The Leading Edge - Summer 2010 - 6

COVER

More sophisticated customers
Schlotzsky’s President Kelly Roddy says the restaurant chain wanted to stay on its customers’ dining list. People typically have five or six staple restaurants they go to, he explains. When a new restaurant opens, they try it. If they like it, it goes on the list. That means something comes off their list, too. Schlotzsky’s was a 40-year-old restaurant brand that really hadn’t done anything to keep itself relevant to diners. “We knew we needed to reinvent the brand,” Roddy says. Consumers now expect more from their dining experience. “Everybody thinks they’re a chef because they can watch the Food Network 24/7,” Roddy explains. “They’re becoming more sophisticated when it comes to food and what they want.” Giving diners more came to Schlotzsky’s in two forms: rebranding Schlotzsky’s from top to bottom and co-branding Schlotzsky’s restaurants with Cinnabon, a sister company in the FOCUS Brands family. “If we could do something to make the restaurant more relevant combined with good food, it would be a home run. It would make the units more profitable,” Roddy says. Schlotzsky sought a branding partner that was profitable. Cinnabon worked well, not just because it was in the FOCUS Brands family, but because it, too, marketed the freshness of its buns that were baked daily just like the Schlotzsky’s bread was. So now Schlotzsky’s diners can opt for Schlotzsky’s sandwiches, Cinnabon rolls or both when they visit a co-branded restaurant. Franchise owners now have two companies’ products to sell but the expense of only one manager, one electricity bill, one staff, etc. The results have proven co-branding success. “Now we’re putting Cinnabon in all new Schlotzsky’s restaurants and retrofitting the existing ones,” Roddy says. “It makes it a lot more profitable.”

Tips for reinvention success
Kelly Roddy, president of Schlotzsky’s, offers these five steps:

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Make reinvention a part of your culture. Everybody at Schlotzsky’s thinks about how we’re here to make our franchisees successful. If we make other people successful, regardless of what position they’re in, and if you don’t worry about yourself, success will happen. Be ready for change. Prior to the explosion of food media, trends developed more slowly and took five to six years before they crossed the country. Now, trends go coast-to-coast in a matter of months. You don’t have to make major changes. You just have to stay relevant with your associates, franchisees, vendors and consumers. Don’t forget solid economics. Reinvention still needs to make strong financial sense. Don’t grow. Schlotzsky’s put growth on hold for a couple years. It didn’t pursue deals, though it still sold a select few franchises. We’ve said “no” more than we’ve said “yes.” Beginning last August, Schlotzsky’s went into growth mode and expects to add 100 stores in the first calendar year. Have a strategy. Be patient and work the strategy. Make sure every piece is fleshed out and works properly before you move to the next step. If our culture wasn’t right, we wouldn’t have the mindset on how to make other stores more profitable. Everything had to happen in order. e

What’s in a name
Schlotzsky’s worked with Back Lot, a brand development and design firm, to come up with a new image, and it didn’t even need to “invent” a new food or come up with a new name. The restaurant chain with the “funny name” and “serious sandwich” was known for its round bread. That signature element led to a new design— everything at Schlotzsky’s centers around that “circle.” The company also gave up its traditional red and green for more trendy and relevant colors to illustrate its dining hangout coolness.
VOLUME 10 • ISSUE 4 • SUMMER 2010

The Leading Edge - Summer 2010

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