From Down on the Farm to High on the Hog

Patricia Hochwarth

TOP 100 CHAIN PROFILE

With updated flavor profiles balancing classic country fare, Bob Evans Restaurants
celebrates its 50th anniversary as a heartland heavyweight. By Patricia Hochwarth

From Down on the Farm to
High on the Hog

Bob Evans Restaurants are as American as, well, not only the farm-fresh pies beckoning from its brightly-lit display cases, but the biscuits and sausage gravy and other down-home fare it offers. But this solid player in the family casual segment (32nd on Technomic’s list of the top 100 largest U.S. chains) isn’t resting on its laurels. Savvy menu management and strategic growth initiatives are its strategy for surviving and thriving in a cutthroat market.

And thriving it is. With 523 restaurants in 22 states and 35 new openings planned this year, the publicly-traded company (BOBE) is celebrating its 50th year of business in restaurants and retail food products, with fiscal 2002 overall sales of more than $1 billion. Of these sales, 79 percent was generated from restaurants, with the balance from food products.

Beyond Sausage and Biscuits
Take a look at its menu and you’ll see items such as Raspberry Grilled Chicken Salad, Chicken and Broccoli Alfredo and Grilled New Orleans-Style Catfish. Hey, where’s the Country-Fried Steak and Biscuit and Sausage Gravy that have come to personify the Bob Evans menu?

They’re still there, and they still sell. But bowing to the American customer’s more sophisticated palate, Bob Evans has worked hard to stay on top of culinary trends with regular updates of its menu.

"We’re about giving people choices," declares Stewart Owens, Bob Evans’ genial c.e.o. and chairman of the board. "We’re more aggressive about menu development and change than anyone else in our category. When we conduct focus group surveys with people who aren’t Bob Evans regulars, they’ll invariably comment: ‘Wow, Bob Evans has changed a lot and I didn’t know they offered all these different things.’ For example, we’ve become well known for our entree salads with five popular varieties. Our stir-fry and Wildfire barbecue items are big, too."

Owens says the company is blurring the line between family and casual dining, gradually upgrading its food presentation and introducing more significant flavor profiles. "We’re moving beyond the meat, potatoes and gravy thing, as popular as they still are."

That aggressive menu development, updated store decor and "a solid fundamental business model" are a few of the factors Owens cites in describing the company’s strong growth. "We had 24 consecutive quarters of positive same-store sales, which, unfortunately, ended with the first quarter of this year (fiscally speaking, last summer)," says Owens. "We experienced the same slowdown that just about everyone else did due to the poor economy. But we’re beginning to see signs of improvement."

Despite challenging conditions, the company was still able to grow its profit margin a half percentage point this past year. "We had 10.3 percent, versus 9.8 percent last year, so we feel really good about that, considering the softness in sales. We usually do pretty well in a weaker economy because of the great value we provide, plus you get a beneficial impact from less pressure in the labor market."

Still, the chain is moving ahead with growth plans, with 75 percent of new openings in its existing markets, primarily in the East North Central, mid-Atlantic and Southern U.S., and 25 percent in new markets. About 50 percent of the freestanding units are located along major highways or interstates, with the balance more localized. Any plans to go west, young man? "We’ve still got a lot of room to grow our concept in the densely populated eastern half of the country before we start hopping into the big open spaces," says Owens.

Franchising simply isn’t an option for the tightly controlled company, at least for now. "We’re not totally closed to the idea," suggests Owens, "but we like having complete control over the facilities, management, marketing and pricing, so we feel we’re better able to protect the integrity of the brand by owning and operating them all. At some point, we may look at it, but we have no plans for franchising at this time."

Down on the Farm
This significant player in the family-dining segment, which includes Cracker Barrel, Applebee’s, Chili’s and IHOP, has come a long way from its humble origins as a 12-stool, 24-hour diner in rural Gallipolis, Ohio. Today it serves 161 million customers per year. Heritage, determination, hard work and farm values are how the company best describes the story of Bob Evans Farms. Bob Evans’ namesake began making sausage on his southeastern Ohio farm in 1946 to serve at the small-town diner. Breakfast was big at the Steak House, but Evans had trouble sourcing decent sausage: The low-quality "blood-shot lard" as it was called back then was all scraps, fat and cereal.

Evans recalled the high-quality sausage that his family had made for years, so he set out to make his own. As Bob’s sausage gained in popularity and sales steadily increased, five friends and family members joined him as partners in 1953 to form Bob Evans Farms, Inc. In 1956, the company served 1,400 grocery stores and restaurants.

