FER EXCLUSIVE: Perspectives 2015

Recession? What recession? While economic recovery may seem sluggish and brighter for the stock market than for Joe Six-Pack, opportunities for growth abound in the foodservice industry. Exactly how to grow in a hotly competitive market and shaky economy can vary dramatically from business to business.

We asked some of the industry’s growth leaders what their strategies are for the year ahead and found some surprising consistency to their comments. Now is not the time to hesitate, we heard, but rather the time to jump on opportunities and compete aggressively for new locations. Customers continue to seek more variety, and chains that are slow to respond have seen same-store sales slip. 

More specifically, say our half-dozen respondents, successful growth will depend on nurturing your most precious resource—people, nailing down the best real estate, squeezing margins from everywhere possible in the face of rising food costs and engaging your customers wherever they are, not simply in your own stores.

Read on for details of how your peers plan to tackle the year ahead. 

TOKYO JOE’S: Deepen The Bench 

CHAD CORRIGAN
V.P. of Brand Expansion
Tokyo Joe’s, Greenwood Village, Colo.
Existing Units: 30
2015 Activity: 10 

For 20 years, Larry Leith, founder of Tokyo Joe’s, Greenwood Village, Colo., contented himself with slow, steady growth in and around his own backyard of Denver. But two years ago, the brand was approached by a private equity group with a plan for bigger growth. Leith liked what he heard.

With 30 stores at the end of 2014, Tokyo Joe’s plans to open 10 new stores next year in places as far afield as Arizona and Texas. 

“We’re set up for growth next year,” says Chad Corrigan, v.p. of brand expansion, “and it will come from a combination of corporate stores and franchise stores, which is new to the company. We’re being very careful with our franchise development. They’ll be within the proximity of corporate stores, which puts them in the same distribution area and provides operational synergies.”

Corrigan is confident that the menu and concept have legs to grow across the country, and because it offers customers a lot of variety, he doesn’t envision needing changes in the menu or cooking platforms. As the company grows, the equipment package—at about $130,000 per store—will remain relatively unchanged. The company may incorporate design changes into new stores as the chain evolves. For example, some stores switched to a new LED lighting program, which has about a two-year payback. 

The company has invested heavily, however, in two areas key to its plans for steady and strategic growth, according to Corrigan. A new MenuLink software program ties the stores’ POS system to inventory, helping the chain keep a handle on food costs. “Food costs are always a challenge,” he says, “and the drought in California has put pressure on prices of rice and produce.” The system also helps track labor costs.

Additionally, a new energy management system controls the equipment with heavier loads, turning it on and off as needed to manage peak energy demand throughout the day. By timing energy demand, the company better controls its energy costs. But the most important technology investment the company has made recently was for a software module that tracks employee development throughout the system. 

“Our business is more a people business than a food business,” Corrigan says. “It’s tough getting good people and even tougher keeping them. We want to make sure we build the right bench of people to have a depth of resources as we grow.”

Tokyo Joe’s already switched to electronic training and operations manuals. The new development software package helps management stay on top of how employees are progressing through the ranks and identifies employees who show promise to help management identify the growth opportunities available to them. 

With great players on the bench, Tokyo Joe’s sees a winning future. 

LETTUCE ENTERTAIN YOU ENTERPRISES: Build On Strengths

MARC JACOBS
Executive V.P. and Partner
LEYE Inc., Chicago
Existing Units: 100
2015 Activity: 5-7 

“Our growth plan is both strategic and opportunistic,” says Marc Jacobs, executive v.p. and partner at LEYE Inc., Chicago. “The heartbeat of LEYE is creating new concepts, and creativity spurs growth, but because we’re privately held, we can open new restaurants when we’re ready.”

Since Founder and Chairman Rich Melman started the company, opening R.J. Grunts in 1971 with partner Jerry Orzoff, LEYE has been synonymous with fresh, innovative restaurant concepts. Its structure is somewhat unique: The company works with individual partners to develop concepts, and the partners run them. Partners, like Jacobs, usually manage several different concepts. Some are stand-alone restaurants, some are replicated in one or two places and a few concepts turn into chains, such as Maggiano’s Little Italy, which now is owned by Brinker Int’l. 

“We try out new ideas,” Jacobs says, “and if they work, we’ll replicate them. With new concepts, we usually keep it close to home.” The company tries new concepts in Chicago first where it has a huge base of talented managers and staff, he explains.

“We’re always looking to get better at what we do,” Jacobs says. “So when we look at new locations, we look at the challenges they present and ask what we can do differently. We’re really good at sharing ideas throughout the company whether it’s a labor model or new equipment, like a combi oven, or new technology [like a high-speed conveyor oven] that makes our lives easier. Hospitality comes first, though, so we protect quality and service before looking at efficiency or cost savings.” 

