Few companies have pulled off large-scale brand conversions in the restaurant business. First Watch hopes to bust the trend.
When First Watch bought The Egg & I Restaurants in May 2015, one of the deal’s selling points stemmed from a tired-but-true real estate theory: Location trumps everything.
Centennial, Colorado-based The Egg & I had multiple locations in Colorado, Texas and Arizona, where east Manatee County-based First Watch had few locations. “We saw it as an opportunity to get a strong presence in markets where we didn’t have a presence,” said First Watch President Chris Tomasso. “It was mostly a real estate play.”
One of the leading daytime-only restaurant chains nationwide, First Watch got its locations, 114 in total, from Dallas to Denver, 20 states in total. First Watch has since gotten something else: a crash course in restaurant conversion strategies.
The initial challenge was there was scant industry research on best practices for brand conversions. “We couldn’t find anything out there that has been done before,” Tomasso said. “No one has really done something like this.”
A rare example of a large-scale hospitality brand conversion, according to a recent report in Nation’s Restaurants News, comes from the 1990 acquisition of Roy Rogers by Hardee’s.
Hardee’s bought Roy Rogers’ 600 locations for $365 million. It converted the majority of the stores.
One reason chains don’t normally attempt a full brand conversion post-acquisition is to maintain the purchased brand’s identity.
Au Bon Pain Co., for example, maintained the St. Louis Bread name in that region of Missouri when it acquired that company in 1993. All other locations became Panera.
“The data can be daunting,” against conversion, notes Tomasso. “All you see in the research is ‘don’t do anything to my brand.’”
First Watch forged ahead.
Because of franchise agreements, not every The Egg & I will become a First Watch. But a large chunk will. The company has completed 22 conversions, and aims to finish eight more by the end of 2017.
It’s also converted 18 The Good Egg restaurants in Arizona to First Watch. First Watch acquired The Good Egg in early 2014.
The first part of the conversion is the store remodel. Since First Watch closes at 2:30 p.m., this work can be done in the night hours, with walls, floors and furniture changed up before 4:30 a.m.
After renovations, the location closes for a few days, for training and to purge ingredients and anything not First Watch. It also holds a series of training and friends and family events.
There also are multiple detail-oriented steps in the process. First Watch executives have discovered some take hours, others take days. One task that took a while, for example, was explaining to Yelp the location is new — not a way to clean its record of bad reviews from a previous tenant.
The final step: a grand reopening.
First Watch executives have learned, or re-learned, several management lessons during the conversion period.
One is to never take anything for granted — that customers get the menu or employees understand what to do or chefs are on top of new items. “Don’t assume bacon and eggs is bacon and eggs everywhere,” Tomasso said.
A cousin of never assume, the executives learned, is transparency, early and often. With that in mind, Tomasso and First Watch CEO Ken Pendery traveled to Phoenix several times in the pregame of The Good Egg conversions. They rented a restaurant and held a town-hall style meeting with managers. “You can’t just surprise people,” Pendery said.
Another lesson came in trying to please everyone, a natural hospitality instinct. But trying to meld menus in a hybrid format to satisfy traditional customers while targeting new ones, was an early mistake, said Tomasso. Executives called it the Muddy Middle.
“We learned quickly that wasn’t going to work,” Tomasso said. “We have to stick to who we are.”