How Black Bear Diner Put Development Back on Track
January 23, 2023 BEN COLEY
THE NEXTGEN CASUAL, WITH DOUBLE-DIGIT SALES GROWTH AND POSITIVE TRAFFIC, OPENED 10 RESTAURANTS IN 2022, AND NEARLY ALL WERE IN TEXAS.
After COVID hit the U.S. in March 2020, it took Black Bear Diner about a year and a half to restart its full development schedule.
But the chain never rested on its laurels. The NextGen Casual used this downtime to create a new e-learning platform and it figured out how to cut its 3 percent food waste in half. CEO Anita Adams calls it building, scaling, and forming “processes around a very entrepreneurial type of company.” It was a lot of discipline around things that aren’t necessarily as sexy, but important to the P&L, like inventory, theoretical food cost, and labor scheduling.
Black Bear took all of this knowledge into mid-2021 when occupancy limits were being removed. Sales were robust—and still are to this day—and there was confidence that consumers were back, Adams says. Amid this shift, there was debate about whether off-premises would stick. As it turns out, the channel remained at a 20 percent mix, tripling pre-COVID numbers.
A favorable environment for relaunching growth.
“We had the confidence that the time was right,” Adams says. “Our lenders had the confidence and our shareholders and so we jumped back in. We are a growth company, and so it was important as we think about our long-term strategy … This company, it’s 27 years old, but in all reality, we’re a very new, young company. Private equity came in ’16 when there were 70 some diners. We’ve doubled at 153.”
The brand climbed to 10 openings in 2022, split evenly between franchise and corporate locations. Operators who developed pre-pandemic are back at the table, which speaks to the resiliency of the brand, Adams says. Black Bear is based in 14 states, from California to Arkansas.
A majority of those 2022 store debuts came in new Texas markets—San Antonio, Amarillo, Dallas, McAllen, Pasadena, Harker Heights, and El Paso. Adams says it’s a concerted effort to demonstrate Black Bear’s portability. The casual-dining chain first entered the Lone Star State in 2018 in Katy, Texas, a store that now earns more than $3 million in AUV. Now there are eight other units in the Houston area. The success validates that Black Bear isn’t simply a California brand, Adams explains. Instead, it’s classical American fare with cabins, bears, and music that can resonate in any environment.
And now that Black Bear has committed to the geography, it’s built leadership. There are assistant managers already slated to become GMs of future diners.
“Texas is just a healthy economic environment,” Adams says. “It’s really 30 percent cash-on-cash returns. It’s been very lucrative for us. And I think too, we have great franchise partners in really more of our legacy footprint, and I believe as a franchisor you need to prove out the portability before you’re asking franchise partners to go build in these new markets.”
Adams says new openings are being received well and experiencing “banner volumes coming out of the gate.” But expansion hasn’t been without its challenges, like inflationary construction prices. In response, Black Bear—like many of its full-service peers—is shrinking its box size and hoping to increase efficiency.
In conjunction with that smaller prototype, Black Bear is thinking more in terms of off- premises. The brand didn’t want situations where to-go bags pile up and delivery drivers, pickup customers, and dine-in guests crowd the entrance. To prevent this disruption, new stores have a pickup window in the foyer where employees distribute orders to off-premises customers and drivers. There’s also additional space in the front for workers to place meals into bags so they don’t sit on the counter.
“All of the diners opened last year would have [the pickup window],” Adams says. “So the 10 and then we had a couple in the prior year that we put that in. We had a franchisee who had converted a Ruby Tuesday and if you look at the Ruby Tuesday’s design, they kept this window and when we were visiting there during the pandemic, they had bags sitting there and it just hit us. We’re like, ‘There’s something to this whole window idea.’ Because now the guest doesn’t even come into the diner.”
Black Bear believes it’s solved the economics of off-premises, too. The chain uses a tiered pricing system in which online orders come with a packaging fee and delivery orders through DoorDash, Postmates, and others come with an even higher cost. Adams says guests valuing these ordering channels are willing to pay larger amounts for the sake of convenience.
The takeout/delivery story began in 2018 when Black Bear partnered with Olo. Back then, the channels mixed only 7 percent, so it’s been quite the journey.
“I struggled because we consider ourselves an experienced brand. How does off- premise fit into that?” Adams says. “And that was what we were grappling with in ‘17 and ’18, and so we felt like, ‘Let’s put it in place, but it’s really going to be kind of just to tuck in.’ We’re not going to really tout it. And so we did that pickup at 7 percent, but then thank goodness because the pandemic hit the next day. 100 percent of our business is going through the channels. So it’s worked out. I just think the world has shifted and there’s guests enjoying our food in their kitchens, their couch, the ballpark.”
Same-store sales rose 12 percent in 2022, and traffic remained positive. To keep guests interested amid inflation, Adams says Black Bear will stay focused on its identity. For instance, in the latter portion of 2022, the brand stayed within its wheelhouse and promoted Chicken Fried Steak. The LTO provided customer value, but at a favorable food cost—giving the chain a key win on margin. In 2023, Black Bear expects to be flat on commodities. In any other year, that would be good news, except that’s compared to a year of 17 percent inflation. Regardless, Adams says the restaurant is about quality offerings and abundance, so it will continue to be aggressive in managing the supply chain.
The longer-term goal is to return to the historical average of 15-20 restaurants per year. In 2023, the plan is to open 15 units, with the majority being franchises. Operators aren’t shying away from development as talks of a recession hang in the background. Adams says there’s a belief that “we’re just going to develop through it.”
“Our aspiration is to go coast to coast,” Adams says. “I don’t think there’s any reason we don’t do that. It’s just a matter of how much we grow from year to year and what our current shareholders want to allocate in capital.”