• Tue. Nov 2nd, 2021

Krystal Relaunches Growth with First New Restaurant Franchise in 15 Years | Franchise News

ByStephanie M. Akbar

Oct 29, 2021

Krystal Restaurants, the maker of the small hamburger, is growing again. The QSR chain announced the opening of a new restaurant by a new franchisee for the first time in 15 years.

Todd Yates, an experienced operator, opened the site in Dublin, Georgia in early October. “It’s an iconic brand” in the South East and “something we grew up on,” he said, adding that he had considered opening a Krystal restaurant in the past. He currently only owns the one restaurant Krystal, but said he has been in the franchise business for 20 years and has been franchised other concepts, including Arby’s, in the past.

Already sold on the brand, it was the conversations with the new management team that convinced Yates that the time had come to become a franchisee. Krystal wants to “double or triple its stores and triple its sales,” Yates said, indicating that management is invested in the long-term health of the brand, despite its private ownership.

Yates said he asked “are you in to turn it over?” CEO Thomas Stager, he said, “sold me the idea that they were here for the long haul.”

Dublin, Georgia, once housed Krystal restaurants. “I don’t think the city is big enough for two of them, and they made two here,” Yates said. One did well and the other didn’t, but neither survived, he said. He learned from whoever did well and chose a high traffic area with many other restaurants and retail outlets for his new Krystal franchise. “You want to go where everyone else is,” he said.

According to Melissa Hodge, senior director of franchising for the brand, the company is taking a similar approach to the new business it took with Yates. The brand is strong and cultured, she said, and the management team have “very honest conversations” with new and existing “zees” and focus on “building trust with them. “.

Franchisee Todd Yates and Melissa Hodge, Senior Director of Krystal Franchising, at the grand opening in Dublin, Georgia.

Krystal ran into financial trouble in late 2018 and into 2019, when court documents indicate the company breached several covenants. The company has attempted to raise capital, including with an emergency equity injection and plans to re-franchise the “100-150” corporate stores, but was forced to file for bankruptcy in January 2020.

Fortress Investment Group, a subsidiary of SoftBank, bought the chain from bankruptcy in May 2020 for $ 48 million, including $ 21.5 million in debt. Fortress brought in Golden Child Holdings, a large Pizza Hut ‘zee, as an operating partner and installed Stager, a Golden Child partner, as the restaurant chain’s CEO.

Research for the Franchise Times Top 400 shows that Krystal achieved system sales of $ 318 million in 2020, down 10.8% from 2019, and that its 287 stores reported average unit volumes of just over $ 1.1 million.

The first move of the new management team was to meet many of the brand’s “zees”, many of whom had not seen a company visit in years, Hodge said. Some brought a “list of grievances” to the meeting, and Hodge said the company had improved many of those grievances, including adjusting the length of the franchise agreement and “more than a handful” of other changes.

A “list of grievances” sounds bad, but Hodge said she sees it as a sign of franchisees’ commitment to the brand. Apathetic people don’t have grievances, and for a new management team, that kind of openness can be a useful roadmap.

Krystal’s small food sets it apart from more established burger brands like Burger King or McDonald’s, Hodge said. “The salty slider is what we’re best known for,” she added. They are available in combined meals of three or five or in “sackfuls” of 12 or 24 sliders.

Hodge said the brand is looking to “grow in the southeast and enter new regions” and is looking for experienced operators to help it grow its footprint. “We like people who have been in space before,” Hodge said, but noted that the company isn’t averse to new owners, as long as they have an experienced operating partner.

To spur expansion, Krystal unveiled a daring, dining-less prototype in July. Hodge said the prototype includes a streamlined kitchen as well as two-way drive-thru and a walk-in window. “The earlier and later hours, which are increasingly important to a successful concept, are an integral part of our offsite strategy. Our brand new design must reflect this trend, ”Stager said in a press release.

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