Memphis part of Krystal’s rebound strategy

The new head of tiny-hamburger restaurant Krystal has big plans to boost sales, and Memphis is in the middle of them.

“This is one of our focus markets,” president and chief executive Paul Macaluso said this week while inspecting Memphis’ newest Krystal.

The airy, stone-and-glass building on South Germantown Parkway across from Shelby Farms is the 19th Krystal in the Memphis TV-ad market. Within a few years, the Memphis region should have 23 Krystals. About half of the 10 restaurants in the immediate Memphis area will be new, Macaluoa said.

“We’re doing a big refresh effort,” said the 48-year-old veteran executive of such chains as Taco Bell, Sonic Drive-In, Burger King, Moe’s Southwest Grill and McAlister’s.

On April 2 he took the reins of Krystal as its third president in four years. Krystal had shrunk and experienced declining sales the past two years while the fast-food industry as a whole grew a modest 1 percent.

Krystal now has 364 restaurants in 11 Southeastern states, and more than half are over 30 years old.

“It makes it hard to keep them clean,” Macaluso said. That’s significant in part because the name of the 86-year-old chain was meant to reflect crystal-clean restaurants.

Krystal plans to demolish and rebuild 50 restaurants, including six in the Memphis market.

The Cordova restaurant is a new site, but the first scrape-and-rebuild here will be in Whitehaven at 4395 Elvis Presley. That old restaurant building was closed recently, and demolition will start soon.

“It helps the whole image of Krystal in Memphis,” Macaluso said. “Of all the

markets, Memphis will be the most modern.”

The 19 Krystals in the region employ about 600, but by the time the new ones are built about 700 people will work at Memphis-area Krystals, he said. The extra employment results not just from new restaurants, but from the increase in sales volume that they generate, Macaluso said.

Snapshot

Macaluso stood in front of the company’s new Cordova restaurant to snap a photo with his phone.

The building of tall glass windows and stacked stone at 206 S. Germantown Parkway is just a few months old and incorporates two drive-thru lanes instead of one, a more efficient kitchen, 20-30 fewer table seats and other components of Krystal’s new strategy for a turnaround.

But while the building is just the fourth of its type, it’s also the last. Macaluso already has tweaked and adjusted the previous prototype since he took over.

The latest design overseen by Macaluso will be incorporated in the new Whitehaven building. That structure won’t have the expensive glass clock tower that the new Cordova building has. Macaluso will take the savings to invest in the interior. The newest design also will feature Krystal’s classic exterior gray paint.

Three-pronged strategy

The new facilities are just one of three parts of Macaluso’s plan for a Krystal revival.

Another is marketing. “We had gotten stale in our marketing effort,” he said. Krystal will start using more digital-based marketing instead of traditional platforms.

A big part of the marketing plan is Krystal’s $2, $3 and $4 value meals: $2 gets two of Krystal’s famously square burgers and a small order of fries; $3 buys three Krystals, fries and a drink; and $4 buys three Krystals, Chik Nuggets, fries and a drink.

The $2, $3, $4 promotion has put a charge in sales, Macaluso said. “Especially as the economy tightens and as competitors get more creative and smart as they do value” meals.

“It’s definitely changed our trajectory.”

Better operations is the third component of his turn-around strategy. Much of that involves retaining and recruiting employees.

“One of the things we’re doing now, we’re trying to make people proud to work here,” he said. The company next week will announce its new Square Scholarships that will be offered to employees to pursue post-high school education.

The company is also pushing its Future Leaders program, which offers a path to advance from the kitchen or counter up the Krystal career ladder.

“We talk about what can we do to hire people and find talent,” Macaluso said. “But it’s first, what can we do to keep people. That’s a core focus of ours.”