The Kansas-born chain stepped outside the U.S. for the first time this year. | Photo courtesy of Freddy’s.
Expect to see more Freddy’s overseas.
The fast-casual frozen custard and steakburger chain made its first international step into Canada this year, with two more north-of-the-border units coming before the end of the year.
Now the company is also looking at Europe, and deals are close to being signed for the Philippines and Mexico, said CEO Chris Dull in an interview with Restaurant Business.
Freddy’s last week announced a change in ownership with the acquisition by private-equity firm Rhône. It was reportedly a $700 million deal, though Dull could not confirm or comment on the terms.
What he could say, however, was that the deal would add fuel to the fire for international expansion. Rhône’s portfolio includes the coffee company Illy, and the firm previously owned the Brazilian upscale-casual brand Fogo de Chao, which operates around the world.
“Rhône has a great understanding of the international markets and I definitely think they can be a value add there,” Dull said.
With 574 units operating across 39 states domestically, there’s also plenty of white space for Freddy’s in the U.S., he said.
Freddy’s has a backlog of about 570 franchise restaurants committed, and the new ownership will help speed those units to fruition.
Only 36 Freddy’s are company owned, though two more company units are expected to open in the next few weeks, Dull said.
About 60 franchised locations are expected to open this year, with another 70-plus next year.
“Even though the brand is over 20 years old, we’re just starting to hit our stride,” said Dull. “It really feels like we’re just ending the first inning.”
Freddy’s units are about 95% franchised. | Photo courtesy of Freddy’s.
That growth, however, comes amid a challenging backdrop. Freddy’s falls somewhere between quick-service and fast-casual, and most units have a drive-thru. The chain’s average unit volume of $1.9 million has been flat this year, and the brand has not been immune to macroeconomic headwinds.
Dull said Freddy’s is forced to compete against the aggressive discounting in QSR as fast-food chains battle for an increasingly skittish consumer.
“That’s something we don’t do. We’re not a discounter,” he said. “We’re not putting forward a value meal or discounted meal for our guests.”
Instead, Freddy’s goes more premium with limited-time offers. Dull said those offers have a higher contribution margin, which, in the end, is better for franchisees.
“Even though our units may not be seeing meaningful same-store sales growth compared to last year, the sales that we’re doing are more profitable than in prior years because the offerings we’re putting forward have significantly larger contributions,” he said.
Freddy’s has also trimmed labor costs and boosted throughput with some improvements in kitchen operations.
The chain has switched to an automated burger press, for example, which has eliminated some labor hours and improved cook time. Freddy’s has also made modifications on the makeline that have reduced training hours and improved guest-per-labor-hour metrics.
The chain has been working on building its digital presence over the past few years. Freddy’s launched web-based ordering and an app in 2022, and Dull said the brand is working on growing both first- and third-party digital sales—while still adding touches of hospitality to the customer experience.
Rather than a traditional pass-the-bag-through-the window drive-thru experience, for example, Freddy’s gets team members outside the building to greet guests, deliver the product to cars, ensure accuracy is there and make sure both customers and delivery drivers have what they need before they leave the premises.
With the acquisition, the executive team will remain in place. Dull said, if anything, the company might look to build on its franchise development team.
Nontraditional growth is another opportunity, in airports and sports stadiums, for example.
Any changes will be about growth, he said.
“We’re not looking to trim back as much as build on a great team.’
