Shuckin’ Shack – Riding the Recession-Resistant Tides
Looking at the restaurant business at a high level, it’s a recession-resistant industry for many reasons. The catch is that you must do everything right from the day you open to thrive. Why? The answers are pretty complex, so in this post, we’ll discuss why now is the time to open up a fast-casual restaurant when there’s so much chatter about an impending recession in the latter half of 2022.
Right now, the U.S. economy is sending mixed signals as to whether or not a downturn will happen. Whatever is going on with the economy, it’s not a traditional recession where companies are shedding jobs by the millions, and people lose their homes as they did in the Great Recession of 2009. This time, it’s different, and the experts are worried about that.
Unfortunately, inflationary price spikes are the new norm, yet consumers still spend at a healthy pace. Either way, our Franchise Owners will be prepared and ready to capitalize no matter how the economic situation eventually shakes out.
No matter what, Shuckin’ Shack will continue to succeed because we’ve taken the time to develop a proven franchise business model that’s both profitable and efficient for new owners. We know the restaurant business inside and out and top to bottom, so we work hard to pass that knowledge to new Franchise Owners.
Still, it’s perfectly understandable to assume that you shouldn’t open a new restaurant as a recession looms on the horizon, but that’s not necessarily the case. Some experts say that a recession can be the best time to jump-start a business if you can believe it.
We ride recession-resistant tides at Shuckin’ Shack, and you can, too, if you join our crew of successful entrepreneurs. Read on to see how Shuckin’ Shack sailed through choppy seas in 2020, eventually becoming more vital than ever, and how we plan to beat the next recession when it arrives.
Covid recovery by the numbers
Ever since the start of the COVID-19 pandemic, the prevailing narrative has been that every restaurant in every corner of the country is on the cusp of failure, having no choice but to shut down in the name of public health and safety. But now that we have some much-needed perspective, you have to ask yourself if the numbers support the assumption.
Many restaurants across the nation closed due to the Covid lockdowns, but you don’t have to look very far to find shining examples of restaurants that thrived – like Shuckin’ Shack! Across the board, restaurants and bars that adapted to the times by offering curbside pickup and contactless payments made it through; those who were slow to adapt didn’t even make it to the end of the lockdowns.
Now, we could give you generalized stats and figures about opening restaurants at the national level, but we’re going to pull back the curtain and show you what our numbers look like. For instance, we opened 13 franchise locations by 2019, with our most successful single oyster bar location generating $2,562,828 Net Sales in 2021 (Refer to 2022 Franchise Disclosure Document Item 19- Table 3).
From 2019 to 2020, most of our Shuckin’ Shack Oyster Bar franchise locations took a minor hit sales-wise, but the two newest restaurants increased sales. That alone should give potential Franchise Owners plenty of food for thought because we helped those fledgling businesses rise to the moment and succeed, whereas so many others gave up. We’ve already accomplished the feat once, and we’ll do it again if the economy takes another nose dive.
Our 2021 numbers proved that we made it through Covid, averaging a 9.3 percent rise in net sales company-wide from 2019 to 2021. One franchise location reported a whale-like 614.6 percent increase during the same period, yet the median figure for all franchises during that time stood at 12.2 percent.
Any restaurant would gladly take those pandemic sales numbers, and we’ve kept the momentum going strong to the present day. From 2020 to 2021, our average net sales per franchise location rose 42.5 percent, and now, we have 15 areas open for business with more development. So, what’s the secret to our success? Part of it is that we have no national competition in the fast-casual space.
Next to no national competition
Nationally speaking, there’s no shortage of seafood franchises, especially in urban areas and on the coasts. The problem is that many of the best places make you wear a suit and tie just to sit at the bar and order an appetizer and a beer. That’s the perception of seafood restaurants: high-end food at high-end prices for “high-end clientele.” But do you have to open a hoity-toity establishment to profit from seafood? No, you don’t, and that’s where our franchise opportunity comes into the equation.