Bob’s early television ads invited people to "come on down and visit us" at the farm. He meant it, too, but it became hard for his family to accommodate all the visitors who took him up on his offer. So in 1962, the Sausage Shop opened nearby in Rio Grande, Ohio, seating 24 people. To offset the effects of increasing hog prices in the mid-’60s and to provide more stability for the company, the owners decided to expand the restaurant business.

Today, only one of the company’s founders is still active in the company. Bob Evans retired from the company in 1986. Dan Evans, a board member, is retired from his roles as chairman and c.e.o.; however, numerous senior officers claim 30 years or more of service, says Owens, including Larry Corbin, executive vice president of the restaurant division, who was one of the original employees.

Owens, himself, has strong ties to the founders. He grew up working for his family’s Owens Country Sausage Company in Texas. "Our family had been friends with the Evanses for decades and we agreed to be acquired by Bob Evans in 1987. At the time, I was president of Owens and, three years later, I was named group vice president of the food products division at Bob Evans. I held that position for four years before being named c.o.o. of both divisions and president the following year."

Nine Texas-based Owens Restaurants are operated by the Bob Evans restaurant division, and, except for some regional menu differences—white cream sausage gravy instead of brown, all beef chili minus the beans, breakfast tacos, quesadillas and some other Southwestern favorites—the buildings and operations are identical.

The company’s strong commitment to employees was recently recognized with an NRA Employer of Choice Award, which noted the company’s major commitment to developing and retaining employees through mentoring, scholarships and a special program for disabled workers. The results: Each year, more of Bob Evans’ top management (25 percent currently) come out of company ranks. Since 2000, management turnover is down 10 percent and hourly, 9 percent.

"We are very much a promote-from-within company," says Owens. "We’ve got really strong tenure within our organization, particularly from the mid-management and up ranks. I’d say in our area-director level, which includes about 80 people who manage anywhere from five to eight restaurants, they probably average close to 20 years’ experience."

Y’all Come Back Now
Bob Evans is big on specials, with six seasonal promotions per year, rolling out new items and editing others about every 60 days. The chain attracts a broad range of ages, skewing a bit older, though it has an extensive kids program and earlier this year won a Merit Award in Restaurant Hospitality’s Best Kids Menu in America Contest. "We just introduced an entirely new kids’ menu with activities materials this past January, with 15 different items," says Owens. Most of them priced at $1.99.

Value is promoted with the chain’s breakfast and lunch saver programs, with 10 items, each starting at $2.99 for breakfast and $3.99 for lunch. In terms of daypart sales, it’s split fairly evenly, with breakfast comprising 31 percent, lunch 35 percent and dinner 34 percent. When it comes to customer counts, breakfast holds the edge.

"Life tastes better at Bob Evans," claims the company’s advertising tagline, broadcast mainly in television and outdoor media, with some radio, newspaper and direct mail outlets thrown into the mix. "We spend in the neighborhood of $40 million per year in advertising," says Owens. "The message in our ads is experiential, with an underlying theme that Bob Evans is a great place to share special times with family and friends."

An emphasis on dessert and carryout sales has contributed to recent restaurant sales increases. Carryout represents about six percent of sales today, increasing about 20 percent per year for the last few years. "We’ve rolled out what we call the Carry Home Kitchen, which features a display case for desserts, an expanded order-preparation area, a separate cash register and phone lines, and a storage area for package supplies," says Owens. "It’s enabled us to dedicate staff to taking care of carry out orders the right way."

To go along with the updated menu, building design and decor are continually evolving, without straying too far from its traditional farm-style roots. The "Steamboat Gothic" style in newer buildings has traded the loud red-and-white board-and-batten exterior scheme for more subtle brick construction, while retaining the signature keyhole cutout at the roofline. Light colors, country-style decor, and oak accents fill the interiors, which seat on average between 155 and 160 diners.

As it moves through a new decade, the Bob Evans game plan stays focused on the customer experience, building quality and service levels. "That’s one of the things we take a lot of pride in, consistent execution and fresh food," says Owens. "We’re very good at the infrastructure and execution, the blocking and tackling of the business."

Any plans to develop a new concept? "We look at acquisitions on both sides of our business on an active basis, so if the right one comes along, we’ll move on it," says Owens. "But we’ve got a lot of room to grow Bob Evans."