Serving sandwiches for a quarter century

Schlotzsky’s Deli celebrates 25 years in Battle Creek

Written by
Jennifer Bowman
The Enquirer

Schlotzsky’s celebrates 25 years in Battle Creek

Eric Kitchen said he hears it at least three times a week.

“So many people pull off the highway and come here to eat and say, ‘I cannot believe I found a Schlotzsky’s. This is the best sandwich on the planet. Do people in Battle Creek know how lucky they are?’” said the 48-year-old. “We get that a lot.”

This month marks 25 years since Kitchen moved back to his hometown from Oklahoma City to open Schlotzsky’s Deli, a Texas-based sandwich shop. He now operates three locations in Battle Creek — on B Drive North, West Michigan Avenue and South 20th Street — and one in Portage on South Westnedge Avenue.

Not bad for a guy who brought a national franchise restaurant to Michigan for the first time when he was just 23 years old.

“I determined that from the restaurant business,” he said, “to be 100 percent committed, the only way to do it is to start something yourself.”

That commitment is clear through his customer service. Kitchen said it’s difficult to choose what has been most rewarding for him since he began the business. It could be the young locals he employed throughout the years, he said, or catering a funeral to fulfill a man’s request. Once, he said, they hustled all night to prepare to cater a 1,500-person event before realizing they hadn’t figured out a way to transport all the food.

But what comes easy for Kitchen is revealing how he has managed to keep his doors open for decades.

“Business isn’t that complicated,” Kitchen said. “If a customer leaves with a smile on their face, telling themselves they’re going to be back soon, then we’ve done our job.”

General Manager Jim Keating — who Kitchen said has been on the team since day one and also acts as a minority owner — agreed.

“It comes down to taking care of your customer,” he said. “If you take care of your customer — give them great service, give them a great product at a reasonable price — they’re going to come back. It all comes down to customer service. That’s the most important thing, is taking care of the customer and treating them like family. And we do that everyday.”

Schlotzsky’s opened in 1971 in Austin, Texas. It was home to a “single, one-of-a-kind sandwich,” according to its website, and now is an international franchise with locations in 35 states and four countries. Its menu has been expanded to offer salads, soups and pizzas.

Kitchen said being in business in 25 years has made it impossible to escape any economic downturn. A company that once boasted dozens of locations throughout the state, Kitchen is now the only remaining franchise operator. He closed his Marshall location about a year ago when it was decided that the cost of revamping the store and taking care of small children at home was too much.

While they used to have a heavy focus on growth, Kitchen said they’re now looking to provide the best quality of customer service at their current locations.

“I think if you do a darn good job, there’s room in the economy for a business,” he said. “There’s much more competition in town than there was when we first started. But I think more people dine out. I think that’s always skewing upward.”

But what has helped, Keating said, is the duo’s close connection to the community. Both are Lakeview High School graduates and work to help with community and school events on behalf of the business.

“Seeing those kids coming in everyday and supporting them, as well as them supporting us, I think is very important,” he said. “The parents and the families appreciate that as much as we appreciate their business. So you try to help out everybody as much as you can and give back as much as you can, and that’s what helped us grow.”

And there are no plans to stop now.

“We probably have 25 more years in us,” Kitchen said.

Source: Battle Creek Enquirer

Schlotzsky’s comeback story: The days of bankruptcy are long gone

Fast Casual

 

February 4, 2013 – Cherryh Butler

Everybody loves a good comeback story, and if Hollywood were to feature one about a restaurant as opposed to an underdog sports team, Schlotzsky’s would be the star. After all, what’s more inspiring than a brand reclaiming a top spot in the industry less than a decade after filing bankruptcy? That story belongs to Schlotzsky’s President Kelly Roddy, the man who took over in 2007, and helped the nearly extinct chain to accomplish seven years in a row of positive comps. It’s also enjoying a huge growth spurt, opening 30 units in the past two years with plans to open at least 50 more this year.

“All round, Lotz better”

While most brands struggling to regain relevancy tend to overhaul their entire menu, Schlotzsky’s left it alone for the most part except for changing the salads — they’re fresh now — and a few other menu additions. Instead of changing the food, Roddy decided to concentrate on updating the look and feel of the brand. What sets Schlotzsky’s apart from competitors, he said, is serving sandwiches on made-from-scratch, round buns, as opposed to the subs served in most restaurants. Those round buns inspired the chain’s design element and new tagline, “All round, Lotz better.” (Click here to see photos of the new design.)

