The chain recently rolled out a virtual brand, Bad Mama's Chicken.
Bad Daddy’s CEO Ryan Zink says operating during the COVID pandemic is like playing a game with a changing rulebook without ever having the rulebook to begin with.
As is the case throughout the casual-dining segment, flexibility and nimbleness have been key to navigating the shifting environment. In Colorado, Bad Daddy’s home state, indoor dining has been shut down in 15 of 64 counties since November 20. That affected nine of Bad Daddy’s 12 restaurants in the Centennial State. Outdoor dining is still allowed, however, and most restaurants have patios.
“The state and the cities have been good about allowing for additional outdoor seating on an ad hoc basis, and we've been able to take advantage of that,” Zink says. “While we do think there’s a bit of a negative and people may be concerned and revert to some of the behaviors earlier on in the pandemic, we feel good about what we’ve done.”
It’s been a costly process with the addition of tents, heating, and windbreaks in parking lots. Among staff, Zink says 39-unit Bad Daddy’s hasn’t seen a large number of COVID cases, but it has seen many workers living with individuals who first become infected with the virus. When that situation arises, those employees are quarantined and utilize a sick day policy.
“I think we've handled it nicely, and it's just required a lot from the entire team in terms of being quick to act, being flexible, and knowing that we're making bets and guesses without all of the potential information that we really like,” he says.
Zink says through the summer and early fall, Bad Daddy’s reported strong sales trends. In its most recent update, Good Time Restaurants, the parent of Bad Daddy’s, reported that same-store sales declined 12.2 percent in Q4, which ran from July to September. Within that quarter, Bad Daddy’s observed sequential improvement. The brand went from capturing about 80 percent of last year’s sales in July to reaching nearly 93 percent in September. Additionally, the restaurant applied for and received $11.6 million worth of Paycheck Protection Program loans to help with payroll and rent.
The CEO notes Bad Daddy’s has nearly clawed back to historical sales levels not only because of customers returning to indoor dining, but also due to the stickiness of inflated off-premises numbers.
Early into the crisis, the burger brand saw almost a tripling of sales outside the four walls when dining rooms were closed in April, most of May, and in some places, early June. Entering the pandemic, DoorDash was Bad Daddy’s preferred third-party delivery partner, but the chain added Grubhub and Postmates. When indoor dining returned, off-premises saw some declines, but the restaurant is still experiencing a doubling in sales volume. Zink says that’s helped to balance the roughly 20 percent decline in on-premises sales year-over-year.
To ensure that off-premises sales remain high, Bad Daddy’s recently rolled out its first virtual brand, Bad Mama’s Chicken, which features wings, tenders, sides, and milkshakes. Zink says ideation began after Chili’s unveiled It’s Just Wings. Bad Daddy’s is primarily known for its made-from-scratch Angus burgers, but Zink believes the chain holds its own when it comes to the chicken category.
“We may not become first on people's radar when they think about wings or chicken tenders, and we actually do both,” Zink says. “And we think we do them as well, if not better, than most of our competition. Because like our beef, our chicken is all fresh. We do the cooking in-house. We hand bread our chicken tenders, and so we thought, ‘Well, we have an opportunity here.' Really one to enable people to experience the great product that we already have, but may not be thinking about, in an off-premise format.”
Bad Mama’s Chicken debuted a few weeks ago. So far, the company is pleased with its performance. It began in three kitchens and has since expanded into 15 stores.
Zink says he’s not prepared to publicly discuss the company’s internal goals for the virtual concept, but he did note Bad Daddy’s will look to expand Bad Mama’s Chicken into more units if certain sales percentages are reached. The chain will likely launch the delivery-only brand in units that have shut down dining rooms. Part of the decision process will also look at how business is performing in each restaurant.
“If we are approaching the capacity of the kitchen or if we think that the additional business from the virtual kitchen might damage our execution of the current business that we have in some of our higher volume restaurants, we might choose not to launch the concept there as quickly until we have a better sense through testing of occasions of orders and the timing and how that coordinates with our existing flow of business,” Zink says.
Zink expects to resume unit growth in 2021. Bad Daddy’s has made no commitment to do so, but the belief is that the environment will again be such that development makes sense. The main priority right now is to create a solid financial footing, or as Zink describes it, a fortress balance sheet.
The CEO says the sobering reality is the future is still uncertain as most of the U.S. heads into the colder months. More stay-at-home orders are likely to come as COVID continues to ravage communities. Bad Daddy’s isn’t willing to make bets right now on new development unless there’s more clarity, which he thinks will come in the next 60 to 90 days.
Until then, Bad Daddy’s will continue to rely on its people to get through the tough times like it has for the past eight months.
“… I think, unfortunately, larger industries get a lot greater recognition in the press and just in general, even as they’re looked at by government policymakers,” Zink says. “But our industry employs a lot of hardworking, dedicated employees that I think need greater recognition than they have received so far. Because they've really been some of the ones who place themselves into potential harm's way, particularly at the beginning, when we had very little knowledge about this. And they did so willingly. I just really want to thank them for all their efforts.”