Operations

Can Smashburger get back on track for growth?

New CEO Denise Nelsen is taking a hard look at the brand and how it can reignite expansion, both domestic and international.
New CEO Denise Nelsen wants to see Smashburger focus on its menu core: Burgers, sides and shakes. |Photo courtesy of Smashburger

Denise Nelsen wants to shift Smashburger back into growth mode.

How exactly the Denver-based fast-casual chain will do that is yet to be determined. But Nelsen, who was named CEO last week (though she actually started in January), sees a lot of opportunity for growth, both domestically and internationally. She replaced Carl Bachmann who left last year to helm BurgerFi after six years with the brand.

Nelsen knows a thing or two about growing brands after 25 years at Starbucks, which had about 500 locations when she joined that company and thousands around the world when she left last year. (The coffeehouse brand is now the second largest restaurant chain in the world.)

Most recently spending five years as senior vice president of U.S. operations, Nelsen’s time at Starbucks gave her plenty of experience with all aspects of growth. And that’s a good thing, because Smashburger has been shrinking since parent company Jollibee Foods Corp. (JFC) first invested in 2015. At the time, Smashburger had 335 units globally. Now the chain has 243-“ish,” said Nelsen, about half of which are company owned.

Nelsen, in an interview with Restaurant Business, blamed that shrinkage in part on the impact of COVID, along with franchisee agreements and leases that ended.

Now it’s time to rethink things, she said.

“It’s a really good time to look at markets we want to be in and make sure we’re building for the future,” she said. “Things change a lot across the life of a lease or an agreement and you want to make sure you’re positioning the brand for future growth.”

Smashburger currently has only 15 units internationally, for example, with a number in airports. One of the most recent openings was at an airport in Panama.

Perhaps the biggest opportunity is in Asia, despite the huge presence of parent company Jollibee there, she noted. JFC operates and franchises some 1,300 restaurants around the world across 18 brands, including the namesake Jollibee, and franchised units of Burger King, Panda Express and Coffee Bean & Tea Leaf.

“We have essentially no presence in Asia, but we have a real opportunity to explore that,” she said.

It’s too early to give specifics, but Nelsen said the company is now in the early stages of mapping out target markets, as well as looking at new formats for growth—like potentially adding drive-thrus.

And the company is working with an agency that is studying the Smashburger consumers and what they look for in their burger experience.

A website and app redesign is in the works, for example, and Smashburger is looking at “how we want to think about delivery,” she said.

Tests of kiosks are coming, as well as other digital technologies, she said.

And Smashburger is taking a hard look at the menu.

Nelsen wants to really focus in on the core categories of burgers, innovative sides and shakes.

“When you think about being the leading burger brand, how much do we want or not want to be in different in platforms, like chicken, for example,” she said. “We have decisions to make around that.”

Nelsen said she’s hearing feedback from both long-term customers and franchisees that many would like to see the return of shake LTOs that Smashburger used to be known for. That’s something that’s fallen off in recent years, she said.

Smashburger will continue to work with Tom Ryan, who co-founded the concept in 2007 and still serves as a culinary advisor. “He’s been a great resource,” said Nelsen.

Smashburger is also one of the many restaurant chains in California that will be subject to a significant increase in the minimum wage for hourly workers. The fast-food wage is scheduled to increase to $20 per hour on April 1.

The chain has about 17 units in California, and Nelsen said the company is considering some “surgical pricing” around some higher-cost-of-goods items on the menu, but the plan is to let the higher wage set for a bit first.

The company is also looking at the labor model overall and the service experience they want to offer guests, as well as menu engineering that will make items easier to execute.

“There’s more to come as we take that adjustment and start to really understand it,” said Nelsen.

She declined to disclose the chain’s average unit volume, but Smashburger averaged $1.2 million in sales per store in 2022, according to data from Restaurant Business sister company Technomic, which at the time was the lowest among peers like Five Guys ($1.5 million), Freddy’s Frozen Custard ($1.8 million) or Shake Shack ($3.8 million).

But Nelsen said Smashburger’s sales are trending in the right direction, even in the short time she’s been with the brand. And she is excited about what’s to come.

“You’ll see us firmly position the brand as a leader in quality in fast casual and with great burgers,” said Nelsen. “You’ll see us focusing on the core of what really has built the legacy of this brand. ... And you’ll see us starting to really get ready to scale for growth, through getting better with operating systems, making sure those are scalable and then really looking to identify great franchisee partners and be clear about the markets we’re looking to grow in.”

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