With a reimaging effort completed in half of its restaurants, Schlotzsky’s continues to expand its menu, with pizza and salads among the traditional sandwich offerings, and grow its tri-branded locations with sibling brands Carvel and Cinnabon.
As a result of these efforts, the 356-unit Schlotzsky’s has seen its customer demographics skewing younger and more female, and same-store sales increases continuing for a sixth year, said Kelly Roddy, president of the Austin, Texas-based Schlotzsky’s division of Focus Brands, which also owns Carvel and Cinnabon.
A company spokeswoman said the results have boosted revenue at the remodeled locations for the 40-year-old brand and resulted in new franchise agreements, including 25 for the tri-brand stores in central Texas and New Jersey.
EARLIER: Focus Brands grows tri-branded locations
Roddy spoke with Nation’s Restaurant News about Schlotzsky’s initiatives.
Of your 356 units, how many are the new prototype and how many are reimaged?
We will have 35 of the new prototype and new look open by the end of the year. The entire system will be 100 percent reimaged — having painted all the new colors, all the new graphics, all the new signage, all the new menu boards.
How many are co-branded and tri-branded units?
By the end of December, 165 of the restaurants will have Cinnabon and around 30 will have Cinnabon and Carvel in the tri-brands. Everything that opens starting next year will be a tri-brand. We’re targeting somewhere between 40 and 60 openings next year.
What are the major changes of the reimaging?
We’ve changed the prototype to the more vibrant, hip new colors. We’ve changed the wall coverings from Old World deli style to a new, hip, more relevant art and design with quirky and unique sayings on the wall like “No Shirtzsky’s, No Shoezsky’s, No Schlotzsky’s.” It makes the restaurant more fun. We’ve gone to softer seating with some booths in the restaurants.
Have you made any changes to menu offerings?
All our salads, instead of being packaged, are made to order and served on plateware. All of our soups are served on plateware. We’re also doing “Pick 2” offers in all our restaurants, so you can order a half a sandwich and soup or half a sandwich and salad or soup and salad.
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What changes have you seen in customer demographics?
It has brought in a younger demographic and also increased our female customer count. Prior to the new prototype, we were at 52 percent male and 48 percent female. And now we are 52 percent female and 48 percent male. We believe we’ve kept all the male customers and we’ve just increased our customers. Our frequency of 18- to 25-year-olds was our biggest increase. Of the new customers we are seeing in the restaurants, it is mostly 18- to 25-year-olds that increased. The second biggest increase was 25- to 35-year-olds. That’s obviously good for us. Before we were doing anything, we had a 45- to 55-year-old consumer that was pretty much pretty higher income, predominantly male and aging. We needed to attract a younger customer. I think we’ve been able to accomplish that with the healthier menu options and the new, more relevant design.
Do the tri-brands require a larger footprint?
They are the exact same square footage: anywhere from 2,800 to 3,200 square feet. We were at 72 seats before and our newest store here in Austin is going to have 85 seats.
Have sales of any menu items increased?
We’ve doubled our salad sales and our soup sales have increased significantly. This is our sixth year in a row of positive comps.
What’s on the horizon?
We are really going to be going after pizza sales. It’s a smaller percentage of our sales now. We don’t serve it on traditional pizza dough. We use our sourdough bread as the crust. We use pesto and put it through our cheese-melter oven. Rather than being a 20- to 30-minute pizza that you would get from the pizza chains, you can have a made-to-order pizza through the drive-thru in three to five minutes. … We’ve done some tests and doubled the pizza sales.
Have you changed the pizza offerings?
We introduced an entire new assortment of flavors in September. The initiative to drive sales is a marketing campaign that will launch next year. We’ll offer the personal size eight-inch and also a 10-inch. … Right now, less than 10 percent of our sales are pizzas. In the test stores where we’ve put marketing behind it, it’s nearly 20 percent of sales.
Focus Brands is an affiliate of Roark Capital Croup, the private-equity firm in Atlanta, and also owns the Moe’s Southwest Grill restaurant brand.
