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Schlotzsky's CEO: Restaurants must 'lean in hard on business partners'

Schlotzsky's CEO Beto Guajardo is helping franchisees in four main areas: communications, financial support, operations and promotions.

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April 1, 2020 by Cherryh Cansler — Editor, FastCasual.com

Editor's note: This is part of a series called "Navigating COVID-19," where FastCasual describes what restaurant brands are doing to keep their businesses alive. If you'd like to share your story or tips, please send email to Editor@FastCasual.com

In the face of COVID-19, Schlotzsky's CEO Beto Guajardo said he's doing everything possible to support his franchisees. Specifically, however, he's focusing his efforts in four areas:

1. Communications.
2. Financial support.
3. Operations.
4. Promotions.

Communications
Franchisees are looking to Schlotzsky's leadership team for clear and honest information to help them navigate through the crisis, Guajardo said.

Schlotzsky's CEO Beto Guajardo is doing everything possible to support his franchisees.

"While there is certainly a lot of information coming through the news, we are filtering through the noise and finding the most important information that could be impacting our franchisees' business," he said. "Helping them to understand how their business is interpreted as an essential service to the community, what a shelter-in-place order means, or how state and federal aid could help their employees and business are examples of topics we've leaned into to assist our owner operators." 

The brand, which is owned by Focus Brands, has also changed its internal communications protocols in order to break through the noise.

"We are communicating critical messages across multiple channels in replica via text, email, web and good old-fashioned voice, said Guajardo, who pointed out that being a part of the Focus Brands portfolio has allowed him to collaborate with its sister brands.

"All of the Focus Brand Presidents, along with Focus leadership, are on the phone every morning coordinating learnings and actions that we can then take to our individual brands," he said. 

Financial support
In order to help franchisees remain cash-flow positive, Schlotzsky's has provided relief on their contributions to advertising and deferred royalty payments through the end of April.

"We have been identifying opportunities to reduce monthly charges where we can, or canceling nonessential services altogether," Guajardo said.

Operations support
Inside the store, the chain is exploring changes to the menu in order to reduce the number of SKUs it must carry, and to simplify production to gain efficiencies and increase speed of service.

Promotions
Guajardo said Schlotzsky's is lucky in that many locations have drive-thrus, so it was imperative, he said, for the chain to get the word out when customers started sheltering in place.

"We wanted to be sure that they knew that our stores were open and safe for them to come to for pick up or order great, comforting and satisfying meals for themselves and their family via delivery," he said. "Across social media, we have focused on the fact that our stores are open for business and that we have put the protocols in place to serve safely. In addition to this voice, we wanted to motivate customers to act by providing great value through target discounts or free delivery."

Recovering sales

Although sales are obviously down, Guajardo said there have been pockets of success. Third-party delivery and drive-thru sales, for example, are significantly up versus this time last year, he said. 
 
"Some of our operators, especially those who had strong community engagement before the crisis, have taken the promotions that we have offered and have used their own networks to ensure customers are aware of our availability and offers," he said. "They reinforced the messages of safety and service and customers have responded. The more hyper-local we can be right now, in service to our communities, the better we will be to get through these times.

It's time to 'lean in'

Guajardo predicted that the only restaurants that will survive the dine-in shutdowns are the ones that were able to lean into serving customers during the crisis via carryout or delivery orders. They must also manage their expenses to meet the new reality of customer demand.

"Ideally, restaurateurs have been able to negotiate rent relief from their landlords and fee relief from their vendors and service providers," he said. "Those who acted fast and aggressively to modify their operations and business model have the best chance of success. Businesses that have levered-up on debt or who were struggling with profitability before the crises will be in trouble."

Ensuring the safety of customers and employees is table stakes, and staying true to who you are as a brand and business, especially your menu offering, is also a must.

"When times are unsettling, people are looking to be reassured that their world has some sense of normalcy, and finding that in the food that they seek at their favorite restaurants is paramount," Guajardo said. "Get the word out over social and traditional media that you are open to serve the community — maybe in a new way, but with the same great menu your customers love."

He also said restaurants should lean in hard on their business partners.

"No question should go unanswered as it relates to asking for support to help you through these challenging times," he said. "And for franchisees, knowing that you are not alone in this business should give you the confidence to ask for the support necessary to weather this storm."
 

About Cherryh Cansler

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Cherryh Cansler is VP of Events for Networld Media Group and publisher of FastCasual.com. She has been covering the restaurant industry since 2012. Her byline has appeared in Forbes, The Kansas City Star and American Fitness magazine, among many others.

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