QSR February 2023

EVOLVINGQUICK SERVICE FOR THE FUTURE FEBRUARY 2023 / NO. 300

®

A New Future of Fast Casual P. 42 Hot Dogs are Hot Again P. 11 PLUS:

40 40 THE LIST Meet the fast casuals ready to catapult out of the pandemic and into a future rife with potential. P. 16

HUSBAND-AND-WIFE TEAM PACE WEBB (LEFT ) & CHRIS GEORGALAS HAVE DEVELOPED A WINNING CHEMISTRY AT DADDY’S CHICKEN SHACK .

/ P.57

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T A B L E O F C O N T E N T S F E B R U A R Y

2 0 2 3 # 3 0 0

D E P A R T M E N T S

F E A T U R E S

T h E F o R t Y f O r T y L I S t

N E W S 14 FRANCHISE FORWARD Taste of Growth

How one franchise group laid a blueprint for 1,000 locations. BY BEN COLEY 50 INNOVATION The Wonders of Web3 The always-innovative Wow Bao has another customer engagement

tool on deck. BY ISABELLA SHERK

I N S I G H T 11 FRESH IDEAS

Letting the Dogs Out One of the industry’s most nostalgic categories is riding a wave of comfort-food preference. BY ISABELLA SHERK 52 OUTSIDE INSIGHTS From Resignation to Retention Perhaps the evolution of the restaurant labor market needs to start from within. BY RAHKEEM MORRIS 56 START TO FINISH Adam Romo The CEO of Eatzi’s Market & Bakery came into the industry by accident. But he’s more than made up for lost time since.

16 /

DADDY’S CHICKEN SHACK GM LARRY NORMAN HELPS THE RISING FAST CASUAL DELIVER ON ITS HOSPITALITY PROMISE.

DADDY’S CHICKEN SHACK, YONUTZ, PLOMO QUESADILLAS

16 The 40/40 List BY QSR STAFF

42 A New Future of Fast Casual BY CALL IE EVERGREEN

Our seventh edition of The 40/40 List once again recognizes 40 fast casuals with fewer than 40 locations that we believe are on the verge of something big. The theme this year? Not just resilience, but reinvigoration as well.

The pandemic inspired fast casuals to adopt drive-thrus and delivery, marking the beginning of a new innovation era that has led to new restaurant designs and technological solutions to supply chain and labor shortage challenges.

2 BRANDED CONTENT

4 EDITOR’S LETTER

7 SHORT ORDER

80 ADVERTISER INDEX

O N T H E C O V E R Daddy’s Chicken Shack has developed a massive growth pipeline in a short period of time. PHOTOGRAPHY: DADDY’S CHICKEN SHACK / SHANNON O’HARA

QSR is a registered trademark of WTWH Media, LLC. QSR is copyright © 2023 WTWH Media, LLC. All rights reserved. The opinions of columnists are their own. Publication of their writing does not imply endorsement by WTWH Media, LLC. Subscriptions (919) 945-0704. www.qsrmagazine.com/subscribe. QSR is provided without charge upon request to individuals residing in the U.S. meeting subscription criteria as set forth by the publisher. AAMmember. All rights reserved. No part of this magazinemay be reproduced in any fashion without the express written consent of WTWHMedia, LLC. QSR ( ISSN 1093-7994 ) is published monthly by WTWH Media, LLC, 1111 Superior Avenue Suite 2600, Cleveland, OH 44114. Periodicals postage paid at Cleveland, OH and at additional mailing offices. POSTMASTER: Send address changes to QSR, 101 Europa Drive, Suite 150, Chapel Hill, NC 27517-2380.

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BRANDED CONTENT

E D I T O R I A L EDITORIAL DIRECTOR Danny Klein dklein@wtwhmedia.com

BRAND STORIES FROM QSR

MANAGING EDITOR Nicole Duncan nduncan@wtwhmedia.com SENIOR EDITOR Ben Coley bcoley@wtwhmedia.com SENIOR EDITOR Callie Evergreen cevergreen@wtwhmedia.com

IN THIS ISSUE

57

F E B R U A R Y / 2 0 2 3

The last couple of years have been a roller coaster for the franchising industry as a whole, even for brands that don’t necessarily fit within the quick-service restaurant space. As consumers gradually returned to dining out and enjoying more time away from home, brands have also had to contend with supply chain issues and chronic labor shortages throughout the hospitality industry.

C U S T O M M E D I A S T U D I O DIRECTOR OF CUSTOM CONTENT Peggy Carouthers pcarouthers@wtwhmedia.com ASSOCIATE EDITOR , CUSTOM CONTENT Charlie Pogacar cpogacar@wtwhmedia.com ASSOCIATE EDITOR , CUSTOM CONTENT Kara Phelps kphelps@wtwhmedia.com

QSR ’s RESTAURANT FRANCHISING / FEBRUARY 2023 These brands are looking for franchisees with which to grow their footprint in 2023 and beyond.

