Schlotzsky's plans April launch for first national TV ads

Nation's Restaurant News, Sept 28, 1998 by Gregg Cebrzynski

AUSTIN, Texas -- Schlotzsky's Inc. is preparing to launch its first network TV ads in April and will spend "a big chunk" of its annual $17 million ad budget on the campaign, according to John Wooley, president and chief executive of the upscale sandwich chain.

"It's a milestone in our company's history," Wooley said.

Until now Schlotzsky's has run local TV ads mostly during the day in such markets as Dallas, Houston and Austin. Those ads have been successful in boosting sales, particularly in Dallas, but they did not provide the reach needed to build brand awareness in the broader market, Wooley said.

He recalled the time someone told him about a man in Omaha, Neb., who thought Schlotzsky's was a Polish plumbing supplier. The expanded campaign will be "positioned for sales growth," he said. "We want to grow the system."

The new ads will run in three flights and consist of 15-and 30-second spots, the majority during prime time.

"We want to be 60 percent to 70 percent in prime time," Wooley said, with ads expected to air during such shows as "ER," "60 Minutes," "Late Show with David Letterman" and Jay Leno's "Tonight Show."

Those programs appeal to Schlotzsky's core customer base of college-educated 24- to 49year-olds, Wooley said.

The chain of 722 units will spend $10 million to $15 million on the network campaign, he said, with all of the money coming from co-op ad budgets.

"That's not an easy step for everyone to take," Wooley said, but franchisees have been enthusiastic since he first proposed the idea more than a year ago. "It's been the easiest thing to get them to do," he said. 'They have really cooperated."

The decision to pursue a network campaign is based partially on the success of the local TV ads in Dallas, where Schlotzsky's has 75 units. During the first year of the campaign sales rose 20 percent in the market, which Wooley said was impressive considering that the ads reached a relatively low number of consumers.

The reach with a local campaign is 60 percent to 70 percent of the audience, he said, compared with 94 percent for a national campaign.

Same-store sales have increased 4 percent annually during the last four years. With a national ad campaign, they could experience double-digit growth, Wooley said. Systemwide sales have risen about 30 percent every year for the last four years, he said, with volume expected to reach $360 million this year and $450 million in 1999.

Although planning for the new campaign is in its early stages, Wooley said, "I'm hoping we'll go with humor. If your name is Schlotzsky's, you can't take yourself too seriously."

Local spots in Austin used actor Steve Landesberg, who starred in the TV show "Barney Miller."

"His ad-libs were great," Wooley said. "We got 10 spots out of it."

But the new campaign is Likely to steer away from using a personality because consumers will remember the actor, not the product, Wooley said.

"Food is really the hero," he said. "We want to have some great food photography. It's crucial to our message."

Production on the ads will start later this year. Local campaigns have been handled in-house using an independent producer, and Wooley is deciding whether to continue that approach. It's likely Schlotzsky's will not hire a big ad agency because of the cost.

"We're shopping around to see what kind of creative talent is out there," he said, adding that hiring a smaller agency would be "the most effective way to spend our dollars."

At this stage in Schlotzsky's development, a campaign to build awareness is exactly what the chain needs, according to Dennis Lombardi, a marketing analyst at Technomic Inc., Chicago.

"Its strength is that it's kind of an area off by itself," he said. "It's not a Subway or a Blimpie serving predominantly cold sub sandwiches."

Still, a consumer-research study showed "they have a need to build awareness, which is not surprising for a growing company," Lombardi said.

Schlotzsky's positioning as an adult-oriented chain, its menu variety and signature sourdough products "clearly give them a point of difference" among their competitors, he added. The problem, however, is that an ad campaign limited to local markets cannot compete effectively with the combined ad budgets of other chains, Lombardi said, and "you have a lot of trouble reaching the target."