In this week's Workstream's webinar series, we are joined by QSR industry leader, Larry Kruguer. Larry was the former COO of Wingstop which operates and franchise more than 1,000 locations globally, and also the VP of International Markets at Wendy's where he helped them expand to over 6,000 locations worldwide. In this Q&A session, Larry shares about what differentiates top-performing restaurants, growth strategies, and modernizing operations to adapt to a COVID world.
Read on for the full transcript:
Table of Contents:
1. Getting a Career in the QSR Industry
Lydia: Today we are joined by Larry Krueger who is the former COO of Wingstop, he was also on the leadership team at Wendy's. I'd love to kick it off by learning a little bit more about your career and how you got into the QSR and fast casual space.
Getting a Career in the QSR Industry
(00:22 - 03:05)
Larry: I got into the sector about 12 years ago, was not in the food sector before that. I've grown up in consumer services, early in my career was with companies like American Express, Alamo rent-a-car. Went off on my own for about six seven years as an entrepreneur, enjoyed that a lot but then life went back into corporate and some old colleagues of mine were in the restaurant sector at the time, at Wendy's specifically. This would have been about 2007-2008 and I had the opportunity to join them during a challenging time in their history, Dave Thomas had passed away some years prior to that and they struggled a little bit. They were looking at bringing in some new talent. This was about the time that they went through a merger with Arby's, so lived through that Wendy's Arby's for about eight years. Most of my time I was in the international side of the business, international strategy, marketing, development, joint ventures etc and then had the great pleasure of joining Wingstop in 2015 as it was going through its IPO. Initially to head up the international side of the business and worked with a team there in 2018, got the opportunity to become their global COO continuing to keep the international business but also overseeing the broader operations across its 1,400 plus locations in the U.S and overseas as well as working with the team on operation support at some point or another supply chain field marketing operational innovation etc. So now, step down pre-COVID, I decided to come back to an entrepreneurial path, enjoyed the ride significantly and wouldn't stop. Came back to South Florida, where I lived for quite a few years and left 12 years ago. So excited to be back here and starting up some ventures, currently managing partner with the Floresta Partners. This is a group made up of a couple of old colleagues of mine from my Wendy's Arby's days, we are in the restaurant investment side, we own a brand in Ohio, we also are in the design side, do a lot of work with companies like Starbucks and restaurants of non-traditional design and also provide some advisory and consulting work for early stage concepts.
How Brands can Adapt to COVID
(03:06 - 04:58)
Lydia: With everything that's going on right now in the world with COVID, curious how are you seeing different brands respond to it and who do you think are some of the most of exemplary brands to follow as far as what they've done to really take initiative and either institute new technology or processes to address what's going on.
Larry: Well obviously first and foremost, it's clear with the whole COVID situation and the closing down of dine-in experience. There's no question that it's hard. The most you would say the casual dining sector and concepts that are very dependent on dine-in business and what it has allowed is concepts that are of smaller footprint maybe been historically strong in takeout or delivery to really prosper as people and consumers have had less options as to what they can do. I think those that have benefited the most or have excelled are those concepts that have taken advantage of setting up the platform and the framework to execute well on delivery, to execute well on takeouts, be it curbside or come in and take out. We've seen that those brands have done well, they have lower overhead costs, less issues potentially with maintaining a significant amount of staff and labor during times like this so those I believe have clearly won during these challenging times and we'll see what is the outcome of the post-COVID world.
(06:36 - 07:56)
Lydia: One thing that we've seen come up more and more are ghost kitchens, I know Wingstop is really big on those. What are your thoughts on ghost kitchens and how do you choose whether or not it's right for you as a company?
Larry: Ghost kitchens have obviously really been top of mind over the last couple years, especially as costs of real estate continue to go up. You look at alternative asset types and trying to keep your overhead costs low, you look at penetrating high density urban areas that again are going to be quite costly from a real estate perspective. I think ghost kitchens definitely have a place within the asset portfolio of a concept. I don't know if ghost kitchen only concepts can succeed because it's hard to establish any type of emotional relationship with your customer and client without having that brand imagery that you're able to establish or that point of contact or point of touch. You have a brick and mortar location so I believe it is great as a complementary asset type, I'm not sure about being the way to go 100% for a format.
Subscription Model for Restaurants
(07:57 - 09:28)
Lydia: Makes a lot of sense. Another thing we've seen pop up more and more during COVID are subscription services. Panera, for instance, has something where you pay a certain number of dollars a month for unlimited coffee. Have you seen that work well for restaurants, would you recommend companies look into something like that just to get people in the door more often or up to the curb?
Larry: It's an interesting loyalty program. I think have had checkered a history of success in the industry. Having come from consumer services, I'm very familiar with loyalty programs, you could say Starbucks is a model of some success, it has a lot of stickiness because it's part of the app, it's part of the experience. As you use it more, and again coffee as in the case of Panera, is more of a daily routine and experience. I think for that type of program, you have to have a very high frequency of use to create traction. When it comes to food dominant concepts, maybe a little bit harder to execute because the frequency may not be there and it may not be as compelling and then last but not least, you got to remember that there is a cost in running those type of programs, what are the margins of your products, what is the average ticket and is it really going to contribute truly incremental sales and profits.
