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What's Hot in Restaurant Design
- 1. Sunday, August 9th 1:45 pm—2:30 pm “Examining current design trends in the restaurant industry. How Fast Casual elements, changing consumer demands, and new technologies are shaping successful restaurant designs.” •Why having a “hot design” is so important. •How trends influence design. •Examples of what’s “HOT”! NEW ORLEANS MORIAL CONVENTION CENTER Date: Saturday, August 2, 2014 Time: 11:45 am —12:30 pm Presented By: Brent Bueche, President Scot Byrd, Vice President www.bbiusa.com BBI Architects Spaces that workT FEATURED SPEAKER PRESENTATION: “What’s Hot in Restaurant Design” AUGUST 9TH , 2015 62nd ANNUAL
- 3. Sales Data: Remodeled Stores +15% Rebuilt Stores +25% In-Store Dining +42% Data is from March 2015 investor’s call
- 6. Sales Data: Foot traffic +12% Remodeled Stores Sales + 9% To-Go Orders +22% Net Earnings +22% Data is from March 2015 investor’s call
- 9. Sales Data: Remodeled Stores +18% In addition to new builds, Arby's is remodeling existing restaurants across the system to the Inspire design and to date has remodeled nearly 40 restaurants and expects to remodel 180 total by the end of the year. On average, remodeled restaurants are experiencing sales increases of 15 percent or more, and in some cases more than 20 percent. - From Arby’s press release dated April 5, 2015
- 12. Sales Data: Revenue Increase +16% Net Income +38% “Our initiatives are enabling us to continue taking market share including our Brand Transformation remodels which are generating even stronger guest satisfaction scores.” - Steve Carley, CEO Press Release – May 19, 2015
- 16. 2002 – Truett Cathy publishes his book. Selects BBI Architects as its sole architect for prototypes, conversions, and remodels.
- 17. 2014 – Chic-fil-A surpasses KFC as number one fast food restaurant with over $5 billion in sales. KFC has $4.2 billion in sales. Chic-fil-A 1775 stores KFC 4491 stores
- 18. 2012 – Dairi-O selects BBI Architects as its sole architect. Sales for new prototype 4 times existing stores, more than double QSR industry leaders.
- 19. 2015 – Rapidly accelerating growth of locations and steady increases in same store sales.
- 20. $3.0M 3.5% net Profit, $105K $4.0M 7.9% net Profit, $315K $3.5M 6% net Profit, $210K Increasing Sales Matters! It Matters a Lot!Sales in Millions Chart showing the breakeven point of sales that meets fixed and variable costs is $2.5M. Variable run rate of profit is 21%. 15% increase in sales resulted in a 50% increase in profit!!!
- 21. Summary Why Hot Design is Important? – Making it fun! – Making it last! – Making money! For many typical restaurants, a 15% increase in overall sales can increase net profits 50%.
- 24. Wayne Gretsky “Skate to where the puck is going, not where it has been.”
- 26. • Person reaching young adulthood around year 2000. • Estimated population: 75.3 million in US 2.5 billion worldwide
- 27. Traits • Digital Native • Social Media Culture • Civic Minded • Health Conscious
- 29. 1. Numbers 2. Sales at restaurants and bars overtook spending at grocery stores in March for the first time ever According to Commerce Department as reported by Bloomberg April 14, 2015
- 32. Seating Options Seat with a View Seat of a View "Millennials view dining out as a social event (i.e. another chance to connect),"
- 33. Interest in Preparation “Tables in the kitchen” Open kitchens Variety of Experiences within the Restaurant Keep it Interesting
- 34. Industry Segments Blur Fine Dining going Casual Fast Casual going quick serve Day Part Flexibility
- 35. Energy Efficiency Appliances Lights Sustainability Recycling Grease Storm water Green Energy Solar
- 36. The Basics: Wi Fi Charging Stations Electrical Outlets
- 37. Sales Tools: Digital Menu Boards LTO Promotions Up Sell In House Video
- 38. Remote Ordering Kiosk Voice Recognition Pay at Table Digital Menu Interactive Tables
- 40. Conclusion Thanks for attending today’s presentation. It was our pleasure to be here today! Copies will be sent to all attendees via email
Editor's Notes
- Thanks for being here, today. I want to thank the Louisiana Restaurant Association for inviting us. We are proud to be members of the LRA and to have the opportunity to share some thoughts with you we hope will be beneficial to your business. My name is Scot Byrd. I am the Vice President of Business Development for BBI Architects. I’ll be presenting the first half of today’s presentation. Please allow me to tell you a little about myself. I worked for a Fortune 500 company for over two decades. In that time I had many roles. I was a bean counter – I was their finance guy. I was a salesman, a sales trainer, business coach and a marketing manager. I was director of economic development for a parish here in Louisiana for several years. I have founded a construction and property management company. I’ve owned four individual units of two different types of franchises. Because of my business background, I will be presenting the part of our presentation that has to do with numbers and profits. The second half of today’s presentation will be delivered by our firm’s president, Brent Bueche. Brent has over 25 years experience in design, much of it in the restaurant industry and in retail. Brent founded BBI Architects in 2002 with an emphasis on restaurant design, prototype design, brand imaging, and construction management. Brent’s creativity has created new concepts and designs that have improved the image and operational efficiency of his clients, resulting in substantially increasing profitability. Our presentation today is called, “What’s Hot in Restaurant Design.” This is presented from the viewpoint of an architectural firm that has been involved in the brand imaging process, site selection process, and building design process for several restaurant chains. This presentation will make good use of the entire 45 minutes we have to share with you today. We’re going to talk about 3 things. Why having a “hot design” is so important. How trends influence design. Examples of what’s “HOT”!
