It’s been more than 10 years since Al Bhakta and his partners opened their first Genghis Grill. The shaky launch in 2002 of the build-your-own Mongolian stir-fry restaurant chain, however, seems like just yesterday to Bhakta.
“It was a Tuesday, and we didn’t serve a single customer all night,” says Bhakta, who is the firm’s CEO. “We had personally guaranteed the lease and our SBA [U.S. Small Business Administration] loan, so everything we owned was riding on the success of that first restaurant.”
What Bhakta and his franchisee partners may have lacked in restaurant experience was more than made up for in enthusiasm. They waited tables and put their tips toward expenses, went without paychecks for 18 months, and tried a host of ill-fated promotions to entice new customers.
When desperation set in, Bhakta courageously created a cocktail named “naked,” and discounted the provocative drink in a last-ditch effort to get customers through the door and hooked on the food.
His shotgun marketing approach paid off. Customers fell in love with the restaurant’s unique, interactive dining experience, where they could customize their entree by picking and choosing ingredients.
Bhakta does concede, however, that he may have ruffled a few feathers when he left “naked” advertising fliers on parishioners’ cars at a local church.
“Ultimately, it was a bold marketing move that saved us,” Bhakta says. “You don’t want to step over the line, but my advice is to be a brave marketeer, especially when you’re starting out.”
After his minor brush with disaster, Bhakta went on to become a capable shepherd of the Genghis Grill brand. Today, it’s the largest build-your-own stir-fry chain in the U.S. with 107 locations in 23 states and annual revenues of more than $123 million.
Promote your brand
As the brand took off, Bhakta and his partners, the Chalak Group, purchased the entire company from the original franchisor in 2004 and set their sights on expansion. Since 57 percent of restaurants fail within the first three years due to lack of capital, Bhakta needed to shorten the path to profitability to ensure the success of new franchisees.
Moreover, a shortage of operating capital inevitably leads to cuts in the marketing budget, which is the second reason why restaurants fail. It takes time and money to create brand awareness and a loyal following, especially in virgin markets.
“Initially, there was no science behind it, we just watched every penny,” Bhakta says. “What grew out of that habit was a culture of frugality and the knowledge that unit economics is critical to survival, especially for a start-up operation.”
Entrepreneurs need to understand the levers that impact unit economics, and figure out ways to create structural advantages to shift them in their favor, Bhakta says.
For example, he reduced initial development costs from about $1 million to $450,000 — nearly 40 percent — by negotiating new contracts with vendors, scrutinizing operating costs on a weekly basis, and in some cases, changing the chain’s all-you-can-eat format to a single-bowl concept. The move helped Bhakta lower his prices, which bolstered the company’s brand by creating a higher value proposition for the consumer.
During the process, however, he learned that not all expenses are created equal. When he made the mistake of locating some restaurants in out-of-the-way Class B and C properties, the old adage “location, location, location” came into play.
“We needed street visibility, signage and parking to attract customers, so I learned the hard way not to skimp on real estate,” he says. “Having the right location reduces your marketing costs, so it pays for itself. My advice is to know the drivers of unit costs so you know the right places to economize.”
Keep your brand fresh
The addition of Kahn’s Rewards, a customer loyalty program, as well as a creative use of social media promotions propelled Genghis Grill to double-digit growth in 2009 and 2010. Company-wide, the brand has more than one million fans in its Kahn’s Reward database and 100,000 followers on Facebook and Twitter. So when some stores reported declining sales for the first time in 2012, Bhakta took a thorough look under the hood in the quest for answers.
Typically, a shift in momentum indicates the need for a brand makeover. Companies that fail to detect changes in customer preferences and sentiment may not survive in a world where consumers are bombarded with choices and information. In fact, experts maintain that successful companies of all sizes should revamp their image periodically.
To assess the current state of the Genghis Grill dining experience and brand, Bhakta surveyed staff, franchisees and 32,000 customers from across the country. The results were surprising.
“We really pride ourselves on changing with the times, so we were surprised to discover that 50 percent of the things we were doing didn’t matter to our customers,” Bhakta says. “In retrospect, I see that we should have been reviewing customer feedback and data all along instead of finding ourselves behind the curve.”
Specifically, Genghis Grill had lost ground with females and young families. In fact, the customer base had slowly and silently become 70 percent male. While guys liked the open food bar and all-you-can-eat concept, women wanted efficient service, and they were turned off by the sticky serving utensils on the buffet line.
