Cotton Patch wants to be the biggest comfort food concept in Texas. | Photo courtesy of Cotton Patch Cafe
Cotton Patch Cafe had been struggling for years when CEO Brandon Coleman arrived last February.
Fresh off a brief stint as the chief executive of TGI Fridays, which was facing troubles of its own, Coleman was charged with reviving Cotton Patch, a 48-unit, Dallas-based casual-dining chain known for comfort food staples like chicken-fried steak and meatloaf.
He had his work cut out for him.
Coleman found a brand, he said, that had lost sight of its customers, its employees, and its shareholders at private-equity firm Altamont Capital Partners, which acquired Cotton Patch in 2016.
Previous management had raised prices significantly against inflation, damaging the chain’s reputation for value. They had “watered down” the brand with unnecessary menu innovation and marketing moonshots. Internally, morale was low. One former leader fired two-thirds of the management team, Coleman said; another “didn’t build people up.”
“We’ve had some management struggles,” he said, “some struggles in continuity, on vision and purpose, and some struggles with culture.”
It all trickled down to the restaurants, where traffic plunged 10%.
Eighteen months later, it’s a completely different story. Since Coleman took over, Cotton Patch has jumped from the basement of Black Box Intelligence’s traffic index to the 93rd percentile. Earnings have increased tenfold. And the chain is ready to start opening new restaurants again, with ambitions of doubling its footprint in Texas alone.
To do so, it took some inspiration from another Texas-based casual-dining chain in the midst of a miraculous comeback story: Chili’s, which is based about a 15-minute drive from Cotton Patch HQ in Dallas.
“I was talking to [Chili’s CEO Kevin Hochman] at an event before the huge run-up Chili’s had, and what he said just made sense,” Coleman said. “They focused first on simplicity of operations and execution, and then they found the campaign that unlocked all of this top line.
“I think we’re in some ways a mini, comfort food-flavored Chili’s, as far as the turnaround and the comeback,” he said.
CEO Brandon Coleman. | Photo courtesy of Cotton Patch Cafe
Cotton Patch’s guiding principle under Coleman has been to find strategies that will benefit its three key stakeholders: employees, customers and shareholders.
To do that, it has used a simple traffic-light system. Each initiative is assigned a rating of red, green or yellow for each stakeholder group. Green is good, yellow is acceptable. “We take no reds,” Coleman said.
But among that group, employees were the company’s first and biggest priority. It worked to sweeten its employment proposition, raising manager pay across the board and adding more benefits, like a 401(k) option, tuition assistance and a profit-sharing program.
Perhaps equally important, it worked to get staff more engaged in the company’s direction and performance. When Coleman started, he said there was “0% recall” among employees of Cotton Patch’s goals for the year. Now, those goals are restated at each one of the chain’s newly instituted town halls, held each month at headquarters.
At those meetings, Cotton Patch shares its results with the entire company, which it had never done before. It recognizes an employee who reflects the brand’s values. And then it opens the floor for questions and comments.
At the first town hall last year, “we had just crickets” during the feedback portion, Coleman said. Employees weren’t used to being asked for their input. Now, the town halls routinely run over their scheduled time because of all the discussion.
“There’s so much content now, and that’s what makes me really proud of what we’ve done here,” Coleman said. “The results are incredible, but the team’s engagement was my number one goal coming in, and it’s really paid off in dividends.”
One marker of that cultural shift: Manager turnover is down to 23%, from 40% previously. It has also added more managers to its restaurants.
“Now we have a culture where people are hearing about what it’s like to work at Cotton Patch, and that’s made it easier to recruit,” Coleman said.
“That $9.99 price point was really important for us, to get in under $10.”
With employees on board, Cotton Patch could then focus on driving customers back to its restaurants.
It started by lowering prices on certain items—a “big no-no” in today’s restaurant business, where margins are as razor-thin as ever.
For instance, the chain traded its combo “plates” for baskets, which it felt was a more approachable format. It lowered the prices on those, while also increasing the portion sizes on its fries.
It also introduced seven value meals for $9.99, jumping on a tactic that has worked well for other casual-dining chains (especially Chili’s). Cotton Patch’s Texas Value Meals rotate daily: On Mondays, the deal is for chicken-fried steak with two sides; on Thursdays, it’s chicken tenders with fries. On Sundays, customers can build a platter of any five sides.
“That $9.99 price point was really important for us, to get in under $10,” Coleman said. “It’s a full-square meal, at a sit-down restaurant for under 10 bucks, and I think that’s an outstanding value.”
At the same time, it has invested in better ingredient quality as well as better service, a goal that is summed up in its companywide purpose for the year, to “inspire more smiles.”
Coleman likes that purpose because it’s something employees can see happening in real time. Also, “It’s a bigger purpose to get out of bed rather than just serving chicken fried steak.”
Customers have responded. Cotton Patch’s traffic is up as much as 10% year over year, a 20-point swing, and the customer experience has improved along with it: The chain’s star ratings on Google have gone up a whole point, from 3.8 to 4.8, Coleman said.
The chain has also taken a different approach to marketing all of these changes. It has shifted from coupons and discounts to more broad-based campaigns, including connected TV ads, with the goal of reaching as many people as possible. Coleman said this strategy is more appropriate for an everyday dining option like Cotton Patch that just needs to be in people’s consideration set.
“It sounds stupid, but everybody eats,” he said. “Getting too finite or too constricted on your targeting, while it may give you a better conversion rate, often misses a large audience that could be dining at your restaurant.”
He called the top-of-funnel approach Cotton Patch’s “biggest transformation” and credited it for powering the chain’s spectacular traffic swing over the past year.
“We know Texas, we win Texas. And I think that we can take Texas from Cracker Barrel, no problem.”
Though all of the above has required a significant investment on Cotton Patch’s part, that has been more than offset by the sales and traffic growth that has followed, Coleman said.
“We’ve given more to the team, we’ve given more to the guests, and as a result, we’ve given a lot more to the shareholders to 10x EBITDA,” or earnings before interest, taxes, depreciation and amortization, he said.
And, he said, there is more room for growth, including more restaurants. Cotton Patch conducted a study that showed it could more than double its footprint in its home state, to 100 locations.
And it is intent on remaining a regional brand. It has three stores in Oklahoma and New Mexico, but it is strictly focused on Texas for now.
“I think there’s a really compelling proposition here that you can double the size of this concept” without running the risk of it failing in new markets, Coleman said.
As Cotton Patch grows, it will look for second-generation restaurant spaces, which will allow it to grow faster and more efficiently. Cotton Patch doesn’t have a specific prototype, Coleman said, which makes it easier to occupy former restaurants.
And, like it did with Chili’s, Cotton Patch will set its sights on another, larger brand for motivation as it expands. Coleman wants Cotton Patch Cafe to become the largest comfort-food chain in Texas by unit count. That will mean overtaking Cracker Barrel, a feat it believes it can accomplish by 2030.
It does not have that far to go: According to Cracker Barrel’s website, the chain currently has 47 locations in the Lone Star State.
“We know Texas, we win Texas,” Coleman said. “And I think that we can take Texas from Cracker Barrel, no problem.”