Post-COVID World for Restaurants
(09:29 - 11:38)
Lydia: Where do you see companies headed after COVID? Do you think things like ghost kitchens are here to stay? Everyone is using Grubhub and Doordash, do you see a lot of those continuing or will there be a shift back and shift away from those?
Larry: Well it'll be interesting because I think there'll be a couple of phases post-COVID. First of all, the winding down hopefully which I think we're still probably ways away until people are 100% comfortable in going back to a regular routine and dining out and things of that nature. I think that in that the next phase, interim phas,e you will definitely continue to see a heavy emphasis on delivery, a heavy emphasis on take out. I think working with companies like Doordash, Grubhub, Ubereats is still going to be a significant piece of the business. If things begin to normalize, you will have customers coming back out to the dining experience. I think that things will go back to some degree but you are still going to have this new element of the ability to have a lot of other options now to dine and I think that people will see that the convenience of having food brought to them or the ability to have a broad array of menu items that they can take advantage of and benefit from, is something that's attractive to many. For people like in Manhattan and New York, they've always loved that, for others maybe it's a little bit of a newer experience so I do believe delivery is here to stay as an important component. I believe that ghost kitchens will have a place as well and probably you will see the traditional concepts rethink their asset sizes, what does their new locations look like going forward and some reformatting I think would be probably safe to assume what will happen.
(16:04 - 19:08)
Lydia: With Wendy's and Wingstop, you had a lot of experience working internationally with them, what were some of the more interesting menu items that were added to other countries?
Larry: Well, reflecting back on Wendy's, we launched in India back in around 2012, 2013, and we had no beef. So for Wendy's who's always been known about fresh beef, never frozen to launch their market like India which you just not really at a scalable level offer beef. McDonald's does not offer beef in their menu and so that took a lot of consumer research and consumer insights to understand how do you get the Wendy's persona, the DNA of what Wendy's is, about fresh higher quality products kind of a cut above when it comes to the fast food sector and introduce that. We were able to do that extremely successful with veggie burgers, we did have chicken burgers and even our famous Baconator was recreated in a chicken Baconator, with bacon we did decide to do bacon which caught some people off guard but actually was very well received. We had a Wendy's cafe, for those that know McDonald's, they have McCafe which here in the U.S. is just a beverage strategy which actually started overseas and was brought in to the U.S. But overseas, Wendy's in some places, we would have our own little cafe shop so it was almost a "Starbucks" type location within the burger place and that was because you had a demand for a morning or afternoon day part to be able to come in and have a coffee or product and it was just an opportunity to get an additional transaction.
Lydia: So interesting. When I'm traveling, I try to avoid going to the American chain restaurants just to be able to experience something different but I do remember once, it was after a long trip in Europe, I just wanted a hamburger and I ordered it at the airport and I asked for only ketchup on the hamburger. I get onto the plane, I open it up there's no meat inside it was just bread and ketchup and I've never been so disappointed in my life.
Larry: I would never expect someone to probably respond that way here but they may interpret it that way.
Hiring in a COVID World
(19:09 - 23:32)
Lydia: Shifting gears a bit, I would love to chat with you about the hiring processes at Wendy's versus Wingstop versus the companies that you're at now. We've seen a lot of changes since COVID as people want to do more virtual interviews and virtual training. What are some of the hiring strategies that you see in both the QSR and fast casual space that have been changing, what's working right now?
Larry: Well, there's no question as we all know people make a difference. Regardless of what the brand is, regardless if its casual dining, fast casual fast food people make a world of difference on the execution operationally and being able to deliver great product. First and foremost, you have to be continuously recruiting. One of the philosophies we had at Wingstop with growth is you have to always continue to be looking for good people because you just naturally have turnover in the industry. It's just a given as people come and go and you can be great, you can retain a higher amount but you have to be looking all the time. I think one of the things that's happening as you look at newer generation individuals is, there's no question their attention span is shorter, the ability to communicate follow up in contact with individuals is more difficult as people are continuously on the move and mobile. I know what I personally love about the Workstream product is the fact of its text-based capability and the fact that today when I look at the younger generations, what do people do all the time, they're texting all the time. I mean it's a matter of fact. I usually don't even see people using their cell phones for a call, it's all about texting right. So I think that one of the key things as a recruiter as someone who's always looking for good people is, how do you communicate right, how do you connect and how do you relate to the individuals. What's the technology that's going to help you capture the right type of individuals, demonstrate to them that you are in with the times, you have a modern process and methodology to recruit, to bring in individuals and what makes you more effective from a time perspective because it's a continuous effort.
Lydia: Yeah that's so true. There's so much change going on right now with just how people communicate. I think it's crazy, I read my voicemails. I literally read the transcriptions of my voicemails, I listen to my books and I use my phone pretty much exclusively for texting so it's so important that you have that texting built into your hiring process since that's where people read. With all the changes that are going on right now and the hiring technology, we've seen a big shift for the sort of the virtual interviews and doing things like Zoom call, are you seeing that getting picked up universally at restaurants or is this something that they've been a little bit slower with the companies you've worked with?
