Guest: Jose Costa
Topics: Bojangles

Transcript:

Chris Ressa 0:00
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management. Welcome to retail retold everyone. Today I am joined by Jose Costa. Jose is the chief growth officer at Bojangles. I’m excited for him to be here. Welcome to the show, Jose.

Jose Costa 0:28
Thank you, Chris. Thank you for having me.

Ressa 0:30
Yeah. So Jose, why don’t you tell a little bit about who you are and who Bojangles says to the audience?

Costa 0:38
Yeah. I’m originally from Venezuela. I came to the US in 2003 for graduate school, and have been here for about 20 years, always in retail. The last three years with Bojangles Bojangles is a up and coming 45 year old brand. We’re expanding from the southeast to become a national brand. Three very strong day parts breakfast, lunch and dinner. A UVs are about $2 million. And we have about 800 locations across the country.

Ressa 1:14
That’s, that’s what’s astounding to me. It’s not a national brand yet, but you guys already have 800 locations. So you know, I like how you put that you’re a 45 year old up and comer. That’s really that’s cool. So you guys are have built a strong brand long history. And now it’s time to put the pedal to the metal. That’s right. That’s that’s exciting stuff. And I’ve been to Bojangles it’s great. But for the audience, why don’t you tell a little bit about if I go to breakfast or lunch or dinner, what I’m going to find in a Bojangles.

Costa 1:47
So there’s three items that make us famous what we’re known for for the last 45 years. And it’s chicken, biscuit, and T so for breakfast, you can have biscuit sandwiches. It’s a very portable, fast. Breakfast location for us about 40% of our sales are before 11am. For lunch, and dinner, you can get boneless chicken sandwiches, tenders. And then your traditional boning meals for the whole family.

Ressa 2:21
That’s fantastic. The the, you know, the breakfast segments always interesting to me, because it’s it’s a segment that a lot of groups have struggled to really crack. It’s a really hard one. But that’s impressive that you guys, how much sales come from before 11. And that’s really incredible kind of sets you apart? For sure. Yeah,

Costa 2:42
almost $1 for dollar is the same breakfast business as McDonald’s with a million dollar less a UV, right. So out of $2 million that we make on average per location, almost 900,000 are done before 11am. And we believe that’s a strong competitive advantage. For sure. What time do you open? Our generally speaking our restaurants open at 6am? And they close at 10pm?

Ressa 3:14
Very, very cool. Okay. That’s great insights about Bojangles. I want to take us to the next bar show we call clear the air. I got three questions for you. They’re fun questions. Are you ready?

Costa 3:30
I am ready.

Ressa 3:31
Let’s learn a little bit about Jose. Question one. When’s the last time you tried something for the first time?

Costa 3:39
Probably about 334 weeks ago, I went to a traditional Mexican restaurant and they ate grasshoppers. I had never had grasshoppers. They’re crispy. And they actually tasted more like butter and garlic then than anything else.

Ressa 3:58
Got it. So that means it was good.

Costa 3:59
It was good. Yeah. I don’t know if I would order it again. But it was good.

Ressa 4:03
Wow. Okay, I need now I’m going to be looking for grasshopper. I want to try it now. Question two. Yep. What is one skill you don’t possess but wish you did?

Costa 4:17
Well that’s a great question. I guess on the sports side. I wish I was more athletic. And earlier in my career, I played professional sports but over time you get deteriorated as you get older, right? Yeah.

Ressa 4:37
What sports did you play?

Costa 4:38
I played rugby for 10 years. I played for the national team back home.

Ressa 4:42
Wow. Yeah. What position?

Costa 4:45
I was a prop number three tight end.

Ressa 4:48
Wow. Yeah. Do you do make it any Do you get any rugby in these days?

Costa 4:54
I have my hip replaced about six months ago because of rugby. So I like to watch it on TV. Sometimes when the old blacks come and play here in the US, I like to go watch them. But unfortunately, I cannot play anymore.

Ressa 5:10
And where do you base now? Jose? Where do you live now?

Costa 5:12
Charlotte, North Carolina? Yeah.

Ressa 5:14
And that’s what Bojangles is.

Costa 5:15
We’re headquartered here since the beginning since 1977. Yep.

Ressa 5:20
Wow. Okay, last question. One of my favorites. What is one thing most people agree with, but you do not.

Costa 5:28
I do not agree that you need to have the same car for the rest of your life. This is an area where my wife and I disagree. I love cars. I only have one at a time. But I’d like to switch it often. And she gets on my case for doing that.

Ressa 5:45
I get it. The but it’s fun. It’s fun. You only live once you got to change it up. And well, that was great. Really appreciate it. Going back to Bojangles a bit. And what you do. Give everyone a little context, Chief growth officer fun, exciting name. What is the chief growth officer do?

