July 21, 2015 01:02 PM
krispykrunchy_rmay
Dan Shapiro, left, and Neal Onebane
Photo by Robin May

After pumping a full tank of gas, you stroll into the nearby convenience store to grab a drink and a snack. As you approach the front door, brightly colored signs featuring a happy sun greet you from the storefront windows. You step into the store and are immediately bombarded by the unmistakable scent of fried chicken. Suddenly, your cravings for a snack and drink change to a hankering for Cajun-style chicken, and your selections from the hot food case fill that very need—a need you didn’t even know you had.

Capitalizing on this impulse-buy concept is exactly what has made Krispy Krunchy Chicken a successful and viable business model over the past decade. With about 90 percent of its locations housed in convenience stores, the Southern fried chicken company has carved a niche market that has since expanded far beyond its Louisiana roots.

Krispy Krunchy founder Neal Onebane owned eight convenience stores in Lafayette, where he began serving his Cajun-style fried chicken in 1989. At that time, more convenience stores were using pressure cookers to cook their chicken. Inspired by the successes of Popeyes, Onebane decided to cook in fryers instead, and was inspired to design a hot food case with grates for the chicken. He started doing his own food photography and selling the breading and marinade he made to other convenience store owners. Eventually, in 1989, Krispy Krunchy was born.

By the early 2000s, the company had grown to about 100 stores but was mainly positioned in Louisiana when Onebane began discussions with Dan Shapiro, who came from the corporate side of convenience stores. While Onebane initially was hesitant to expand, fearing the concept might not work outside the core area and that distributors would not want to sell proprietary items — paper goods, chicken, etc. — to just one store, Shapiro was able to work out a deal to secure the Kansas and Missouri markets, which started the fire for a larger company expansion. Shapiro officially joined the company as part owner and vice president in 2006, at which time he and Onebane decided to take it national.

As the company’s founding state, Louisiana has the most Krispy Krunchy locations — nearly 300 — followed by the rest of the South and Southeast, including Texas, Mississippi, Georgia, Alabama and Tennessee, in that order. Certain cities have a higher concentration of locations — Greater New Orleans has 39 stores, Acadiana 35 and Baton Rouge 20 — while large metropolitan areas like Greater Los Angeles and Miami boast nine and eight, respectively.

Between 1989 and when the company went national in 2006, Krispy Krunchy opened approximately 200 stores. From 2006 to 2015, that growth surged from 200 stores to 1,800 stores across the country, including one in the U.S. Virgin Islands, for an average annual growth rate of 97 percent. In 2014 alone, Krispy Krunchy opened 508 new stores and so far this year has opened more than 300 locations — about 12 per week. In California, it has opened an average of one to two locations a week, for a total of well over 50 stores in just a year and a half.

Photo by Robin May

Though the company remains best established in the Southeast, other areas of the country are primed for growth. This includes the Northeast, particularly the areas surrounding New York City, and Pacific Northwest, where Krispy Krunchy opened two locations this year. Before the expansion, the company attended a food show in Oregon — and got a good taste for what we take for granted in these parts. “Some people who came to taste our product had never eaten fried chicken in their lives,” Dan Shapiro says. “They were blown away. They couldn’t believe how good it was.” The first Oregon location already ranks among some of its top-performing stores. “It’s like we became the new thing, the new food, in Oregon,” he adds.

By the end of the year, Krispy Krunchy plans to expand to the inter-mountain areas like Utah and Colorado as well, and it’s closing in on what could be a significant international expansion into the Pacific Rim, starting with Malaysia, the Philippines and Indonesia, as part of a partnership with some of Circle K International’s licensees. There are still challenges to work out, including finding local farmers with a steady supply of fresh poultry, but Shapiro is more than confident: “We believe we will have 10 to 15 locations open in Malaysia by the end of this year,” he says. “In the next five years we could have hundreds of international stores.”

Growth - Step by Step

Typically a business owner — usually of a convenience store, or an executive overseeing hundreds of convenience stores — approaches Krispy Krunchy about integrating the chicken program into an existing store. Salespeople and a marketing team for Krispy Krunchy are then sent to scout the location, which must already have foot traffic. They also evaluate the store’s financials to determine whether a Krispy Krunchy could thrive in that store and meet the $20,000 monthly sales baseline.

