The ICR Conference in Orlando concluded on Wednesday with a host of privately-held chains making their pitches to a selection of investors and others interested in the industry.
Dozens of public and private companies made such presentations during the three-day event, providing a glimpse into the state of the restaurant industry at the beginning of the year.
Here are our takeaways from the conference.
California problem? What California problem?
You might have thought a company like Jack in the Box would go on a long rant about the impact that AB 1228, the now-law in California that will raise the minimum wage at fast-food chain restaurants in the state to $20 come April.
Jack in the Box has, well, a lot of restaurants in the state, both with its flagship brand and with Del Taco, the Mexican chain it recently acquired.
But company executives said that the law is not preventing franchisees from expressing an interest in buying some of the chain’s Del Taco locations in the state. “For many operators already in California, they know how to navigate those changes,” CFO Brian Scott said. “They have scale as well.”
OK so what about dealing with the sudden increase in wages? “We have a really strong plan to address it,” CEO Darin Harris said. He mentioned pricing and cost-saving initiatives.
Just Salad's reusable bowls. | Photo courtesy of Just Salad.
Is salad the new category to watch?
The 80-unit Just Salad founder Nick Kenner argues that salad is the first new category creation since Starbucks reinvented the coffee space in the 1980s and ‘90s.
And though that may be news to basically the entire fast casual segment, he makes a good point that only a handful of dedicated salad players are out there today doing about $1 billion in sales, and there is a big opportunity for those who can capture health-minded Millennials (and younger). Kenner sees the potential for the category to grow to $7 billion over the next 10 years. Just Salad, which does $2 million in average unit volume, saw 18% growth in same-store sales last year, with only 5% of that from price.
The 130-unit Salad and Go, likewise, is another salad concept arguing it could reach thousands of units, without franchising. Salad and Go is growing with a 750-square-foot building with a double drive-thru and no dine in. CEO Charlie Morrison notes that salads are a fragmented segment—just about every restaurant offers a salad. And some salad players, like Sweetgreen, are expanding menu offerings to shake off the salad concept label.
Still, there is potential for those offering a unique, freshly prepared product at the right price.
“It’s not sexy, but it allows us to serve more people.” -First Watch CEO Chris Tomasso, on the addition of a bussing procedure and double dishwashers to the back of house.
A little can mean a lot
A number of chains offered examples of small tweaks that had a big revenue impact.
Chicken Salad Chick last fall launched its first hot sandwich, a Chick Melt, made possible with the addition of a small toaster. The croissant sandwich is now about 8% of the menu mix and has helped build dinner sales.
Freddy’s reduced the number of drink cup sizes offered, from four (with five lids) to three (with three lids), and that alone saved franchisees about $3.5 million.
First Watch has boosted throughput with simple changes, like adding a bussing procedure and double dishwashers to the back of house. “It’s not sexy,” said Tomasso, “but it allows us to serve more people.”
Catering is the new hot channel for fast-casual
A number of brands boasted about the potential of their nascent catering programs. Many are projecting significant growth in the channel this year.
Qdoba, for example, said that catering represents 10% of its sales, and it’s growing in the double digits. Some restaurants are doing $3,000 in weekly sales in catering alone, said John Cywinski, CEO of parent Modern Restaurant Concepts.
At Chicken Salad Chick, catering is 6% of sales, with plenty of white space. Both El Pollo Loco and Potbelly are aggressively growing their catering business.
Qdoba is a bowl chain
You might think of Qdoba as a fast-casual burrito chain, but that’s not quite the case.
The fast-casual Mexican chain generates more sales from its burrito bowls, and it’s not particularly close. The company said 37% of its product sales mix comes from the sale of bowls. By comparison, 19% of its sales come from burritos. And, as noted, 10% is from catering.
Meanwhile, the 750-unit chain generates 16% of its sales through third-party delivery.
“We’d be idiots now not to do it.” - Domino's CEO Russell Weiner, on third-party aggregators.
Domino’s wants to talk quality
For much of the past 15 years, Domino’s has marketed just about everything but its actual pizza. It advertised technology. It filled potholes and is now plowing streets. It guaranteed quality carryout. It gave customers points for visiting other restaurants.
Expect that to change soon, largely because CEO Russell Weiner likes the chain’s pizza. “We know we have the most delicious food in the industry,” he said. “But it’s time to talk about it.”
By the way, he said it’s a no-brainer for the company to start using third-party aggregators. “$5 billion worth of pizza is sold” by those aggregators, Weiner said. “We’d be idiots now not to do it.”
Bloody Mary. | Photo: Shutterstock.
Brunch booze is table-stakes
Hey remember when alcohol was a novelty at breakfast and brunch concepts?
Now it’s almost required because customers expect it.
Or so says Chris Tomasso, the CEO of First Watch, who said adding alcohol was a response to customer demand. It’s now about 6% of the chain’s menu mix.
Though First Watch will never be “alcohol-forward,” he added, “The brunch occasion was becoming more social. We wanted to eliminate the veto vote.”
More chicken at Freddy’s
Freddy’s Frozen Custard and Steakburgers sells exactly what you’d think it does: Burgers, fries and custard.
But maybe it could sell a bit more chicken.
Chris Dull, the chain’s CEO, noted that about 85% of the chain’s sales come through its core categories. But he said the company wants to expand that menu “a little bit,” mostly by boosting sales of chicken.
“Less than 10% of our sales are chicken,” Dull said. “We believe that we grossly under-index there and have a tremendous opportunity to attract more traffic.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.