Most articles in QSR and other trade pubs cover growth stories of brands that are expanding in large and midsized metros. It makes sense since most people live and work there. Instead, this story addresses a fast-casual model that focuses on growing in small metros.
Nearly all The Works Cafés are located in small metro markets where we generate industry-leading AUVs and profits. Throughout our company’s 35-year history, we have learned how to leverage the numerous advantages and overcome most of the daunting challenges that come with operating in small cities in the Northeast.
We are not the only chain that sees opportunities in these markets. Some large fast casuals like Chipotle have recently discovered the benefits of locating stores in small metros, yet struggle to overcome the challenges. Others, like Panera, have long leveraged the advantages, but many of the local Paneras we compete with, are still struggling with operational and food-quality challenges.
Here are some of the strategies that have brought The Works Café eateries success in small metros.
Location, Location, Location
First, we locate most of our stores in the heart of communities with vibrant downtowns. Most people who live in or near these metro hubs are engaged with their community’s center and often shop or work there.
For our “community-minded cafes,” downtowns offer six key advantages:
- Very low marketing costs
- Downtown rents are usually much lower compared to the increasingly expensive prime locations in major metros.
- Since our stores are typically located in the geographic center of these metros, they are ideal locations for our substantial digital delivery and take out businesses. Plus, customers and delivery drivers rarely face traffic issues.
- These Locations offer the potential for strong morning, mid-day and early evening day parts, year-round.
- Our typical downtown locations have heavy foot traffic which results in attracting walk-in customers all day.
- We have relatively little direct competition due to our unique and varied menu. From an ROI perspective, this could be the most important advantage for us.
Main disadvantages—and they are major —include:
- Not having opportunities for drive-thrus
- Needing more customized build-outs in often older buildings
- Various ops challenges, especially recruiting quality DMs, GMs, and ADMs
However, in the last 10 years, we have turned these last two disadvantages into strong competitive advantages, and this has greatly contributed to our success.
Community, Community, Community
Strong, tightly knit communities tend to be much more common in small metros than in larger cities, so we begin by focusing on becoming part of each individual community the day we sign the lease. While most chains rely on rigid, cookie-cutter store designs and branding, we have developed the creative expertise to design each store to match its specific community.
Customized storefronts give our company a distinctly local branding that is very much appreciated by those who live in or near these metros. In addition, our substantial tourist business also benefits from this community-focused approach because visitors often prefer to sample local cuisine rather than settle for standard chain food.
Other ways we assimilate into communities include paying our employees to volunteer for local non-profit organizations, sponsoring “good works” projects to help people in need and donating food to local non-profits.
Our Menu Selection is Designed for Small Metros
Large cities offer a wide variety of niche and ethnic fast casuals that may not have enough variety nor the right type of foods to thrive in small metros.
Our menu, which continues to feature the fresh-baked, all day, New York style bagels we launched with, has expanded well beyond this specialty. Over time, we have developed and perfected a wide variety of healthy foods like organic whole grain bowls and relatively healthy comfort foods like Vermont cheddar mac and cheese that appeal to customers of all ages.
Moreover, our eat in, take out and catering businesses are thriving partly because we offer a variety of foods that have something for everyone in families and businesses. Most importantly, we have developed this variety of offerings very carefully over the years to limit SKUs, as well as line and prep complexity, without slowing throughput.
Very Low Marketing Costs
As mentioned, our central locations expose us to most residents and workers in town and the surrounding communities in the metro area. From a marketing perspective, this convenience and exposure are very effective.
The large free food sampling parties we host are our largest grand opening marketing expense. At these events, we invite large numbers of community leaders and influencers to enjoy half-portions of most items on our menu. In no time, word spreads throughout the metro area with praise for our high-quality eatery, both by word of mouth and social media. Thereafter, marketing costs remain very low except at our one location near Albany, a major metro market.
On going marketing costs are primarily basic social media interactions, in-store branding and promo signs, our expanding loyalty program and Chamber of Commerce-type functions.
People who live in small metro communities tend to appreciate businesses that are serious about environmental sustainability—especially because store locations are close to nature. Many residents in these communities chose to live there to avoid the numerous environmental hazards that are common to large metros. In fact, some of our best customers are “refugees” from large metros who live in small towns to escape air, water and noise pollution (and excessive traffic).
Regarding sustainability, The Works Café is well positioned and fortunate that its founder and CEO has been a pioneer in composting, recycling and local sourcing for decades. Many other chains are only beginning to take these impactful issues seriously.
This strong branding gives our stores a competitive edge both with customer loyalty and recruiting/engaging employees. Environmental sustainability is a very important issue among the Gen Z workers who are the majority of our workforce.
Major HR and Operations Challenges are Becoming Competitive Opportunities for Us
Staffing these locations with well trained, high quality, engaged workers and managers in towns that are far away from each other creates complex challenges we’ve been working on overcoming since we opened our second eatery 33 years ago. Most of our locations are about 90 minutes apart. This makes it difficult to transfer workers from one location to another and build a management bench.