58 Bobby’s Burgers 60 Bonchon 62 Hukleberry’s 64 Pizza Factory

66 Slim Chickens 68 The Human Bean

74 Abbott’s Frozen Custard 76 BurgerFi and Anthony’s Coal Fired Pizza & Wings 78 Mr. Pickle’s Sandwich Shop

64 Pizza Factory Hits a Homerun in Hometowns Nationwide Iconic West Coast

72 Bring the Taste of HarlemHome with Harlem Shake

70 Focus Brands 72 Harlem Shake

A R T & P R O D U C T I O N ART DIRECTOR Tory Bartelt tbartelt@wtwhmedia.com GRAPHIC DESIGNER Erica Naftolowitz enaftolowitz@wtwhmedia.com PRODUCTION MANAGER Mitch Avery mavery@wtwhmedia.com

ADOBE STOCK / BY JOSHUA RESNICK

RESTURANT FRANCHISING | FEBRUARY 2023

57

58 Bobby’s Burgers by Bobby Flay a Top Franchise Brand to Watch in 2023

brand enhances operations with innovative tech-stack, driving sales and expansion. SPONSORED BY PIZZA FACTORY 66 Slim Chickens Hit Major Milestones in 2022 The breakthrough chicken brand wrapped up 2022 on a high note. SPONSORED BY SLIM CHICKENS 68 The Human Bean’s Personal Touch

S A L E S & B U S I N E S S D E V E L O P M E N T GROUP PUBLISHER Greg Sanders gsanders@wtwhmedia.com NATIONAL SALES DIRECTOR Eugene Drezner edrezner@wtwhmedia.com 919-945-0705 NATIONAL SALES MANAGER Edward Richards erichards@wtwhmedia.com 919-945-0714 NATIONAL SALES MANAGER Amber Dobsovic adobsovic@wtwhmedia.com 919-945-0712 NATIONAL SALES MANAGER John Krueger jkrueger@wtwhmedia.com 919-945-0728 SALES SUPPORT AND DIRECTORY SALES Tracy Doubts tdoubts@wtwhmedia.com 919-945-0704

HARLEM SHAKE

This unforgettable, retro-dining experience is on the franchising fast track. SPONSORED BY HARLEM SHAKE

BOBBY’S BURGERS BY BOBBY FLAY

74 Abbott’s Frozen Custard Is Heating Up The 120-year-old

World-class leadership team invites operators to franchise with renowned chef. SPONSORED BY BOBBY’S BURGERS BY BOBBY FLAY 60 Bonchon Celebrated its Twentieth Anniversary and Drove Growth in 2022 The Korean fried chicken concept continues to strate gically push growth and increase sales. SPONSORED BY BONCHON

brand recently inked a 100+ unit franchise agreement. SPONSORED BY ABBOTT’S FROZEN CUSTARD 76 Fast-Growing Chains Seek Franchisees SPONSORED BY BURGERFI AND ANTHONY’S COAL FIRED PIZZA & WINGS 78 This 56-Unit Premium Sandwich Concept Has a Unique Recipe for Growth The crowd favorite in northern California since 1995, Mr. Pickle’s Sandwich Shop is ready to franchise nationwide. SPONSORED BY MR. PICKLE’S SANDWICH SHOP

F O U N D E R Webb C. Howell

A D M I N I S T R A T I O N 919-945-0704 / www.qsrmagazine.com/subscribe QSR is provided without charge upon request to individuals residing in the U.S. who meet subscription criteria as set forth by the publisher.

THE HUMAN BEAN

Pairing cups of kindness with a top-ranked drive-thru coffee brand. SPONSORED BY THE HUMAN BEAN 70 Power in Numbers Focus Brands leverages its size to reap benefits for franchisees. SPONSORED BY FOCUS BRANDS

R E P R I N T S The YGS Group 800-290-5460 FAX: 717-825-2150

62 Huckleberry’s Breakfast and

qsrmagazine@theygsgroup.com www.qsrmagazine.com/reprints Sponsored content in this magazine is provided to the represented company for a fee. Such content is written to be informational and non-promotional. Comments welcomed at sponsoredcontent@qsrmagazine.com.

Lunch Positioned for National Expansion Strong unit economics and 7 A . M . –3 P . M . operating hours set this brand apart. SPONSORED BY HUCKLEBERRY’S

WTWH MEDIA LLC RETAIL, HOSPITALITY, AND FOOD GROUP

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E D I T O R ’ S L E T T E R

Restaurants and the ‘Lipstick Effect’

I ’m not an economist. I can’t count the number of quarters in my daughter’s piggy bank before getting a headache. As I type this in early January, I’ve browsed a lot of articles concerning a potential recession, with some claim ing there’s a current one, and what it all means or could mean or where it heads next. I can’t speak to the curve or the recovery line, but I do want to highlight something I came across recently that speaks to a broader theme. Generally (and why COVID was nothing like 2008–2010 ), foodservice, especially fast food, weathers economic downturns better than most. It’s a ref lection of the so-called “Lipstick Effect,” where con sumers are willing to buy lower-priced luxury goods when wallets tighten. Say, instead of a fur coat, you get expensive lipstick. In the case of restaurants, think of families replacing vacations or other excursions with a night out at their favor ite eatery, or a bag of takeout. But how does this carry forward into today’s landscape? Something I’ve heard from a lot of operators is that consumers have begun to self-segment their behavior to fit the climate. Some are eating out less frequently, yet doing so more indulgently. Starbucks, for one, speaking nothing of its traffic, has seen beverage modifiers balloon into a $1 billion business. Younger consumers in particular are taking advantage of a cold customized beverage program that’s replaced revolving LTOs. What it suggests is core and loyal customers are amping up “affordable luxuries” when they feel the experience is worth the price. The real friction that’s popped during this inf lationary era is when brands ask customers to pay more for

something they’ve historically paid less for. Or, even more so, try to justify the tag of “shrinkf lation” in a universe that built its base on value and abundance. However, guests don’t appear to be pushing back nearly as much for things they choose. One example: delivery. As you can see on page 8 , price is hardly a consideration for that cohort. Getting back to the data I teased earlier, the Loyalty Report 2022 from Paytronix showed 55 percent of restau rant loyalty customers increased their average check size by more than the cost of menu items, indicating inf lation increased loyalty member visits. Simply, loyalty has become a tool for mitigating difficult economic conditions. As the company pointed out, while the exact relationship between loyalty check size and prices can be difficult to determine, the trend is clear—loyalty members continued to spend despite inf lation. Starting around March 2022, loyalty member checks lifted in lockstep with prices. In my view, core users are going to stick as long as brands give them the means and support to do so. Along the way, loyalty also empowers restaurants to present a new face of value that goes beyond the deep discount—one that’s personalized and catered to what a guest actually wants. In the end, it’s something worth paying for.

