Knowledge Partners 09087 II Recently we described how Saladworks, the innovative Conshohocken, Pennsylvania-based restaurant chain, took the opportunity to invest in point-of-sale software and new cash-management practices while positioning the company for success in today’s challenging economy.

In addition to implementing on-demand solutions that streamline everything from inventory management to shift scheduling, Saladworks is cutting back on certain areas of spending and applying those savings to other, more promising areas.

Redirecting the Cash Flow

In the current recession, according to Saladworks founder and CEO John Scardapane, “We stopped spending cash on expansion and focused more on unit economics. The marketing we were doing to drive sales to the unit level was good in a good economy, but it wasn't strong enough in a bad economy. So we asked franchisees and company stores to redirect their unit marketing to the brand fund marketing.”

Today, three percent of net sales from each franchise go toward marketing the brand. This is up from two percent in past years.

Saladworks used the new funds flowing in from stores to make TV commercials for the first time in the chain’s history. “It was a little bit of a struggle for the mangers,” said Scardapane. When we broke the news it was rough for a couple weeks, but then, at our national convention, we showed them what the ROI would be” on the advertising spend. After that, he said, the managers were ok with the plan. And when they saw the results, they were delighted.

“We decided to run three flights,” recalled Scardapane. “One in the spring, one in the summer, one in the fall.” Before the TV ads, Q1 sales were trending 12 percent negative compared to the previous year. “After the ads ran we were running just under one percent positive,” said Scardapane. “All we needed a two percent jump in growth to pay for the ads.” Today, he says, average unit sales are going up.

Motivation at the Store level

Saladworks also invested in researching and value-engineering its build-out costs – with outstanding results, according to Scardapane: “We lowered build-out costs. We were at $650,000, now we're at $550,000 per unit per build-out.”

In addition to saving cash, Scardapane said he expects to see continued growth as unit volumes increase. “As the brand becomes known,” said Scardapane, “we expect sales to go higher.”

Another area where Saladworks is investing more money: mystery shopping. “We used to have them come two times a month per store,” said Scardapane. “We changed it to four times a week per store. This really motives everyone at the store level.”

The commitment to unit economics seems to be attracting a new group of franchise prospects. According to Scardapane, “We grew traditionally with mom and pops, one store at a time. Now we have investors who come in, see our numbers and buy 15 or 20 stores at a time.”