Insights into how the 50-year-old iconic diner and breakfast brand is going through an amazing brand evolution
When Michael Abt assumed the top leadership position at Huddle House in 2012, the iconic franchise was at the beginning of a top-to-bottom “Evolution” redesign. Flash forward almost three years, and there’s no doubt the redesign is working.
Michael credits much of the positive growth to the durability and universal appeal of the Huddle House concept.
The 24-hour, Southern-inspired family restaurant franchise is known for serving affordable, unapologetically homestyle food in a warm, friendly environment. Huddle House locations are often beloved gathering places in their communities, places where residents and travelers can get breakfast, lunch and dinner any time of the day or night. With more than 400 locations open and under development in 21 states, the 50-year old franchise is growing well beyond its original core market in the Southeast and into markets in the West, Midwest and Northeast.
In 2014, Huddle House signed 21 new franchises and two new multi-unit deals representing more than 30 new restaurants. Same-store sales growth has increased for 18 straight months, and the franchise is on pace to open as many as 20 new restaurants in its fiscal year ending April 30, 2015. The new signings, which include new states such as Nebraska, New Jersey and New York, are testament to Michael’s belief that Huddle House’s core American comfort foods have broad appeal in every corner of the country.
We asked Michael to share his thoughts and ideas about the company’s highly successful Evolution redesign and what makes Huddle House one of the most promising restaurant franchise opportunities in the market today as it enters its next 50 years:
You came to the Huddle House franchise from Arby’s in 2012. What attracted you to Huddle House?
One of the first things that attracted me to the Huddle House brand is the food. It’s delicious and craveable. We have hearty portions, and we serve a great variety of products 24 hours a day. I felt like there was a real strong product proposition for our customers. I was also attracted by the Evolution restaurant design. It’s a very contemporary, exciting look that is inviting to our customers. It’s equally exciting to our franchise partners, and it’s very competitive with other restaurant concepts.
Another thing that drew me to Huddle House was the opportunity for our franchise partners to be able to grow. We have strong unit-level economics, and our franchise partners can get in with significantly less investment than they could in other concepts. That certainly makes us very attractive, and it helps us create a strong growth proposition. It provides opportunities for us to better support our franchise partners as we grow.
What’s special about the Huddle House menu?
Americans have a unique love affair with diner food and traditional comfort food. That’s our specialty. People love the kinds of meals we serve, starting off with traditional breakfast foods such as cooked-to-order eggs, crisp bacon, country ham, buttery waffles, grits and biscuits with sausage gravy. Huddle House understands America’s love for hearty, stick-to-your ribs food. We go way beyond breakfast food, with a full-service menu that includes a wide assortment of popular lunch and dinner items — BLTs, burgers, fries and shakes; regional favorites like country-fried steak; and classics like ribeye steak and potatoes.
Why is now a good time to invest in a Huddle House franchise?
We have tremendous support at Huddle House right now. We’ve built a best-in-class operations team, and we’re really improving the metrics that matter most to franchisees. Another great reason is that the cost of entry has gone down. We’ve adapted our business model from a ground up, free-standing building to include an end-cap model, which requires much less investment and helps our franchise partners achieve return on investment in a much shorter timeframe. We’re really excited about our new endcap design.
If you study restaurant industry, you’ll find that the breakfast segment has been the fastest-growing segment in the industry for the past few years. Huddle House is perfectly positioned to take advantage of that, since over 60% of the items we sell are breakfast items. Huddle House is a tremendous opportunity for anyone thinking about investing in the restaurant space right now.
At Huddle House, it’s not just about building a restaurant on a piece of dirt. We have opportunities to grow with end-caps; there are opportunities to grow in convenience stores and travel centers, and there’s opportunities to grow in urban markets. That’s appealing to an investor because the growth possibilities are so diverse.
What makes the Huddle House franchise a unique brand?
We don’t feel like a big chain at Huddle House, and that’s one of the things that separates us from the competition — our Southern hospitality. We feel a little bit like a mom-and-pop restaurant from 20 or 30 years ago, where people gather with friends and family and let themselves be taken care of while they enjoy some delicious food. Huddle House grew up in the heart of the South — Decatur, Georgia. It doesn’t get more hospitable than that!
Huddle House servers usually know our customers by name, and they often know what their customers prefer. Our restaurants are places where you feel comfortable. You’re invited into a warm, friendly environment. That’s really what separates us from many of the huge, cookie-cutter, national brand restaurants. We differentiate by being a restaurant that is more connected to the guests and more connected to the consumers. It’s a concept where the owners and the franchise partners are much more involved in their business.
Again, one of the most exciting developments over the past five years at Huddle House has been the development of our Evolution prototype restaurant. The design is generating higher revenues than our older restaurants, and our Evolution remodel restaurants are producing very strong returns on the top line and the bottom line for our franchise partners. The Evolution store design really separates us from the direct competition: It features bright, contemporary colors and quilted stainless steel behind the kitchen area. The seats are very comfortable, and the décor is very warm and inviting. There are signs around the restaurant that help show our unique proposition.
One of the things I really love about the Huddle House brand is that we serve any meal, anytime, 24 hours a day. Our guests can get our delicious food whenever they feel that desire to go out and get the unique, craveable products that Huddle House serves.
