Would you like Fries with that?

May 31, 2010

Jay Gould, the president and founder of New York Fries and South St. Burger Co. is profiled in today’s National Post in the Q&A section (FP8). In this article he shares his secrets of success and the insights that were at play when he created the South St. Burger Co. brand. Article is courtesy of Hollie Shaw.3091163bin

After successfully founding Cultures Fresh Food Restaurants and New York Fries, Toronto entrepreneur Jay Gould ventured into premium burgers in 2005 with the opening South Street Burger Co. in Toronto. He opened his 12th store this year — all them in Ontario and Alberta. He spoke with Hollie Shaw about expansion plans and how to stay unique in a crowded category.

Q: What made you decide to get into the burger market? Given the market presence of giants like McDonald’s and specialty players like Licks, it is a pretty competitive category.

A: South St. Burger Co. came about initially as an expansion strategy for the New York Fries brand and as we began to build the concept we quickly realized that this was a much bigger opportunity than merely growing our fry units. We noticed that the premium burger segment was being poorly serviced in Canada, so we set out to create upscale burger experience that stood apart from traditional fastfood burger offerings. NYF was built on the concept of real and fresh ingredients and we wanted that same standard put to our burgers. So, while the burger category is a very crowded one, as you point out, we don’t feel there is strong competition at the higher end. Burgers are the second-most-purchased food item outside the house in North America. And fries are No. 1.

Q: How do you make a unique brand statement?

A: Our mantra is to “Be the Right Choice”–our guiding principle in dictating which ingredients we purchase, our obligation to our community and environment. Our burgers are made with fresh, 100% pure beef patties [with] no preservatives, additives, spice packs or filler. No hormones or antibiotics are given to the cows; and the animals are naturally and conscientiously raised. We use only real cheese for our cheeseburgers and have a selection of four or five different cheeses depending on what is locally available. The mantra [also] extends beyond our food. We recently signed up to have five of our stores Bullfrog powered, we installed a solar electrical system and solar thermal system in two locations, and we have moved into high-efficiency equipment even though the cost is higher upfront. A brand is built, not designed, and we feel these were the right long-term moves for the company.

Q: Was it any easier to secure new business funding given your established track record?

A: Absolutely it makes it easier. As most of our New York Fries units are franchises, the company has not had to rely on raising capital to finance the expansion of the NYF brand. But having a franchised model for NYF has certainly worked in our favour to develop the South St. Burger Co. brand, which are mostly corporately owned. The royalties earned from our NYF franchisees provides a predictable influx of money to the company. Leveraging the cash flow from our New York Fries operations, the company has been able to finance the construction of eleven South St. Burger Co. restaurants, with one more unit [in north Toronto] currently under construction.

Q: Did you plan the venture with the idea of co-branding locations with New York Fries?

A: Pairing New York Fries with South St. Burger Co. was a deliberate strategy. We knew that NYF was an impulse purchase and did very well in mall food court environments, but it wasn’t a strong enough calling card to serve as a destination on the street. Serving it with a premium burger changes the game. South St. Burger is a destination brand, and serves to expose many men, who do not hang out in malls, to New York Fries. Also, with so many burger concepts focusing only on the burgers, and leaving the side orders as a distant afterthought, we knew there was an opportunity to improve the overall gourmet burger experience with the New York Fries quality.

Q: Everybody was hit in some way by the recession, and in your category you offer a premium product. Did the recession hurt sales and profits?

A: We fared well during the recent recession, but I should qualify that the fast food industry as a whole generally does well in tougher times. People tend to trade down from a sit-down experience to a quick-service meal, and though we don’t classify South St. Burger as a “fastfood” play, the same rules applied to us. The recession actually coincided with the hamburger “barbell” phenomenon: Many traditional fast-food burger restaurants went after the value meals and at the same time launched a premium burger offering, so they could offer their customers a meal that suited them. We don’t have a dollar menu list, but we still found that people opting out of their $30 steak dinners were coming to us for lunch. The chain also opened new units within the past 18 months, so we had the benefit of double growth — same-store sales increased in addition to new unit growth. Q What advice would you offer to other entrepreneurs? A Surround yourself with a strong team. Many entrepreneurs are too used to doing everything themselves and have some issues with control. Being able to identify areas that are not your strengths, and hiring strong people will take you from a respected one-person show to a successful and valued company. Also, seek advice from appropriate professionals but don’t let your idea get too watered down–stay focused.

Q: How big would you like South St. Burger Co. to get?

A: In the short term, I would love to see South St. Burger Co. continue to grow within the two markets that we already occupy, [southern Ontario] and Calgary, before we venture into new territories. In my experience, restaurant brands work well when they are developed within a concentrated market first, to leverage the efficiencies of marketing and operations. Expanding into new territories means we need to source a local supplier for our beef, buns, ice cream, etcetera, which takes time and patience. That said, from a brand perspective, we think the concept has a broad appeal [that could grow to] at least 100 units in this country. After that we would consider international expansion, if all our criteria were met.

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