The quick-service consumer has already begun to vote with their wallets.

DKLEIN@WTWHMEDIA.COM QSR MAGAZINE

Danny Klein, Editorial Director

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SHORT ORDER

Subway sells more freshly baked cookies than any other restaurant company in the U.S.

Subway’s Sweet Spin Two of the brand’s most

TOCELEBRATENATIONALCOOKIEDAY on December 4, Subway unleashed a foot of “cookie goodness,” piled high with toppings. Inspired by the company’s new Subway Series signature lineup, cookie lovers could sink their teeth into four limited-edition footlong flavors exclusively at Cookieway, Subway’s pop-up restaurant that only serves its cookies. One example: The Subway Cookie Club, which mirrored Subway’s No. 11. It stacked cookies on cookies with a Double Chocolate cookie base and vanilla frosting, then topped with Chocolate Chip, White Chocolate Macadamia and Raspberry Cheesecake cookie chunks, rainbow sprinkles, and chocolate and raspberry sauce. Other options included: The Mexi-Cali; The Monster; and The Great Pickle: The “subs” were available on a first-come, first-serve basis in exchange for a donation to the Subway Cares Foundation, a 501c3 non-profit organization that provides grants to organizations around the world.

iconic items melded together for a cause.

SUBWAY

www.qsrmagazine.com | QSR | FEBRUARY 2023

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SHORT ORDER

The top five influencers:

Inflation remains an ever-pressing concern. By now, it’s no mystery prices have climbed industry-wide. Customers are paying more for many of the quick-service meals they’ve ordered for years. And there’s not much to suggest that’s going to subside any time soon, even if it might have peaked during 2021. All said, though, how are consumers reacting? Specifically, we’ll focus on one positive reflection from a study by global scale-up company Deliverect, which serves more than 27,000 locations across 40 markets. The company surveyed over 7,000 global consumers to identify preferences and changing habits when it comes to restaurant o erings. One point that emerged on the U.S. side—delivery consumers don’t consider price a key factor in their delivery purchasing behavior. Simply, they’re willing to foot the bill for convenience.

30 % Quickest delivery time 28 % Convenient location

25 % Specific

17 % Sawon social media

The baseline: Guests, inflation and all, are still ordering more delivery: 42 percent of people in the U.S. get up to three deliveries a week. That’s 2 percent above pre-inflation habits. 42 % It’s not just a solo thing: Twenty percent of respondents in Deliverect’s study said they were ordering on a weekend evening with friends and family, which was 1.4X more than people ordering on a weekday with their crew. 20 % Ô 1.4 What do they care about (if not price)? A whopping 90 percent said quality ingredients were more important now than before the rise of inflation. Additionally, convenience was a major deciding factor for guests selecting a restaurant for takeout and delivery; 84 percent claimed how close a restaurant was and how fast their food could get to them was more important today than of people in the U.S. get up to three deliveries a week were ordering on a weekend evening with friends and family which was 1.4Xmore than people ordering onaweekday

menu item availability 19 % Appealing photos of the food

The classics: Just as restaurants witnessed out of the COVID gates, pizza remains a cuisine delivery customers gravitate toward—whether the reason is price or comfort. Forty seven percent of people said they’d order pizza any time, inflation or not. “Good ol’ American food” was next at 40 percent . 47 % The not-so-good, or why people are frustrated with delivery: of people said they’d order pizza any time, inflation or not

31 % Long delivery time 30 % Incorrect orders 26 % Delivery charges

25 % Incomplete orders 23 % Unexpected/

(such as itemsmissing)

miscommunicated delays with order

To circle: “overpriced”menu items didn’t appear in the list, “reinforcing that people arewilling topay more for high-quality food, ” Deliverect said.

it’s ever been. 90 % 84 %

said quality ingredientswere more important now than before the rise of inflation claimed how close a restaurantwas and howfast their food couldget to them was more important today than it’s ever been

Wait? In terms of wait times, here were consumers’ expectations:

10–20 minutes 23 %

21–30 minutes 34 %

31–40 minutes 23 %

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In just over 20 years, we’ve gone from a single Texas neighborhood BBQ place to QSR magazine’s list of America’s 40 hottest category startups!

As we continue to grow, we’re excited about where we’re headed, but we’ll never forget where we’re from.

That’s why we smoke all of our meats in-house for 10 – 14 hours every day at every single Smokey Mo’s location. Having Mo’ flavor and Mo’ passion is how we provide every customer with authentic Texas BBQ and genuine Texas hospitality.

For locations and franchise opportunity information, follow the smoke to smokeymosbbq.com.

fresh ideas Letting the Dogs Out One of the industry’s most nostalgic categories is riding a wave of comfort-food preference. | H O T D O G S S E A R C H F O R G R O W T H |

B Y I S A B E L L A S H E R K

Hot Dog on a Stick keeps delivering its recognizable menu to guests.