Not just limited to convenience stores, locations have been added into food courts in shopping malls or universities and even the Wichita Zoo. Only occasionally will the company open a standalone store, and that is normally only in a rural town where Krispy Krunchy essentially becomes the McDonald’s of that area.

If an operator doesn’t have any kitchen equipment or printing and signage, the initial investment is an estimated $35,000. If an operator has a kitchen in the location and only needs the hot food case and graphics, that investment is closer to $12,000.

As far as typical expenses, such as rent or mortgage and utilities, usually the operator already pays that for his convenience store, so they’re not additional expenses for an operator who wants to open a Krispy Krunchy in his store. From there, the operator begins selling Krispy Krunchy products and integrating those sales into his store’s monthly revenue.

“What we’re doing is increasing the ring on the cash register,” says Allison Shapiro, Dan’s daughter who serves as the company’s director of technology and communications. “Customers might have just been coming in for a pack of gum or soda, in the $2 ring. But now, after buying Krispy Krunchy, they’re in the $15 ring.”

Krispy Krunchy’s business model varies greatly from other fried chicken establishments, such as Popeyes or Raising Cane’s. The company does not see these fellow fried chicken establishments as competitors because of their different methods of operations.

Operators of Krispy Krunchy locations do not pay franchise or royalty fees, or any percentage of their sales. Instead, the company receives a percentage of the sales from items operators buy from associated companies. This includes a percentage from Tyson, its exclusive chicken supplier, of all chicken sold, along with a percentage from proprietary items, such as side items, paper goods and breading, from distributors, the vast majority of which are with Sysco.

The more chicken and other food items an operator buys, the more money Krispy Krunchy makes. This model has thus far been successful for the company. In 2006, Krispy Krunchy outlets’ annual sales were $12.6 million, while in 2014, sales grew to $155 million (Onebane and Shapiro’s sales to operators was $78 million, the figure the company reported for Top 50).

This setup makes accounting easier for both parties, as Krispy Krunchy only has to collect from about 40 distributors rather than 1,700-plus stores. It also saves the operators money by not having to dip into store sales to pay monthly fees to the company.

Krispy Krunchy also sets up geographic protection for its operators. In an urban or metro environment, the company typically offers about 1 mile of protection. In rural areas, the standard is 3 miles, and in some downtown areas, it could be as little as blocks.

“We don’t want to hurt our operators, but we don’t want to limit ourselves,” says Dan Shapiro.

Choice is Everything

Krispy Krunchy menu items resemble a traditional selection of Southern and Cajun foods, all of which starts with the marinade-injected fresh chicken. These include dark, mixed and white meat fried chicken, Cajun Tenders, the Krispy Chicken Sandwich, Cajun Catch Seafood, either Cajun Style Fish fillets or Krispy Shrimp, and buffalo wings, which come in Krispy, Traditional and Cajun Sweet & Sour.

Operators can personalize the sides they want to carry, which may include honey-butter biscuits, red beans and rice (most popular), jambalaya, fries, and the company’s latest addition, mac and cheese, among others. The company has also expanded its sauces from one to eight flavors, including Sweet & Hot Mustard Sauce and Spicy New Orleans Ranch. The Sunrise Breakfast is another set of optional products, which includes food items like blueberry or tender biscuits and breakfast empanadas or burritos. All menu items are displayed on Krispy Krunchy’s two or three-screen LED menus with menu boards on the left and right screens and an optional video on the third center screen.

Operators also have the option to sell cooked and chilled Krispy Krunchy chicken, as well as the “You Buy We Fry!” offer where uncooked chicken is sold to customers who can either take it home or have it fried in-store. A third option is Krispy Krunchy’s “Grab N’ Go bag,” which offers operators another outlet for selling leftover chicken that has surpassed the recommended holding time at regular price.

Marketing

Originally, Krispy Krunchy’s marketing efforts targeted operators with ads that mainly appeared in convenience store trade magazines and at food shows. The company only started marketing directly to consumers last year as it continued to solidify its strong growth and recognizable brand throughout the country.

In 2014, operators spent $3.4 million on graphics and branding materials to market to their customers. A starter marketing kit for a new store might include outdoor banners, feather flags, trifold menus, various decal graphics, aprons, shirts and hats.

