Chains seek ways to fine-tune concepts, streamline operations

Chains seek ways to fine-tune concepts, streamline operations

During these tough economic times, when so many aspects of how consumers spend their limited dollars are largely outside of a restaurateur’s control, more brands are addressing the things they can influence: improving efficiencies, reducing startup costs and boosting returns on investment.

Chains as varied as Marco’s Pizza [3], McAlister’s Deli [4] and Raising Cane’s Chicken Fingers [5] are examining ways to reduce everything from real estate to building costs through the introduction of new prototypes and streamlined menus to squeeze more value from their concepts.

“We’re always looking for ways to keep costs down, but when the economy began to turn south, we saw it as an opportunity,” said Bryon Stephens, vice president of new business development at the nearly 200-unit Marco’s Pizza of Toledo, Ohio.

Marco’s has cut about 20 percent off construction costs, he said.

Marco’s is not alone in pursuing a value-engineering program. Phil Friedman, president and chief executive of McAlister’s Deli in Jackson, Miss., said his company already had been in the process of re-engineering the concept before the economy turned.

McAlister’s new prototype, which opened in Columbus, Miss., is an evolution, Friedman said.

“We’ve been able to downsize the footprint from 3,600 to 3,000 square feet,” he said, “and we’ve been able to enhance our throughput of product.”

Raising Cane’s Chicken Fingers, the 80-unit fast-casual chain based in Baton Rouge, La., also has been re-engineering its units. A smaller prototype that opened last October in Natchitoches, La., has been further refined with the recent opening last month in Grove City, Ohio, of a unit owned by Raising Cane’s Ohio Ltd. Owners Tim McCarthy and Roy Getz said the prototype was reduced from 3,500 square feet to 2,700 square feet, but it still has the “horsepower” of a larger unit.

RCO worked with Raising Cane’s to build the unit for $1.2 million, about 10 percent less than prior costs, even with inflation factored in. The unit also only has two-top tables, which give the smaller dining room greater efficiency than with the usual mix of four-tops, RCO said.

McAlister’s Deli had been working on its new prototype for more than year, Friedman said.

“This all started a year and half ago, but it picked up speed in the last 12 months,” he said. “We saw our construction costs getting higher. We looked at the kitchen and asked how we could do what we are doing with less equipment during lunch, our busiest daypart.”

A decision to go to presliced meats helped McAlister’s reduce equipment and speed up preparation time.

McAlister’s also re-engineered its 100-item menu to accommodate savings in the physical plant.

“We looked at the product selection, and we were offering 12 different bread options. We reduced that to eight,” Friedman said. “That did several things for us. Obviously, it helped our efficiency of product usage. It also made it easier to train and add speed to service.

“It also allowed us to take out some freezer equipment, because those products were coming in a flash-frozen state,” he said. “We were able to reduce our freezer space and reduce our footprint.”

McAlister’s also examined other areas to save space.

“We took some space out of the dining room and the ordering counter,” Friedman said. “By reducing 600 square feet out of the unit, that really reduces the investment.”

Other menu changes helped reduce storage and waste costs.

“We had a pretty extensive dessert line, offering five or six [selections],” Friedman said. “We went to a signature dessert that we promote heavily through limited-time offers…on a calendar basis.”

The reduced unit size also allows franchisees to find real estate sites that are more flexible. The new prototype in Mississippi is in a shopping center end cap and allows for a drive-thru window. That has helped grow to-go sales by about 10 percent, Friedman said.

For Marco’s Pizza, the value-engineering has produced a 35-percent reduction in the cost of building a unit, Stephens said.

“We were able to cut out about 35 percent and raise our sales-to-investment ratio from about two to one to about three to one,” he said.

The company completed the process in January, looking at nearly every line item in the building costs. The chain’s pizza hoods provided one area of savings.

“We’d been using an island-style hood,” Stephens said. “By creating a small wall in the construction process and using a wall-mount hood, we can use a hood that only has a single bank of filters. That alone saved us about $2,000. It’s also more energy efficient, and we’ll have incremental savings there.”

Startup costs for a Marco’s unit had been about $300,000 to $310,000, Stephens said.

“We’re now in the $240,000 to $250,000 range,” he said.

Marco’s generates an average unit volume of about $685,000.

The chain also implemented an open-bidding process for its equipment and examined construction efficiencies, he added. Floor tiles were put out for bids and the company was able to reduce costs by more than $2 per square foot.

“Our stores are only about 1,500 square feet, but that’s about $3,000 out of our flooring costs,” Stephens said. “Our goal was a 20-percent reduction in construction costs, and we were able to achieve that.”

Friedman said an ongoing evaluation of costs is extremely important for a concept to grow.

“As the market and costs evolve, you have to keep looking at these things,” he said. “You don’t necessarily have to make radical decisions, but you absolutely have to make evolutionary decisions.”