Blending Old and NewBy Baselinemag | Posted 2008-04-30 Print
Johnny’s Lunch is on a roll with a combo of good food at reasonable prices, great service and the right technology.
Blending Old and New
One of the first challenges the owners tackled was figuring out how to take Johnny’s Lunch national while retaining its unique look and feel. “We want Johnny’s Lunch to have, not the feeling of a typical quick-service restaurant, but more of a ‘Cheers’ feeling of going to a place where everyone knows your name,” Goulson explains.
“We discussed thoroughly how we would take Johnny’s Lunch across the country. The company was new to franchising, but we weren’t.”
Maintaining affordability for franchisees was another key challenge, so management decided to locate new restaurants in strip malls, in facilities ranging between 1,400 and 1,800 square feet. “We’re trying to control unit costs, so we’re not looking for freestanding locations,” Goulson says. “Mall locations also offer more available real estate.”
When the executives began discussing geographic locations for new restaurants, they quickly realized that taking a scientific approach promised the best chance of success. “We decided to go to one of the best companies in the world to analyze our cycle and the demographic profile of our customers, and then map various locations around the country where there was potential for Johnny’s to be successful,” Goulson says.
The aspiring franchisor turned to Pitney Bowes MapInfo to identify a geographic expansion strategy. “Johnny’s Lunch believes in technology and research, and it’s very rare to find a company that is willing to invest in that,” says Orton, who had been a vice president at MapInfo when this project began.
In the initial research stages, the Predictive Analytics group at Pitney Bowes MapInfo interviewed 600 customers at the one existing Johnny’s Lunch location, doing one-on-one interviews at the restaurant for 10 to 12 hours a day for an entire week. “Initially, it was primarily a research project,” Orton recalls. “With just one unit, we were limited in terms of observations, but MapInfo had done a lot of research and could provide an analysis.”
The research found that most of the store’s customers came from the lower-middle to the upper-middle range of household incomes. Half were families; most were either between 16 and 24 years old or over 60. The interviews also revealed how many customers were coming into the restaurant from home, work, shopping or some other location.
While useful in terms of profiling existing customers, the research didn’t provide enough of a foundation on which to make critical decisions. To close the gap, the company created an analysis that combined the aspirations of Johnny’s Lunch, the existing data from the one store, and the assumptions and experience garnered from other restaurants in the QSR category.
“They didn’t know how many units each market could support or which markets to go to first,” recalls Brian Hill, practice leader, restaurants, for the Predictive Analytics group of Pitney Bowes MapInfo. “We helped them develop a market planning tool to effectively quantify the marketplace and prioritize where they should go within those markets.”
MapInfo’s Smart Site Solution uses analytics technology to pinpoint potential markets and identify the optimal number of sites within the market to maximize sales. “Using MapInfo to break up the United States into designated market areas [DMAs] allows Johnny’s Lunch to divide the country into logical areas so management can understand the level of competition, demographics, characteristics and attributes of a particular location,” says Marcus Torchia, an analyst at the Yankee Group in Boston. “Based on that, they can put together a growth plan on how and where to grow, and then identify a logical sequence of how to make that happen.”
The technology created a predictive model based on 20 different retail concepts—including trade area size, buffer distance between stores, customer profile, etc.—to allow Johnny’s Lunch to identify sites in the absence of historical sales data.
“Smart Site can look at any intersection in the country and quantify the demand at those locations,” Orton says. “So we were able to gain an understanding of how a Johnny’s Lunch could grow there.”
This analytic information helped the executive team prioritize expansion throughout the many possible locations. Currently, Johnny’s Lunch has identified 210 DMAs and plans to appoint area representatives to cultivate relationships with potential franchisees.
“We have a contract with the area reps, and they contract with the franchisees,” says Goulson, adding that the area reps buy the rights to the name, as well the training and support, and can open stores in a particular geographic area. “It’s a very scalable model since, rather than dealing with 4,500 franchisees, we will be dealing only with the area reps.”
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