BEYOND MEAT
One year into new ownership, Texas’ beloved burger chain prepares for new look, new turf
Whataburger has built a devoted following over the past 70 years, and while it operates more than 800 restaurants across 10 states, it holds a special place in the hearts of many Texans. The state is home to the bulk of the burger chain’s locations.
So loyalists were stunned when they learned in June 2019 that Chicagobased BDT Capital Partners was acquiring a majority stake in the familyowned business.
The firm, started by former Goldman Sachs banker and Warren Buffett adviser Byron Trott, advises and invests in family- and founder-owned businesses. It has raised multiple billion-dollar funds, and its investments include coffee pod maker Keurig Green Mountain Inc. and whiskey distiller WhistlePig. The firm also has consulted on deals involving Mars Inc. and Walmart Inc., according to Bloomberg.
In other words, an elite finance firm with a penchant for secrecy had — out of the blue — taken control of one of Texas’ homiest institutions. Some fans erupted over what they saw as a sellout to a Northern interloper. Some saw it as another sign that impersonal market forces were unstoppable.
Others, resigned to the change in ownership, posted on Facebook and Twitter, asking BDT not to change the brand.
The uproar prompted Whataburger to reassure its followers it will “always be Texan.”
The announcement that set off all the angst stated Whataburger’s founders, the Dobson family, would keep a minority position in the company and the parties would “begin exploring expansion plans.”
The decision was “both exciting and bittersweet,” Tom Dobson said. Just a year later, the fuss has largely died down. And the first inklings of BDT’s strategy have emerged. After years of slow, steady growth, Whataburger is getting aggressive. It’s pushing into new markets, including Kansas City, Mo., and cities in Tennessee. To hasten its expansion, the chain is franchising again for the first time in nearly two decades. Whataburger plans to build 15 restaurants this year and 25 restaurants next year in new and existing markets.
Whataburger is undergoing a face-lift and business initiatives since its takeover by a Chicago equity firm. The San Antonio-based burger chain celebrates its 70th anniversary this year.
The Dobson family knew how strong the Whataburger brand was and recognized the opportunity to expand it, said Ed Nelson, who joined Whataburger in 2004 and was promoted to CEO this month.
“We’re here to protect their legacy,” he said. “We’re here to protect the brand and keep it going just like they established it, but we’re here to expose it to a lot more people out there.” When BDT came into the picture, then-President and CEO Preston Atkinson and board Chair Tom Dobson stepped aside from daily operations to focus on operating Las Aguilas, an investment company launched by the Dobson family in 2011 that focuses on real estate and philanthropy. Both remain on Whataburger’s board.
“It’s time for Whataburger to go to the next level as a regional, and then as a multiregional, brand,” Nelson said. “That’s the reasoning for the growth.” Family-oriented communities such as Kansas City are attractive to the brand, and Nashville, Tenn., is a growing city that draws plenty of tourists, exposing visitors in the country music capital to Whataburger as the chain expands east, Nelson said. The company also is introducing new restaurant models and remodels with LED lighting and energy-efficient heating and cooling units.
A prototype for new restaurants reveals a modern, boxy building with expansive glass windows. The chain’s distinct A-frame structure is gone, though renderings include an homage to the company’s architectural signature over the new restaurants’ entrance.
“It’s not an exit from the Aframe,” Nelson said. “It’s more of
making it relevant to today. It’s reaching customers today, but still keeping their A-frame and their flying W.”
The design was introduced at Whataburger’s convention last year, several months before the BDT sale, and unveiled to the public this summer.
Pockets of die-hard fans have thrown fits over the new look.
“@Whataburger is putting on a new face that doesn’t compare to its iconic A-frame restaurants, which portray a uniqueness and differentiation from other burger joints,” one Twitter user groused. “Maybe more modern, but it diminishes the appeal and brand equity the company commands from the curb.”
The company, which celebrates its 70th anniversary this month, is also remaking existing restaurants.
Kitchens have been designed to make the food preparation faster and more efficient. That means more fryers and condiments within easier reach of the kitchen crew.
The company’s challenge, industry consultants and branding experts said, is keeping its fans happy while luring new customers and differentiating itself from the competitors in new markets.
It also has to adapt to customers’ changing tastes.
