Lexington-based Fazoli’s and its franchisees operate more than 220 restaurants.
It’s hard to blame restaurant operators for being anxious about the ongoing COVID-19 pandemic. As of January, 110,000 eating or drinking places have closed nationwide, either temporarily or permanently, since dine-in shutdowns began in March 2020. Industry-wide sales losses for last year are estimated at $240 billion and, according to a February 2021 survey conducted by the National Restaurant Association, a third of operators believe sales traffic won’t normalize for at least seven to 12 months.
Meanwhile, Lexington-based Fazoli’s is reporting record sales, and even its management team admits those outstanding results were unexpected.
Just like its industry peers, leaders at the 220-unit, fast-casual Italian chain watched anxiously as COVID-19 infections spread across the United States. Knowing dining room closures were inevitable, they moved quickly to conserve liquidity and prune any expense deemed unnecessary. Next came requests for favors from vendors and landlords. Without customers inside its restaurants, would music providers pause their subscription charges for three months? Would landlords allow short-term rent deferrals if given a plan for catching up? Both groups and many others said “yes.”
Knowing Fazoli’s franchisees also would need relief, the corporate office dismissed royalties for two months.
Carl Howard
“I remember saying to our team, ‘There’s nothing else we can do to take costs out of our business without putting the brand in harm’s way,’” said Fazoli’s CEO Carl Howard. “But I also said that same day, ‘On Monday, I want to talk about going on offense. We’re going to figure out how to adjust to what we’re facing now.’”
Howard’s executive team focused on what customers needed now from Fazoli’s, and how the chain could get it to them. Before the pandemic, it wasn’t known for delivery, drive-thru service or carryout, but Howard believed it had to master all three quickly. It marketed its online and mobile ordering options and promoted delivery and curbside pickup. At units already converted to drive-thru access, staffers moved outside with wireless order-taking tablets to shorten queue times.
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Drive-thru and delivery service, revamped menus and value-centric offers such as a $20 “Super Family” meal have helped Fazoli’s post record profits despite a global pandemic.
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Drive-thru and delivery service, revamped menus and value-centric offers such as a $20 “Super Family” meal have helped Fazoli’s post record profits despite a global pandemic.
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Drive-thru and delivery service, revamped menus and value-centric offers such as a $20 “Super Family” meal have helped Fazoli’s post record profits despite a global pandemic.
When new value-centric menu options — a “5 for $5 menu” and a Super Family meal that bundled a cheese pizza, a bucket of spaghetti (meat sauce or marinara), a bucket of fettuccini Alfredo, a bucket of iced tea and 16 breadsticks, all for $19.99 — spiked sales and created long lines in Fazoli’s parking lots, staffers went outside to pass out free breadsticks and lemonade.
“What I cared about most was getting guests to the restaurant and making us part of their ordering routine,” Howard said. “Ours is a habitual society, and I knew that if we could change people’s ordering habits, we’d get them and keep them.”
In the space of a month, Fazoli’s March sales went from minus 40 percent (compared to March 2019) to flat in April (compared to the same month in 2019). And despite a rollercoaster ride of sales soaring and slumping throughout 2020, sales finished up 9.9 percent for the calendar year — a notable accomplishment in a normal year and attention-grabbing numbers during a global health crisis. In 2021, Fazoli’s logged its highest January sales on record, and despite February’s harsh winter weather, Howard expected the chain to finish up 2.5 percent compared with February 2020.
“This March we will probably be up 50 percent over last year, and we’ll probably finish our fiscal year 2021 [which ends in March] up 12 percent,” he said.
Rodney Lee
Howard was hired by Fazoli’s in 2008 to save its failing business. Founded in Lexington in 1988 and managed by the Jerrico, Inc., restaurant group, the company grew steadily and profitably before sales to a pair of management groups saw its products cheapened to increase profits. Chief operating officer Rodney Lee, who was hired shortly after Howard, said customer surveys done back then showed 75 percent of patrons were leaving the brand because food quality had plummeted.
“We had a dairy-free Alfredo sauce, if you can believe it,” Lee said, referring to a sauce whose scratch version is made from cream and Parmesan cheese. “You could order a twice-baked lasagna, and before your credit card was back in your pocket, it was on the counter. How did that happen so fast? It happens when everything is precooked.”
Howard and his team began a three-year effort to overhaul the menu by raising food quality and by cooking meals to order. Guest survey scores improved and sales moved in step.
When Howard ordered the shift from disposable plates and utensils to washable plate ware, glassware and silverware, unit operators bristled over buying a dishwasher and adding labor. But when guest experience scores doubled, their opinions changed.
“You had to invest money in the guest and stay ahead of what they wanted. We did that to update a tarnished brand.” —Rodney Lee
“You had to invest money in the guest and stay ahead of what they wanted,” Lee said. “We did that to update a tarnished brand.”
With unit sales and profits rising steadily, franchisees got reenergized about Fazoli’s and began reinvesting in its system.
“The same guys who once were saying they didn’t know how they were going to make it are killing it now,” said four-unit franchisee Rob Hearden. “Some of them said the same things about when we started doing delivery last year. They didn’t want to do it, but they’re killing it on that now, too.”
Both Hearden and Lee credit Howard’s leadership and team-building skills with not only the chain’s gradual turnaround but also its rapid repositioning during the COVID-19 crisis.
“When Carl makes up his mind up to do something, he pushes hard to make that happen while being receptive to feedback,” Hearden said. Howard made hard decisions that weren’t quick fixes, he added, but he said it all paid off in the long run. “He had a strategy in mind, put it forth and then got to work executing that strategy. That takes time, but it’s been worth it.