Red Rooster rolls out smaller shopfronts: Has the traditional drive-through restaurant model hit its peak?

Red Rooster is looking for compact solutions to capture customers with a new “small footprint” store model, and its chief executive says urban development and population density have changed the game for traditional drive-through food models in Australia.

The chicken chain announced plans this week to launch a smaller store model focused on urban and inner city clientele,  and designed for those on the run or those who want to order delivery meals via the Red Rooster app.

Chief executive Chris Green tells SmartCompany that the new format stores, which will be called “Reggies” after the chain’s mascot, are aimed at customers that spend time closer to central business districts, where big suburban takeaway joints don’t really have a place.

“You look at inner city or urban locations, the drive-through is not a viable real estate strategy. This enables us to make sure we can become more accessible in those built-up areas,” Green says.

The small format stores will be as compact as 42 square metres, whereas the chain’s larger drive-through outlets can be as big as 400 square metres in size. Four of the new format stores will open in Northbridge and Goulburn in New South Wales, and Ashgrove and Northward in Queensland.

While the drive-through food model is gaining traction in some areas of the quick service food market, with news this week that Boost Juice is opening its first store in the Victorian city of Ballarat, Green says for a business like Red Rooster, the traditional large suburban restaurant model is facing its own challenges when it comes to expanding to new locations.

“I think this is particularly because with the traditional drive-through model, that land is just not going to be available anymore now. And with a lot of apartments being built, height restrictions being removed, the population is going to be more dense,” he says.

Capturing this dense, inner-city population is as much about delivery as it is capturing foot traffic in high profile areas. Red Rooster says it’s on track to book $500 million in sales this financial year, and Green says about 10% of that sales volume comes from delivery orders.

“The new concept is really only possible because of our delivery system. There are some Red Rooster stores where [delivery order volume] is 30%, and that’s obviously depending on what kind of area it is,” he says.

While the food delivery model has been a learning curve for franchisees, who have had to spend time understanding peak ordering times, the company believes bringing meals directly to customers’ homes is paying off in the long run.

“The customer response has been amazing, it continues to exceed our expectations. It’s definitely not easy and we’re finding we’re having to adapt and grow into how to deliver, but it has been unbelievable,” Green says.

Green says thousands of potential franchisees make contact with Red Rooster each year, and he believes the smaller shopfronts will be appealing to those wanting to set up a shop for the first time.

The new format stores are half the investment of a traditional Red Rooster, with lower costs and rents. And unlike pop-ups in food courts within shopping centres, franchisees would have the freedom to open for longer and capitalise on the late night dinner rush of customers.

“Compared to food courts, we can trade much longer trading hours, and particularly with us being very strong for dinner,” Green says.

Two of the new Reggies’ stores are owned by existing franchisees, with another two operated by new franchisees.

“We’ve just opened one in Goulburn, and it shows this is just as much a town or a smaller population strategy as well, because the investment is lower,” Green explains.

The fast food wars are fierce in Australia, with delivery apps, new sleek stores and even drone technology regularly dominating headlines. When asked why Red Rooster will win the battle for customers when people have the whole world of food available through their mobile phones, Green says the chicken store’s menu offering means people are more likely to order across all nights of the week.

“I think the big one is actually the food — and it’s real, it’s wholesome. If you look at pizza, it’s more of a treat and we do find in our weekday sales we find they’re probably stronger that what pizza would be,” he says.

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