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Schlotzsky’s bucks the trends in its new repositioning


Restaurant chains of all stripes may be scrambling to simplify kitchen operations, but Schlotzsky’s sees no reason to follow the pack. The 47-year-old quick-service concept is recasting itself as Schlotzsky’s Austin Eatery, with a focus on ambitious items such as brisket roasted for 11 hours and a new line of baked pasta entrees.

It has also added beer and wine, giving an almost instant boost to dinner traffic, according to President Kelly Roddy.

“We’re really going back to our roots,” he says. “We need to reposition our brand to take credit for the things we already do.”

He notes that 400-store Schlotzsky’s has always aimed high in its kitchens, baking its muffaletta-style bread from scratch. The chewy round buns are the foundation for the concept’s signature sandwich, The Original, which boasts about 15 ingredients.

“I look at the builds of our sandwiches and think, ‘Why do you need all of these ingredients?’” says the former Walmart executive, a relative newcomer to the restaurant business. “But you take one off and people think, ‘Oh, my gosh!’”

Instead of moving away from that heritage, which began with a sandwich shop in the proudly nonconformist stronghold of Austin, Texas, Schlotzsky’s is embracing it, Roddy continues. A new menu sports a line of sliders made with the slow-roasted brisket, along with baked entrees made in the pans that are used to bake the muffaletta breads. Also spotlighted are a line of street tacos and flatbreads.

Each is prepped extensively on-premise, he stresses. One of the operational changes is having a kitchen crewmember present the dish to customers with an explanation such as, “a brisket slider made with fresh jalapenos for some crunch and heat.”

“It’s all about the prep,” says Roddy. “We already have the skills in the back of the house. We need to tell the world that we’re doing these things.”

He acknowledges the simplification trend elsewhere in the industry, but says Schlotzsky’s was in a unique situation to shift into what he calls “fast fine.” Because hands-on processes are ingrained in the concept and its culture, there wasn’t a need to engineer new kitchen procedures or blaze new training programs.

Part of the inspiration, he said, were the chef-manned food trucks that abound in Austin. “They’re hand-crafting each item,” says Roddy. But merely copying those kitchens on wheels wouldn’t have worked because “Our people want their food in four minutes.”

Schlotzsky’s focused on prepping ahead of time, then combining ingredients in a variety of ways, or what some might call the Chipotle method. “We learned we could do some things very quickly,” says Roddy. “Come lunchtime, you can crank out tacos and sliders and Pick Twos,” referring to Schlotzsky’s mix-and-match menu section.

Labor and food costs held steady, a surprise to the chain, says Roddy. “We modeled for food costs to go up, the labor costs to go up and the check to go up enough to offset the increases,” he continues. The tab of stores bearing the new design has indeed risen above the chainwide average of $14, he says, but the spike in costs didn’t materialize.

Roddy would not reveal the average unit sales for Schlotzsky’s, but observed that it’s surged in the last decade from a typical sandwich shop volume of about $600,000 to volumes more typical of fast-casual operations. “We even have some stores doing $3.3 million,” he says.

Schlotzsky’s was also contrarian in deciding what size of restaurant would sport the new Austin Eatery identity. The industrywide trend is to reduce floor space, yet the next generation of Schlotzsky’s units encompasses “3,000 square feet, maybe even 3,300,” from a previous mean of about 2,800, says Roddy.

However, it’s testing a variety of sizes, and “I think we can end up taking a few hundred square feet out of it,” in part because of increased sales for off-premise consumption, he adds.

The revamped units sport a design inspired by the Austin dining scene, where even high-end eateries are often assembled from whatever furniture and visual elements their founders could pull together. “We thought, ‘Let’s just go back to building restaurants like they do in Austin, with found objects,’” says Roddy. “That creates a really nice warm environment.”

Uniforms were tweaked to make them more casual.

The redesign sports a pickup area for takeout and delivery. Since mounting the sort of push for off-premise business that many chains have recently undertaken, Schlotzsky’s has seen its sales through those channels jump to 4% of the total store mix in a matter of months, says Roddy. That portion is separate from business generated through the drive-thru, which remains a standard feature of the concept.

Roddy pegs the cost of converting stores to the new identity at about $175,000, and says one franchisee managed to make a changeover for $50,000. The franchisor already has signed agreements to convert 105 stores, he adds.

The overhaul is the latest recast of the concept, which is now owned by Moe’s and McAlister’s parent Focus Brands. “We’ve gone from a sandwich shop to a deli to more of a deli to a bakery-cafe,” Roddy says.  

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