Operations

Zaxby's shares COVID-19 recovery plan

After reading the PPP criteria and realizing that Zaxby's qualified, CMO Joel Bulger said the chain applied and then ended up giving back every cent.

Tony Townley, Zaxby's chief strategy officer and co-founder, and Zach McLeroy, Zaxby's CEO and co-founder, are waiving $5 million in fees for licensees.

May 27, 2020 by Cherryh Cansler — Editor, FastCasual.com

Zaxby's is emerging from the pandemic with strong sales due to a three-pronged recovery strategy that included waiving $5 million in fees for licensees, shifting its business model to drive-thru only and adding family menu items for people sheltering at home, 

The initiatives have allowed the chain to post some of its best year-over-year comp sales in company history over the last two weeks, despite most dining rooms still being closed, according to Joel Bulger, Zaxby's chief marketing officer.

"While Zaxby's exact sales figures are proprietary, we can tell you that our systemwide sales for the first three weeks of May were up 7.9% over the same period last year," Bulger told FastCasual. "We posted our all-time best one-week sales during the week ending May 3, despite most dining rooms still being closed. We're confident that the measures we've put in place during the pandemic have positioned us well going forward."

The chain has reinvented the customer experience via drive-thru, curbside pickup and delivery and even created a Soundcloud playlist of Zaxby's ambient restaurant noise for brand fans who miss dining in. 

Helping licensees
Zaxby's provided $5 million in financial relief to licensees hit hardest by the COVID-19 pandemic through a royalty abatement program. In addition to suspending royalty fees for certain licensees, Zaxby's removed marketing fund contribution fees for all of its 487 licensees across 759 locations in 17 states.

"At Zaxby's, our licensees are family," CEO Zach McLeroy told FastCasual. "They're entrepreneurs with skin in the game and heart for the brand. I can't say enough about their flexibility, resilience and grit during these unprecedented times."

The chain also instituted a lump-sum retention bonus of $1 per hour worked for restaurant employees of 146 company-owned stores through June 16, as well as up to $1,000 in appreciation pay for general managers. The bonus program is in addition to a wage increase of $1 per hour from April 13 until June 7.

Operations pivot

On the operations side, Zaxby's made a pivot to focus on its drive-thru business, as licensees responded quickly to the temporary closing of their dining rooms. Depending on the location, licensees allocated additional staff to support drive-thru, curbside pick-up and order-ahead, keeping average wait times steady at four minutes despite a 35.6% spike in drive-thru traffic.

"The relationship between the licensees and Zaxby's Franchising has never been stronger," Tripp Clayton, licensee and chairman of the Zaxby's Advisory Council, said in a press release. "We immediately shared insight and ideas from the front lines of our restaurants and quickly collaborated to make critical decisions that ultimately led to a sustained positive impact on our business."

New menu items

Zaxby's launched a menu option designed to meet the needs of families sheltering at home. The Zax Family Packs include 20 chicken fingerd or 30 boneless wings with shareable sides to feed four people starting at $24.99. The LTO has been well received, and, at a time when industrywide sales are dropping, Family Packs contributed to a 22.5% increase of overall average check.

"Our successful LTO created specifically for consumers sheltering at home, Zax Family Packs, have increased overall average check by nearly 23% since launching on April 6, and we've just launched Zax Pack for Two to build on the momentum," Bulger said.

Drive-thru wait time has held steady at 4 minutes, despite a nearly 36% increase in traffic during the pandemic. Additionally, order-ahead transactions are five times greater than they were just two months ago.

What about the PPP loan?

After reading the PPP criteria and realizing Zaxby's qualified, Bulger said the chain applied. After all, it had spent $5 million on royalty fees and national advertising fund contribution abatements for some struggling franchisees.

"We gave $2.5 million in incentive compensation to our ZAX company store-level team members for their courage and willingness to step up during this crisis," he said. "We then returned every single dollar of PPP funding we received after we better understood the nature of the program and the fact that many small businesses could not get access to PPP funding."

Zaxby's has grown to more than 900 locations in 17 states and is headquartered in Athens, Georgia.

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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