Growth | January 2009 | By Pam George

10 Under 300

Emerging restaurant brands are always a hot topic in the industry. Here QSR presents the top 10 chains with fewer than 300 units.

Lean and Mean

In the past six months, Ed Frechette has noticed a trend. “People on Wall Street are coming to Au Bon Pain for meetings and interviews,” says Frechette, senior vice president of marketing for the Boston-based chain, which has locations in New York City.

Financial executives are not the only ones looking to save money. Customers across the board are watching their wallets—yet at the same time, they don’t want to sacrifice flavor. And that is where small quick-service chains like Au Bon Pain stand to benefit in a cutthroat market.

Lean and mean, many small chains focused on managed growth and customer satisfaction long before the economy hit the skids. Being small also helps keep you close to your staff, says Reggie Orchid, chief support officer of Beaumont, Texas-based Jason’s Deli. “The closer you are to your people the closer you are to your business,” he says. “We have an obligation to our people to stay financially solvent.”

That’s not to say there’s no work to do. To stay on top, many of the top 10 chains with fewer than 300 units are upping healthy alternatives—there is practically a race to eliminate high fructose corn syrup and promote lighter fare. They’re also offering smaller, more affordable portions. (The exception to the trend is In-N-Out, which continues to stick to the tried-and-true.) Many restaurants are also focusing on customer satisfaction and improving operational efficiencies.

The chains’ ability to hold their own against the powerhouses in a thriving economy could put them in a good position to weather the storm. Here are the top 10 chains with fewer than 300 units listed by fiscal 2007’s annual sales.

*Annual sales figures are from Fiscal 2007.

1. Jason’s Deli

  • UNIT COUNTS: 2007: 180 | 2008: 204
  • UNIT COUNT CHANGE: 13.3%
  • ANNUAL SALES: $427 million
  • AVERAGE SALES PER UNIT: $2.7 million

 

In 2008, Jason’s Deli opened three Chicago locations. More are on the way. As with Houston and Dallas—successful markets for Jason’s Deli—Chicago boasts a thriving downtown and a cluster of towns on the city’s fringe. The chain also opened locations in Washington, D.C., south Florida, Phoenix, and Philadelphia. Expected revenue for fiscal 2008 is $500 million.

“We built more stores in 2008 than we ever have,” says Reggie Orchid, the brand’s chief support officer. Twenty more are expected to open in 2009.

But, if expansion is not economically feasible for franchisees, Jason’s understands. “We let our franchisees decide what’s best for the life of their business,” Orchid says.

In addition to a 4,800-square-foot prototype, Jason’s Deli introduced a newer, delivery-friendly 3,200-square-foot model.

The big news, however, is on the chain’s menu. High fructose corn syrup is gone—except in some carbonated beverages. And a yet to be named line of smaller sandwiches is rolling out this year.

“In 2009, there will be a shakeout between those claiming to offer healthy food and those who really do,” Orchid says. “There’s nothing better you can do for yourself than to get as close to the food source as possible.”

2. In-N-Out

  • UNIT COUNTS: 2007: 213 | 2008: 233
  • UNIT COUNT CHANGE: 9.39%
  • ANNUAL SALES: $400 million*
  • AVERAGE SALES PER UNIT: $1.92 million*

 

The last time Irvine, California–based In-N-Out added a new product was 1995, and that was Dr Pepper. “Our menu of burgers, fries, and drinks has remained essentially the same since our inception in 1948,” says Carl Van Fleet, vice president.

Hamburgers are made from 100 percent pure beef, ground by company butchers. Lettuce is hand-torn to remove veins. Potatoes for french fries are hand-cut in the store. The American cheese is real, and buns are made from slow-rising sponge dough. Shakes contain real ice cream.

Marketing has primarily consisted of radio and outdoor advertising. But that’s not to say the products aren’t promoted. A pop-culture icon, In-N-Out stars in the cult film The Big Lebowski. Message boards describe the food as “addictive” and “awesome.” Web sites reveal a list of the “secret” burgers customers can order. Since In-N-Out will make burgers however customers like, it’s more about the fans’ in-the-know names for the combinations than the hush-hush factor. What is closely guarded, however, are the company’s financials

 As with its products and marketing plan, the family-owned business’s growth strategy remains unchanged. “We grow slowly and will continue to do so as we move forward,” Van Fleet says. In-N-Out in 2008 opened its first Utah store in Washington City.

3. Fuddruckers

  • UNIT COUNTS: 2007: 233 | 2008: 234
  • UNIT COUNT CHANGE: .4%
  • ANNUAL SALES: $320 million
  • AVERAGE SALES PER UNIT: $1.45 million

 

In July 2008, visitors to Las Vegas noticed lines formed around a building in Las Vegas. The main attraction wasn’t Elvis. It was the opening of Fuddruckers’s first Las Vegas store, a 4,200-square-foot end cap. A second store in the city opened in November in the Orleans Casino. The chain also received notice when it opened stores in the Houston airport, in downtown Savannah, and in Orlando.

Perhaps that makes up for some negative press resulting from the 2007 closings of four Columbus, Ohio­–area restaurants—the second time in two decades that Fuddruckers has bolted central Ohio—and the closings of two other Ohio restaurants.

Fuddruckers, like many chains last year introduced health-oriented items, including fresh-baked cookies with zero trans fat and its Lighter Options Menu, which debuted in early 2008. The menu features salads, bunless burgers, and five core patties: ostrich, buffalo, turkey, veggie, and salmon.

Fuddruckers also lightened up its self-service topping bar with such health-friendly selections as seasonal fruit salad; low-fat ranch and Italian dressings; and Alpine Lace low-sodium, low-fat American cheese. While the healthy items have been popular, the standard burger still reigns.

The chain, which has taken it on the chin for not releasing its products' nutritional information, will provide info on the Lighter Options Menu upon request. Fuddruckers maintains that its policy is not unusual in the quick-serve industry.

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