September 2006
Volume 7, Issue 9, Part 2
Publisher: Mary E. Tomzack
Editor: Lynie Arden
Assistant Editor: Vanessa Goldschneider
Design: Konstantin Bykhovsky

The Latest on Casual Dining
Used by permission of FranchiseHelp
To see article at FranchiseHelp Online click here

Today's diners are increasingly demanding higher quality food, but many still prefer to stay at affordable prices. Fast casual restaurants continue to reap the benefits of this demand by offering a wide variety of interesting and freshly prepared menus at a price point below the full service casual market. In this issue, we continue our look at casual dining as we talk to Marc Geman of Spicy Pickle and Bob Faller of Retail Brands Group.

Upscale sandwich shop continues to draw loyal following

In the revered tradition of great entrepreneurs, the idea for a new fast casual restaurant was conceived during a brainstorming session at a local bar. It was the late '90s when founders Tony Walker and Kevin Morrison polled their fellow patrons of the Denver establishment to come up with the perfect name for an upscale sandwich shop. Democracy ruled and the winning name, "Spicy Pickle," was scribbled on a cocktail napkin. The actual trademark pickle with its proprietary brine came later, followed by the opening of the first store in 1999.

"At the time, the two men were chefs at an Italian restaurant," says Marc Geman, CEO. "They felt that Denver was a sophisticated enough market to support an upscale shop serving an interesting assortment of panini's, salads, and other high quality lunch fare." Panini wasn't anywhere in Denver at that point so they were definitely ahead of the curve. And it was a very cult following then. The first restaurant was just off the downtown corridor and they had a very loyal following. Today, there are over 17,000 possible sandwich combinations (not counting the 8 specialty panini's) for customers to create from the wide choice of meats, cheeses, toppings, spreads, and fine Italian artisan breads.

The fast casual sector is getting crowded, but Geman says Spicy Pickle has a simple recipe for success. "Our real advantage is this: we make great food. Tony and Kevin did a masterful job of putting great flavor profiles together. People are addicted to our sandwiches. We generally have lines out the door of our stores during lunch hours. We do a lot of surveying of our customers on a continual basis and we find our customers visit us 4 to 6 times a month. That is a very strong loyalty."

Location, location, location

"Spicy Pickle customers are primarily white collar administrative, managerial, professional type people who are willing to pay a little more for better flavor profiles and more interesting sandwiches than they can get in a grocery store or a sub shop. So most of our locations are determined by that kind of white collar environment," explains Geman. "We look in off downtown areas for tech centers, universities, hospitals, government centers and anywhere else that has a big concentration of that kind of white collar population."

Location is critical. Geman has noticed that the stores with the best sales growth are located within walking distance for diners. He says, "People don't want to drive 5 miles to get a fast lunch, spending 25 minutes in traffic when there's only an hour to get back to work. When we do demographic studies, almost every universal study looks at 1/3/5 mile radius. But we look at a half-mile."

Finding ideal locations is a real challenge to expanding the Spicy Pickle organization. "We are location constrained at the moment," says Geman. "This is a highly competitive market with a lot of other concepts that are looking for exactly the same size, visibility, and access. We're not just competing for customers, we're also competing for space to serve those customers. And we are very careful. We are very nervous about putting a franchisee or a corporate store where our all-in rent is going to exceed 10% of our anticipated gross volume. We would rather wait than take a space that is too expensive."

More than one way to increase sales

While many fast casual restaurants are struggling to stay in the black, the Spicy Pickle organization is planning to increase volume by 25% or more. Is that a viable goal in today's economic environment? "Why not?" says Geman. "It's going to take some marketing. But I think it's a very viable goal for us. We have a catering program now that offers platters. That kind of service environment could increase our volume 15-25% all by itself. And then depending on where we are in the downtown market, we think our new breakfast panini's will bring in business from the going-to-work commuter side of that market. And for stores off the downtown corridor, where there's some more 24/7 activity and some rooftops, we're adding a dinner component built around the new Neapolitan pizza. So we have 3 ways to increase our volume right now: breakfast, dinner, and catering."