Bob Evans Farms Inc. reported a 31-percent improvement in net income for the third quarter of fiscal 2012, due in large part to cost-saving and sales-building initiatives that helped its Bob Evans and Mimi’s Café brands improve food and labor costs.
For the Jan. 27-ended quarter, Bob Evans Farms had a net income of $20.26 million, compared with $15.47 million a year earlier. Restaurant sales for the quarter totaled $337.3 million, down slightly from $337.7 million a year earlier.
Same-store sales at Bob Evans restaurants rose 1.6 percent for quarter, while Mimi’s Café reported a 3.4-percent decline in same-store sales.
The company’s namesake family-dining chain, which has 564 locations in 18 states, led the way with growing carryout sales and a reimaging program that allows remodeled restaurants to increase carryout volume and add a new sales layer with on-site bakeries. Its sibling casual-dining brand, Mimi’s Café, with 145 units in 24 states, has adopted similar menu strategies over the past few quarters.
Steve Davis, chief executive of Columbus, Ohio-based Bob Evans Farms, said both chains would continue collective cost-cutting efforts and stay committed to barbell menu strategies that also emphasize carryout to grow profits.
“Commodities typically go up, labor over time will go up, and we’re in an economic environment where pricing actions are limited,” Davis said. “Our strategy is to push productivity hard across the enterprise to minimize the price increases we’d have to take. To turn around and start discounting at a time like this is a failed strategy.”
Rebuilds and barbells for Bob Evans
Remodels at the namesake system are an ongoing effort not only to drive guest counts but also to incorporate new sales layers like bakeries and to emphasize the chain’s carryout and catering business.
Bob Evans completed 30 Farm Fresh Refresh remodels in fiscal 2011 and is on pace to finish 90 in fiscal 2012. For fiscal 2013, the brand would accelerate the pace of reimaging to include between 150 and 160 locations. Chief financial officer Paul DeSantis said the cost to remodel locations would range from $200,000 to as much as $350,000 for older units in established markets, where the restaurants’ size and center entrances make remodeling more expensive.
“As we expand beyond core markets, that top range will come down a little bit,” DeSantis said. “In terms of the sales lift, we’re still seeing that 5-percent-plus lift as we move forward. We’re also seeing a nice lift in the profitability of those restaurants, from the additional sales layers.”
The new design has spread one trading area at a time, in contiguous markets, executives said. The program began in Dayton, Ohio, then spread north to Toledo, Ohio, and Detroit. South of Dayton, the Cincinnati market will be completely refreshed by the end of the fourth quarter, and Columbus, Ohio, to the east will wrap up reimaging in the first quarter of 2013. Then it’s on to Cleveland, Davis said.
“When we did the Farm Fresh Refresh we went to one location at a time to get the economies of scale for training, marketing and construction,” Davis said. “When we cluster around a market, it works so much better than pin-dotting and chasing numbers.”
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While the new prototype was designed to add bakery sales and boost carryout sales, Bob Evans also engineered its menu with a “barbell” strategy to offer premium entrees like Sweet and Savory Stuffed Pork Chops or value offerings like $6 Farmhouse Deals with additional sides for 99 cents.
“The big cornerstone is the 99-cent add-on,” Davis said. “If you take $6, plus an add-on and a drink, you get to our per-person check average.”
The chain also gains efficiencies the more it builds carryout sales, Davis said.
“Carryout guests are more likely to add on,” he said. “The labor costs less because it takes five minutes to process a carryout order, which is significantly less than serving somebody at the table. We put those 10 meals together with an eye on food costs, and they’re easy to assemble, so we’ll see favorability on our margins as carryout grows.”
Mimi’s Café goes after traffic
Same-store sales declines at Mimi’s Café narrowed in the third quarter but still were negative. To turn that trend around, Mimi’s has been adopting sales building techniques similar to Bob Evans’, like Family Meals to Go, a carryout soup program, Express Lunch, and add-on-friendly dinner deal Mimi’s My Way 1-2-3.
The traffic driving initiatives begun at Mimi’s Café still have plenty of runway, Davis said, citing carryout, which currently makes up 4 percent of sales and which executives would like to see approach Bob Evans’ level of 11 percent. All but 20 of Mimi’s locations now have full liquor licenses, he added, meaning the chain could grow alcohol sales from 5 percent of sales and move toward the casual-dining segment average of 10 percent.
The other big opportunity to improve guest counts is “owning the holidays,” Davis said.
“The recent strategic partnership with the American Heart Association to sponsor Go Red for Women during February not only resonates with our female-dominated audience but also coincides nicely with Valentine’s Day, which is one of our highest-volume weekends,” Davis said. “When are the big pops for us? Thanksgiving, Christmas, Valentine’s Day and Mother’s Day, and the like.”
Much of those promotions would be digital, particularly through Mimi’s email club, which reached 1 million members in the most recent quarter, he said.
“Digital [marketing] is going to be the cornerstone for Mimi’s,” Davis said. “We’re hitting our target audience, it has a lower cost than a freestanding insert, and you get loyalty with it over time.”
Contact Mark Brandau at [email protected].
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