Pandemic or Not, Dave’s Hot Chicken is Growing

    The emerging brand signed three multi-unit franchise deals in April.

    Dave's Hot Chicken

    Going forward, all units will have a walk-up window for takeout and third-party delivery providers.

    If Dave’s Hot Chicken CEO Bill Phelps were to rate his team’s response to the COVID-19 pandemic, he’d give them a 12 out of 10.

    Phelps says he’s been stunned by how quickly his employees adapted, innovated, and moved ahead of the curve.

    “The team just has held up and has performed so well,” Phelps says. “I can’t believe it. At every turn they have a fast solution to every problem. I can’t get over mostly the performance and secondly the results that we’re getting. It’s just kind of blown my mind.”

    “When I heard early on they started requiring masks of everybody, I wasn’t sure that was the right message to send to guests,” he adds. “And it turned out, that’s what everybody went to two or three weeks later, but our guys were out ahead of it.”

    The three-unit brand, based in Los Angeles, was founded in 2017 by chef Dave Kopushyan, Arman Oganesyan, and brothers Tom and Gary Rubenyan.

    The company began franchising a few months ago, and even during the pandemic, deals are still being completed.

    In April, Dave’s inked multi-unit franchise agreements in Northern California, Portland, Oregon, and Denver.

    George Almeida, who has more than 30 years of franchising experience, signed a seven-unit deal for Northern California. Alex and Joe Karcher, members of the restaurateur family behind Carl’s Jr., will open five locations in Portland. Jason Beld and Marc Rogers, who introduced Fuzzy’s Tacos in Colorado, will open 11 in the state.

    In early March, the chicken brand signed deals for 10 units in Southern California. Dave’s now has 100 units under contract for development.

    “We’re still in active negotiations and we’re still signing agreements just in the past 30 days,” Phelps says. “You’re talking to people that are sophisticated. They’ve seen the downturn, they’ve seen the ebb and flow in the economy, and these are development deals that people are going to be doing over the next two to four years. So they’re smart people and they’re taking a longer term view and they’re saying they believe in the concept enough that they’re willing to move ahead albeit with more risk factor and more unknown at this point. But the product, and the marketing and the positioning of the brand is so exciting. We still have a lot of people interested in signing up with us.”

    Phelps says Dave’s transitioned fairly well to the off-premises only model once dining rooms closed. Off-premises represents about 35 percent of business at the low end and around 56 percent of business at the high end.

    Going forward, all units will have a walk-up window for takeout and third-party delivery providers. He estimates that 40 to 60 percent will have a drive-thru. One drive-thru location is already in the works.

    “I mean clearly, the industry, the best operators in the fast-casual fast-food industry, have seen the opportunity with drive-thru and with what’s happened with the coronavirus. We only see that increasing,” Phelps says. “And so we’re going to be pursuing many opportunities for drive-thrus over the next year or two.”

    To ensure health and safety, stores use a no-touch thermometer to check employees and ask  a number of questions regarding symptoms. The brand also installed PathSpot hand scanners in each unit—a tool that made Time Magazine’s Best Inventions list in 2019. After employees wash their hands, they place them under the scanner to ensure they remove all contaminants. Workers are also required to change gloves every 20 minutes.

    “All of those things combined make it as safe as possible for the guests and the employees,” Phelps says. “ … Obviously there’s a concern with asymptomatic people, but we’re going over it and doing everything we can to screen for anything.”

    Similar to larger chains like Starbucks and Chipotle, Dave’s is paying employees an additional $2 an hour to compensate them for what Phelps refers to as “the hassle of working in a tough environment.” 

    “The message is, these are difficult times and we recognize coming into work and being considered an essential worker—because somebody has to provide food to people—it’s a hassle, and there are risks involved,” Phelps says. “We appreciate that they are still committed to the company and are willing to work there. It’s just a signal that we’re going to pay extra and we recognize what they’re doing for the company and the guests. It’s just a way of saying thank you.”

    Phelps says customers have always been concerned about cleanliness, but he expects that to rise to another level during post-pandemic business. He also believes off-premises will account for a much larger portion of sales even when dining rooms reopen.

    The CEO says Dave’s trust with consumers has come in the form of all the procedures his employees have put in place since the outbreak and each of the policies the company will have in the future.

    “We’ve talked about providing all of that information to our guests,” Phelps says. “As a guest, if you see all the steps that we’re taking as a company, I think it increases your trust in the concept and in the people running the business that they’re focused first of all on the team member and employee safety and at the same time guest safety.”