The 2017 Growth 40
Tom Berzinski is the managing director of Dallas-based R Taco, a six-year-old concept owned by Buffalo Wild Wings. R Taco has 13 locations across four states and intends to double its unit count in 2017, including expansion into six additional states.
Sean Pourteymour is the CEO and cofounder of Luna Grill, which has 29 units in California and Texas. The 13-year-old chain headquartered in San Diego has an additional 18 units within its development pipeline for 2017.
Charlie Morrison is the president and CEO of Wingstop, a 1,000-unit chain with a presence in 40 U.S. states and five countries. Long term, the Dallas-based concept looks to have as many as 2,500 U.S. restaurants.
Matt Eisenacher is the director of marketing and communications at Piada Italian Street Food, a Columbus, Ohio–based fast casual with more than 30 units across six states. In 2017, the seven-year-old chain plans to focus its growth on building out existing markets, such as Houston, Dallas, and Minneapolis.
André Vener is a partner at Dog Haus, a gourmet hot dog concept founded in 2010. With 21 restaurants across five states, the Pasadena, California–based chain looks to launch more than 450 restaurants in 19 states over the coming years, including up to 60 stores this year.
Jayson Tipp is the chief development officer and senior vice president of technology at Papa Murphy's. The 35-year-old chain headquartered in Vancouver, Washington, has nearly 1,600 units across 38 states and is increasing its store count at a 6–8 percent annual rate.
John Dawson is the chief development officer at El Pollo Loco. The Costa Mesa, California–based chain, now in its 37th year, has more than 450 restaurants across five states and opened nearly 30 new units during its most recent fiscal year.
In the limited-service restaurant game, growth never comes easily—especially when a brand explores entry into a new geographic market.
From selecting specific sites to building brand awareness and corralling the right team, growth involves several complex decisions, and any misstep can threaten not only a brand's success in the new market, but also, in some cases, the company's long-term prospects.
We connected with executives at seven actively growing limited-service companies—a diverse set of quick-service and fast-casual brands that blanket the country and represent various culinary categories—to discuss the key factors that drive expansion into a new market.
What's the first thing you're looking for in a new geographic market?
Dawson: It's not just one element, but a collection of elements we consider. The size of the prize—basically, how big the DMA (designated market area) is and the number of units we can place in the market—certainly sits high on that list, but other considerations like supply chain, media costs, price and availability of real estate, and labor pool are analyzed as well.
Pourteymour: Our No. 1 element is the availability of store counts. We want a market we can put 10–15 restaurants in, not just three or so, because the cost of infrastructure can be so expensive. … When we set up infrastructure in a market, we want to make sure there are also neighboring markets we can flow into.
Eisenacher: Our primary goal is to identify markets with significant growth potential so we can expand with the future in mind. Finding a market that can accommodate 10, 15, 20-plus Piadas over the long-term allows us to create a strong foundation for future growth. This also allows us to open future units at accelerated volumes, given that brand awareness will be established from the previously opened units.
Vener: The major determining factor would probably be population of an area and if it has enough people to sustain a store all year round.
Morrison: We look for experienced franchisees who have restaurant knowledge and who have a proven track record of building successful concepts in that market. … [We] need to see that the franchisee can build to scale and develop a successful business strategy.
Berzinski: A good franchise partner that knows their market and shares our passion for the brand is a top consideration factor.
How do you build brand awareness as you prepare to open in a new market?
Berzinski: We establish a social media presence locally and conduct outreach to the local media. We also give away tacos so people can taste our product and know what makes our tacos stand out from the crowd.
Pourteymour: One of our firm beliefs is: Get the food in your mouth and the rest will speak for itself. Convincing new customers to come in takes effort, and we make a big effort for our Friends and Family Nights. All we need is one customer. If they are happy with a great experience, they will tell the next one.
Eisenacher: Nothing can replace allowing the local community to experience [your concept] and to tell a friend. And in a day when sharing has become that much easier, it makes even more sense. At Piada, we turn our opening into a VIP experience by allowing the public to sign up in the months leading up to the opening. Then, when we open our doors, we are able to offer these guests the "white glove treatment" and give them the opportunity to share the experience with their friends and family.
Dawson: We really focus on our food and try to break through the noise by working with food influencers like the press and bloggers, and hosting culinary events so we can generate buzz before we even enter the market.
What is the biggest challenge you face when entering a new market, and how do you address that?
