What is in this article?:
- Restaurant exec outlook optimistic at Baird conference
- Commodity pressure bites in short term
- Chains plan for robust unit growth
Growth companies share their plans to manage past competition and commodity challenges.
Chains plan for robust unit growth
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Many of the restaurant brands presenting at the Baird Growth Stock Conference expressed optimism not only for hitting unit growth targets in 2014 but also for finding key real estate sites for planned openings in 2015 and 2016.
“Some concepts have noted signs of slightly increasing costs and greater competition for new sites,” Tarantino wrote, “although there doesn’t appear to be broad-based pressures at this point that would meaningfully impact new-unit returns or the ability to source enough real estate to support planned expansion.”
Managers for Noodles & Company said the fast-casual chain would achieve unit expansion near the higher end of its guidance of 42 to 50 openings this year, or 13 percent to 16 percent growth. They added that initial sales results in new markets like San Francisco and Orlando, Fla., have been encouraging.
Jason Morgan, chief financial officer of newly public Zoe’s Kitchen Inc., told attendees that the company would open between 28 and 30 Zoës Kitchen restaurants in 2014. The company aims to grow the fast-casual brand from 114 restaurants currently to about 1,600 domestic locations over the long term.
“We’ve built an in-house tool that allows us to do site selection … and we’ve looked at over 4,000 points of interest across the U.S.,” Morgan said. “We scored each one and got it down to 1,600 mutually exclusive locations where we believe we can build a Zoe’s Kitchen.”
Two other presenting companies, Ignite Restaurant Group and Chuy’s Holdings, gave similarly optimistic outlooks for growth prospects based on their agile methods for fitting their brands to real estate they already own or could procure through converting old restaurant sites.
Ray Blanchette, chief executive of Ignite, said much of the company’s focus would be on turning around Romano’s Macaroni Grill, which it acquired in 2013, while continuing to grow its other casual-dining concepts, Joe’s Crab Shack and Brick House Tavern + Tap.
But for Macaroni Grill locations that need to be shuttered, Ignite has an opportunity to convert many of those restaurants to the Brick House concept, which has several advantages, like a 43-percent sales mix for alcohol and a daypart mix that includes one-fourth of sales derived from the afternoon period between lunch and dinner.
Three locations have been converted to Brick House to date, he said.
“When you have the real estate under your control, the speed to market really is dramatically impacted,” he said.
Chuy’s chief executive Hislop said the casual-dining chain is targeting 20-percent unit growth over the next several years to eventually grow from more than 50 locations now to 500 units in the United States. The brand’s “unchained” approach allows Chuy’s to put common design elements to remodeled end-cap or freestanding sites converted from other restaurants.
“We love ‘hermit crabs,’ but the site will always win, so we have a few different prototypes,” Hislop said.
Chuy’s has accelerated its growth to 44 restaurants opened in the past six years, after building eight restaurants in its first two decades in existence.
This story has been revised to reflect the following correction:
Correction: May 21, 2014 An earlier version of this story misstated Jason Morgan of Zoe’s Kitchen's title. He is the company’s chief financial officer.
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