Long John Silver’s Steadies the Ship Amid Choppy Waters – QSR magazine

In the first half of 2019, Long John Silvers charted a course for recovery, beginning with stabilization.

At the time, the business faced three main obstacles. The chain had a master lease situation hanging over its head, which presented a lot of dead rent assets. Long John Silvers was also shedding about 60 restaurants per year and was burdened with the task of buying back troubled franchises.

The strategy was to simplify the business. Long John Silvers went from 75 workers at its Restaurant Support Center to roughly 45 and renegotiated its master lease. As the process unfolded, the brand started thinking less as a national brand and more about how it can take its marketing spend and make it more local for franchisees.

The restaurant began to see wins throughout the middle of 2019, it said. Long John Silvers stared down a tough reality in the final part of the year, however, as the brand tightened its advertising budget to prepare for 2020. As a result, transactions declined.

So we had our level set starting into 2020, says Blain Shortreed, who was recently hired as CEO. And we thought that most of the assets that were part of the LoJohn [leases] that were going to be removed from our base were gone. We felt that most of the bleeding from our ad budget was done, and we were ready to reset ourselves. We got into 2020, and I think our story was starting to pan out.

Long John Silvers went from 1,000 stores in 2015 to around 740 in 2019, including 540 franchises and 200 company-run stores. In January, the chain saw positive same-store sales stacked on top of growth from the previous year. Then COVID arrived a couple of months later, and the 52-year-old brand was forced to adapt.

Two decisions from 2019 worked in its favor. First, the chain started third-party delivery. Additionally, Long John Silvers local approach to marketing prevented it from overspending. So when COVID hit, the company essentially stockpiled money.

We didn't have to spend on advertising, Shortreed says. We didn't have too many forward buys. We could actually put our advertising on hold.

Transactions declined 30 to 40 percent during peak Lenten season, which usually brings the highest sales volumes of the year. In addition, Long John Silvers switched from a 50 percent dine-in business to 95 percent drive-thru and 5 percent delivery. Business shifted overnight, but Shortreed says managers had the innate ability to adjust within days. Operators found ways to cut back on cash flows, saving Long John Silvers in the neighborhood of $200,000. They also learned ways to move from 15-day inventory to about eight days, which saved another $500,000 of working capital.

Because no capital was being spent and no one could visit restaurants, Long John Silvers considered furloughing seven to 10 employees. Instead, the brand told those workers to refocus on being productive during COVID. For example, John Haley, the brand director for development, had no funds to build out restaurants. So he switched to building shields to protect customers and employees inside stores.

Another 60 or so units shuttered in 2020, meaning roughly 300 stores have closed in the past five years. Long John Silvers currently has670 stores346 standalone, 139 co-branded with A&W, and 185 co-branded with KFC and Taco Bell.It also breaks down to 200 corporate stores and 470 franchises.

I know in this business when you have restaurants that have a problem, throwing complexity at them, being that they have to go through a drive-thru and they weren't good at drive-thru, it's not going to fix their business enough so that they can recover like the rest of the restaurants, Shortreed says. So good operators survived through that, and I think some of the ones that were already not some of our better operators, we had to take some action just to make sure that we were making headway on our overall vision to simplify our business and make sure that we're delivering on the customer experience.

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Long John Silver's Steadies the Ship Amid Choppy Waters - QSR magazine