- The theme of this year’s Restaurant Association Expo is “Passport to Profits”. That’s where Brent and I are going to start our discussion this year. The reason having a compelling restaurant environment is so important is simple. Profits. In the next few slides, we are going to take a look at what some of the biggest names and some small names in the business are doing in keeping their brand relevant and fresh and what results they are seeing from their investment. That’s how they are looking at it – as an investment.
- Let’s start with Wendy’s. Wendy’s call their brand reimaging process the Wendy’s Image Activation Program – the goal is to rebuild or remodel half of its 600 company owned stores by the end of 2015. That a pretty ambitious program – 300 stores in 3 years and they are on track! By starting with company owned locations, they demonstrate to franchisees that the investment is worthwhile. The first year, the rebuilt stores “drove average sales increases of 25 percent, and those results continue to hold today.” That’s a quote from Emil Brolick, the company’s chairman and CEO, in a call with securities analysts. As you can see, the results were quite good for the remodeled stores and the rebuilt stores were outstanding! One of the primary objectives that Wendy’s wanted to achieve was to increase their in-store dining, which had been on a steady decline. Frankly, those results probably exceeded their expectations. Industry research has shown that the average ticket for dine-in sales is greater than drive-thru or to-go orders.
- The company also created a $10M incentive program with three tiers to encourage franchisees to rebuild or remodel their stores. The next goalpost for Wendy’s Image Activation Program is to have 65% of company owned stores and 35% of franchise locations remodeled by the end of 2017. The cost of a remodel usually ranges in the $450K - $650K range. With typical location sales volume in the $1.6M range, a 15% increase would generate $240,000 in additional sales for a remodel each year.
- One of the trends you can see emphasized in Wendy’s new design is a variety of seating arrangements, including lounge chairs and cocktail tables. Fireplaces are also a prominent feature in the design in a feature that the architect refers to as “the red blade”. Many experts have noted that the design takes a lot of cues from the Fast Casual segment. Experts also expect the improved design to attract more customers from higher income brackets, which would help insulate the brand from the negative impacts of price increases. Amid pressure to increase hourly wages, this is a concern for our industry, as labor is typically 33% of the cost of sales.
- Now let’s take a break from quick serve and take a look at a more traditional dining restaurant. Most analysts have remarked on the need for a refresh of the Olive Garden brand for some time now. What’s important to note is that Olive Garden had been a drag on the whole Darden chain, posting negative foot traffic trends and consecutive quarterly decreases in same-restaurant sales. The goal here was to increase foot traffic, which was they achieved - in double digits. They updated their menu offering to include some less expensive items, which is why the overall sales increase did not quite make it to double digits to match the foot traffic. Remodeling the menu did play an important part in increasing their to-go orders dramatically.
- Knowing your goals is important to the design. Wendy’s wanted to increase their dine-in business and Olive Garden wanted to increase their to-go business. The new designs helped both chains achieve their goals. Technology also played a role in Olive Garden’s redesign, with online pay and pick-up, coupled with a reorganization of the to-go area.
- Olive Garden was launched in 1982. It accounts for over 40% of the revenue of Darden Restaurants, which is a six billion dollar sales chain. Olive Garden is transitioning from TRADITIONAL ITALIAN to MODERN ITALIAN , using natural earth tones. The faux, “old world” Italian look is being replaced by a more modern, open feel by removing some walls, using brighter colors, and modern art.
- Jumping back to quick serve for a moment. Here’s a quote from George Condos, Arby’s president and chief operating officer, “Since the start of rollouts in early 2014, the revitalized restaurants have seen an average of nearly 20 percent in sales increases, which further supports our focused efforts on this front.” As you can see form the slide, in April Arby’s had remodeled 40 restaurants and expect to have 180 done by the end of this year.
- The franchisor struck a deal with Element Financial Group, which has more than $4B in assets, to loan money to franchisees to fund as much as 100 percent of the cost of the remodels, which could cost on average of $300,000 per location, with Arby’s owner – Roark Capital – guaranteeing a portion of the loans. Approvals normally take just five days.
- Here’s a nice interior shot of a remodeled Arby’s. As you can see, use of natural wood tones is a distinctive feature of Arby’s redesign efforts.
- Back to another more tradition dining experience. Notice that a 16% increase in sales resulted in an almost 40% increase in net income. We are going to explore this idea a little further in just a moment.