H ot dogs are a classic and nostalgic food that generations of Americans have enjoyed. Memories of celebrating the Fourth of July, for example, are often associated with grilling the food by the pool or out on the deck. People crave hot dogs at the fair, the carnival, or the boardwalk. Hot dogs are hardly new to the consumer conscious, but industry professionals in the category are working to keep them relevant to modern diners. During the pandemic, online ordering and third-party delivery boomed, and the trend has proved to have lasting power—some thing that translates well to hot dogs. Being stuck at home brought

a return to the comforting, nostalgic food people grew up with, now available through a few clicks on their mobile devices. One of those items was undoubtedly hot dogs. What normally is an occasion-based food shifted into an opportunity for convenience. Jenn Johnston, president of the quick-service restaurant divi sion at FAT Brands, where Hot Dog on a Stick is housed, says the pandemic surge continues to adjust dayparts. The snack brand’s year-to-date sales and transactions are each up 10 percent. “I think that is a testament to consumers really continuing to crave comfort foods post pandemic,” Johnston says.

HOT DOG ON A STICK

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fresh ideas

| H O T D O G S S E A R C H F O R G R O W T H |

Hot Dog on a Stick has 50 units, with the majority located in shopping malls, and a smaller footprint on boardwalks and amuse ment parks. Before the pandemic, the brand mostly drove customers to stores by being located in foot traffic-heavy locations where they were out shopping or having fun, and wanted a quick bite to eat. After, like many other quick-service brands, Hot Dog on a Stick had to adjust. The chain had not majorly delved into the world of third-party delivery yet. “Our products aremade fresh to order when people get to the counter, so we hadn’t really antici pated the demand for people ordering to go and enjoying them later in their home,” John ston says. “With the pandemic we ended up putting all of our stores on third party deliv ery and online ordering.” Johnston also notes that because hot dogs can be a snacking occasion or a meal for consumers, many will order multiple hot

sticking to its classic menu items generally serves it well. “People typ ically go back to what they actually love,” he says. “Our No. 1 sellers are chili cheese and chili dogs.” Similarly, Johnston says Hot Dog on a Stick also likes to prioritize its core. “We really try to stay true to our iconicmenu first and foremost,” she says. “It gives us a lot of cred ibility—we do a few things and we do them really well. We spend a lot of time in research and devel opment with numerous items, and only a small amount of themactually make it tomarket because we want tomake sure that if we do innovate, it’s a wow factor.” In terms of playing into the nostal gia of the food group, Koegeboehn says it has its place, but is not the only thing that is important to talk about. You also have to continue promoting their relevance today, he says. “I truly believe the best way to promote any product is showing how it’s relevant in today’s society,” Koegeboehn says. “Nowadays you should be talking about the quali ties of the product.” Leaning into relevance is impor tant, Koegeboehn adds, because of the preconceived notions peo ple may have surrounding the food. Many Americans are still afraid of what is in hot dogs, even if they may love the taste, he says. That’s why Koegeboehn thinks keeping

WIENERSCHNITZEL, THE COUNTRY’S LARGEST HOT DOG CHAIN, OFFERS OPERATORS A WIDE ARRAY OF ASSET MODELS.

dogs in each order. This leaves room for innovation in the cate gory, especially at Hot Dog on a Stick—if a customer orders dinner and wants to try a new kind of hot dog, they might get one newer option alongside their classic favorites. One popular offering of late has been the Flaming Hot Cheetos hot dog, Johnston says. She also adds a large portion of transactions are ordered with a lemonade, another item the brand likes to focus on in terms of R&D. The brand offered a “Pineberry” flavor throughout the hol iday season, for instance. Wienerschnitzel, which claims to be the nation’s largest hot dog chain, also focuses on innovation to inspire trial and encourage repeat visits from loyal users, chief marketing officer Doug Koege boehn says. The brand has rolled out pretzel buns and different toppings for fresh kinds of hot dogs. Koegeboehn says he believes toppings are where innovation thrives in the hot dog business. One of Wienerschnitzel’s popular creations is called a “junkyard dog,” which has chili cheese fries on top. However, the brand finds

the modernity element in marketing and social media is impor tant. Spreading the word about Wienerschnitzel on social media along with fans of the brand online have made it a viable option for many franchise opportunities to come to fruition. Koegeboehn says area deals have been sold to new franchisees moving across the Midwest, and the brand’s first international deal was signed because of Wienerschitzel’s longevity as a brand. That nostalgia factor when it comes to hot dogs remains vital, however. It is a driving force behind people’s hot dog cravings and the food’s classification as a comfort category in general. This balance between nostalgia and innovation can perhaps best be seen in Hot Dog on a Stick’s original location that had been open for 75 years on Muscle Beach in Los Angeles. Recently, it under went a makeover. “It’s still very nostalgic and true to the roots of the original location,” Johnston says. “But it’s been optimized in a lot of ways with modern amenities like air conditioning being added.” q

HOT DOG ON A STICK, WIENERSCHNITZEL

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FEBRUARY 2023 | QSR | www.qsrmagazine.com

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DEPARTMENT FRANCHISE FORWARD

Tasteof Growth How one burgeoning franchise group laid a blueprint for 1,000 locations. B Y B E N C O L E Y

Where else are you given that opportunity in life?” In pursuit of this dream, Rodriguez part nered with private equity firm Triton Pacific Capital to form franchising company, Tasty Restaurant Group. From the start, the goal was to enter agreements in quick service because of its recession-proof nature and ability to withstand different pressures, like a global pan demic. Rodriguez sought the best of fast food so he could worry less about brand management and leadership and more about developing people and fine-tuning operations. The f irst acquisition was Burger King in June 2018. Tasty Restaurant Group also con sidered Wendy’s, but Rodriguez previously worked at Burger King and served as a fran chisee; he also grew up in Miami, where the chain is headquartered. A year and a half later, Rodriguez leveraged his years of experience with PepsiCo—the parent of Yum! Brands— to buy into Pizza Hut. Then, after serving as Dunkin’ president from 2006–2008, the industry veteran became a franchisee for the doughnut chain and sister concept Baskin-Rob bins. Rodriguez rounded out Tasty Restaurant

Tasty Restaurant Group runs about 400 restaurants in the Midwest, including 20 Dunkin’ stores.