Like many CEOs, Bhakta faced the challenge of altering his brand to attract new customers and rekindle lost relationships without alienating the chain’s loyal male following.
“You need to add things, not subtract them, to retain your current customers and add new ones when you go through the rebranding process,” Bhakta says. “Otherwise, you’ll trade one group for another and end up in the same place.”
Bhakta assembled a feasibility committee and charged the members with looking at everything from signage to menus and restaurant decor in an effort to revitalize the company’s fading image. The team recommended adding chef-prepared dishes to the menu, an upgraded contemporary look and feel that would appeal to females, and new uniforms so employees would convey the restaurant’s theme and casual atmosphere.
“The reality of what was happening was reflected in our database,” Bhakta says. “Customers are like compasses; if you watch their direction, they will help you find true north.”
To make sure he stays ahead of the curve, Bhakta implemented customer surveys via the web and mobile phones. In addition, he now uses a real-time business intelligence tool to make sense of the information collected and to capture demographics for future marketing purposes.
The solution helps him monitor the health of his restaurant’s brand by providing real-time alerts when customers report a negative experience, automated report cards on each location’s status, a coupon verification system and staff performance rankings.
“Our ability to identify our core customer and demographic has grown with the implementation of our loyalty program and tools,” Bhakta says. “The demographic and behavioral information we have on our loyalty members helps with real estate, growth and branding decisions throughout the country.”
Bhakta vetted the committee’s list of suggested changes with the staff and franchisees before piloting new menu items, cleanliness guidelines and buffet protocols in restaurants located throughout the greater Washington, D.C., area.
“Any time you go through a rebranding initiative or consider major changes, you need to get everyone involved,” Bhakta says. “Our success hinges on support from our franchisees, and it takes time to test and prove new concepts. Even if you don’t have franchisees, executives can’t implement change by shoving their ideas down everyone’s throats.”
Bhakta strategically selected Washington, D.C., for the beta test, since those restaurants are fully owned and managed by franchisees and are located outside the company’s stronghold state of Texas, where many restaurants are co-owned and run by the corporation.
Passing what franchisees perceived as a difficult test helped Bhakta garner buy-in for the proposed changes from franchisees throughout the country.
“We needed unbiased feedback and testimonials from the D.C. area franchisees to convince everyone that we were on the right track,” Bhakta says. “Executive endorsements aren’t enough; you need others to carry the torch.”
Since loyal customers visit a Genghis Grill an average of 2.2 times per month, Bhakta tested the proposed changes for six to eight weeks and monitored customer feedback before inching forward with the rebranding initiative.
“There’s no cut-and-dry answer to the timing issue,” he says. “Obviously, you can’t stay in limbo forever, but you need time to incubate ideas and simmer changes before you roll them out. The rebranding process has taught us to be patient.”
Going slowly helps consumers connect with a new brand, and it gives companies time to tweak their delivery system to match their promises. Ultimately, your customers will determine the merits of your rebranding initiative through first-hand experience.
“If we don’t garner feedback that is current and relevant to our operations, we will fail to deliver on expectations to our fans,” Bhakta says. “Executives need to identify their audience, find the best way to communicate with them and repeatedly test and tweak their marketing and branding programs to develop a steady clientele.”
How to contact: Genghis Grill, (888) 436-4447 or www.genghisgrill.com
The Bhakta File
Name: Al Bhakta
Company: Genghis Grill Franchise Concepts LP
Born: Pecos, Texas
Education: Bachelor’s degree in business with a minor in information systems management from the University of Texas, Dallas.
What was your first job and what did you learn? When I was 12, my brother-in-law paid me $2 an hour to stock shelves in his new convenience store. Seeing the long hours and effort he put in helped me appreciate the hard work it takes to build a business. I learned what it takes to be successful at an early age.
Who do you admire most in business and why? The person I most admire is Herb Kelleher, co-founder of Southwest Airlines. He’s a legend in Dallas who’s known for his charisma, humbleness and his ability to relate to customers and employees. He’s done more than build a company; he’s built a legacy.
What is your definition of business success? I think you’ve achieved success when others believe in your vision and are willing to invest in your concept. You have to do a lot of things right to garner the trust of strangers.
What was the best business advice you ever received? One of our investors told me, you’ll lose the support of talented people unless you strive for a win-win when you negotiate with vendors, employees and customers. You have to give up something to get something even if that means growing more slowly. That advice has helped me negotiate beneficial deals because they work for both parties.
Promote your brand.
Use data and feedback to keep your brand fresh.
Reduce rebranding risk by piloting changes.