The Habit Burger Grill chain is launching a franchising program for the first time with the goal of building the California brand on the East Coast.

Russ Bendel, Habit Burger’s chief executive, said Monday that the better-burger brand has been growing steadily as a company-operated chain since 2007, when private-equity firm KarpReilly LLC acquired the then-35-year-old concept and began evolving it as a more contemporary, fast-casual brand.

At the time of KarpReilly’s investment, Habit Burger had about 23 locations, all in California. Before the end of 2013, the chain expects to have 82 locations open in California, Utah and Arizona, including 22 opened this year alone.

While franchising was never in the plans previously under KarpReilly, Bendel said the landscape of the better-burger space has changed and become increasingly competitive.

“We would love to be able to grow on our own even faster, but we’re already growing at a pretty aggressive pace, and we wanted to be able to keep our arms around execution,” he said.

With California well penetrated at this point and the brand growing in two other states, the company began looking across the country for room to grow and saw great opportunity in northern New Jersey and surrounding environs, said Bendel. That part of the East Coast had the population density, the workforce and income levels, he noted.

“We looked at the southwest and the Midwest, and none of those areas excited us as much as the East Coast,” Bendel said.

Habit Burger has planned three company-owned locations in Bergen County, N.J., within the next year or so, and the company is looking for potential area developers as franchise partners who might be interested in building out contiguous areas.

Having both company and franchise locations on the East Coast would allow for supply chain efficiency and other synergies, Bendel said. Habit Burger has national potential, he said, though the mix of company-to-franchise restaurants would not likely go beyond 80 percent/20 percent, he said.

The company has hired John Phillips as vice president of franchising and development to help build the franchising program.

Habit Burger plans to open its first nontraditional location next year on the campus of the University of Southern California, or USC, which could open up other growth opportunities.

Meanwhile, the chain has also begun opening restaurants with drive thrus where real estate opportunities arise. So far only four restaurants have drive thrus.

While drive thrus are not common for fast-casual, cooked-to-order concepts like Habit Burger, Bendel said the need for convenience is increasingly important to today’s consumers, and even fast-casual brands like Panera Bread are looking to add drive thrus.

Bendel said typical Habit Burger locations have about 2,300-square feet and cost about $700,000 to build.

Over the past six years, the décor has evolved with higher-grade finishes, stone and natural light. As a result, average unit volumes have grown by about 30 percent to more than $1.5 million, Bendel said.

The chain is known for its popular charburgers, but the Habit is also known for its freshly grilled albacore tuna sandwiches, salads, shakes and ice cream sundaes. The average check per person is about $7.70.

Comparable sales have been positive since the second location opened in 1997, and Bendel said the system is expecting to finish 2013 with revenues of $112 million. That total does not include five licensed units operated by Brent Reichard around the brand’s founding city of Santa Barbara, Calif.

Reichard, who began working at the original Habit Burger in the Santa Barbara, Calif., area in 1969 at age 16, and later bought the restaurant with members of his family. Reichard sold the Habit Burger chain to KarpReilly.

As a franchise brand, Habit Burger will go up against fast-casual burger players like Five Guys Burgers & Fries and Smashburger, which have been growing at a rapid clip.

Bendel said Habit Burger’s goal is not necessarily to line up franchisees across the country, but to look for select, sophisticated partners in the specific region around northern New Jersey where growth is targeted.

“Right now, it’s more about where and finding the right partner,” he said.

Contact Lisa Jennings at lisa.jennings@penton.com.
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