R obert Rodriguez came to the U.S. without knowing English, and like many other immigrants, found his voice through restaurants. His resume now features 50 years’ worth of industry experi ence—on the franchising and corporate side—including notable executive stops at McDonald’s, Taco Bell, and Denny’s. As he aged, Rodriguez became increasingly interested in running an organi zation that gives back to the community and creates a clear-cut career ladder for employees. “How do I lead and how do I show people that this is an industry and this is a profession and it’s not a job and how do I give back?” Rodriguez says. “So I can give you example after example of going into restaurants and we see people who are struggling, don’t know what they want to do with their careers and businesses.” “This is a great career,” he adds. “It’s really a great career, and it’s not just because you make money. It’s because I’m going teach you about a profit and loss statement, I’m going to teach you how to manage people, I’m going to teach you how to lead individuals, I’m going to teach you how to run a multimillion-dollar business.

Group with KFC and Taco Bell in December 2021. The franchise company now operates roughly 400 restaurants in the Midwest, Mid-Atlantic, and Northeast. Tasty Restaurant Group is most heavily invested in Pizza Hut (221 stores ), followed by KFC (90), Burger King (68 ), Dunkin’ (20), and Baskin-Robbins ( six ). “Our mission continues to be the same,” Rodriguez says. “We’ve got to take care of our people first and foremost. We want to be a leading brand running great restaurants. But more importantly for me, it’s taking care of the people who will do that. Because I keep reminding everyone that at the end of the day, there are only cash registers in the restaurants. They’re not anywhere else. So the rest of us are just G&A and support staff.” Of these brands, Dunkin’ is heading toward the biggest growth spurt. Tasty Restaurant Group recently signed a 45-unit deal to bring new locations to New Orleans, Baton Rouge, and surround ing markets over the next several years. There are only 15 Dunkin’ stores in Louisiana, but Rodriguez says those select few are “per forming extremely well.” As an executive that spent years trying to build out the fast-food chain west of the Missis DUNKIN’ [CONTINUED ON PAGE 54]

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4 4 O O fast casuals with fewer than 4O locations / B Y Q S R S T A F F Innovation, opportunity, and hardships spur entrepreneurship. And that’s always been the case for quick service’s most inventive corner, fast casual. While COVID-19’s grip has lightened, there remain roadblocks, from rising costs to labor to a consumer grappling with uncertain economic conditions. But this hasn’t curbed the growth and inspiration of a new generation of brands. ¶ Our seventh edition of the 40/40 List once again recognizes 40 fast casuals with fewer than 40 locations that we believe are on the verge of something big. Whether just getting started or prepping for major expansion, this list of restaurants has designs to cata pult out of the pandemic’s depths and into a future rife with potential. This wave of battle-tested fast casuals is ready to emerge into a new era of restaurant growth. The 40/40 List

T h E F o R t Y f O r T y L I S t

➺

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■ FOR HUSBAND-AND-WIFE TEAM PACE WEBB AND CHRIS GEORGALAS, IT ALL STARTED WITH A GAME-CHANGING CHICKEN SANDWICH. 

The 40/40 List

Daddy’s Chicken Shack

A wordPaceWebbkeeps returning to is “chemistry.” Daddy’s Chicken Shack tells a startup story that’s not unfamil iar. The brand had a product guests craved and then fit the dream into an improbable box. In this case, a 700-square-foot space in

HEADQUARTERS: HOUSTON, TEXAS

UNITS: 1

Pasadena, California, Webb and her husband and business partner, Chris Georgalas, discovered on Craigslist. There was no bathroom, foot traffic, seating, and a red curb fronting the store (so no park ing). Webb says Daddy’s could count the number of customers “on our hands and feet in a day.” This was November 2018. Four years later to the month, Daddy’s signed its seventh regional devel opment deal and second in Texas. Not in the brand’s history, but in just 2022 alone. Along with the inking of eight franchise agreements across California, Oregon, Texas, Colorado, Arizona, Georgia, and Florida, the brand today boasts a total of 120 units in development.

DADDY’S CHICKEN SHACK

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There’s one location open and run ning—a 2,400-square-foot Houston model that portends future development. But two, in Scottsdale and Denver, are slated to land in Q1. The Pasadena test kitchen is no lon ger open to the public. While there’s a lengthy road ahead, Daddy’s is off to a rare spurt. “It just all feels right,” Webb says. “And it doesn’t mean the path to success is at all linear, but we’re definitely in a very good place, and with great chemistry.” What Webb is referencing is that intan gible piece that often splits upstarts from those that make it. For Daddy’s, it clicked through the center of COVID-19. Webb maintained a fine-dining catering business in Daddy’s early days. When the pandemic hit, though, one company moved down ward and the other rocketed: Daddy’s watched sales leap 200 percent. Georgalas says COVID forced Daddy’s, like hosts of brands nationwide, to make serious adjustments and gather intel as it tried to figure out how to reach people. There came a point where drivers pulled up and got in line, and guests piled up outside. Georgalas had never worked in a restau rant, so he went to the front of house and tried to meet every customer who walked in. Naturally, Daddy’s didn’t staff for a 200 percent increase, which kept him busy. Georgalas handed water bottles and cook ies to drivers and diners. As regulations relaxed, Daddy’s fig

