As we wind down our Conversations series from Chicago (one more to go), Dave’s Hot Chicken CEO Jim Bitticks dropped by to discuss everything from viral product launches to why speed isn’t necessarily king anymore in QSR. Bitticks, formerly COO and president, elevated to the top spot at the emerging chain in January.
CHECK OUT THE OTHER SEVEN CONVERSATIONS HERE AND HERE AND HERE AND HERE AND HERE AND HERE AND HERE
Here was our conversation.
Let’s start with an innovation you think is really helping restaurants.
What you’re seeing happen throughout the entire industry is everyone is coming out with food ideas, more and more heavily. Five years ago, for us, we were saying we were just hot chicken, tenders, and sliders, and we weren’t going to do anything. And then, the reality of the actual sales performance hit and you’re like, OK, what can we do?
So, we started repackaging existing products. We came out with a single slider and fries. The very first thing we did was add shakes. That added a couple of points. We did a Hot Box, which is like Raising Cane’s Tailgater, but Dave’s style. That added 2 points to sales. Then, all of sudden, you start to see it. Even without adding new SKUs, or new actual items—we didn’t add pastrami or anything—it drove new use occasions. It drove sales.
Then, we added Bites, which are chicken nuggets. Our Bites sales are up to 14 percent of total mix with all the things they’re in and on. We started looking at it and realizing there was stuff here. Everybody is seeing that. It’s why the Big Arch Burger [was a hit]. Or Chipotle’s Honey Chicken. All the different proteins.
Now, it’s a wave, every quarter, where brands are trying new stuff. And the big hot thing everybody is talking about is drink innovation.
It’s helped us. We did a bunch of innovation, including slushies. We were at 52 percent drink attachment, which was up 15 points. That’s real sales.
We just launched this product called Hot Mozz. It’s fried Mozzarella cheese where you break it and get this cheese pull. Chili’s was the inspiration for it. They borrowed Nashville hot for their links, which is what made it pop up on our feed.
One of our marketing VPs said, “we should try this.” We tried it. We made it in-house. My product development guy made it in his own home. It was delicious. And then we went out and found a manufacturer. We started the journey about a year and a half ago.
It flipped us from negative 9 to positive 30 in three days. (Comps).
That got such engagement. It was a big activation. The cheese pull turned into a huge thing. And we’re comping up a couple of points now as it’s settled in. We actually ran out. We ran out of two months of product in two weeks. We underestimated it.
I took over as CEO in January. Former CEO Bill Phelps calls me about a week in, and he’s always the guy who’s not as willing to try new products. He calls and goes, “congratulations, you achieved one of the great achievements in marketing—product shortages because you blew the doors off.” That’s the Holy Grail. You love when that happens.
We were out for a month. Cheese takes 21 days to make. But there was not even enough. We couldn’t have even switched to making it in-house. It was crazy.
It came back about a month and a half ago (two-plus months now). It’s kept us positive in sales.
Next question. Let’s flip to something you’re not as bullish on, innovation wise.
AI in restaurants and what that means. Everyone has asked us what we’re using AI for. My response: responding to guests. It’s helpful, but it also … do you fly a lot?
Not really …
But do you ever fly American Airlines? I’m not a fan. I don’t want to feel that way but they’re the worst. And then when you want a refund or you have to call, they send you through their AI bot. I just want to scream. There are brands using AI to respond to drive-thru orders. I hate that. I hate AI on the phone. Even to take an order. So, what are we going to it for?
I keep seeing all these vision AI companies saying, “well, this can help you speed up your restaurants.” I actually don’t want my restaurants to go faster. When I was 15 years old, I started in the restaurant. And when your managers put pressure on speed, you as a 15-year-old kid, you just cook more food. You put two baskets down instead of one. I only need one, but I’m going to use two. It might be 20 minutes from now.
As those guys try to sell me on the idea of speed of service, I don’t want it. I want something that helps me with order accuracy. If your cameras can tell me that order is missing a fry, or at the very least it’s missing one item—that’s what I want. I don’t want it to tell me we’re going too slow. I don’t believe that is what fixes your sales. I think it actually hurts them, when you put pressure on speed.
