Jeff Jacobson hears the gloomy restaurant news trickle in like everyone else. A chain’s sales are up a solid half point. They’re flat. Out of the red equals reason to celebrate. “Flat has become the new up, and anyone reporting positive sales is, whoa, what are they doing? We’ve all seen it. The industry has slowed somewhat,” he says.
At Costa Vida, a 90-unit fast casual, franchisees saw a 10.8 percent growth in average revenue last year. Jacobson, the brand’s chief operating officer, says Costa Vida sped to profitability through very careful—and very thorough—evolution. Most vividly, four years ago the concept stood as a 100 percent mix of dine-in and take-out sales. That’s when the team started to ask itself a straightforward question: Can we add a drive-thru and not hurt our identity?
Costa Vida looked at brands it admires, like Panera Bread and Pei Wei, and then compared some, such as Pei Wei and Panda Express. Can an elite fast casual have a drive-thru window and still separate itself from the fast-food lexicon?
“We had a good amount of internal debate over that and ultimately came to the conclusion that you can be a top-tier fast casual brand and have the convenience of drive-thru service,” Jacobson says. “It really comes down to how can you provide your guests with your food in areas that are easy for them.”
Naturally, Costa Vida couldn’t just go in and pop a window and drive-thru lane into its locations around the country. But it did teach the company to start looking at real estate more strategically. The brand has drive-thru service at 19 of its 90 stores currently, and is leveraging the model as a primary growth driver.
In those restaurants, the drive-thru is accounting for about 34 percent of sales, Jacobson says. While that’s lower than your average quick-service brand, where some of the top players report 60–65 percent of their sales, it’s a pretty enviable topping.
“For us, it’s been a great additional source of revenue because we see that a lot of that drive-thru business is incremental to what a lot of other locations that don’t have drive thrus are able to produce,” he says. “As a brand our drive-thru locations, the number is just a little bit better than 50 percent higher in sales than our non-drive-thru sales. It’s huge.”
What that measures out to is more than $20,000 per week in the drive-thru.
“That’s a million dollars in sales through that one avenue. That one channel,” he says. “It’s really been great for us.”
One challenge, Jacobson adds, has been the need to temper consumer’s expectations. Costa Vida’s food does not fly off the line like McDonald’s. “So much of our food is custom made for an individual as they order through,” he says. “So there is definitely a dynamic of setting expectations with our guests that we won’t execute in under a minute, but are you comfortable with perhaps five minutes to get fantastic food?”
Spending some time in the car, even if it’s five minutes, is a preferable option for many customers who don’t want to walk into the four-walls of the restaurant and interact with a cashier, he says. If anything, just having that option has kept Costa Vida in the discussion for many diners on the go.
Convenience-based ordering, which has seemingly replaced customizable ordering in many limited-service circles, is piloting Costa Vida’s growth in several areas.
The brand offers online and phone ordering, as well as off-site catering. Those three offerings account for about 11 percent of Costa Vida’s sales, Jacobson says.
Take-out dining represents about a third of the brand’s sales in locations without a drive thru. That shifts somewhat in locations that do.
In the fourth quarter of 2015, the company partnered with Punchh for a loyalty program. This replaced Costa Vida’s physical card system and sent its process into the digital space. Jacobson says the move instantly improved throughput. The old method also forced cashiers to run the card through a unit’s point-of-sale system, which cost the employee about 10 seconds a transaction in added processing time. “With a fast casual brand, every second counts,” Jacobson says. “When we’re able to take that transaction away from the front register and let guests do it at their convenience, when they sit down or get home they can scan and get their points at any time, it really helped our throughput. That was a big thing.”
Costa Vida is ranging between 18–20 percent of its guests as loyalty members. So about one in every five transactions that once included a card swipe and that 10-second processing time is being streamlined. It’s all about quickening the pace.
Costa Vida is also a concept that works to balance large-batch cooking methods and improve portion and inventory management to aid in food prep. The brand cooks with “common denominator” ingredients that thread throughout the menu, such as sauces, beans, rice, and proteins. Then, tortillas, sauces, and different options allow the customization factor to play a role.
“From an efficiency standpoint, instead of cooking multiple times throughout the day, we cook a batch and understand how much we’re going to use in a day,” he says. “That way we’re able to focus much more, and devote a higher percentage of our employees’ time toward working directly with guests on their meal versus the behind-the-scenes work preparing the meal.”
The company believes in keeping its skin in the operating game. There are 18 company locations with six new openings on the slate for this year. Jacobson says they’re targeting 15–20 percent of the system to be company operated. There are 23 different franchise groups in the fold, and Jacobsen says he expects those operators to outpace corporate as growth ramps up.
“Between myself and the company and the president of the company, we’ve got over combined 65 years of operating experience. To our core, we’re operators and so there is the ability to demonstrate by leading and having company stores,” Jacobson says. “But there is also, we won’t diminish this fact, there is a profit motive. Our stores are profitable and do very well. As part of our growth plan is that we really enjoy making money.”
Aside from the financial success, Jacobson says franchisees are drawn to Costa Vida for its transparency. All operators have access to the company’s PNL data and its restaurant. They can tour any location at any time.
Costa Vida isn’t setting a target growth mark. Jacobson says the brand doesn’t want to gauge itself based on how many units it can open in a specific window.
“We have been measuring ourselves whether we succeed or fail based on the quality of the stores we’ve opened. When stores open with strong sales volume and strong profitability for our franchisee, we’re happy. We would much rather have a manageable or sustainable growth rate than open, say, 50 stores next year and a have a number of those not be profitable. This is our preferred path to success.”
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