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Big Boy looks to bounce back under new ownership

As Big Boy’s new owners aim for a comeback, the change comes in small moves — taking MSG out of seasoned salt, for example — and large ones, like paying off $34 million in debt.

The Warren-based restaurant chain’s CEO led a group of local investors that bought Big Boy Restaurants International LLC last fall. Now called Big Boy Restaurant Group LLC, the company plans a slew of improvements centering on more cost-effective expansion, a food overhaul and more effective marketing.

Still, a comeback will be a tall order for the 83-year-old icon that has shrunk to a sliver of its former self.

A main challenge could be assuring customers, especially Michiganders, that Big Boy hasn’t disappeared, despite restaurant closings, CEO and co-owner David Crawford said. The chain is down from around 149 locations in 2009 (23 company-owned) to 75 now, 14 of which are company-owned.

Crawford has a goal: He wants to grow Big Boy back to 100 restaurants in two years. His “reach goal” is 200 in five to seven years.

The chain plans to open five locations in Michigan this year: A new fast-casual model in Southfield targeted for the week of Aug. 19, a Garden City restaurant that opened in March, a concession stand in Fraser, and two more in Muskegon and Okemos.

Most existing locations are in Michigan, though the chain has some in Ohio, California and North Dakota, according to a location map on its website.

Big Boy Restaurant Group now owns the Big Boy brand, name and assets, as well as Bob’s Big Boy in California and the Big Boy Food Group in Warren that makes soups, salad dressings, baked goods and mayonnaise. That’s aside from around 120 stores owned separately in Ohio, Indiana and Kentucky.

An additional 274 operate in Japan independently. Big Boy also signed a seven-country deal with Singapore-based Destination Eats to build a minimum of 70 restaurants, though it’s aiming for 1,000.

Roots to sale

Big Boy may be looking to modernize, but it traces its origins to the Great Depression. Founder Bob Wian bought a 10-seat diner in Glendale, Calif., in 1936 and grew it into Big Boy, with help from an eventual first franchisee, the Elias family of the Detroit area.

Big Boy peaked at 950 units in the 1980s. In 2000, radio station entrepreneur Robert Liggett bought the 455-restaurant chain out of bankruptcy.

Crawford joined Big Boy in 2009 and became CEO in January 2018. He and investors he declined to name bought Big Boy for an undisclosed amount that year on Oct. 24.

“On Oct. 23, we were $34 million in debt. By Feb. 4, we were debt-free,” Crawford said. “We paid off debt through a series of sale-leasebacks for (around 10) properties that we owned.” Big Boy also sold off 16 company-owned stores to franchisees, which also alleviated rent burden for those locations.

The company and its franchises employ 3,000. It saw $110 million in system wide sales in 2018, down from around $113 million the year before. Crawford attributes the fall to closing underperforming restaurants in Grayling, Shelby Township and Westland. He attributed the longer-term shrinkage of the chain to a strategy that shuttered franchise locations whose owners wouldn’t finance remodeling efforts. He said he’s allowing franchisees without the ability to finance such overhauls all at once to do partial renovations over several years.

Big Boy faces a hotly competitive restaurant market where its sit-down family-restaurant roots have become passe.

“I think a comeback is a long shot,” said Erik Gordon, a University of Michigan Ross School of Business professor who focuses on strategy and entrepreneurship. “Big Boy, in its heyday, faced lots less competition. What’s exciting about Big Boy that would draw people away from all the other choices they have? … I think Big Boy will have to get lucky. Or extremely creative.”

Gordon said he doesn’t see past store closings as hurting Big Boy with its consumers, though it could prove troublesome in convincing franchisees it’s a good investment.

Tony Michaels, the former Big Boy CEO who is credited with leading the charge to save the company from bankruptcy in 2000, said the company must “make sure they’re answering the age-old question about relevance.”

“Do I think it’s doable? Oh, absolutely,” said Michaels, who is now president and CEO of The Parade Co. “The job they have ahead of them is to really look at the product line and understand the people situation, and they’re also going to have to take a look at their facilities. … The restaurant business is heavy lifting right now.”

Fast and furious

At the fast-casual, 3,000-square-foot Big Boy set to open within weeks at 26400 Telegraph Road in Southfield, customers order at a counter and sit down with numbers, waiting to be served. There’s no tip line on checks. It seats 75 and employs around 24.

Crawford aims to get the model’s cost down from $800,000 to $500,000, creating an appealing three-to-one sales-to-cost ratio for franchisees ($1.5 million in annual sales). A free-standing, around 5,400-square-foot Big Boy costs $1.7 million to build.

Customers are asking for fast-casual in California, Florida and abroad, Crawford said. More could crop up in Michigan, but in general local Big Boy fans value their sit-down breakfasts and buffets.

The Southfield location is in a three-tenant building Big Boy constructed for around $1.2 million, with Starbucks as a tenant and another yet to be signed. Crawford said the model is less cost-prohibitive than a stand-alone restaurant and Big Boy plans to replicate it. The Big Boy building planned on Woodward Avenue in Royal Oak on the old Pasquale’s Restaurant site will be somewhat similar.

Opening new locations helps Big Boy convince potential customers the brand is sticking around, but image is key, too. One piece is better telling its “food story,” Crawford said.

Big Boy has used non-frozen, local ingredients for decades, but only now is it making that part of the image, including by plastering phrases on walls and place mats such as “house-made ice cream” and “fresh eggs sourced from a single-family farm.”

The company a year ago hired Chris Cason, a former executive chef at Chapman House in Rochester and sous chef at Roast in downtown Detroit. They have built a tighter menu with the well-loved burgers, as well as vegetarian Impossible meat, more salads, ingredient changes such as eliminating MSG (a sometimes-controversial flavor enhancer), house-made chips and other additions.

For an iconic brand like Big Boy, there could also be danger in steering toward newness.

“We have to be very careful about how we treat our existing guests that come through the doors, saying, hey, I’m going to try to reach the millennials, and then I’m going to upset my (older) base,” he said.

 

Posted By: Crain’s Detroit Business on August 11, 2019.  For more information, please click here to read the source article.

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