Family-dining chain Huddle House had a decent turnaround in 2015, with a return to unit growth and same-store sales increases of 5.3 percent. The chain closed 20 underperforming restaurants, but opened 22.
Michael Abt, CEO of the 372-unit chain based in Atlanta, discussed the chain’s success and plans to nearly double restaurants’ average unit volumes in the coming years.
You’ve been remodeling a lot of restaurants. How is that going?
At the present time 41 percent of the stores in the system reflect our current image, compared to only 6 percent four years ago.
The remodel program really has been propelled by a franchise partner incentive program, where we will provide $25,000 to a franchise partner who remodeled their restaurant — $20,000 cash when they complete the remodel and $5,000 ... towards local store marketing activities to promote the newly remodeled restaurant.
We’ve given away over $2 million to franchise partners since this program started over the last three and a half years.
I guess the results are worth it then.
Very much. The results are strong and continue to provide the motivation to franchise partners to remodel.
And we are currently working on a new prototype for the system which will be designed to meet the goal of $1.5 million in sales and 15 percent EBITDA margin.
What are your current AUVs [average unit volume]?
The system AUVs are north of $700,000 and the new stores are around $950,000
So $1.5 million is tremendous.
It’s a big leap.
How are you going to do that?
First of all we’re going to optimize our kitchen design, so the expediting and service areas will be designed to increase throughput capacity and operational efficiency and will use new cooking platforms and technologies.
We’ll put cheese melters in the restaurants. We’ll have new Turbo Chef ovens in the restaurants, and higher capacity convection ovens to expand baked offerings
What’s going to be the cost of that build-out?
The idea is to be able to build out that restaurant at no more than a 5 percent increase per square foot.
But it will be a larger footprint: Our current footprint is 2, 700 square feet. The [new] prototype will be 3,200 square feet. We’ll go from an average of 92 seats to 115 seats.
So it might not be possible at existing locations.
No. It will not be for remodels, but once we’re finished we’ll migrate some of the learnings and technology from the new prototype into the future remodels.
What other growth strategies do you have?
Our future growth is predicated on continuing our franchise development and also adopting a more aggressive company store acquisition strategy.
You mean you’re buying back franchises?
Yes, franchise partners who are retiring and want to get out. We’ve developed some strong competencies for operating company store locations [we currently have 13] and we will continue to support our unit count growth and profit growth by acquiring some of these restaurants.
Apart from kitchen equipment, do you have any other technological upgrades in the works?
We will roll out a new back-office system to the franchise partners before the end of the calendar year, along with a new business intelligence tool, and a P&L [profit and loss] reporting platform.
This will be our first fully automated back-office tool that will do inventory management and labor management, and the BI [business intelligence] tool will provide above store reporting platform for both single and multi-unit franchise partner, consolidate their daily, weekly, monthly and annual financial information.