“In March, we didn’t know if we were going to be alive today.”
Those words probably don’t seem hyperbolic to anyone who operated a restaurant at the beginning of the coronavirus pandemic. After all, at the time, the uncertainty of the virus’s spread, coupled with the collective rug being pulled out from beneath the feet of retail businesses in the form of mandated closures, sent the entire industry into a free fall with no bottom in sight.
Perhaps a little surprising, though, is who uttered those words: restaurateur Sam Fox, concept developer extraordinaire and a man who was fresh off a 2019 deal to sell his company, Fox Restaurant Concepts (FRC), to The Cheesecake Factory for $353 million.
Indeed, the immediate effects of COVID-19 were just as traumatic for renowned, well-capitalized restaurant companies as they were for small mom and pops. It didn’t help that Fox and his Phoenix-based outfit have made a home in upscale casual dining for more than 20 years, specializing in restaurant experiences that are meant to encapsulate everything people love about a neighborhood gathering place—experiences, in other words, that were quickly a victim of social distancing.
Fox and the 50 or so restaurants he had spread across 11 concepts under the FRC banner—including Blanco, Olive & Ivy, Zinburger, and Wildflower, as well as 26-unit fast casual Flower Child—needed to change tack, and fast.
“We were just really trying to be as entrepreneurial as possible and say, ‘How are we going to drive business and revenue in this stressful time?’” Fox says.
The answer to that question proved multifaceted. And through Fox and his portfolio of brands, the rest of the casual-dining industry perhaps can glimpse a blueprint for the category’s future.
Everything to everybody
Prior to the pandemic, FRC was one of the hottest companies in casual dining. Not only was the company responsible for launching True Food Kitchen—which Fox developed with health-food guru Dr. Andrew Weil and then sold to P.F. Chang’s in 2012—but it had also scaled North Italia to 21 locations in 10 states and Washington, D.C., before selling to The Cheesecake Factory (separate from the FRC deal). Fox told FSR late in 2019 that the partnership with The Cheesecake Factory would help elevate FRC brands into national players, with growth plans not only for North Italia but also for Flower Child and classic American concepts Culinary Dropout and The Henry.
“I’ve never been part of a public company, so it’s creating a whole lot of learning opportunities,” he said at the time. “Hopefully we’ll do things that are meaningful to them and to us. And hopefully we’ll get better every single day.”
The idea was not only for FRC to leverage The Cheesecake Factory’s infrastructure for growth, but also for Cheesecake to tap into FRC’s creative well in developing a multi-brand, casual powerhouse that originally projected to earn about $3 billion in revenue in 2020.
Of course, 2020 didn’t quite work out as planned. And perhaps ironically, it was Fox’s history in the fast-casual industry that may have spared FRC from the worst of the pandemic. Not only had he developed a fast-casual pizza concept, Sauce Pizza & Wine, in the early 2000s (he sold the brand in 2015), but he also developed Flower Child as a sort of counter-service sister to True Food Kitchen. And that fast-casual knowhow provided some valuable lessons in adjusting the full-service concepts to an off-premises-only environment.
“We really weren’t set up for online ordering and all of that stuff,” he says of his casual concepts. “We were able to pivot and use the functions at Flower Child and use that website base. We implemented it right away and were able to plug that in and build off the technology and the platform.”
It was clunky at first—guests who ordered takeout from, say, The Henry might see Flower Child’s logo on their invoice—but in time FRC developed standalone platforms for each brand. Meanwhile, the company also leaned into the partnership Flower Child had with DoorDash in facilitating delivery for the rest of its concepts. Fox says the leadership team re-examined its packaging to ensure that food would travel well, and he insisted that everyone in management order through the new off-premises channels, then compare pictures and notes to evaluate how they could make the experiences better.
With the infrastructure in place to do off-premises business, FRC’s concepts turned to innovation. Each brand developed its own family packs while also serving beer, wine, and cocktails to go, which Fox says proved especially beneficial to all the concepts through the summer (“No one likes to make their own margarita at home,” he says).
Once dine-in business started to open back up, FRC took advantage of its Southwestern climes and expanded its patio business. But the months spent doing primarily off-premises sales gave FRC’s casual concepts new insights into how to do to-go business in a more efficient manner, Fox says, and forced the company to consider how it could better balance that business with dine-in.
“It’s hard to be everything to everybody all the time,” he says. “How do you become a little bit more where those lines are blurred and you can be more inclusive to your audiences without one of those audiences being neglected—the to-go person or the person in your dining room?”
