As Rave Restaurant Group pushes through a turnaround, Brandon Solano—who began his tenure as CEO in October—remains optimistic about the potential of his two brands, Pizza Inn and Pie Five.
Solano opened the company’s Q2 earnings call emphasizing Rave’s focus on “optimizing the core business and building on our key strengths.”
Pizza Inn’s performance in Q2 appears to reflect some of the potential Solano eluded to. The full-service chain—which Solano refers to as a sleeping giant in the pizza category—increased domestic same-store sales by 2.4 percent in the quarter, (153 units, including Pizza Inn Express), or a two-year stack of about 5 percent. Year-to-date, domestic comps rose 2.7 percent. Pizza Inn opened three domestic units and closed two. It finished Q2 with 34 international locations, down from 48 at the end of Q4.
To sustain that momentum, Rave is investing in consumer research with the hope that it results in compelling marketing and positive traffic. The parent company also created the Pizza Inn Franchise Leadership Council to assist franchisees in driving growth.
Dallas-based fast casual Pie Five, however, has a bigger mountain to climb. Domestic comps dropped 11 percent in the quarter; that’s a negative two-year stack of almost 15 percent. Pie Five has reported 17 consecutive periods of declining sales. Year-to-date, same-store sales decreased 10.8 percent. The chain opened three domestic units and closed six, bringing its system-wide domestic total to 53. The brand had 65 units in the same quarter last year, and about 100 locations a couple of years ago.
“Although Pie Five clearly isn't where we want it to be today, we are unwavering in our commitment to rebuild the brand,” Solano said during the call. “We believe we have an opportunity to differentiate Pie Five in a more meaningful way and we've engaged agency partners and research partners to make sure we get it right.”
“We're a fast-casual brand and not [quick service],” he added. “Our menu and service model must articulate this brand promise in a way that resonates with consumers.”
One of Rave’s goals is to seek valuable partnerships that will draw investments from franchisees—albeit in nontraditional locations. This started with Pie Five’s opening a Texas unit inside KidZania, an indoor family entertainment center. Solano hinted that more of these locations are possible in the future.
“We look forward to continuing this long-term alliance by growing with this innovative brand across the country," Solano said. "Pie Five still has expansion opportunities, and we expect development to increase once we transform the brand and restore positive momentum. … This is the first of many profitable partnerships underway for this brand.”
Overall, total revenue decreased $400,000 to $2.8 million year-over-year in Q2, an 11.4-percent decline. Year-to-date, revenue dipped to $5.7 million, a 7.8-percent slide. The drops were attributed to a decrease in franchise royalties and license fees. Net income dropped year-over-year from $200,000 to $14,000 in Q2.
Solano emphasized that Rave now has a leadership team in place to “drive incremental improvements in the short term and return RAVE to growth and stability for the future.”
In November, the company hired Mike Burns as chief operating officer and Douglas Kwong as vice president of marketing. Prior to Rave, Burns directed operations at more than 80 Pei Wei Asian Kitchen restaurants. He also has eight years of experience overseeing 175 Bojangles’ as director of operations support and regional vice president. Kwong previously worked as director of ecommerce and digital marketing at Pei Wei, where he increased digital sales from 8 percent of revenue to 30 percent.
After Q2 wrapped up, Rave hired Clint Fendley as vice president of finance. Before Rave, he worked as 7-Eleven’s data analytics and strategy manager of new concepts.
Along with his team, Solano said he is committed to fighting hard for the brand.
“We're doubling down on our efforts to address underperforming areas of the business, and see significant opportunities in marketing, menu innovation, and operational efficiencies that will lead to a more positive business model,” Solano said. “This will drive long-term value and consistency for our consumers, our shareholders, and importantly, our franchisees. … With the right team in place, we're optimistic that the transformation is entirely viable, and a plan to build on our core strengths.”