Operations

How Dave's Hot Chicken is harnessing a rabid fan base

Top 500: It was one of the fastest growing fast-casual chains in 2023 and sales nearly doubled. But is the hot chicken concept growing too fast?
Dave's Hot Chicken is rounding the 200-unit milestone and expects to reach 275 open before the end of the year. | Photo courtesy of Dave's Hot Chicken.

Dave’s Hot Chicken franchisees like to call the growing brand “the In-N-Out of chicken.”

There are vast differences between the two chains, of course. In-N-Out, a quick-service burger brand, was founded in 1948 and has grown slowly over the decades without franchising. The only six-year-old Dave’s, meanwhile, is an almost entirely franchised brand that is growing at rapid clip—so fast, in fact, that sales nearly doubled last year, according to data from RB sister firm Technomic’s Top 500 Chain Restaurant Report.

A more likely comparison is with the much larger Raising Cane’s at 727 units, another fast-casual chicken concept that has grown quickly with a simple and straightforward menu: chicken tenders and fries. But, like In-N-Out, Raising Cane’s doesn’t franchise.

Dave’s, however, adds the game-changing option of spice to its chicken menu, and potentially, a lot of it. It’s like Raising Cane’s with a finger in the electric socket.

Dave's Hot Chicken food

Chicken tenders and sliders are the stars of the menu. | Photo courtesy of Dave's Hot Chicken.

It’s the similarities between all three brands that have attracted franchise operators to Dave’s. All are concepts built around quality food at an affordable price, with a focused menu and simple operations, they say.

And all three have truly rabid fan bases, including loads of celebrities. In Dave’s case, those stars fan the social media flames around the fast-growing concept on a regular basis.

Take the rapper Drake, for example, who is an investor and brand ambassador for Dave’s. Drake’s birthday (Oct. 24) has become a brand holiday of sorts, a day when Dave’s restaurants offer free sliders. The event has been hugely successful in bringing in new first-time customers.

@much

Worth it or nah? 🍔🍗🦉 Happy birthday Drake, but there’s food at home😂 [via wal_allaudin/TikTok]

♬ original sound - MuchMusic

Other A-list investors behind Dave’s include singer/songwriter Usher (who is also a partner with an Atlanta franchisee); actor Samuel L. Jackson; former NFL player and TV personality Michael Strahan; the Hollywood producer John Davis; former California First Lady Maria Shriver; and Boston Red Sox owner Tom Werner.

And then there’s the cadre of social media influencers who have beat the drum for Dave’s’ Nashville hot chicken sliders and fries since it began in 2017, contributing to the brand’s more than 1.2 million followers on Instagram and 2.3 million on TikTok.

So many civilian TikTokers have taken to filming themselves tasting Dave’s for the first time, or blasting their palate with the spiciest heat level called “The Reaper,” that Dave’s has spun the user content into needle-moving advertising on Connected TV.

 

The star of the content is the chicken—crispy fried tenders (and sliders) doused in sauce and dusted with spice with varying levels of heat.

It's a model many hot chicken brands now emulate, but few have earned the devotion of franchisees that are all-in on Dave’s.

“I do think the product offering is incredible,” said Andrew Feghali, who is a partner with Lawrence Kourie in Cluckin Inc., the brand’s largest franchise group with 10 open, and partner with Usher in Atlanta. Cluckin plans to add another eight to 10 each year for the next five years. “After you’ve had Dave’s, when you try other hot chicken, it’s just not as good.”

By the numbers

Indeed, in the fast-casual segment, Dave’s was a standout last year with nearly 100% sales growth, reaching domestic systemwide sales of $406 million, according to Technomic’s Top 500 data.

That increase mostly reflects the chain’s explosive unit count growth. Dave’s ended fiscal 2023 with 169 units domestically, a 76% increase over the prior year. By the end of 2024, the chain is hoping to reach about 275 units open, said Jim Bitticks, Dave’s president.

Currently, about 950 are in development and most U.S. markets are sold, though the existing franchisee base continues to add more to their agreements, often filling in suburban locations where they currently operate.

Dave's Hot Chicken exterior

Dave's sees a lot of opportunity with both international and nontraditional growth. | Photo courtesy of Dave's Hot Chicken.

And Dave’s hasn’t even started moving into nontraditional locations, like airports and transit centers, which offer even more opportunity, Bitticks said. There are some nontraditional locations in Canada, where the brand is also growing, and mall locations in the Middle East, but not yet in the U.S.

Internationally, Dave’s moving next into the United Kingdom, where the company is in the final stages of an agreement that could bring 50 units there, starting this year. And there is interest in South Korea.