No matter how you look at the restaurant industry, you have to offer guests something new, a different kind of dining experience than they’re used to enjoying. And for Shuckin’ Shack Franchise Owners, that means enticing people with a down-to-earth, fun atmosphere and top-notch seafood.
Our franchise business model is built on a foundation of sourcing sustainable seafood without inflating prices double digits. The Shuckin’ Shack Franchise system leads the seafood fast-casual space with virtually no national competition, and it’s not an accident. No one else is putting this much effort into sustainability and a robust supply chain. It’s a different spin on the “buy local” angle that’s worked well for us.
The basic laws of supply and demand still apply to restaurants, so what happens when people can’t find a seafood restaurant that suits an environmentally conscious lifestyle? To us, that sounds like a huge business opportunity because you’ll be digging into a perfect niche at the right moment. Fresh seafood is healthier and tastes better, and you can tell the difference.
The ultimate goal is to build regular clientele to get the restaurant off the ground. No seafood restaurant can succeed within the first few years without regular guests who spend more money over time. About 30 percent of your business will come from repeat guests, regardless of the economy. Every new regular you earn will increase profits. According to a Harvard study, a five percent rise in regulars can lead to a 25 percent increase in sales, conservatively speaking.
Even in a perfect economy, most people will not return to the exact location if they are not impressed. If you don’t offer them something unique, people will assume you’re just another seafood place. But with Shuckin’ Shack, that’s not the case!
Our atmosphere is energetic because we don’t rely on a dark, candlelit dining floor. We have a raucous bar, great drinks, and incredible seafood at great prices. And people come back again and again to the exact locations. Our net sales figures prove that we can increase foot traffic and build clientele in the worst times, so how much will you benefit when the economy starts roaring again?
No high costs
If you’re leery of going the franchise route, take a step back and look at the numbers. Some seafood and bar franchise opportunities look affordable and profitable, but the royalty structure can be uneven. Our tiered royalty structure begins at only 3.5 percent for the first year, which allows Franchise Owners to start earning quickly.
Keeping costs low should be the mantra for any business, but it’s critical in the restaurant industry during an economic slowdown. Food costs and labor are the two most significant expenses you’ll have to manage, and today’s rising inflation makes that more difficult without a solid business model. We’ve found tremendous success by helping our franchises build partnerships with sustainable sources and distributors.
A seafood restaurant can thrive during a recession, but you have to stay agile and be ready to adjust. When food costs rise, you must look for other ways to control expenses. At Shuckin’ Shack, it starts with a great design and a well-thought floorplan. Extra, unused space is a waste, so we designed our restaurants and bars with efficiency and speed on top of our mind.
By making the best use of smaller spaces, we limit the number of employees working at any given time to reduce labor costs. You shouldn’t need an eight-man crew to churn out fresh oysters and delicious cold bars. We also take a no-frills approach to our menu since there is no advantage to complicating products that are naturally delicious and desirable as is. This strategy reduces how much equipment we need to make more efficient use of available space.
Furthermore, our dining floor is optimized for efficiency too, so when you combine lower costs and high efficiency with excellent service, people will take it to heart.
A vast industry, colossal franchise opportunity
Despite headlines to the contrary, the restaurant industry is not collapsing in the wake of the covid pandemic. Many new establishments are doing better than before the lockdowns hit. The catch is that the restaurants with the most success were already prepared for a downturn by keeping costs low.
Shuckin’ Shack is strategically placed between the $295 billion quick service restaurant industries and the full service restaurant industry that generated $187.6 billion dollars in 2021. Today, it’s worth more as the business opens and recovers. But what’s the seafood restaurant market like?
The U.S. is the second-largest seafood consumer, consuming a total of 6.3 billion pounds in 2019 alone. Another way to think about it is that only 28 percent of people who eat seafood feel confident about home preparation. Most of us don’t have the chops in the kitchen to cook great seafood, so what do most people do? We visit our favorite seafood restaurant and bar because we know we’ll have a good time and get great value.
