Article
Bojangles' finds opportunity in recession
The company has taken advantage of lower construction and real estate prices to continue its growth.
October 29, 2009
*For a slideshow of the company's menu offerings and a reimaged store,click here.
Over the past 18 months, the quick-service industry has been hit by a number of challenges, from high commodity costs to falling same-store sales. Some chains retracted. Some, like Bojangles' Restaurants Inc., have taken advantage of the recession to actually ramp up their growth plan.
"These are challenging times for everyone, and we don't take anything for granted," said Eric Newman, Bojangles' executive vice president. "But we do think this is a time actually for us not to participate in the recession but actually use it as a time to take advantage of the hidden benefits."
While the economy has sputtered, the high commodity costs that hit the industry hard last year have moderated, helping operators save on costs. But the bigger savings Bojangles' found were in construction and real estate. Those costs have "moderated significantly, which was one of the great challenges prior to the slowdown, where it was stretching everyone's unit economics," he said. "The price of land and the price of construction was really challenging the ability to add new restaurants."
But now, opportunities abound, with land not only more affordable but more available. And Bojangles' has taken advantage of it.
Last year, the chain, which has 450 stores in 10 states, added 44 new units. This year, it should add more than 30, with 15 still planned over the next few months. By late next year, Bojangles' expects to open its 500th location.
"Our pipeline (with 300 stores) — both company and franchised — continues to be healthy," Newman said.
To help with the company's growth plans, Bojangles' recently finalized a $70 million debt restructuring, resulting in a lower interest rate and a reduced principal amount. "And that was done right in the middle of the most restrictive lending market anyone has ever seen," he said. "Our lenders perceived that we're actually building value and continuing along a very good line."
Even before the restructuring, Bojangles' was investing heavily in the company's brand with a reimaging program that began three years ago. Most of the chain's 155 company-owned stores have undergone the remodeling, including new builds and major remodeling projects. More than half of its stores overall now reflect the new prototype.
"We're customer focused, and that's where we're spending our money," Newman said.
Strong breakfast daypart
While other quick-service chains, including No. 1 chicken chain KFC, have experienced falling sales and traffic during the recession, Bojangles' has had some of its strongest results. Last year, the company had its best year overall. The first quarter of 2009 was its best ever, followed by its best six months at the end of the second quarter, Newman said.
The privately held company does not publish financial results, but Newman did say the chain has brought in about $650 million in revenue so far this year. Its company stores' average unit volume (AUV) is about $1.4 million, and its franchised stores' is about $1.73 million.
In comparison, according to restaurant industry consulting group Technomic Inc.'s Top 500 Restaurant Chain Report, KFC's AUV was $960,000, Chick-fil-A's was $2 million, and Popeyes' Louisiana Kitchen's was $950,000.
Newman said Bojangles' has been fairly insulated during the recession because of its focus on breakfast. According to The NPD Group, which prepares and disseminates CREST data, overall QSR traffic was down 3 percent for versus last year in the quarter ended August 2009, but breakfast traffic did slightly better, remaining flat.
Bojangles' breakfast remained strong. More than 40 percent of the chain's sales are transacted before 11 a.m., and stores capture another 10 percent from continuing the breakfast menu all day, he said.
That strong breakfast component actually sets the chain apart from other chicken concepts to which the chain is typically compared. Yes, Bojangles' sells Southern Cajun-style bone-in chicken. But the chain's founder holds the claim of inventing the QSR biscuit, and customers' craving for it has developed into somewhat of a cult following.
"We have a loyalty that is very strong, so you combine that with the breakfast daypart and even with the current conditions, we're positioned well," he said. "We haven't experienced the same level of downturn as some other chicken chains have."
Freshness and value
The core of Bojangles' brand is centered around fresh: fresh, made-from-scratch biscuits every 20 minutes; fresh, never frozen chicken; scratch-made sides; and fresh steeped tea.
The company also maintains a value positioning but has had to step that up during the macroeconomic times, increasingly offering various specials, including combo deals.
"Like everyone, we're trying to do smart marketing," Newman said. "So at all times were trying to not only give our usual value but also give options to people who are focused on value in this time."
As important as value is, Bojangles' branding also continues to focus on its freshness, uniqueness and quality.
"We don't want to live on discounts alone," Newman said. "We want to continue to build strength."
