Flynn on way to ‘nice round number’
Greg Flynn, CEO of Flynn Restaurant Group, says 1,000 restaurants are in his company’s near future. Panera is the latest addition to a stable that includes Applebee’s and Taco Bell as well.
The Flynn Restaurant Group is one of the master operators in franchising. So when he changes tactics, the industry takes notice. The Applebee’s and Taco Bell operator has shifted his focus in the past two years with a massive diversification play that has him gobbling up locations in the Panera system.
His most recent acquisition of 34 locations means the leader of the Franchise Times Restaurant 200, the annual list published in August ranking the largest U.S. restaurant operators, is a little further ahead and rapidly approaching the $2 billion sales mark. Flynn said he doesn’t have specific goals for growth, but the 1,000-store mark will be something to celebrate.
“That’s a nice round number, and I think that will be fun,” said Flynn, whose company ranks No. 1 on the list. “There’s not even an explicit goal to grow for the growth. It’s only growing if it’s accretive and strategic, the financing is attractive and we have the ability to operate. Having said that, growth is fun and we’ve always embraced it as a core objective.”
Flynn acquired the restaurants from one of Panera’s first franchisees: Randy Simon, co-founder and CEO of Original Bread, who opened the 19th Panera back in 1994. He’s also a co-founder of Freddy’s Frozen Custard & Steakburgers. Simon will now focus his efforts on growing Freddy’s.
For Flynn, Panera is an ideal middle child between his Applebee’s and Taco Bell holdings.
“It’s fast-casual but frankly it’s a more complicated, bigger, broader offering than most fast-casual offerings,” said Flynn. “Panera is the perfect diversification for us. Obviously with Applebee’s we have the classic sit-down diner with liquor, then Taco Bell is classic QSR with 70 percent drive-thru which is all about convenience is value.”
Not typical for a middle child
Panera also hasn’t seen the volatility felt across the fast-casual segment lately—it’s been one of the weakest segments in the last two months, according to TDn2K research.
“I think fast-casual was really hot for a while. It got badly overbuilt and the novelty wore off,” said Flynn.
Unlike the typical middle child, however, it’s getting a lot of attention. “We went from zero to 130 in two years, so it’s a very high priority for us. I think Panera is a wonderful system right now. It benefits first and foremost from great franchise leadership,” said Flynn. “But also the fact that they own 40 percent of their cafes, so they put their money where their mouth is.”
Testing initiatives like Panera 2.0, cleaner food, catering and delivery internally before rolling out to the system is the optimal way to run a franchise, according to Flynn.
The 34 restaurants are some of the oldest in the system, and while Flynn said there’s plenty of work to be done, there are no losing cafes in the whole portfolio.
“We wish to do all the upgrades the whole system is going through—that’s 2.0 conversions wherever it makes sense, which we think will be most of the cafés. It’s café-based delivery, which requires some changes and lots of training and lots of hiring,” said Flynn, who will also be moving away from tired trade areas. “In many cases it’s relocations, because these are some of the original cafes and they are in-line or end cap in a shopping center but no drive-thru. But trade areas have changed and the concept has changed.”
Big upgrades are a common theme in the flurry of recent acquisitions, especially as longtime operators like Simon foresee a mountain of capital requirements and a lot of work to stay in the Panera system. Flynn said it’s just the modern life cycle of franchised restaurant operations.
“We have capital, and it’s a way for us to add a little value using an advantage we have anyway to take that portfolio to the next level,” said Flynn.
Flynn expects to build another four Paneras in the next year and accelerate as the new-location pipeline comes up to speed. His Taco Bell construction efforts produce about 10 restaurants per year. The San Francisco-based operator now controls 130 Panera restaurants, along with 477 Applebee’s and 274 Taco Bells.