“It’s our brand filter, our promise to do everything better,” Roddy said.

The first unit to get the redesign was in Waco, Texas, in 2009, because if it worked there, “We knew it would work anywhere. Circles are just a cool design and you see them everywhere from on the walls to the lamp shades to our cups and bags,” Roddy said. “When you see a circle, we want you to think Schlotzsky’s.”

The design also incorporated fresh, modern colors, including apple green, sky blue and bright red mixed with some earth tones.

“It’s just a cool, hip look,” he said.

When sales increased at the Waco unit by 45 percent, Roddy and his team knew they were onto something and began building all the new units with the new look. They still had 350 “old” stores, however, that needed updated. They went to work planning how to use their marketing dollars to retrofit the other stores. It took a few years, but now nearly every unit has new paint inside and out, new signage, packaging and road signs.

Better service

Although customers still order at the counter, Schlotzsky’s staff bring their food to their tables. In the past, guests waited for their numbers to be called and had to fetch their orders.

“It’s now more of a sit down and relax atmosphere, and we’ve removed the clutter with the numbers,” Roddy said. “We also added more soft seating instead of mainly just hard chairs. There’s more booths and nice lighting. It feels more like a casual dining experience.”

The food comes on china as opposed to paper products, which also upgrades the experience.

Branding together

The chain also found another way to increase sales; it added a Cinnabon Express to about 200 of its locations, and 30 units now house Carvel Ice Cream units.

“When we add these brands, we are more of a complete package,” Roddy said. “We may be selling ice cream to one out of 10 customers during the day, but it’s more about creating family events at night. It helps bring in more families. We’ve seen a nice little bump in the Carvel stores at dinner.”

Cinnabon, which sees half its sales as take out, also encourages guests to spend more money.

“They’ll stop in for lunch and then grab Cinnabon to go,” Roddy said. “It’s a very inexpensive way to put in another national brand and bring in customers.”

Looking ahead

Schlotzsky’s is in full growth mode, said Roddy, who predicts the spurt won’t stall anytime soon. The chain, which has a presence throughout the States, has sold more agreements in Texas and Oklahoma and has also targeted Phoenix and California. Franchises will also soon open in Philadelphia, North and South Carolina, New Jersey, Kentucky, Tennessee and Florida. An announcement about an international deal is also just weeks away, Roddy said.

“We’re not only financially strong; we are growing and will be for years to come,” he said. “It’s just been a great ride.”

Source: Fast Casual

Schlotzsky’s sees growth with reimaged units

NRN_Banner

President Kelly Roddy shares results of reimaging with NRN and details 2013 plans

By Ron Ruggless

Schlotzsky’s Franchise LLC this past year completed the reimaging of older stores in the 350-unit chain and this year plans to amp up expansion of its tri-brand units and catering.

Over the past several years, the company has packaged new stores with sibling brands Cinnabon and Carvel, all owned by Atlanta-based Focus Brands Inc.

Schlotzsky’s unveils new look – Check out the slide show!

Kelly Roddy, president of the Austin, Texas-based Schlotzsky’s division, said in a phone interview earlier this week that the company is set to open tri-brand stores in the new markets this year. Those markets include Kentucky, New Jersey and North Carolina as well as: Minneapolis, Minn.; New Orleans, La.; Orange County, Calif., Philadelphia; and Sacramento, Calif. Schlotzsky’s currently operates in 37 states.

The privately held company said reimaged restaurants are seeing a 20-percent increase in sales on average. In addition, Roddy said Schlotzsky’s has seen seven years of positive same-store sales increases “even through the tough economy.”

Roddy recently discussed the reimaging of Schlotzsky’s with Nation’s Restaurant News.

What have been Schlotzsky’s highlights in the past year?

We’ve reimaged the restaurants over 2011. We launched new menu boards with new soups, new fresh, made-to-order salads. All the stores are now on table service. Our new prototype rolled out. All the new stores we’re opening will have tri-brands with Cinnabon, Carvel and Schlotzsky’s. All this has been evolving over say the last five years to relaunch the brand. The result has been a lot of growth.

