Culver’s Franchise Systems Inc. executives speak about their chain differently than other quick-service chains do. They call transactions “experiences” and gather their franchise partners at a “reunion,” not a convention.
Despite those differences, they still see the quick-service segment’s challenges much as their competitors do. Founder and chief executive Craig Culver said commodity inflation is the No. 1 challenge in the industry right now, necessitating menu innovation, operational excellence and differentiated marketing to protect sales and average unit volumes.
Culver, who founded the chain in 1984 with his late father, said the qualities that have helped to differentiate the brand from its competition are the same things that have helped Culver’s maintain its steady sales and growth. Those qualities, including high-quality “Butterburgers” and small-town hospitality, are captured in the brand’s current marketing campaign, “Welcome to Delicious.”
Culver, brand president Phil Keiser, chief financial officer Joe Kass, and vice president of marketing David Stidham discussed business with Nation’s Restaurant News at the 445-unit chain’s Prairie du Sac, Wis., headquarters.
Culver’s “Welcome to Delicious” campaign, starring Craig and many of the chain’s suppliers, seems to speak to a need for authenticity we’ve seen among quick-service customers.
Stidham: We’re very proud of where the campaign has gone, and the biggest driver of that is telling the story of who we’ve always been. How do we feel about other brands like McDonald’s trying to play in that space? I can’t speak for other brands, but I believe that the more [consumers hear about it], the better off we are, because we fit in that space very well.
Culver: What we’re really selling is the values of Small Town America. … There’s something about those values that everybody wants. Yes, we sell the Butterburger, but we also have great people at Culver’s, and that’s what sets us apart. We’re selling food, but it’s the experience that people [appreciate]. We’d always used the term “transactions” [for guest counts], but that word sounded so corporate, so now we use the term “experience,” which I love. It has a whole hospitality theme to it.
Keiser: That’s why it’s worked. When people go into the restaurant, [that messaging] matches up at the counter.
Watch the commercial; story continues below
You’re selling food and experiences, but you’re also selling franchises.
Culver: No, we don’t. We “award” franchises.
Fair enough. But does this campaign help you award more franchises?
Keiser: Since the launch of “Welcome to Delicious,” we’ve had an increase in inquiries, but that’s a little harder to say [if it’s] only because of the campaign. But we do agree that is a message that works with that part of our business.
Koss: And ultimately if the campaign drives sales, that is what ultimately attracts operators.
Culver: That’s the main message. How do we increase sales in each of our existing restaurants? We’re a family-owned business. I never dreamed we’d have two restaurants, much less a franchise company. Our goal is not to see how many restaurants we can add. It’s how can we increase business at each location. We don’t advertise our franchises at all; it’s all word-of-mouth. We’re not good salespeople at all, but that’s exactly the way I want it.
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Everything we do at Culver’s, we now ask, “Does it fit ‘Welcome to Delicious?’” We have to make sure everything we do fits in that message.
What else conveys that message besides the new marketing?
Koss: We’ve been trying to make our dining rooms more welcoming … with our newest dining room prototype. Our operators are starting a big reimaging effort.
Keiser: It’s a voluntary program, but we continue to talk about it and try to measure it. I’m very happy with the response we’ve had. We’re at a point now where we can go forward with it in a big way. … We’ll have to say to some [franchisees] at some point, “You have to do this now,” but that’s why we’re talking about reimaging now. … So hopefully we can avoid those tough ones. Our franchise community has been willing to do these things without being asked to.
That’s good, because the push and pull we’ve seen in quick service comes from franchisors wanting to reinvest, while some franchisees don’t feel fully recovered from recession.
Keiser: We discovered that early on. As we started talking with our field team, we knew at some point it wouldn’t be reasonable to ask some franchisees to do certain things, so we’ve been trying to give ourselves some flexibility, where we don’t force a guy to do something he can’t afford. We hope they’re in a position where they wish they could [invest], and if we can do something to help along the way, we’ll do that too.
How does Culver’s grow average unit volumes and gain efficiencies when its restaurants have to deal with high commodity inflation?
Culver: I think this is the No. 1 subject the restaurant industry has right now. We can’t take our menu pricing up enough to cover the costs of commodity increases. What the grocery industry did this past year, going up somewhere near 15 percent — we’ve gone up only 4.3 percent, so we haven’t covered those costs, and it’s hitting our bottom lines. We haven’t figured it out, as an industry or at Culver’s.
Keiser: We’re trying to approach it all ways. We’ve had a major emphasis for years on tightening our controls. We’ve done a little barbell strategy and sought ways to get more beverage, custard and side dish sales.
Koss: We have been able to introduce some more premium-burger limited-time offerings, and we can take some more price on those.
Stidham: We have to understand who our target audience is and how to reach them. There are a lot of people out there willing to pay a little extra for quality. Panera’s a good example. When unemployment went to 10 percent, they said, we’ll focus on the 90 percent that’s still employed. We think our message will continue to resonate with people who do care about quality, and we’ll continue to see our growth in sales and experiences.
Keiser: That’s why everything has to match up. If the whole experience doesn’t match up with the price you paid, then you question it as a consumer. That’s why we have to keep challenging ourselves on execution, our facilities and our menu.
Given the success of “Welcome to Delicious” and your other initiatives, what are Culver’s growth goals in the near future?
Culver: We think we’ll grow by 30 units this year, and that area has bounced back from where we were a couple years ago. In 2013, we’ll open our 500th Culver’s. It started with one restaurant — I can’t believe it.
2008 was a great year for us. We went to our reunion in February 2009 and said, “We’re not going to participate in the recession.” Well, we participated. We hit the wall in April, and 2009 was the worst year we ever had, down about 3.5 percent. We introduced 8 Meals under $4 that year, and in 2010 we bounced back a little. We were up 1 percent in 2010, and last year we were up 4.5 percent.
We’re aiming for up 5 percent to 6 percent this year. December was especially strong for us, up 13 percent, and then we were up 12 percent in January. We’re off to a good start, and I’d like to say it’s mostly marketing and operations, but we’ve also had wonderful winter weather.