Zaxby’s is planning to expand into new markets in the South and Midwest, and is exploring a new breakfast daypart as part of an overall growth strategy for the chicken chain.
The Athens, Ga.-based chain plans to open 31 new restaurants in 2011, and between 35 and 40 new units in 2012. New markets will be throughout Oklahoma, Indiana, Kentucky, Ohio, Virginia and West Virginia, as well as southeastern U.S. states where Zaxby’s already operates restaurants, said Tony Townley, Zaxby’s co-founder.
Zaxby’s executives spoke with Nation’s Restaurant News about the brand’s growth strategies, and noted that the company is trying to build on its 2.7-percent systemwide same-store sales gain through this year.
In 2010, Zaxby’s booked U.S. systemwide sales of $777.6 million, up 8.3 percent from the preceding year, according to NRN’s Top 200 study. The brand finished the fiscal year with 514 restaurants, comprised of 89 corporate locations and 425 franchised units. The total unit count rose 4 percent from the preceding year.
Zaxby’s estimated sales per unit of $1.5 million ranked third behind Chick-fil-A and Pollo Tropical in the chicken chain category, while in previous years its sales were flat, according to NRN’s data.
Menu growth: Limited-time offers
A key to the brand’s growth is its new and limited-time offer menu additions, which complement signature Zaxby’s offerings, such as chicken fingers and sauces that range in spiciness from “Wimpy” to “Insane.”
In the first quarter of 2011, Zaxby’s rolled out a limited-time Chicken Parmesan Sandwich Meal and Fried White Cheddar Bites. In the second quarter, Zaxby’s introduced a limited-time Birthday Cake Milkshake and Blue Zalad. And in the third quarter, a limited-time Strawberry Cheesecake Milkshake and a Sweet & Smoky Sandwich debuted.
Zaxby’s deployed television commercials featuring celebrities such as the actress Doris Roberts to promote the offers.
“When we put those on television, it drives traffic to the stores. It works,” Blake Bailey, Zaxby’s vice president of accounting and finance, said. “In the current climate, we don’t want to change what’s working.”
Bailey said Zaxby’s also will rely on its casual ambiance and its diverse and prepared-to-order menu offerings, which include salads competitively priced at $5.59 to $5.99.
“We have had minimal menu inflation in last three or four years,” Townley said. “We’ve tried to save money on things instead of raising prices.”
Bailey emphasized Zaxby’s quality and value offerings.
“We feel our attributes have been quality, so we’re in a position of strength there,” he said.
Daypart growth: Breakfast test
Zaxby’s customers consider Chick-fil-A a competitor, founder Townley said, but Zaxby’s move to research a new breakfast daypart was not a response to Chick-fil-A’s new breakfast items, such as oatmeal.
The company is seeking to expand in non-traditional locations such as airports, which means complying with the airports’ guidelines of offering three meals a day, Townley said.
“Now it’s about the breakfast wars, but I don’t see it as a push against Chick-fil-A. These larger chains don’t see it as going after competitor A or competitor B. They see it as an opportunity to enhance unit economics,” said industry observer Dennis Lombardi from WD Partners, a restaurant and retail consultancy. “It’s an attractive, growing daypart.”
Contact Alan Snel at [email protected].
Follow him on Twitter: @AlanSnelNRN