In part because of the rapid growth, getting a read on Dave’s performance is a challenge. Same-store sales were flat systemwide in 2023, but that’s partly because there were only 17 restaurants that had been open 18 months for year-over-year comparisons, and new units sometimes steal market share from those older restaurants in the same-store sales base. That will settle in time, said Bitticks.

The year started with same-store sales down 11.1%, but by the end of the year, comp sales had climbed steadily to up 9.2%.

Traffic, likewise, was up 1% for the year overall, but the year also started with traffic down 9.2%, and ending with traffic up 7.1% by the final period.

Franchisees spoke of doing “crazy volumes” in 2023, which has only picked up this year. Both sales and traffic are up 5% year to date in mid-May, said Bitticks.

The parking lot popup

As Dave’s rounds the 200-unit count, however, the challenge is to stay grounded in its roots, Bitticks said.

Dave’s has a great back story.

It began as a parking lot popup in East Los Angeles. Four friends, including Dave Kopushyan, brothers Tom and Gary Rubenyan and Arman Oganesyan, had the idea of cooking Nashville hot-style tenders, using a propane tank to run the fryer and ice chests full of chicken.

The popup was an immediate hit, thanks in part to bloggers who raved about the spicy chicken. The four founders opened their first brick-and-mortar location in 2018.

In part because of Oganesyan’s “marketing genius” of cultivating social media influencers, said Bitticks, the line at the restaurant was around the block. And it attracted the attention of Bill Phelps, who had grown Wetzel’s Pretzels to more than 350 units before he stepped down as CEO (though he’s still on the board). Phelps later was an investor in Blaze Pizza.

In 2019, Phelps acquired a partnership stake in Dave’s with plans to franchise the brand. Phelps brought some of the same investors in Blaze (later acquired by a private-equity firm) into the deal. Dave’s founders still operate a handful of units, but franchisees took the ball and ran with it.

Bitticks was also with Blaze for eight years as that brand grew from two to about 275 locations, before he made the move to Dave’s. Franchisees say the leadership team behind Dave’s is a big part of the reason they chose this brand in a crowded world of chicken franchises.

“We have a lot of confidence in Bill Phelps and his tutelage of the founders,” said Martha Olmos, COO of Dave’s franchise group Damm Fine Chicken, which operates six units.

Olmos also operates 15 Blaze units, but that’s a brand her company does not plan to grow further. “We learned a lot with Blaze,” she said. “We learned a lot about what not to do as well.”

Blaze was also once the hot, rapidly growing fast-casual brand in its early years. But the private-equity ownership brought a certain emotional detachment, she said.

For Phelps and others on the leadership team at Dave’s, she added, “This is their baby.”

Keeping it simple

Faith in that leadership team also gives franchisees like Raj Patel, president of Hari Group, reason to add to his plans to grow Dave’s.

Patel operates eight units in Chicagoland, with plans to reach 21 there. He recently bought the St. Louis market, and he’s planning seven there. And he’s in negotiations for more stores in Ohio.

“The biggest key is leadership,” said Patel, who is also an established operator of 95 Dunkin’ units in Illinois and Indiana. “Leadership can mess up brands in seconds. When we signed up for Dave’s, it only had one unit. So the two things we focused in on were the food and the leadership. And those two things lined up very well.”

Now Patel said his units open more than a year are “comping at double digits on $3 million AUVs,” he said. “The volume is great. The volume is there. If you get the right real estate and operate correctly, the volume is there. But really, over these last six to 12 months is we’ve really been able to up our marketing dollar, because obviously more locations means more marketing dollars, and we’ve seen a direct impact in sales growth.”

Rapid growth can bring hiccups and challenges, but so far Patel said Dave’s has done a good job of staying ahead of potential problems, like forecasting hiring needs.

He notes that some on the leadership team, including Bitticks, are franchise operators themselves, so they know what headwinds franchisees see ahead, like chicken prices, construction costs and regulations.

As head of the franchisee counsel, Patel said there are varying views about where Dave’s should go from here. Some are looking for more LTOs, while others—including Patel—don’t want to complicate operations.

Unlike Raising Cane’s, Dave’s has played with the menu a bit.

Last year, Dave’s launched Dave’s Not Chicken, which were fried cauliflower steaks and bites as a plant-based option. They started as an LTO and were later added permanently to the menu.

This summer, the chain will add new Dave’s Bites, smaller breast meat bits of the signature chicken with the same varying spice levels, which Bitticks said would appeal as a lunch or snack alternative to the rather large sandwiches and tenders, with no new SKUs.

Dave’s is also planning to add new frozen drinks—with an equipment assist from Coca Cola that will ease costs for franchisees—as well as some innovative flavor and topping options for those drinks as well as the brand’s shake.

“We’re in a good spot right now,” said Patel. “Really the hardest part now is, with huge sales and huge comps, it’s about staying focused on the basics.”

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