Pourteymour: It's scary going into a new market. The way we try to address that is to study the market well in advance. Do a lot of visits, ride around and visit restaurants, try to eat at as many places as possible, talk to servers and managers to see how the city ticks. In Dallas, we learned we had to have extra sweet tea. We were losing business when we first opened because we didn't have it. Learn and ask questions, too, even in store design. We didn't realize that in some cities, because of the wind chill, you had to have a double-door entrance with a foyer.
Vener: Going from a local destination restaurant to a national brand presented us with the challenge of re-creating the one-on-one personal relationships we have forged with our guests and vendors on a large scale and in communities where the Dog Haus brand is new. Finding franchisee owner-operators that are active and involved members of the communities where their businesses are located [is a challenge]. We focus on the local community at all levels, starting with the people who make up the business.
Dawson: The biggest challenge is how you get your name and brand out there when the market has limited brand awareness and you have limited funds to broadcast your arrival. Word of mouth and buildings remain our biggest advertising tools.
Tipp: As the nation's largest "take 'n' bake" pizza brand, consumers in new markets often have little, if any, experience with our product, and those consumers sometimes expect us to be selling cooked pizza like every other pizza place. We see a lot of opportunity for consumer education and sampling.
In what ways do you consider the competition when it comes to growth?
Eisenacher: As a small, growing brand, it is hard to find a negative in locating next to other great concepts. While it undoubtedly results in other choices for the guests, it also allows us to quickly get on their radar sooner and introduce them to the Piada experience. Locating next to other best-in-class brands also forces us to refine our execution that much more, knowing that each guest experience matters and that we need to ensure that each guest leaves happy.
Pourteymour: We go into similar restaurants and other genres to see how we compare. You have to look at your price point. Are you competitive? I try to dine at a lot of restaurants and try to think, where would we place? Would I go to my concept? Are we different enough?
Tipp: In many markets, we are coming into a neighborhood after several other pizza options are already open and operating. This presents real estate challenges if we are excluded from entering attractive shopping centers due to existing exclusivity agreements. On the other hand, shopping centers and restaurant locations tend to cluster together in areas consumers frequent, and that's a strong indicator of demand for us.
Berzinski: We like to be located near other restaurants to be a part of the consideration set, and we feel that R Taco offers a unique experience and menu, differentiated from any other concept.
Vener: We are solidly entrenched in the fast casual 2.0 tier of restaurants, so you could conceivably call any of them competitors. But because of the difference, as well as the variety of options on our menu, we strongly feel that we can position ourselves next to just about anyone.
Morrison: We are very much a category of one, so we don't lose sleep over what other restaurant brands are doing. With our 75 percent takeout statistics, small footprint, and focus on flavorful chicken wings, we will always be a standalone, even when surrounded by other concepts.
Once you decide to enter a market, how do you go about selecting the right sites?
Dawson: It's a very disciplined approach. We work with a modeling company to help us understand the elements that work best for our brand. We'll look at things like the total population and daytime population within a three-minute drive, as well as things such as access, ingress, egress, circulation, and capacity. After we've done our mapping, we put our boots on the ground and go validate the model alongside local brokers.
Eisenacher: Ease of access and convenience are important in our segment. Lives are not getting slower, so as time passes, we want to make sure that our locations are conducive to saving time for our guests. We ask ourselves how we can locate a Piada where a guest can easily stop in on the way home from work and grab dinner for the family, or where coworkers can quickly get in and out on a short lunch break. Convenience and ease of access will drive more consistent traffic and repeat business.
Vener: The general criteria would be a solid population base with great visibility and opportunities for signage on busy streets.
Berzinski: We look for sites in high-traffic areas that meet a checklist of criteria, such as high visibility, access to parking, and if it can support multiple dayparts.
What's the best approach to developing your people when you enter a new market?
Eisenacher: Culture is critical, and nothing can replace experiencing a brand's culture prior to opening a new market. We will fly a new chef to one of our core markets to experience the brand and interact with our teams. The extra cost is nominal compared to the value that they bring back to their new team. It's one thing for us to explain what "genuine hospitality" means at Piada, and it is another for the new chef to experience it themselves so that each guest is treated the same way, whether you are in Columbus or Minneapolis.
Tipp: We have a thorough and demanding training program for new owners that is administered through top operating stores that meet very specific operational criteria. Additionally, Papa Murphy's operates roughly 10 percent of the stores in our system. These company stores provide us with the opportunity to train and grow team members who can take on more senior roles supporting franchise owners as we expand.
Berzinski: We have a training team that travels to the market and each new location. They spend several weeks recruiting, teaching the recipes, and training the staff on all things R Taco.