TGI Friday's quick pivot to delivery kickstarts chain's journey towards diversification

Signature Hospitality Group talks to QSR Media about their business continuity strategy.

When the shutdown for restaurants, pubs and other indoor venues was announced on 22 March, Signature Hospitality Group CEO James Sinclair had two main things on his mind that evening: how to temporarily close all its 34 outlets in less than 18 hours, and figuring out how the business can generate revenue when customers aren’t allowed on-premise.

“That required us to really come together quickly. And our leadership team got together immediately on what we have to do just to execute (the closures) for the next day,” Sinclair told QSR Media in an exclusive interview.

Later that night, Sinclair took to his email and put out a “war cry” to their broader team, asking for their top three ideas on generating revenue - likening it to the Marine slogan of having to improvise, adapt and overcome.

Three days later, he received over 100 submissions of ideas from their team on what they would like management to try and do.

“That was overwhelming and really good to get the power of the minds throughout our business,” he said. “And from there, I locked myself into my office for probably about 16 hours straight, and just went through all of them in conjunction with my CFO, and we tried to identify what we thought were the top 15 that would generate the highest return on investment. Once we got that list, we presented that to the group on a large Zoom call.”

The top of the ideas list, albeit an obvious one, was shift to home delivery, starting the group’s quest to be casual dining’s best in providing the service.

The group, which operates TGI Fridays in Australia, admitted its need to pivot quickly and position itself as a premium choice, taking lessons from its counterparts in other markets that were finding success.

“In Australia, home delivery was only 1% of our revenue, which is very different to other markets. In America, for example, pick up and to-go has been 20% of their revenue for years,” Sinclair explained, noting that their U.S. counterparts would likely double their revenue due to the pandemic.

“But for us, coming off a base of 1% that was really quite negligible, (it) required a huge amount of work.”

The group then put the brand on Australian television for the first time ever, spending on ads promoting home delivery, whose riders were their own staff members.

It also put a lot of effort into upgrading their 300,000-strong MyFridays app to easily welcome to-go or pickup orders. Staff were also involved in regular social media promotions to help the group effectively market. Other launches include an online bottle shop for sell beverages at a cheaper price compared to on-premise costs and “Better Days” home meal kits.

“I did [the meal kits] at home with my kids and it was a great fun activity while we're all in isolation. We really enjoyed the team rallying together and executing,” he said.

Whilst not as profitable as on-premise sales, Sinclair says offering delivery and takeaway guaranteed business continuity during this challenging period.

“We were really fortunate and grateful that the government at least gave us that opportunity to continue that as an essential service because it enabled us to retain hundreds of our staff. It enabled us to continue to have something meaningful to talk to our customers and guests with and engage with them throughout the period,” he said.

“It also enabled some continuity with our stakeholders, with our landlords to keep activating our stores to some extent, and with our supply chain, who, like us, are decimated in revenue when every little bit helps to keep the lights on.”

The value of diversification, smaller formats
For Sinclair, the pandemic highlighted why diversification is a good idea for brands and led them to rethink how to utilise their larger spaces moving forward.

“We've typically had quite large spaces and paying very high rents. We need to make sure that we're finding alternative revenue sources to make that as efficient as possible. So I think throughout the pandemic, we've been able to explore those to become more efficient, and it's made us question how we can operate with smaller spaces ongoing and make that work,” he said.

The pandemic, for Sinclair, also accelerated some of the things and trends that they anticipated to happen, such as further digital transformation. TGI Fridays recently launched a contactless tap-to-order technology as a response. Sinclair also sees opportunity in utilising the data for more strategic promotions.

“It removes a huge pain point at the end of the journey for the customer, which has always been paying. I think on average, guests usually wait in a casual dining restaurant between seven and ten minutes to from the minute they decide that they have finished the meal and are ready to leave to paying and leaving,” he explained.

In terms of negotiating with landlords, Sinclair suggested that all parties involved could do regular reviews and monthly reassessments to reach common ground.

“The biggest challenge, of course, is knowing what the future holds,” he said.

“We all need certainty to be able to plan our businesses, and part of the certainty is knowing what our occupancy costs are going to be going into the future. So without having agreement with landlords on that, it makes it more difficult to plan. And conversely from a landlord, it's very hard for them to agree to a concession upfront, when they don't know what the revenue will be.”

Amidst uncertainty, Sinclair is firm with the group’s expansion plans, which he expects to start by August. Of their 13 existing Fridays stores, two will be relocated whilst an additional three interstate venues are planned for construction. He also shared his excitement to reopen the chain’s first QLD site, which was established last year.

Being social amidst social distancing
But what will the new in-store TGI Fridays experience look and feel like? Sinclair said they will endeavour to provide the same feel, albeit meters apart and with even more stringent sanitation.

“There's nothing like the buzz of having a full restaurant with the noise and laughter and excitement. It's more important than ever for our staff to come to work with the Friday's feeling and convey that energy, that welcoming feeling, and give people an experience because we're all social beings,” he said.

“Our tables and settings are generally more generous and bigger than then a normal QSR format. So that naturally does provide a little bit more distance and separation and then the other offerings around us.”

And being social beings, Sinclair predicts a strong demand in on-premise dining once restrictions further lift but whilst anticipating a rise in eating and drinking at home.

“It's not just about fulfilling our hunger, it's fulfilling a social need to get together and, and break bread and restaurants are always going to be key to doing that,” he said.

“Economically, we expect...the next 12 months will be tough. There's going to be some austerity as we rebuild from this shock. So we'll be looking to make sure that, as a brand, we're delivering value to help offset that. Politically, I think this is a real opportunity for us as an industry and as a nation to have a look at what we're doing to really ensure we've got a great business model that works for our society.”