Contact Ron Ruggless at ronald.ruggless@penton.
Follow him on Twitter: @RonRuggless
Tim Hortons Inc. said new products, like Specialty Bagels and Real Fruit Smoothies, as well as operational improvements, contributed to a positive third-quarter financial report, including a 40-percent increase in profit.
For the quarter ended Oct. 2, Tim Hortons reported net income of $103.6 million, or 65 cents per share, in Canadian dollars, compared with earnings of $73.8 million, or 42 cents per share. Revenue increased 8.4 percent to $726.9 million.
Same-store sales for Tim Hortons’ 3,225 units in Canada increased 4.7 percent during the quarter. At its 645 U.S.-based units, same-store sales rose 6.3 percent. The company opened 41 new restaurants in Canada and 23 new units in the United States during the quarter, it said.
Tim Hortons opened its first unit outside North America in September in Dubai, United Arab Emirates. Approximately five UAE restaurants are scheduled to open this year. Tim Hortons’ master license agreement there calls for 120 units over a five-year period.
“Operating conditions in North America continued to be challenging, and the strength of our sales performance is a great testament to our strong price-value brand position with our guests,” said Paul House, Tim Hortons president and chief executive. “We continued to innovate in the third quarter and execute our strategic growth plans to build our business.”
House added that Tim Hortons soon would roll out its Tim’s Café Favourites — a line of espresso-based lattes, mochas and cappuccinos — to nearly 3,000 units in Canada and the United States. The Canadian system also will receive digital menu boards, and will soon extend breakfast hours nationwide to noon, he said.
Oakville, Ontario-based Tim Hortons has opened 77 locations in Canada and 43 units in the United States in the year to date.
Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN
Fueled by improvement in key metrics and growing franchisee confidence, Popeyes Louisiana Kitchen is tracking favorably with its long-term growth plans, officials of parent AFC Enterprises Inc. said today.
Cheryl A. Bachelder, AFC chief executive and president, and H. Melville Hope, the company’s senior vice president and chief financial officer, gave that news to analysts on a conference call Thursday covering results for the third quarter, which were released Wednesday.
Bachelder also spoke separately with NRN about results for the quarter that saw global systemwide sales climb 5.5 percent to $450.6 million.
Before recapping quarterly and year to date results, Bachelder told analysts, “Our culinary innovations and Bonafide [bone-in] chicken promotions continue to resonate with our guests in our restaurants.”
Popeyes’ menu additions most recently have included boneless and portable limited-time chicken products like Wicked Chicken and Rip’n Chick’, as well as the ongoing Dip ’n Chick’n promotion.
AFC said Wednesday said that third-quarter net income totaled $5.8 million, or 24 cents a share, compared with $5.9 million, or 23 cents a share in the same 2010 quarter.
Revenue rose 3.8 percent to $35.4 million, on flat company-owned restaurant sales of $12.3 million and a 6.7-percent increase in franchising revenue, to $22.2 million.
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Global systemwide same-store sales rose 1.7 percent in the latest quarter, lapping year-ago growth of 5.2 percent, AFC said. While third-quarter domestic systemwide same-store sales grew 1.7 percent, AFC-owned restaurants saw a same-store sales decline of 1.9 percent, which the company attributed to tough comparisons against 8.5-percent growth in 2010.
Popeyes ended the third quarter Oct. 2 with 1,998 restaurants worldwide, up 2.5 percent from the same quarter a year ago. Domestically, the chain ended the quarter with 38 company and 1,560 franchised restaurants, or 1,598 total locations, for year-over-year growth of 1.8 percent.
“Popeye’s strategic plan remains the organizing principle of our growth initiative and serves us well in this challenging economy,” Bachelder told analysts.
Over the next four to five years, AFC expects to deliver an average annualized basis same-store sales growth of between 1 percent and 3 percent; net unit growth of between 4 percent and 6 percent; and earnings per share growth of between 13 percent and 15 percent.
