011.

“The goal was to differentiate ourselves by leveraging what customers have come to know us for: a quality product and quality experience,” says Frank Paci, president and owner of the 310-unit chain

What was most interesting about the upgrade, Paci says, was how beneficial it was to the brand’s crewmembers.

“It improved the morale of the staff in the restaurants,” Paci says. “The whole McAlister’s experience got better, too, because the employees were so enthusiastic about the products.”

 

Rule No. 3: Always Offer Combos and Specials

Combos and special offers are a signature in the quick-service industry, helping retain customers looking for good value and enticing new customers looking to try something different.

But Illegal Pete’s, a burrito chain based in Denver, has chosen not to offer either.

“We’ve found it works better being genuine with customer service, not having our employees interact based on a script,” says Chelsea Marx, operations manager at the five-unit chain.

“We empower our employees to offer discounts … to create and build relationships,” she says, adding that employees can offer a 50 percent discount to one customer per shift.

Instead of offering specials or combo meals, Illegal Pete’s has a handful of off-menu dishes. “Customers see one person get it and then it spreads like wildfire,” Marx says. “That’s an opposite mentality—it’s an upsell for us. I think customers like that feeling of knowing a secret about a place.”

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