What has reimaging done for franchise sales?

We sold 110 new Schlotzsky’s tri-brand agreements this past year. We’re on trend to get 40 or 50 open this year. We have 27 under construction right now with other leases being negotiated.

Are you including drive-thrus with the new units?

They pretty much all have drive-thrus. There will maybe be one or two that will not. The average store that is opening right now is about 3,000 square feet with a drive-thru and a tri-brand. It has soft seating, so you have booths and lots of bright colors and new modern look.

How did you change the food-delivery model?

We put [food runners] in the new stores and went back and retrofit the other stores. [The table-runner model] is now in place everywhere. It eliminates all the clutter from the paging [system]. It allows the guest to go sit down, relax and start the conversation with whomever they are there with. It’s just more enjoyable. It allows us to engage with the customer. It allows us to monitor the dining room to make sure that it’s clean. If someone needs napkins or whatever, we can bring that to them. It gives it a little more of a casual-dining feels rather than a fast-food feel.

What strengths are you finding in the menu changes?

Our soup and salad business has grown. We’ve seen an increase in the female customer count since we introduced the fresh, made-to-order salads.

Any shift in dayparts?

In 2012, we saw a small bump in our dinner daypart. We think it’s because of the upgraded salads and serving everything on plate ware. We went from Styrofoam bowls, basically, to serving everything on china. That and the booths give us a little more credibility at dinner. This year, we’re looking at how to strengthen that with better offerings around our pizza, etc.

What are the advantages of the tri-branding?

It helps you capture different dayparts. The Cinnabon gives you a nice snack daypart fill-in. You’ll see a lift in the 2-4 [p.m.] range. We’re seeing quite a bit of ice cream sold in the evenings. We think it’s helping bring in families.

What’s the focus in the year ahead?

Catering. We added about 60 new catering vehicles this past year to the fleet. We will continue to do that. Most stores are getting catering vehicles. We’re also partnering with online catering vendors. We’ll also be working on a dinner daypart strategy as well, which will probably roll out at the end of the year.

You started the year with about 30 catering vehicles, so it’s now in about a third of your stores. What are you seeing in catering sales?

It was small to begin with. Catering sales were probably in the 30 to 40 percent increase off a small base. Our goal would be to double our catering sales within the next 12 months.

What kind of customers are you targeting with the catering sales?

It’s pretty much lunch business meetings for Monday-Friday lunch.

What challenges do you see on the horizon?

Commodity costs look to be a challenge, but everybody is in the same boat. We haven’t taken any price, and we’re doing everything we can to not to take price. We have pretty good food costs. We’re going to watch and see what happens.

Source: Nation’s Restaurant News

Schlotzsky’s President Kelly Roddy on FOX Business News

Kelly Roddy talks to FOX Business News about Schlotzsky’s expansion plans and the success we found with co-branding with Cinnabon and Carvel Ice Cream.

QSR 50 Contenders

August 2012 | By Sonya Chudgar

These quick-service and fast-casual companies just missed the QSR 50.

Want to know which 15 brands are knocking on the QSR 50’s door? Some are old favorites, others are new to the list, but they’re all trying their hardest to climb their way into the Top 50 ranks.

51 McAlister’s Deli RANK LAST YEAR: 52

While McAlister’s grew by only two units in 2011, its sales increased by more than $25 million over 2010. In April, the company announced a brand-wide redesign that will add bar stools and booths, WiFi, and a Tea Bar to stores. Customer loyalty appears solid, meanwhile, as a Technomic study revealed consumers aged 19–34 ranked McAlister’s the top fast-casual brand in terms of social responsibility and food quality.

52 Auntie Anne’s ( 51 )

Auntie Anne’s added 120 stores last year, almost half of them abroad, and celebrated its 23rd year of positive sales growth. The pretzel company also signed a $25,000 check to jumpstart its charitable partnership with pediatric cancer nonprofit Alex’s Lemonade Stand Foundation, and in January began testing whole-grain pretzels.

53 Moe’s Southwest Grill ( 53 )

Moe’s was seeing green in 2011, between its first LEED-certified store in Williston, Vermont, and $381 million in sales. In fact, since unleashing its Food Mission in January 2011, Moe’s AUV increased by a whopping $114,000. The brand also inked a licensing deal with BJ’s Wholesale Club and shows no signs of slowing down, with a strategic plan to grow to 800 locations by the end of 2015.

