Today's guest is Craig Dunaway, COO of Penn Station East Coast Subs, who shares insights from his 25 years in the restaurant industry. Learn how to spot lasting trends, adopt new technologies wisely, and use a 'fast follow' approach to stay ahead without breaking the bank.
We'll dive into how third-party delivery services are changing the way customers interact with restaurants and why building personal connections is crucial. Discover how brands like Chipotle keep customers loyal despite challenges like rising labor costs and changing preferences.
Thanks, Craig!
Today's guest is Craig Dunaway, COO of Penn Station East Coast Subs, who shares insights from his 25 years in the restaurant industry. Learn how to spot lasting trends, adopt new technologies wisely, and use a 'fast follow' approach to stay ahead without breaking the bank.
We'll dive into how third-party delivery services are changing the way customers interact with restaurants and why building personal connections is crucial. Discover how brands like Chipotle keep customers loyal despite challenges like rising labor costs and changing preferences.
Thanks, Craig!
Welcome to another edition of Give an Ovation, the restaurant guest experience podcast, where I talk to industry experts to get their strategies and tactics you can use to create a five-star guest experience. This podcast is sponsored by Ovation, an operations and guest recovery platform for multi-unit restaurants that gives all the answers without annoying guests with all the questions. Learn more at OvationUpcom. And today we have Craig Dunaway on the podcast with us, coo of Penn Station East Coast Subs, and he has been there for a quarter century. And it's crazy, craig, because it looks like this is I mean, it's like man. Is this like your first job out of college? You look so young.
Speaker 2:What's up? You're right, zach, I appreciate you having me here today. It's great to be on your show, but no, I've been at Penn Station. You're right, I'm going into my 25th year here, so it's been a good run and hopefully there's a lot more ahead of it.
Speaker 1:And one of the things that's incredible, craig, is that I see you at trade shows, I hear you speaking. We've known each other for a long time, you know I've I've played pickleball with your, your wife. We actually won the RLC pickleball tournament, that's true, and she still talks about it, I might add, as as do I. It is one of my, one of my proud moments of trade shows, and you know. But one of the things that's incredible is you would have thought, looking at how active you are and how much innovation you bring and how much change you're looking to do, I would have thought that you joined Penn Station a year ago. And so tell me, how do you keep that energy of innovation up? How are you? How do you focus on always improving? Because that's that's a hard, hard thing to maintain for 25 years.
Speaker 2:Yeah, you know that's a really good question. I think that you know it's adapt or die, right, and I think if you're not trying to improve every day I don't want it to sound cliche-ish, but you fall behind. I mean, you play in the world of technology much more than I do, and what we have to balance is it's what's the difference between a fad and a trend? And you know, as a franchise brand we're selling return on investment and the thing that we get bombarded with technology daily and you have to decide is it going to be around for the long term? And if you adapted everything on the technology side that's out there today, you may not make any money because there's so many choices and so we have to be very prudent about the way we go about it. So we're constantly looking at it and that's what keeps it exciting and going. I mean, something new is cropping up every day in the boring restaurant industry. Kind of blows me away.
Speaker 1:And it's more than just try our new ketchup right Like there's some really cool stuff happening, Although we did have a guest on the podcast who had like powdered ketchup, which I thought was pretty interesting, but oh, that's interesting, anyway. So tell me about, like this concept, though, of fad and trend. That's a really interesting framework. How do you differentiate, I mean, like do you wait to see what's around, not the first RLC time, but the second RLC time? Like how do you, you know, differentiate?
Speaker 2:Yeah, I think you don't want to be first to market, you know, I think I mean we're a brand with 323 locations and so what we have to do is we have to look at the big boys and see what they're doing. And you know, we ask ourselves a lot. You know we don't study Chipotle per se, but I think they're a really, really good brand. So we look at what they're doing. I mean I'll give you a good example, I think is digital menu boards. I mean, digital menu boards are huge right now. I think it's a trend. They're not cheap, although they're a lot less expensive than they were maybe five years ago.
