When Jeff Melnick joined Boston’s in April 2018, he described the full-service landscape as a “second coming of casual dining.” The former SVP of operations at Red Robin and VP of CraftWorks Restaurants & Breweries Inc., said brands hit an inflection point. Older concepts were maturing and innovating around changing customer preference. Emerging, micro-chains, though, had a chance to carve out a home in the blurring middle between segments. With fast casual raising the quality quotient in counter service, sit-down brands were forced to rethink the convenience and price tradeoff that long split the industry. And upstart full-service brands were becoming what chef-driven fast casuals once represented to the fast-food world—a new benchmark for sourcing, food innovation, and brand distinctiveness.
There is simply more defining today’s full-service dynamic than name equity and server differentiation. Firstly, the category is flooded and there are more options. Just in regards to independent restaurants, CHD Expert taps the segment as 68 percent of the total U.S. dining market. As of October 2017, there were more than 489,900 total independents (defined in this pool as establishments with fewer than 10 units). The NPD Group reported the number of single-unit stores as 352,815 in the spring of 2018—down 2 percent, or 5,719, from the previous year.
Despite the decline, however, the group still represents more than half of all U.S. commercial restaurants and was forecasted to spend $43 billion with foodservice manufacturers in 2020, a 3.4 percent compounded annual growth rate over 2018. That measures to 15 percent of total restaurant operator spend, per NPD’s Foodservice Future Views. Here’s a deeper look at the state of local restaurants.
But what this also suggests is that chain restaurants, emerging and established, as well as local brands, are fighting for slices of a much different pie. Chains are trying to unchain their stores and operate like local restaurants. Independents are competing with fast casuals, both in cuisine type, price point, and uniqueness. The big chains are grappling for share among each other and with quick service on value. One quick example: Carrabba’s president Michael Kappit said there are four independents for every multi-unit Italian brand in the country. So, the Bloomin’ Brands icon is even battling for guests with competitors it can’t see.
It’s a crowded field. And one Boston’s think it can thrive in since, “We can come in and have an opportunity to be a fresh, new undiscovered brand,” Melnick, the company’s EVP, said.
Boston’s has always been an interesting case. While 22 locations deep in the U.S., the chain has more than 400 stores in Canada and serves—as an organization—40 million-plus guests annually and pushes total systemwide sales north of $1 billion, including Mexico restaurants. The concept arrived in the U.S. in 1998 and has searched for its footing since. Boston’s had roughly 40 restaurants in 2013 and began to retract due to demographic and real estate missteps, the company said. By May 2017, Boston’s unveiled a domestic brand refresh, putting its sizable operating strength behind core products and practices, including a new logo, and deciding to embrace its Canadian powerhouse counterpart.
The wheel began to really turn in 2017 when Boston’s closed the calendar year with 33 franchise agreements signed. In the last half of 2018, Boston’s sales rose 0.9 percent over the prior year, and the chain set an expansion goal of 30 percent every year for the next three, with six planned for 2019—five of which will be in new markets. That will be followed by a projected nine and 12 new units, respectively, in the years following. If all goes accordingly, Boston’s will more than double its U.S. footprint by 2022.
Boston’s also hired Adam Gardner as VP of operations and Ryan Reeves as VP of franchise sales this past year to aid future U.S. expansion.
To date, 2019 has been eventful. Much of that has to do with the growing operator base and getting ready to position those restaurants for sustained success.
Boston’s rolled upgrades to its franchise model—from the size and design of locations down to the menu itself—all geared for scalability and potential increased ROI for franchise partners. The store refresh incorporated a more flexible footprint so Boston’s could target smaller sites, reduce costs, and make the brand a better fit for larger urban cities. Improved tech was part of it, too, as were upgrade patio spaces with fire pits. Stores in Texas that underwent renovations witnessed a peak revenue jump of 22 percent, the company said. Boston’s plans to expand the program to the Northwest, Midwest, and Southeast locations by 2020.
Another big change was a “dough-centric menu” that expanded in the spring. It first tested at Boston’s two corporate units in February before arriving at franchise advisory council stores in April. With a goal of putting more money in operator’s hands, Boston’s highlighted dishes made with its staple ingredient. That allowed it to have a stable food cost within the core of its menu. Additionally, unlike some other menu revamps, a “dough-centric” approach put the spotlight on what Boston’s was providing as opposed to cutting, Gardner told FSR.
Boston’s goal is to stay at about 24 percent food cost, and the menu helps that.
Speaking to the competition dilemma in casual dining, Boston’s has continued to try to separate with an “artisanal take” on food and a store design set up to accommodate families as well as sports viewers. The brand lets guests control the experience. Boston’s features a sports bar side to present a livelier experience. It also offers a warm, friendly atmosphere for families on the other side. And the core qualities thread throughout.
Specialty items have been a key lately as well, from the Beyond Burger (here’s what went into the plant-based launch) to Buffalo Cauliflower to Truffle Mushroom Thin Crust Pizza. As well as drink items and the company’s new “Appy Hour,” offerings, which focus on thin-crust pizza.
Melnick chatted with FSR about all the changes, one year later, as well as how Boston’s plans to keep growing and carving a role in the rapidly changing world of casual dining.
How far has Boston’s come in the year-plus you’ve been with the brand? What are some of the key changes?
When I joined the team, a key focus for me was to build community amongst our office and the franchise partners. Before I arrived, there was a period of turnover at the corporate level and at the franchise partner level with restaurant closures, so it was crucial that we focused our efforts on creating consistency, building trust, and earning respect.
Some immediate changes we welcomed were hosting three successful Franchise Advisory Council Meetings in the last year. We’ve been able to capture feedback directly from our owners and operators that has been applied to improvements both within our support platform and to specific projects we’ve launched in unity with our restaurants.
Additionally, we worked side by side with the franchise partners to ensure the recent menu launch was successful. We went through two rounds of testing, held weekly calls, aligned on strategy for pricing, and held on-site training sessions in Dallas for every restaurant in the system to prepare for the launch. The feedback generated from the testing process was crucial to the final result available in restaurant today—from the offerings themselves, POS-structure, layout, photography and more.
We welcomed new hires to add to our operational support team. We placed a keen focus on increasing profits for our franchise partners without disrupting the guest’s experience. Our team works diligently to improve prime costs, by leveraging purchasing efforts, technology and placing an emphasis on labor. We’ve also brought in consultants to ensure the corporate team was able to focus on their specific roles to build up the brand—focus on our franchise partners and their guests.
Specifically, the redesign, what elements did Boston’s identify that led to the 22 percent increases in revenue in updated restaurants?
The improved tech, flexible square footage, and upgraded patios with fire pits were all contributing factors to the remodeled restaurants that showed immediate ROI with significant sales increases. We are strategically monitoring the recently renovated locations.
The success of the recently renovated locations will contribute to development for our future prototype, with AV as a constant priority. We’re working diligently to provide our franchise partners with more flexibility of square footage in guest-facing areas and removing non-revenue generating spaces. We have several things in the works that relate to improving kitchen efficiency and adding other aspects of entertainment i.e. trivia, e-sports, tournaments, etc.
In regards to menu changes, Boston’s goal remains to stay at 24 percent food cost. How do you balance premium items and stay at that number? How successful has the “dough-centric” menu been, especially from franchise partners’ perspectives?
To help achieve a highly competitive food cost, we ensure a healthy mix of high and low cost food items and strive to more prominently display the items with higher profit margins.
By leveraging existing ingredients, we were able to reduce single use items and create a more efficient kitchen, which is always a win. We’ve been running multiple LTOs and printing our menu twice per year, allowing us to leverage commodities through menu engineering and timely innovation.
Smart purchasing has allowed us to make changes to raw materials, with a standard of “as good or better,” but at the same time are lower cost. We did this by replacing “Pizza Cheese” with whole milk mozzarella at the same cost. We also added a higher-quality fresh ground beef patty that required no hand rolling. Our franchise partners have been vocal with their appreciation of our commitment to innovation while being mindful of their costs.
Talk about the balance between innovation and satisfying loyal guests, with everything from the Beyond Burger to Buffalo Cauliflower starters, new drinks, and an enhanced Appy Hour. What were guests telling Boston’s they wanted? And how did the chain respond, while staying on brand?
We track rate-of-sale (opportunities to sell versus quantity of items sold) of each item on our menu. Some items don’t move as well from a velocity perspective, but we know we have those loyalists who visit Boston’s for one specific item. Depending on the guest’s spending habits and consistency, we may or may not keep that item.
We test for execution and interest, and then make a decision. If we make a mistake, we change it. At the end of the day, we have the courage to try new things and we’re quick to evolve to serve the wants of the guest. We embrace the nimble menu strategy while making a continuous effort in how to improve them. Between being attentive to our franchise partners, listening to the guests, and the collaborative testing process, I’d say we have a high-performing batting average.
With growth, how big is the whitespace for Boston’s?
In Canada we have 400 restaurants in a country with about 32 million people. We are working on a smaller prototype, which will offer a lower franchise investment and allow us to consider new real estate options like smaller second generation, endcap, and non-traditional spaces. We can have several hundred restaurants in the United States. We are working to fill in the markets where we currently have a presence and then grow into additional markets. Our priority is to increase our regional density.
What’s Boston’s answer to staying agile with real estate, looking into locations like old casual-dining conversions to non-traditional?
With the development of a smaller prototype, we’re researching how different spaces allow for flexibility, while maintaining our approachability for families and sports bar enthusiasts. Second generation spaces can be great opportunities.
We are in discussions with a few airports and see endcaps and regional strip centers as strong investment spots too. We’re establishing relationships with developers who are interested in teaming up to attract the right brands. In some cases, they will build and deliver the shell of the building, so the capital requirement is significantly lower to get the restaurants up and running.
The sports bar category as a whole continues to shift. What are some ways Boston’s is differentiating itself? How do you remain family friendly but also a great place to be loud and watch the game?
Our entire positioning is based off of being ‘America’s Sports Restaurant.’ To be a passionate fan in the dining room is completely acceptable and adds to the atmosphere we welcome. We even have playing cards for kids that we hand out to families to create conversation and excitement at each table while they wait for their meal.
We do everything through a sports lens, we serve our full menu (featuring made-from-scratch food and plenty of shareable items), and we have local craft beer and handmade cocktails to enjoy. We naturally cater to families without alienating our sports enthusiast who come by for a beer and some pizza.
Other ways we are looking to differentiate, includes streaming ChiveTV in our restaurants, looking to show kid’s TV during certain dayparts, and testing some late-night activities that are family-friendly.
How has Boston’s evolved as consumers watching preferences shift? In other terms, how do you get customers off the couch and into Boston’s?
We have to focus on occasion-based dining, events with calls-to-action, and be the best in service to ensure our gourmet food is worthy of experiencing on-site.
One way we do this is by providing that local community spot created to cheer and celebrate your favorite sports team or enjoy conversation with coworkers, friends, and family. We’re a reasonably priced restaurant that can also cater to larger parties, has flexible seating, a Team Room in many of our new locations, and space to host large gatherings. Many competitors limit themselves to booths and static seating, which is not flexible or dynamic for growing families and large parties.
What are some of the biggest labor challenges facing Boston’s right now, and how is the restaurant solving them?
Labor is a significant issue across the country. With unemployment as low as it is, finding people is tough, which is causing wage pressure across the nation. On top of that, many states are increasing minimum wage, which makes it difficult on our Franchise Partners. No one pays minimum wage in the Heart of the House (HOH), but the mandated increases cause wage compression, putting pressure on the owners to increase wages. Servers get tips, so they make way more than minimum wage, but the mandated increase is a significant cost.
To help combat some of it, we are looking to simplify recipes and increase efficiency in the HOH. We are working on a wage matrix to give guidance to franchise partners on the number of suggested labor hours based on sales and guest counts. We’ve provided benchmarks for each restaurant for sales to help them efficiently plan labor.
Additionally, we are testing affordable handheld ordering devices, which have encrypted payment that will allow servers to serve more guests, while improving the guest experience. We have also updated our website and connected it with online ordering, and integrating with our POS system. This decreases the hours people spend handling take out. All of this will help Franchise Partners manage labor.