An Interview With Michael Abt, Huddle House Franchise CEO

The 52-year-old iconic diner and breakfast brand is going through an amazing brand evolution.

What makes a brand iconic? In the case of Huddle House, which has been serving high-quality home-cooked meals to millions of families for more than 50 years, it has been the brand’s ability to adapt to the changing times while never losing sight of what its growing base of customers has come to love.

America’s favorite breakfast franchise is entering the New Year on a wave of momentum that will see the brand growing into new areas of the country and strengthening its foothold where Huddle House franchise locations are already thriving. With more than 400 restaurants open and under development, 2016 will mark yet another year of continued growth and innovative menu changes, and will see the further roll-out of the brand’s “Evolution” redesign campaign — which gives Huddle House franchise locations a chic new look that enhances the customers’ experience.

Leading the charge for the Huddle House franchise is CEO Michael Abt, whose forward-thinking leadership has breathed new life into the 52-year-old brand. In this interview, Michael opens up about the forces that are driving the brand’s continued success, the importance of changing with the times, the value the franchise is creating for its franchisees and what Huddle House will achieve in 2016.

There has been quite a turnaround since you took the helm at Huddle House in 2012. When people in the franchise industry mention Huddle House today, it is typically followed by: “Wow, they’ve really turned the business around. There’s a lot of momentum happening.” What’s happened at Huddle House since you took over?

During my first few months here, we spent a lot of time talking to franchise partners and the
Huddle House teams, trying to understand what was holding the brand back from becoming a great brand. The base of the brand was good. The food was good. The Evolution design concept for our locations was good. We felt like the business was positioned well strategically, so we set about the task of identifying some key drivers that were needed to move the business forward.

We decided that we needed to focus on the franchise partners; we needed to provide a high level of support and increase our communication. We needed to remind them that the Huddle House executive team has their best interests in mind. We knew that we needed to create a mindset that our role as the franchisor is to work with our franchise partners to elevate the customer experience in the restaurants. Internally, we needed to get our team believing that our job is to wake up every day figuring out how we will serve the needs of our franchise partners.

We achieved this by increasing our level of communication with our franchise partners. We set up weekly calls, we created franchisee forums and we elevated the importance of our annual convention. The executive team made ourselves visible out in the restaurants. We set up a franchisee email system, enabling everyone to communicate on the same platform. Communication is really, really important to us.

Our franchise partners have been very good about supporting our initiatives. We expanded from five franchise area directors to nine. We also added three field trainers, a director of training, a director of company restaurants and additional district managers. We added support personnel, and we spent a lot of time developing systems for our franchise partners. We reworked our cook training guides and server training guides. We developed what we call the Eagle’s Playbook, which helps franchise partners understand how to attract, develop and retain the right people. We built business processes internally for managing food costs and labor. In essence, we developed systems to help the franchise partners operate their businesses on a day-to-day basis.

Over the past 10 months, we’ve implemented the Franchise Owner Business Review Process. The franchise area directors are developing an annual business plan with our franchise partners and reviewing it with them. We’re talking about people really owning their business from the inside out.

How has the network of Huddle House franchise partners reacted to the business planning and coaching platform you initiated?

Initially, I think they saw this as just another exercise with the corporate folks, but so many of them have given us feedback and said, “Wow, my franchise area director did a great job; I didn’t know there was so much opportunity in a business. We really appreciate looking at the business from a holistic standpoint.”

Have you seen franchise partners increase their margins?

We’ve definitely seen the margins increase in the business. Our initiatives were really built around elevating the capabilities of the franchise partners. Our goal wasn’t to run the business for them, but teach them how to drive their business and to better understand which levers to pull to increase the margins at a store level. Ultimately, because so many franchise partners have invested their lives into their business, it comes down to their ability to make money. We’ve saved a lot of restaurants through this philosophy and helped many owners prosper.

It’s not just about squeezing labor and squeezing food costs; it’s really about driving the business and the top line. It’s a combination of developing a sales and a profit mentality in the system. The profit mentality was always there, but the franchise partners lacked the tools to help them understand where the opportunity was. The way to move forward isn’t to save your way to prosperity, but to drive the top line and drive sales. We’re going on 25 months of positive sales growth by increasing customer frequency, adding on upsell menu items and increasing the average ticket price. That extra milkshake or piece of pie can make a huge difference in your bottom line.

What’s helped you drive the top line sales numbers?