Speaker 2:And we get asked by franchisees about digital menu boards and one of our questions is what's Chipotle doing? Does that mean Chipotle is the end, all be all? No, but they're not doing it, and you can bet that their tech team's a lot larger than ours and they've spent a lot of time talking about it. So you know, we look to larger brands that we think are best in class and see what they're doing. We just, you know, if you're going to fail, fail fast, but we don't get in quickly. You know we want to be second to market and not first to market, and I think when we do that, it allows franchisees to save a lot of money, because fads can come and go.
Speaker 1:Yeah, I think that's a really interesting point of like. You know you don't have a tech team but you can leverage the research of other tech teams right, and I think that's a really interesting perspective of there's nothing wrong with being second to market. There's nothing wrong with the fast follow approach and having a couple of key people that you're looking at to see, hey, they're growing well, what are they doing Really speaks volumes to how to differentiate that fad and trend. I like that. I like that framework.
Speaker 2:Well, you know, zach, I was at a conference last October we were just talking about this before we got online and we were sitting at a table myself and president and our senior director of franchise services and it was the three of us and four tech companies and we went around the table just asking questions, getting to know each other, and one of the ladies I don't even remember what her company was and I wouldn't put her on the spot on this call but I asked how much their business model had changed the last 10 years and she said we've changed what we're doing four times.
Speaker 2:So, as the franchisor selling return on investment for franchisees, can you imagine if, 10 years ago, I signed up for whatever service they were selling at the time and then two years later they shifted and then two years later they shifted again and then another time they've shifted. Their business model was completely different. And I think, because technology is changing so fast, we just have to be really, really patient in what we adapt, because ultimately, franchisees have to make money on whatever we bring in, otherwise we can't sell more restaurants.
Speaker 1:Well, and the other thing, too, is like picking a partner that is innovating and is pushing the limits right, because, for example, we have tried and true solutions and then we're constantly building out brand new cutting edge things that you know you could afford to be first to market, so to speak, by virtue of trying out a new thing at one of your innovative partner companies.
Speaker 2:Right.
Speaker 1:Without having to, you know, just do that one new thing to see is it going to work or not? Right, and so I think that's been one of the things that we've loved about partnering with great brands is they approach us with different ideas of things that we could do and we approach them with crazy ideas of new things that we can do, and it just it connects right and it makes sure that we can work together to be an innovation partner with our large customers.
Speaker 2:Yeah, I think that's the synergy you're looking for with work with somebody. I mean, you guys clearly have the expertise that we don't have and hopefully you know we're asking you questions of oh, I never thought about it that way. I mean, think about COVID. I mean, we are about half of our franchisees used mystery shoppers four years ago, five years ago, and really relied on it. The questions there were 20 questions that were specifically designed for us, but it was based upon in-house experience. And then COVID hits in March of 2020. And guess what? No one can dine in the restaurant. So the need for Mystery Shop pretty much went away because nobody was eating inside. But yet we still need to know all about the guest experience. It's just a different guest experience. Now it's third party, it's online ordering, it's call in, it's carry out, and Mystery Shop wouldn't take care of that for us today.
Speaker 1:Yeah, totally, and I think that's part of like the innovation cycle is sometimes you innovate, other times you get driven to innovate right, right, right, yeah, that's the adapt or die.
Speaker 2:I mean, we did not have third party implemented prior to COVID and we had been studying it for several years, but we didn't like the model because, as you know, the commissions are expensive I mean that's a big buzz in our industry right now still but we had to. We had to adapt third party and, and you know, we felt like we picked up an incremental customer as a result of it too.
Speaker 1:Yeah.
Speaker 2:Love that.
Speaker 1:So, speaking of that, speaking of customers, obviously everything that we do in the restaurant industry is about the guest experience, and so what do you feel the most important aspect of guest experience nowadays is?
