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Mendocino Farms rolls with the changes

The fast-casual sandwich chain is taking its offerings outside of California while evolving to meet the needs of changing consumers, says RB’s The Bottom Line.
Photograph: Shutterstock

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Only one person was in line when I arrived at the Mendocino Farms in Studio City, Calif., during lunchtime one recent afternoon. That was surprising, because the outside lot was so full of customers going to the Trader Joe’s next door that it contained its own traffic jam.

But Mario Del Pero, the chain’s affable co-founder, quickly guided me to the counter and pointed out the kitchen behind glass, filled with employees busy putting together sandwiches and salads. The counter was covered with bags, all of them designated for delivery drivers or mobile order customers.

There was a line, apparently. I just couldn’t see it. “You can’t get an online order until 2 p.m.,” Del Pero said. It was noon.

“Welcome to the future of Mendocino Farms,” he said.

And welcome to the future of the restaurant industry, I thought.

About 60% of “Mendo’s” business is takeout, a percentage growing so much that the chain is shrinking its dining areas, expanding its kitchens with second lines and adding seating areas for mobile order and delivery customers.

The company’s success with takeout has helped the chain to strong growth in its home market of California, where the chain operates 27 locations.

But now it faces some major tests. It recently hired former Zoes Kitchen chief executive Kevin Miles as CEO. And Mendo is going big into Houston, its first market outside of California. It recently opened its first unit there, the chain’s 28th overall.

And by big, we mean big. “We’re opening five in a row,” Del Pero said.  

“Houston has an unbelievable economy and a foodie culture,” he said. “It is ethnically diverse and has a wide range of ethnic restaurants.”

Houston checks other boxes: It has a high-end demographic, and Whole Foods Market did well there. Whole Foods has been a key investor in Mendocino Farms.

Del Pero and his wife, Ellen Chen, created Mendocino Farms, opening the first location in downtown Los Angeles in 2005 after conceiving the idea two years earlier. The sandwich and salad concept is sort of an upscale Panera Bread without breakfast.

Indeed, Del Pero admitted that they spent a lot of time inside Panera locations, seeking out clues to its success.

That’s an important point. Bakery-cafe chains have a mixed history. For every Panera, there are two Cosis or Au Bon Pains, chains that thrived in urban areas but just couldn’t make it anywhere else.

For Mendocino Farms to thrive over time, it will have to work in suburban areas like Panera does. Del Pero pointed to the center aisle in the dining area of his concept’s Studio City location for one element that came directly from Panera. “It’s wide enough to fit a double stroller,” he said. Urban-centric locations might not think of families like that.

It’s working so far. Mendo has generated strong same-store sales in recent years, and its system sales are booming. System sales rose 78% between 2016 and 2018, according to data provided to Restaurant Business. They are expected to jump another 34% this year. Average unit volumes are approaching $4 million.

And while the chain takes a lot of its inspiration from Panera, it omits one key element: breakfast. Instead, Mendo often subleases some space to coffee shops.

The Studio City location has a Blue Bottle Coffee next door, which gets to use Mendocino’s patio during breakfast hours.

The reason for no breakfast? It’s too busy during those hours. “We’re doing so much in lunch catering,” Del Pero said. “We do $800,000 in lunch catering per store on average. That’s before we open.” It basically makes more money before it opens than many sandwich places make all day.

The company works with local farmers and bakers for its ingredients. And it features an upscale sandwich menu, with items such as the “Not So Fried” Chicken, which features roasted chicken breast stopped with crispy buttermilk batter known as Mendo’s krispies.

Its work with Impossible Foods is also different. Instead of a burger, the chain makes chorizo out of the plant-based meat and uses it in its Impossible Taco Salad along with fried quinoa for crunch.

Del Pero has focused on culinary since he ceded the CEO role to Yard House founder Harald Herrmann in 2017, when TPG Growth bought a majority stake in the company. Herrmann in February took a job in the nonprofit sector, creating the opening for Miles.

While the company is changing a lot, both in terms of its management and its interior operations, Mendocino Farms is willing to embrace it. Inside that Studio City restaurant, Del Pero points to a seating area for takeout orders and large pickup shelves, and that busy kitchen staff behind glass.

“I’ve been in the restaurant business for 25 years,” he said. “I’ve experienced having to think about the world changing more in the last three years than in the past 22 before that.”

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