DOGGED APPROACH
James Coney Island enters its second century with a new name, new strategy
When James Coney Island was founded in 1923, there was no McDonald’s, no Whataburger, no Burger King.
There was only a hot dog stand in downtown Houston run by two brothers, both Greek immigrants. Now, that stand is gone, along with all of the chain’s locations within the Inner Loop.
Over the past four years, the company, recently rebranded as JCI Grill, has cut its number of locations in half as the pandemic, remote work and demographic shifts have made the Houston area a much different landscape for a fast food restaurant in 2023 than it was 100 years ago.
But while drivers may take the large “closed” signs on Westheimer Road and South Shepherd Drive as signs of weakness, JCI President Darrin Straughan says it’s all part of a plan. In the past decade, the local chain has changed names, switched up its menu and shifted its strategy toward the suburbs to make sure the century-old Houston institution will be around for several years to come.
After starting as a hot dog stand in downtown Houston in 1923, James Coney Island began expanding the 1960s, growing to as many as 21 locations in Texas. In 1990, the family of the founders sold the company to six local investors who have kept the privately-owned business running for the past 33 years. Straughan has been president of the firm for 29 of those years.
But as James Coney Island neared the end of its first century, it was already confronting two major problems: an aging customer base and rising occupancy costs at its urban locations, Straughan said.
The first step they took was rebranding to JCI Grill in 2013 to highlight to younger consumers that the chain sells more than just hot dogs. While JCI has kept its legacy menu of classic Coney hot dogs, it’s also now offers Greek salads, Chicago-style hot dogs and several other offerings.
The initiative was successful in increasing JCI’s dinner business and the average amount of money each customer was sending, according to Straughan.
But by 2018, the cost of property taxes and insurance at some of JCI’s more urban locations had also become overwhelming, and sales at those locations weren’t enough to cover it, he said. According to the Harris Central Appraisal District, the former JCI Grill on South Shepherd Drive was worth $1.3 million in early 2022, and the former Westheimer location more than $2 million.
“Those are very expensive pieces of property, and we’re selling hot dogs on it. Kind of hard to maintain,” Straughan said.
The situation became a “survival of the fittest,” he said, with the company keeping locations that were profitable and easy to maintain while selling the others for capital JCI could use to pay down debt and open new stores in better suited locations.
So in 2018, the company sold three locations Straughan said were expensive and underperforming.
Then the pandemic hit. JCI was forced to put the strategy on pause while it focused on adapting its restaurants to the changed business landscape that came with COVID-19.
In the second year of the pandemic, JCI sold nine more of the 15 stores it had left, all also “underperforming,” in Straughan’s words, though the company continues to lease and operate three of them while the buyers looks for new tenants, he said. When that happens, JCI Grill will be left with just six of its
original stores. It’s workforce, which stood at about 400 in 2018, has dropped to a little over 200, Straughan said, though all employees at closed locations were given an offer to stay with the company.
Though JCI is private and does not disclose financial information, Straughan said that while the company remains in a strong financial position, increased costs have taken a toll on the chain’s profit margins.
Shifting landscape
At the six JCI Grill locations the company still owns and operates, Straughan said sales have been steadily increasing as business has become less spread out. The Meyerland store's sales were up 37 percent year over year last December. The three leased locations — one in Pasadena, one on I-45 in north Houston and one on I-10 in east Houston — will close as soon as a new tenant moves in.
JCI’s current state may not look as pretty, and certainly isn’t as comfortable as it was prior to 2018, Straughan said. But he believes the strategic decision to cut down on locations has helped JCI become a stronger company than it was during the pandemic, and will help facilitate new growth.
The next generation of JCI Grills will find their homes in suburbs — Katy, Fulshear, CyFair and The Woodlands are just a few places where JCI is actively searching for new locations, according to Straughan. Those new locations will also be much smaller— 1,800 to 2,000 square feet compared to Westheimer, which was almost 6,000, he said.
While JCI Grill’s pivot may seem dramatic, its actions mirror several ongoing trends in the fast food industry, according to Jean Chick, principal and U.S. restaurant and food service leader for Deloitte.
“Across the U.S., we have seen a shift to more suburban locations and the closure or consolidation of more urban locations,” Chick said. “The reason why we’re seeing that is mostly due to hybrid work models.”
Without downtown offices brimming with people looking for a quick lunch, the volume of customers isn’t enough to justify paying urban rent for many restaurants, she said. Meanwhile, the majority of the Houston area’s population growth comes from its surrounding suburbs.
Instead, many — like JCI Grill — are experimenting with new types of restaurant footprints. More companies are now testing out restaurants with smaller dining rooms and more support for pick-up orders. While working with third-party pickup and delivery services such as DoorDash or GrubHub often means sacrificing a cut of the profits, according to Chick, it achieves one key factor: convenience.
“Convenience is winning the day,” she said. “Convenience is the number one reason why restaurant customers make the restaurant choices they do, unless it’s a special event like a birthday or anniversary.”
The next 100 years
Straughan sees much of JCI’s changes as the natural consequences of reaching 100 years in business. The stores that were a perfect spot for a local hot dog chain in the 1970s just aren’t the same anymore, whether it’s because of changes in Houston’s roadways or the evolving demographics of the city, he said.
“The dynamics changed, they changed a lot in the past three to four years, and we’re just doing the very best we can to get ourselves in a prosperous position,” Straughan said. “Maybe in five to 10 years, we’re going to have a bunch of new small James Coney Island restaurants out there doing well.”
If there’s one thing that hasn’t changed, it’s JCI’s classic Greek style hot dog, the perfect blend of Coney sauce, hand cut buns, Cheez Whiz, onions and of course, the sausage itself, in Straughan’s opinion. It’s kept the company relevant for a century, and he’s confident it’ll carry them through the next 100 years as well, he said.