Capriotti’s Leverages Innovation to Thrive in Pandemic

Capriotti’s went into COVID with a big question mark concerning how it would persevere and what would be necessary to ensure guests knew how to use the brand.

So through advertising channels, the fast casual—which was mostly off-premises pre-COVID—leaned even heavier into delivery and takeout. Sales cratered in March, but the messaging has slowly brought the company back to baseline. Off-premises sales are mixing about 90 percent.

CEO Ashley Morris says major urban markets are still struggling, but suburban areas are doing better than expected. For Capriotti's, it’s about communicating to the world as loud and as often as it can to stay top of mind.

“If you’re seeing the data and becoming fearful that going out and eating is no longer safe for you, which I believe is about four out of 10 people in this country right now, they can still get Capriotti’s,” Morris says. “ … We are literally omnichannel to the point where however our guests want and need to use our brand, they’re able to. And I think by doing that, and having done that so quickly, and really making that evolution, it has really allowed the consumers out there to feel comfortable with remaining a Capriotti’s customer because they know whatever is important to them, their needs are going to get met.”

The 105-unit chain’s growth during the pandemic has been in part fueled by menu innovation. Most notably, the restaurant formed a partnership with Snake River Farms—a producer of American Wagyu steaks and roasts—to elevate its sandwiches.

Morris explains that before onboarding Snake River Farms, Capriotti’s was already known for its quality and passion for the unexpected. For example, the restaurant roasts whole turkeys in-house for 12 hours each day, cooks 20-pound top round beef, and makes its own meatballs. With the American Wagyu, Morris says Capriotti’s was looking to take its identity and lift its choice roast beef sandwich even higher.

“With the gaining popularity of American Wagyu around the fine dining steakhouses, we thought, what a world we could live in if we’re really being extraordinary. How extraordinary would it be to bring the highest quality beef in America into our sandwich shop and be able to sell it for less than $10 per sandwich?” Morris says.

The company was set to launch the product in the spring, but COVID forced it to shift focus. However, Capriotti’s came to realize that COVID hit the casual-dining and fine-dining space a lot harder than fast casuals. The pandemic gave the sandwich chain an opportunity to fill the void left by full-service establishments.

The sandwich, which Morris describes as a “melt in your mouth” type of item, is representing roughly 10 percent of sales. The company’s goal was for it to mix in the 5-6 percent range.

Capriotti’s

Capriotti’s famous Bobbie sandwich.

"With those two industries really being decimated unfortunately, the reality is people could not get a really fantastic steak meal easily,” Morris says. “So we thought, this would even be possibly a more appropriate time to follow through with our nationwide launch. Because we could offer a really, really premium product—the best quality beef in America—to people who were accustomed to going to fine-dining steakhouses to get this product.”

When it comes to expansion, off-premises continues to be a major factor.

Capriotti’s has two ghost kitchens in operation, and by the end of 2020, there will be six—four franchises and two company-owned. Morris notes that the two open virtual kitchens are already meeting sales expectations.

The restaurant is also experimenting with delivery-only brands that comprise segments within the sandwich space. Capriotti’s is currently testing a fully vegetarian concept, one that’s solely high-quality beef, another for turkey lovers, and one based in the cannabis arena.

“So they’re appealing to probably a narrow part of the market, but it’s really hyper-focused,” Morris says. “So the idea being can we generate additional sales by delivering these concepts with an ultra-delicious high quality product. A lot of our secret menu, and a lot of things that have evolved at Capriotti’s, they wind up making it on to these [virtual] menus where they have been historically on the Capriotti’s menu.”

The sandwich company, which is composed of 92 franchises and 13 company-run stores, is based in Las Vegas, an area that was recently labeled as having an increased risk for COVID spread.

In response, Morris says the company has taken a slow, meticulous approach to reopening stores—an easier task for brands in the fast-casual segment. The restaurants are taking all the common precautionary steps—handwashing, wearing masks, washing tables, social distancing, and checking workers daily—to maintain the safety of customers and employees.

“We’re taking this very seriously. As a company, we don’t want to participate in part of the problem. We want to be part of the solution,” Morris says. “… Obviously most of our system is franchised, so we put the rules out and do our best to enforce the rules. And our hope is that all of our franchise partners are also taking this very seriously and following the rules themselves. And we believe they are.”

Overall, Capriotti’s has opened more than a dozen restaurants this year, and plans to open seven more by the end of the year. More than 165 are in the development pipeline.

Morris prefaces Capriotti’s attractiveness as a brand by explaining that getting into business is by nature a risk. And so for a person to take that risk—especially in an industry that experiences ebbs and flows—he or she must perceive the reward to be greater than the risk.

He says this because Capriotti’s was founded more than 40 years ago, and has survived wars, recessions, and now a COVID pandemic. It’s thrived in all situations and all macro environments.

Morris says investors know that this sandwich shop has the future in its hands.

“That’s really a testament to the safety of the company, and I think that really resonates with people who are wanting to invest $300,000-plus into a business,” Morris says. “They want to feel safe. They want to know there isn’t something where they wake up one day and the company is not positioned to survive the environment.”