Bachelder explained that the four pillars of the plan are: “build the Popeyes brand;” “run great restaurants;” “strengthen unit economics;” and “ramp up new unit growth.”
Related to that last charge, in speaking with NRN, she noted that revised guidance on global restaurant openings and closings in fiscal 2011 had the Popeyes chain on track to open a net 60 locations for the year, which, if achieved, would almost double 2010’s net number of 34 and nearly triple 2009’s 21 new units.
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“Our marketing effort is to build the brand by balancing innovative new product news with compelling promotions of our core bone-in chicken,” Bachelder told analysts.
She added, “In the third quarter, this resulted in our sixth consecutive quarter of positive same-store sales for our domestic restaurants, and seventh consecutive quarter for our international restaurants.”
Related to the chain’s goal of improving restaurant operations and service, Bachelder said that in the third quarter, 76 percent of the guests of domestic restaurants who took part in the chain’s receipt-initiated survey program gave Popeyes the highest – or “delighted” – rating. That marked an improvement of 3 percentage points over 2010’s third quarter, she said.
“Our [in-restaurant] speed-of-service score, at the end of the third quarter, was over 70 percent ‘delighted’ – a gain of 15 percentage points since we rolled out the initiative in 2008,” Bachelder said. “Approximately 65 percent of our restaurants were reporting drive-thru [service] times at our goal of 180 seconds or less.”
Among other information shared by Bachelder:
• Third quarter commodity inflation at Popeyes was about 9 percent compared to last year, helping to force down restaurant operating profits by 2 points, to 18.3 percent of sales. The company said it would work to mitigate higher costs through restaurant efficiencies and supply chain savings
• Popeyes reported significant improvement its third annual franchisee survey. “Our franchisees let us know that despite these commodity challenges, the overwhelming majority of them feel good about the quality of the Popeyes franchising opportunity,” Bachelder said.
• To boost new unit growth, Popeyes, among other moves, has become more proactive in recruitment of franchisees, through such actions as holding seminars in priority markets, such as Florida and Southern California.
• Bachelder said Popeyes’ “strong brand,” “rigorous site selection” and high performing new units – which are generating averaging volumes of about $1.4 million, compared with the systemwide average of approximately $1 million, are “are strengthening our new unit development pipeline.”
Contact Alan Liddle at alan.liddle@penton.com.
Follow him on Twitter: @AJ_NRN
Sales of Burger King’s new soft-serve ice cream and desserts, as well as the BK Chef’s Choice burger, have exceeded expectations in the United States and Canada, company officials said Wednesday.
In a call to analysts following a mixed third-quarter report, Daniel Schwartz, chief financial officer for the burger chain’s parent company Burger King Holdings Inc., said the Chef’s Choice burger, launched as a limited-time offer in late October, has been added as a permanent menu item. The premium burger, with its 5.5-ounce patty topped with bacon, American cheese, red onion, lettuce tomato and a “Griller” sauce on an artisan bun, sells for a recommended $4.99.
In September, the chain rolled out soft-serve ice cream cones and sundaes, as well as hand-spun shakes. Steve Wiborg, the company’s executive vice president and president of the North America region, said ice cream sales hit a peak of about 200 units per day, which far exceeded company expectations.
“We’re very happy with launch as we go into the winter months,” he said.
The new menu items are part of ongoing efforts to re-energize the nation’s second largest burger chain since it was acquired by private investor group 3G Capital Management just over a year ago. During the past year, the company has launched a global restructuring effort, as well as a new zero-based budgeting plan to reduce costs.
In the United States, the chain has focused on menu enhancements, restaurant re-imaging, streamlining operations and revamping marketing to appeal to a broader consumer base and drive sales growth.
While same-store sales were relatively flat for U.S.- and Canada-based restaurants in the third quarter, the results indicated sequential improvement over the decline in same-store sales of 2.2 percent in the second quarter this year.
