Established businesses often find themselves in a unique dilemma – they have years of experience serving a loyal customer base, but recognise that bringing new customers in requires change. How can innovation be delivered without alienating the business’ bread and butter base?
In an exclusive chat on the My Business Podcast, Chris reveals:
- How new service offerings are expanding the brand into untapped markets
- Why he personally got behind the wheel to test Red Rooster’s new delivery service
- The importance of differentiating different brands owned by the same company
- His insights from three decades in the customer-facing fast food industry
Plus loads more!
Adam Zuchetti: Welcome to the My Business Podcast, thanks so much for tuning in. Adam Zuchetti here and Andy Scott, as usual. We've got quite a big name in the studio toda,y in terms of the brand...
Andy Scott: I thought you were talking about me for a second and I was flattered. No, we have. This is a household brand that I think most of our listeners will recognise. They started in 1972 in one store in Kelmscott, in WA. They've since grown to 350 different outlets nationwide. As I said, just thinking about it has made me a little bit hungry. But enough of my yacking. Adam, why don't you introduce today's guest?
Adam Zuchetti: We've got Chris Green who heads up Red Rooster. Chris, thanks for joining us today.
Chris Green: Thanks very much Adam and Andy, I look forward to some great questions.
Adam Zuchetti: It's an interesting business and a very prominent business that a lot of people know, but particularly at the moment, it's a business under transition, as a lot of businesses are. We wanted to really get you in the studio and pick your brains about some of the transitions that you are currently undergoing and some of the recent ones that you've implemented.
We were just having a bit of a chat off-air about delivery as one. Now, that's essentially been a brand new distribution channel for you as a business. Can you talk us through, I suppose, what were the inspirations for doing that and getting involved in home delivery and things like that, and how you really, sort of, made that strategy come to fruition?
Chris Green: Yeah, sure. First thing I'd probably say is that deliver for Red Rooster was almost about disrupting ourselves, and secondly about disrupting the industry as well. We started in delivery about three years ago, and it's actually been an amazing journey. But it really took us three years to get where we are, and today we actually have 250 of our sites that actually do delivery, out of 350. We've had amazing growth. The customer demand is really, really strong for delivery; much, much stronger than the traditional business. For us it was really about shifting into a high-growth area, and it's about convenience. Customers really are demanding food available on the internet, so online.
That doesn't just mean desktops and iPads. Most of our orders actually comes through mobile phones, and they want it delivered. The beauty for Red Rooster is, we already have a very, very strong drive-through network, so 300 of our 350 sites. Delivery is complementary to that, so we're able to use those sites for delivery. We're leveraging the same kitchens, a lot of the same staff, although we have had to obviously invest in online ordering, as well as the franchisees have had to invest in cars and signage to tell people about it.
Adam Zuchetti: Coming to that investment, in terms of both the financial cost, but also the time of investment: how long and how much was really spent on developing the entire system in terms of the mobile app and the delivery channels and things like that?
Chris Green: Probably the first year, it was really just about sort of testing and piloting. We did it in a very low cost way with minimal investment. We relied on third parties, so we actually used Menulog at first. That's a great partner of ours. By using them, we were able to prove out the model, that there was high demand and that our product was wanted by people that wanted delivery. Very, very low cost. After about a year - and we went from one restaurant to about 28 - we realised that there were benefits with investing in our own online ordering platform, in that we could control the total customer experience and not have to compete on an online world with other businesses.
At that stage, we actually made the decision to invest about $1 million; since then, it's probably been closer to two, and we now have close to about 70 per cent of our orders come through our online system. But Menulog is still a great low cost way for us to get new people into the business, but obviously we pay higher commissions on that network.
Adam Zuchetti: How did you choose which stores to start that trial with? The first one, and then you said it was about 28 or something that you expanded that to... How did you really select those stores as the ones to go for with this?
Chris Green: We have a number of ex-delivery people in the business with competition, so on my team I've got somebody that worked for Pizza Hut, I used to work for McDonald's and did delivery in Asia, so we have had some delivery experience. The first restaurant we chose was a suburban location in Sydney: Baulkham Hills. And most important you want a good mix of commercial, office, and also households. That was the first one. That was amazing.