54 Wingstop ( 54 )

In the 12 months leading up to this summer, Wingstop signed agreements to add more than 325 units, including 120 in Mexico, and celebrated its 500th location in Brooklyn. October ushered in the brand’s 10th flavor, Louisiana Rub, and the opening of rapper Rick Ross’ first unit. Super Bowl Sunday, meanwhile, resulted in monster sales of 5.6 million wings—a 12 percent boost over 2011’s Super Sunday—and helped Q1 sales soar 10.5 percent over Q1 2011.

55 Cold Stone Creamery ( 49 )

No. 49 on last year’s QSR 50, Cold Stone lost 36 net units last year and suffered a loss of nearly $20 million in year-over-year sales. Still, the chain remains in the game. It debuted frozen yogurt in stores nationwide last summer, rolled out a line of plated desserts, and signed franchise partners in Singapore, Greece, and Brazil.

56 Au Bon Pain ( 55 )

First, Au Bon Pain shelled out $500,000–$1 million per store to remodel flagship locations in Boston, installing snappy iPad ordering and sandwich and salad stations. The brand also boosted its menu by adhering to the cupcake craze and adding the frosted handhelds along with enhanced beverage options. Then, in New York City, remodeled stores began generating double-digit sales increases. Now, given the enthusiastic customer response, Au Bon Pain plans to take the makeover nationwide and expedite store openings this year.

57 Taco John’s ( 56 )

Taco John’s winged it last fall, to extremely positive results. The West-Mex chain enjoyed a $15 million boost in sales over 2010, thanks primarily to three varieties of wings that joined the menu in late October. Though originally intended to be a limited-time offer, wings increased sales so significantly, they may earn a permanent spot in the chain’s starting line-up.

58 Souplantation and Sweet Tomatoes ( 57 )

The sustainable, healthy approach continues to pay off for Souplantation/Sweet Tomatoes, whose 192 restaurants boast the same AUV as McDonald’s. In February, the brand joined Kids LiveWell and in September, parent company Garden Fresh Restaurant Corp. became the largest restaurant chain in the nation to be certified by the Green Restaurant Association.

59 Firehouse Subs ( 60 )

Last year, the brand founded by firefighting brothers became the first national chain to host the Coca-Cola Freestyle machines in all its restaurants. Along the way, it added 79 stores and 80 new franchisees and entered 13 new markets, including its first international market. The Firehouse Subs Public Safety Foundation, which puts a local face on the restaurant, also raised $1.8 million to donate to local fire and police departments and emergency medical services. This is one fire you don’t want to put out.

60 Baja Fresh ( 58 )

Get fresh, save the earth. That was Baja Fresh’s message in 2011, when the Mexican brand rolled out its Earth Fresh Initiative, which features recycled bags, unbleached recyclable burrito wrapping paper, and biodegradable plates. Though sales declined by $12 million from the previous year, the company is continuing its international expansion, announcing its first Singapore location.

61 Fuddruckers ( 59 )

A tough 2010—Fuddruckers filed for Chapter 11, closed nearly 50 units, and was purchased by Luby’s—set 2011 up as a recovery year. Sales dropped by $12 million, but Luby’s has lofty goals in mind for the burger company, including the first combined cafeteria-Fuddruckers unit, a Fuddruckers drive thru, and expansion into Mexico.

62 Corner Bakery Café ( 62 )

Corner Bakery Café retained its No. 62 spot following the acquisition of parent group Il Fornaio Corporation by Roark Capital Group in June 2011. System-wide sales grew to $261 million, up $14 million from 2010, and community work remained strong as the brand raised $268,000 during the 2011 Dine Out for No Kid Hungry. Millennial consumers, in fact, gave top marks to Corner Bakery Café for its charitable efforts and support of community organizations.

63 Charley’s Grilled Subs ( N/A )

A newcomer to the contenders list, Charley’s hired Bob Wright as the company’s first COO last April. Wright grew the brand by 30 units, emphasized international expansion, and received a promotion to president in January. Charley’s announced a play in the fast-casual category in December, unveiling Charley’s Philly Steaks, an upscale version that may have up to 10 locations open this year.

