Value menu test fails to “move the needle,” CEO says, as chain gets “bullish” on drive-thrus
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A free burger promotion and California storms hurt sales at The Habit Restaurants Inc., which reported a third consecutive decline in quarterly same-store sales.
For the first quarter ended March 27, The Habit Burger Grill restaurants saw same-store sales drop 1.4 percent. The decrease came after the Irvine, Calif.-based fast-casual chain reported same-store sales declines of 1 percent and 0.2 percent in the previous two quarters, respectively.
Habit Restaurants CEO Russ Bendel said the chain’s annual free burger promotion in March didn’t “move the needle” in terms of boosting incremental sales, as it had done in the past.
“We’re going to take a hard look at the use of free going forward,” Bendel told investors during a conference call on Wednesday.
Moving forward, the chain is looking to boost sales and foot traffic by ratcheting up plans to open more drive-thru restaurants, adding self-serve ordering kiosks and finally moving ahead with testing breakfast. Four of the 11 company-owned units that opened during the quarter were drive-thrus.
“We continue to be very bullish on the drive-thrus and how it addresses the needs of today's consumer,” Bendel said.
Expanding its delivery footprint is also a priority. Off-premise sales are projected to increase once the company introduces a new proprietary app.
A “heavy promotional environment” in both the casual-dining and quick-service segments also hurt restaurants.
In the first quarter, the chain tested an off-menu value deal in the Arizona market. It featured two sliders and small fries priced at $4.50, and a BLT and small fries priced at $3.95. But the deal came at the same time as the free burger promotion, which likely led to a disappointing response, Bendel said.
When the company rolls out its new mobile app, meal deals could return for digital customers. Until then, value testing is on hold, he said.
“We need to rework how we execute on it,” Bendel said.
For the quarter, revenue increased 17 percent, to $91.9 million. Net income was $0.7 million, a decrease from $1.8 million the previous year. Habit Restaurants operates 222 locations and expects to open 30 new company-operated units this year.
Contact Nancy Luna at [email protected]
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