BK officials also said commodity costs remain challenging. Schwartz said food costs were up in the mid-to-high single digits during the third quarter, a trend that is continuing into the fourth quarter.
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Burger King did not raise prices during the third quarter, Wiborg said, but he the company will “continue to look at the menu, commodity costs, our competition and our value strategy.”
Schwartz said the company remains focused on other key strategies for driving domestic sales, including a new remodel plan for 2012.
The company has launched a lower-cost remodel initiative with third-party financing from Rabo Bank to help franchisees with re-imaging efforts. Schwartz said he hoped to see 1,000 units remodeled over the next 12 months — though plans for company locations have not yet been formulated.
Remodel costs are expected to range between $200,000 and $300,000, depending on the location, he said.
International results also drove improvements in the third quarter, and Schwartz said the company will continue to expand its global footprint, looking to grow in countries like Brazil, where Burger King recently signed with a master franchisee with ambitious plans for growth.
Third quarter same-store sales were particularly strong in Latin America, where they grew by 10.5 percent. Schwartz said more than half of the countries within the Latin American region showed double-digit sales growth, including Mexico.
Sales were also strong in Germany, Turkey, Spain, the United Kingdom and China, but locations in Australia saw same-store sales decline, he said.
Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout
Sonic, Dunkin’ Donuts and Red Robin each introduced limited-time offer sandwiches to their menus this week.
On Nov. 7, Dunkin’ said it will offer a Smokehouse Sausage Breakfast Sandwich. The new item features a toasted English muffin filled with egg, American cheese and smoked sausage.
“We’re always looking for ways to innovate around our breakfast menu and introduce new and unique flavor choices,” Stan Frankenthaler, Dunkin’ Brands executive chef and vice president of product innovation, said in a statement. “We’re confident that our guests will love this new menu item.”
The new sandwich will be available through the end of December at participating Dunkin’ Donuts locations at a suggested price of $3.29, the company said.
Canton, Mass.-based Dunkin’ Donuts has more than 9,700 locations worldwide.
Oklahoma City-based Sonic also introduced new sandwiches this week.
The quick-service chain will offer two Toaster Melt sandwiches during November and December. The Bacon Cheddar sandwich includes a beef patty, grilled onions, bacon, Cheddar cheese, pickles and barbecue sauce between Texas toast. The Mushroom Swiss sandwich, also served between Texas toast, features a beef patty topped with grilled onions, Portobello mushrooms, Swiss cheese and mayonnaise.
“These new Toaster Melt sandwiches pack an unbelievable one-two punch of flavor and value," Danielle Vona, Sonic chief marketing officer, said in a statement. “Sonic customers now have two more delicious ways to stay toasty this winter.”
Watch a commercial for the Toaster Melt sandwiches; story continues below
The sandwiches can be ordered in full or junior sizes, and start at $1.99, the company said.
Sonic has more than 3,500 restaurants in 43 states.
For the holiday season, Red Robin has introduced a Sweet Jim beam Swiss Burger, which consists of a bourbon-glazed beef patty topped with Applewood smoked bacon, caramelized bourbon onions and melted Swiss cheese on a garlic butter toasted brioche bun.
“This burger is truly the epitome of sweet meets savory,” said Dave Woolley, Red Robin’s executive chef. “The bourbon is cooked down with molasses and caramelized onions, so there is no alcohol in the burger, and is paired with a buttery brioche bun, Swiss cheese and Applewood smoked bacon to make the perfect, crave-able holiday treat for burger lovers of all ages.”
The item is available for a limited time through Dec. 24.
Red Robin has more than 460 casual-dining restaurants in the United States and Canada.
Contact Charlie Duerr at charles.duerr@penton.com.
In his first conference call with investors since being named chief executive of The Wendy’s Co., Emil Brolick discussed menu news, from the successful launch of Dave’s Hot ‘N Juicy Cheeseburger to ongoing testing of the brand’s breakfast platform.
