We've spent the week at the CREATE Conference in Nashville, run by our sister publication Nation's Restaurant News. We were treated to some fascinating advice from the operators and investors presenting during the event.
So let's share some of their comments and our take on that advice.
Times are tough, so slow down
Andrew Smith, the managing director of the private-equity firm Savory Fund, revealed that many of the fund's restaurant chains have slowed down to focus on existing restaurants.
"Slow down," Smith said. "Make sure you have the right fundamentals in place. Just make sure that the rooftops you own today ... are all healthy. This is a marathon. Our brands should outlive us. So we're slowing down with a number of our brands."
This is arguably the most head-scratching environment the industry has ever faced. The economy is generally sound, but much of the spending is coming from a relatively small group, meaning the bulk of consumers are cutting back. That has hammered traffic at many brands.
If consumers are cutting back, the investment thesis behind opening more restaurants becomes more difficult to justify. And it's better to ensure that existing locations are sound and performing well.
Operations are vital
We wrote about Cava CEO Brett Schulman's interview at the conference, but he also dished out a ton of great comments. We'll focus on this one in particular: "You cannot market your way out of a bad operations experience."
It's one thing to get customers to your door. It's another to keep those customers.
We do believe marketing is important, and arguably the most important function at a restaurant chain today — especially if that chain is a franchise. So we're not dissing marketing.
But you wouldn't invite people to your house if it looked like something out of "Hoarders." So why would you market a brand that is struggling on operations?
There are many examples of brands that thrived by first getting those fundamentals right. Domino's long run of success didn't begin until it fixed its pizzas. Chili's current run of success didn't begin until the company fixed its store operations. On the other hand, Burger King for years was able to get people to its restaurants, only to lose them because its operations weren't right.
There is an order of operations here: Fix operations, then tell people about your good stuff.
Breakfast isn't for everybody
Those of you yearning for hot chicken breakfast sandwiches shouldn't get your hopes up, unless you're in an airport. That's a good thing.
Dave's Hot Chicken serves breakfast at some airport locations, which typically require all restaurants to open in the morning. Jim Bitticks, president of the fast-casual chain, was asked whether it would do so at its other locations. His answer was refreshing.
"Breakfast is like no man's land," he said. "Everybody wants to do breakfast and it always sucks." He said that, while Dave's Hot Chicken has a good breakfast at those airport locations, it has no plans to do so anywhere else.
A lot of executives get stars in their eyes thinking about breakfast, arguing that companies can leverage fixed costs by selling food in the mornings. But breakfast is an amazingly frustrating daypart. There are only so many occasions. Consumers are more habitual in the mornings. And oh, by the way, it is the most recession-prone daypart in the industry.
Just because you can sell breakfast—even a good breakfast—doesn't mean you actually should. Just ask Portillo's, which just pulled back on its test of the breakfast daypart. It really is a no man's land.