“biggest, baddest thing you could have.” Daddy’s expects to spread mainly as inline or endcap locations, with about 25 per cent or so as standalones. “When I’m in the space, it has the gravitas of a legacy brand,” Webb says. What can’t be lost, however, is why Georgalas pushed his chips in on day one. Webb’s Los Angeles-based catering shop, Taste of Pace, was asked to make sliders and tacos at an event back in 2013 (they weren’t on the menu). She developed a fried chicken sandwich with sriracha mayo, Thai-style slaw, buttermilk fried chicken, and a brioche bun. The food drew a crowd and even the praise of actress and singer Mandy Moore. The following day, Webb called her dad and flippantly mentioned she had a retirement plan. He’d be able to hang in the Venice Pier, wear Hawaiian shirts, and fry chicken. That’s where the name, “Daddy’s,” was born. Webb’s father, an artist and graphic designer, would actually, in time, craft the Houston store’s interior alongside Harri son, a global consultancy company that’s assisted with development of several familiar restaurant aesthetics, including Fogo de Chão and Maggiano’s. It’s an authentic-looking shack that mismatches elements of a house, like win dows of random sizes, and a door hanging from the dining room ceiling. Think of it as American South with Japanese minimal ism as a backbone.

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DADDY’S HAS BIG-TIME BACKING AS IT READIES TO GROW.

ured out how to schedule shifts and leverage tech, which was an area the brand got ahead of from the outset; it had to, given the lack of foot traffic and parking. Daddy’s became one of the early customers of Ordermark (now Nextbite)—an online ordering solution that offers integration of third-party delivery providers—and dipped into facial recognition kiosks and autonomous delivery. By the end of 2018, Dad dy’s was on 11 delivery apps and offered native online ordering. Essentially, the fast casual navigated COVID with an omnichannel system before the couple (or many other people, for that matter) were even sure what that term defined. “We were able to take a look at our data and look at our numbers and say, this is what we need here and adjust and once that dust set tled, that’s when we realized,” Georgalas says. “We came up for air and we’re like, oh, I think we have something here.” Georgalas reached out to old contacts and a close friend. Even tually, Daddy’s crossed paths with Dr. Ben Litalien, founder of FranchiseWell, an agency that consults with mega groups like UPS and IKEA. The partnership evolved into an investment from Dave Lini ger, the co-founder of global real estate franchise RE/MAX. He chose Daddy’s from 200 potential candidates. “Hearing the success stories, hearing the challenges, [Dave] telling us that he’s made every mistake in the book in the last 50 years, but hearing what that’s yielded as far as the success that people were set up for from inside the business and outside, is really what was attractive to us,” Georgalas says. Daddy’s then set out to design its Houston flagship, a standalone the company says shows potential franchisees an example of the

Returning to the food (and Georgalas’ initial inspiration), Webb fine-tuned her sandwich over the years before Georgalas tried it in 2015. He believed Webb found her Shake Shack. “I told her you should do something with this and she looked at me like I had five heads and she said, ‘well, you should do this with me,’” he says. At the start of 2018, Webb and Georgalas opened Daddy’s at Smorgasburg food market. The weekly event attracted 4,000 cus tomers when the restaurant joined, but saw upward of 13,000 at some points. Hundreds of sandwiches were sold each day and later that year, Georgalas tracked down the Pasadena space. They signed a lease and moved in 18 days later. Webb notes, although she didn’t recognize it then, she had been training to be a CEO for years. “A chef’s career is very similar in a lot of ways,” she says. “You’re type A, a little high strung, have to be a great leader, have a product to get out on time, on budget, at a certain tem perature. There were so many similarities that I didn’t even know I had been cultivating.” But importantly, in addition to the sandwich, Georgalas believed in Webb. His first role, he says, was to support her and find ways to get the message out. He was an institution position trader at Deutsche Bank and the hospitality sector before they met, with no inkling to get in the restaurant game. “It was about supporting her, supporting a woman as a founder of a business called Daddy’s, which is really cool. And the magic is really starting to happen,” he says. Why the franchising route came down to Liniger. They jumped

DADDY’S CHICKEN SHACK (2)

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in together. Liniger joined as an investor and later sought out his own regional development agreement. He was the first to ignite a chain of regional development deals, securing 20 units split evenly between Arizona and Colorado. A year after starting its franchising journey, Dad dy’s hosted a regional developer conference in Las Vegas. The small menu helped streamline oper ations and Daddy’s tech chops created a systemwhere the brand could track and moni tor performance. Daddy’s selection of chicken sandwiches is best described as a confluence of Southeast Asian, American South, and Jap anese culture, partly an ode to Georgalas, who is half-Japanese. For instance, the Big Daddy sandwich comprises napa slaw and sriracha mayo, while the Spicy Daddy features sam bal, cilantro, and ginger mayo. For dessert, the restaurant offers salted miso chocolate chip cookies, baked fresh each day. The regional developer approach is a hybrid of sorts; a “train the trainer” system that enables quick growth if executed correctly. Regional developers buy the rights to a territory of a million people that matches the demo graphic of a Daddy’s customer. They’re then required to open a store (or more). After, they sub-franchise the other nine units, almost like a mini franchisor. The idea being they get a flag ship location certified as a training store and lay the blueprint for regional operators. This way, training is hyper local and franchisees aren’t reliant on corporate for every level of support. Getting these developing units open is on

