Ignite Restaurant Group Inc. is readying its 16-unit Brick House Tavern + Tap for franchising, bolstered by the company’s acquisition of franchise-oriented Romano’s Macaroni Grill earlier in the year.
Ray Blanchette, chief executive of Houston-based Ignite, which also owns Joe’s Crab Shack, said Wednesday at the investment firm Piper Jaffray’s Consumer Conference that the Brick House brand “has some real strong momentum.” Franchising would help accelerate growth, he said. The company has filed franchise documents, but it has yet to bring on a franchise partner.
“Once we acquired Macaroni Grill, we really brought a franchising component in house,” Blanchette said during the public presentation to investors. Macaroni Grill has a long history of international franchising, and that division also handles some domestic franchising, predominantly in airports, he said.
The Brick House brand’s “chef-inspired tavern food” is ripe for franchising, Blanchette said. “It’s a brand that is extremely well-positioned for the future,” he explained, adding that the menu appeals to Millennials, who have “an enormously high food IQ.”
“When you look at the sort of bar-and-grill segment of casual dining and try to predict where it is headed, it’s very clear to me that this sort of next-generation, sort of polished bar and grill is going to be an enormous segment,” he said.
With 16 units, the Brick House brand is years away from reaching the size and scale to support national cable TV advertising, he said, but the company is committed to relationship marketing, with an emphasis, on email across all three of its brands.
“No one has really shown me yet how you monetize this sort of social media into actual guests,” Blanchette said. “It’s a conversation, but there’s not a strong call to action associated with it. But with email, I think it’s a little different. So we’re really focusing Brick House on keeping a constant conversation with our guests. Brick House is a high-frequency brand, so it sort of encourages that ongoing conversation.”
Blanchette expressed a dim view of restaurant loyalty programs, though he said Ignite had vetted some. “Loyalty in restaurants is something that I think a lot of folks have spent a lot of money trying to figure out,” he said. “And no one has really cracked the code.
“You know that once you start these loyalty programs, the expense starts immediately,” he said. “But if you don’t establish a switching cost with the consumer, then all you are left with is the expense. I think that’s what most loyalty programs have manifested themselves into is just an expense on the P&L that doesn’t necessarily directly correlate to increased traffic or increased frequency. I think you can accomplish the same thing through email communication for no expense.”
Marketing as an investment
The company is using cable TV to promote its Macaroni Grill brand, a $54 million acquisition that closed in April. The brand is large enough to support “the weight of national cable TV, which means we are in control of brand awareness and we are in control of brand relevance,” said Blanchette.
The chain recently began airing commercials for its “Summer Uncorked” promotion. “We’re so passionate about bringing wine and food back together in this brand, we are literally selling all of our wine for half price all summer,” Blanchette said, adding that it positions Macaroni Grill out of a “sea of sameness,” including discounted multi-course offerings or buy-one-get-one promotions.
The brand is differentiated with its wine offerings, he added, noting that Ignite has hired a new wine manager for all the brands. “We’re going to get very aggressive,” he said.
Macaroni Grill, before its acquisition, had seen average unit volumes slip to $2.1 million, which Blanchette linked to the absence of TV advertising for a year. He said that Ignite, as a publicly held restaurant company rather than a private equity owner, sees marketing as an investment, not just an expense.
“[Macaroni Grill’s AUV] didn’t go from $3.4 million to $2.1 [million] overnight,” he cautioned. “It doesn’t need to go back from $2.1 [million] overnight. The good news for our shareholders is that as this business improves, they get the benefit of the entire ride up.”
While largely a suburban concept, Ignite’s Joe’s Crab Shack will be opening its first New York City store in July at 125th Street and 8th Avenue in Harlem. Blanchette said that while the move doesn’t indicate a larger strategy of going into densely populated urban areas, the company also has plans to open in a new commercial real estate project in downtown Newark, N.J.
Ignite owns and operates 133 Joe's Crab Shacks, 186 Romano's Macaroni Grills and 16 Brick House Tavern + Taps. It franchises 12 Romano's Macaroni Grills in the United States and Puerto Rico and franchises 12 added units throughout nine nations.