From there, what we wanted to do was establish that it could work in other types of formats, so the next six we chose some country towns, some inner city locations - so a broad range. Then what we found is it worked almost anywhere. Then from that seven, we actually expanded it to WA where we did another 20 restaurants. That was about getting a bigger market that we could actually advertise, but that was how we started.
Andy Scott: You mentioned at the beginning that the move to home delivery for you guys was about almost disrupting your own business. Why did you feel the business needed to be disrupted?
Chris Green: It wasn't just Red Rooster that needed to change, the world was changing, so customers were demanding it. If you look at businesses like Menulog, EatNow, I mean three years ago UberEATS didn't really exist, Foodora, even Deliveroo. So we were probably first to market from a traditional quick-service restaurant. But we also got probably the most opportunity, so even though we're big as a network, 350, we're smaller than our competitors. A lot of the big multinationals, McDonald's, KFC, even Domino's, Hungry Jack's - so this was a way that we could actually differentiate ourselves from the market.
The other things is, we thought our offering was ideal. Roast chicken and our chips hold up very well from a delivery perspective, so we could see a market there that potentially we could play in; we had a great product and we had great brand awareness.
Andy Scott: Was it driven more by threats that you thought the competition might do, or was it driven by opportunities that you thought you guys could open up?
Chris Green: I think it was more about opportunities, so it gave us a way to differentiate ourselves from the competition. The other thing I would say from a real estate perspective, is that we saw it as an opportunity to actually open different types of formats. That's been one of the pleasing outcomes of launching delivery, is in areas like Sydney and Melbourne where we have low penetration, and particularly sort of inner city, northern beaches, northern suburbs, it's very, very difficult to get traditional drive-through locations.
Delivery opens up new formats, so we can actually open in shopfronts now, where the investment cost is probably half the cost of a drive-through format, the rent is typically, I'd say, half to a third and most importantly you have dense populations, so it's quite easy. The nice part is that there's a lot of shopfronts, and so it's a lot easier to open sites. I wouldn't say that we went into delivery with that in mind, but it was almost one of the unintended consequences is that it has opened it up ... more locations for us.
Andy Scott: Did you find with, I suppose your customer base as well, you'll obviously have a lot of loyal customers, but loyalty is quite fickle, particularly in the food space. Did you find that it was something that you needed to do to retain that connection with your customers, to be able to move where they were going as well?
Chris Green: That's interesting, because I've actually done a lot of deliveries myself, and especially in the first year, I really needed to establish who were these delivery customers. It was great that there was demand. In the first year... actually well, it's highly incremental, and reality is, if I had to segment our delivery customers into two, one is, they're existing customers using us at a different occasion. It could be, they might be parents going out and there's a babysitter, so they're getting food brought in; they might be sick at home and can't leave the house. But the second sort of segment is new customers. I have seen so many people that said, "It's great to have another choice other than pizza" predominantly, and Indian and Chinese. I'd say they're probably the two key groups of customers.
Adam Zuchetti: Between that split, has it mostly been those existing customers making additional purchases, or has the new customer segment... has that actually been quite a significant portion of the business that delivery's now introduced?
Chris Green: I'd say the biggest group is the new customers, and maybe some lapsed customers as well. I've seen definitely people that used to frequent the brand, and they've gone online to get delivery, they've seen Red Rooster delivery, and often we'll get comments like, "We haven't tried you of 10 years, and we recently got delivery and we were blown away. We'll be using you again." Definitely I would say they're different customers that would normally use a drive-through or in-store experience.
Adam Zuchetti: Now Red Rooster made the decision to have branded cars as part of the mix. You had a fascinating story as to why, well not so much why that was done, but the benefits of having that in place. Do you want to re-share that story for our audience?
