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Driving Forces

BY CSA STAFF

Founded as a “cook your own steak” restaurant in an abandoned gas station in 1974, Quaker Steak & Lube has evolved into one of the nation’s most up-and-coming casual-dining chains, renowned for its award-winning chicken wings and flavorful — make that hot — sauces. But as much as the food offerings have changed at “The Lube,” the brand remains true to its gas station and vintage car-loving roots.

The founders, George “Jig” Warren and Gary “Mo” Meszaros, conceived of the concept as more than a restaurant, but also as a way to preserve the culture of old gas stations and high-powered muscle cars, vintage autos and antique motorcycles. Today, the company still rescues classic cars, hanging them from the walls and ceilings in each restaurant, where they share space with gas-station memorabilia. The decor, along with high-octane events, help the concept stand out in a crowded field. (As to how it got its name, Quaker Steak was founded in Sharon, Pa., not far from Oil City, home of Quaker State Oil.)

Quaker Steak is owned by some 44 shareholders who bought into a private offering in 2004, which is when it started franchising and its growth began in earnest. Now with 63 restaurants in 19 states and Ontario, Canada, the chain is headquartered in San Francisco and poised for even greater growth under evolving leadership.

In January, CEO John Longstreet stepped down after nearly four years at the helm. Quaker Steak CFO Frederick Dreibholz is serving as interim chief executive, while the search for a new CEO is undertaken.

Contributing writer Michael Fickes recently spoke with Dreibholz about his interim assignment, the chain’s market positioning and plans going forward.

Why were you tapped as interim CEO for Quaker Steak & Lube?

Upon John Longstreet’s departure, the company was looking for an interim replacement while they complete a nationwide search for the permanent CEO. As I was the sitting CFO and had intimate knowledge of the brand and our associates, it made sense for the company to appoint me during this transitional period.

Tell us a little about Quaker Steak & Lube.

Quaker Steak & Lube is an iconic brand that has experienced significant growth in the past, and is poised to continue growing in the future. Our brand is well-received by our customers as is seen by our near industry leading average unit volumes. I look forward to continuing to move the brand forward and working with the great team assembled here.

Will you change anything significant during your term or continue the current direction?

As the interim CEO, I’ve been tasked to maintain the positive impetus we have gained over the past several years. In the restaurant industry, there are always small changes that are required to continue to retain your existing customers and attract new customers. As a result, I will focus on continuing to push the brand forward without making significant changes.

Tell us about the restaurant design.

We focus on authentic motorsports-themed decor. It is virtually all authentic cars and motorcycles — hanging from the ceiling, displayed on the walls and furnishing. There are automotive parts, oil cans, gas cans, license plates and more. Each restaurant has a unique decor package, and each has four different spaces. The Handlebar area features motorcycles. The Vet VROOM area is dedicated to Corvettes dating from 1962 to the late 1970s. Thunder Alley is the NASCAR area. Fourth is an outdoor seating area with a bar called the Brickyard Patio.

As to the exterior, our buildings look like gas stations and use colorful LED lighting. The LEDs not only save energy, but also help attract people. When you drive by one of our restaurants at night, you want to stop and see what is going on.

Who is the typical Quaker Steak & Lube customer?

We veered away from conventional marketing theory, which recommends carving out a niche. George and Gary always wanted to be all things to all people, and, by and large, they have succeeded. We attract a broad middle-class group of customers. The heaviest users range from 25 to 55, and 53% of our customers are female. Everyone asks: How can more than half of the customers in a motor-themed restaurant be women? There are a couple of reasons, including that we appeal to families. We have lots of games and lots of things for kids to do. We also work hard to make the bar female friendly.

At lunch, you will find tables of blue-collar workers, as well as doctors, lawyers and groups of elderly ladies.

What is the average footprint and site selection criteria?

Our site selection criteria include 60 different points, with the most important being a dense residential population. About 47% of our guests have children, so we’re skewed toward families with average household incomes between $35,000 and $100,000. To achieve our average unit volume, we also need nearby office, retail or industrial for a large daytime population for our lunch business. We like highway visibility, too.

Our average footprint is 7,700 sq. ft., which requires a two-acre lot, but we have two other prototypes for 6,250 sq. ft. and 5,250 sq. ft. Overall, our restaurants range from 4,500 sq. ft. to 12,000 sq. ft.

What differentiates Quaker State from the competition?

We commissioned a survey of 2,500 customers in which we asked them if they weren’t going to Quaker Steak, where would they go. Customers identified our competition as Chile’s, TGIF, Buffalo Wild Wings, Applebee’s and Red Robin. We differentiate Quaker Steak from these restaurants with our unusual motor theme, authentic decor, casual appeal, energetic music and entertainment themes. We have car cruise-ins on Sundays, all-you-can-eat wings on Tuesdays, biker night on Wednesdays.