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PACE AND CHRIS’ RESTAURANT FAMILY IS GROWING ALONGSIDE THEIR OWN.

what I’m super passionate about.” Speaking of chemistry, being married and also being business partners isn’t for everybody, Webb laughs. “I’ll say that off the bat,” she says. “But it’s definitely for us.” Before they started Daddy’s, Webb says she was given a piece of advice—stay in your respective lanes, define roles and responsi bilities, and make sure one person doesn’t feel like the boss of the other. Technically, Webb is the CEO and Georgalas president. “It just really works. We’ve also got a very different skillset and the way we approach problem solving, thinking, is also very different and so it’s very complementary,” she says. Webb focuses on ops and culinary, while Georgalas oversees marketing and tech. He’s more of a macro thinker whereas Pace dives in. Again, however, the nuances aren’t as vital as the high-level pic ture, which is something Daddy’s continues to keep in sight. “You just go through incredible highs and experiences and then you have incredible challenges at times,” Georgalas says. “But we find that we’re saying during both of those scenarios that we get to do this together, and it doesn’t matter.” Webb was pregnant when Daddy’s debuted. They now have two daughters and Georgalas jokes Webb runs the household like she does the restaurant. “Parts to reorder, a toy list,” Webb quips. But throughout it all, Georgalas says, Daddy’s chemistry has held because the goal has stayed unshakable—develop a restaurant that empowers others to excel. “That’s what makes us feel really good about what we’re doing,” Georgalas says. ➺

the horizon for Daddy’s, which has forced Georgalas and Webb to undergo a crash course on franchising and expansion: to make sure real estate selection, tech, marketing, and using data to attract and reengage guests is tight and ready to replicate. “And then culture. I think the harder part of franchising—yes, very systems and process focused. But how do you scale a culture?” Webb says. “Because one place can have a delicious chicken sandwich, but if they don’t have a good hospitality experience that’s just really going to hurt, especially for an emerging brand.” Georgalas calls this, “scaling a feeling.” One element Daddy’s has going in its favor is how the chain took root. The ability to deliver dig ital hospitality—a target brands across the lexicon are working back against these days—was something Daddy’s developed from the ground floor. It started with a blank canvass in one of the biggest par adigm shifts in sector history. “It’s exciting and we’re up for it,” Georgalas says. “And again, we have a responsibility and we’re going to give every ounce of effort we have to set people up for success, both internally and our team. Fran chisees and developers, just across the board.” Daddy’s will focus on regional growth so it can quality control and wield purchasing power. Once it establishes an area, the brand will refocus before heading elsewhere. “I like to see other people win,” Webb says. “I know I can make an awesome piece of food. I know I can make a great fried chicken sandwich. I know I can run a restaurant if I’m there five, six days a week. I know all that. I don’t need to prove that anymore. I want to make opportunities for other people—that’s

DADDY’S CHICKEN SHACK

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District Taco HEADQUARTERS: FALLS CHURCH, VIRGINIA UNITS: 14

GUISADOS (3)

District Taco is the restaurant rags-to-riches story at its f inest. After leaving his home in Yucatán, Mexico, hoping to make it in the U.S., Osiris Hoil hit a setback. In 2007, as the economic crisis took root, he was laid-off and forced to start from scratch in a new country. He took his mother’s recipes, passion for com bining Mexican cooking with a new American

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lifestyle, and began to chart a business. Hoil and his neighbor, Marc Wallace, got together in 2019 over homemade chips, salsa, and gua camole and decided to launch the District Taco food cart in Ross lyn. The brand has since grown to 15 stores across the DMV. “Beyond cre ating fresh, healthy, DISTRICT TACO (3), STAFF: MATT MENDELSOHN PHOTOGRAPHY

Guisados

HEADQUARTERS: BOYLE HEIGHTS, CALIFORNIA

UNITS: 8

and unique recipes, we are also committed to strengthening the well-being of our growing community and the members within them,” says the company, which was named one of QSR ’s Best Brands to Work For this past year, earning recognition for its PTO for all employ ees and a Pioneer Program of peer-nominated rewards. Prior to 2020, District Taco had started to make technological advances within its restaurants. When health concerns arose, cus tomers moved from dining in-store to ordering pickup and online deliveries. District Taco just announced plans to expand via franchising. The brand aims to add an average of 15–20 franchises per year for the next f ive with initial growth primarily focused on the Eastern Sea board and the Midwest. “District Taco has come a long way from the original taco cart in 2009, where we began delivering a unique dining experience by providing fresh, healthy, authentic Yucatán inspired food to a loyal customer base,” Hoil says. “I am so proud of the journey we have undertaken so far, and excited for the road ahead as we continue to expand and franchise across the country. We hope our story continues to inspire others to follow their own American dream.”

