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Habit Burger to test breakfast at drive-thru restaurants

A smartphone app and kiosk test are also coming

The Habit Restaurants Inc. plans to test breakfast at a handful of drive-thru locations in second quarter, executives said on Wednesday.

The Irvine, Calif.-based parent to The Habit Burger Grill, which currently offers breakfast at college campus and airport locations, plans to test a breakfast menu at about six drive-thru units, said Russ Bendel, Habit president and CEO, in a fourth-quarter earnings call.

“We believe that drive-in locations are a great place to start,” he said

In the second half of 2017, the chain opened an outlet at the University of California-Riverside that serves breakfast. The location is operated by a third party, so Habit will conduct further tests at company-owned restaurants to gather more granular data.

“The restaurant doesn’t have a lot of history, but we are pretty excited about the sales trends that it has in the morning daypart and really feel that moving that test to six of our street drive-thru locations is really the appropriate next step, and with that we will be able to best determine its effect on sales and profitability,” Bendel said.

Breakfast also “has attractive food cost associated with it,” he added.

In addition, Habit has selected a digital agency to develop a smartphone app for the brand.

“This app will allow our customers to skip the line and place their order from their mobile phones or tablets,” Bendel said.

Along with the rollout of the app, Habit is also in the process of developing a self-ordering kiosk to promote speed of service and ease cashier labor. Both the kiosk test and app launch are expected in the second half of the year.

As another effort to improve convenience for customers, the company plans to develop more drive-thru units. Habit ended 2017 with 22 drive-thru locations among its 193 company-owned restaurants.

Ira Fils, Habit CFO, said drive-thru locations average annual unit sales of more than $1.2 million, compared with $850,000 for a traditional restaurant.

For the fourth quarter ended Dec. 26, 2017, Habit swung to a loss of $6.2 million, or 30 cents per share, on special tax bill charges, compared with net income of $1.3 million, or 7 cents per share, the previous year. Revenue rose 15.2 percent, to $85.1 million, compared with $72.9 million the previous year.

Same-store sales in the quarter declined 1 percent, including a 3-percent decrease in traffic that was partially offset by a 2-percent increase in average transaction amount.

The first Habit Burger Grill opened in Santa Barbara, Calif., in 1969. The chain now has more than 209 restaurants in 11 states, as well as three international locations. In the fourth quarter, Habit opened its first restaurant in China, in Shanghai.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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