Costa 6:10
Well, I spend the bulk of my time thinking about how to successfully grow the brand outside of our core markets. So that means identifying the right franchisees. It means divesting some of our company own acids. So out of the 800 that we operate 300, our company own and 500 of our franchise. So I have a team of people that go out across the country and try to recruit franchisees to join our system. We look for sophisticated restaurant operators that may have burgers or pizza or Mexican. And they’re missing Chicken. Chicken is the fastest growing protein worldwide and in the US, and it has a lot of tailwinds right now, and that that helps Bojangles significantly as we grow

Ressa 7:09
is the franchisees that have our strong expertise. There are a lot of you know, what’s happened over the last decade these private equity companies or large scale businesses that heck there’s even some public companies like a Carol’s or something that you know, that own different franchise brands. Or some of these, do you have some operators that have like 50 locations and things like that?

Costa 7:38
We do. If you look at those 500 franchise locations that I mentioned, one owner, Jeff Rigsby owns 100. Out of those 500. He’s our largest operator, he represents about 10 openings a year for us. So he’s he’s really big, a really important and a very good partner. Then it comes down, we have two two groups with about 7075 each. We have a group that recently joined the family with about 50. So that gives you a scale, a reference of what we have right now,

Ressa 8:17
what’s my man if I want to be a Bojangles franchisee? What’s my minimum requirement?

Costa 8:23
So the minimum package right now is about three to five restaurants, financially and liquidity. We’re looking for liquidity of half a million dollars and net worth of a million. And that’s per restaurant. So if you want to buy five territories, basically multiply that number by five.

Ressa 8:46
That makes a lot of sense. And you’ve been here at three for three years, where were you before,

Costa 8:55
I worked at yum brands with KFC Taco Bell Pizza Hut, I worked at Burger King. And then I took about a seven year hiatus from from the restaurant space. I worked five years in the automotive industry for driven brands, and two years for an optical retailer.

Ressa 9:17
And you’ve come back to food. And when you dug into Bojangles and you were looking at, you know, how do we grow this brand? What were some of the things you want covered like that were surprising to you. You’re like, wow, this is really interesting.

Costa 9:34
So the company went private, about three, three and a half years ago, and the two private equity firms brought a new management team. So we intentionally took the first few months to understand our mistakes from the past. What made us special and strong and how to grow the brand. So some of the things that investors look for when they’re analyzing Bojangles number one is being in the chicken space. As I mentioned, it’s the fastest growing protein and a lot of investors want to be in the chicken space. Number two is having three strong day parts. Very few brands out in the marketplace have three day parts. If you’re a McDonald’s, you have breakfast and lunch, you technically don’t have a strong dinner business. If you’re a Pizza Hut, you don’t have a breakfast business and so on. Number three, our recipes are made from scratch. We don’t have microwaves, our operations may take a little bit longer, but you can taste the difference, right. And then fourth. It’s a 45 year old brand that has a cult following. And anyone that has traveled through the South that has tried our products. They love it, and they want it. And we hear it a lot in social media. I travel with local where sometimes through the airports, and I get stopped. When are you bringing Bojangles to Austin or to New York or to Chicago? And the answer is we’re working on it. We’re going to come soon.

Ressa 11:17
Unbelievable. Very cool. Well, I want to take the next part of the show to talk about a Bojangles that opened. And where are we going? Jose?

Costa 11:37
Well, we are growing contiguously we don’t like to jump states. So right now we’re we’re going is we’re going deep in Texas, Arkansas, Oklahoma, Illinois, and then in the northeast New York, New Jersey, PA. And if if you do a quick Google search, but Bojangles go to news, you can see all the development agreements that the team has been signing for the last few years. And it’s exciting, we have close to 400 restaurants in the pipeline to be opened within the next five to seven years.

Ressa 12:11
Wow. And the are these franchisees? Are they typically buying the location they ground leasing them? Are they are they just leasing them? What how are they doing this?

Costa 12:24
It’s all of the above, I would say half of the franchisees that come into the system would ideally like to buy the land 25% leverage the build to suit model, and about 25% are looking at ground leases. Because in some areas like downtown Dallas or downtown Atlanta, if you’re really wanting a plus location, most likely the only way to getting there is with a ground lease.

Ressa 12:56
Yeah, for sure. I understand being on the developer side. So I get it, how big 800 locations and you guys are growing, how big is your team and who are the parts of the team that that you’re responsible for.

Costa 13:12
So my first two years when I joined the brand, I was a chief development officer. I had real estate I had construction, I had design, and I had development. About to about two years into that role. We were growing so much that we decided to separate the function. My team today focuses strictly on growth. And then Byron Chandler, our Chief Development Officer, he’s overseeing real estate construction and design.

