The FSR Growth 23: These Restaurants Defied the Pandemic Odds in 2020

“I think over the last several years, what’s been important in our industry is a focused menu—clean, fresh, craveable—and in a manageable box. … We bring the perfect sort of balance of speed if you want more of a fast casual experience,” Artinian says. “So, given our focused menu in being built for quality and speed, we’ve been able to meet this interesting need with the emergence of fast casual, but still [meet consumers’] desire for experience.”

Limited-service restaurants, while still negatively impacted by COVID-19, were more insulated than their sit-down counterparts. But full-service restaurants that toed the fast-casual line were better positioned to succeed this past year.

That’s not to say operators needed a strong off-premises program pre-pandemic or that restaurants doing robust takeaway sales were guaranteed expansion opportunities. Both factors certainly helped, but growth largely came down to cash flow, existing commitments, and franchisee buy-in.

Little help from my friends—and investors

Only a few weeks before the coronavirus struck the U.S., Condado Tacos closed a deal with The Beekman Group, where Artinian was the managing director for the private equity firm’s restaurant and consumer channels. The fresh injection of capital helped the brand continue expanding, even if the actual store openings fell a few shops short of the ideal target.

Now growth is ramping back toward The Beekman Group’s initial targets; it will add nine new units this year and 10–12 in 2022, with an eventual pace of 12–15 per year.

Cooper’s Hawk Winery & Restaurants slowed its growth in 2020 but didn’t stop entirely. The pandemic did, however, force the wine-driven concept to spend a few months reevaluating its path forward.

“We had these different phases during COVID. So the first one was [shock] mode. After that, it was to try to ensure we could survive financially,” Cooper’s Hawk founder and CEO Tim McEnery says. “We just didn’t want to lose that much momentum.”

Being backed against a wall brought the brand’s strengths into sharp relief, he adds. The restaurant knew its business well, had a solid employee culture, and had diversified revenue streams thanks to its retail arm and membership-based wine club. And like Condado Tacos, it also had the financial backing and trust of a private equity firm.

“Having partners like Ares [Management Corporation], we were very lucky to know that they would always be there to support us,” McEnery says. “I knew we had to be incredibly fiscally disciplined at this moment in time, but if we paused all growth for the entire duration of COVID, we’d regret that after COVID. [Ares] totally agreed, and we just got right back into it.”

After a few months formulating a game plan, Cooper’s Hawk resumed its expansion and finished last year with three new units in its system. The brand will add four in 2021, but McEnery expects it will be back to 6–8 annually by next year.

The show must go on

As counterintuitive as it may sound, opening new stores could, in certain instances, be more financially prudent. During the pandemic, some restaurants that were already far along in development plans decided to charge forward, even when the locations were opening with no dine-in service whatsoever.

That was the position Walk-On’s found itself in last year. Multiple locations were already in various phases of construction when the shutdowns began. So, the brand moved forward.

“One of our first areas affected was financing,” Landry says. “Despite the crisis, one restaurant opened for to-go and curbside only and set some impressive sales marks.”

Walk-On’s performance in the early stages of the pandemic quickly proved the brand’s resiliency and potential. Soon, funding to open even more restaurants was no longer an issue.

“When we were able to begin bringing in limited guests, our sales soared,” Landry adds. “We broke two national opening-week sales records with restaurants at 50 percent occupancy restrictions. The banks took notice and financing flowed.”

By year-end, the Walk-On’s footprint had grown by a dozen units. This year, it’s on track to open 20 locations including several in new markets like Phoenix; Tuscaloosa, Alabama; and Chattanooga, Tennessee.

Going into new markets adds another wrinkle into the expansion equation. Even under the best of circumstances, entering a new city can be dicey. Restaurants may lack brand awareness, and it can take time to build a solid consumer base and turn a profit. Adding a global pandemic into the mix makes circumstances all the more challenging.

For Walk-On’s, expanding its menu—rather than contracting it—for off-premises helped attract guests to new locations. In addition to dine-in dishes, it added family meals, take-and-bake items, and beverage kits featuring drinks like mimosas and margaritas.

Similarly, Cooper’s Hawk was able to use its wine club as a way to engage with guests at new and existing locations during the pandemic. Of the three added units in 2020, only one was in a new city (Scottsdale, Arizona), but it represented a higher percentage than typical years when new markets accounted for 20 percent or less of all openings. The brand doubled down on its wine club and diversified its offerings with new items like wine-based hard seltzers. These efforts not only boosted revenue, they also grew brand recognition.

“Amazingly we were able to grow the wine club during COVID. I didn’t see that coming just because everybody was being very cautious with their discretionary income,” McEnery says. “But when you have almost 500,000 wine club members, who are incredibly loyal, coming to pick up a bottle of their wine every month, it sure does help a lot.”

For its part, Condado Tacos makes a point of forging community ties when it enters a new market. It does this by inviting local artists to paint murals on the restaurant walls and championing inclusivity, which founder Joe Kahn made a core value of the brand from the very start.

