Reinventing the Wheels

Fast-casual has older chains reevaluating their concepts

By Scott Hume, Executive Managing Editor -- Restaurants & Institutions, 4/1/2004

When Chin Chin opened in 1983 on Sunset Boulevard in West Hollywood, Calif., it was the next big thing. Owner Bob Mandler, a former lawyer, envisioned a restaurant serving authentic Asian food without MSG in a more hip atmosphere than was available at the time in most small, family-run Asian operations.

Riding the success of the concept's signature Chinese Chicken Salad—a blend of roasted chicken, lettuce, carrots, scallions, toasted almonds, crispy noodles and tart ginger dressing—the restaurant was a success.

Twenty years later, Mandler operates six Chin Chin units, but is feeling competitive pressures in an unforgiving restaurant market where it isn't hip to be square. "Times are more difficult now. Being Chin Chin may not be enough, and I'm looking at reinventing the brand," he says. "Japanese and Pan-Asian restaurants are very hot. There's sushi everywhere. I have to respond."

Though Jack in the Box has redesigned its stores before, it's now reassessing the entire concept.

Restaurant concepts are not immune to rust, and chains may lose their luster more quickly than single-unit operations because it's more difficult to continually upgrade a string of locations. In the present, rapidly changing marketplace, it appears that brand reengineering is the order of the day at many chains, including some of the largest, most established and most successful.

Mandler is considering reconcepting one Chin Chin location. Chinese Chicken Salad stays, but there will be Thai and Vietnamese dishes and Pan-Asian grilled foods. If it clicks, other units could be similarly altered.

A slightly different name for the broader-menu units may be created, Mandler says, in order to signal differences to consumers. Sometimes a name change is needed to reflect a chain's evolution. Damon's the Place for Ribs became Damon's Grill; Perkins Family Restaurants morphed into Perkins Restaurant & Bakery.

When the San Francisco-based Pasta Pomodoro chain last year opened its first location in Southern California, the unit was christened Pomodoro Cucina Italiana. The change (though locations in Northern California retain the original name) reflected differences in the menu (more light pasta entrées) befitting preferences in that market.

When the 100-plus-unit Pizza Outlet chain became Vocelli Pizza last year, the Pittsburgh-based operator changed not just signage but also store décor, crew uniforms and other elements to raise consumer perceptions of its brand.

"When people think carryout/delivery there's a tendency to think low-quality," says Varol Ablak, Vocelli president and CEO. "When we switched to the Vocelli name, we had people saying, 'Your pizza tastes better.' But it's the same high-quality product."

As Vocelli Pizza, the chain has been better received outside its Pittsburgh base and franchise inquiries have risen, Ablak says. The new name also has encouraged the chain to broaden its menu with a line of entrée salads.

"It's not often you get to make a fresh start. We said, 'Let's raise the bar on everything we do.' The results have been huge," he says.

Impact of Fast Casual
A frequent cause of brand burnout, especially with smaller and privately held chains, is what consultant Aaron D. Allen calls "the founder's trap." Allen, CEO of Orlando, Fla.-based Quantified Marketing Group, which works with chains to reinvigorate their brands, says it often happens that concept founders who put their lives into their businesses hit a point where they "desire to introduce innovation and fresh ideas, but have a difficult time relinquishing control. They don't want to be in day-to-day control, but also don't want to turn it over fully to their No. 2 person."

When Pizza Outlet became Vocelli Pizza, restaurant interiors got a new look, and some customers thought its pizza tasted better though the recipe was unchanged.

In such cases, concepts can remain static too long. They still may experience financial success, but that can blind a CEO to needed adjustments in menu or market positioning until it's too late.

Allen sums up in two words another factor causing the recent upsurge in brand reevaluation: fast casual. "This has really shaken things up," he says. "Even the largest chains ask: 'How can a fast-casual concept open a unit for $300,000 and do $600,000 in sales when we're opening for $1 million and doing maybe $1 million [in sales]?' The money—from investors as well as consumers—is moving toward fast casual, and the older chains want to know why and how to respond."

With more than 1,900 restaurants, San Diego-based Jack in the Box is a successful and well-entrenched company. Yet it is pursuing one of the most complete brand reevaluations of any quick-service chain. President and Chief Operating Officer Linda Lang hasn't said the process was triggered by the growth of fast-casual competitors—the company owns the 101-store Qdoba Mexican Grill concept, which competes in the fast-casual category—but the company's consideration of higher-price menu items and a greater level of service suggests the plan is to reposition Jack in the Box higher in the restaurant industry.

"We're currently converting two restaurants in San Diego that will serve as learning labs," Lang said in a February conference call. "These restaurants will feature an upgraded menu, totally redesigned facility and a substantially higher level of guest service.

"Brand reinvention is anticipated to be a three- to five-year program that will roll out only after sufficient testing." Moving the Jack in Box menu closer to fast-casual offerings already is underway. The chain recently introduced Pannidos—combining deli meats and cheeses on foot-long baguettes—at a suggested price of $4.39.

"This rebranding initiative attempts a significant redefinition of the concept to a leadership position within the quick-service segment," David Geraty, Minneapolis-based restaurant analyst for RBC Capital Markets, recently wrote. "In response to a changing consumer environment, the company is broadening its focus to include ... more females and older males."

The 40-year-old Benihana chain is working with a consultant to reevaluate and standardize the look of its restaurants.

Birth and Death
Restaurant concepts do not necessarily have set shelf lives, but they do have life cycles. "Every concept, even McDonald's, has ups and downs. It's difficult to stay on top for a long time," says Lee Peterson, executive director of the design group at WD Partners, a Columbus, Ohio-based architecture and engineering firm that works extensively with chain restaurants. The company currently is working with Miami-based Benihana to reevaluate the 40-year-old concept and establish a more current and consistent brand identity across its nearly 100 restaurants.

"If your brand is trendy and you're not thinking that it could be irrelevant in five years without continuous attention, then it certainly will become irrelevant," Peterson says.

Concepts aren't destined to die out, but they do require refurbishing to survive. That requires "a process of thinking about the magic that made a concept successful in the first place," he says. As a concept grows, management's attention often shifts from ensuring delivery of high-quality customer experiences and focuses instead on "banging away at unit growth," he says. A brand's essence can then be lost.

Birth of the fast-casual segment made the quick-service industry realize it was aging, Peterson says. But that's healthy because it spurs reflection and improvement.

When Ray Kroc first developed McDonald's, it was the cutting edge in fast food, Peterson notes. "It was all about innovation. But sometimes McDonald's has strayed from that and they try to get it back. You do it by revisiting the original magic and by making that more relevant. Brands are like people: They experience life-changing events."

As Smart as Einstein

Fast-casual's rapid rise has been an eye-opener for bagel chains. Richmond Heights, Mo.-based Panera Bread's average unit volume of approximately $1.9 million left bagel chains, many with average per-store sales of less than half of Panera's, wondering how to adjust menus and pricing to catch up.

Hamilton, N.J.-based New World Restaurant Group recently announced that it has initiated a concept reevaluation program for its 380-unit Einstein Bros. Bagels chain to hasten its redevelopment as a fast-casual, multi-daypart concept.

"Our Brand Renaissance program was developed in response to survey data from our customers as well as restaurant consultants," New World CEO and Acting Chairman Paul Murphy told a February meeting with the company's bondholders. "It addresses issues such as our brand position, service system and customer experience. We are in the process of designing a new prototype as well as initial concept stores for the existing store base that will reflect our new direction."

Einstein Bros. last year rolled out a line of panini sandwiches on ciabatta bread to strengthen its lunch business.