Brolick also announced the introduction later this month of the W sandwich, an offering with two 2.5-ounce burger patties and premium ingredients from the Dave’s burger, but at a $2.99 price point between the newly launched item and burgers offered on the 99-cent My 99 Everyday Value Menu.
EARLIER: Wendy’s reports $3.97M loss in 3Q
In previous earnings calls, Wendy’s management had said the test of Dave’s Hot ‘N Juicy Cheeseburger drove same-store sales increases 2 percent to 3 percent above the rest of the system’s results. Brolick told investors that results for the fourth quarter are trending “well above that,” and said the brand had its best five-week sales period since 2004. The sandwich went systemwide in late September, but momentum carried through the Oct. 2 close of the third quarter and into the start of the fourth quarter.
“The thing we feel we’ve done with the launch of Dave’s Hot ‘N Juicy is refocusing on core items,” Brolick said. “What’s really gotten us back into the business is selling large hamburgers, chicken sandwiches and salads as a balance with our My 99 value menu. We probably went through a time as a brand where that [balance] got a little out of whack, so we feel really good about the momentum we can sustain.”
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Climbing to “a cut above”
The higher-quality food aspects, from the ingredients in Dave’s Hot ‘N Juicy to similarly upgraded chicken sandwiches slated to debut early next year, will help Wendy’s reclaim a positioning officials said the brand had lost, which Brolick described as being “a cut above.”
“This is the natural position for the brand,” Brolick said. “We went through a period of time as a brand where we stepped back from this position, and we have to step back into it. I’m not suggesting that we want to become a Five Guys or Smashburger or something like that … but I do believe there’s a significant opportunity in the marketplace for higher-quality products that are fresh, made-to-order products.”
While Brolick complimented the “new QSR” chains in fast casual like Chipotle, Noodles & Co. and Five Guys for elevating food quality and freshness — even going so far as to reference Chipotle’s “Food With Integrity” slogan — he said Wendy’s is the traditional fast-food chain most suited for making that kind of quality its competitive advantage.
Introducing the W mid-tier sandwich so soon to the launch of the more premium burger is meant to move sales from the lower price points rather than encourage trade-down from Dave’s Hot ‘N Juicy, Brolick said.
“We’re trying to have a price point at $2.99 that is closer to where some of the My 99 or $1.29 products are so we trade people up into those products,” Brolick said. “Believe me, we’re going to continue on an ongoing basis to put some pressure against Dave’s Hot ‘N Juicy as we look to next year. As we look back historically, by not putting pressure on some of our core and chicken sandwiches, that contributed to the erosion in some of those products.”
RELATED: Analyst: Wendy’s growth won’t slow
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Looking to rise and shine
The brand also remains optimistic that the breakfast platform being tested in seven markets would be a big opportunity for Wendy’s to grow sales in the near future and over the long term. Wendy’s planned breakfast items like the Artisan Egg Sandwich, Grilled Breakfast Panini or Warm Oatmeal Bar are supposed to fulfill the brand’s intended “five-star food for three-star prices” positioning.
Though Wendy’s said in earlier conference calls that it intended to introduce breakfast in 1,000 locations by year-end, the chain will no longer update analysts on incremental milestones toward a systemwide launch. The key to spreading the menu to more locations would be integrating the Redhead Roasters coffee program and bakery items in test with the breakfast sandwich line also being tested, Brolick said.
“We want to go out there with an offering that’s distinctive,” he said. “We feel that by taking the approach we’re taking, we are ultimately going to have a much stronger and more successful offering in this arena.”
Wendy’s needs to take advantage of growth projected for the breakfast daypart over the next 10 years, Brolick said. He added that Wendy’s would advertise the morning meal consistently and aggressively, like McDonald’s.
Getting Wendy’s locations prepared for breakfast also will require ongoing investments in training staff to improve service and to remodel restaurants along one of the brand’s four prototypes being tested, Brolick said.
“Demographics support this, because as people age, they like to spend more time in the restaurants,” he said. “With the launch of breakfast, we know we have to do better in the dining room, particularly on weekends.”
Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN
