Transcript of Food & Restaurant Marketing Podcast – Episode: Brand Extensions

Transcript of Food & Restaurant Marketing Podcast – Episode: Brand Extensions

[00:00:05] Adam Pierno: All right, welcome back to another episode of Food and Restaurant Marketing with me again with Mr. Dan Santy.
I’m Adam Pierno; you get to hear my mellifluous voice for the next 20 to 30 minutes speaking about another issue in the restaurant space that we’re very passionate about. Today we have an interesting topic do we not Dan.
[00:00:32] Dan Santy: We do. I’m excited about this topic because I love talking about when brands go off strategy and off point.
[00:00:40] Adam: Yes, we do learn a lot from that and what’s funny is we’re Dan and I we will spend a lot of time together, so we talk about this stuff all the time and then we try to organize it into a 20-minute conversation [laughs].
We have a 10-minute conversation before we hit record, so it’s funny for us a lot of this stuff maybe we have coming back in the surface for us.
[00:01:03] Dan: But it makes us feel better though because we get to say it twice.
[00:01:07] Adam: Yes, now we know we nailed.
[00:01:08] Dan: Yes.
[00:01:09] Adam: That’s good. Okay, the topic today what we’re looking at is lighten us some recent stories going back about 30 days. We want to talk about why restaurants not succeed more often at extending their brand or their line. You know a CPG that means, “Hey, we make a product A, and we can also make product B that is somewhat related.”
But in the restaurant space, it seems harder and harder for a restaurant brand to capture what the essence of the brand is that makes customers come. A lot of times they stumble when they try to do a variety of things to expand their reach, and that could be either what we were just talking about adding locations or offer a new kind of food offering that’s receiving a lot of types of spin-offs.
[00:01:57] Dan: Yes, typically what happens is that they have a growth trajectory, right? A new brand or an existing brand around for a while and then their trajectory flattens out, and everybody’s always looking for growth and so that’s typically the genesis of these steps. C-suites sits around and talks about well what if all the what ifs out there instead of focusing on your core operating and say, “If we got 500 locations and each have of four walls we have X amount traffic coming through, how do we do what we’re doing better.?
How we do we’re doing a more complimentary way that we can add sales. But that’s just not sexy quite frankly. It’s sexy to say, “Hey, let’s go to this new thing.” Jamba— you just brought that up to me a little while you were doing, they opened up kiosks.
[00:02:53] Adam: Yes, let’s talk about that.
That’s definitely one of the new stories here that we wanted to use as example in a way into this conversation. I think about two years ago that Jamba Juice announced this JambaGo platform where it was essentially kiosk, self ‘serve. They wanted to be able to put these locations and a lot of underserved areas with a smaller much smaller footprint, and their stores are pretty small to be fair.
Those are not huge boxes, but they wanted to figure out how to do it even smaller and in schools and in cafeterias and at hospital, anywhere there’s food service. Not surprisingly to me and this is what I think is always true, outsiders can always look at these things and tilt their heads and say, “What.”
[00:03:40] Dan: You’re right, it’s easy for us to critique.
[00:03:044] Adam: Well, yes and we love doing that. But it always seems incongruous with the business. Have this moment when I saw the JambaGo platform upfront and then when I read the news story that they were pulling the plug on it was like, “Yes, right that doesn’t even make sense.” What you said earlier I think is important, “It’s not sexy to solve your traffic problem.”
[00:04:10] Dan: Right.
[00:04:10] Adam: As small as those stores are their dollar per foot and their traffic per store is probably flatter going down as the trend changes and that was –
[00:04:21] Dan: That’s having a such changes and all of that but what I think was terribly flawed about it from the get-go and I think is why we all tilting our heads pointing this out earlier.
Part of the experience of going to Jamba is seeing them make that your drink- fresh.
[00:04:41] Adam: Right.
[00:04:41] Dan: Right there in front of you and that’s a huge piece of it, and now I can see the ingredients going in, I can see how they’re making it. I think I’ve never had better experienced about that the flavor profile that product quality that is attached to it versus something that’s dispensed with no theater if you will.
[00:05:02] Adam: Right, and then behind the scenes maybe it is a fresh fruit and vegetables that are dropping into all that get served up it. To my eyes, it might as well be the Slurpee machine that’s just turning that juice.
[00:05:16] Dan: Right, it’s sterile right. The experience is very sterile.
[00:05:17] Adam: Well, they reduced it to transactional we just be opposite of the trend we need to have we’re going to be going to be traffic and sales is how do we play up that theater and make up something experienced and just even an tiny bit memorable.
[00:05:31] Dan: Right.
[00:05:31] Adam: The next the next brand that I wanted to talk to for example and then we can dive into this, Red Robin. Red Robin is a brand that is a hot chain, they do a lot of things well. But they opened up a brand extension called Burger Works that was meant to compete with the Smashburger and the Five Guys of the world fast casual version of Red Robin.
[00:05:58] Dan: Right.
[00:05:58] Adam: They’re closing that down. I think they opened a dozen or so test units and they’re closing those down some of them will reopen as I think Red Robin express maybe their call.
But again Red Robin just said, “Well, we’re selling burgers and those guys sell burgers and couldn’t we just change the name and do the same thing?”
[00:06:19] Dan: No-no, and when did they do it? The late entry alone was pretty I think ridiculous. There’re many of these brands now what is burger work she’ll start a whole new brand and educate people about what burger work is and convince me it’s better than Steak & Shake, it’s better than Smashburger better, it’s better than Five Guys, it’s better than that.
That’s a tall order and if you took that same energy, same resources whether it’s people or money or time and poured it into your pool earlier, how can we improve traffic at our core brand? That money’s going to be far better snack, and I think you are realizing it to be greater in that situation. But it just isn’t sexy because a lot of times you have a mature brand like Red Robin is we get a little myopic and like, “Well, there’s not much else we can do. We tried everything.” We know from experience that that’s not true, we’ve revived a couple of dying brands in our careers and consulted on these dying brands and are thriving and growing today as a matter of fact which quite frankly took a lot of work, a lot of energy but it pays off.
[00:07:36] Adam: Yes, and a lot of times just by optimizing what you’re already doing and killing some poor performing items and changing some things about training. I wish it was that easy but isn’t. Let’s talk about why they try to do.
Number one traffic right now, industry-wide it’s down; traffic is down there’s more competition, so traffic is going to get spread out by concept. They’re looking for ways to improve traffic and honestly is it—Dan, do you think it’s lack of confidence or is it– what is it about the idea of, “Hey, let’s go start this other thing instead of just investing in the four walls?”
[00:08:21] Dan: A lot of times the when I see the brand is struggling. Traffic which is down that means probably same store sales are down and the ownership team in whether it’s private equity or if it’s a public company they’re looking at the C-suite.
They are saying, “You know what? Maybe it’s time to change it up. Xx been here for ten years, he’s not making a difference.” They bring in a new C-suite, so start at the CEO he/she brings in her/his team, right? And they’ve been tasked, “Turn this thing around,” and of course, we all know money is not patient especially when it’s coming from private equity or public company.
[00:09:05] Adam: Any shareholder outside your organization
[00:09:07] Dan: Exactly and they’re seeking to do things to look like they’re doing something smart, strategic that could have a material with that. In my opinion, that’s where the flaw begins right in there because how sexy is it that you go to your chairman’s board and saying, “I have a three-pronged strategy to improve traffic at the core brand.” He’s going to look at you and say, “That? What?” You don’t have to wait for this strategy to take.
[00:09:38] Adam: That’s right. That’s a person that’s trying to win the board meeting versus the long haul. We’re working with someone else who unfortunately I can’t name who is getting ready for a board meeting and doing great job that’s like, “Here’s what we’ve done just in the four walls and here’s what we’re going to do just keep having those things home I think we can eke out another four or five percent.” And I just I like.
[00:09:58] Dan: Here’s the two-point advantage we got from it. There is ROI, so we’re heading into the right direction.
[00:10:05] Adam: To me when you say money is not patient, as a shareholder, I love that story of a team that’s saying, “How do we tighten the screws on what we already have and what we’ve already invested to give you more return?” I enjoy strategically versus, “We can get more revenue if we open another chain that’s something like ours.”
[00:10:28] Dan: Well, the burger example is the best example. “We make great burgers.” I can hear their conversation, “We make a great burger. We’re just sit down now, and less people are going in to sit down, and they are going to pay the check,” and I can hear their conversation. But again like I said earlier, too late.
[00:10:47]Adam: Yes, and I think the second reason, new ways to get revenue. New lines of revenue’s very sexy. I think the other thing that we look at is defensive posture. I don’t think this is true in the Jamba Juice example; I think that was more revenue. For Red Robin, totally defensive play. You could hear the chest pounding of, “We’re the king of the burger experience, and those guys don’t even have half of our experience. We could just dip into that cut service and squash them.” It should be much better. Well, if only.
[10:11:17] Dan: Yes, on the flipside, when you brought this up earlier is Arby’s. I got to tell you I’m impressed with Arby’s. That was a fledgling brand a number of years ago, and they have been doing a good job with the strategy of saying, “Okay, who are we at our core? And what else can we do that’s related to the core? Let’s now go start reconserving tacos, and hold on, and get an extra visit from our loyal customer. Let’s get a new visit from a lapse customer because also now we’ve got something going on.” They talk about what they did because I bet their menu extension was brilliant.
[00:12:06] Adam: Yes, one thing that Arby’s has been doing great is not just knowing their brand, but it’s knowing their core customer, and knowing, “Okay I can get an extra occasion. I can get them excited about adding on.” This year they had their sliders menu. What a smart idea because they’re known for meat they have their meat platform, and all they keep doing is figuring out new wrinkles of that. I think I’ve read that they’re testing venison which I think will fail —
[00:12:32] Dan: [laughs]

{Editor’s note: Boy were we wrong so far. Sold out of samples at test stores. Let’s see how it goes in a regional roll out.}

[00:12:33] Adam: – But I like that they are testing the limits of it, and it’s all on the menu. They can do that in some tests stores. The sliders was another example of, it’s all things that they already sell, it’s a new way to have it. As an Arby’s customer I could see myself at the menu saying, “Okay, that makes sense with what I’m about to order. I could try one of those, or I could substitute three of those for what I normally get.” It was successful from a sales perspective.
[00:12:57] Dan: How about it being a shape or a creator tool? A slider? I can get a slider at three o’clock, and it’s my afternoon snack.
[00:13:07] Adam: I love that.
[00:13:08] Dan: Or a late night snack from after leaving our bar [laughs].
[00:13:14] Adam: Right, for those open late locations for sure. Yes, and I think when you look at that it’s a much more intelligent way to combat the burger craze, and keep your share, and make your customers happy than creating a burger works chain. I don’t think Red Robin — I know there are smart people there, I don’t think they understood what that challenger ethos was about, and what the fast-casual burger chain is compared to what they offer, which is not fast at all. It’s slow, and it’s leisurely, and it’s family, and it’s the opposite, it’s that experience.
[00:13:50] Dan: Embracing.
[00:13:51] Adam: Right.
[00:13:52] Dan: But that occasions is still occur, and the key is saying, “Where is the erosion and why, and how do we combat that based on everything else that’s going on?” Crop that strategy, and then do what we always tell our clients to do across-the-board in many places. Talk about testing menu, testing, test and optimize. Test and optimize. Use again, use the locations you have, the four walls you currently have to test things before you go foreboding something, and you’re bound to find solutions that are going to have traction and work for you that could be implemented system work.
[00:14:37] Adam: Yes, and in both of the cases, in Jamba Juice, in Red Robin, the way they tried to extend are not things that are in their DNA. The Red Robin experience is about the art on the wall. You have to be sitting in a table to recognize what’s weird about it. You have to sit there and have that experience, and you have to interact with the server a little bit to get the quirk of the place. If you came through fast and just walk through Red Robin, I think it all goes over your head. It’s sitting there and experiencing it you go, “Oh yes, those are Rubik’s cubes,” or, “That thing is made out of crayons.” There’s little details that are important to that experience. That’s what you’re talking about when you’re sitting at that table.
For Jamba Juice, it’s so much of it. They underplay it so much which I think works for them, but it’s watching somebody grab a handful of fruit and throw it in, and then watch him grab the banana which is [unintelligible 00:15:31]. But watching them take all those ingredients it’s very underplayed, but you feel when you get that drink that’s high sugar content is not very good for you. Besides what they add to it, you feel energized just by watching everything that went into its own fruit drink.
[00:15:19] Dan: Yes, I think. Add to that the customization element of it. I can add a protein to it or whatever. However you’d like to customize your drink in that kiosk, there was none of that. I don’t know, I never used one of those or a little bit of that, but it’s not the same. By the way, you don’t have that upsell opportunity. When that cashiers are taking my order, they can say, “Would you like some white protein with that?
[00:16:20] Adam: Right. Or, “How about a Kind Bar?”
[00:16:21] Dan: Yes, exactly.
[00:16:22] Adam: Those little things that they do. That’s a great point. You just brought something up. Looking at these brands and how they expand and another example I think. I look at the Create Your Taste menu from McDonalds. The kiosks that they’re opening inside their own stores where you customize those, and I’ve had the opportunity to try that, and I found the burger to be pretty good, better than an average McDonalds’ burger. I enjoyed the experience although it took a long time to go through the whole thing because I’m slow.
[00:16:53] Dan: You are?
[00:16:54] Adam: Not very capable.
[00:16:55] Dan: That was your first experience, so you were probably doing your own research like, “Okay, so what is this?”
[00:17:01] Adam: I looked at a lot of different options.
[00:17:03] Dan: Actually I missed the fact that you’re a restaurant marketing consultant.
[00:17:08] Adam: Maybe my prison was a little—well, yes. My wife is definitely irritated. But that’s a good extension for them because that’s a way for them to put their toe in the fast-casual burger and the premium burger in their business with ingredients, and things that already hit their COGs, and they’re not freaking out about, “How are we going to sell this?” It isn’t in their DNA, but it’s not a side business either. It’s not now this diversion of revenue, it’s a product, it’s a sub-brand, but it happens inside the arches. Going through it as a customer I didn’t feel taken out of McDonalds. Even though my kids just got whatever; their happy meals they always get there. It’s pretty interesting.
[00:17:49] Dan: Has anybody been successful with this Adam? Did you find any brands selling burgers in one way, and selling in another way, or open a completely different brand for that matter?
[00:18:02] Adam: You don’t see too much. We’ve seen Arby’s adding menu items intelligently. I vowed internally that we were not going to talk about Chipotle, so the jury’s out on Tasty Made, and we’ll see how that burger experience.
[00:18:20] Dan: I can’t resist either. I just saw that — I don’t know if it was Carl Icahn, our activist investor or –?
[00:18:27] Adam: Yes, there’s a lot of action.
[00:18:28] Dan: There’s another guy that’s famous for being an activist that has bought up all more to [unintelligible] on the company and is —
[00:18:34] Adam: Is making moves, that’s all.
[00:18:36] Dan: Yes, a lot going on there. That’s it. Another time.
[00:18:40] Adam: But you will definitely revisit.
[00:18:43] Adam: But you brought up a great example along the lines of the JambaGo kiosk platform. You said you had an example of, we just talked about of a major brand that reformatted but figured out how to keep their experience the same.
[00:18:59] Dan: I did?
[00:18:59] Adam: You sure did.
[00:19:01] Adam: Subway.
[00:19:02] Dan: Subway, I’m sorry.
[00:19:04] Adam: You’re so off. This guy — this is less than 20 minutes ago.
[00:19:08] Dan: I have to tell you, I was not a Subway fan, and that’s just because as you know I am a freaking snob. My wife, who is very meticulous about what she eats and puts in her body, when we travel on the road, like when we’re meeting a road trip, she makes me stop at Subway because she knows she can get that turkey sandwich exactly how she wants it. I like mayonnaise better than that, and since being indoctrinated to that, I have been going to Subway on occasion. I have to admit their product is rock-solid, they evolve the offering. It’s always a Sub, but it is different. It’s a different set of ingredients or combination of ingredients that are intriguing, and interesting, and great flavor profile. I did Subway great kudos for their menu innovation and menu evolution I guess would be the best way to describe it.
[00:21:50] Adam: Yes, well, they do a good job of evolving to trends without selling out the core concept. I can still get the same stuff I got while I was in high school-
[00:21:52] Dan: Yes
[00:22:03] Adam: -But there’s updates to it. They are always bringing in new sauces, and they’re having LTO’s that are trial flavors and it gives you an opportunity to try a lot of different things or just stick to the same thing that you always want, that you always get.
[00:22:07] Dan: Right, and I always thought– the other thing that impressed me about those guys is that. When Quiznos was on their upward trajectory, and their whole point of difference was that they were toasted, what did Subway do? They put toasters in their-
[00:22:09] Adam: I know
[00:22:10] Dan: -It’s hard to differentiate-
[00:22:11] Adam: It’s a machine
[00:22:13] Dan: -Points. It’s a machine that they just completely knocked them out from under their feet with that point differentiation.
[00:22:14] Adam: Yes, I’m glad you brought that up because one of the notes I have is why do these things fail, and it’s, it’s because customers know who brands are. Subconsciously customers who don’t even know what a brand is, know what your brand is. Believe me, they’re your customers, they sniff out a fake. If they are a Red Robin customer or they are a Five Guys customer and they go into Burgerworks; and I’ve never set foot in one, I don’t know what it’s like, but either of those two customer profiles walking in there would tilt their head and say, “This is not the place I love.”
[00:22:16] Dan: Right
[00:22:21] Adam: A Five Guy’s person would not be fooled and say, “Oh no,” okay this is just like Five Guys, it’s just like Smashburger, they’ll know what’s wrong with it right away. I think when we talk about a place like Subway and adding toasters, that’s when the Quiznos’ machine fell apart because customers went to Subway. I actually remember reading a trade article quoting somebody at Quiznos, who said, “It’s not just as easy as putting in toasters. There is an art to it, and how you heat things up and customers know the difference,” they didn’t. I mean it was q1 of that experiment that Quiznos just drew up a hockey stick.
[00:22:23] Dan: It was a machine and a little bit of staff training, you can ask, “Do you want that toaster?”
[00:22:25] Adam: Right, very little
[00:22:26] Dan: Yes, and time to cut up like a major competitor’s point of difference that easily is pretty crazy
[00:22:28] Adam: Right, yes, and then I think they just-
[00:22:30] Dan: I still like Quiznos so-
[00:22:31] Adam: I do too
[00:22:32] Dan: Keep it up, guys
[00:22:33] Adam: I do too
[00:22:34] Dan: Come on, I’m rooting for you
[00:22:41] Adam: Let’s talk about what would it take to succeed at this. If you were going to succeed– if you were going to open a new concept or take your concept and spin it into a new format. Not just a menu expansion, which in itself is gargantuan effort for a fast casual or any scale restaurant organization that’s not easy we know that.
But if you’re going to succeed, there’s a few different things that we look at. Going back to the two examples we started with, with Jamba making a kiosk and Red Robin and their Burgerworks. The ops and the experience that you are creating of both of those places is totally different.
