Background and Challenge
With fierce competition in the European casual dining market, restaurants are constantly looking for new ways to create value and increase their market share. A leading French restaurant chain, which had already achieved substantial success with a network of more than 300 restaurants situated in virtually every large French city suburb, was eager to enter its next phase of growth. Recognising the need to diversify its approach, the client engaged L.E.K. Consulting to develop a new restaurant concept to target smaller French cities.
Approach and Recommendations
L.E.K. was responsible for designing the new restaurant concept, from developing the initial idea to rolling out the strategy across France. The challenge was to adapt the existing successful proposition to smaller catchment areas while retaining the brand name, securing all the positive attributes and addressing some weaker points, such as costly construction costs.
Working closely with the client’s management team, architects, design agencies, procurement companies and franchisees, L.E.K. delivered four critical elements necessary to build and launch the new restaurant concept:
- Development of a new business model: The L.E.K. team modelled multiple financial scenarios based on variable construction, operational, staffing, financing and franchising costs. In particular, L.E.K.’s proposal to introduce innovative construction techniques, furniture and kitchen equipment, and staffing models, played a key role in developing a highly profitable new business model.
- Definition of a new architectural blueprint: In collaboration with the client’s management team and external architects, L.E.K. established an optimal architectural design for the 300-sqm, 100-seat prototype. This focused on the latest construction techniques and materials to significantly reduce initial investment costs and maximise the space available for revenue generation.
- Identification of appropriate restaurant sites: L.E.K. prioritized over 50 potential locations out of an initial list of 150, scoring each one against a specific "attractiveness" framework to draw up a final shortlist of suitable sites.
- Re-launch of the franchisee commercial and recruitment strategy: With the aim of attracting new franchisees, L.E.K. undertook an extensive benchmarking project of competitor chains in order to identify best practices in franchisee commercial policy and recruitment strategy. The resulting insights from this exercise helped the client redesign its offer and processes in order to launch its new recruitment drive and pursue an aggressive expansion plan.
L.E.K.’s robust analysis and commercial advice enabled the client to create a profitable new restaurant concept that is designed specifically for smaller cities. Precise operating guidelines underpin a business model with a projected 25-35% EBITDA margin, largely due to L.E.K.’s recommendations on an innovative staffing model and a 15% reduction on initial construction costs. The new franchise offer and commercial policies provided by L.E.K. have also enabled the client to successfully recruit more external franchisees and, as a result of L.E.K.’s assessment of potential restaurant location sites, the client has a defined roadmap of openings.
The first prototype was opened at the end of 2014 and performs as planned. Multiple new openings are scheduled in the coming years for this critical growth program.