Can you talk more about the advantage of an end-cap model?
Huddle House has significantly lowered its initial investment for franchisees. Traditionally Huddle Houses were free-standing units on land purchased by the franchise owner, and some could require an investment of $1 million or more. Today, new franchisees are opting for the far less expensive end-cap and inline retail locations. These new locations perform at similar levels to freestanding units, and yet the average investment needed to open the end-cap store and produce revenue is typically less than half of when you go with a free-standing version.
Where do you see the Huddle House brand going?
The Huddle House executive team has a very strong vision. In three years we see ourselves at over 500 restaurants, with 70 percent of our system reflecting our Evolution image. Beyond that, there is no reason Huddle House won’t grow into a 1,500-2,000 unit chain. As we expand into new areas of the country, there are choice locations available, and our segment is really popular.
We are a 50-year-old, iconic brand, so we have some older restaurants in the system, but our Evolution remodel incentive program has really helped us accelerate the image of our system over the past two years. It significantly increases sales and profits for our franchise partners and makes us very competitive in the restaurant space.
We feel a responsibility to have people in place on our team who can help our franchise partners develop their capabilities and learn to elevate the customer experience in the restaurant. We have a competitive advantage from a product standpoint because we serve our meals 24 hours a day. We have a great selection of breakfast, lunch and dinner products, and they are delicious products — hash browns, prime rib tip sandwiches, burgers, milkshakes, eggs, bacon, dinner plates, etc.
Finally, it’s all about profit. If you’re a franchise partner or an investor, you’re here to make money. Our team is focused on putting systems and processes in place to help you get the most out of your business. That’s so you can take as much revenue as possible to the bottom line, so you can invest in future business opportunities and help secure your future.
Do you see the Southern food and hospitality concept continuing to grow beyond the Southeast?
Our brand and menu have broad appeal to many customers, and that appeal is allowing us to expand to many new markets we’re not in today. It’s a tremendous growth opportunity for our franchise partners, and it will help them make more money.
Huddle House is really scalable, and we’ve shown that over the past few years by growing outside of our core markets. We started in Decatur, Georgia, over 50 years ago. Over the years we’ve grown throughout the Southeast United States, as far west as Eagle Pass, Texas, and as far north as Fargo, North Dakota. What that shows us is that there’s an appeal beyond our core markets. It gives us the confidence to know that we can continue to grow throughout the United States. It’s going to create many, many more opportunities for our existing and new franchise partners to become part of the Huddle House family.
Huddle House offers a unique proposition to our franchise partners and investors. We have an appeal that’s unique in the restaurant industry. There’s an atmosphere and spirit of Southern hospitality at Huddle House that doesn’t exist in other restaurants. Over 60% of our products are breakfast items, and breakfast is one of the fastest-growing segments in the industry. People like to gather in a restaurant, enjoy food and spend time with their friends and family, and Huddle House is that great family dining location. We believe we have the lowest initial investment and a high potential return on investment, making us a best bet in our category.
What are some of your proudest achievements since joining Huddle House?
We’ve been working very hard for the past three years. I’m really proud of our operations team. We think we have best-in-class support for our franchise partners. Our team spends almost three weeks in a restaurant helping franchise partners open their restaurants, and it doesn’t stop there. Our area directors spend a tremendous amount of time in the field working on business plans with franchise partners — helping them solve problems, grow the top line and make more money. One of my goals was to build out a best-in-class operations support team. Have we succeeded? Ask our franchisees, and you’ll like what they have to tell you.
We also have a fantastic marketing team that spends time thinking about how franchise partners can grow their businesses. We have field marketing directors who work directly with our franchise partners to work on local marketing plans at the store level. Our culinary team works on developing products in our test kitchen so that Huddle House stays cutting edge and ahead of the competition, particularly as it relates to developing craveable products in our restaurants. Our executive team spends its time working on strategies to develop strong promotions to drive traffic and sales to our franchise partners’ restaurants.
We’re also proud of our franchise development team. Over the past two years we’ve shown that the Evolution remodel incentive program is able to pay great returns to our franchise partners. The remodel program is producing significant sales on both the top line and the bottom line. My team and I are focused on developing strategies to drive guest count into our restaurants. Everything we do is coordinated to drive more customers into our restaurants and help our franchise partners grow, whether it’s through operations programs, marketing initiatives or development strategies.
Can you share more about your main targets for growth?
There are three primary places to grow. First of all, you can grow in small-town America. We have hundreds of restaurants in some of the smaller towns in the Southeast United States that are flourishing and doing extremely well, and there’s room in the market for hundreds more. We become the gathering place in many of these small towns. As an owner and operator of a Huddle House in these venues, you often become a leader in your city, and you have all of your friends and family coming to your restaurant.
There’s also tremendous opportunities to grow in convenience stores and travel centers. We have several hundred restaurants that have done very, very well in those venues. Then we have an opportunity to grow our business in some urban markets because of the success of our smaller endcap units. Investors now have an opportunity to get into markets where real estate is a little bit more expensive by going into an inline or end-cap location.
If you want to learn more about how our 50-year-old legacy brand is growing, please explore our research pages and exciting developments on our blog. You can also fill out this form to download our free franchising report. We’d love to hear from you!