The World's Smartest Hamburger

By Abigail A. Lorden | May 05, 2008

Squash is back on the menu, general managers have taken back twenty minutes of their lives each week, and knowledge is on the rise. Things are looking good at Austin, Texas-based Magic Restaurants, better known as Fuddruckers, the self-proclaimed home of the "World's Greatest Hamburger."

The picture wasn't always this juicy and grilled to perfection, however. A little over one year ago the 250-outlet burger chain began an evolution, moving away from informational silos to create a culture based on open communication and business knowledge. And it all began with a computer printout.

The Tipping Point
Like most general managers in the food service business, the GMs at Fuddruckers and Southern California-based Koo Koo Roo (acquired by Fuddruckers in 2003) received regular reports with a host of financial information detailing store performance. Similar reports were sent to senior and executive staff. But despite having a wealth of information in front of them, real knowledge remained just out of reach. "The financial data that came out to us was quite complicated by anyone's measurement," recalls Alan Watts, senior vice president of operations for Fuddruckers & Koo Koo Roo. "You'd spend 10 to 20 minutes just tearing the report apart trying to make sense of it." That, according to Watts, was the tipping point in moving the company in a new direction.

But the reporting procedure was just the tip of the iceberg. "Overall we felt like we were underperforming, based on the potential of these two tremendous brands," recalls Watts. "We knew a big piece of solving that was to make better decisions and make them from a more empirical place."

The IT and operations departments huddled with general managers to create a new reporting document that was immediately discernable to the eye. But more importantly, resolving this one issue empowered the company to embrace a collaborative approach to problem solving, and to re-focus on intelligence-gathering strategies.

Today, the company is leveraging several new tactics, including business intelligence and rich customer feedback, to continue its evolution. "We're moving through a learning curve, as with many companies, with regard to not only IT but with having departments truly synergized and communicating from end to end. In years past, they were definitely distinct departments," says Watts. "We'd find ourselves looking at updates every six months, saying 'what is IT working on?'"

Distinct departments for operations and IT still exist, but now the team members are in constant conversations, attacking problems as a group so that each person understands his or her role and can meld their component to the desired outcome. For Watts, the ideal picture is one of balance: "Cooperation between departments is essential, but I do think that it's okay and even necessary to have creative tension. We're not looking for group think."

This new direction is something that Watts says has been long in the making, and long overdue. "It's an idea we gave lip service to quite some time ago, and in the last six to nine months it's really become part of our culture and led to the motivation and excitement of our group."

Knowledge Is Power

Under this new strategy, comprehensive in-depth meetings have moved from semi-annual to period-by-period, supplemented by a great deal of informal daily communication within and between departments.

Leveraging feedback, the company has redone its employee bonus program and radically revised its menu both in content and in layout. In the name of ongoing knowledge, IT has created a hot list menu, which allows executives to monitor the results of menu changes: how they've affected food costs, average check amounts, and what percentage of sales new items represent. "IT gives us the tools we need to analyze what these changes really mean to our business," says Watts.

A business intelligence (BI) strategy, still being fine-tuned, is already paying off. The company can now identify accurate targets for its stores across the country. For example, food costs in Washington, D.C., differ from those in Houston, Texas, in part due to transportation costs. A BI tool allows the company to upload all of its recipes and adjust cost targets for stores based on menu mix.

The company is now able to compare franchise results to corporate store results, and also compare performance across geographic regions.

"It's allowed us to hone in on really spectacular results, draw that franchisee into conversation, and say 'help us to learn. What are you doing and what are your best practices?'"

For the Love of Squash
Watts is taking the company's mission to embrace knowledge even further by leveraging one of the most valuable and all-together vast resources for data-mining: the Internet.

Watts uses Google to monitor any mentions of Koo Koo Roo and Fuddruckers on a daily basis. "I set it up as a permanent alert, so that I'll be notified of any mentions on those brands," says Watts. Combing the Internet has allowed Watts to be notified of media references, as well as feedback from the company's most important critics: its customers. In fact, Watts embraces Internet social networking trends and will regularly scour blogs for candid feedback on the brands, good and bad.

One such search single-handedly changed the fate of Koo Koo Roo's butternut squash. The California-based chain focuses on fresh, healthy foods with a sizable complement of side dishes. For Ross Matthews, a California native who proclaims Koo Koo Roo as is his favorite restaurant, it's all about the butternut squash. That is, until one day last December when Ross stopped in to order his usual chicken breasts, green beans and squash, and was politely told by the checker that Koo Koo Roo had discontinued the golden gourd.

Thoroughly dismayed at this news, Ross (a former intern for The Tonight Show with Jay Leno who's since moved up the ranks to correspondent) exercised his birthright as an indignant American: he blogged about it.

Watts' Internet searching alerted him to the blog, which included live video footage of Ross' dismayed drive home from the restaurarant and his subsequent call to the company's customer service line (to his credit, remarkably polite for a disgruntled customer). Watts embraced it as valuable feedback and took action.

"We brought back the dish and named it Ross Squash," says Watts. The return of the squash prompted a praising blog entry from Ross, who, thanks to his exposure on The Tonight Show, has quite a following. "Our sales were up 10 percent the very next week," says Watts. "That was a very eye-opening component as to the impact that this kind of technology can have on your business."

For Watts, the importance of embracing these new forms of communication and intelligence gathering can not be overstated. "The trepidation people in this industry have for social networking really amazes me," he says. "All of these companies that do focus groups, you just got it for free. Not only do I have zero trepidation in learning from these social networks, I believe it's going to become more important as we go forward."

Forging Ahead
The company continues to embrace an open-book perspective when it comes to internal communication and feedback. "We try to be as transparent as we can be with all levels of management," says Watts. "We want everyone to know where we're at as a company and aim to provide enormous clarity."

An informal hierarchical structure fosters communication up and down the pipeline, and employees are encouraged to share their thoughts with anyone at any time in any position. "It's not uncommon for a general manager to communicate a thought or idea to the CEO, CFO or COO," says Watts.

With its new focus on being information-rich, Fuddruckers' next goal is to practice knowledge management - making sure that this newfound insight isn't diluted by staff departure, particularly given the high turnover rates in the foodservice industry. "Many companies, us included, haven't done a good job at it. As we're able to better orchestrate that knowledge management piece, it allows us to make better decisions on a go-forward basis," Watts explains.

The company's training team, in partnership with its operations and IT departments, is hungrily attacking a knowledge management strategy. The solution will be a "one-stop creation allowing us to compile actionable and relevant data, as well as tools and learning modules for our people," says Watts. "We will also ultimately be able to monitor where each manager is in their development through this tool." And perhaps once the knowledge management component is firmly in place, the world's greatest hamburger may well become its smartest, too.

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