Dave’s Hot Chicken expansion reaches new equipment

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To say that 2020 has been a crazy year would be an understatement, says Bill Phelps, CEO of Dave’s Hot Chicken.

The industry vet doesn’t mince words when referring. He thought of the worst when the brand’s home state of California became one of the first places to close on-site restaurants last year.

“We thought we were kinda screwed,” Phelps recalls.

And there were reasons to be afraid. Fast food restaurants saw their transactions drop 38% in the week ending April 5, according to The NPD Group. Not to mention, Dave’s entered the pandemic as a young brand with three units and a pipeline full of restaurants after launching a franchise initiative in October 2019.

It seemed like Dave was vulnerable, but reality proved just the opposite. Franchise sales have stopped. However, it lasted for about two weeks. Business boomed and the growing chain was able to “sell more than we ever dreamed of” in terms of franchise territories, says Phelps. To quantify that dream, Dave sold the rights to 285 locations in 2020. That number is now in the order of 400, which includes more than a dozen states and markets like Boston; Oklahoma City; Indianapolis; Fort Wayne, Indiana; Cleveland; and Columbus, Ohio.

The chain, which now has 14 stores, is expected to open 30 more by the end of 2021.

“The brand itself has this cult following, and its appeal is a bit crazy,” says Phelps. “And so smart franchisees follow a good unit economy, and they looked at it, talked to other franchisees who opened their stores, and the business was really, really solid. So they were very, very excited about the potential of the brand.

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The rapid growth is mainly due to franchising. Of the 14 restaurants open, two flagship establishments operated by the company are based in the Fairfax and Northridge neighborhoods of Los Angeles. Everything else is franchised, and Phelps says that proportion will stay the same going forward.

In terms of a growth plan, Phelps says conventional wisdom would tell you that it is initially based on demographics and region, but the CEO says the real starting point is the quality of the franchise partner. The company wants area developers with experience, the right values ​​and the ability to build lots of stores in a short period of time. Dave’s uses this philosophy because the product has already been proven to work in every market it has entered, so there is no need to focus on geography. In addition, the target is Gen Z and Millennials, and these groups are present in all markets, he says.

Phelps knows Dave’s is growing fast, but there is a plan in place to make sure it’s done responsibly. Part of this is over-investing in the development team so that the right infrastructure and support systems are in place for franchisees and their managing directors. The other, of course, is the quality of franchisees.

“We don’t take moms and dads,” says Phelps. “We don’t take unit operators. We take people who have a multi-unit and quick and relaxed experience who have done it before because we don’t have the time to train people who are not restaurateurs.

Dave’s offer became more attractive throughout COVID as the channel proved it was pandemic-proof. At the start of the crisis, the brand saw 9% of its business come from third-party deliveries and zero from online orders. In two weeks, the chain’s entire offsite channel shot up to 60% and eventually peaked at 63%. Instead of being ‘screwed up’ as Phelps once feared, ‘business exploded’ as more consumers turned to convenience and mobile ordering.

Even when the on-site meals returned, the premises remained blocked. Consumers will have many more choices to eat and drink now that California has reopened its economy, but Phelps doesn’t expect Dave’s to be negatively affected. The business created roots during COVID, and it’s not stopping now.

“Our business has gone crazy because we’ve seen this happen with a lot of the drive-thru guys. Business has been great until last summer, ”says Phelps. “Now we’re going against those big numbers, but our business is really holding up and we’re really happy with the business. Even as full service restaurants and casual restaurants open up, our business remains very strong. “

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