Old is new again
Aging brands get new life
The Plamondon family put a lot into the Roy Rogers brand over the years. Pete Plamondon Sr. operated the company for its owner, Marriott, before becoming a franchisee in 1980. His sons Pete Jr. and Jim joined the company, which had grown into a strong multi-unit developer of hotels and restaurants, and eventually took over.
So it’s safe to say that the family was as disappointed as any to see the decline of Roy Rogers restaurants in the 1990s. It’s also why the Plamondon sons jumped at the chance to buy the brand four years ago. “Dad loves it,” Jim Plamondon said. “It’s back in the family.”
These days Roy Rogers has not only stopped the chain’s decline, the company is doing something it hasn’t done in 17 years: expand.
Roy Rogers is one of a handful of older brands, including Sizzler and Shakey’s Pizza, being given a second lease on life by new owners hoping to bring back departed customers while luring a few new ones in the process. But returning a brand to prominence isn’t easy. While the companies have the advantage of name recognition, they also have the name’s baggage.
Worse: Some people may even forget what the restaurants serve. “Is it easier to bring back an old brand? No,” said Ken Cole, the chief executive of California-based Sizzler. “It’s easier to grow something new and hot than something old and tired.”
Still, there is value in old brands, and so long as that old brand hasn’t been irreparably damaged, an investor willing to put money behind a concept can return it to glory, and indeed there are a long string of examples of old restaurants made new again. “There’s still currency to the name,” said Robert Passikoff, president of New York-based brand consultant Brand Keys. “It stands for something in customers’ minds.”
Sizzler, which has a new prototype, is recovering from a series of setbacks.
So what did happen to Sizzler? It’s a question Ken Cole gets all the time. His answer: It didn’t go anywhere.
The casual-dining chain was founded in 1958 and built a reputation for quality as it grew to more than 600 restaurants at its peak. Yet it suffered from a series of issues, mainly of its own doing, that forced the company to retreat back West.
Many blame much of the chain’s downfall on its move to a buffet concept, which evolved from the introduction of its popular salad bar in 1978. “Sizzler had 30 good years,” Cole said. “When we went into buffet, that just about killed it.”
The company declared bankruptcy in 1996 and trimmed its stores in half. A redesign later didn’t sit well with customers or franchisees. In 2000, an E. coli outbreak in the Midwest made matters worse. When Cole arrived in 2001 he was the chain’s third CEO in four years.
Under Cole, a veteran of numerous concepts including Ohio-based Damon’s, the chain studied other restaurants that have come back after difficult times, including IHOP, Denny’s and A&W Root Beer, as well as non-restaurant brands like the Ford Mustang and Cadillac. The company also found that it had more than 90 percent brand awareness, almost all of it positive. “We were pleasantly surprised,” Cole said. “We found that Sizzler had a more tarnished name in the trade periodicals than in the customers’ minds.”
Sizzler redesigned its stores under Cole and revamped its menu, dumping the buffet and returning to higher-quality beef and seafood that had been abandoned in tough economic times. It kept the salad bar, which makes up 60 percent of lunchtime revenues. The company also took its time to implement the changes, testing the new design and menu in the Sacramento, Calif., area for six months to ensure that higher initial sales—23 percent at the test store—were no fluke.
The caution was understandable. “We had to get consumer research to make sure we didn’t make any mistakes,” Cole said. “The brand wouldn’t have made it.” Today, 98 percent of company stores have the new design. Revenues between 2001 and 2005 grew from $245 million to $354.8 million. In 2005 the chain’s parent company, Worldwide Restaurant Concepts, was sold to Australian private equity firm Pacific Equity Partners.
Sizzler is now in a growth mode, adding stores mostly on the West Coast where the concept remains strongest. It also signed its first development agreement to place a store in Mexico. The chain is focused on value customers, placing its pricing between casual restaurants like Chili’s and lower-end casual dining such as Denny’s, while offering quality food.
“The new management over the last five to six years has done a really good job of putting all the things in place to protect us,” said Ron Higgins, CEO of Forbco Management, which owns 23 Sizzlers in Central and Southern California. “They’re strong financially. I’m looking at it as a new birth.”
Another California chain, Shakey’s, first opened in Sacramento in 1954 and by 1957 became the nation’s first pizza place to franchise. At its peak the chain known for its family-friendly atmosphere had more than 500 restaurants and had become the most recognizable name in the industry.
In 1967 company founder, Sherwood “Shakey” Johnson sold his half of the chain to Colorado Milling and Elevator. It would be the first in a series of ownership changes over the next 30 years that would throw the franchise into disarray, including a 1989 sale to Singapore-based Inno-Pacific Holdings. “All those firms were probably more focused on trying to get a financial return on investment, rather than trying to build the brand,” said Tim Pulido, who was named CEO of Shakey’s in 2006.