64 Schlotzsky’s ( 63 )

Turning 40 last year, Schlotzsky’s had much to celebrate. Things got “Lotz Better” when the rebranding project, which refreshed the menu and splattered store interiors with vibrant colors, boosted visits by 18–25-year-olds and doubled salad sales. All locations that open going forward will be tri-branded with Cinnabon and Carvel, an idea that began in 2009 and has increased AUV by $9,000. As the brand eyes its goal of 600–700 units by 2015, upping pizza sales will be the next target.

65 Jamba Juice ( 61 )

The company sold 173 units in 2011, refranchising to shift to an asset-light model, and signed Venus Williams as a franchisee. In January, Jamba launched BLEND Plan 2.0, which hopes to grow Jamba’s licensing category from 30,000 to 50,000 touch points and debut JambaGo, a new platform for nontraditional venues. A move in the tea category may be on the horizon, too, as Jamba acquired burgeoning tea company Talbott Teas in February.

Source: QSR Magazine

Richer Fillings

For sandwich sellers, more is better as premium products rule

By Jonathan Maze
As published in: Franchise Times – June-July 2012

Like many sandwich chains, Wisconsin-based Cousins discounted its way through the recession—a year ago, its restaurants were selling sandwiches for $2.99. This year, the company stopped discounting, and started making its sandwiches better, adding 50 percent more steak to its Cheesesteak line.

The result: Same-store sales are up 5 percent this year, and customers are switching from the cheaper sandwiches to the bigger ones. “Instead of discounting, we increased the product in our sandwiches, made it more premium,” said Joe Ferguson, vice president of development for Cousins. “They’re trading off to more premium products.”

Cousins isn’t the only chain beefing things up right now. In the midst of a highly competitive sandwich market, concepts are improving their menus, redesigning their restaurants and developing new financing options in an effort to break through the crowded field.

Thanks to their portability and flexibility, sandwiches are perhaps the most popular menu item in the restaurant industry. According to market-research firm NPD Group, the number of sandwich-chain units—a number that includes burger concepts—has grown 26 percent since 2011, an annual growth rate of about 2.4 percent.

Yet that growth has slowed since the onset of the recession, to less than 1 percent in each of the past two years. Some prominent sandwich concepts have struggled more recently, such as Denver-based Quiznos and Scottsdale, Arizona-based Blimpie.

Meanwhile, concept leader Subway keeps finding places for new restaurants—it had 24,449 U.S. restaurants at the end of 2011. St. Louis-based Panera Bread, the leader of the bakery-café sub-sector, also keeps growing, with 1,541 restaurants. Chains such as Champaign, Illinois-based Jimmy John’s and Jacksonville, Florida-based Firehouse Subs have also been adding units at a nice clip.

As they try to play catch-up, smaller and mid-sized concepts such as Cousins, McAlister’s Deli, Schlotzsky’s and DeSoto, Kansas-based Mr. Goodcents Deli Fresh Subs are making improvements to get more customers in the door. Some are even experimenting with drive-thrus, which aren’t common outside of burger chains and Arby’s. Based on their sales results, the efforts appear to be working thus far.

Remake for Schlotzsky’s Deli

Reimages are a challenge in the restaurant industry, because in many cases operators are being asked to spend tens of thousands of dollars to remodel a restaurant that is financially weak after years of falling sales. Last year, Schlotzsky’s found a solution—using franchisees’ ad dollars.

Eager to update its stores, the Austin, Texas-based chain handled the full remodeling for more than 300 restaurants. The company went market to market, giving each restaurant a facelift, with new signs, menu boards and paint. The entire-market approach cut the per-store cost of a reimage to roughly $18,000 to $25,000 per unit. “When you paint 300 stores at one time, you get a much better deal on paint,” said Kelly Roddy, president.

When all the stores within a market completed the remodel, the company used ad fund dollars from that market to pay the vendor. The lack of marketing did bring down sales for a time, but Roddy said a post-remodel sales bump more than made up for the loss. “We felt that really helped us drive sales without advertising,” Roddy said. The company is back on the airwaves this year, and same-store sales are up 7 percent.

Schlotzsky’s is also working to add sales to restaurants in two other ways: through multi-branding and a drive-thru.

