Q&A: Max & Erma’s CEO talks company turnaround

Hazem Ouf discusses the brand’s improving sales trends

Less than a year after purchasing the Max & Erma’s casual-dining chain out of bankruptcy, American Blue Ribbon Holdings LLC said it has reversed declining same-store sales trends by introducing a new menu, service upgrades and a renewed focus on marketing.

Columbus, Ohio-based Max & Erma’s is poised to begin growing again, with a new prototype and a remodeling program that has energized its franchise community, said Hazem Ouf, chief executive of ABR and acting chief executive of the 78-unit chain.

The chain is looking to its franchise community to jumpstart expansion again in the Midwest, but Denver-based ABRH — a subsidiary of Fidelity Newport Holdings LLC — may open more company stores by converting shuttered locations of other brands, Ouf said.

He recently discussed with Nation’s Restaurant News the path forward for Max & Erma’s now that the chain’s same-store sales decline has been reversed.

What’s gone into your turnaround plan for Max & Erma’s, and how is it going so far?

We’ve packed three years of work into the last 11 months. We had double-digit declines in same-store sales when we bought the company, and now we have positive comps in the high single digits. I loved the brand and thought it was relevant and never lost its soul. It just needed a management team that could adapt.

We’ve launched a comprehensive turnaround strategy that really focused on guest service, a new menu, and a new emphasis on the lounge area with several bar initiatives. Within a few months we began to see the turnaround in a very positive way. And now, the best news of all is our franchisees are beginning to reinvest. We’ll open three franchised restaurants this year, with a goal of five more in 2012.

Remodels and new prototypes are going to be part of that growth?

We’re testing two new prototypes in the Columbus area, and based on the results of the test, we’ll roll the best one out systemwide. This month we’re remodeling with new exteriors in the Detroit market, where we have 12 restaurants, and those run about $300,000 each. It’s tough to compete with a national brand, so a chain like ours has to have a personality and high-quality food and service.

We wanted to really infuse and preserve the quirkiness and fun personality of the brand. When we bought the company, we found that the consumers were so loyal to the brand and had a positive impression and wanted Max & Erma’s to survive. We want our people in the community to know how it’s starting to be all about the future for Max & Erma’s. It has a lot of applications, from freestanding units, to airports and casinos, and now we’re developing a new casual prototype.

How much of your comparable-sales increase is due to higher traffic, and how much of it results from raising menu prices, as many casual-dining competitors have had to do?

Since we acquired the brand, we took a 1.7-percent price increase, and that’s way below the commodity cost inflation you’ve been hearing about. We introduced a new menu five months into [ownership], with new appetizers and entrées, but without any new price increases.

Our approach was to ensure that the passion to serve became a core competency for our success. We’ve tried to share the best practices from the other American Blue Ribbon Holdings concepts [ABRH also owns Village Inn and Bakers Square brands] and started focusing on the Good Neighbor Rewards frequent-diner program.

Pricing, quite frankly, was a very minor part in our same-store sales increases.

How did you change Max & Erma’s marketing strategy?

We’ve doubled the marketing budget from what Max & Erma’s had been doing. We introduced a new marketing program in Pittsburgh, giving away our celebrated cookies for free with any meal purchase. We’re careful about discounting, because you can’t continue to drive the business that way in the long term.

The 3-Course Combo the previous management team put together, with a burger, soup and cookie, is still an option, but we’ve just completed a new burger platform. So we’re hoping the burger upgrade will be a core competency for us, and we’ll be investing significant resources into Good Neighbor Rewards.

We like habit-forming marketing, getting guests to visit on a frequent basis. Beginning July 18, we’re launching our “Life is a Beach” promotion celebrating tropical drinks and summer.

The discount trick has a very limited application, because it may drive business for a few weeks, but it’s not really the answer.

Contact Mark Brandau at [email protected] [3].
Follow him on Twitter: @Mark_from_NRN [4]