Go National? Not This Fast-Growing Chain
The company wins industry awards. It ranks high in customer surveys. Potential franchisees want it to go national... but it doesn't. Smart strategy, or huge missed opportunity?
Here's another in my series in which I pick a topic and connect with someone a lot smarter than me. (Check out some previous installments at the end of the article.)
This time I talked to Eric Newman, executive vice president and general counsel of the privately held Bojangles' Restaurants, a quick-service restaurant chain with over 500 locations in 10 states (and D.C.).
When I think about running a fast-food business, I tend to think of operations as the real function, with food the end result. Mentally I would be in the operations business, not the food business.
You're not alone. We focus on food first--but that doesn't go without saying for every restaurant chain.
In quick service, people are always trying to take out steps and take out costs, but I've always thought of us as a southeastern version of In-N-Out Burger, and with a Zagat ranking in the top five of the large chain restaurant category for food, it's clear we do food exceptionally well.
Years ago we did try to automate the process to a greater degree. But the food wasn't as good. So our chicken is delivered fresh, it's hand breaded, we make our dirty rice from scratch, our biscuits from scratch, we have an incredible following for our tea... we perform complex preparation in a quick service format that yields a high flavor content.
That's not an easy formula, but when you execute well customers definitely respond.
You also take a different approach to the day than the average chain.
The typical Bojangles' does 40%-plus of their revenue in the breakfast day part. That's an incredible head start and great leverage against fixed assets. In the quick-service restaurant industry, only McDonald's and a few others are successful at breakfast.
For us that's intentional. For example, we locate on the breakfast side of the street. The typical quick service chooses the "going home" side of the street. We look for locations on the "going to work" side with great traffic flow, easy exits back out... and our equipment and systems and labor are designed to increase the drive time capacity of breakfast. Most people tack breakfast on to their existing systems, almost as an afterthought.
Keep in mind the breakfast customer is the most loyal and yet the most intolerant of bad service--so you have to be true in the morning. All the issues that make breakfast work are built into our system.
Speed is important, especially at breakfast. If you're slow when I'm on my way home I may get irritated but at least I'm not late for work. Does that mean you need more food-in-process?
Some of our competitors do tend to hold product for a longer period of time. A well-managed Bojangles' has the data, knows the patterns, plans labor and food properly... and as a result cooks less more often, whether for breakfast or lunch or dinner.
That's our mantra: Cook less more often. The key to pulling that off is training and management and execution and designing your systems to accommodate smaller batches.
Since quick service tends to have a reasonably static menu, how do you deal with changing commodity prices?
We have a diverse breakfast menu, so when commodity costs change we accentuate product lines according to commodity costs.
That makes a restaurant more complex to operate and manage, so it's a daily management focus.
What about the rest of the day? There are restaurants--not yours--near me that are busy in the morning but they're like ghost towns in the evening.
Basically there are three day parts made up of three different groups of customers. Satisfying all three starts with choosing the right locations.
For example, take the commuters that may not live nearby; they need easy in and out at all times of the day, and full visibility. Lunch customers may work in nearby industry offices. Dinner can either be people on the way home or who want to eat at home... so you need plenty of rooftops.
The ideal location satisfies all three.
Do you have an ideal demographic?
We tend to be more suburban and rural than urban.
Keep in mind some concepts tilt to a certain part of the market; few go across the full spectrum.
When properly penetrated a Bojangles' can go top to bottom economically and demographically. Some of our best units are urban, some are in college towns, some in upper-end economic areas, some are working class and multi-ethnic. So the concept tilts itself according to its customer.
I'm fascinated by the franchisor/franchisee relationship. You go into business with highly independent people who want to run their own businesses--yet the nature of that relationship means you retain some amount of control over them.
We're growing very rapidly. We're opening a new store about every nine days, we're one of the fastest-growing freestanding QSRs, and while we are adding franchisees a significant part of that growth is company-owned stores.
That results in a complete unity of interest with franchisees. We naturally don't want to sell things to franchisees or push them into things that won't work for them because our interests are aligned. If we create a product or institute a policy it has to make sense for the company stores before it makes sense for franchises.
There's a long list of lawsuits by franchisees against major chains, but we're not on that list. We haven't had a substantial franchisee dispute in over 15 years.
I like to think that's because we're really great guys, but it's also because we have a unity of interest that lessens the potential for disagreements.
Most franchisors go national as quickly as possible, sometimes just for bragging rights, it seems. You've stayed regional. Why?
Our growth is focused on building out as much as possible in the states we're already in. That way we increase volume, but not geography. And since we buy fresh chicken we buy from local or regional chicken farms where we can develop long-term relationships.
Plus, greater penetration creates greater market awareness and our marketing dollars go farther. So we will grow around the edges, but there is so much we can do within our footprint, and even growing more quickly gives us greater range within that footprint.
One day we'll move into other states--but not today.
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