CHICAGO Gary Beisler, chief executive of Qdoba Mexican Grill, knew his fast-casual brand would be in for a bumpy ride as the country began its descent into the recession. As the economic news worsened during the summer of 2008, Beisler and fellow Qdoba executives began exploring ways to improve service, food and design throughout the 500-plus-unit system in an effort to emerge "bigger, badder and stronger" when the recovery finally kicked in.
One result of those explorations was a weeks-old prototype restaurant Beisler visited last week in Chicago. The prototype, which will be the model for future Qdobas and system retrofits or remodels, was introduced last August in Centennial, Colo. Developed with Columbus, Ohio-based design firm WD Partners, the prototype contains more sophisticated decor elements and several features designed to increase throughput. Click here to see a slide show of the new prototype.
The colorful murals of old Qdobas have given way to a "brand wall" of understated black-and-white photographs depicting Mexican scenes. In addition, the sculpted-cement artwork by artist Ralph Prada has been embellished with more colorful backgrounds. Beisler said the expanded vestibule inside the front door serves as a "landing place for newbies" to read the menu in addition to being another place for point-of-purchase advertising.
An "artisanal prep station," located just before the make line, features "freshness" cues, like avocados used to prepare the housemade guacamole. The heated prep line contains warm surfaces across its entire length to help control food temperature.
Even Qdoba's communal tables got an upgrade in the new prototype. The original stainless-steel model has been replaced with a warmer look of laminate on wood. Most of the changes were aesthetic, including new uniforms and music, and added only about 5 percent to construction costs, Beisler said, which Qdoba aims to reduce to zero as more locations are built.
In a meeting with Nation's Restaurant News at the newly opened prototype, Beisler discussed Wheat Ridge, Colo.-based Qdoba's decor, menu and marketing changes, and the chain's emergence from the difficult challenges of the past couple of years.
This seems like a departure from your "modern nouveau Mexican" positioning, but it's still very recognizable as a Qdoba.
"Modern nouveau Mex" served us well for about 10 years, but that felt more like a menu strategy than a brand positioning. So we did some work and came up with an updated version, which we're calling the "artisanal Mexican kitchen." Now that's a pretty lofty term -- in fact, the word "artisanal" has been overused. But we're not using that as copy. We're using that as internal speak, so everything has to go through that filter in order to qualify.
You got started on this updated brand position back in the summer of 2008, which was a pretty grisly time.
Things were going to hell in a hand basket. What we believed is that when we came out the other end, we'd be bigger, badder and stronger as a company. … We're as bullish about our future now, and in the midst of all of this, we're still building restaurants.
As many as you wanted to?
No, we've had a bit more issues on the franchise side, primarily because of financing.
Is that still the biggest challenge to franchisees?
Absolutely. The big franchisees don't have any problem. They're already mature, they've got the cash flow, and they can still plop 20-percent to 30-percent equity into a new store. Guys who are starting a brand new business are having a much more difficult time. In 2008, we built 58 stores, in 2009 we built 62 stores, and this year we're projecting 30 to 40.
Right now the restaurant industry is living in the collateral damage. Whatever's going to happen has happened. The stores that were going to close have closed, and sales that were going to go down have gone down, and now we're in the rebuilding stage. I feel like our brand is coming out of it as one of the winners. I believe tough times make the good times great because you'll be a better company after dealing with your adversity.
How do you think fast casual fared, now that we're in the collateral-damage phase?
The average fast-food customer probably had no savings before and has no savings now. A lot of them don't have jobs, and heavy fast-food users tend to be young minority males, who have the highest unemployment rate in the country. So fast food's customer base is still reeling, and there's probably some false sense of security about how good their world is based on how the stock market's acting. The difference is, our customer's 401(k) is probably 60-percent back; their customers probably don't have 401(k)s. The person likely to spend $7 or $8 on a fast-casual lunch is feeling much better about the world than the person who is making minimum wage or is unemployed.
The moral of the story is that middle-income America is coming out of this sooner than lower-income America, which has the heavy users of quick service. Even though [quick-service restaurants] are offering $1 this and $1 that, their customers don't have it.
How did possible struggles with financing for your franchisees affect this brand-updating strategy?
It didn't, and it shouldn't. It was very deliberate, and the franchise system as a whole agrees with that and embraces it. They know there's going to be pretty minimal cost to build it relative to older stores, and they're obligated to remodel over time anyway. We have a franchise advisory council, with four members elected by their peers, and they're always in the middle of the process.
What else came out this development process we've been talking about?
Well, we continue to test new products. We have street tacos in test. There are always things brewing that we can't talk about. We'll have a new marketing campaign breaking in the next 30 days. We just finished our "Craft Your Life" online game [to promote the Craft 2 menu], and it got half a million hits. We are getting very strongly engaged with digital media. We're going to have an upgrade on our loyalty card coming out this summer.
Anything else you're monitoring? A lot of NRN readers are worried about health care reform, but what are you keeping your eye on?
With health care, I don't know what it means yet. The law still has to be interpreted, and the Republicans are fighting it, and a lot of it kicks in in four years. Part of it is, it hasn't been explained. I relate it to Sarbanes-Oxley: It took years for the government to figure out how to implement it, and we all hated it. Talk to me in a couple years when I know what it means. I think it's going to change more. Nobody knows how we're going to execute it, or what it'll cost the businesses.
The only other thing that I think will create an interesting environment is the real-estate market. New development has come to a halt. We fast-casual brands all went into new shopping centers with new movie theaters and Targets, and that has just dried up. Between the gourmet-burger guys, and fast-casual Mexican guys, and Starbucks being back in the market, we'll all be chasing the same real estate. The availability of affordable, quality real estate will be a bit of a drag. Developers may go bankrupt, and new owners will come in and pick up those leases. We'll have new landlords, but if there's a cash flow in the business, somebody will buy it.
Alot of the issues in this business don't change through the years. I'm sure we'll have cyclical problems with food costs again soon.
Contact Mark Brandau at [email protected].