Ressa 13:45
So how do you like the different roles for you?

Costa 13:48
I like it because it makes us more specialized. And we divide and conquer. He’s a great partner has been a great addition to our team. He’s spent 20 years on McDonald’s leading real estate for McDonald’s. And I love working with him.

Ressa 14:06
I’ve read I’ve read a little while ago. I don’t know if he’s still on. It’s Gary Vaynerchuk on your board.

Costa 14:12
He is Yeah, yep. He he’s definitely. So interesting to hear him talk. every board meeting always has a lot of ideas. We work with his agencies. And it’s just fascinating to see the way he thinks about social media marketing in general and digital.

Ressa 14:33
Yeah, for sure. He’s, uh, I was wondering, when I when I, you know, learned you were, you know, the the chief growth officer. I was wondering, I assumed you might uh, you know, he’s all about growing businesses, right. So I assume that you might have heard him, you know, speak or been in a meeting with him or something. So

Costa 14:52
every month he’s he’s in our board meetings, is it’s a great asset to our brand. We’re thankful grateful to have him on board. Word. Very cool.

Ressa 15:04
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Ressa 15:52
When you look at the the growth, you mentioned, a bunch of different areas is are you mentioned national brand is the long term vision coast to coast.

Costa 16:07
The long term vision is actually International. The short term vision I would say the next three to five years is strictly focus in domestic growth. Close to coast, but contiguous, we don’t want to be jumping states. So if you call us today and say I want to go to Colorado, or California will say thank you, Chris, we like you a lot. We’re going to put you on this database. And in about 18 months when we’re ready, we’re gonna call you back.

Ressa 16:38
Yeah. Understood. Makes sense. I like I like a continuous growth, I know some continuous state growth, there’s, there’s, there’s some brands that try to like do all the major mshs. And there’s some brands that just go where the franchisees are. And, you know, we’ve seen the ups and downs of both. Yeah,

Costa 16:56
we are a little more old school when it comes to, to that aspect of growth. Because if it’s contiguous, it allows us to provide better support. So we visit the restaurants quite often. It creates more marketing dollars when you cluster the restaurant, so you can advertise. It just makes the whole business function a lot better. If you can concentrate, contiguous we versus jumping all over the map.

Ressa 17:27
I think the last part that I’m curious about is tell me about digital and how is the digital, you know, online restaurant world impacted your business? And how are you guys taking advantage of that.

Costa 17:43
So think of the beginning of the pandemic. So the first semester of 2020, our sales were already about 85% off premise. So through that drive through either curbside or ahead, carry out. Coming into the pandemic, we were already at 5% off premise, the pandemic accelerated us to 100%. So we rolled out our delivery platform. Right now it represents between five to 6% of sales, and it’s growing. We this year recently rolled out order ahead and curbside in q3 of this year, you’re going to see we launched our new app, I encourage you to download it. And then q3 You’ll see loyalty, we’re going to roll out loyalty, and then we’re going to roll out catering. So there’s a nominee channel roadmap that takes us about three years out, then digitally is a big part of Bojangles going forward.

Ressa 18:48
Have I’m curious on your takes, especially your experience, what’s your take on it? Because it feels like it was hot, and it’s kind of faded on Ghost kitchens? And where does that play a role does it at all in what you’re thinking?

Costa 19:06
So we spent, I spent personnel, the last two years looking at it, we met with various partners. We were very, very close to signing an agreement, and then we decided not to move forward. I think it’s an interesting idea. If if a brand wants to explore ghost kitchens, I think the financial model of doing it yourself makes a little bit more sense because you can control the experience the quality and the cost, versus maybe going with Cloud kitchens or reef or any of the players out there. In those type of settings, you’re going to be sharing the kitchen with many many other brands. And sometimes product quality suffers food safety suffers. And that guest experience is not the same makes a lot of sense

Ressa 20:01
makes a lot of sense. In your, in your days at Bojangles I’m curious, any one location that opened up it really like wow, this was really interesting story how this Bojangles ended up somewhere.

Costa 20:19
I can think of many of them but one here close to her headquarters. It’s a franchise location here in Charlotte, North Carolina. The franchisee Arash Pathik calls me and he said, Can you come look at this location? It was a corner, lot covered in trees. I mean, you looked at it, and you wouldn’t think much of it. And we started driving the trade area and I’m picking his brain, can you educate me? Why do you think this is a great site. So we turn the corner and keep driving, and there’s this huge piece of land. And he said, one of the largest hospitals in the area is going to be developed here. They’re about to break, land to break, break, break ground. And then we started continuing driving. And we saw McDonald’s popped up about a mile and a half away, but there wasn’t, there was nothing close to that hospital. So he ended up buying two, two parcels next to each other. And, yep, put Bojangles on the corner. And sometimes you’re smart. And you plan sometimes you get lucky by by putting it on the corner, the CD decided eventually they’re going to put a light, a stoplight there. So he was ahead of his time corner unit, 3200 square feet building, he thought he was going to do probably 35 40,000 a week, he’s doing 55,000 a week, and the hospital has not even opened. So I think that’s going to be a great location. It opened about six months ago. And the hospital won’t open for a while, but you can already see the traffic. It’s coming.