One of the things that we’ve been very successful with is the Evolution redesign program. When I started, only 6% of the restaurants in our system reflected our current image. We’re going to finish this year with more than 40% of our system reflecting the current image and we’re remodeling units daily. Updating our facilities has provided a lot of lift and customers tell us they really love the design.

The second driver is really focusing on the customer experience. We’ve implemented a digital customer feedback system so that our franchise area directors can give more immediate and objective feedback on areas that need to be improved operationally to drive the business and elevate the customer experience. We’re also focused on operations and execution, which includes the people side of the business.

The third driver is our marketing initiatives. We don’t have huge national advertising. We don’t do radio, we don’t do TV. What we have been doing is print and direct mail coupons. We’ve really refined the print program and increased our coupon redemption significantly, not just by increasing the number of print pieces, but by optimizing coupons to make sure our offers are meaningful to customers. Our guests look at us as a good value for their money.

We’ve had periods in the last 18 months where it was common for us to have increased our coupon redemption in a given month by 30% or 35%. Our discounts have only increased from 4% to about 5%, so we’ve increased discounting by only 1%, while increasing our redemption significantly by managing the offers.

The other thing we’ve focused on, from a menu standpoint, is revenue-driving layers, such as specialty items and incremental sales. For example, our seasonal menu features a new promotion once a quarter, which generally has a value slant, but it’s more about a differentiated unique product like stuffed hash browns. So there’s value, yes, but we’re creating differentiated products that you can’t find in other family diner locations.

What would you want somebody to know about your growth up to the end of last year?

We’re seeing the pipeline and the number of leads grow. We have new leadership that we’re excited about with Christina Chambers as Vice President of Franchise Development. We’re able to tell a different story at Huddle House now when we’re talking to investors. We can talk about new store performance being strong. We can talk about doubling the number of new store openings in fiscal 2016 versus 2015. We can talk about the amount of investment that our existing franchise partners are putting back in the business for remodels. We can promote stronger unit level economics. We’ve just got a stronger product to sell now than we did three years ago.

Do you still see a lot of growth to be had in a business that does well with a breakfast daypart, or serves breakfast 24-7?

Our segmentation study helped us understand that we are square in the bulls-eye of family dining with the likes of IHOP, Denny’s, Waffle House and Cracker Barrel. Sixty-five percent of our items sold are breakfast items. We know we’re a breakfast concept, and I think it’s important to promote that to our guests. They can get a great, unique, somewhat indulgent breakfast at Huddle House any time of the day. Other family dining concepts aren’t necessarily serving breakfast all day long.

How is Huddle House a smarter investment, compared to its competitors?

Our DNA comes from the small towns in the Southeast United States, and we’ve found that we can expand that to middle-sized towns outside the Southeast. We’re willing to go into towns where other brands won’t go. We like the fact that we have the niche where we are the only family dining chain concept in many of the towns that we serve. We’re starting to expand that out into larger towns and go head-to-head with IHOP and Denny’s because we think we can succeed.

From a development standpoint, we’re in the middle of modifying our prototype locations. We’re not changing the design of the restaurant aesthetically on the outside, but we’re testing a model that grows us from a 2,600-square-foot footprint to a 3,200-square-foot footprint, which is an increase of 30 seats. By changing the layout of the production line, the service areas and the seating areas, we can increase the capacity of our restaurant. We’re doing all of this to provide better quality food, served faster to our guests, while also making it easier for our franchise partners to operate.

Where would you like to see the brand end up in the next few years?

We’re going to continue growing locations and growing profit margins for our owners. We’re going to grow at a pace that allows us to continue to provide the kind of support that our franchise partners need. For me, that means that net growth is about 20 to 25 restaurants per year.

I think we will grow organically in the markets that we are already serving, pushing out a little bit on the edges. We still have a lot of infill areas in a lot of the markets around the ones that we’re serving now, and we’re expanding into new regions of the country such as Texas and Oklahoma and the Northeast.

During your tenure at Huddle House, what are you most proud of?

Moving the system forward and bringing franchise partners with us, creating a real sense of hope and optimism about the brand for existing franchise partners. I’m also proud that we helped shape a brand that is attractive to new investors. I think that’s the best measure of our success — our franchise partners are healthy, profitable and growing, and many are in a much better position than they were three years ago.

Since you’re out in the field a lot, what do you order these days?

I really love our indulgent sausage-stuffed hash browns.

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