Numerous stores closed. Others became old and fell into disrepair. In 2002 a group of franchisees sued Inno-Pacific for what amounted to neglect of the franchise. That suit revealed serious financial problems with the chain’s owner, and ended with the 2004 sale of Shakey’s to a 19-unit franchisee, Jacmar Inc., for $4.5 million. Today, Shakey’s has 55 stores.
But Shakey’s received a “clean bill of health” under the new owners, Pulido said. The company was debt-free. Its new owner lured investors and pumped $11 million in capital into the concept. It also started overhauling the management team, luring Pulido away from Asian chain Pick Up Stix, where he had been president.
Executives quickly worked to establish Shakey’s brand, deciding to refocus on its traditional category as a family-based fast-casual restaurant. It also worked to rebuild broken relationships with franchisees by forming a franchisee advisory board.
Then the chain worked to remodel old stores while creating a new design that keeps the entertainment while shielding customers from what Pulido calls the “Las Vegas effect” with bright lights and noise. It also updated its menu, though kept its focus on its core items: pizza, chicken and its signature fried potato dish, “Mojo Potatoes.”
The company’s efforts weren’t without missteps. While sales at its new prototype store, opened in Covina, Calif., in September 2006, were up 60 percent over the location’s previous iteration, its lunch crowd remained flat. Pulido blamed that on the company’s decision to eliminate the lunch buffet in favor of other menu items, including Angus burgers. Subsequent prototypes and remodels will keep the buffet while ditching the burgers. “While we’re not an all-day buffet, lunch buffet is part-and-parcel to the Shakey’s brand,” Pulido said.
Overall, same-store sales grew 7.5 percent last year. They’re up 6 percent so far this year. Shakey’s is opening three corporate stores and two franchise locations this year. It is planning another 12 franchise openings next year. “I think it’s great,” said Frank Kelleher, an owner of Shakey’s in Northridge, Calif. “It has to be re-energized. We were not that active for a long period of time.”
All in the family: Roy Rogers
Roy Rogers this year expects to open its first new franchise locations for the first time in 15 years.
Maryland-based Roy Rogers is growing modestly these days, with plans to open six to eight stores over the next two years. Yet that Roy Rogers even exists is only slightly short of miraculous.
The Maryland-based fast-food chain was started by the Marriott Corporation in 1968, which used the name of the famous cowboy singer and actor to promote a brand specializing in higher-quality burgers, roast beef sandwiches and chicken. At its peak the chain had 648 locations, mostly in the Mid-Atlantic States.
The company’s struggles began in 1990 when Hardee’s bought it, planning to convert all the restaurants. That decision was made despite one key fact: “The Roy Rogers brand had more resonant values among customers than the Hardee’s brand,” said Passikoff, whose company had studied fast-food brands just before that decision.
The conversions didn’t take. “One year to the day later in The Wall Street Journal, (former Hardee’s Chairman Purdy) Crawford said, ‘we made a mistake. We underestimated the Roy Rogers brand,’” Passikoff added. Yet, five years later, the struggling Hardee’s chain decided to sell off Roy Rogers restaurants bit by bit to rival fast-food companies Wendy’s, McDonald’s and what is now Boston Market. In one year the chain went from 550 stores to 150.
By 2003, the chain was down to a handful of franchisees that had been keeping the brand alive despite no corporate support. There were fewer than 50 total stores. “It was awful,” Jim Plamondon said. The Plamondons stepped in and bought the brand from Hardee’s that year.
By that time, the Plamondons had done so much work supporting themselves that they were ready to become a franchisor. “For many years when Hardee’s was getting out of the business, we had to step in as the franchisee and do a lot of work ourselves—marketing, training, product development. They weren’t doing it for us,” Plamondon said. “We were happy to have full control.”
To Plamondon, there is nothing wrong with the Roy Rogers name—“The brand was never broken,” he said—it just needed some new life. The brand still had a strong following, particularly in Maryland and Northern Virginia, despite a check average of more than $6, high for a quick service restaurant.
Plamondon said Roy Rogers is one of the rare fast-food restaurants that are a destination for customers. Indeed, in April when the company opened its first restaurant outside Charleston, W.V., the line to get in was out the door. “We like to call it a ‘cult-like following,’” he said.
These days Roy Rogers is adding new restaurants, including two new franchise locations by the end of 2007—the first new franchises in more than 15 years, Plamondon said. Others are renovating. Marriott spinoff HMS Corp., the company’s biggest franchisee, is renovating the 21 stores it operates in airports and travel plazas.
“We’re all excited about the opportunity that has presented itself,” Plamondon said. “We talk about the days when (Roy Rogers) used to be so strong. Now there are a lot fewer stores. On the other hand, but for that happening, we wouldn’t be where we are today, owning the brand and that concept.