Ressa 22:12
So it’s such an interesting development story and about, and I appreciate it. So one

other thing I think is important that we all we all in every business get excited about chasing growth. Right? And sometimes, you know, timing is everything you get a little early, like all people are gonna move here. This is the this is the city that’s gentrifying, and so. But if you time it wrong, you can spend a lot of cash burning cash until it actually comes to fruition. So I think the thing that really is amazing to me, the part that you mentioned at the end is he opens up this location and he’s doing so well. And the hospital still hasn’t opened yet. That is fascinating to me. And I gotta give the franchisee some, a lot of kudos there. I mean, to envision this and it to come to reality. That’s a hard, it might seem simple to some. But that’s really hard that we’ve seen a lot of mistakes in our day about people trying to catch the growth at the right time. And totally miss. It’s why, you know, the sometimes you know, going into the mature market, while you might have that might not have the excessive growth, it’s stable, right. So to catch the trade area at that time and still be successful. And I think it’s also a good story to the power of Bojangles brand. Right to be able to be able to do that. Without that brand power and brand equity. There’s no way you get to 55 a week.

Costa 23:52
Right. And I think it plays absolutely to the brand. It plays to how many years has the brand been present in that market. So here in Charlotte, we’ve been around for 45 years. If you were to implement that strategy, in a Houston or Chicago, we’re we are not there. It’s a much riskier proposition versus here. Here. You almost are buying insurance because in the Carolinas we’re so penetrated that every exit there is a Bojangles right. So people know the brand, they know the product that it has a cult following. So for a franchisee like him, it’s easier to take that risk here versus in a new market.

Ressa 24:38
Wow. Well, that was a great story. Thank you for the other piece of that story. A lot of franchisees struggle with this. He had to assemble land. That’s really a development move. I’m sure you guys had helped him with that. But that’s not easy getting through municipalities and assembling land and dealing with two owners. That that is that is not simple when when he told you that really like now we got to assemble both these parcels and

Costa 25:09
he’s as sophisticated investors so we helped him but he did most of it himself. We we encouraged him to go to the corner versus midblock because we know when we are in a corner, the dual entry points. The stop stoplight helps with traffic. So it was definitely the right move.

Ressa 25:35
Excellent. Well, listen, thank you so much for telling stories. Thank you for so much for talking about Bojangles it’s exciting story. Excited to see what you guys can do. I want to take us to the last part of the show. I got three fun questions for you. You ready? Jose?

Costa 25:48
I am ready. All right.

Ressa 25:51
Question one. What extinct retailer Do you wish would come back from the dead?

Costa 25:55
Blockbuster?

Ressa 25:57
Perfect. All right. Question two. What is the last item over $20 You bought in the store?

Costa 26:06
A bottle of wine?

Ressa 26:09
And then the last question if you and I were shopping at Target and I lost you what aisle would I find you in

Costa 26:19
probably baseball cards buying some for my my kids.

Ressa 26:23
Oh my god. So baseball cards are hot right now. So hot. I have I’ve been on the I’ve been on the tab and buying

the buying some of the rookie cards of the quarterbacks of today the mahomes and the and the Herbert’s and Kyler Murray’s and Joe Barrows. I got a few so

Costa 26:44
nice. That’s gonna be a good investment down the road.

Ressa 26:47
I hope so. They’re in my safe. Well, you guys are baseball. Your son your son likes baseball.

Costa 26:57
Yeah, I got three kids. The two boys love baseball and my daughter loves soccer.

Ressa 27:02
Amazing. What’s your guys team? Boston Red Sox. Wow. Boston. Were you were you up in Boston at one point in your career?

Costa 27:13
No. We moved to the Carolinas there is no baseball Major League Baseball here. So he was about five, six years old. And I put all the teams out. And I said Which one do you like and why? And he picked the Red Sox. So we went up to a game last summer and he had a blast. So it’s been fun. And then now recently, we just got an MLS soccer team so so the Charlotte Football Club. We went to a game a few weeks ago and my daughter was in heaven, so it’s fun.

Ressa 27:51
Well, Jose, this has been great. Thank you so much. I really appreciate the time.

Costa 27:55
Thank you, Chris. Nice to see you.

Ressa 27:58
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