Whataburger CEO sees opportunities beyond Texas
SAN ANTONIO — In his first interview since being promoted to CEO of Whataburger, Ed Nelson discussed the San Antonio company’s expansion plans and how the coronavirus pandemic has affected operations.
Nelson joined the company in 2004. Under his leadership, Whataburger has launched curbside and delivery service across the 10 states in which it operates, introduced three new burgers on a limited-time basis, built seven restaurants with more planned by year’s end, introduced new restaurant designs and announced plans to start franchising again.
Here’s an edited transcript of our interview with Nelson.
Q: We can see how the pandemic has affected restaurant service. How has it impacted the corporate operations at Whataburger?
A: In the restaurants, the (managers) know the customers. They know their names — the regulars — they hear their voices in the drive-thru and go, “Hey, Jim, you want your regular today?” As soon as they say something, there’s a bond and an engagement that the Whataburger family member builds with our customers, and you
feel it. I felt that when I came here.
(The COVID-19 pandemic) has been hard for us because you don’t get to walk down the hall or run into somebody coming in the building and just walk around and experience the friendliness and engagement. You do on calls, but it’s not the same.
Q: The number of new restaurants you’re planning to open in the near future seems like a more aggressive pace than in the past.
A: It’s just a change in the way that we look at the brand versus how former ownership looked at it. The Dobson family was a phenomenal owner of this brand. We’re here to protect their legacy.
It’s time for Whataburger to go to the next level as a regional and then as a multiregional brand. That’s the reasoning for the growth.
The Dobson family always had a strategy of growth, but again, we just see that there’s opportunity now. That’s one of the reasons that the Dobson family, I believe, looked for another investor.
They found a great investor with BDT. It was aligned with their values and culture and enabled the brand and the leadership the Dobson family put in place to take it to the level and the vision that they always had for it.
Q: Whataburger is beginning franchising for the first time in almost 20 years. How does that factor into the expansion strategy, and why is that the preferred method?
A: Franchising is not the preferred method. Our preferred method is company store growth.
Our brand is 86 percent company-owned, 14 percent franchise-owned. Our objective is to balance maybe 80/20, so we will be 80 percent companyowned and 20 percent franchised.
It’s just an optimization strategy. There are certain markets and areas I can put so many stores in, but I need market penetration. Having a really good franchise operator putting stores out there at the same time I’m putting stores out there can allow better penetration for those markets, better supply-chain optimization, better models to attract the right leadership from a company perspective and even help the franchisees optimize their models.
Q: There’s obviously a difference between a family-owned company and a company owned by an investment firm. What changes have occurred in terms of management and culture?
A: We have a leadership team that has been here for basically 10 to 20 years. The same faces that were here before the transaction are here after the transaction. We’ve got the same leadership team.
We’re a close leadership team, very collaborative. We were that way before the transaction. We’re still that way. We’ve worked really hard as a leadership team to set objectives and goals that we framed with our board.
What’s changed is the fact that, as the brand grows, the more stores we put on the ground, the more general managers we’re going to need. We’re hiring a lot of people in our restaurants right now.
What’s changed is the brand is actually growing and providing opportunities for people, whereas before, we were growing five to six stores a year so we didn’t have that many job opportunities for people.
Q: At some point, would another sale or an initial public offering be a possibility?
A: It’s going to take the leadership team and myself some time to grow the brand and keep growing the brand to get to where we see the opportunity for Whataburger, and there’ll be points in time where
I’m sure people want to look at that.
All the leadership team is doing right now is focusing on the growth of the brand: new units, growing our average unit volume and partnering with some new franchisees.
We’ll assess every year and see what our opportunities are to continue to grow. I don’t have an answer on the IPO or the transaction because right now we’re focused on growth.
Q: How has the coronavirus pandemic affected operations?
A: We’ve taken a crisis and found something really good about a restaurant company, at least for corporate, being able to work and not be in the same office building all the time. But we do miss our culture some. We miss the friendliness and camaraderie of being here.
Prior to (the pandemic), the longest our crisis command center had been open was 31 days. We would open it for a hurricane or a flood, work through that situation and close it once everything got back to normal. We’re in our 130-plus day (due to the pandemic) and we still don’t see the end.
Q: What about the decision to close for in-store dining?
A: (That) was tough for us because a big part of our business came through our dining room. The rest came through drive-thru. We turned on delivery and curbside pickup to be able to give our customers ways to replace the dining room, for them to feel good about at least having us bring it out to them versus getting in a long drive-thru line.
We’ve also been able to optimize our drive-thru speed to allow our customers to feel good about, “If I’m going to get in a long drive-thru line, Whataburger’s going to be faster than it used to be.”
Q: Have you furloughed or laid off workers during the pandemic?
A: We’ve been hiring in our stores and we haven’t cut hours in our stores.
In corporate, we have had to optimize our support model as things have changed. We have done some downsizing and furloughs, but we’ve been able to bring a large number of furloughed people back.
Q: What lasting changes do you foresee as a result of the pandemic?
A: We see that there will be more working from home in corporate America because of it. We think customers want curbside and delivery. That’s something Whataburger didn’t do, but I believe customers are telling us they want it, so we will be keeping delivery and curbside.
When we get to the other side of the pandemic, whenever it is, then we’ll look at dining room sizes and drive-thrus versus dining room transactions and see if things need to change.