Speaker 2:You know, I think it's to serve the customer the way they want to be served, and I'll tell you what I mean by. That is Zach. I had a meeting at Starbucks last week with a gentleman and we sat at a table for about an hour in our meeting. We were the only customer that sat down the whole time for an hour at a Starbucks at 7 am on a Tuesday morning. Wow, it was either people walking in to pick up their order at the counter and leaving they had already paid for it through the app or they walked up to the counter, which was very few, and took their coffee to go, or they were going through the drive-thru, and what I asked myself was if they did not have a drive-thru here, would the guest walk in to get their order? And I think the answer is no.
Speaker 2:I think a guest wants to get their product. Whatever they're buying, they want to get it a certain way, and we've had to learn that a little bit. I don't think you can change consumers' habits through willpower. I think if people want to use third-party, they're going to use third-party. You can't make them come in just because you don't want to be on third-party platform. And so I think the last five years that has really shifted from I am the brand, I will tell you how you will buy product for me, to I am the consumer and I want you to fill my need or I will go somewhere else.
Speaker 1:And I think that's really been a big shift, especially because of COVID. I really like that because that gives such an interesting perspective on how we should be looking at things. Right, you no longer are the only sandwich shop in town that has good sandwiches, right, like? There are so much competition, and there's competition that's cheaper, there's competition that's more expensive, there's competition that has better digital, and so it's a matter of like.
Speaker 1:You need to be able to compete because, as consumers are becoming more and more fragmented, what we're seeing is there is a lower tolerance for issues. There's a higher ability of switching. It has never been more expensive to get a new customer in, and in 2024, this will be the most expensive year in the history of restaurants to get a new customer in, and in 2024, this will be the most expensive year in the history of restaurants to get a new customer to dine at your restaurant. And so the name of the game is convenience and ease of use, so that way, you can retain your customers and make it easier for them to place an extra purchase each month.
Speaker 2:Yeah, I mean, look, survey after survey, QSR, nation's Restaurant News whatever convenience is always number one. I mean the quality of the products, third or fourth on the list, yeah, so you know it goes back to my Starbucks example, and we've had to learn that because you know we've got great food. We've got really, really good food and we've won a lot of awards for it. But if we can't be convenient to the consumer, regardless of how good our product is, they're going to go somewhere else. That's just the reality of the landscape of our industry today.
Speaker 1:And then, when you want to take a level up, then it's about not just being convenient, right, but it's about being consistent, which, obviously, as head of operations, you know how important consistency is. And then, at the very height of true, you know how important consistency is. And then, at the very height of true, loyalty isn't convenience or consistency, but it's connection. It's that one-to-one guest connection that drives a framework of loyalty that goes beyond what other people can have. As you look at these publicly traded companies, I've read studies that show that if you own stock, you are more likely to spend money there, which is why I take it from Chipotle Every single time I talk about online reviews and I talk about how online reviews affect growth and sales. There's always an asterisk, which is except Chipotle. Their stores are at like a 2.3 stars and they're so busy, but it's because people will take the abuse, because they feel like they have a connection to Chipotle.
Speaker 2:Yeah, yeah, and that's, I think, few and far between. I mean, don't we all wish we were Chipotle, right? Yeah, most people can't get away with something like that, absolutely.
Speaker 1:Which is why you have to work a little bit harder to show them that you care a little bit more. And then they choose hey, let's go get sandwiches here as opposed to Chipotle, because, man, they're a cool group of people there and that's really, at the end of the day, people will always choose connection above everything else, you know.
Speaker 2:Yeah, I agree. I mean, you know, 5, 10, 15 years ago it was the quality of the product, it was the convenience and it was the cleanliness of the restaurant. Yes, and now 80% of our food is consumed off premise. So that means 8 out of 10 customers don't know if we're clean or dirty.
Speaker 1:Yeah, right, and it's an FSI right. Food Service Impression, and now the impression is the packaging, not the restaurant, right.
Speaker 2:Right, right right.
Speaker 1:So what do you think? What's a tactic that you've used to improve the guest experience lately?
