What have been some of the big differences between running a fast casual versus a major quick-serve player like Burger King?
There certainly are a number of differences, many of which may be particular, however, to the brands themselves rather than their designation of “fast food” or “fast casual." One of course, is overall size: a brand with over 7,000 U.S. restaurants as compared to one with 700 will have much more opportunity from a marketing perspective. A larger brand also offers greater insight into analytics and drilling down to what really makes a successful restaurant tick. Success becomes more of a science than an art with a larger brand. On the other hand, the smaller fast casual brand offers more individualized attention, a greater sense of collaboration, as well as the “cool” factor which attracts more employees and community attention. Fast-casual brands also tend to be very focused on their category (Mexican food for example) which allow for less complexity and need for adaption by the team when a new product or process is introduced.
A particular difference between Burger King and Qdoba, however, is that Qdoba still has nearly half of its restaurants corporately owned and managed. Burger King is basically entirely franchised. This results in very different levels of understanding and communication between the franchisees and the corporation.
In regards to the fast casual Mexican category in general, where do you think the winners will separate from the crowded pack?
By definition, fast casual restaurants need to be a “comfortable” place. Environment and experience will eventually differentiate between them if everyone already is prepared with the table stakes of quality food offerings. Qdoba is primed for growth and has all of the foundations in place along the lines of what guests expect in the category: quality, safety, comfort, “coolness,” and community. Additionally, the leadership team at Qdoba is a competitive advantage we feel really puts us in a position to win with their commitment to profitable growth.
What kind of changes is Qdoba making to stay ahead of those trends?
As mentioned before, the new image is awesome and will carry the brand for a number of years. Qdoba is also beginning to spend more energy on analytics and communicating those to the franchisees. A continued focus on food costs and profitability will also lend itself to success. Finally, continuing to invest in technology is absolutely imperative and Qdoba understands that now that they have separated from Jack in the Box ownership.
Talk about the real estate angle and owning the land. How big of an advantage does that provide?
In today’s business world, land ownership is only becoming more important (and more costly) relative to success long term. We own the land under all but two of our locations. Due to our experience with difficult landlords and the benefits of long term asset appreciation, we always try to buy a property before we build. We happen to be in a part of the country where it is still possible to buy an acre of land in a strong commercial zone, build and manage a typical fast food or fast casual restaurant, and still be profitable. This also becomes an advantage when negotiating with franchisors. By owning property, the franchisee has a great deal more leverage relative to their future options and opportunities. We have a strategy of looking for new developments where we can be the “first in.” We then purchase multiple lots, knowing that once we arrive, others will follow. We have been successful with this approach and often covered the entire cost of our lot via the appreciation of the other lots’ values.