COMPANY PROFILE: Red Rooster was founded in 1972 in Australia and has a national coverage of 360 restaurants. In the past financial year, the company has introduced home delivery, launched a loyalty program and opened more restaurants from breakfast through to late night dessert.
What has the past year been like for Red Rooster?
“It’s been a great year. I’d say it actually looks like we’re going to finish the year more than five per cent up in sales. And we’ve been able to improve franchisee profitability in regards to gross margin, too.
But the biggest thing we’ve done this year has been launching the delivery. We’re now well and truly Australia’s third largest delivery business and I’d say we’re knocking on the door of being number two.
We’ve still got some work to do in terms of the customer experience – we’ve done a lot of work there, but we’ve still got more restaurants to refurb and more work to do from a speed perspective.
In our plans, we’re relentlessly customer obsessed. We’ve been fanatical. I’ll break it down into three areas:
The basics are about the customer experience when people visit and making sure they get friendly service, everything is accurate, they get what they paid for and it’s fast. And it’s high quality as well obviously, too. We’ve done lot of work around there.
The second component is around our facilities. There’s no doubt that for a long period of time, Red Rooster didn’t refurb a lot of its restaurants, so there was a lack of investment in the network.
In 2015, we refurbed 75 restaurants out of 350 and, to be honest, they’d never done more than 10 in previous years. There were a lot of restaurants that hadn’t been touched for 10, possibly even 20, years. We called it Operation Street Appeal – it was realising that franchisees have limited capital to invest and we needed to optimise the investments and make sure that we got the highest return.
That was by ensuring that the majority of the money went into the areas that have made noticeable change to customers, like the exterior, the signage and the menu boards. Red Rooster was extremely strong in the 70s, 80s and 90s, but at the turn of the century, it lost its way and didn’t evolve, so now we’ve mostly been modernising the look and feel of the restaurants.
We refurbed 75 restaurants in 2015. This year, we’re going to have close to 50 done and it will be an ongoing process where we do a minimum of 50 a year going forward. We’re almost onto our second evolution of the design, so we’re just firming that down now and we’ll look to doing new restaurants or refurbing ones from 2017 onwards.
The third area is really around customer recovery. There are going to be mistakes and problems, so it’s about making sure the franchisees and managers are focused on recovering when a customer has an issue. We want to reduce the amount of issues, but when there are problems, we need to make sure our people are responding within 24 hours.
A lot of work has gone into the brand. We’ve hired a customer experience manager and we’ve implemented Salesforce. Three years ago, there was no system to capture customer feedback, so now we’ve got a very robust system. We’re web-based so we can capture customer feedback, and we can monitor the status of issues and how satisfied our customers are with how their issues have been dealt with.”
“Amazing. I worked for McDonald’s for 28 years and to me, it’s not often in any sort of business that you get this sort of opportunity. I think for McDonald’s, it was McCafe that redefined the business and changed the trajectory. For KFC, it was probably around burgers and now, delivery is transforming Red Rooster.
It’s been almost all incremental from a sales perspective and it’s high growth as well. I’d say the people using our delivery have been existing customers using the delivery service at a different location, or we’re bringing new customers that have never actually tried Red Rooster before.
At the moment, delivery is offered at 230 locations out of a total of 350. We definitely have plans for another 30 or 40.”
Why do you think the take-up of delivery has been so successful?
“I think it’s doing really well because for the consumer, it’s all about convenience. They’re time-poor and they’re online a lot more.
There’s almost a hole in the delivery market. You’ve got pizza, and then you’ve got ethnic takeaway – Chinese, Italian and Thai – so there’s a hole for wholesome, delicious food. Roast chicken is honestly one of Australia’s’ favourite meals. Not even the supermarkets deliver roast chicken. Supermarkets sell a lot of roast chicken but obviously not as good [as Red Rooster].”
What were some of the challenges that you had to overcome when rolling out the delivery service?
“It’s been two years since we started the first delivery restaurant in November 2014 in Baulkham Hills. The first challenge for us was the profitability and the actual margin. In reality, it costs a minimum of $10 to deliver food to a customer. We were charging normal prices with a $25 minimum charge, plus the delivery charge. But to be honest, the margins weren’t right. That was the Pizza Hut model.
We actually changed over to the Domino’s model, where you have higher pricing in delivery. We still had a minimum charge, because you can’t make money if you’re delivering $15 worth of food. So we kept the $25 minimum charge but had no delivery fee. It gave us higher gross margins and there was no disruption to customer demand. Domino’s has done well with it.”
“The second challenge I would say was awareness. When you’re a traditional drive-through business, you’re relying on people to drive past the restaurant and seeing the sign or knowing that you’re there. We overcame that by doing one of the most successful things we’ve done – the branded Red Rooster delivery cars.