Speaker 2:Yeah, yeah, you know we were talking before we went live here about the gentleman we hired who's director of franchise services and his job is to look at where the customer plays, how do they want to order, to look at best in practices with brands, how the customer wants to order, and then we make some determinations, like we talked about 10 minutes ago. Is this going to be a fad or is this going to be a trend? You know one that we study that's a little bit of a tangent here is kiosks. I mean, you know, I think about the way look at kiosks in the airline industry. 10 years ago you walked up to a kiosk to do whatever you need to do and now you use your smartphone. And so, to me, kiosks is, even though California is fighting $20 an hour wages and kiosk will probably replace people, is that going to be a trend that finds its way across the country? I don't know, and because we're second in market, I'm not or second to market, I'm not prepared for us to make that financial investment today.
Speaker 2:But, pure and simple, tyler's job is to look at, kind of the Starbucks story. I told how someone exactly wants to order their food. Do they want to use their smartphone, do they want to call in? Do they want to be online? Do they want to do it from a desktop? And then we have to make that as seamless as possible for the consumer.
Speaker 2:And so, as an example, you know we have one of our biggest selling items is a cheesesteak, and options are onions, mushrooms, banana peppers, well, and mayo, well. If 90 percent of our sandwiches come with that, why not just default to that and then let the customer take it off so they don't have to click four extra boxes? I think it's those little nuances, because now the attention span of society has gone from one minute to 15 seconds to about seven seconds. Because now the attention span of society has gone from one minute to 15 seconds to about seven seconds. You know you have to be able to make sure that you're reducing that time for the consumer, or again they're just going to go somewhere else of somebody who does make it efficient for them.
Speaker 1:Absolutely, and in my case I definitely need an option for Cheez Whiz Well that's because you're an East Coast guy, yeah that's right. Aren't you an East Coast shop?
Speaker 2:I don't know. You know well, we're based out of Cincinnati and I will say that it's a backhanded compliment because to this day, after 25 years, I'm copied on every customer comment that comes in. And I'll say comment because they're not all complaints, but occasionally, maybe two to 10 times a year, there'll be the Philly customer who comes in and says you are the best cheesesteak outside of Philly. So we always take that as a compliment because we know it's a provolone and not a cheese. Whiz, yeah, but hey.
Speaker 1:I love me some provolone too, so no shame in that. Well, craig, who is someone that deserves an ovation in the restaurant industry, who's someone that we should be following, you know?
Speaker 2:I follow Jonathan Mace. I think he does a nice job. He's with Restaurant Business Magazine and he just gives good practical insights, especially for big brands kind of what you and I were talking about earlier. We can't afford to do it, so I follow Jonathan. I follow the wolf of franchising too. I think he gives a lot of good insights into franchising. So there's a lot. I'm a big ex-guy and if you were to look at my ex-follower accounts, I follow people in our industry and there's a lot of them out there and it's easy to find them depending on the topic. Do you want M&A? Do you want insights into the industry? Do you want insights into franchising? But those two are really good people, I think, to follow.
Speaker 1:Awesome, the Wolf of Franchising and Jonathan Mace right, yep, yes, great. Well, where can people go to learn more and go and follow you on X or on LinkedIn, maybe?
Speaker 2:I appreciate that. So you know you can look Penn Station up at penn-stationcom. You know, on the internet and, like I said, we're based out of Cincinnati, ohio I don't tweet as much as I follow, but you know I'm CND CPA Craig, so I'm happy to have followers. I offer up only insights when I think I can add value to whatever somebody is saying. So I appreciate that.
Speaker 1:Well, craig, for giving us the motivation to adapt or die and the information to discover if it's a trend or a fad. Today's ovation goes to you. Thank you for joining us on Give an Ovation.
Speaker 2:I appreciate that. It's great to see you again.
Speaker 3:Thanks for joining us today. If you liked this episode, leave us a review on Apple Podcasts or your favorite place to listen. We're all about feedback here. Again, this episode was sponsored by Ovation, a two-question, sms-based actionable guest feedback platform built for multi-unit restaurants. If you'd like to learn how we can help you measure and create a better guest experience, visit us at OvationUpcom.