The Habit Burger Grill has set on expanding its nascent presence on the East Coast. President-CEO Russ Bendel told analysts the Irvine, Calif.-based chain, which opened its its first East Coast location last year in New Jersey, intends for 20 to 25 of the projected 30 to 32 new company-store openings in 2016 to be on the East Coast, specifically in New Jersey, Florida and the Washington, D.C., area.
The chain has 128 locations currently, a small number of which are franchised. Bendel reaffirmed that the long-term goal is to keep franchised locations at less than 10% of the system, a 180-degree reversal of the strategy the largest burger QSR chains are pursuing (Burger King is now 99% franchised).
For Q3, Habit Burger a reported same-stores sales increase of 2.9%, of which 2.1% was the result of a 3% mid-summer price increase (offset by negative impact of menu mix shifts), and a 0.8% increase in customer transactions. Management pointed out that Habit enjoyed a 16.2% jump in comps a year ago following a favorable article in Consumer Reports.
Habit Burger also took 3% in pricing in mid-2014 and likely will boost prices again in December or in January 2016 to offset expected minimum-wage hikes in West Coast markets. CFO Ira Fils said the company expects that increase will be “2%ish.” Habit’s prices on the East Coast already are about 3% higher than on the West Coast, it acknowledges. Bendel also said the chain does not intend to change its determination to do no discounting and to not offer a value menu for those with less discretionary dollars to spend. He repeated his belief that Habit Burger’s regular pricing provides sufficient value.
Traditionally reticent to fund marketing outside its stores, Habit Burger went about as old-school as possible in Q3, spending on freestanding Sunday newspaper inserts in two markets to promote its LTOs. One was the Roasted Garlic Portabella Double Char burger (two flame-grilled patties topped with roasted-garlic portabella mushrooms, melted cheese and roasted garlic sauce on toasted garlic-herb sourdough bread). The other was a Grilled Chicken Salad with Raspberry Vinaigrette. Bendel said freestanding inserts provide a sales lift but likely won’t become regular strategic tools.
Bendel told analysts that he believes 20% to 25% of Habit Burger customers are taken from traditional QSRs such as Burger King and McDonald’s, with an even larger group (25% to 30%) coming from bar-and-grill concepts such as Chili’s and Applebee’s.