For example, when the Antico Posto Italian Café, Oak Brook, Ill., was remodeled, the design team considered combi ovens, but decided on convection ovens based on the menu. At Foodease Restaurant Market in Water Tower Place, Chicago, LEYE received approval from the city to use ventless ovens and a flattop griddle, giving the restaurant flexibility to prepare some items from scratch. Additionally, a sushi-rolling machine adds speed and consistency to its sushi offerings. At Foodlife, also in Water Tower Place, a high-speed conveyor oven shortens wait times for pizza.

“Our biggest challenge,” Jacobs says, “is having the talent we need to support our growth elsewhere. I love our Beatrix concept [a neighborhood restaurant, coffee shop and hangout that features natural, organic and gluten-free products on its menu] and would like to expand it, but I need someone in a different market with the same passion for the concept that I have.”

The company uses a lot of social media to hunt for talented people, and partners are actively involved in the interviewing process to ensure LEYE hires staff members that have the ability and passion to provide the same excellent food and service in all of their locations in Chicago, Miami, Las Vegas and Washington, D.C. 

CHECKERS AND RALLY’S: Give Guests More Of What They Want

ADAM NOYES
Executive V.P. and Chief Restaurant Operations and Supply Chain Officer
Checkers Drive-In Restaurants Inc., Tampa, Fla.
Existing Units: 800
2015 Activity: 45+ 

Coming off of four consecutive years of same-store sales growth, Checkers and Rally’s, which falls under Tampa, Fla.-based Checkers Drive-In Restaurants Inc., isn’t content to rest on laurels or anything else. The company signed up an additional 24 franchisees and opened 45 new stores in 2014 and is on pace to open even more stores this year. Its growth strategy is simple: Give customers more of what they want.

“We are consistently innovating our menu—launching new products and LTOs that deliver on our brand promise of bold flavor at an unbelievable value,” says Adam Noyes, executive v.p. and chief restaurant operations and supply chain officer. “At the same time, we’re ensuring that we’re right for the eating occasions that matter most to our guests, like snacking, mini meals and late night, in addition to the traditional lunch and dinner hours.” 

To meet the challenges of its ambitious expansion plans, the chain recently developed the latest in a string of store designs. Known for its double drive-thru restaurants, Checkers has added in-line, end-cap, second-generation conversion and nontraditional designs, such as airport concessions. Its new Checkers and Rally’s 3.0 design, however, features a single drive-thru and more efficient kitchen layout.

“We completely reengineered the kitchen design for better efficiency and faster service,” Noyes says. “For example, we placed the fryer next to the grill under one hood, which not only saves us money on equipment and utility costs, but also creates labor savings because now a single employee can work the fryer and the grill during non-peak hours. This design has improved our speed of service and guest satisfaction scores as well.” 

The chain constantly looks to improve certain aspects of its restaurants, including equipment for new menu innovations and technology that will increase guest satisfaction. “We are currently testing several new initiatives with product,” Noyes says. “We’re also planning the testing and implementation of a guest-loyalty program as well as a new learning management system for our employees in our restaurants.”

The guest-loyalty program is a mobile app that will deliver coupons and other promotions to customers’ phones, and the company is investigating ways to use mobile technology to speed service and potentially save labor. Additionally, the learning management system houses all of the training strategies for employees; integrated content helps staff learn new positions or skills. Managers can track the progress on each employee’s personalized learning plan to help his or her team strengthen and develop. 

MURRAY STATE UNIVERSITY: Leverage Growth Opportunities

PAULA AMOLS
Director of Dining Services and Racer Hospitality
Murray State University, Murray, Ky.
Existing Units: 10
2015 Activity: 0 

Three years ago, when Paula Amols accepted the position of director of dining services and Racer hospitality (auxiliary services) at Murray State University, Murray, Ky., she took on a good news/bad news scenario.

“The program was in great shape financially when I arrived,” she says. “People thought the catering program was the best around, and plate costs were low.” 

The bad news: She found only one piece of gas equipment on campus, and the foodservice facilities were tired. So, Amols invested in the foodservice department. She overhauled the single residential dining hall’s kitchen, replacing the old equipment and HVAC system, renovating the loading dock and installing all new refrigeration. The facility produces 5,000-6,000 meals per day, and the kitchen remodel has made it more energy and labor efficient. New equipment, such as combi ovens and a custom Mongolian grill, gives the staff the ability to produce more menu items.

A large, cash, straight-line cafeteria in the student center was gutted and renovated in 2013, making it more attractive to students, faculty and staff. A sandwich shop also located in the student center got a facelift and new identity; it now instead sells sushi and healthy grab-and-go items. 

“It’s a different culture here,” she says. “It’s very rural, and kids here are not particularly adventurous, but they love sushi. The new market-style concept handles three times the throughput, and we sell between $10,000 and $12,000 of sushi a week.”

Refreshing the look of a small café in the business school and reorganizing its equipment has resulted in a 30% bump in sales. And the purchases of not only Murray State’s but Kentucky’s first on-campus food truck helps dining services reach students living on the fringes of campus and provides a late-evening option for off-campus students. 

After the three-year renovation spree, dining services is still debt-free. The department saw revenue growth this past year without a rate increase in the meal plan and is looking for more growth opportunities.