Chris Green: Yeah, it's one of my favourite stories and based on that story we became a 100 per cent committed to having branded cars. We've got 400 of these red delivery cars buzzing around the neighbourhood. But effectively a franchisee in Melbourne did a delivery to a street, let's say it was number 11. They then went back to the restaurant and when they got back to the restaurant, there was an order waiting for number 13. The franchisee, you know, really excited say, "I'll take that one." Delivered it, and then said to the customer, "You're never going to believe this, I just delivered to your neighbour."
The customer basically said, "Yeah, I saw your car out the front." They then went back to the restaurant and there was one for number 35 in the same street. So having those branded cars, not only do they sit out the front and promote delivery, but when they're buzzing around, they're like mobile billboards. They do help us reduce costs a little bit with drivers as well, but the exposure that we get from an advertising [perspective], is huge.
Andy Scott: You mentioned that, I suppose, stories like that were the times that you guys realised, "Yeah, we need to be all-in doing this." What was the real driver for, I suppose, taken that entire relationship on-board with yourselves, and maintaining that so the whole customer journey started with Red Rooster and ended with Red Rooster? And would you advise other firms with similar delivery to do that, even though the investment is huge?
Chris Green: I'd probably say start with third parties, because it is low investment. The key reason that we decided is, we could see that it was going to be a significant part of our business. Obviously there were some advantages, but there's much lower commissions having our own online ordering. But probably the most important part for us was owning that experience. One of the key things is, we have 360,000 Red Royalty members, so that's our loyalty programme, so we're actually able to integrate that into the online ordering platform.
Then obviously with that platform, we then have the customer's details and we can directly market to them as well. A very, very efficient way to market. We, on average, probably send one SMS a week to our delivery customers; we would send probably two to three EDMs a week as well. It's a very efficient way to market, but it's a win-win, because the customer ... well, they find out about new products and new offers, but they also earn dollars for every single order that they can then redeem. Obviously having our online ordering platform, we can do that.
The other thing, which we're just about to launch very, very soon, is a partnership with GetSwift, which actually is track your order. Customers will get an SMS to tell them how long their order will be,hey'll be able to see the roast chicken being delivered to them. But most importantly, we'll be able to send the customer an email basically requesting, "How was your experience?" We'll be able to track the individual restaurants and the individual drivers on customer experience.
Andy Scott: You mentioned that you can market to your customers as an SMS, and certainly in the fast food space and the food space in general, special offers when you're at a restaurant, or I'm thinking particularly if I'm in a food court looking around and they'll give me a free drink and that I'm going to get a free side salad or whatever, do you find that home delivery customers are as susceptible to those special offers where you can almost sway them from ... they weren't thinking of the possibility of Red Rooster tonight, but because this great offer's come through, you suddenly notice a spike, on say, Wednesday evenings where you wouldn't normally get one?
Chris Green: Yeah, absolutely. I mean the one thing I would say is that delivery is not a value channel. I mean obviously there's significant cost in delivering food to customers, and you need to recover that. We try and get the balance right between when we offer value doing it in a way that, yes, it's going to drive people to there, but we need to recover the cost of the delivery as well. But yeah, we have two examples of that: we've run free chicken, where you can actually ... you order $25 worth of food and you get a free chicken. The first time that we did it, we literally doubled our average deliveries. We've done free chicken twice now.
I remember the first time ever that we did an SMS, it was only in November last year, but we send out an SMS to 30,000 people at about five o'clock at night, and we actually ... we got smashed. It was like all of a sudden, every restaurant had between six and 10 orders come in, so customers absolutely respond to value, but you can't offer it every day as well - you've got to do it in a measured way.
Adam Zuchetti: Now, I want to come back to ... you were talking about launching into suburban areas and taking on quite a new market. What challenges has that really presented for the business? Going into something that you're not particularly strong in, or you haven't traditionally been strong in, it's quite confronting, potentially more so for a very big, established, well-known brand, to do something new, to take a risk and try something. But what have been those key challenges and how are you overcoming them?
Chris Green: Yeah, so I think the example you're talking about is, we call it Reggie, which is the small shopfront model. Probably the first thing was, is those locations are a lot smaller than our typical drive-through location. So we had to do a lot of work taking our layout from around about 150 square metres, down to ... the smallest one we've built is 45 square metres, and just really getting the equipment into that smaller box. That's probably number one, but we've opened three now and every site's a little bit different, we're getting better at it.