We do not have all the solutions, but we are proud of the progress we have made, especially in the last ten years. For us, overcoming the distance challenge has become a powerful competitive advantage over most chains in our markets. For example, we have created a mobile “pro team” consisting of the best, most experienced staff from all our locations that can be pulled together at a moment’s notice to help open a new café or invigorate an existing one.
In contrast, a Chipotle in Maine was closed last year by the company because its workers went on strike. Employees weren’t primarily seeking higher wages; they wanted a manager who had the talent to hire enough workers because the under-staffed employees were being overworked as they struggled to deliver “food with integrity”. Competing with Panera in the small metros used to be difficult for us, but not anymore. We attribute this to the HR-related ops problems Panera is experiencing. Today, we look forward to competing with Panera as we explore new markets to grow our chain.
How We Have Overcome Our Daunting Ops Challenges
We used to have just one DM supervise all our locations. Now we have two top-quality, very well paid DMs and are searching for a third because we just opened a new store and will soon open more.
Incentivizing ambitious and capable DMs and GMs to move to small towns is expensive, but we believe this to be well worth the costs. All QSRs benefit from more frequent visits from talented DMs, and ours spend virtually all their time in the stores or traveling to them. Their hard work results in hiring, training and supervising higher quality GMs who in turn hire, train, manage and engage higher quality shift managers and staff.
Another key factor is that our workers receive higher hourly wages than the workers of other QSR chains in our markets. In addition, we offer health insurance, meal discounts, tuition scholarships and we award bonuses to employees who qualify. Since we now have higher quality managers in place to train, mentor and guide them, our workers are earning their relatively high compensation by increasing throughput, producing more consistent food quality and delivering fast, friendly customer service. This results in happy customers who add to our employees’ compensation by tipping generously.
Potential Directions to Scale Our Company in the Future
Just because we thrive in small metros and are passionate about becoming an important part of our communities doesn’t mean we want to remain a relatively small chain. Since we have finally overcome most challenges associated with small metro locations, we look forward to growing faster.
Currently, we continue to open new stores in New England and Eastern upstate New York. However, we are beginning to explore opening clusters of company-owned stores in different parts of the country.
Another direction we’re exploring is growing our business through franchising in new regions of the U.S.
Franchising is not new to us. We have had one franchised store for 12 years that is just as successful as our other stores. We believe our small metro business model could be a great addition to the portfolios of both multi-brand franchisee groups and independent franchisees.
The Works Café may someday become a well-known national brand, but that is not our primary vision. Our goal is to become a popular, well-respected local brand in small metros in different regions.
We have noted that it can be very challenging to supervise stores that are located far apart from one another. Here is one of the methods we’re exploring to help us grow in new regions while maintaining our high culinary and customer service standards.
Surveillance cameras are common in fast casuals. They are often utilized to identify or prevent inappropriate actions among store-level personnel. Aside from giving employees the impression they are working in a big city police state, tracking employee behaviors can be effective. But working in a setting where it feels like one is being watched, rather than trusted, isn’t appealing – especially in small metros where locals often trust their neighbors.
Why not expand the video camera functions and change their in-house branding and scope? Why not also use them to catch employees doing something right or extraordinary? Then recognize and reward workers with cash bonuses, desirable prizes and storewide recognition for their achievements. We are currently exploring this dual concept we call “Bonus Camera branding” by trying to answer these questions.
Conclusion and Takeaways
It is inevitable that some of the rapidly expanding fast-casual chains that currently focus on major and mid-sized metros will eventually try new locations in nearby, but separate, small metros. They may succeed if they:
- Possess or adopt appropriate branding
- Are willing and able to make the needed substantial HR investments
- Have unusually robust environmental sustainability policies and practices such as recycling and composting
- Feature at least some food options, including locally sourced ones, that make them stand out from competitors
- Offer broad menu selections like those found at Chipotle and Panera, unless their chains focus on America’s most popular foods: burgers, chicken and pizza
We are proud that at The Works Café we’ve learned to optimize the numerous advantages and mitigate most of the challenges associated with operating a fast-casual chain in small metro markets. The foundation of our success is the strong overall company culture we have built and expanded on in each individual location.
Richard French worked in his father’s restaurant, which was located in a small metro, throughout his childhood. After graduating from The University of Vermont, he became a serial entrepreneur by starting three innovative catering businesses. He then moved back to his hometown of Manchester Center, Vermont, to open his first fast casual, The Bagel Works. Over the last 35 years, he has expanded his business by opening new stores in other small metros and evolving his business model. Richard is slated to speak at QSR’s Evolution Conference in September.
Stuart Skorman is a serial entrepreneur who has started 12 businesses in nine different industries. He sold five of his start-ups to Fortune 500 companies. His favorite start-up was a chain of video stores that generated the highest AUVs in that industry. His stores were located in some of the same small metro areas as The Works Café. In fact, Stuart met Richard and began working with him because their first locations were next to each other. Stuart grew up in Ohio working at his father’s chain of discount stores that were also located in small metros.