Adjusting on the Fly
Even as the summer afforded FRC a return to a more traditional dine-in model—albeit at a lesser capacity—the company decided to explore one of the shiniest off-premises tools to emerge from the pandemic: the ghost kitchen. In December, FRC introduced Fly Bye to the Phoenix market, selling square, Detroit-style pan pizza and crispy chicken via takeout and delivery only.
Fly Bye doesn’t partner with a ghost-kitchen facility like Kitchen United or REEF, but rather leverages kitchen space FRC already had as part of a banquet facility it operated in the same building as one of the Culinary Dropout locations.
Fox says Fly Bye is a riff on FRC’s Doughbird concept, but without that brand’s signature rotisserie chicken. “I told the team, I want to take off the rotisserie and just expand the chicken category more with chicken tenders and wings, and just kind of grow that audience,” he says. “I have kids and they love going to their tender place, whether it’s [Raising] Cane’s or whether it’s Chick-fil-A.… And while we were working through that, I’ve also had this infatuation with this Detroit-style, grandmother-style pizza.”
Fox says he’s kicked the tires of ghost kitchens before. When Flower Child explored entering the Bay Area a few years back, he says, the team considered doing so through a ghost-kitchen model because real estate was so expensive. But he says he “never got to the finish line with it,” for one important reason: It was too much production and not enough soul.
“I struggle a little bit with these businesses that are just built for ghost kitchens. Where is the connection to the guest? Where is the connection to the neighborhood?” he says. “I like the idea of having a brick and mortar, and then maybe as you expand into a market, you’re expanding in different areas with some as ghost kitchens, but you’re just sort of this hub-and-spoke approach.”
Fox’s hesitation to jump onto the ghost-kitchen bandwagon with both feet demonstrates his commitment to the experience provided by a sit-down, stay-a-while kind of casual restaurant. It’s something he says all restaurants should keep in mind as they plot growth for a post-pandemic world. Even as the industry moves en masse toward more takeout, delivery, and drive thru, the dine-in model isn’t about to die. Nor is the expectation of quality from the consumer; Fox says limited-service operators would be wise to embrace some complexity as a way to differentiate themselves, much like how Flower Child prepares everything from scratch in its kitchens.
“Don’t just try and go to the easiest way to run a brand, because it’s going to all be sort of the same,” Fox says. “It’s going to be heartless and soulless.”
Coming out the other side
That heart and soul that Fox has pledged to preserve in his 11 concepts has helped pull all the restaurants through the pandemic. And evolving the brand has been a lot easier because he’s still involved with the company as founder.
“Founder-led brands, I think, have been a lot more successful through the pandemic,” he says. “When you start something, it’s not an instant success overnight. Even if you’re busy, you’re still figuring out how to make money. And you have growth issues and personnel and all sorts of evolvement of all of these ideas. So you have to lean on all those years of experience and help guide your brands through tough times.”
Of course, those tough times aren’t over. At the time of this writing, COVID continues to drag on the retail industry even as vaccinations provide a light at the end of the tunnel. The winter surge in cases made things “choppy” again for FRC, Fox says, after business had somewhat stabilized over the summer and fall (“It wasn’t great, it wasn’t bad, it was consistent,” he says).
While the restaurant industry has yet to turn the proverbial corner and put COVID squarely in the past, Fox says the pandemic has provided learning experiences every single day that have made his company stronger in the long run.
“When you go through a crisis like this, if you don’t come out on the other side of it better, then you haven’t done a great service to your organization,” he says.
For one, he says he’s recognized just how valuable his employees are to the success of the business, that the bond among the teams will strengthen the brands. The management team will have improved, he adds, because they’ve spent the past year in the trenches with their teams, keeping the restaurants afloat. And the company leaders will be better operators, having learned everything from how to manage curbside service to how to better develop food for off-premises business.
“Hopefully we can do more with less and be more efficient,” Fox says.
Appropriately, he points to a flower as an analogy for how the restaurant industry can come out of the COVID-19 crisis. Even though it might wilt in the winter, it blooms again in the spring. He thinks the availability of real estate, people, and ideas after this season will help birth new concepts with legs to go far.
“I bet you fast-forward two years from now, there are going to be some amazing ideas and some brands just like Fly Bye,” he says. “You’re going to see something that evolved out of this that might become the next big brand.”