San Antonio Express-News (Sunday)
Expanding yet staying just like Texans like it
Whataburger tests recipe for moving into new markets
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, 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.”
The push into the Midwest — and the Southeast — was in the cards when Chicago-based BDT Capital Partners acquired a majority stake in the San Antonio company in 2019.
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. Those restaurants, its first in those states, are not among KMO Burger’s locations.
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.
Whataburger is also adding more locations in existing markets. The company plans to bring a restaurant to metro Atlanta, its first in the area and second in the state, Tomorrow’s News Today reports. Locally, stores at San Antonio International Airport and on the far West Side are in the works for next year.
“This is a big day,” company CEO Ed Nelson said at a press conference at the airport last month. “After 71 years, we finally have a Whataburger at our hometown airport.”
Restaurant industry experts say Whataburger’s expansion to states such as Kansas, Missouri and Tennessee is logical, considering its popularity in the South and with Hispanic customers.
“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 FoodserviceResults, 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.”
The process of opening in a new city involves researching the
market, finding sites, lining up vendors and deciding how ingredients will be brought in, said David Littwitz, a restaurant broker and consultant with Houstonbased Littwitz Investments. Whataburger will be competing with other companies for real estate.
“It takes time,” Littwitz said. “You really want to bring in people from the area ... to help you out.”
The company also will be working to raise awareness of its brand among customers unfamiliar with its thin patties, 5-inch buns and variety of toppings. 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.”
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.
The key is focusing on franchisees, training them and sticking to the standards that have kept customers coming back to Whataburger for decades, Tristano said.
“There are brands that don’t invest enough in prototype stores, in forcing franchisees to update their menu (and) maintain appropriate prices,” he said. “It takes a lot of work to make that happen, and when they do that, normally that’s the sign of a good franchisee that likely won’t fail.”
Juelene Beck, a Miami-based industry consultant who previously worked for Burger King, Dunkin’ Donuts and Sara Lee Corp., said that choosing and training franchisees is crucial.
Culver’s, a popular Midwestern fast-food chain known for its burgers and frozen custard, is an example of a company that’s done a good job of expanding through franchising, Beck said.
Franchise owners and any investors must come up with a minimum of $350,000 in liquid assets to qualify for ownership
and go through a four-month training program, according to Culver's website. The company has more than 800 restaurants in 25 states, and some of its markets are available only to existing franchisees.
“They choose their franchisees unbelievably well,” Beck said. “Most of the other companies are mostly interested in just getting the revenue to the bottom line. Yes, they have their standards, but they really don't look over their potential franchisees the way they should.”
Whataburger is also expanding its presence in customers' closets — and reminding Texans of its devotion to the Lone Star State, where it operates over 80 percent of its more than 840 restaurants.
The company recently launched a clothing line with Academy Sports + Outdoors that includes orange-and-white fishing shirts, boat shorts and hats, available for a limited time at Academy's 106 Texas stores.
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.
Whataburger was named the official burger of the Dallas Cowboys last year as well, a sponsorship deal that means more orange-and-white on the Whataburger Game Day Set at the AT&T Stadium.
“Those things are emotionally connecting consumers and keeping the brand top of mind,” Tristano said.
Texans are proud of being Texan, and Whataburger is homing in on that with these deals, Haskell said. For her out-of-state nephew's birthday, Haskell said, she's likely to buy him a Texasthemed gift, such as a Whataburger shirt, which provides advertising for the company when he wears it.
“It does remind Texans, ‘Hey, we're still loyal to you guys,' ” Haskell said.
Whataburger declined to make any executives available for an interview by press time.
Burger stand to contender
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 had 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 current offices near Jones-Maltsberger Road and U.S. 281 the next year.
The chain is known for 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 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 familyand founder-owner companies.
Many loyalists were incensed, worried that putting 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 hand-wringing has largely quieted and Whataburger's growth plans have begun materializing.
The company, which has more than 50,000 employees, last year announced plans to expand to Missouri and Tennessee. Familyoriented cities such as Kansas
City and tourism hubs such as Nashville are attractive markets for the brand and enable it to introduce itself to more customers, CEO Ed Nelson said in a 2020 interview.
The majority of Whataburger's restaurants are company-owned and that remains the chain's preferred method of expansion, he said.
“Our objective is to balance maybe 80/20, so we will be 80 percent company-owned and 20 percent franchised,” Nelson said.
Whataburger also rolled out new restaurant models and remodels. A prototype for new restaurants features a modern, boxy building with big windows and no A-frame structure, designs introduced to employees several months before the BDT sale.
Technomic ranks Whataburger the 26th-largest U.S. restaurant chain by sales, which reached
$2.7 billion last year.
That's an increase of 5.6 percent from 2019, according to the food service consultancy. The company is outperforming the industry: Sales among the top
500 chains fell 1.9 percent last year and rose 0.3 percent in the burger category.
As customers flocked to drivethrus and delivery apps during the coronavirus pandemic, Whataburger thrived.
The chain closed its dining rooms last spring as the coronavirus pandemic took hold, rolled out curbside pickup and delivery services and began reopening some dining areas in June. It “set record company performance numbers,” according to an April press release announcing over $90 million in bonuses to show appreciation for its employees.
The company also said it would change general managers' titles to “operating partners” and they could earn six figures annually, including bonuses of up to 150 percent of their target incentives. At the time, Whataburger did not respond to questions about the announcement.
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 selfdescribed Whataburger fan.
“This is a slow but steady race.”