Since itsDecember2010 founding,Guisados’ vision has remained intact, and it begins with the style of cooking itself. Guisados’ food takes a differ ent approach to the mainstream “taco.” “Growing up, momwasn’t on the grill making carne asada or nachos; these stews were/are not only a portrayal of how we as Mex ican Americans eat, but howmany other cultures cook for their fam ilies,” says owner and operator Armando De La Torre. “We take pride in our food and realize that our menu is an accurate portrayal of the foods we really ate grow ing up.” Guisados’ goal was to serve homestyle braises on hand made corn tortillas—the latter of which are made to order from fresh ground masa. “Over the years our growth not only fuels foodies and visitors of our city, but brings so many back to the memories of

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Sprinkles HEADQUARTERS: AUSTIN, TEXAS

consumers around the world.” It’s a path that’s been building from an infrastructure standpoint. Just before the pandemic, Sprinkles rolled out an e-commerce platform and began offering nationwide shipping. Amid COVID, the chain expanded offerings (the aforemen tioned chocolate and popcorn) , and in addition, Sprinkles implemented creative partnerships with brands like Golde, Kosterina, and Sanc tuary, as well as award-winning chefs like Brooke Williamson and Claudette Zepeda, to create lim ited-edition cupcakes. Across the pandemic, Sprinkles grew its direct to-consumer channel and tacked on CPG products like cake and cup cake mix. It created eff icient ways for guests to order, either through its custom-built online ordering platform or at kiosks in-store. Dig ital menuboards are also a staple feature. The female-founded brand, by Candace Nelson, says 76 per cent of its bakery GMs are female. “We are constantly innovating and will be launching a new product format in the new year,” the com pany says. “Sprinkles will continue to partner with brands across all lifestyle verticals including, food, beauty, fashion, and entertainment in addition to the celebrity and chef collaborations also slated for 2023 and beyond.” Wing Snob HEADQUARTERS: Just under f ive years ago, Wing Snob started up in Michigan. The brand has since reached 35 loca tions and is actively expanding in seven states and Canada. The brand says it noticed the inf lux of delivery coming in during the pan demic, so it worked to lean into relationships with third-party deliv ery companies. Since, it has also WARREN, MICHIGAN UNITS: 35

their mothers kitchen,” De La Torre says. "Guisados' menu is a memory, a recreation of our childhood, and it is truly some thing special to be able to share that with our city and all those who pass through our doors,” he adds. “We take deep pride and responsibility in its continued growth and enjoy the challenge of bringing that identity to life with each new loca tion.” The family run operation is an ode to howmom spent her afternoons: stirring, dancing to Mexican singer and actor Javier Solis, and adding each ingredient as she prepared family dinners. Since Day 1, Armando Sr. has been in charge of food, consistency and development, while De La Torre (Armando Jr.) handles daily operations, designs the menus, brand identity, marketing materials, collaborations, and all creative aspects of the restaurant. Natalie, who is Armando Sr.'s daughter, serves as GM and continues to manage and operate multiple locations and day-to-day tasks. “All with a belief that the most essential type of leadership is presence, and that our presence continues to have an impact on our company’s culture and growth,” De La Torre says. The nostalgia has carried to units in Echo Park, Downtown L.A., West Hollywood, Burbank, Beverly Hills, Pasadena, and soon, Hermosa Beach. Guisados’ stews and masa are still made at the original Boyle Heights kitchen multiple times a day and delivered to restaurants. Along the growth trail, the company has cultivated a community of artists through its Featured Artist Program—a revolving display of local art and murals—and introduced a breakfast taco menu. When COVID hit, Guisados closed all locations. Three weeks later, Armando Sr., Jr., and Natalie rolled up their sleeves and opened one branch, slowly inviting a couple of long-time employees to help out. “We focused on deliv ery, takeout, and always offered to put the food in your trunk if you requested,” De La Torre says. “Our business actually became a bit more efficient as we learned some new ways to cut overhead and streamline our operation. Fortunately, being that we are already a [quick-service operation], our menu and packaging essentially remained the same.” The brand introduced taco kit style options to feed a fam ily of four to six. They came fully dressed and ready to eat, or in a “survival pack,” where the items arrived separate in deli containers so guests could make their own and store for later. Today, Guisados operates with a spoke-and-wheel system where everything is cooked and sourced from a central com missary where it braises stews and grinds corn, and delivers to units, as mentioned before. The approach, the company says, gives it confidence to open another seven to 10 loca tions. This commissary/co-packing method is key to future consistency. “Our goal is to grow even further than that; we are ready for the next step in our journey,” De La Torre says. “Restaurants are a labor of love, and though the ever changing landscape of the labor force and supply chains may feel tedious day to day, we are grateful that we are continu ing to manifest the dreamwe once had when we first opened our doors,” he adds. “To be able to provide more jobs for our community and more opportunities for our staff is one of the most rewarding feelings of seeing this restaurant grow. We've seen employees become mothers, fathers and friends, we've seen fathers become grandpas and so many stories begin within our walls."

UNITS: 8

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Over the past 17 years, Sprinkles has expanded from its trailblazing roots in Beverly Hills, Califor nia, to a national presence with

SPRINKLES

bakeries that serve hand-crafted cupcakes, each frosted in its sig nature swirl alongside layer cakes, cookies, brownies, and even “pup cakes.” The company also recently launched a line of Belgian choco lates and popcorn inspired by its top-selling cupcake f lavors. But Sprinkles might just be best known for its cupcake ATM, which it claims is the f irst on the market. Today, they can also be found in non-traditional spots like airports and college campuses. Going into the future, the classic brand is ready to ramp up growth via franchising. Sprinkles’ f irst domestic franchise opened in Salt Lake City and inter national expansion will follow, starting in Asia. “As a brand, we are so fortu nate in the way Sprinkles lives in the hearts and minds of our guests. We’re connected to celebrations, sharing joy and everyone’s favorite ‘treat yourself ’ moment,” says Dan Mesches, Sprinkles CEO. “Inno vating new products and f lavors, franchising domestically and inter nationally, and growing our DTC channel are not only integral to our growth strategy but allows us to connect meaningfully with more

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