QSR Magazine - Craveworthy Brands CEO Gregg Majewski grabs a breather in a noisy restaurant. The last couple of times I’ve called him that’s been the case. The first, he stepped aside from a menu tasting. On this Thursday in January, Majewski was in the kitchen helping to ease a rush. Does that part of being a restaurateur ever leave you? “It does not,” says Majewski, a former Jimmy John’s CEO, who led the brand’s expansion from 33 to 300 restaurants.
Just as he did with the sandwich franchise, a tenure that extended from 1998–2003, Majewski likes to mix it up. His fast-casual multi-brand platform Craveworthy arrived at the end of 2022 when it acquired Wing it On! and Budlong Hot Chicken and created Krafted Burger + Tap and virtual concept The Lucky Cat Poke Company. The company later added Mongolian Concepts Restaurant Group (where he was CEO), the parent of Genghis Grill, Flat Top Grill, and BD’s Mongolian Grill. Only a week or so ago, Craveworthy also bought cookie chain Dirty Dough and began crowdsourcing investors by offering up to $5 million worth of Class A units, with a per-person minimum of $500. If Craveworthy reaches a $5 million target ($450,000 had been raised as of late January), it said it plans to use $3 million for store build outs, $500,000 for brand acquisitions, $375,000 for working capital, and $325,000 to pay off expenses related to the process.
While a sharp departure from your standard capital approach, it aligned with Majewski’s style. Craveworthy last April announced intentions to raise as much as $25 million by placing a call for investors on its website. These Class A units showed at $2 per share in a private placement, asking for a minimum of $5,000.
Majewski leads through transparency and disruption. His company’s culture, he says, is best described as “flat” where opinions flow and there’s no top-down distribution of ideas. He’s still a franchisee and, until his company reaches 300 locations, Craveworthy plans to operate 10 percent or more of every concept it directs. It’s also a good bet Majewski himself, who has investments in manufacturing as well, is going to own a store of any brand his company buys.
So lowering the threshold to welcome investors of every stripe fits with Majewski’s view of what makes this sector what it is—a place where you bet on yourself and the partnership, and the upside of entrepreneurship.
Majewski and I discussed a lot of topics on this call, from value amid inflation to Restaurant Brands International’s recent deal to acquire 1,000-plus Burger Kings from its largest franchisee. It made sense, I felt, to share our conversation in a first-person format (which I’m not sure I’ve done at QSR before) since we crossed so many threads and none of them stayed on track.
To start with price and the perception of what it costs to dine out today, Majewski feels the industry has bumped an urgent point. According to a recent survey from Revenue Management Solutions, a majority of consumers feel they are paying more for restaurant food and one in three note they’re limiting restaurant spend. The number choosing less expensive restaurants was up nearly 10 percent from last quarter and nearly 50 percent said they were also ordering less frequently from restaurants.
“There’s nothing left for people to trade down to,” Majewski says.
“We’re all too priced,” he adds. “So when the economy starts pulling back, like it is right now, what are you going to? Where is your option? Where are you going to go eat? And how are you going to survive? You’re going to go cook your family a meal, cook a family dinner. Because you’re saving 30 percent.” A case: McDonald’s on Monday told investors it was shedding some of its $45,000-and-under-income cohort to grocers.
Majewski shares an anecdote as well. He says he recently hit up a fast casual for six people and dropped $200 (he has teenage boys). Takeout pizza in Chicago for a different occasion: $100.
Like all restaurants, Majewski says, some of Craveworthy’s stores are excelling amid this climate and some are not. He says the economy and its effect on discretionary spend is being undersold by broader headlines. “There’s a lot of people who are not being truthful on that,” Majewski says of its health.
Blue-collared America has felt the sting, he continues. From Majewski’s vantage point in manufacturing, there’s been a slowdown. Last February, people pulled orders and it became a real issue. Generally, restaurants run a year behind. So within six months, as blue-collar workers noticed a tightening, they cut out and value-minded restaurants braced for the fallout. Six months after manufacturing returns, the economy often picks up, Majewski says. That started to happen in November. In other terms, by Q3 or so, he expects the economy to improve and blue-collar towns to thrive again. But that’s just not the case today.