In terms of market expansion, Condado Tacos has found that it performs especially well in the suburbs—even though the concept first debuted in downtown Columbus, Ohio. Prior to the pandemic, urban and suburban locations were neck and neck in terms of sales, but that dynamic has since shifted. At the height of COVID-19, one downtown location in Columbus’ Short North Arts District was down as much as 38 percent, while some suburban units were up 30–35 percent.

“With people being in their homes and working out of their homes because of the pandemic … our growth was focused in those suburban locations,” Artinian says. “Online ordering and all those things serve the suburban markets really well. That’s where the density was because the workforce wasn’t coming downtown to work during those times.”

All in this together

Just as customer support was key in keeping restaurants afloat, franchisee buy-in was critical in continuing with expansion. Five years before the pandemic, Black Bear Diner was beginning in earnest to chart a course beyond its West Coast home turf. The California-based chain now has a presence in 14 states, and corporate growth is largely responsible for the brand’s eastward march.

With about 30 franchise partners running just under 90 locations, Black Bear’s operators are the lifeblood of its system. To that end, the chain took great care in guiding them through the past year. When the pandemic began, the parent company held meetings every week (if not more frequently) with franchisees to share intel and updates. Black Bear also abated its royalties and didn’t begin phasing them back in until dining rooms had reopened.

“Subsidizing our franchisees in the short term to ensure their long-term viability was truly paramount. We’ve looked back and asked ourselves what we would do differently, and there really wasn’t much that we came up with,” says Black Bear CEO Anita Adams. “I would say we [already] had very strong relationships with our franchise partners, and I feel like today, we’re even closer. The relationship has deepened. And we’re emerging here post-pandemic in a position of strength.”

Black Bear did close one location for reasons unrelated to the pandemic, but it’s hardly a setback. All franchisees who were growing pre-COVID are actively working to expand their portfolios, Adams says.

From the beginning, Walk-On’s involved its franchisees in the decision-making process. Corporate worked in lockstep with operators to create additional revenue streams, like the new “to-geaux” menu items, launch online ordering, and enhance curbside. This early involvement plus the fact that 80 percent of sales had been recuperated through off-premises business within a few months fostered greater trust between the corporate office and franchisees. That trust, in turn, paved the way for continued expansion in 2020 and beyond.

“With franchisees’ confidence in our team reaching an all-time high, we continued driving development,” Landry says. “Franchisees opened locations, acquired additional territory, and set opening week sales records throughout the pandemic. As a company, we confirmed our role as dynamic leaders and stewards of the brand.”

Press restart

Even though a small cohort of full-service restaurants were able to grow in 2020, they still faced obstacles aplenty; some even had to close locations in the midst of opening new ones. Growth may have continued, but the way restaurants approached it—both in terms of unit counts and new business channels—was forever altered. Some of the changes were relatively small, while others marked a crucial turning point.

Condado Tacos launched a catering program right before the pandemic began and large gatherings were prohibited. Rather than abandon the program altogether, Condado created Bud Boxes, which were essentially a la carte catering experiences. The sealed, individual boxes included two tacos and a half-portion of dip, as well as plasticware; customers could order these for small, socially distant gatherings without having to share items like queso and guacamole, which are usually communal.

Even though regular catering operations have now resumed, the individual Bud Boxes will remain as an available offering.

Like Cooper’s Hawk, Black Bear Diner used the pandemic as a time to reassess its business so that when the time came to revive aggressive growth, it would be ready to do so in an efficient and cost-effective manner. From inventory management to employee scheduling to supply chain pricing and margin enhancement, Black Bear diner put its entire operation under a microscope.

“The silver lining of 2020 was that it allowed us to take a step back and focus on margin-enhancing initiatives and invest in learning and development systems,” Adams says. “We recently rolled out a new learning management system and created a leadership track for our managers and team members, which will greatly benefit our growth strategy going forward.”

These strategies are already yielding fruit; this year’s sales are besting 2019 levels, and Adams believes 2022 could bring about the most new store openings in a single year in Black Bear Diner’s quarter-century history.

In addition to growing its off-premises program, Walk-On’s became even more invested in smaller footprint stores. Less dine-in traffic during the pandemic made smaller spaces more cost-effective and also helped the brand streamline its mix of off- and on-premises business. Not only do smaller stores open up more options in terms of real estate, but they can also help restaurants weather a new challenge altogether.

“Shortages in raw materials have caused some delays, but we’ve been able to navigate many of those issues with a redesigned prototype that maximizes a smaller and more efficient footprint,” Landry says.

At Cooper’s Hawk, McEnery expects life to return to normal in most respects. Consumers have hit a point of digital fatigue, he says, and will be eager to return to in-person dining. Nevertheless, the founder admits the past year offered lessons aplenty, especially regarding the importance of off-premises—something he had resisted prior to COVID-19.

Cooper’s Hawk has tweaked its design and store layout based on lessons from the pandemic and already those modifications are being rolled out. While not an entirely new prototype, the brand’s latest location in Sarasota, Florida, boasts more carryout support with a special area dedicated to off-premises orders. Moving forward, all new locations will also sport this design.

“This was a once-in-a-lifetime opportunity to really reset how we thought about growth and what we were able to do,” McEnery says. “So if there were things happening in your business where you thought, ‘how are we ever going to go back and turn that around,’ it gave us an opportunity to do so.”