Zach McLeroy is CEO and founder of Zaxby’s, the chicken fast casual born in Athens, Ga., that has grown to more than 900 locations doing roughly $2 billion in annual sales.
Leaning into its robust drive-thru capabilities and its place in the red-hot chicken category, Zaxby’s enjoyed positive sales in 2020, which helped it secure a significant investment from private equity group Goldman Sachs late last year. The investment will help Zaxby’s become a national and even international brand in the coming years.
McLeroy joined Nation’s Restaurant News editor Sam Oches for the inaugural episode of Take-Away with Sam Oches to talk about Zaxby’s menu and digital innovation, its expansion plans, and why it was time to bring on private equity after 30 years in business. Here are Sam’s five take-aways from his chat with McLeroy:
1. Being efficient can be smarter than being fancy
In the past 18 months, restaurants have released a lot of outside-the-box renderings of futuristic restaurant prototypes. Some of them are interesting and functional, but some appear over the top and perhaps too outside the box. As McLeroy discussed, sometimes it’s not the bells and whistles that count but rather the fundamentals, specifically speed, accuracy, and quality. While Zaxby’s is redesigning its stores to account for the boom in off-premises business, it’s also really focusing on throughput and ensuring that it can get guests in and out quickly and accurately.
“[The pandemic] proved to a lot of licensees that they can be faster in the drive-thru, and it also proved the importance of accuracy behind the order and a quality product and speed,” McLeroy said. “Those three things are what came out of that, and we said … it's time to go back and perfect the systems we put in place, and that's what we're undergoing right now — really undergoing a digital transformation to help us have more seamless throughput in the drive-thru and to increase our speed and accuracy for the consumers.”
2. Try to convey the interior experience of your restaurants on the exterior
Zaxby’s has a really striking and identifiable exterior design, presenting itself as a sort of farmhouse-style restaurant with Southern charm. But as the company shrinks its footprint and focuses on its digital business, McLeroy said it’s trying to communicate that same kind of charm on the exterior and in the drive-thru lanes, leveraging signage, lighting, and more.
“We have to create that atmosphere that you would get when you came into the store, because I think that's one thing that set us apart all these years,” he said. “It’s not just about the food experience, it’s about the overall dining experience. Coming into Zaxby's is like a casual-dining experience … but I think as we move forward, there will be less people coming into the stores. So we have to figure out a new way to create that same atmosphere, that ambience, that feeling.”
3. Be calculated and methodical in your growth
If you look at a map of where Zaxby’s locations are, you’ll see that it’s heavily based in the Southeast corner of the U.S. That’s because Zaxby’s followed a growth strategy that saw it move into contiguous states — the concentric circles approach to expansion that’s common in retail. But also, it’s pursued expansion into new markets very methodically, leveraging its existing licensees and investing in media in markets where it doesn’t even have stores yet, just to build that brand awareness. Now Zaxby’s isn’t just a healthy brand; it’s also got incredible white space to grow into and an experienced team of licensees prepared to drive that growth.
“I would say some of the strength behind our growth is existing licensees carrying the brand into new markets because they have experience with it,” he said. “They know what to do. And we are advertising before we go into new markets, so people are aware of the brand before we go there.”
4. It’s never too late to bring on an equity partner
You often hear about private equity in relation to emerging brands that have been around for a decade or so. Zaxby’s, though, is 30 years old and a $2 billion business. But the time was right to bring on an equity partner, as Zaxby’s cofounder Tony Townley was looking to exit the business. In Goldman Sachs, Zaxby’s found a partner that should unlock a totally new phase of growth for this brand.
“They have been bringing us great advisers, great consultants and really analyzing our business and looking at the things where they thought we had weaknesses and areas that we could shore up some, and we certainly have done that because of them,” he said. “As we move forward, it's really going to help us in our initiative to grow, to become a national company and at some point, international. They realize the value we have, and they realize the opportunity we have.”
5. Go toe to toe with your competitors—even if it requires big change
Zaxby’s clearly operates in a busy category. There’s more attention now on chicken than ever before. But McLeroy shared that he wasn’t scared of that competition, and in fact is prepared to do what it takes to fight in those chicken wars. That includes totally rethinking Zaxby’s Signature Sandwich, which it rebuilt from the ground up in order to hold its own in the ever-crowded chicken category.
“We didn't have the best chicken sandwich. It was really inferior to our competitive set,” McLeroy said. “I convinced the team that we needed to completely rebuild this from the table up. It was a new piece of protein, it was a new bun, it was a new batter, it’s a new marinade — so completely redesigned from the table up, and something that would compete with everyone else.”