Krystal chain expands to new markets
April 1, 2003
CHATTANOOGA, Tenn. (April 2)- America's biggest burger chains may have lost their growth sizzle, but the South's oldest fast-food restaurant is still cooking up new markets. Despite recent losses, restaurant closings and even bankruptcy by operators of McDonald's and Burger King, the Krystal Co. is in the midst of a five-year plan to double in size. In the past year, the Chattanooga-based fast-food chain has signed franchise agreements for another 100 Krystal restaurants and is talking with dozens of more companies about even more units, according to company officials. "There are lots of places where you can get hamburgers, but there's only one place to get a Krystal," said Phillip Sanford, the company's chief executive. "We still see tremendous areas of opportunity, both in many of the markets we are already in and in other adjoining markets where we are growing into." Krystal is now opening a new restaurant, on average, every 13 days. Virtually all of the new restaurants are by franchisees and within two years the number of franchised Krystal units should surpass the 246 company-owned stores. While Krystal is still hungry for growth, McDonald's, Burger King and Wendy's have adopted a leaner approach to business in the past year.McDonald's reported its first quarterly loss in its 47-year history last year and has since trimmed its international expansion. The largest franchisee of Burger King, AmeriKing, filed for bankruptcy in December and has closed eight of its 19 Burger King restaurants in the Chattanooga area. Even Wendy's has tightened its 2003 projections. The major hamburger chains have been locked in a costly promotional war that has driven down prices for many items, AmeriKing President Joseph Langteau said. The National Restaurant Association projects that fast-food restaurants will still increase overall in 2003 by 4.1 percent to capture $120.9 billion in revenues. But that growth rate is below the overall 5.2 percent growth pace for all restaurants. "There are some fast-food brands having trouble because of the saturation of their markets. But we're a Southeastern chain with a great deal of potential in and around our heritage markets," said Glen Griffiths, vice president of franchise and development for Krystal. "We're still building momentum." Founded in 1932, Krystal is older than the nation's biggest fast-food chains of McDonald's, Burger King and Wendy's. Famous for its fresh, hot, small, square hamburgers, Krystal has remained a Southern tradition. Only its northern counterpart, White Castle, is older.But Krystal only began franchising in 1990. The chain's biggest growth in recent years has come since the company emerged from bankruptcy and was bought by an investment group organized by Sanford in 1997. Krystal is expanding into contiguous markets to its Southeastern base with the addition of major new markets in Florida, Texas and Virginia, among other areas, Griffiths said.In February, Krystal announced one of its biggest franchise agreements with Triton Restaurant Group for another 20 Krystal restaurants in the Tampa market, where Krystal previously has operated only a few units. "Residents of Tampa have already had a taste of what Krystal can offer and we look forward to bringing the Krystal experience to even more people," Triton's James Patton said. An even bigger market is being opened up this year in Texas. The first Krystal unit opened earlier this month in Beaumont, marking the return of Krystal to Texas for the first time since the 1970s. The new unit is one of several planned along Interstate 10 in Texas by the Houston-based Square Burgers Ltd., which also operates Krystals in Louisiana. Krystal has new franchise agreements with two other Texas restaurant developers and is talking with 19 others about still more new markets. "Texas is a huge state and a great opportunity for us," Sanford said. "You can build a lot of Krystal restaurants before you run out of room in Texas."