Not only that, but the general population is also becoming more health-conscious, which has led to 42 percent of consumers replacing other types of meat with seafood. One recent survey found that as many as 56 percent of Americans are now eating seafood at least twice a month! The challenge is getting those people to come to a Shuckin’ Shack and try something different.
Top-level marketing to attract new customers and grow the business.
Marketing is key to success in the restaurant and franchise business, and we strive to provide all the necessary tools for our Franchise Owners to grow and attract new customers. In addition to grand opening marketing, we provide social media support, public relations (PR), advertising, and media buy assistance.
We can also create an annual promotional calendar with quarterly marketing directives and promotions and give you access to an in-house graphic designer. That way, public and media relations will go much smoother, and you’ll have everything you need yearly.
So, do other fast-casual seafood and bar franchises offer the same level of support? No, they don’t provide the same help level because we’re leading the space. We learned a long time ago that the restaurant business is all about building relationships one at a time, whether it be with distributors or with the restaurant patrons themselves.
When it comes to growing a business, marketing is one aspect that first-time entrepreneurs struggle with because it’s easy to confuse “getting the word out” with a real marketing campaign. It’s not enough to put a chalkboard outside the front door with the daily specials and expect foot traffic to swarm into the dining floor. Instead, you need a 360-degree marketing plan that includes the technology side of the equation, like social media and website content.
If you try to work with the typical marketing agency, you’ll pay an arm and a leg for the same marketing assets we can provide in-house. There’s also the problem of executing the marketing campaign. No matter how much effort you put into digital assets, people will need you to follow through on what they expect.
For instance, let’s say you’re trying to build hype for the start of the NFL season, so you create a full slate of hilarious memes and great digital flyers to promote the opening night. That’s fantastic, but what will happen if your bartenders aren’t aware of the effort? Guests will enter the restaurant expecting a festive atmosphere, and the staff needs to match the energy. It’s an all-hands-on-deck marketing approach that’s worked well for us over the years, and we’re always looking for ways to improve.
A marketing success story – The Shack-lete Program
One of the hardest things you have to do as a restaurant Franchise Owner is build connections within the local community. Operating a fun, bustling restaurant is the idea, but you must make new guests buy into the Shuckin’ Shack experience. So, how do you do that?
One strategy is to connect with local athletes to support their endeavors and show the community that you care about them: The Shack-lete Program! It’s essentially a way to sponsor college athletes and help them make a modest living from their name, image, and likeness (NIL), which they couldn’t do until recently.
Former college athletes sued the NCAA to earn the right to use their NIL. Right now, the landscape is a bit like the Wild West because no one knows what to expect. Nevertheless, we see it as an opening for Franchise Owners to sponsor local college athletes – the underdogs going to college to earn a degree – and promote the restaurant. Once again, no one else is doing things this way, not in the fast-casual space.
The bottom line
You must look at the bottom line when trying to manage and prepare for a recession. The restaurant industry is no different but more resilient against downturns than you assume. In this post, we’ve gone over why the restaurant and bar business always makes it through choppy seas. People may cut back on discretionary spending here and there, but your regular guests won’t. To them, having a cold beer with new friends is worth the price.
We believe that a recession will arrive eventually. We just can’t predict how bad it will be or how long it will last. Nonetheless, we’re in a great position to help new Franchise Owners through this period of uncertainty.
Without a doubt, Shuckin’ Shack is riding the recession-resistant tides, and we invite you to join the crew. Don’t let a forthcoming and unpredictable recession get in the way of your entrepreneurial dreams because we’re ready to weather the storm. We’ve done it once during Covid lockdowns, and we can do it again for your franchise.
Visit our franchise website for more information about the Shuckin’ Shack franchise opportunity.
* Sourced from FDD Item 19, Table 5