The concept is part of Focus Brands’ portfolio, the Atlanta-based franchise company owned by the private equity group Roark Capital. Fellow Focus-owned concepts Cinnabon and Carvel are being added to many of its locations. The company’s ultimate goal is to add at least a Cinnabon to each of its locations, while new units will have all three.

Multi-branding has been a hit-or-miss franchising plan, but Roddy said the addition of dessert concepts works in Schlotzsky’s case because Cinnabon and Carvel are snack concepts that don’t compete with Schlotzsky’s sandwiches. “From what I’ve seen in cobranding, in most cases you’re selling the same share of stomachs,” Roddy said. “You’re competing lunch against lunch. For us, it’s other dayparts. The same person who orders a Cinnabon may not come in to get a sandwich.”

The other improvement is a drive-thru. Schlotzsky’s developed a new prototype with all three brands, plus a drive-thru, and early tests have been strong. A company test saw a 45 percent sales increase, with the biggest share coming from young women. It is attracting more 18- to 32-year-olds, and women represent 52 percent of the customers at new stores, versus 42 percent in the old ones.

The 360-unit chain is opening 35 restaurants this year. Next year, it expects to open 60 units “on the low side,” Roddy said. “We’re going crazy. We’re growing. Things are changing. Things are rolling.”

Source: Franchise Times

3 profitable restaurant models

Schlotzsky’s Deli, Moe’s Southwest Grill and Sizzler discuss the payoffs of their recent remodeling projects

June 7, 2012 – Mark Brandau

Restaurant brands are getting more than just a fresh coat of paint with their latest efforts to refresh and remodel.

In addition to looking modern and relevant, now a necessity in a highly competitive restaurant landscape, chains are repositioning themselves, expanding into new dayparts and sales layers, and motivating their franchisees and staff through large investments for reimaging.

While major public companies like McDonald’s, Wendy’s and Bob Evans have identified remodeling as a major growth strategy, smaller brands also are targeting significant returns on reimaging investments and renewed growth. Schlotzsky’s Deli, Moe’s Southwest Grill and Sizzler spoke with Nation’s Restaurant News about how their recent remodels have begun to pay off.

Schlotzsky’s Deli: Tripling down on new positioning

In order to complete the reimaging of its more than 375 restaurants in 2011, Schlotzsky’s Deli invested $40 million in not only refreshing the chain’s décor but also in adding service elements to solidify its positioning as a fast-casual brand.

“Schlotzsky’s had gone through many years of being in between quick service and fast casual, so we repositioned from our marketing, service, and look and feel,” president Kelly Roddy said. “We changed it to ‘Lotz better,’ with new packaging and colors, new signage, and with food runners bringing food to the table. … We saw a significant improvement in customer counts and sales as soon as we finished the reimages.”

The Austin, Texas-based chain, which is a division of Atlanta-based Focus Brands, steadily grew average unit volumes after accelerating the rebrand process in 2011, going from average sales of about $660,000 in fiscal 2007 to about $780,000 by the end of 2011. Year-to-date, average unit volumes are tracking at about $800,000, Roddy said.

Some units even co-branded with other Focus properties, including Cinnabon and Carvel, to expand into dayparts beyond the typical lunch rush, he added. Units co-branded with a Cinnabon are on pace to pay back the remodel investment within nine months, while other Schlotzsky’s locations that simply updated the décor would reach their return in about 16 months.

“We now have a brand that’s more relevant and seated more strongly in the fast-casual position,” Roddy said. “We’re very much a lunch business, so our goal now is to reach beyond lunchtime. We can take some items we currently sell, such as our pizzas, which we’re starting to promote past 3:00 now, and introduce ourselves as a dinner player.”

The ability to fill the restaurant with customers at all points of the day — including for Cinnabon treats in the morning or at snack time and for Carvel ice cream at night — has increased productivity without adding much incremental labor, according to Roddy. He added that franchisees are bullish on the potential of Schlotzsky’s units tri-branded with Cinnabon and Carvel.

“It has re-energized the franchise base,” he said. “They’re starting to grow now, and people who haven’t built stores in a decade are out there expanding. We’re selling a lot of franchises, but we can be particular about who we let into the brand because it’s in such high demand.”

There currently are about 20 tri-branded locations, and Schlotzsky’s plans to open 35 more in 2012, Roddy said.

Source: Nation’s Restaurant News

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