The Melt spent a decade proving it could transform its restaurants. Now it must prove someone else can run them just as well.
The California-based fast casual is moving into franchising after lifting average unit volumes from $700,000 to roughly $3.5 million under CEO Ralph Bower. The growth plan calls for the company to reach 80 corporate restaurants by 2030 across California and Arizona, with franchisees carrying the brand into new states.
It is a significant turn for a chain that was primarily known for grilled cheese when Bower arrived 10 years ago. The menu has since evolved into chef-inspired comfort food led by burgers, melts, mac and cheese, and chicken. The operating model has undergone an even larger transformation, producing 10 consecutive years of positive same-store sales and online ratings that have held between 4.7 and 4.8 this year.
“I don’t know of another brand that’s ever been able to drive their AUVs from 700 [thousand] to 3.5 [million],” Bower says.
His first move was to ask customers and employees what should change and what should stay. An email to the brand’s database drew 1,100 responses. Bower posed the same two questions to restaurant operators, collected the findings in a spreadsheet, and acted on the feedback.
The resulting sales climb accelerated during the pandemic. Average unit volumes were near $1.5 million entering 2020 and doubled to $3 million by 2021. They have since gained another $500,000. The Melt’s sales initially fell 80 percent when shelter-in-place orders arrived in San Francisco, recovered to flat by May 2020 and set a record in June. Sales increased 57 percent from July through the end of that year, followed by a 54 percent gain in 2021 against the prior surge.
The Melt had spent years preparing its kitchens to withstand high-volume periods. Its speed of service did not change by five seconds when sales doubled, Bower says. Proprietary software alerts restaurant personnel when ticket times breach key thresholds. A nine-minute average over a 15-minute window triggers texts to Bower, the chief operating officer, area manager, and general manager. A 15-minute mark prompts automated calls.
Those peaks can arrive late. Forty percent of The Melt’s sales occur after 10 p.m. One San Francisco restaurant recently processed a $4,600 hour from 11 p.m. to midnight, following a $3,000 hour. A La Jolla store that routinely posted weekly sales near $20,000 before the pandemic reached $80,000 per week by the end of 2020.
The brand ties employee bonuses to guest feedback and delivery errors instead of sales and profit. Operators join a 9 a.m. call seven days per week to review customer responses, mistakes, and restaurant performance. Teams also hold rallies before lunch and dinner shifts based on the companywide goal of delivering an “I love it here” experience to every guest.
“I think sales and profits are what you did yesterday, what you did last week, and what you did last month. It’s history,” Bower says. “The number one indicator of what your success tomorrow is going to be is your guest feedback today.”
The Melt’s franchising push will test whether that culture can transfer outside its corporate system. Bower has long been cautious of licensing the concept because he could not know how much of its improvement came from the food and how much came from operational intensity.
Greg Vojnovic, head of franchising, began advising the company roughly a year ago. He and Bower previously worked together at Popeyes, and Vojnovic had evaluated two Melt sites years earlier. The initial discussion was not necessarily focused on franchising. It concerned how a successful regional brand should grow and whether its restaurants could succeed in distant markets.
The company ultimately decided franchise partners offered a route into new territory without diverting the resources supporting its own development pipeline. Vojnovic describes The Melt as “polished fast casual,” featuring elevated comfort food and an elevated experience in a counter-service setting.
“We’re operators first,” Vojnovic says. “I’ve owned my own companies. I’ve been a franchisee. I still own restaurants. Ralph’s an operator. John Morlock, our COO, he’s an operator too, and we operate our company restaurants. That’s our core business.”
The target franchisee is an experienced multiunit operator with recognition as one of the top performers in an existing system. During initial conversations, The Melt asks prospects to name the best franchisee in their current brand. The company wants candidates to name themselves and substantiate the answer with awards.
Scale alone will not secure a deal. Bower says some operators with hundreds of locations may have lost the restaurant-level discipline they displayed when their portfolios were smaller. The Melt wants owners who know their general managers and district managers and are recognized by employees during restaurant visits.
“We’re looking for people that are recognized not just for being big, but for being the best operators in their system,” Bower says.
Franchise restaurants are expected to preserve a compact footprint. The chain has shown it can produce its current volumes from spaces measuring 1,900 to 2,300 square feet, supported by 33 standard pieces of equipment. Its Stanford restaurant exceeds $6 million from 2,200 square feet. Several stores produce more than $2,000 in annual sales per square foot.
The format also gives The Melt access to second- and third-generation inline and endcap spaces that some competitors cannot use. Patios can add seating capacity, particularly in California. Freestanding restaurants and drive-thrus are possible future formats, but the early franchise program will stick close to the proven model.
Corporate development is moving quickly. The Melt began the year with 17 restaurants and has opened seven, bringing the system to 24. An eighth could debut before year-end. Its latest opening converted a former Boston Market in a half-occupied Monterey Park development into The Melt’s first freestanding unit. It delivered the strongest opening week in company history.
Vojnovic says the chain will add only one major layer of complexity at a time, with franchising serving as the current undertaking. The method lets The Melt protect its operating system as it establishes a presence in markets outside California and Arizona.
“We wouldn’t do this until we knew that the restaurant deserved to travel, and they now deserve to travel,” Vojnovic says. “It’s purely a result of this obsessive focus on operational excellence and the values of ‘I love it here’ that the result is the sales. That’s the difference.”
