VIDEO: Smashburger's success, growth plans

Smashburger, the better burger chain making a run at segment leader Five Guys Burgers & Fries, grew its restaurant base by 55 percent in 2011, and isn’t looking to slow down.

Currently at about 140 restaurants, Smashburger chief executive Dave Prokupek said the chain is looking to hit close to 300 locations by 2013.

Prokupek sat down with Nation’s Restaurant News at the recent ICR XChange conference to discuss growth, an unlikely rival in the quick-service segment, and pricing plans that call for a never-changing $4.99 burger — even in a market as expensive as New York.

More exclusive video interviews from the ICR XChange:
• Analyst Nicole Miller Regan, PiperJarray
• Analyst Andy Barish, Jefferies

NRN.com will be airing additional video interviews from the ICR XChange, including looks at Caribou Coffee, Denny’s, Boloco and others.

Contact Sarah Lockyer at sarah.lockyer@penton.com.
Follow her on Twitter: @slockyerNRN

Starbucks outlines unit, product growth

Starbucks Corp. is continuing to pursue expansion plans both within and outside its units, despite outside economic pressures threatening the company’s bottom line.

The headwinds of higher commodity costs, primarily for coffee, will take a projected $230 million toll on Starbucks in 2012. But momentum from its expanded grocery store products and international growth will continue to drive results, company officials said following a report on first-quarter earnings, which showed a 10-percent increase in profit and record revenue.

Starbucks chairman and chief executive Howard Schultz said the coffeehouse chain is serving more customers than ever before at its 17,244 worldwide locations, despite a “seismic change” in consumer behavior from the “cataclysmic” recession.

Starbucks, he said, is well positioned to take advantage of those changes, which include continued economic pressures on consumers, and increased use of digital and social media and mobile payment.

For example, one in four customers pay with Starbucks loyalty cards, which offer discounts that appeal to budget-minded guests, he said.

Starbucks also has 40 million fans on Facebook and is a leader in Twitter and Foursquare, allowing the company to lower traditional advertising costs and “build a more enduring emotional relationship with our customers,” Schultz said.

Given the macro issues many companies face, “We have been able to turn into a competitive advantage with regard to value, social digital media and mobile payment,” he said.

Starbucks’ U.S. company-owned units posted a same-store sales increase of 9 percent in the first quarter, including a 7-percent increase in traffic. It was the strongest holiday season in the company’s 40-year history.

Company officials credited improved unit-level productivity, as well as daypart-stretching success with the chain’s Bistro Box meals, Frappuccino Happy Hour deals and Treat Receipts, offering discounts on a second drink later in the day.

Starbucks outlined other projections for 2012:

• The Americas: Using a new format to report results, the Americas region now includes 12,494 U.S. locations — which account for about 90 percent of results — along with Canada and Latin America.

Clifford Burrows, president of The Americas division, said holiday offerings, such as peppermint mocha, gingerbread latte and caramel brulée latte drinks, boosted sales by about 20 percent over the previous year.

Average daily transactions per location surpassed a previous record set in 2006, and 413,000 people joined the chain’s My Starbucks Rewards program in December alone, bringing total membership to 3.7 million.

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Burrows said the company would continue to focus on building business throughout the day, as well as increasing capacity during the morning peak.

Lunch, in particular, offers an opportunity, and more is planned for the Bistro Box line, as well as the afternoon “cake pop” hour.

Earlier this month, Starbucks said it is expanding this year its test of a new format — including beer, wine and compatible small plate offerings — to locations in Chicago, Atlanta and Southern California, in addition to the six locations that currently offer it in the Pacific Northwest.

Starbucks this year plans to open 400 locations in the Americas in 2012, mostly in the United States, about half of which will be licensed.

The company has reached 500 units in Latin America, as well as 300 locations in Mexico. New units in Brazil are showing strong results, the company said, and Starbucks in May will open its first locations in Costa Rica.

• New products: Last year, Starbucks acquired the Evolution Fresh juice brand, which will join the company’s growing consumer products group, or CPG, lineup in grocery stores, and be sold in Starbucks locations.

Hoping to grab a piece of the $50 billion health-and-wellness category, Schultz said the company will unveil the middle of this year a new juice bar concept “unlike anything in the market today.”

Starbucks in January launched a new Blonde Roast coffee, a milder version now available in its coffeehouses, as well as in grocery stores as packaged coffee, VIA Ready Brew and K Cups.

The Blonde Roast offers an opportunity for incremental business, Schultz said, with an estimated 40 percent of American coffee drinkers preferring a lighter style.

Schultz predicts both VIA and K Cups will each develop into billion-dollar businesses, as Starbucks roll out the products globally.