- Red Robin began its redesign efforts in 2013. Red Robin operates 477 locations, 339 company owned and 133 franchisees. They have been opening about 15 to 20 restaurants per year and remodeling about the same to the new design. Same store sales at the remodeled stores have significantly outperformed the older stores the last two years since the program was begun.
- The C-level management at Red Robin associates its redesign program and creative use of social media as the key drivers in returning customer foot traffic back to positive increases.
- Technology has also been an important part of the Red Robin brand turnaround program. They entered into a partnership with Ziosk for pay and order at the table technology. They also began an extensive social media program which had a dynamic customer loyalty program component. Ain’t technology cool? This kids these days, the Millennials, don’t know how good they have it! I remember when I was a kid, I had to walk 6 feet, slogging thru shag carpet, to change the TV channel.
- Mr. Cathy publishing his book has nothing to do with what’s hot in restaurant design. It just happened the same year we took over as their primary architect. Chick-fil-A spends a fair amount of money on customer research. That knowledge is used to help drive their designs and the customer experience. There are a lot of little subtle things that go into the design that are not always readily apparent. This is just one example of what I was talking about when I mentioned Brent’s creativity improving the image and operational efficiency of our clients. With Chick-fil-A, BBI Architects perfected the double barrel drive thru, for example.
- This past year saw Chic-fil-A surpass KFC as the number restaurant chain featuring chicken. What’s more, just recently Chic-fil-A was selected in the most comprehensive annual survey conducted in the restaurant industry as America’s favorite restaurant – a surprising achievement for a chain that features chicken. The American Consumer Satisfaction Index survey had Chic-fil-A as the clear winner with the highest rating ever achieved by a fast food restaurant.
- Just to show you that investments in improved design aren’t just paying off for the large chains, in 2012 BBI Architects became the sole architect for a small regional player in North Carolina. This chain has quadrupled sales over its original design and the newly design locations’ sales volume is more than twice what the industry average fast food restaurant produces per location.
- This chain is beginning to accelerate the number of locations and has steady year over year increases in same store sales. They are now working on their six and seventh location, as well as remodeling an original store.
- Remember when we were discussing Red Robin’s 16% sales increase, with an almost 40% increase in net profit? Here are some illustrative numbers based on an actual real world example. A typical restaurant might generate 6% profit on $3.5M in sales, making $210K. Note - That profit was actually generated on the last one million dollars in sales. It breaks even at $2.5M in sales. So, it’s variable expenses profit margin is 21%. $210K on one million. A 15% increase in sales to $4M increases net profit 50%.
- Passion equals energy. It’s a lot easier for both yourself and your employees to be passionate about working in a place that has a great atmosphere and dealing with happy customers. Having fun is a necessary ingredient for success in any business, but particularly in the restaurant business! It’s not only important to have a “hot design”, it’s important to have a hot design that is going to have staying power and will last so that you can get the maximum return on your quality investment. And it’s great to have fun at work, but it’s even more fun if you’re making really good money and can look to the future a positive outlook. After the facts I just presented, it should be obvious that an investment that is shown to improve sales 15% and net profits 50% is a great investment. Now that I’ve spent some time talking about why a “hot design” is so important for your restaurant, I’m going to turn it over to Brent to speak with you a little bit about the creative process that goes into creating a “hot design” that will be fun, will last, and make you a lot of money. Please join me in welcoming the founder and creative genius behind BBI Architects, Mr. Brent Bueche!
- Thank you Scot So Scot just presented some very valuable information on taking a CONCPET and building a BRAND then locating that BRAND in the appropriate MARKETPLACE. For the next part of the presentation I am going to discuss how to take the CONCEPT create an environment that represents that Concept.
- When it comes to knowing what is “Hot!” in restaurant design, it is important to keep in mind that the goal is not to do what everybody else is doing, but be able to do something that is relevant to where the trends are heading. But to know where you are going, it is important to know where you are at! We are going to take a look at current popular designs in the restaurant industry and see what that tells us about what cultural influences are driving the current designs in restaurants. By examining the underlying cultural influences that influenced the design, we can see what are the important elements to include in our design that will be meaningful and lasting, so that our design does not become dated in just a short while. A recurring theme for the really good designers is how they made good use of the unique characteristics of the existing space where the restaurant is located and they also designed around the chef’s talents and style. Another common issue is limited funds. Being creative in making a memorable design with a limited budget is fairly common.
- Thank you Scot So Scot just presented some very valuable information on taking a CONCPET and building a BRAND then locating that BRAND in the appropriate MARKETPLACE. For the next part of the presentation I am going to discuss how to take the CONCEPT create an environment that represents that Concept.
- That concludes our presentation for today Thanks for letting us share our presentation, today. We hope this gives you a better insight on growing your brand. We are making ourselves available for free one hour consultations during the remainder of the show. Scot has the sign up sheet and schedule. Please check with him if you are interested. If we have more participants than we have time for here at the show, we will schedule some Google hangouts during the next two weeks. Please leave a business card with Scot if you would like us to email you a copy of this presentation. Again, we would like to thank the show sponsors for inviting us to speak here today. It has been a pleasure meeting you, so many other new people and visiting with old friends. We hope you enjoy the Expo!