I believe we think, and it’s based on what QSR is supposed to be, that speed is super important to the customer. And it’s changed over time because now, even my CFO, and I’m a franchisee of Dave’s, so he’s my business partner in the franchise, when we opened our first store and it’s a drive-thru, he was giving me all this pressure. I’m in charge of ops for the franchise. He’s in charge of finance. And we have a guy in charge of development. We have four stores. We’re going to open our fifth in June.
I was telling our CFO, it’s not 1999. Nobody is going through a drive-thru because they’re in a hurry. If they’re in a hurry, they’re mobile ordering. Starbucks flipped the script on speed when they launched the app and you loaded it, instead of waiting in line, and went in and grabbed your stuff. It changed the entire game.
So, when people are using drive-thru, they’re not using it for speed. They are using it for convenience—they don’t want to get out of the car. But they’re not necessarily using it for speed the way we used to 20 years ago.
When we opened our first location, I was out with a digital pad, taking orders. [The CFO] was, too. You tell people there’s no waiting inside. I had a line, I’m not kidding, of 40 cars.
You’d tell people there’s no waiting inside and they’d respond, it’s cool, and sit there watching TikTok. They didn’t want to get out of their car.
The speed thing isn’t as important to people as it once was. I’m not trying to make the experience slow, it’s just not as vital.
Accuracy and quality are key. Quality can be, does it taste good? Is it what I expected?
The other thing about speed, if you think about it, TV shows like Game of Thrones, where they’d do a season and then two years later, they’d bring out the next one. We all now wait for it. The moment it drops, you binge watch. You don’t lose a beat. Or you wait five years to get a Cyber Truck. People will wait for clothing drops, like shoes.
I don’t know. I don’t think it’s as pressing as it was. If you do want something fast, you mobile order or you have it delivered and you don’t even leave the office. So, it doesn’t matter.
OK, third question. Let’s get into the rise (or not rise) of the impact of GLP-1s.
I was thinking about GLP-1s about a year ago when sales started to turn a little negative. Period 8 last year—it’s always a little bit negative—but we were thinking it was going to bounce up. But then Period 9 came and it didn’t. And period 10 arrived and it didn’t. We got a little bit of a bounce from a product we launched, but it went right back down.
So, we started talking internally: is this an Ozempic effect? Is this changing consumers’ tastes and preferences, or their habits? We pulled some research. We talked to a Coke economist, Carlos Herrera. And everyone was saying they weren’t seeing anything in data that said it was diminishing sales in restaurants.
Somebody said they observed it in Wal-Mart and Target and grocery, 2 points down, because people weren’t eating as much.
I’m not sure. In the last four years, I lost 70 pounds. I lost 50 pounds doing intermittent fasting and I lost the last 20 doing Wegovy. It didn’t reduce the amount of food I ordered. I’m one of those guys, especially if I’m not paying, where I say, “let’s order all the appetizers. Let’s try everything.”
I really like trying everything. For example, Chili’s threw all this shade at us because we did their Hot Mozz links. Imitation is the sincerest form of flattery. We respect their success. We were talking internally about whether we’d respond on social or say something snarky back. My thought was, when they were saying, “when this guy named Dave’s stole the idea for Mozzarella,” or something like that. And I was like, “when this guy named Chili’s stole the idea for Nashville Hot.” That’s what it was. It’s the only reason we even ever saw it.
After we launched the product, I went into a Chili’s and tried it again. And by the way, Chili’s, it’s not just their Mozz or Triple Dipper. The Chili’s I went into was clean. It had really good service. The people were attentive. They filled up my drink quickly. It was good. They’ve done some work here beside products. We have a lot of respect for them.
I tried the Chipotle Honey product and thought, this will be good with Hot Honey (on the Dave’s menu now).
You’re going to see us launch a product similar to Triple Dipper. It’s called the Dave’s Big Trio.
When customers have a lot of options like that, I think they order more. And if you’re on GLP-1s, what’s great is you can eat it. You just get full faster. I hate to be wrong two years from now, but, if anything, I feel like people will look at it like a magic bullet where they can eat whatever and they’ll be fine. We’ll see what happens.
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