The second one is probably locating those type of sites. We've had to develop criteria, and the things that we look for is, you want a site that's visible to passing traffic; there's no point being one block back. You need parking, not only for your delivery cars, but also for the customers that want to come in and pick up as well: so timed parking or lots of parking is important. The third thing I'd probably say is the traffic generator - you want to make sure that there's other generators around the area, whether it's supermarkets, or schools, or different types of retailers.
Adam Zuchetti: Mm-hmm. Has it been an active decision by Red Rooster not to go into food courts in major shopping centres?
Chris Green: We haven't actively pursued it. One things is, is that Red Rooster is very, very strong at dinner. One of the issues that we actually do have with food courts is typically they're only open one night a week: you might get three if they're in cinemas as well. And particularly with delivery as well, 80 per cent of the delivery business happens at night. We have found food courts difficult, I would say, to do business in, because of that offering that we do have. The other thing is just they're highly, highly competitive and there's been a lot more food open up, with very high rents. It definitely isn't on our number one list to pursue. I would probably say drive-throughs is our number one, followed by these shopfront locations.
Adam Zuchetti: Mm-hmm. Now expanding into shopfront locations, that pits you squarely against Oporto, which is another of the brands owned by your parent company. How are you managing that channel conflict between the different chains and the different businesses?
Chris Green: Yeah. We actually have three brands: we have Chicken Treat, Oporto and Red Rooster; it's owned by Craveable Brands. The most important thing is that we ... and I'm a 100 per cent focused on Red Rooster, but obviously heavily involved in the Craveable Brands leadership. We are 100 per cent focused on making sure that the three brands are differentiated.
Oporto in particular, they probably appeal to a much younger demographic, so definitely millennials. And then secondly, their food is Portuguese: that's their heritage and that's the space that they play, so a lot of spice and a lot of flavour. Red Rooster is definitely about convenience, drive-through and delivery, and it's about real, wholesome and nutritious food. It's particularly strong at night time and roast dinners. Then Chicken Treat, which is the third brand, also a WA brand - a lot of the listeners may not know it, unless they've spent time there. It's probably targeted at probably a lower to middle demographic; we've been positioning it around fried chicken. Three brands, but all very differentiated through targeting different customers.
Adam Zuchetti: Okay, but all three of those brands are effectively competing against the likes of KFC, this international behemoth. How does a business like Red Rooster, that has been around for so many years, how has it actually survived against such a giant competitor? And then you've got the likes of other fast food businesses like McDonald's and things like that on top.
Chris Green: Red Rooster's been around 45 years, so it's had ups and downs in that period. What I will say is that, clearly something that customers love is that it's an Australian born and bred business, and I think we get a lot of customers that use us for that reason. A lot of the others are multinationals. And I think that the roast chicken offering is very, very different from the KFC offering. Roast chicken is one of Australia's favourite meals. Coles and Woolworths sell a lot of roast chickens, but what Red Rooster offers is probably a better quality roast chicken, but most importantly, convenience as per the supermarkets.
At the end of the day, we do compete with Hungry Jack's, McDonald's and KFC, particularly around drive-throughs, but I think that product offering is very different.
Andy Scott: Over the last few years, we've seen the explosion of wellness and clean eating and healthy eating and all those other things as well. For a brand like Red Rooster, is that a threat or is that an opportunity for you guys?
Chris Green: I'd probably say opportunity. I've been with Red Rooster for almost three years; I actually worked for McDonald's for 28 years before that, so been in the industry a long time, seen trends come and go. One of the things that surprised me with Red Rooster is, is that customers actually love the fact that our food is real. We have fresh chickens brought into the restaurant six or seven days a week. They're not processed, they're fresh chickens that we then stuff and season and then bake for 55 minutes.
