Back Yard Burgers talks next steps of turnaround

Back Yard Burgers has been tackling its turnaround for the past year a half, and its chief executive says recent initiatives are taking hold.

David McDougall, who became Nashville, Tenn.-based Back Yard Burgers’ chief executive in January 2013, as the brand emerged from bankruptcy, said a remodeled unit in Franklin, Tenn., which had suffered a fire, and menu initiatives are among elements that bode well for the company’s future.

Back Yard Burgers now has 68 units, with 22 company-owned locations and 46 franchised units, down from 180 restaurants at its peak before the bankruptcy, in which it received a $14 million infusion from Nashville, Tenn.-based Pharos Capital Group LLC.

Lattimore Michael founded the concept in Mississippi in 1986, and moved its headquarters to Memphis, Tenn., eventually taking the brand public in 1993. In 2007, BBAC LLC, a holding firm created by Pharos Capital and Cherokee Advisors, took the chain private in a $38 million deal. Back Yard filed for bankruptcy protection in October 2012.

McDougall said the company has been working on operations and the menu, which yields an average check of about $9.50.

The fire-damaged Franklin, Tenn., restaurant has elements of what the brand will look like, he added.

“We put in a new interior design with a more contemporary look and feel,” he said. “We put in new LED lighting and fixtures. We opened the restaurant up so there’s more visibility into the kitchen. We put in a complete brand-new kitchen in and, with that, some new restaurant drive-thru technology and display systems.

“It’s been a good first step as we look at a new concept store,” McDougall said. “The store itself has been performing extremely well compared to previous sales.”

McDougall discussed the turnaround with Nation’s Restaurant News:

What was the challenge when you came on board?

We got started in this turnaround back in January of 2013. The focus was certainly on ensuring our company-owned and franchised restaurants would be successful financially and operationally. It’s been an 18-month process. Both our franchised and company stores are performing much better.

How many units did Back Yard have at the time?

I believe we were at 84. Our company base has been stable. But clearly, bankruptcy has a lot of ramifications, and sometimes some unintended ones. From the standpoint of our franchise system, when they saw we had closed a number of company locations, that clearly didn’t send a strong message. What that resulted in was as folks came up for renewals or the stores weren’t performing well anyway, they saw it as an opportunity to leave, and they did.

The next 12 months

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What were the first steps you took when you came in?

To me, it’s always about the people. It’s about our franchise owners, our company employees and even our vendor partners. [It was about] being able to create a vision and work hard to convince them that it will get better and that, collectively, it will take all of us. We have to put the past behind us, because none of us can change that. But we certainly can impact today and going forward.

And from a bottom-line perspective?

Unit-level economics had to be the top priority. Our restaurants have to be profitable. And second is building positive relationships with our franchisees. I’m a strong believer in partnership. They have a lot vested — and invested — in their businesses. I take that responsibility very personally, to help do everything we can do as a franchisor to see that they are successful. Part of that is just good communications, transparency and being willing to admit mistakes, owning up to them and moving on. Part of that was re-establishing an advisory council. We have some of the key owners in the brand involved with that. And lastly, going back to our roots and what makes the brand special.

Your same-store sales have been positive for 15 months. What are you doing in the next 12 months?

We have a new menu-board initiative that’s in test right now. We would expect that to roll out before the end of the year. We are testing new products. One of them is a new Farmhouse Burger. We’re focusing on more premium sandwiches with higher quality breads and proteins. We’re seeing success with that, like a Prime Rib Burger we promoted in the spring. … We continue to expand our line of milk shakes with peanut butter and banana, and we’ve got a cherry-chocolate [milk shake] in test right now.

Where do you think mistakes were made with the brand?

Real estate is such a critical component in the restaurant business. While you might be able to save a little money on the rents by taking a secondary positioning, it’s really, for me, looking for that key real estate. Everyone is trying to do that. You’ve got to have a good location to start with. The other thing is that it’s all about operations and execution and delivering on that guest experience. Clearly that didn’t happen across the board, and that was hurtful to the reputation. Consumers may give you a chance once, but they are not going to do it repeatedly because there are too many options out there. We’re working to improve those things going forward.

And as you look forward to 2015?

We would like to get some growth going again.

Menu modifications

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You've brought back the chain's popular seasoned fries. Will you make any other menu modifications?

Yes. We were known for our third-pound Black Angus burger. That was something that had been changed, taking it to a quarter pound. You might think that’s a subtle difference, but it was clearly something the consumers knew had changed. That was a big one to get back to. That is our core. It’s our standard.

How do you determine what to keep?

My chief operating officer Monte Jump is keen on doing “Star-Dog Charts,” which is helpful in determining what’s moving and what’s not. It also looks at what products are most successful margin-wise. It takes a graph and looks at the four quadrants. It’s a good way to get a quick snapshot analysis of how things are performing and where they are performing.

Any recent “dog” that came off the menu?

We had a smoked sausage. For whatever reason, it had maybe a half a percent of total sales. It just didn’t move. Most products have to have at least 2 percent. It was a good product but it never caught on.

And what about the menu “value strategy” of the past?

We’d brought in a number of $1 and $2 items. We learned in our brand architecture that that is not how people view us. They view us as a step above. We have to stay focused on that.

What keeps you excited about the brand every day?

This brand has gone through some very difficult times. This brand has been resilient. We’ve got some people who have been with Back Yard Burgers 30 years. That tells we have something here.

Contact Ron Ruggless at [email protected]
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