Operations

Habit invests in digital growth with traffic down and prices up in Q3

The fast-casual burger chain saw same-store sales climb 3.1% on declining traffic and rising menu prices.
Photograph: Shutterstock

With traffic down and prices up, The Habit Burger Grill is banking on its digital initiatives and drive-thrus to boost sales.

The Irvine, Calif.-based fast-casual chain reported a same-store sales increase of 3.1% for Q3 ended Sept. 24. But Habit Burger’s traffic fell 2.7% during the period, with a 5.3% price increase that the chain took in May to offset higher wages, particularly in California.

Pricing has been a consistent issue for the 265-unit chain. Executives told analysts during a conference call Wednesday that there are no plans to raise prices further in 2019.

The chain, which currently partners with DoorDash and Postmates as delivery providers, is testing service through Uber Eats, with plans to roll out the delivery partnership nationwide by the end of the year.

“We believe that adding a third partner will allow us to continue to grow our delivery business by reaching customers that are not currently being served by the two other providers,” Habit Burger CEO Russ Bendel said, noting that delivery has “quickly grown to be a meaningful part of our business.”

Habit Burger quietly launched a new app in July. The chain saw sales via the app and other online ordering channels grow to make up 25.8% of same-store sales in Q3.

Adding to the chain’s tech-enabled presence are kiosks, which are now in use at 20 units and are proving to result in higher overall check averages, Bendel said. All new stores and remodels will feature self-order kiosks.

Habit Burger opened four units with drive-thrus during Q3, bringing its total number to 51. Drive-thrus, chain executives said, will continue to make up at least half of new store development in the future.

After a limited test of the plant-based Impossible Burger, Habit Burger plans to run it as a systemwide LTO in 2020, assuming the chain can secure its supply chain with the in-demand burger producer, Bendel said.

“It appears to be a beef customer that’s looking for an alternative product,” he said. “We think that it potentially represents incremental visits.”

In August, Habit Burger closed all three of its poor-performing stores in the Orlando, Fla., area. The chain said it has no plans to leave other markets.

“Based on their amount of losses, it just didn’t make sense for us to keep operating them,” CFO Ira Fils said. “We were better off closing those down and then really focusing our capital in other markets in the East.”

 

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