Long John Silver’s chief executive Mike Kern says brandwide optimism for menu upgrades and eventual unit redesigns could spawn accelerated growth in the years ahead after what he describes as “two lost decades” for the 1,300-unit quick-service seafood chain.
Kern, who previously served as chief marketing officer of the chain and also remains a franchisee of several units in the Southeast, said Louisville, Ky.-based Long John Silver’s has made several strides as a standalone company following its September 2011 divestiture from Yum! Brands Inc. In its first year on its own, Long John Silver’s posted a same-store sales increase of 5 percent for the 2012 fiscal year.
The new parent company that acquired the brand from Yum was a franchisee consortium led by Kern and LJS Partners. The group was formed to leverage more input from the franchisee community, he said. That more collaborative process has filled Long John Silver’s pipeline with new ideas about menu items, marketing and restaurant design meant to capitalize on the brand’s momentum that never materialized as a Yum-owned concept.
“We’ve lived through the ups and downs of the Yum era and their co-branding strategy, which initially was just gangbusters,” Kern said. “Ultimately, not just with Long John’s, but also with any of the pairings they had, it really began to wane. Operationally, it was very complicated, so the P&Ls didn’t look great, and the consumer was confused.”
Hatching a turnaround
When Long John Silver’s was spun off from Yum in 2011, year one was about rebuilding its fundamentals and training structure, as well as reconnecting with franchisees to begin leveraging more input from them, Kern said. It also began a new branding campaign, “That’s What I Like,” in October 2012.
The efforts produced a 5-percent increase in same-store sales and a 50-percent increase in average franchisee cash flow.
“There was a lot of harmony coming out of 2012 between us and franchisees with respect to the vision, direction, culture and results,” Kern said. “2013 has been more choppy. We had that tough start in winter, with the fiscal cliff and payroll tax hike and delayed tax returns, and overall confidence was rocky.”
Long John Silver’s recovered in this year’s second quarter, returning to flat-to-slightly-positive same-store sales despite more difficult comparisons to a year earlier.
“We have yet to fire some of our really big initiatives meant to catch up and make the brand more relevant and contemporary in today’s marketplace,” Kern added. “We’re now entering that phase in the plan.”
Those moves include the brand’s first menu revamp in several years, launched this January. It featured not only new entrees like Asian Red Pepper Cod, but also upgraded sauces and side dishes. In May, Marie Zhang joined the company as its first chief food innovation officer.
All market testing of new menu items now happens with Long John Silver’s core consumers in their test markets, rather than through third-party focus groups, chief marketing officer Charles St. Clair said. The biggest trend that emerged in those meetings was the need for more menu variety, which the brand will address with increased focus and resources in culinary research and development.
Zhang said her four focuses for Long John Silver’s menu innovation would be promoting different fish varieties, cooking preparations, flavors, and platforms like sandwiches, tacos, salads or soups. The next big menu introduction for the brand would be a Ciabatta Fish Sandwich coming in early September.
“We’ve made a lot of progress across these four categories in the past 18 months,” Zhang said. “A year or two from today, you’ll see a totally different Long John Silver’s that can delight our core user and our light users.”
The brand also will build a new prototype unit in Louisville in the near future, Kern added.
The goal of all the growth initiatives is to “take the seafood leadership role” and move consumers’ perceptions of the brand and of quick-service seafood past only a fried fish-and-chips kind of offering, he said.
“We think the next decade is going to be the decade of seafood,” Kern said, “from a protein, megatrend standpoint. The winds are at seafood’s back, and we’re poised better than anybody to capitalize on that from a restaurant brand standpoint.”
A history with two 'lost decades'
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Before the turnaround, in 2010, when Yum signaled that it would pivot away from co-branding, it left a strategic void for Long John Silver’s, Kern said, and the brand went through misguided moves like beverage and non-fried menu platforms that did not pan out. Because Long John Silver’s had been acquired for a co-branding strategy that Yum had decided to ditch, he and four other franchisees began talking to Yum about spinning off.
Yum revealed such an intention in early 2011, and by August Kern’s consortium had the winning bid for the business, which Yum announced a month later. LJS Partners closed on the sale in December 2011 and moved to new office space by February 2012.
Even before the spinoff from Yum, some of Long John Silver’s stagnation as a brand had developed during what Kern called “the two lost decades” of the 1990s and 2000s. The brand struggled to service its debt obligations after a leveraged buyout in 1989 took parent company Jerrico Inc. private, and it endured several leadership changes after being divested from Jerrico in 1990.
Long John Silver’s filed for Chapter 11 bankruptcy protection in 1998, and the next year the parent of A&W Restaurants bought the brand out of bankruptcy to combine the two chains under Yorkshire Global Restaurants.
Amid all that upheaval, Long John Silver’s lost its way and produced very little growth in sales or standalone locations, Kern said.
“The company was like this boat veering about for a decade, and with every transition and a lot of energy and effort focused on the balance sheet and servicing debt, the strategic course of the brand and the physical assets got short shrift,” Kern said. “Net-net, where the brand was in 1999 was the same place it was in 1990.”
Yorkshire’s plan for Long John Silver’s was a “fix-and-flip” play, Kern said, which included a co-location strategy beginning around 2000 with A&W units, as well as locations of KFC and Taco Bell. That dovetailed with a co-branding strategy begun at Tricon Global Restaurants, then the parent of KFC, Taco Bell and Pizza Hut. In 2002, Tricon acquired Yorkshire and renamed itself Yum! Brands Inc.
“Yum came in, but their original motivations didn’t really pan out, and they were at a bit of a loss to say what they wanted to do with Long John Silver’s,” Kern said. “So net-net, again, the brand in 2010 was where it was in 2001.”
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