Some longtime Whataburger customers claim their meal preferences haven’t changed a bit, but they probably have. Take the chain’s spicy ketchup: Some diners couldn’t fathom not having it with their fries, but it’s only been around since 2011, when it was introduced as a limited-time offer.
And then there’s the coronavirus pandemic.
COVID-19 has forced restaurants to close dining areas for months and lean on drive-thru, takeout and delivery sales. Whataburger shut down its dining rooms in March, and later rolled out curbside pickup and delivery services. It began reopening some of its dining rooms in June. About half are currently open.
Despite the closures, Whataburger has set multiple weekly sales records during the pandemic, resulting in same-store sales gains in the second quarter.
“(Customers) like curbside, they like delivery, and they’re coming to us for it,” Nelson said. “They like the touchless aspect of it.”
Whatahistory
Harmon Dobson and Paul Burton founded Whataburger in 1950 in Corpus Christi.
The idea, according to a company history, was “to serve a burger so big that it took two hands to hold, and so good that after a single bite customers couldn't help but exclaim, ‘What a burger!’”
By 1960, Whataburger had opened 17 restaurants in Texas, Florida and Tennessee and it built its first A-frame restaurant not long after. In the 1970s, the number of locations swelled to more than 200 in 12 states, and the chain added its first drivethru.
The company also put jalapeños and onion rings on the menu. The following decade, the chain started operating some locations around the clock. Those features set Whataburger apart early on, said Lane Cardwell, president of Dallas-based Cardwell Hospitality Advisory.
“I think it changed the way people saw them,” he said. “It was kind of a burger-ized Denny’s. You could go any time of night and get any type of food.”
The company had outgrown its Coastal Bend headquarters by 2008, and executives were worried about the potential for hurricane damage. Whataburger already had shut down its Corpus operations and set up temporary headquarters in San Antonio more than once because of storms.
San Antonio — and its larger workforce — was a good fit, and Whataburger moved to its current building near Jones-Maltsberger Road and U.S. 281 in 2009.
All about quality
Restaurant industry consultants said the chain’s connection to its followers sets it apart from other fast-food options, as does the size and quality of Whataburger’s fare, its made-to-order meals and variety of toppings, and its customer service.
“It’s a very strong brand. It’s amazing how many locations they’ve been able to do successfully,” said Larry Reinstein, the Dallas-based president of LJR Hospitality Ventures, which works with restaurant owners and operators. “It’s very logical that they grow.”
Burgers are a large — and competitive — segment of the restaurant industry, crowded with multinational companies such as McDonald’s, regional brands like Culver’s and fast-casual concepts like Shake Shack.
“To play in the burger category, you need to have a phenomenal product,” said David Henkes, a senior principal at food service consultancy Technomic.
The firm ranks Whataburger the 30th-largest U.S. restaurant chain by sales, which totaled about $2.5 billion last year. Sales at its locations were up 5.8 percent, compared with a 4.1 percent increase across the burger category.
“It was a pretty good year for them,” Henkes said. “They’re outperforming the broader industry.”
As the company grows, its primary task is to hold onto its loyal fan base while figuring out how to differentiate itself from rivals in new areas.
“Part of it is don’t lose sight of your core business,” Henkes said. “While you’re expanding into new markets, you’re facing all of these competitors with great products, and part of it is what you’re doing to differentiate yourself.
“You need to (expand) deliberately. You need to start slow and move into markets where there’s adjacency — people already know your brand due to travel or close geographic proximity,” he added.
Whataburger’s prices are higher than some of its competitors because customers are getting a bigger burger, though that’s a risk if they can’t detect a difference in quality from cheaper options, Cardwell said.
“Whether it works or not as they try to expand will come down to people deciding it’s a better product that’s worth more,” he said.
Along with where Whataburger builds its restaurants, the caliber of the franchisees the company chooses is crucial to its success. Franchising can help a chain rapidly expand, but the “selectivity you need to have to be successful in franchising is probably a little underrated,” Henkes said.
Reinstein, the Dallas consultant, agreed.
“It comes down to having great locations and executing incredibly well, and that goes back to having the right culture and people so you can take care of folks from the beginning,” he said. “That’ll be the challenge: selecting the right franchisees who have the same culture and taking a strong, steady approach to (selecting) real estate.”
“We’re here to protect the brand and keep it going just like (the Dobsons) established it, but we’re here to expose it to a lot more people out there.” Whataburger CEO Ed Nelson