[00:23:43] Dan: Right
[00:23:43] Adam: You can’t expect to take your ops team from your core brand and then just say, “Okay, we’ll figure out the kiosk. Have that done in 90 days, let’s get a kiosk out there and test it.” You need different personnel and I think for this to be successful that’s part of what it takes is not
[00:24:00] Dan: I agree, I think this happens a lot. Just because you’re good at casual-dinning doesn’t mean you could be good at fast-casual or QSR. Likewise to those categories, just because you are good at QSR doesn’t mean you can also suddenly go casual-dining. I think you make a good point about your operation’s team which will have to be very well versed in how to launch whatever category you’re going into.
I think that the key for brands today or companies that are seeking to start new brands, you got to look forward, you got to look five years out, ten years out. Not now, I think too often we look at what is happening now, what I like to call the bright shiny things; the better burger is running its course, right? How many more can the country handle?
Be looking forward, where are flavors going, where are customers tastes going? That’s the kind of research you have to do to identify what the potential is. Again to the extent that you can, it’s more difficult than ever but test and optimize man, test however you feel you can.
[00:24:53] Adam: Yes, I can’t stress that one enough. I think the other thing is, we think about it internally but then we have to think about it externally. We gave Arby’s credit for it, we should give Subway credit for it and even in McDonald’s in the Create Your Taste. Knowing what your customer expects from Red Robin and then knowing what they would expect from a Red Robin express now or Burgerworks as it was called, they’re not the same thing.
That experience is so different, a consumer walking in off the street has a different set of expectations, a different set of ideas, the menu, the feel of the place. Everything from beginning to end is just different. If you’re not looking at it through that prism and trying to understand what they want and what they expect, you will not connect with them, and they’ll be able to sniff out that fake.
[00:25:47] Dan: I still go back to it, if your brand today, that’s fledgling or your challenged and there’s many. We read about them everyday, there’s bankruptcy after bankruptcy, lots of closures. I like to see restaurants closings because that just reduces
[00:26:03] Adam: A number of competitors
[00:26:05] Dan: The number of units which always can potentially help traffic industry-wide. But take a look at who you are, what got you here and reflect on how you can improve on that. Because I guarantee you, the odds of being successful and improving on what you have is much greater than going on and starting something completely new
It’s just is because you have certain level of traffic. Maybe it’s down, but you start traffic. You have a certain level of sales, yes it’s down but you have sales and what are you doing to leverage that? Please please please invest in marketing. Stop cutting the marketing budget, it’s not going to solve the problem, you cannot save your way to profitability. I don’t know about you– if you don’t have a share of my mind you’re not getting a share of my stomach
[00:27:02] Adam: Yes, you can’t be considered if you’re not known, and we’ve seen that a lot. I think the fast casuals get a lot of credit for not doing much traditional marketing but as you dig into it more and more, we know that that’s not true, they’re marketing in different ways, and they’re finding different ways to get their share of voice up and get their share of awareness
[00:27:23] Dan: Yes and who’s testing TV. Our friend’s spotlight have been around TV before so
[00:27:28] Adam: They’re back
[00:27:29] Dan: There you go, and prove positive.
[00:27:32] Adam: Alright, well, I think that just about covers this conversation but we’d love to continue it with anybody listening. If you have more thoughts, questions, ideas or challenges, please you can find us on Twitter @FandRM. You can also email either one of us, dan@foodandrestaurantmarketing or adam@foodandrestaurantmarketing. Or both of us and more of the team at info@foodandrestaurantmarketing. Please subscribe and share this podcast with your friends, we appreciate it.
[00:28:00] Dan: Eat well.
[00:27:53] [END OF AUDIO]

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Author: Adam Pierno

Adam Pierno has a one-of-a-kind perspective on restaurant and CPGs. He investigates the connections between strategy, media, digital and business goals employing social media listening, analysis and traditional consumer research to find meaningful insights for brands thinking about their futures.