And returning to where value fits in, one of the things Genghis Grill did when it revamped its menu, was lower prices in strategic spots. It offered 20 bowls at under $10. A VALUEBOWLS lineup featured six recipes below $8. Additionally, the brand introduced 12 small Chef Bowls and Fried Rice Bowls at $9.99 or less. The COY bowl also dropped from $14.49 to $12.49. A shift toward curation helped operators streamline and cut back food waste.
These small bowls, Majewski adds, are still nearly a pound of food. They’re similar in scope to what Chipotle serves.
Majewski wanted guests to trade down in hopes transactions would climb. He predicts, if the brand didn’t attempt this, it would be 15–20 percent lower on transactions. Instead, the red line has been 2–3 percent. “It’s costly, but it’s working,” Majewski says.
Grocery prices have climbed 25 percent over the past four years, outpacing overall inflation of 19 percent. Yet this has begun to slope sharper than restaurants in recent months.
The food-at-home (grocery store or supermarket food purchases) consumer price index decreased 0.1 percent from November 2023 to December 2023 and was 1.3 percent higher than December 2022.
Food-away-from-home (restaurant purchases) CPI lifted 0.3 percent in December 2023 and was 5.2 percent higher than December 2022.
Majewski says you don’t need an economist to realize you can save money at home (as McDonald’s guests apprantly have). “Where are people going to eat when you have a family of four?” he says. “To go out to eat if you’re making $20 an hour, you need to work four hours to go eat out. So just for lunch, let’s say you’re going for yourself, you make $20 an hour, you have to work one hour to eat. Something is not right with that.”
Majewski feels the pressure is on restaurants to address the friction. “It’s going to take people in this industry to realize that the portion sizes that we provided for so long have to change. And we’re going to have go more to the European portion and we’re going to have to charge less for that portion, and not just keeping charging that higher price because that’s what people are doing now to make their bottom lines better,” he says, “they’re shrinking the portion but they’re not changing the price. We’re going to have to actually shrink the portion and change the price.”
At Craveworthy’s Budlong Hot Chicken brand, the menu used to only menu a breast sandwich. It rolled a chicken thigh option at $6.99 (the breast is $9.99). Going with a different product allowed Budlong to share an item under $7. Yet customers can still ladder up for an additional $3—the change is the brand gave them a choice.
“Nobody is going to hit the sales projections they set [this year] because everybody thinks they’re going to grow 10–12 percent because they think they’re going to rebound,” Majewski says. “If you packed in a real number and think you’re going to grow this year without spending a crap ton of marketing and discounts and everything else you need to do to drive traffic, you will not see a positive increase this year, in this industry. If you do, it’s because of heavy discounting.”
The scope of Burger King’s decision
During Majewski’s years with Jimmy John’s, he facilitated the sale of 600 franchises. I asked him what he thought about RBI’s decision to acquire Carrols Restaurant Group and embark on a refranchising initiative. The 500-foot-view is RBI wants to remodel to its Sizzle package and hand high-performing, modernized assets to franchisees with smaller portfolios who live in their communities. Burger King’s updated preference will be for operators to have no more than 50 restaurants. It currently has 300 franchisees, but that is expected to surge to roughly 400–500 in the next few years.
Majewski’s called the decision “as big of a balls-y move as you could possibly have from a company.”
“They’re going all-in on them,” he says. “And if it works, they’re going to be geniuses.”
The idea of franchisors buying out franchisees isn’t new. It happens for one reason or another all the time in quick service. Perhaps an operator doesn’t want to invest in whatever program is on deck. Or corporate is working to regain control of an asset and fix it before selling it to somebody else. Among myriad other things.
