In addition, the company decided not to open on Mondays, with the idea that it would recapture business throughout the rest of the week. Although it’s not easily quantifiable, Ray feels like that plan has worked thus far.
There’s a couple of reasons for that optimism. For one, the COO says typical lunch customers are converting to a dinner experience, resulting in longer stays and higher average check. Also, while the likes of Denny’s, BJ’s Restaurants, IHOP, and others slowly recover their late-night daypart, Margaritas has seen “significant increases” in that time of day across all of its restaurants.
“Everybody's faced staffing challenges and a lot of people cut out the later hours to be able to spread their coverage, but they're also the ones that are open for lunch,” Ray says. “And so I think one of our advantages was we came out the other way. We already have people staffed in the evening. It's really only a couple more hours for us to stay open and capture that late-night demand. And the other places in a lot of our markets were closed last year. More are open later this year, but we’re established, and we're a fun place to come and have a drink later at night.”
The improvements give Ray much confidence in Margarita’s renewed franchise program. Ideally, the chain will look to expand along the Eastern Seaboard and north of the Mid-Atlantic so everything remains contiguous, but the company is open to working all the way down the East Coast and in the Midwest if it finds the right partner. The preferred option is to sign operators willing to open multiple units so Margaritas can focus on fewer partners while also leveraging the benefits of scale.
Ray says franchisees won’t necessarily be tied to changes made at company-operated units, including whether to include the lunch. In fact, four corporate stores still offer the daypart on weekends.
“We think it's possible that that could happen in other markets,” Ray says. “I think it's going to be case by case, but it's hard to deny the impact on profitability of building the plan around the evening business first. I think we're looking for people that understand that as a priority.”
The chain will likely present franchisees with slimmer-than-usual prototypes after discovering during the pandemic that 50 percent capacity results in just as much business in a variety of markets. The success confirmed what Ray and everyone else believed, which is “the days of opening 8,000-square-foot restaurants” are behind them. The chain will also allow for flexibility and adaptability through the use of second-generation spaces.
The executive says Magaritas will approach this growth push with caution. So even though the brand is ready to “share margaritas with the world,” the chain will be selective about the opportunities it pursues.
“The trajectory, I think we're going to accelerate our growth a little bit compared to the last decade, but we're not going to overextend ourselves,” Ray says. “We're going to focus on doing a really good job for our existing team on the company side and also existing partners and then integrate new restaurants on both sides, where it makes sense.”