From there, operators can invest in more marketing materials throughout the year, from decals for store windows and the hot food case to pump and table toppers. Marketing materials and décor aim to attract customers and ensure a better in-store experience. These eye-catching graphics allow operators to enhance what might normally be little more than an empty storefront with neon beer signs.

With a marketing partner in nearly every state, Krispy Krunchy customizes marketing plans for each location to ensure operators use the right amount, types and placement of products for a store’s location and current and target demographics. Part of this includes co-branding with the store’s existing products and marketing. Krispy Krunchy doesn’t prohibit operators from selling their own foods, instead encouraging them to integrate the two on menu boards. The company even encourages new product development by operators, such as the Krispy Krunchy Chicken Tenders Po-Boy.

Handing out free samples is another key aspect of marketing for a new store or helping out a store in need. Samples are a full tender and a biscuit rather than a bite on a stick, which Krispy Krunchy offers operators for free. The company used about 40,000 pounds of chicken for sampling events in 2014 to promote its product, which it puts up against any competition.

“Dad always says our best ad is our product, and I completely agree,” says Allison Shapiro. “We think that if you try it, you’ll come back.”

In addition to free sample events, Krispy Krunchy finds other ways to assist stores in reaching their full potential and higher sales. The company may send coupons to the neighborhood, supply free graphics or meet with the operator in person to discuss marketing and operations strategies and figure out how to improve performance.

“It’s a special interaction with operators,” says Dan Shapiro. “We thank them for their help and for being a great partner.”

Allison Shapiro joined the Krispy Krunchy team four years ago to reinvent the company’s online and social media strategy and branding through Twitter, Facebook, improved Google search rankings and other marketing strategies.

“We needed to get in the mindset that customers are on the computer looking for us,” says Allison Shapiro. “It’s a process, because everything is online these days.”

The company offers each location its own Krispy Krunchy website template that can display the menu, location, store hours and contact information plus a personalized website address. Through these sites and Google search, the company aims to make it easier for customers to find a Krispy Krunchy location in their area whenever they’re hungry.

Social media strategy includes posting facts and asking followers questions to increase engagement and visibility. Shapiro often retweets followers and other posts that tag or mention Krispy Krunchy.

Krispy Krunchy employs about 40 people to provide on-site training at no extra cost. This includes a week of training just before the grand opening as well as check-ins throughout the year, particularly if an operator has new hires, new products or new marketing initiatives. Trainers demonstrate cooking and ordering processes, how to engage with customers and encourage them to try new items and how to come up with new promotions.

“It’s someone in there who gets dirty, who’s in there for a full week to show you that this can be successful,” says Allison Shapiro.

Far from throwing someone a manual and having them teach themselves, Krispy Krunchy’s hands-on approach is something they say separates them from competitors.

“Retraining is important, because we believe that it’s a good system and it works. So if we keep showing them how to do that correctly, it’s successful for everyone,” says Allison Shapiro. “If they make money, we make money.”

Trainers often develop close relationships with the operators and employees at the stores they visit, and they own a part of the profits of those stores. For these reasons, Krispy Krunchy employs more trainers than any other position, and the company has a high retention rate for the position.

Krispy Krunchy has also benefited from the growth of convenience stores in the last few years. A recent Convenience Store News survey showed that 86 percent of store owners expect increased sales in 2015. This is in part because they are capitalizing on lower gas prices, which allows customers to spend more money in the attached convenience stores.

An operation like Krispy Krunchy also saves people time by providing a food option when they’re already at the store to get gas or other merchandise. The Wall Street Journal recently reported a 3.1 percent increase in the number of meals served at convenience stores in the 12 months leading up to August 2014. This is compared to a 0.4 percent decline at restaurants in that time frame. These numbers position convenience stores, like those with Krispy Krunchy operations, as viable competitors in the dining industry.

Shortly after this interview earlier this year, Dan Shapiro was heading to Boston to meet with an operator to figure out why that location isn’t doing high enough volume. “This guy’s gonna see the executive vice president and one of the owners of the company come to figure out his situation, of 1,800 locations that we have, to see how we can help,” Shapiro says. “That personal touch is what really makes us successful.”

A version of this story originally appeared in Biz New Orleans magazine. Additional reporting by Leslie Turk

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