What are your plans for expansion?

Most of our growth will come from franchising. We estimate that 70% to 80% of our future growth will be franchised restaurants. (The company plans to open 12 or more locations in 2014.)

On the company-owned side, we will expand in our heritage markets: Pennsylvania, Ohio and West Virginia. For franchisees, we will go where they want — as long as we can get product to their restaurants cost-effectively. We’re as far west as Denver now. Our northern-most restaurant is in Fargo. We’re as far south as Houston. In the Southeast, we’re in Clearwater, Florida. In the East, we’re in upstate New York and New Jersey.

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Looking to the Future

BY Marianne Wilson

Think brick-and-mortar retail is doomed in an increasingly digital world? Visit Sephora, where consumers line up to sample the dizzying array of beauty products. Watch as a bunch of excited kids go through the rounds at Build-A-Bear-Workshop. Listen as a pharmacist at Walgreens gives some advice to a harried mom whose kids are coming down with something. Stop in at H-E-B, Whole Foods Market or some other great supermarket and breathe in the tantalizing aromas. Fool around with the latest gadgets at Apple or one of the new generation of AT&T and Verizon stores. Sign up at Lululemon for a yoga class.

I could go on (and on), but you get the idea. The stores above are just a tiny sampling of all the great retail experiences that exist in the brick-and-mortar space. They are my rebuttal to all those pessimistic pundits who claim that e-commerce, via smartphone, desktop or some other device, will, by and large, be the death of physical retailing. Enough already.

The truth is the digital onslaught is reshaping brick-and-mortar retail in ways that will ultimately make it stronger going forward. Savvy retailers across the board, from Macy’s to Walmart to Gap, are reinvesting in their store experiences to make them more entertaining, interactive informative and fun. The smartest are focusing on their trump card: tangibility.

Brick-and-mortar naysayers often point to the slowed pace of expansion and store closings as evidence of brick-and-mortar’s decline. There is no denying that many big players have pulled the reins of expansion and shuttered locations. But in the apparel sector at least, this has as much to do with new com petition and changing tastes as anything else. New fashion powerhouses such as H&M, Uniqlo (both of whom have serious U.S. expansion plans) and Forever 21 have taken market share from more established chains, wooing customers with their fast fashions and value prices.

And while big-box chains may not be building big anymore, they are still building. Walmart has doubled the projected growth of its small-store format, and now plans to open from 270 to 300 Walmart Neighborhood Market and Walmart Express stores in its current fiscal year. This July, Target will test a smaller (20,000-sq.-ft.) footprint, TargetExpress, in Minneapolis.

At the same time, new retail concepts continue to pop up across the board. Take, for example, Fresh Thyme Farmers Market, a new specialty grocery format featuring value-priced healthy and organic offerings. The company, headed up by the former CEO of Sunflower Farmers Market, plans to open more than 60 stores in the Midwest in the next five years. It will open its first store this spring, in Mt. Prospect, Ill., with eight more locations to follow by yearend. One of my favorite new concepts is Polaroid Fotobar, where customers can turn photos taken on mobile devices into custom photo products.

I’m not naive. Retailers that fail to keep up with evolving technology and increased shopping sophistication are unlikely to thrive going forward. But there is plenty of opportunity for those that seize the moment and put the spotlight on the in-store experience.

Marianne Wilson

[email protected]

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General Mills unveils limited-time, in-box promotion

BY CSA STAFF

General Mills Big G cereals now include four collectible comic books featuring DC Comics’ Justice League characters, on shelves now through April 2014.

Four specialty issues created exclusively for General Mills, in partnership with DC Entertainment (DCE) and Warner Bros. Consumer Products (WBCP), can be found in grocery retailers nationwide, with a bonus fifth issue available only in select boxes of Cheerios at Target.

"There is a certain shared fanaticism among cereal lovers and comic book fans, which is why Big G cereals, WBCP and DCE make a super team," said Lisa Tomassen, integrated communication manager at General Mills. "We’re excited for people young and old to discover these comic books in their favorite cereals, giving them a strong, confident start to the day."

Each specially marked box of Big G cereal also features several DC Comics Super Hero costume piece cutouts on the back. Fans are encouraged to put them and post to Twitter, Facebook or Instagram using #SuperHeroing.

Consumers who have read part one of each in-box comic book can then visit www.BigGCerealHeroes.com to read part two.

Participating Big G cereals include Cinnamon Toast Crunch (12.2 oz. and 21.25 oz.), Lucky Charms (20.5 oz.), Honey Nut Cheerios (12.25 oz. and 21.6 oz.), Trix™ (10.7 oz.), Cookie Crisp (11.25 oz.) and Reese’s Puffs (13 oz.).

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