Everything is coming up Teriyaki Madness, at least to hear CEO and owner Michael Haith talk about it. “Sales are great,” he said. “With commodities dropping and labor improving and margins expanding, everything is terrific.”
He has plenty of reason for the bullishness. The company he acquired in 2016 has been one of the fastest-growing restaurant chains in the country in recent years, going from 12 fast-casual restaurants to 130 despite the presence of a global pandemic.
It has plans for another 40 to 50 restaurants this year, with growth coming from both new and existing franchisees. “Our biggest problem is just getting locations open,” he said.
The chain was initially founded in Seattle. It features customizable bowls, with items such as Chicken or Steak Teriyaki, Chicken Katsu or Orange Chicken. Customers customize their bowl with different types of rice, noodles and vegetables.
“It’s delicious food that’s healthy,” Haith said. “It’s not healthy food trying to be delicious.”
The company operates out of an inline restaurant format, where it generates average unit volumes of nearly $1 million, according to data from Restaurant Business sister company Technomic.
Haith helped build the Maui Wowi and Doc Popcorn chains. He was brought in to help expand Teriyaki Madness when it had seven locations. He invested in the concept and then bought the franchise in 2016.
Haith was attracted to the brand’s positioning as a healthy brand that doesn’t make that a point in its marketing. He was also interested in a concept that could do well in inline locations. “I was looking for a brand that could do $1 million out of strip malls and small footprints,” he said.
The chain has since moved to Denver, a traditional hotbed for fast-casual concepts—though some of the biggest, such as Chipotle and Qdoba, have since moved to California. “Colorado has a good fast-casual scene and we were able to attract some good people,” Haith said.
Teriyaki Madness put a lot of its technology in place in the process as consumers were clearly shifting to more takeout-focused options, particularly delivery. That gave it a head start heading into 2020, when the pandemic hit. “We were all ready for restaurants closing down,” Haith said. “We found our feet during COVID.”
Indeed. System sales grew by 55% in 2021 and Haith said the company exceeded that last year. Same-store sales increased between 6% and 7%, on top of 21% growth the year before. Haith said the company’s limited-service model proved popular during the pandemic and has remained so afterward.
The company did run into some supply chain challenges as its cost-of-goods sold increased 3% as a percent of sales. The company made modifications in its kitchens and focused on the items it uses in its entrees. “We really sharpened our pencil to make sure the margins were there and that franchisees were making money,” Haith said.
The result appears to be working. Cost-of-goods sold is down 5% since then. “We wanted to make sure we had a solid foundation,” Haith said. “We were absolutely focused on the profitability of the business model. We’re now reaping the rewards.”
These days, Haith said, the brand is getting growth from existing and new operators. He said the company is encountering some challenges. But among the biggest is financing. “The issue is not necessarily getting money,” Haith said. “The issue is, the money’s gotten expensive.”
Teriyaki Madness is a franchise and franchisees rely mostly on loans to finance new units. But rising interest rates, and tougher terms on loans, have increased the cost of that debt. As such, the brand has turned to an alternative financing strategy called Franshares, an investment platform that enables investors to generate passive income by investing in upstart franchise locations.
Franshares will help multi-unit franchisees fund a new location in exchange for equity in the company. Franshares then becomes an equity partner. It’s expensive, but allows an operator to get a location open, start generating cash flow, with plans to buy out Franshares later. “The credit markets are tightening up,” Haith said. “This provides another option for our franchisees.”
Many of the operators are interested in the idea, largely because they apparently want to build more locations. “It’s a viable option, especially with some of the aggressive growth our franchisees are pursuing,” Haith said.
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