Boston's Growth Sets Up Promising Post-COVID Future

The 437-unit chain is developing a smaller, more efficient prototype.

May 25, 2021 Ben Coley

The current restaurant environment is a complete 180 from where it was this time last year.

The industry as a whole saw two-year sales increases in March and April, according to Black Box Intelligence. Same-store sales lifted 6.8 percent on a two-year stack in April, compared to 2.3 percent in March. In fact, Black Box said April was the best sales growth month in more than three years. Food and drink places earned $64.9 billion in April—a new COVID peak, according to the U.S. Census Bureau. It’s $14 billion more than what the industry witnessed in December.

Boston’s Pizza Restaurant & Sports Bar, which operates 437 units across North America, certainly feels the momentum. President Jeff Melnick says during the beginning of COVID, the chain was very conservative in budgeting, focusing all of its resources on franchisee needs. The plan worked to perfection as restaurants through May are collectively exceeding comp sales from 2019.

Granted, stores in restricted markets aren’t seeing the same level of sales, but the performance of restaurants in unrestricted markets gives Boston’s optimism for what’s to come. Development wise, the brand continues to build its presence in the U.S. and is expected to double its footprint in the country by 2023. The company is also preparing a smaller, more efficient prototypical “restaurant of the future” for Canadian and American locations.

The biggest obstacle right now is the labor shortage. Melnick notes that Boston’s stores “have so many jobs, but no applicants, and it is not due to the wages we are offering”—a sentiment shared by many brands in both the full-service and quick-service segment.

FSR recently caught up with Melnick to get a sense of how Boston's is navigating the changing market and what lies ahead for the 57-year-old legacy chain.

How have digital and off-premises progressed as dine-in returns?

Our digital engagement continues to exceed expectations. Takeout and delivery overall are declining as a percentage of sales, but that is due to guests returning to our restaurants. Our fans want to be in the restaurant. As for the proportionality of the current sales, those have remained the same. Seventy percent are calling in or using our online platform to pick up. The remaining 30 percent are using one of the delivery service providers. I believe we will keep a significant portion of the takeout business that we realized during the pandemic, but our best experience is in our restaurant. The other piece of off-premise is catering. That almost completely declined, but offices are reopening, and groups are gathering, so we expect a significant increase by the fall of 2021. We have a great program, and our restaurants are very good at executing for the guest.

What does average capacity look like for Boston’s? How do restaurants in fully open states compare to those that are still restricted?

We have an expansive footprint. Our restaurants are distributed across the country, from Seattle to Jacksonville. Some of our restaurants that do not have capacity or curfew restrictions are consistently showing double-digit gains over their sales in 2019. The ones that are in states that continue capacity restrictions and curfews are negative 20-40 percent compared to 2019. It is tragic that some of our partners are suffering unnecessarily after the year that everyone has been through. I am confident all restrictions will be lifted by Independence Day, which is great news for everyone.

Boston's Pizza Restaurant and Sports Bar

The sports bar will have 27 U.S. stores by the end of 2021.

What is unit growth looking like for Boston’s? What are the target markets and what level of interest is the chain receiving from franchisees?

During the height of the pandemic in 2020, we opened four restaurants which was 20 percent growth for us. Also, worth noting, we signed several franchise and development agreements mid-2020 as well. In 2021, we have opened one of the five we have under construction to open in 2021, which will result in nearly 25 percent growth. Next year is looking to be even better. We will have 27 restaurants in the U.S. by the end of the year, and we have 437 in North America, including Canada and Mexico.

Three markets are generating the most interest—the Southwest, West Texas/Panhandle, and the Upper Midwest, specifically the Dakotas, Michigan, and Ohio. But we are fielding inquiries from across the country. The other opportunity that is exciting is the interest we are getting from hotels. We are now an approved brand for both Marriott and IHG. They have realized that a branded restaurant is a benefit to their franchise partner, can attract more hotel guests and be a destination for the surrounding community.

Why are hotels interested?

