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The limited-time-offer French onion Charburger drove sales last year.

Habit Burger CEO: Delivery is not as ‘incremental’ as many say

Convenience strategies contribute to a strong quarter for the chain

After getting off to a rocky start in early 2018, The Habit Restaurants Inc. closed the year with strong revenue growth driven by the introduction of more unique LTOs, the launch of delivery and growth of drive-thru locations.

CEO Russ Bendel said The Habit Burger Grill chain pivoted last year to emphasizing initiatives that bring convenience and value to customers amid the on-demand economy. Adding craveable limited-time menu items such as a French onion Charburger and Sriracha-lime green beans (below) also drove sales in 2018.

“We pride ourselves in blocking and tackling and executing,” Bendel said during a Thursday afternoon conference call with investors.

But the Irvine, Calif.-based company said labor headwinds and third-party delivery fees remain challenging.

Bendel said he’s happy with delivery but it is not “as incremental as the third-party aggregators tell you they are.”

Still, he said delivery is “part of doing business” and the company will expand its partnerships with DoorDash and Postmates by the end of the first quarter.

In 2019, stepping up drive-thru locations also will be part of the brand’s convenience strategy. Last year, the fast-casual chain opened 14 drive-thru locations, bringing the total to 35 of its 247 restaurants.

The company is also testing new store layouts that add efficiencies to operations, which is important to offset labor pressures, Bendel said.

Led by newly appointed chief brand officer Iwona Alter, who previously worked at Jack in the Box, the Habit also plans to step up digital marketing in 2019. That includes reaching more customers through social media and its mobile app.

The company said it will expand a test of its app, which allows for order and pickup, to San Diego, Sacramento and Utah. The app will roll out systemwide in the third quarter, Bendel said.

In fiscal 2018, company same-stores sales increased 1.5%, compared to a decline of 0.1% in 2017. The growth was driven, in part, by a nearly 4% increase in menu prices taken in May which came as the company saw a 3% drop in traffic.

Later this year, the company expects to raise prices again by as much as 4 percent. Bendel said he wasn’t concerned about backlash because the company’s $9 average check remains a good value among better burger concepts.

“We are not being any more aggressive [on price] than anyone else,” Bendel said.

For the fourth quarter, ended Dec. 25, 2018, revenue increased 21% to $102.7 million, compared with $84.8 million in the same period a year earlier. Same-store sales at company stores increased 2.4%, compared to a 1% decline in the same quarter of 2017.  Net income was $0.7 million, or 3 cents per share, compared to a net loss of $6.4 million, or 31 cents per share, in the fourth quarter of 2017.

Contact Nancy Luna at [email protected]

Follow her on Twitter @FastFoodMaven

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