4 Franchises That Pulled Off a Major Pivot
When was the last time you saw a muffler rusting in the gutter? At one time, the car part was common roadside detritus. But in the late 1990s, automobile manufacturers began making the noise-muffling devices from cold-rolled steel, a sturdy material that can last the life of a car. That little industrial tweak was a huge blow to Meineke, the brand that drove the catchphrase "I'm not going to pay a lot for this muffler" into the minds of several generations.
"The company was founded in 1971 in Houston, and we did no brakes and no oil changes," explains Dave Schaefers, senior vice president of franchise development for Charlotte, N.C.-based Meineke. "We only did mufflers for many years. We knew we had to start moving into different service offerings."
In other words, Meineke had to pivot, a daunting prospect for any brand, but especially for a franchise. Expanding, tweaking or reducing a core service or product can be a rocky transition. Customers and franchisees will either embrace the new offerings or reject the remodeled concept, leading to months or years of wasted effort and potentially millions in losses. Even worse is when companies fail to see the need to pivot before it's too late. But the smart ones look ahead, anticipate changes in the marketplace and face them head-on by refocusing their brands.
Meineke, for one, saw the changes coming in its industry. In 2003, it officially rebranded an estimated 800 stores from Meineke Discount Muffler Shops to Meineke Car Care Centers and began handling air conditioning, oil changes, brakes and other automotive services. Just over a decade later, mufflers--which used to account for 90 percent of sales--make up only 10 to 20 percent. After adding about 120 units since the switch, the company now has aggressive plans to open 1,000 new stores in the next four years. It's also rolling out a tire service over the next year, more or less completing its transition to a full-care auto center.
But Meineke's pivot wasn't just about how it handled cars. The company also changed its culture. "We used to be very transactional," says Schaefers, who once owned 10 Econo Lube locations. "We'd inspect your car and present what we found, and that was it. Now it's very much a relationship with customers. New technology has made it much more personal than it was a decade ago. We're looking for lifetime transactions with customers. That means we pay attention to how the store looks, how our managers look, how we market to our customers and remind them they need service. It's a shift almost as big as going from mufflers to complete car care."
In 2007, when Cheryl Bachelder took over as CEO of Popeyes, the 42-year-old Louisiana-style chicken franchise, the company had been in decline for almost a decade. Falling sales, aging restaurants and a strategy that focused on urban areas and outskirts of towns led to stagnation. As the recession began to take hold, Bachelder and her team decided it was time to make some radical changes at the Atlanta-based company.
"We knew Popeyes had some of the best food around, but we had to build awareness," says Ralph Bower, the company's U.S. president. "We changed our name from Popeyes Chicken & Biscuits to Popeyes Louisiana Kitchen. Everyone knew about our chicken, but they don't realize we have great jambalaya and seafood. Calling ourselves a kitchen gives us the latitude to go beyond chicken."
The name change was just one part of the pivot; the company also began to refocus its development. "If you go back 10 or 20 years, there was a belief in the company that Popeyes was a destination brand. You could build almost anywhere and people would show up," Bower says. "But we've evolved past that."
In the past half decade, Popeyes has become rigorous about site selection, making sure traffic and demographics can support the units. It also has begun building in suburban neighborhoods, which means that upfront real-estate costs are higher than in the past, but Bower believes the advantages outweigh the extra costs. "In the last five years, no one has come to me to say they wished they had bought a worse piece of real estate," he says. "We continue to invest in higher and higher quality real estate."
Those strategies, along with an intense focus on unit profitability, the rollout of a strong national advertising campaign and a complete restaurant remodel earlier this year, have shown results: Over the past six years, unit profits are up 60 percent, and from first-quarter 2013 to the same period this year, the company grew its share of the chicken market from 20 to 22 percent, an almost unprecedented jump.
It all meant challenging some long-held beliefs at the company's core. "I think customers and our competitors have always known we have the best food in all of quick-serve," Bower says. "We just had to start showing some pride in our Louisiana heritage."
Not Just Desserts
In the early 2000s, Dairy Queen was feeling the limits of its concept. With health-conscious consumers avoiding the stores completely, the company was struggling to find strategies that might increase sales.
"We see our average consumer once per month," explains Barry Westrum, executive vice president of marketing for Minneapolis-based Dairy Queen. "Changing that to two times is a big opportunity for us. The way we tackled that is by essentially promoting both sides of our business."
The company began a concerted effort to promote its full menu of hot foods and salads alongside its famous sweet treats, a strategy embodied by the Grill and Chill restaurant model, which it launched in 2002. Now, a decade into the pivot, half of Dairy Queen's 4,445 U.S. locations have converted to Grill and Chill, and another 1,700 are signed up to convert over the next few years.
The main battleground for DQ is lunch. While most quick-serve restaurants do about 44 percent of their business at lunchtime, Dairy Queen is at 29 percent. Westrum says that's a gap the company hopes Grill and Chill will close, giving Dairy Queen franchisees a big advantage over those of other systems.
"Our competitors play in one daypart, usually lunch. But we play in multiple dayparts. There's afternoon snacks, dessert after dinner, Little League teams coming after games, as well as lunch and even dinner," he says. "That's one of the biggest strengths we have, and it's what makes our restaurants economically viable. We promote food and treats simultaneously to grow the bottom line."
Pivots don't come only to mature franchise systems. Dallas-based la Madeleine Country French Café, for instance, has been around 31 years, but it only recently decided to expand through franchising. That meant taking a hard look at the business and deciding what was essential and what could be changed.
The first step was to bring all food preparation in-house. Previously, soups, sauces and entrees were prepared at a central kitchen and delivered to la Madeleine locations, a model that would not be possible with the company's expansion outside of Texas.
"We came up with a strategy to figure out long-term how to grow at a decent pace while maintaining the integrity of our food," COO John Cahill explains. "We put our focus on looking at every single product and figuring out how to easily execute it, while staying true to our French heritage. The past few years we've worked on the simplification of our processes. We call it 'polished casual,' because we do lots of real cooking vs. typical fast-casual restaurants."
La Madeleine got rid of a cafeteria-style setup for soup and salad in favor of preparing all food on-site. The company also had to acknowledge that the "French country cafe" of 30 years ago has moved on, and undertook an overhaul of the décor.
"It's been a real transition in the last three years. We've really been working on the atmosphere," Cahill says. "We want the décor to remain French country but more relevant. Customers have told us for years our two biggest selling points are our food and our atmosphere. That's something we need to preserve."
Part of that preservation process has been bringing founder Patrick Esquerré, who sold the company in 1998, back into the fold. As a consultant, Esquerré helps keep the management team true to their core concept as they try to transition the business to a faster, more manageable franchise system.
"We really wanted to protect the brand; that's why we brought him back," Cahill says. "As brands go through the years and have leadership changes, the concepts often look nothing like when they started. We wanted to make sure we kept our core values. He does a fantastic job of reminding us how we started and the culture we're founded on."