Carl Bachmann knows why he is now CEO of BurgerFi. Second quarter results are enough of an explanation.
The fast casual's systemwide same-store sales dropped 10 percent in Q2 year-over-year. That breaks down to a 15 percent drop at company units and an 8 percent decrease for franchised restaurants. Systemwide sales lowered 9 percent to $38.8 million in the second quarter compared to the prior period. Meanwhile, comps for Anthony's Coal Fired Pizza & Wings rose just 1 percent in the quarter.
Development is proving to be troublesome as well. Three BurgerFi restaurants opened in the quarter, bringing the year-to-date number to five. However, because of permitting and construction delays, the chain projects that it will finish 2023 at the lower end of its original 15–20 unit estimate.
It's clear that Bachmann's tenure—which officially kicked off July 10—was a turnaround mission from the very start. But he's well-equipped for it after a restaurant career spanning 40-plus years in the fast-casual and casual-dining segments. He recently spent six-and-a-half years at Smashburger, leading the brand to double-digit systemwide same-store sales growth.
Bachmann showcased his belief in BurgerFi early on by purchasing 63,500 shares.
"I'm firmly aligned with our shareholders," the CEO told investors during the brand's Q2 earnings call. "With only a little over a month on the job, there is no question we can do better as the challenges both brands face are not new to the industry. To say that I've seen it all before and prevailed is not a stretch. To drive our turnaround, I'm going to be using a similar proven playbook that I executed previously at other brands."
The executive said all decisions will be made through what the company calls the three W's: It must be a win for the guest, a win for the team members, and a win for the shareholders and franchisees.
Using that philosophy, Bachmann mapped out five strategic priorities for BurgerFi. The first is enhancing employee training and focusing on general manager development at the restaurant level. BurgerFi is currently seeing meaningful improvement in hourly and management turnover, with metrics hovering above industry benchmarks. At Anthony's, hourly turnover is better than the industry average, and management turnover is steadily getting better.
Priority two is upgrading the menu. BurgerFi is looking to launch new crispy chicken and grilled sandwiches to eliminate the customer veto vote.
"We're not even in the chicken wars and we need to get into the chicken wars," Bachmann said. "Burger brands should run 10 percent, 12 percent, 15 percent of chicken mix. ... I think that that's a huge opportunity for us to broaden really, again, the guest funnel, and draw new guests in. So I think that's an opportunity on the BurgerFi side. We are seeing a little bit of improvement now and I think we'll continue to see that as we progress."
The chain also wants to fix its milkshakes and French fries, which are the source of several customer complaints. Bachmann noted that BurgerFi uses a freshly cut potato and that it's a "phenomenal product," but the process was flawed. The fast casual is already working on testing new methods to update the side item. Bachmann thinks there are also gaps in Anthony's menu. The casual-dining chain wants to keep a streamlined menu, but the CEO believes that an Italian restaurant should offer certain dishes, such as a meatball dish and an Alfredo pasta. These could pave the way for introducing new items like an Alfredo-based artichoke and pizza.
"The bottom line is that we cannot accept performance like Q2 and are committed to driving better results for all of our stakeholders," Bachmann said. "We will also ensure that our teams are proud of the products that we serve."
BurgerFi's third objective is redefining its portfolio—from a development perspective and inside the four walls. Bachmann is hoping to answer questions like "Is the ambiance right?"; "Is the look, feel, and value, right?"; "Does the platform promote ease of execution?"; and "How the company can best support the franchise community?"
As of July 3, there were 114 BurgerFi restaurants (87 franchises and 27 corporate units). When the fast casual went public in December 2020, there were roughly 125 units systemwide. Although unit growth hasn't met expectations in the past few years, Bachmann said the brand has the opportunity to expand in Florida and along the I-95 corridor.
"There's so much opportunity to build out of Florida," Bachmann said. "We've built a great reputation as a leading burger brand in Florida and I think it's time for us to expand our horizons. There's a lot of great franchise operators out there that are looking for the next big brand. So I think it's very smart of us to strategically work our way up the East Coast. ... That is one of the primary strategies around BurgerFi, and looking for the right franchise partners that have, again, the right operators with the right background and experience. We need true restaurant operators to help grow our franchisees on the BurgerFi side."
Anthony's sits at 60 company-owned locations. It had 61 stores when BurgerFi acquired it for roughly $157 million in 2021.
Franchisee NDM Hospitality Services is charged with initiating Anthony's franchising journey. The first unit will be a co-brand location in Florida alongside BurgerFi. The next two stores will be slimmer, standalone prototypes. Bachmann said he began negotiations with several interested parties for future multi-unit Anthony's franchise deals.
"I always say when we're growing franchise business, we should grow like a bush not like a vine so that we can really get the economy of scale," Bachmann said. "We can get the economy of scale when I talk about guests, talks about operations, talk about supply chain, and as well as market penetration. So I think those are the strategies that we'll employ over the next few months as we kind of jump into this thing."
The company's fourth priority is forming golden standards that create brand promises and define its pride in product, process, and facility. Once these are clarified, BurgerFi will build a restaurant-level audit process to hold teams accountable every day. Bachmann said these changes should drive employee engagement and operational efficiencies.
The fifth and final tenet of the CEO's plan is strengthening brand awareness through intentional marketing efforts. This means more attention on driving frequency in the loyalty program and bolstering website, app, and third-party traffic. BurgerFi will use a barbell approach and reel in customers with premium innovation and value propositions.
Even though Bachmann has been with the company for roughly a month, he's "more confident than ever" that he made the right decision to join BurgerFi. One because he sees two "very high-quality brands that are on trend with the consumer." Secondly, the challenges these chains face aren't new to the restaurant industry.
"Fixing won't happen overnight, but believe it will happen, and these improvements will begin to become evident to you, our stakeholders," Bachmann said.