Fazoli’s is following up its recent run of same-store sales success with a limited test of beer and wine sales and a wider test of new sales layers set to debut at the end of the year.
At a restaurant near the University of Kentucky in Fazoli’s headquarters city of Lexington, the chain has begun testing the sale of beer and wine. Consumer research at that unit determined that alcohol sales were the most requested change sought, chief executive Carl Howard said.
A franchisee in Michigan also has asked the quick-service Italian chain if he could experiment with alcohol sales, but the brand will do its market testing at the corporate location in Lexington first, then try it at two nearby restaurants that skew more toward the core family demographic than to college students, he said.
“The caution with us is we are a very family-oriented concept,” Howard said. “We do well on Sunday, which is our second-busiest day of the week, and have a large after-church crowd. We skew really high with young families with children, so we want to make sure we provide an environment that’s not counterintuitive for those groups.”
Though he doesn’t expect beer and wine to be major sales drivers if they prove popular with guests, Howard did say that beer and wine would fit Fazoli’s trajectory of moving the brand toward a “premium QSR” positioning.
“We don’t believe it’s going to be a huge game changer,” Howard said, “but I also don’t believe it would be like adding veal to the menu or something — this isn’t a big reach for us. … It’s a brand extension, but we’re doing it with caution. We’re optimistic we could expand it, and I believe that with everything we’ve done [to evolve the brand], it’s a logical next step.”
The investments in an alcohol platform have not been too onerous, he added. A liquor license in Lexington costs $500, insurance costs rose about $600, and the restaurant invested in some additional staff training and a $600 ice chest to drop into the recess of the front counter.
“We’re fortunate that most of our markets are really simple,” Howard said. “We’re not in Philadelphia, where a liquor license costs half a million dollars. It’s a pretty quick return on investment.”
A preview of ‘Menu 3.0’
Fazoli’s also is testing other new menu initiatives, internally called “Menu 3.0,” that the company hopes to roll out to all corporate stores by November and to the franchise system by early next year. Howard credited the last menu revamp, the “Expand Your Taste” menu introduced in October 2011, with sustaining the chain’s sales momentum.
In July, the brand’s franchisees set a record with their 25th consecutive month of same-store sales increases, and corporate stores tied their record with a 24th straight month of same-store sales growth. With a few days left in Fazoli’s fiscal month of August, same-store sales are up 4.3 percent at corporate restaurants and up 4.7 percent at franchised locations, Howard said.
“I feel really good about September and October, too, but then we’re going up against some big [same-store sales] numbers [from a year earlier],” he said.
A refreshed and relaunched catering offering will anchor the new menu, Howard said, and Fazoli’s also hopes to start a line of consumer packaged goods in November, with a goal of reaching 3,000 grocery stores by January 2013.
A “Toppers” option for the in-store menu would aim to improve the “Expand Your Taste” build-your-own pasta offering by giving customers some set combinations of proteins and flavors that they could add to pastas and sauces they choose. When Fazoli’s tested this option in April, 25 percent of customers who ordered personalized pasta opted to top it, at a $1.49 add-on cost.
“The last time, when we unbundled everything, it went well but our guests didn’t always know how to pick the right protein,” Howard said. “So we’re coaching our cashiers to pair these toppers with the pastas. We’re creating some good protein and vegetable blends to add to our pasta lineup that would allow us to keep our pricing flat but pick up our per-person spend and profit.”
Boca Raton, Fla.-based private-equity firm Sun Capital Partners acquired 250-unit Fazoli’s in 2006.