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    For Fazoli's, the Momentum Isn't Close to Slowing Down

  • It wasn't that long ago the Italian chain was in dire straits. These days, positive sales and menu upgrades have the brand riding high.

    Web Exclusive March 5, 2018 By Danny Klein
    Fazoli's
    Fazoli's continues to ride a strong run of positive sales.

    Fazoli’s is closing in on one of those milestones you can’t measure with straight-line statistics. In the not-so distant future, CEO Carl Howard and the executive team would have, as he puts it, “repaired every single piece of this business from the day we got it.” This isn’t just company spin. Fazoli’s closed 100 stores and watched its same-store sales drop 54 of the previous 73 months before Howard took the reins in 2008.

    There are two main pieces of the puzzle still waiting to be pieced together, Howard says. But before touching on the future here’s a pulse-check of the present. At the end of January, Howard couldn’t remember exactly whether the brand was sitting on 21 or 22 consecutive quarters of same-store sales growth. That’s an enviable lapse in memory. He was certain of the month count, however: 87 of Fazoli’s last 91 months have reported positive. In that span, average-unit volumes are up 50 percent.

    Looking closer, Fazoli’s 91 franchised locations (there are 119 corporate stores) enjoyed a 5.1 percent lift in same-store sales in December versus the prior-year period, and a 2.5 percent increase in guest traffic. Fazoli’s had robust growth as well, with six new development agreements for 15 restaurants signed by year’s end. Five restaurants opened in 2017 and eight are currently under construction and slated to open in 2018’s first two quarters.

    Fazoli’s most recent franchise agreement signings include:

    • Three units in Atlanta, Georgia
    • Three units in Detroit, Michigan
    • Three units in greater Portland, Oregon
    • Single unit in Mobile, Alabama
    • Single unit in Prattville, Alabama

    Yet believe it or not, these results are the work of a brand in motion. Fazoli’s has managed to ignite these numbers during what remains a formative period. The Italian chain is a long way from the edge it once teetered on, but there are still plenty of adjustments ahead.

    Perhaps the biggest shift in recent memory for Fazoli’s came in mid-June when the brand unleashed its clean menu at corporate locations. This flip was not for the faint executive at heart.

    Interior of Fazoli's fast casual restaurant.
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    Fazoli's

    Fazoli's updated nine restaurants in 2017, with more on the way.

    Interior of Fazoli's fast casual restaurant.
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    Fazoli's

    Fazoli's is currently working to lower the cost of its remodel program.

    Interior of Fazoli's fast casual restaurant.
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    Fazoli's

    Fazoli's new look and updated menu places it in quick-service-plus territory.

    The process involved cleaning 81 ingredients from Fazoli’s menu and took more than a year, $1.5 million in capital, 1,000 hours of labor, and a logistical supply chain headache that involved working with roughly 50 suppliers to wipe artificial ingredients, colors, and preservatives from the menu.

    How has it gone? That’s been a mixed bag in some ways, although far from an unexpected one. Howard says Fazoli’s received a “pretty mild response from the consumer,” around the initiative. In general, this was a perception, not a quality or flavor issue. Many customers view Fazoli’s as an indulgent experience, just like most Italian meals, and that health-forward guest has turned out to be an elusive one

    “We didn’t necessarily see this new consumer group come in,” Howard says. “And that was a little bit disappointing. The overall flavors of the menu and everything else, we certainly did a great job upgrading the quality of our sauces. We continue to pump more money back into quality.”

    Fazoli’s kept its ear to the ground and listened to operators and customers. Now, with some changes, the menu is getting close to a finalized edition, and should launch to the franchise system in late spring, early summer, Howard says.

    There have been several renditions along the way. One of the key changes involved the chain’s famous breadsticks. Fazoli’s does about 50 percent of its business off-premise and found that the new breadstick recipe didn’t travel well. After about 15 minutes it would harden to a degree and simply wasn’t the signature offering Fazoli’s is known for. And that’s one menu item where Fazoli’s can’t afford to present something less than 100 percent, Howard says.

    Ranch dressing was another. “I would say the majority of our menu still remains 90 percent plus clean. We’re really happy with where we’re at and we’re real proud with the changes that we made,” Howard says.

    Much of this plan is intended to firmly position Fazoli’s as a quick-service-plus brand, in Howard’s terms. In addition to the menu changes, plateware and service were enhanced. Parmesan is now grated tableside and there are new dishes, such as Spicy Penne with Chicken or Sausage, and Brownie Gelato Sundae.

    Next to the menu changes, Fazoli’s is smoothing the kinks in its remodel program. Fazoli’s refreshed nine of its locations with a new, contemporary look in 2017. These include communal tables and WiFar bars, as well as an updated, modern décor package. This brought the grand total to 14 remodels. Here’s the issue so far: these remodels are running bills of $300,000–$400,000. Upgraded units are seeing a sales increase of about 9 percent. While the return is decent, Howard says it could be much better.

    Fazoli’s wants to cut that cost to $200,000, with the ultimate goal being $150,000. “Once we get that all tweaked and done, we’ll finish up the company stores and roll it out to the franchisees,” Howard says.

    Once this is complete, Howard says, Fazoli’s won’t just be completely reworked; it will be in rare and comfortable territory. The Italian quick-service category isn’t exactly moving at a burger-a-minute pace right now.

    Howard says Fazoli’s draws from the Olive Garden pack, as well as those who simply don’t want a taco or chicken sandwich for lunch. And speaking of the casual-dining leader, Fazoli’s had this to say of Olive Garden: “Anytime they want to go head to head I would be more than happy to do a blind [taste-test] panel with them.”

    Despite being a quick-service plus-brand, Howard says Fazoli’s is an everyday value competitor as well. It doesn’t try to buzz the customer with $1 items, yet remains a strong player in the space. The most expensive menu item is $7.99 and there is always the $5 lunch, which allows customers to pick from spaghetti with marinara or meat sauce, fettuccine with Alfredo sauce, penne with marinara or spicy tomato pepper sauce, ravioli with marinara or meat sauce, lasagna with meat sauce, cheese or pepperoni pizza slice or side salad. These come in half portions and are joined by a drink, available until 4 p.m.

    On top of the everyday value, Howard says Fazoli’s “goal was to have killer LTOs, really unique craveable food items and try to start them at a decent entry point. But not to make it 100 percent about price.”

    “We want to really compete on quality. That’s been our focus since I’ve gotten there,” he adds.

    A lot of Fazoli’s growth is internal. Howard says legacy franchisees, or those who have been in the system for 15 or more years, are starting to build more restaurants. Another third of its franchise group is coming from groups who have opened a restaurant and are now moving on to a second or third.

    “The great thing for us is we’re seeing the new franchisees we sign are making money, they’re seeing their return on investment and they’re looking o do another one. We really have the model right, right now,” Howard says.