Larry: I believe that it works maybe at certain levels, there's always that importance of the more personal touch, it's so hard to just recruit individuals without having a face-to-face experience or being able to kind of socially connect with an individual. I think that for certain levels of jobs, managerial jobs and above Zoom is a workable mechanism but when you're looking at frontline customer, service oriented personnel, counter personnel, kitchen personnel, it may be hard because some of these individuals may have a difficult time expressing themselves in a clear way through this type of technology. I do believe it's still about filtering individuals quickly, being able to capture those individuals that seem to be a good fit and then still having that personal interface. I believe that is pretty much the case and will be for the foreseeable future.
1. What do you think are some of the key factors that are leading to success with locations that do not have drive-thrus? If you don't have a drive-thru, what strategies do you recommend companies employing?
- Well first of all, like anything in the restaurant business you have to have a great product. So if you don't have a great product, it's going to be challenging to drive any type of business. Let's assume you have great product, if you don't have that convenience of a drive-thru, like I described Wingstop is a business that doesn't have drive-thrus, it's typically in strip malls and it's historically been very heavily set on takeout business and rolled out delivery. The ability to deal with customers orders in a fast quick way using through technology pre-ordering etc, being able to have people come in and out of a location quickly. I think is critical while maintaining social distancing and following all the norms necessary. Those are the things you have to look at. Some brands have decided to go down the promotional route, assuming you have the elements of service I've just described as a base, so you just have to have the ability to turnover customers in a quick manner, in a high service touch manner while maintaining the CDC or general guidelines.
2. Since you're (Larry) familiar with so many different cultures in the world, what do you see as a big challenge in bringing those concepts in the U.S. market and also bringing U.S. franchises to the international markets, curious on both sides of that what you've seen and what the big challenges are?
- Fortunately, I've had a lot of experience both in dealing with taking U.S. concepts overseas as well as bringing international concepts domestically. With U.S. concepts overseas, there's always this issue of the cultural adaptation and trying to maintain the same DNA of what the item is all about. I think the perfect example is always McDonald's, it's the 800-pound gorilla the global player but McDonald's in Asia and the McDonald's in parts of Europe, their menu is not exactly the same that you see here in the U.S. While the look and feel or the essence of what it is is the same, I can assure you the retail experience, the look and feel of the restaurants, typically are much more upscale internationally and their menu items may be more varied, maybe more healthy oriented conscious etc. The same thing applies when you bring in concepts from overseas to here, you have to think about what is it in the core DNA of the concept that made it successful but understand that consumers here in the U.S. are very used to eating quickly especially if we talk about the lunch or breakfast. A lot of it is about drive-thrus, it's about hand-held items versus in other parts of the world there's a greater focus on sitting in dining in even for breakfast. That's not as common here so those are pieces of an adaptation that you need to take into account.
3. I was watching the debate yesterday, it's clear that there's a fear of depression. How do you think that will affect the business going forward especially if there is a market crash?
- Those are beyond my capability of interpretation but we have a healthy market, U.S. is a very vibrant country, it's a vibrant market, strong middle class. Even with everything we're going through COVID, there is still a great deal of consumption, maybe a little more caution about it so I'm still very bullish and optimistic that's what's made America what it is and it's that continuous momentum forward regardless of issues that we may disagree on or just politics if you want to call it. So I'm optimistic that you will continue to see opportunities and growth in the sector.
4. Do you believe in doing a market flavor profile research before going into a new international market?
- First of all, you always should do some consumer research. There is no question about it. My experience again having started early in my life in consumer services, you do drive everything from what the consumer needs and demands are. I'm a big believer in doing in-market consumer research, looking at having people get the opportunity of tasting your product, evaluating the experience, the positioning, the pricing. I think it's not wise to just assume that everything that you're doing in the U.S. or in your home market will automatically work somewhere else and then the challenge for you is how do you still maintain the core DNA of who you are and yet still being able to adapt to a level for success in that market.
5. How long do you think it'll be until things get back to normal? What does the future hold?
- I'm down here in Florida for about a month or so, restaurants have begun normalizing, starting only with dining outside, the inside of restaurants I think have been opened at 50% capacity. I think there's some discussion now that it's going to go fully normal in the next month or so and I think we're just going to have to take steps. I think we're going to have to be very conscientious about what happens with the number of people that may get COVID, indoor fatalities and just take it a day at a time. I think that you obviously need to take steps forward, people want to work, they need that social interaction while still being able to maintain social distancing and being cautious but I think that things will open up slowly but surely and we'll just have to keep track and if you have to put a little bit of a pause button maybe you do, until we're comfortable that we have immunization that people can be comfortable to get and hopefully that will be sometime early mid next year the sooner the better.
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Lydia Fayal Hall is Head of Marketing at Workstream. She previously held leadership roles at OneSignal and Chalkup, acquired by Microsoft. Lydia has written for publications including The Wall Street Journal and Forbes. She is an alum of UPenn, Johns Hopkins, and YCombinator IK12. Originally from Stonington, CT, Lydia now resides in San Francisco, CA with her Australian Shepherd, Indy.