RBI’s case is undeniably nuanced given it’s an operator who owned roughly one out of every seven Burger Kings in America. Carrols in 2012 entered into an asset purchase agreement with Burger King Corp. (as it was directed at the time) to acquire 278 BKC company-owned stores in seven markets. As part of the deal, Carrols committed to remodeling roughly 450 stores over three and half years. The company was in the process of spinning-off Fiesta Restaurant Group, which umbrellaed Pollo Tropical and Taco Cabana. The deal was conditional upon that spin-off as well as financing to fund remodeling. In sum, Carrols would only run Burger Kings and become the system’s largest franchisee globally with 575 stores. Also, BKC got a 28.9 percent stake in Carrols and $15.8 million in cash. BKC assigned Carrols right of first refusal on sales of Burger King restaurants by existing operators in 20 states. Carrols was able to grow quickly at low-interest deals because of this and climb to 1,022 Burger Kings stores by the time of the $1 billion sale.
In more recent times, Burger King built a tool with Carrols to figure out how to prioritize the highest-return projects. And instead of doing what many chains do, brand president Tom Curtis said previously, which is when a contract ends after a decade or two, force operators to remodel, Burger King told franchisees they could replace contractual obligations with upside remodels.
The first iterations of Burger King’s new prototype, labeled “Sizzle,” came to market in Marion, North Carolina. The Marion store, located about 20 minutes outside of Blue Ridge Mountain-nestled Asheville, was built by Carrols. Another rooted in Bennington, Vermont. The store design features digital-forward aspects like kiosks and mobile order and pickup inside the store as well as at the drive-thru.
The plan now is for Carrols’ operating team to run restaurants in partnership with Burger King. RBI, as mentioned, will spend five to seven years refranchising most of the portfolio to new and existing smaller franchisees. Burger King will keep roughly 200 restaurants for itself.
And Carrols units were performing among the best in the system. In early January, Carrols reported Burger King same-store sales growth of 7.2 percent in Q4, year-over-year. CEO Deb Derby shared Burger King’s jump was fueled by a 4.2 percent increase in average check and a 2.9 percent uptick in traffic.
As much as anything, Majewski says, the decision to buy Carrols is a clear signal RBI believes in the work it’s done to reinvigorate Burger King. The company can hyper-drive the refresh through units before handing the keys to local operators. There’s a positive tilt to the brand’s trajectory that hasn’t been in there in recent years. “If I had that kind of cash, I’d do it, too,” Majewski says. “I’d always bet on myself.”
In some respects, it’s as though Burger King is becoming an emerging brand again. And corporate is pushing its cards to the center. There could result in oversight with regionally based operations capable of sending send people to stores. “What every franchisor knows is, if a company has stores and they’re all in a regional area and you can actually have supervision over those stores regularly, those franchisees perform better,” Majewski says.
Majewski underwent that emerging-brand shift in mindset, albeit at an admittedly much smaller scale, with Genghis when he came in and launched a new look and feel. The brand slashed square footage from 5,000 to 2,100 and reduced the cafe from 97 to 50 seats. Th new prototype was also built so one employee could operate during non–peak hours, whereas it took four in the present version.
With the aforementioned menu shift in particular, Majewski says he had to do some convincing. The brand needed to close the transaction decline number, even if it wasn’t an easy path. Namely, having pre-crafted options opened the brand to a customer base it missed before. Historically, guests pack ingredients into their bowls and hand them over to be cooked. That’s still available, but so is the ability to order off a menu. “There’s a huge population that doesn’t want to touch raw meat. They don’t want to go and pick their bowl,” Majewski says. “My wife would never had come into Genghis. She’ll eat there now because I can go and build my fat bowl with all the protein I want and she can go and order what she wants and she never has to go up there to see it.”
Circling back to RBI and the wider message, Majewski is a believer in franchising as one of the industry’s manifestations of the American dream. It allows people to come into the sector as a one-store operator who believes in something bigger, while also charting a financial road forward. He says it’s as critical selling to single-unit franchisees as it is to 50- and 100-store ones. “You have to have a combination of everything in your system if you’re going to be successful,” Majewski says. “That one-store franchisee tends to be the best operator in the system because they put everything, they put their butts on the line to make that store work. And they live and die with it. … They’re going to be your best ambassadors. Without them, a franchise company does not grow. I will not ever deviate from that.”
“If they’re successful, they’ll want to buy store two, three, and four,” he adds. “And then all of sudden you are creating this generational wealth for a guy who took this gamble with you with their next income. Then they become the next big multi-unit guy.”