Tighter control has helped keep food costs in line, but she’s squeezed as much as she can by joining a group purchasing organization and installing new food management software. She hopes a new waste management system will deliver 3%-4% food cost savings by identifying and correcting food overproduction. She also wants to install retinal scanners and tie them to the POS system to prevent meal-plan abuse and eliminate a cashier. 

If feasibility studies are positive, she’d like to remodel the servery in the residential dining hall—replacing one of two soiled-dish dropoff lines with exhibition cooking stations and added seating—and change out the 40-year-old hood in the residential dining hall’s kitchen for a new energy-efficient model. Amols also hopes to expand the c-store into the former mechanical-room space; the c-store did $1.3 million in sales in 1,000 sq. ft. last year.

WHICH WICH: Keep Growing Organically 

JEREMY COOK
V.P. of Real Estate and Construction
Which Wich, Dallas
Existing Units: 343
2015 Activity: 80 

In 11 years, Which Wich Superior Sandwiches, Dallas, has grown from its initial store to a chain of nearly 350 restaurants. That’s a remarkable feat for any company, but for Which Wich that kind of growth doesn’t feel out of the ordinary.

“We’re taking the approach of growing organically,” says Jeremy Cook, v.p. of real estate and construction. “We let the brand speak for itself, and people develop an emotional tie to the brand.” 

With very little marketing, Which Wich has attracted a large following of customers and franchisees who want in on the brand’s success. It’s a matter of doing what you do best, Cook says. The company has put together a great support package for a brand that grows stronger every day. In turn, “we award franchises to people with the entrepreneurial spirit to run a successful business,” Cook says.

Location is key, Cook says, because Which Wich doesn’t just compete with other sandwich chains. “We’re really competing for share of stomach, so we want to be where the action is, such as a lifestyle shopping center. If we’re lucky, we want to get there first. But we’re not your everyday sandwich shop, so if we end up near a Chipotle, for example, people can experience our difference.” 

Finding the right real estate is a challenge that Cook sees as an opportunity. “Our standard footprint is about 1,600 sq. ft., but in places like California where real estate costs are higher, we’re looking for about 1,100 sq. ft. Then it’s a matter of what does the space look like and how do we fit our style into that space.”

With a well-established menu, the equipment package isn’t likely to change any time soon, so opening new stores becomes a matter of moving the pieces around to fit. The chain achieves menu variety by changing “Bag No. 8” every six weeks or so, offering new sandwiches, such as bahn mi or gyros, as special promotions. 

Two new nontraditional drive-thru locations opened in December, and the company is watching closely. New touch-screen kiosks replicate the Which Wich ordering process—customers check off the ingredients they want on paper bags using Sharpies—helping retain the chain’s signature customer experience.

Franchisees already have opened several international stores, and more are coming, suggesting there’s plenty of fertile ground for more organic growth. 

MOOYAH: Build Better Burgers

MICHAEL MABRY
Chief Operating Officer
Mooyah Franchise LLC, Plano, Texas
Existing Units: 75
2015 Activity: 25 

Does the world need another burger chain? The answer is a resounding “yes” if you’re Michael Mabry, COO of Mooyah Franchise LLC, Plano, Texas. Mabry is bullish on the seven-year-old chain because he feels it offers a better burger and a better experience.

“The burger industry is very competitive, but it’s always been that way,” he says. “It’s the leading category in both QSR and fast-casual dining. But our competition is anyone looking for a 2,000-sq.-ft. end cap, whether it’s another burger restaurant or a dry cleaner.” 

Mabry is confident that the company has the operational team in place to see the chain grow an additional 25 stores in 2015, but says the year ahead isn’t without challenges. Big ones for the company are people, real estate and the rising cost of commodities, particularly beef.

To address the latter, the chain is looking to squeeze margins everywhere it can rather than pass on increased costs to customers. In the last quarter of 2014, the company was in talks with all of its suppliers, from paper goods to produce, to negotiate new purchase agreements. Earlier in 2014, it upgraded equipment, such as fryers and shake machines, to realize increased efficiency. 

To address the challenges of people and real estate, Mooyah has adopted the motto “simply better” for 2015. The company has targeted analytics, culture and training/support as areas to improve and simplify to keep operating smoothly and successfully.

“We’re knee-deep into a technology strategy,” Mabry says. “We’re going vendor by vendor to see if we can consolidate technologies, particularly our POS and back-office systems. 

“When it comes to culture, we want to make sure it’s ingrained, but there’s really no strategy. You have to live it. We reorganized our team recently so everyone reports directly to two to five other people, so staff can build relationships and support networks. We want to hire appropriately at the assistant-manager level and above in our stores to ensure our level of hospitality is high. I can teach someone to wash dishes, but you can’t teach a smile.

“Finally, we’re making sure the people in our system receive the proper training and support they need to deliver our offerings and experience.” 

With a great base of franchisees to work with, Mabry sees a bright future.