A recipe for success
Two years in, Whataburger’s new owner is riding the chain’s popularity with expansion plans into a handful of new markets
SAN ANTONIO — What do you do when the closest honey butter chicken biscuit, taquito, and mushroom Swiss burger from your favorite orange-and-white chain is hundreds of miles away?
If you’re Patrick Mahomes, you open a Whataburger in your backyard. Maybe even a string of them.
The Kansas City Chiefs quarterback is part of an investor-led franchise group that plans to develop 30 Whataburger restaurants in Kansas and Missouri over the next seven years, including a cluster in Kansas City.
The locations operated by KMO Burger will stretch from Wichita, Kan., to St. Joseph, Mo. The first two, both in Kansas City, are scheduled to open late next year.
“I love Kansas City and I love Whataburger,” said Mahomes, a Tyler native and Texas Tech University star who tweeted at Whataburger to open a Kansas City location in 2018. “I’m excited to help bring a gift from my first home to my second home.”
Since Chicago-based BDT Capital Partners acquired a majority stake in Whataburger in 2019 to expand it, the San Antonio chain has been pushing deeper into the Midwest and Southeast. Construction is underway on restaurants in Overland Park, Kan., and Lee’s Summit and Independence, Mo., Whataburger said last month.
Tennesseans will soon be able to get their fix too. Five restaurants are coming to the Memphis area in 2022 and 2023, and nine to middle Tennessee, including a location in Nashville, according to a company announcement and local media.
In Colorado Springs, longtime franchisee BurgerWorks is opening the first Whataburger restaurant and training center in the state this year, with more locations planned in 2022. BurgerWorks owns and operates nine Whataburger locations in Texas.
Restaurant industry experts say Whataburger’s expansion to states such as Kansas, Missouri and Tennessee is logical, considering the chain’s popularity in the South.
“That will allow them to deal with consumers whose taste preferences they are comfortable with as well as be able to get to people who are aware of the Whataburger brand,” said Darren Tristano, CEO of Foodservice Results, a Chicago research and consulting firm.
The new restaurants’ proximity to vendors that supply beef, vegetables and other ingredients is also a consideration in determining where new locations will be, said Reba Haskell, a lecturer at the University of Houston’s Conrad N. Hilton College of Hotel and Restaurant Management.
“It’s not just about, ‘Oh, this is a great location for a Whataburger,’” said Haskell, who has had Whataburger executives visit her classes. “(They’ve) got to make sure that they can still uphold the Whataburger brand standards with the support that other Whataburgers have.”
After BDT Capital purchased the majority stake, the company started franchising again after a 20-year pause. It’s a faster and less expensive route than opening company-owned stores, but it also leaves corporations with less control over the brand, analysts said. The key is focusing on franchisees, training them
and sticking to the standards that have kept customers coming back to Whataburger for decades.
The process of opening in a new city involves researching the market, finding sites, lining up vendors, deciding how ingredients will be brought in, and finding the right locations, said David Littwitz, a restaurant broker and consultant with Houston-based Littwitz Investments. That’s why local knowledge and partners are important. Enter Mahomes.
“Who better to use in the Kansas City area right now?” Littwitz said. “I think every business up there would want to have Patrick Mahomes associated with their business on a positive basis.”
‘What a burger!’
Harmon Dobson and Paul Burton started Whataburger in 1950 in Corpus Christi.
Their goal, 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!’ ”
Whataburger steadily expanded and opened more than 200 restaurants in 12 states by the 1970s.
The chain then added its first drive-thru, put taquitos and Whatachick’n on the menu, and began operating some locations around the clock. The 400th Whataburger opened in 1987, and it reported its first $1 million sales day in 1994, according to the company.
Whataburger reached 500 restaurants in 1995 and $500 million in sales chain-wide in 1998. The Texas Legislature recognized the company as a state treasure in 2001.
By 2008, the company had outgrown its Corpus Christi headquarters and executives were concerned about hurricane damage. Whataburger moved to its offices to San Antonio the
“I love Kansas City and I love Whataburger. I’m excited to help bring a gift from my first home to my second home.”
Chiefs QB Patrick Mahomes, a Tyler native and Texas Tech alum
next year.
The chain is known for its quality and customer service, and has cultivated a devoted customer base. Whataburger donates to local causes, sponsors events and has garnered more than 2.1 million page likes on its Facebook page and 1.2 million Twitter followers with its casual, conversational tone. Customers host birthdays, engagement photo shoots and even weddings at its restaurants.
Major players in the burger category have taken notice.
“In-N-Out and Whataburger are two companies that I know internally McDonald’s has been concerned about,” Beck said. “They see what their average unit volume is and how popular they are.”
The Dobson family had built Whataburger into a flourishing company with over 800 restaurants by 2019, when they announced they were selling a majority stake to BDT Capital to expand the chain. The firm, led by Goldman Sachs veterans and Warren Buffett adviser Byron Trott, advises and invests in family- and founder-owner companies.
Many loyalists were incensed, worried that putting their beloved Whataburger in the hands of a Northern private equity firm would change the quality and customer service the chain is known for.
Whataburger rushed to reassure them.
“Texas, we don’t want you to be upset,” the chain tweeted. “We will always be Texan and represent you in a way that makes you proud.”
Since then, the handwringing has largely stopped as Whataburger’s growth plans materialized.
Slow, steady race
The company, which has more than 50,000 employees, last year announced plans to expand to Missouri and Tennessee. Whataburger rolled out new restaurant models and remodels.
The company also launched a clothing line that includes orange-and-white fishing shirts, boat shorts and hats with the Katy retailer Academy Sports + Outdoors . Shoppers who spend $20 or more on the collection get a Whataburger and Magellan Outdoors table tent, an homage to the table tents with order numbers that are regularly stolen from Whataburger restaurants.
The majority of Whataburger’s restaurants are company-owned and that remains the chain’s preferred method of expansion, CEO Ed Nelson said in a 2020 interview. “Our objective is to balance maybe 80/20, so we will be 80 percent company-owned and 20 percent franchised.
Whataburger thrived during the pandemic as customers flocked to drive-thrus and delivery apps during the coronavirus pandemic. When the pandemic forced the company to close its dining rooms in the spring of 2020, it rolled out curbside pickup and delivery services, generating strong sales. The company announced more than $90 million in bonuses for its employees.
The company also said it would change general managers’ titles to “operating partners” and that they could earn six figures annually.
Technomic ranks Whataburger the 26th-largest U.S. restaurant chain by sales, which reached $2.7 billion last year, up 5.6 percent from 2019. The company is outperforming the industry: Sales among the top 500 chains fell 1.9 percent last year.
Coming into new markets is difficult initially because it takes time to establish a “critical mass” of restaurants, educate customers on a brand and differentiate from competitors with deep roots, the industry experts said.
“For every person who’s out there who is familiar with Whataburger, there’s 10 people who go, ‘Oh, goody, another hamburger joint.’ They could care less ... and you have to somehow get their attention,” said Littwitz, a self-described Whataburger fan. “This is a slow but steady race.”