• Europe, Middle East and Africa: This region is underperforming, according to Starbucks, showing the weakest same-store sales of any region, with an increase of only 2 percent.

Troy Alstead, Starbucks’ chief financial officer, said the company is planning a turnaround for the region, and that the second and third quarters will include “foundational investments” that may weigh down margins but improve results over time, he said.

• China and Asia Pacific: Showing the most success, with same-store sales up 20 percent and rapid growth continuing, the CAP region gained traction with Starbucks’ loyalty program, with nearly 250,000 members in China alone.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout
 

Restaurants seek athletes as franchisees

Brandon Gorin is hoping the weekend surrounding Super Bowl XLVI, which takes place Feb. 5 in Indianapolis, will drive his highest sales weekend ever at his two Marco’s Pizza franchises in Fishers, Ind.

Gorin, who won two Super Bowls with the New England Patriots during his eight-year career in the National Football League, is one of many professional athletes to invest in a restaurant franchise after their playing days were over, and Marco’s Pizza is one of several foodservice brands that recruit from this pool of potential partners. Next week, Gorin and Marco’s will present at a player networking event that the NFL has set up for 600 current and former players.

“Sports go hand in hand with food sometimes, and franchising helps me be my own boss but still get aligned with a team that has my same vision,” Gorin said. “Opening my own restaurant, like a Brandon Gorin’s Bar and Grill, would have been much more difficult. When I was looking for my transition [after playing in the NFL], franchising made a lot of sense to me because I knew I’d be supported.”

Other examples of athletes turning to franchising include Gorin’s former teammate from Purdue University and the San Diego Chargers, Drew Brees, who owns several Jimmy John’s locations in New Orleans. Tennis star Venus Williams is a Jamba Juice franchisee, while Canadian juice chain Liquid Nutrition counts Steve Nash of the Phoenix Suns and Vincent LeCavalier of the Tampa Bay Lightning as franchisees.

At its annual convention next month, the International Franchise Association will hold several information sessions for interested athletes, with presentations from operators like retired National Basketball Association star Jamal Mashburn, a franchisee of several Dunkin’ Donuts and Papa John’s Pizza restaurants.

Marco’s Pizza began its partnerships with former pros in the past few years, after meeting Gorin at a networking event organized by the NFL.

“We were very fortunate to meet Brandon early in the process for us,” said Bryon Stephens, vice president of new business development for Toledo, Ohio-based Marco’s Franchising LLC. “He exhibits all the traits we’d want in a franchisee: He’s very disciplined, with an exceptional work ethic.”

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Training former athletes without restaurant experience to run a Marco’s unit involves more business ownership coaching than pizza-making coaching, Stephens said. The brand places many of its experienced operations people — who could run their own franchises but often lack the startup capital an NFL alumnus could supply — in the new franchisee’s stores, letting the former athletes learn how to run the business more holistically.

“They need to know how to develop a team and build a network, because most of them talk to us about owning between five and 20 locations in a territory,” Stephens said. “They possess the capital and the work ethic, and they also come into this business with their personal brand identity. They’re opening stores in areas where they played or in their hometowns and where they can capitalize on their personal brands.”

Marco’s is still relatively early in its athlete recruitment efforts. Kirk Luchman, who played basketball at Florida State and in the pros in Europe, is a franchisee in Tallahassee, and Marco’s only other athlete franchisee to date, but it’s a “very good fit,” Stephens said.

“The key element for us it to talk to these players while they’re still playing,” he said. “None of them knows when his or her career is going to end, because it could get cut short by an injury. We’re beginning to go up-line, so that they understand that putting their capital to work now will keep them from seeing a huge drop-off from their active playing days to their active rest of their lives.”

Denny’s also began signing pro athletes as franchisees several years ago, which resulted from trying to match well-capitalized partners lacking restaurant experience with the family-dining chain’s operators who were looking to run their own units but could not necessarily collateralize the financing, said Steve Dunn, the brand’s senior vice president of global franchising.

“It just so happened that our program ended up catering to former pro athletes,” Dunn said. “While the program isn’t targeting them specifically, it’s our new- and emerging-market strategy and provides incentives to anybody with capital to invest in new territories.”

Denny’s currently has one former athlete in its franchisee base, former Jacksonville Jaguars safety Chris Hudson, who operates several units in the Memphis market. Previous franchisees, like basketball players Hakeem Olajuwon and A.C. Green, have run Denny’s locations in the past, “and got a good price and sold their businesses,” Dunn added.

He agreed with Stephens of Marco’s Pizza and other executives that the commitment and passion athletes showed to play professionally translate well to the business world, making them desirable franchisees.

“The competition in the restaurant industry is different, but it’s competition nonetheless,” Dunn said.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN