A couple of years ago, Famous Toastery was one of the fastest growing better breakfast chains in the U.S.
After starting a franchise program in 2013, the North Carolina-based concept jumped from three to 35 stores in about five years. The brand earned spots on Entrepreneur Magazine’s Franchise 500 and Inc. 5000 and set a goal to reach 50 units.
But growth slowed in 2019. Last summer, two franchisees in North Carolina filed bankruptcy and some units shut down. While not ideal, CEO Robert Maynard says the company learned an enormous amount from the setback. Even before the bankruptcies, the restaurant halted franchising and took time to “button up” its training system, franchisee selection, and onboarding process.
Maynard says the now 26-unit Famous Toastery was in great shape at the beginning of the year, and it was about to restart franchising—then COVID happened.
“You just had to face the facts of where things were,” Maynard says. “Casual-dining, family-dining got smashed. … You really had to do what you thought was best for your brand. There were so many people with so many ideas. The word pivot became the new ‘thank you.’ You had to do what you knew is best for what you can execute. And if you just follow the leader, that really wasn’t working. Everyone does have a little something different.”
Some of the adjustments included paper menus (and eventually QR codes), contactless payment, and limited menu items.
The biggest leap was the switch to online ordering, which was rolled out in four days.
“We knew online ordering was going to be big,” Maynard says. “We were already in the middle of different programs to do online ordering anyway, and it was kind of like well, we picked one, and we had to roll with it. … Our POS system was great, the group that did it for us was great, and our team was great. They just worked day and night.”
“ … You can’t be taking phone calls,” he continues. “You have two people in the kitchen, two to three people in the front, and you can’t have three people taking phone calls to take orders. So it made it so much easier to execute for the customer.”
Stores have since reopened, albeit with limited capacity and rising expenses because of PPE and cleaning supplies. Maynard says restaurants have put their focus on the lunch daypart since breakfast remains under extreme pressure due to the loss of the morning routine.
The brand has seen slower traffic recently because of the rise in COVID cases across the country. The CEO says there’s a strong relationship between the rhetoric around COVID and how restaurants perform. For example, Maynard says when racial protests were in full swing and COVID took a backseat in the national media, sales were increasing.
Now that COVID has returned to the front of everyone’s mind, restaurants are taking a hit. This trend is happening despite restaurants being one of the safest places for consumers because of heightened safety protocols, Maynard says.
“It’s so many different angles that it scares people,” he says. “I still believe it’s a third, a third, and a third. A third don’t care—they’re just going to come out and do their thing. A third is going to be cautious and a third is not going to leave their house until they have this idea that there’s a vaccine. There’s nothing positive going on in the news cycle right now that’s helping the business of restaurants.”
Regarding the health of franchisees, Maynard says operators are doing well, but are in waiting mode for things to return to normal. During the pandemic, Famous Toastery forgave royalties and franchisees were able to utilize funds from the Paycheck Protection Program.
However, Maynard acknowledges that the worst is yet to come in the industry. He adds that everyone is surviving and that when the dust settles, the landscape will change significantly.
“People all have to give,” he says. “Because we’re seeing a lot in the landlord business, that they just want their money, maybe not today, but in three months. But what they don’t get is that the balance sheets of all these restaurants is just going to get uglier and uglier. You’re saying OK, I’ll defer for three months and then your payments are due in December and November. Do we think there’s some kind of magic wand going on? Now people owe another $50,000 to $60,000 in rent on top of that balance sheet.”
However, Famous Toastery appears to be set up well for the future. The company restarted its franchising program during the crisis and has received a lot of interest. Three stores are scheduled to open before the end of 2020.
Maynard knows the brand won’t be at regular sales levels anytime soon, but that’s the new normal. The Famous Toastery leader says his team can only control how it handles the pandemic, which has been going the extra mile for employees, franchisees, and customers.
There will be long-term changes and low points to deal with, but the CEO is confident that the food and beverage industry will rebound.
“We just don’t see how America stays in limbo and lockdown forever,” Maynard says. “Just like there’s revolts going on with race relations, this is next. You can’t keep people locked up like animals forever. We get it, you have to do it for a while. You have to do certain things to make people feel safe, to stop the spread. … It all makes a lot of sense. But after a while, you gotta place your bets, and my bet is, the economy will eventually come back roaring because there will be a lot of pent up demand from all over the place from the local soccer mom to the person who wants to come from Spain to vacation here.”