Whilst I think health means different things, so there's definitely a real versus processed piece to it. But the other thing I'd add is that there's a place in the market for treat. One of my favourite meals at Red Rooster is the quarter chicken and chips, and with the quarter chicken you've got this amazing real chicken, not processed, but then the chips are a real treat on the side. Yes, they've got salt on them, but you've got the nutrition of the chicken and you've got the treat of the chips.
Andy Scott: Do you find that's something that you guys are consciously aware that you almost need to keep reminding customers that you're not necessarily the same product as that might fall into, in that you KFC, your Macca's, that very processed sort of food stuff. Is that something you guys need to remind your customers of?
Chris Green: Yeah, we try and really hero the roast chicken. The roast chicken is at least a third of our menu, and it's not just roast chickens that people come in and buy whole. We use that roast chicken in a number of different products: we use it in the roast chicken and gravy roll, we use it in the famous ... our hero product, which is the rooster roll, the quarter chicken and chips... That is the foundation for a lot of our menu. We absolutely play up ... we call ourselves the roast chicken champions, and we do play that up.
Adam Zuchetti: In terms of new product developments and things like that. How difficult is it to balance the fine line of trying to bring new customer in and add new things to the menu, while still acknowledging that the classic roast chicken is at least a third of our business, and you can't cut off that bread and butter supply.
Chris Green: Yeah, I think it's, especially for traditional brands or long-established brands, there is a limit to how far you can really stretch yourselves, 'cause absolutely you've got a core customer that loves you for the product that you've got. But in order to attract new customers, or even your existing customers more, you need to have exciting new news, or permanent menu items. We're very focused in the next 12 months on definitely around salads, sides and desserts. They compliment our roast chicken, particularly because of that fast-growing delivery channel, they also play into that channel as well.
A good example of something that we've done recently is bastings on roast chicken. We've had the same roast chicken for 45 years, and recently we gave the customers the option where they could add different bastings or glazes to the roast chicken. We introduced new flavours, so there was a Texas BBQ, there was a Moroccan, and there was a honey soy. I think that's a great ... but it was a limited time, so it was a great way to give our existing core customers something new, but also have some news that could bring some people to the brand.
Adam Zuchetti: Mm-hmm. Just to finish this off Chris, basically your entire professional career has been in the fast food space: that's a lot of expertise and experience, particularly in a very customer focused industry. So what three things have you learnt in your time in the industry, that you could pass onto our listeners?
Chris Green: Okay, well I started as a 14 year old at McDonald's, and so you're right, I did 28 years at McDonald's and then three years at Red Rooster, so it's all I've done. But I will say that I've worked around the world and the one thing that stands out to me, is people and training. That is the first thing. You can recruit people that don't have skills in this industry, but what you've got to do is make sure that you've got a very strong culture around standards and training of people. So I'd say that's number one: it all starts with people.
Two, I'd say definitely standards need to be sort of well documented, but you need to ... We have a process for serving a customer, but you need to actually encourage people to go above and beyond that. McDonald's used to have six steps of service, but you don't want to be robotic; you've got to let people use their personality as well. We really encourage that in Red Rooster.
The third one, I would talk about - and we found this particularly as a franchisee - is our franchise network runs much, much better restaurants than we do in our corporate business. We're 99 per cent franchisee, and that's because they're involved in the local community, they know their customers, they hire their local community, but they're on the front line. So they're obviously heavily incentivised, because they own the business. But I think that sometimes if you grow too rapidly, and particularly if you do it in a traditional sort of corporate way, you can lose some of that drive and desire at the front line. That would be the three.
Adam Zuchetti: Yeah, all right. Very good. Thanks so much for coming in, Chris.
Andy Scott: Appreciate your time, Chris.
Chris Green: Thank you.
Adam Zuchetti: Yes. I suppose the website, if anyone wants to...
Andy Scott: ...order Red Rooster.
Adam Zuchetti: ...well, like we're feeling a bit peckish, or they want more information on the business itself, redrooster.com.au is it?
Chris Green: Yeah, just head to redrooster.com.au and then press the delivery icon. Works on your mobile phone, that's 80 per cent of orders, but also iPads and desktops as well.