For a long time hotels have tried to make a go of the restaurant space with their own concepts. This takes a great deal of behind the scenes effort to curate recipes, processes, procedures, marketing, menu creation, etc. At Boston’s Pizza we take care of all of that. Additionally, for hotels we have customized offerings beyond our core menu to address the breakfast and banquet needs of a hotel.

Describe the progress of the new prototype and how it’s expected to help franchisees going forward?

We began the project in 2019, but then it was idled for several months, as we focused on our franchise partners immediate needs and the brand's success. The end of 2020 and the past few months, we have made significant progress. We have a new, much more efficient prototype that is roughly 25 percent smaller, but has the same number of seats as our larger prototype. We have expanded the patio, which can be modified to be three or four seasons, depending on the location, to maximize its use.

The to-go area has been modified to improve efficiency and handle the influx of business. We have value-engineered the FF&E and building materials to reduce costs and really put the focus on the guest experience. Our AV is topnotch. We continue to have both family and sports bar areas, but the flow and energy of the restaurant is much better. We will have the first restaurant built in Canada this year and have our architects working on versioning it for the U.S.

The spatial efficiency we have created is a huge win for our conversion opportunities. Often when we take on a second-generation space, the building dictates the dining room design. The modular kitchen equipment and more efficient spatial utilization will allow us to drop our kitchen into most conversion opportunities without a significant cost to modify the structure. We believe we can take 30 percent out of the building cost, generate more revenue per seat, and increase/accelerate the ROI.

Boston's Pizza Restaurant & Bar

Boston's expects a big boost in sales in the coming summer months.

How challenging has the labor market been for Boston’s?

Everything you read and hear is true. Every restaurant is significantly understaffed and cannot find people to even apply, let alone show up to work. It is really the one and only consistent topic of conversation I have with all my franchise partners. We have restaurants that are not able to open for lunch or are closed certain shifts each week, so that they can staff their busiest shifts. The unfortunate part is that guests are so excited about being out, that they then visit a restaurant that has closed sections, or the service is not what it should be due to staffing. Most guests are understanding. We have some magnificent team members that are exhausted. They are making fantastic money, but they are tired. This too will pass, but I ask that everyone is understanding over the next few months.

Has there been any notable effect on the supply chain?

Supply chain has been challenged from all angles. Commodities and labor cost are prompting manufacturers to use force majeure clauses to amend contracts. Certain ingredients are simply not available (i.e. sliced pepperoni or ribs), our manufacturers are facing historic labor constraints and raw ingredient shortages. Lead times have increased on everything from takeout containers to fryers. As a growing brand, we have had to add additional time in the construction phase for lumber and FF&E.

Do you think it will hinder unit development, in terms of franchisees being hesitant to open stores?

No, I believe we have a compelling model that allows franchise partners to get a return on their investment. The supply chain will find equilibrium in time—by the end of the year I believe. The labor market will as well, as soon as people feel comfortable to return to working—which is their personal choice—and the assistance dissipates. The workers in the hospitality industry will return. Some may have found other vocations, but we always have young people coming of age who need to set out on their own, and our industry is a perfect starting point. This situation has put significant inflationary pressure on wages. That may be here to stay, so pricing will be impacted to some degree. We will continue to look for efficiency and productivity enhancing opportunities, as long as there is not a negative impact on the guest.

We have a new partner who is working on a predictive sales and labor model that will help to focus labor hours on when the guest is in the building. We have reduced our menu and subsequently kitchen labor cost. That is an ongoing effort for our brand.

What type of environment does Boston’s expect for the upcoming summer months?

It is going to be a great summer! Our patios are open, we have a fantastic Spring Summer menu; families and sports enthusiasts can get out and celebrate so many things. What our world, country and our Boston’s communities have gone through the last 18 months has been tragic. So many have lost loved ones and lived in some relative state of fear and disruption. Now that we have vaccines and people are safe, we are seeing and will see an exuberance to get out and celebrate, and there is no better place than Boston’s Pizza!!