Country Kitchen: cooking up a global future

Nation's Restaurant News, March 29, 1993 by Carolyn Walkup

MINNETONKA, Minn. -- While Country Kitchen, like its sister concepts, continues to reposition from its old image as a 24-hour coffee shop to a contemporary family dining concept, it is targeting international expansion for much of its future growth.

Domestic expansion for the 231-unit chain had been placed on the back burner while chain executives concentrated on updating older units and convincing franchisees that repositioning was the way to go.

However, the chain is making some headway in expanding into international and non-traditional locations. Citing such wide-ranging locations as Indonesia, Japan, Europe and Puerto Rico, Jon Ostrov, vice president of marketing for the Country Hospitality division, says, "We have interests in many parts of the world."

He also points to one of the company's newest locations in the San Juan International Airport -- a conversion of a former Wendy's -- which is one of three franchised units in San Juan including one in a Travelodge Hotel.

But the recent emphasis on international growth does not mean that the company is not looking for domestic opportunities. Curtis Nelson, who replaced Frank Steed as the head of the Country Hospitality division just this month, says he expects the chain to grow much faster than it has in the past. "The company is ready to take off," he explains.

For example, Country Kitchen recently sealed a pair of franchise agreements, with Franchise Associates of South Weymouth, Mass., and Four Seasons Restaurants in Amherst, N.Y.

Franchise Associates, the franchisor of Howard Johnson's restaurants, will develop Country Kitchen units in select locations, while Four Seasons will convert several of its restaurants to the Country Kitchen concept and franchise additional Country Kitchens in 12 western New York counties.

As a result of developing programs for hotel foodservice -- which includes room service, catering and banquets -- Country Kitchen has attempted to position itself for growth within the hotel segment. Its hotel programs currently are in use in the San Juan Travel Lodge hotel.

Nevertheless, before he left to take the post of president of Bonanza Steak house, Country Kitchen's former president, Frank Steed, predicted that most domestic expansion would come from existing franchisees, adding that "the economy has to turn around before dramatic things can happen."

Many of the markets that Country Kitchen is in -- mainly smaller manufacturing cities in the Midwest and Canada -- have suffered economic downturns in recent years. So franchisees have expanded slowly, if at all.

Meanwhile, the chain has made remodeling one of its priorities -- while emphasizing its lunch and dinner dayparts in attempts to boost per-unit sales. That strategy appears to be helping, since the per-unit sales average increased from $778,000 in 1991 to $817,000 in 1992.

Marketing has targeted new lunch and dinner menu offerings more than breakfast. Both the regular menu and limited-time specials have concentrated on higher-priced foods than in the past, such as steaks and seafood.

Some other newer items include fajita salads, personal-sized pizza, barbecued ribs and Southwest skillet breakfasts. An increasing number of low-calorie, low-fat and low-salt items also are showing up on the menu.

Ambitious goals

Steed and Ostrov had set the ambitious goal of becoming the sales-per-unit leader in the family dining segment. However, "we still have a ways to go," Ostrov admits. He points to higher average sales in new units of $1.1 million as a goal for the system as franchisees complete remodels of older units.

In fact, the company's $817,000- per-unit sales average placed it behind all of its larger family segment competitors except Friendly's Restaurants. Estimated per-unit averages last year for segment leaders were $3.5 million for Cracker Barrel Old Country Store; $1.6 million for Bob Evans Farms, Marie Callender's and Bakers Square; and $1.3 million for Perkins.

Projected total sales for the Country Kitchen units for fiscal 1993 are $243 million. The total for 1992 was $225.3 million, up from $178 million in 1991.

However, "the new units are doing twice the volume of old units that are no longer part of the group," Ostrov says. The company has sold or delicensed more than 70 units in the past three years that no longer met its upgraded standards.

"If they are in the bottom 10 percent of the system, we will sit down with them and tell them how to improve. If they don't uphold the standards of the system, we can force them out," Steed had said, expounding the Carlson Cos.' companywide philosophy that "nobody should be last."

"We encourage them to become an independent if they still want to be a 24-hour coffee shop," he says.

The system was just that when Carlson Cos. acquired it in 1978. Its founder, William Johnson, started the chain with 10-cent burger stands in 1938 that evolved into drive-ins in the 1950s, followed by full-service coffee shops. Many franchisees have been with the system for a long time.