There’s one story where a franchisee was doing a delivery to 11 Smith Street and 20 minutes later, there was a delivery for 13 Smith Street. The franchisee did the delivery and said, ‘You’re never going to believe this. Your neighbour just ordered with us’ and the customer said, ‘Yeah, we saw the car out front.’ An hour later, there was a delivery for 37 Smith Street and the same thing happened – they’d seen our car earlier.
Our restaurants have not always looked that good, so when you have a shiny red car, it increases awareness but it changes the perception of the brand and it saves cost. The red car was really critical. One of the benefits of delivery is there’s a defined map or delivery area so you’ve got the cars buzzing around, but you can do mailers, to have a 3,000 population around the restaurant. That was really successful.”
How did Red Rooster tackle the last mile challenge that a lot of fast food delivery services face?
“I’ll be honest, we probably have larger delivery areas than some of our competitors, particularly Pizza Hut and Domino’s because we had low awareness. But as it has grown, it means that we can really concentrate more on our marketing efforts on the people who live closest to the restaurants. You’re better off doing three deliveries an hour than one an hour. That was a challenge that we didn’t realise as early on, and that’s where the mailers work – you can go, ‘I want to do the closest 3,000 households to the restaurant.’
There are some areas we’ve had to turn off – not a lot, but you need to make sure you can properly deliver to people. A customer’s expectation for delivery is 30 minutes and if you go over 45, it starts to become a big issue.”
“Number one, you have to evolve. I think if you look at Domino’s, McDonald’s and a little bit of KFC, they’re very good examples of brands that have continued to evolve.
Red Rooster did a good job in the first 30 years, then they got fairly stagnant for 10 years, when there was suddenly an explosion in variety, taste and different options in the market, but they had failed to evolve. So over the last three years, we’ve evolved.
But it’s not good enough to just do a turnaround of the business and catch up. There has to be a transformation to leapfrog over the competitors, so I think delivery is a great example of that.
I think we’ve got Australia’s best chicken, obviously. It’s bloody good, but I will say that just having on favour of roast chicken isn’t enough. We literally just launched three new glazes that you can have on your roast chicken – hickory spice barbecue, honey soy and Moroccan. That’s a good example of the evolution that we’ve had to make and customers expect.”
What plans do you have for the Red Rooster menu in the future?
“We’re trying to get the balance between having limited time offers (LTOs) to create news and excitement, but also add permanent additions to the menu. For LTOs, we’ve had lamb, lamb shanks, lamb rolls and roast chicken pies. A lot of work goes into that.
On the permanent side, last year, we launched a roast chicken and gravy roll – I can’t believe it wasn’t done 10 or 20 years ago! We launched it as an LTO and it was so successful, we kept it. We’ve got some real favourites, like cheesy nuggets and Rooster rolls. Over December, we’ll promote pineapple fritters in a mini trop pack. With the menu, it’s a balance of doing LTOs, carefully adding new items and promoting the favourites that people love.”
People have become much more health-conscious over the last few years. How has a fast food outlet like Red Rooster responded to that?
“It’s interesting. From working at McDonald’s for 28 years, I’ve see a lot of change. One of the things that shocked me when I came to Red Rooster was the amount of real food that we actually have in our kitchen. For people, I don’t think it’s so much about being healthy anymore. I think there’s something about real food that’s less processed and getting the balance right, so there are times where people are watching what they eat but there are times when they want a treat, so you have to appeal to both.
Red Rooster uses fresh chicken and we offer carrots, potatoes, pumpkin, peas, but McDonald’s has a lot of stuff that’s processed and brought in frozen. But our customers actually perceive us as the healthier option. It’s surprising how many people go to gyms and Red Rooster after a workout because chicken is a very healthy protein.
It’s about keeping the balance. My favourite thing at Red Rooster is chicken and chips. The chicken is amazing, it’s wholesome and delicious and real, but the chips are a bit of fun.”
QSRH owns Red Rooster, Oporto and Chicken Treat – how do they work strategically so they don’t cannibalise each other?
“Before I joined, it was one thing I wasn’t sure of – why have three different chicken businesses? The reality is all three brands have a different positioning. Red Rooster is really around real, wholesome delicious food and Australia’s best roast chicken. To be honest, it’s more of a family positioning, it’s got a very broad demographic.
Oporto is definitely a millennial brand that’s much younger and obviously a Portuguese obsession with a lot more flavour and spice. Chicken Treat – which a lot of people don’t know about because WA’s favourite fried chicken.
There’s a bit of crossover with Chicken Treat and Red Rooster, but lately, we’ve been positioning Chicken Treat as a fried chicken brand, so it’s directly going after KFC. Their philosophy is around food-induced happiness, so they do a lot of things like deep-fried chocolate bars. They have a lot of fun with their food.
But really, it actually works. There’s a bit of crossover, but all three brands are targeting different parts.”