2020’s Breakout Brand: Another Broken Egg Cracks the COVID Code
By: Danny Klein From FSR Magazine
Published: January 2021
THE BREAKFAST CHAIN IS LEARNING FROM GUESTS, AND DELIVERING EACH STEP OF THE WAY.
Three decades into his career as a restaurateur, Paul Macaluso arrived at Another Broken Egg with something to prove. He left Krystal Burger in November 2019—his first CEO post and one that began only the previous April. By January 2020, the burger chain was bankrupt and on its way to a $48 million sale to Fortress Investment Group.
Macaluso, whose career includes stops at Taco Bell, Burger King, and prior to Krystal, as president of McAlister’s, says it marked the first time he wasn’t able to get things turned around.
He also never worked in full service before Another Broken Egg. This latter point is really where the chain’s industry-defying 2020 journey began, although, like all restaurant brands, it couldn’t possibly have predicted that at the time. Within four months of Macaluso joining, COVID-19 scrubbed the sector and darkened dining rooms nationwide. Another Broken Egg was no different. Early on, only five of its 70-plus stores stayed open.
As we know today, COVID mandates essentially transformed all restaurants—from fine-dining landmarks to neighborhood concepts—into quick-service concepts overnight.
Well before coronavirus, Macaluso asked Another Broken Egg’s leadership about to-go and third-party delivery. They tossed the notion aside. It represented just 2 of the business.
Yet come March, Macaluso knew exactly where to pivot. He had previous relationships with aggregators DoorDash, Uber Eats, and online ordering platform Olo, and set Another Broken Egg’s off-premises transformation in motion.
“My experience and strength in those things worked out because I was able to draw on that when we got shut down, and we were able to strengthen that because I had that experience,” Macaluso says.
And as a result, Another Broken Egg’s COVID downturn turned out to be more a lull than long-term setback. From late March to August, same-store sales trended negative, year-over-year, across the chain. But it’s boasted positive figures since September. As of mid-December, Another Broken Egg’s system was double-digit positive against 2019. Some units, even though they were shuttered for two or three months, were actually positive for the year because of the ground they’ve made up. Not just on a week-to-week basis, either, but against the entire previous fiscal calendar.
These results, as well as the runway remaining, earned Another Broken Egg FSR’s Breakout Brand of the Year for 2020 honors.
There are a few layers to Another Broken Egg’s story. The first, naturally, is the incremental jolt provided by off-premises, which did not exist in any meaningful way before and now accounts for 15 percent of total sales. It’s held steady as dine-in returned. Another Broken Egg’s base is heavily Southeast, so its avoided some of the harsher markets when it comes to rollbacks. Twenty-five percent of the company’s restaurants are in Florida.
But there are also more nuanced developments, too. “Alcohol just continues to be off the charts for us,” Macaluso says. Pre-COVID, Another Broken Egg reported between 10–12 percent of sales from alcohol mix. Today, it’s 25 percent, which has driven check and profitability to record highs.
Why this is happening is foolhardy to pinpoint. Perhaps customers just want a drink when they break quarantine habits? But it’s not a behavior shift Another Broken Egg plans to let go unnoticed regardless of the reason.
Starting 2021 in the company’s home Orlando market, it began to test a “bar forward” strategy, or “bar of the future” mantra. “We’re developing more fun drinks, or bar-forward alcohol, to see if we can continue to ride that wave,” Macaluso says.
Company Chef Jason Knoll says Another Broken Egg offers everything from a Brunch Old Fashioned to Spike Cold Brews, “and the innovation around these products will never stop.”
“We don’t just serve cocktails, but rather, the cocktail is a core piece of our menu and the guest can see that in our restaurant design and on our menus,” he says. “Our servers are also trained to share great detail on our cocktails and even suggest pairings with certain menu items. Additionally, people still want to have a brunch experience. The pandemic has had all of us inside of our homes and socially distant for many months and sometimes guests want to get together with core members of their family or a couple of friends and enjoy a delicious brunch with a cocktail in a safe environment.”
Alongside beverage sales, Macaluso says more guests are coming during the week. Again, the “why” might not be as important as the “what are we going to do in response?”
Likely, it’s a result of the same dynamics Knoll highlighted with higher drink mix: Customers are treating in-restaurant occasions as escapism. And with work-from-home tossed in, peak hours have blurred. A drink at 11 a.m. on a Tuesday? Why not?
And so leaning into experience climbed the ladder for Another Broken Egg. If people are going to take the risk, it has to be about more than just the food. And it needs to be something they can’t replicate at home.
“While there is an element of familiarity with some of our core cocktails, we also offer our guests creative twists on seasonal cocktails through adding things like herbs and spices, or flavorful liquors,” Knoll says. “Our cocktail innovation is part of what separates us from our segment competition, while also providing our franchisees with great margins and returns.”
“While we all know pizza, tacos or burgers are undeniably delicious, there are several different restaurant options available to choose from and guests frequently have the ingredients on hand to prepare at home,” he adds. “However, if you’re craving a Louisiana Crawfish Bowl or one of our signature benedicts, it’s very specific and you can only get those savory and uniquely paired flavors with us.”
Macaluso says he’s never been more excited for year-ahead planning than he is for 2021. Part of that is because Another Broken Egg has never enjoyed a more defined personality. The pandemic might have forced the 1996-founded chain to do things it hadn’t before (like delivery) but it also forced it to evaluate and reevaluate, and repeat, Knoll says.
The end product being a case study in what makes Another Broken Egg, well, Another Broken Egg.
“The beauty in that, however, is that it led us to pare down menu items and tighten up to focus on the signature products that we’re known for, like our Crab Cake Benedict or Lobster and Brie Omelets,” Knoll says. “We also had to place a greater emphasis on the menu items that not only taste amazing, but travel well.”
Out of the gate, Another Broken Egg’s menu went from about 60 choices to 20, which helped keep managers employed, as well as some hourly workers. The chain, in fact, never laid off managers, electing instead to shift them to open units during the height of closures.
While takeout was a foreign concept ahead of COVID, Another Broken Egg did make investments in secure and durable packaging—moves that “gave us a head start,” Knoll says.
At restaurants themselves, Another Broken Egg’s patios surged in popularity. The brand, just as it did with drinks, responded by diverting resources to meet the customer head on. It’s testing drop-down curtains and heaters, efforts to create three-season patios where possible. The company is also working with landlords to expand spaces. Where it had umbrellas in the past, it’s looking at fixed roofs. In units with the latter, it’s plotting how to add shades that drop down and block the sun and shield from wind. There’s also talk around upgraded fans.
“We even improved the quality of the furniture,” Macaluso says. “Make the furniture a little bit nicer, better quality, more fitting with the interior of our cafes, which are really nice.”
As you can see, the COVID response for Another Broken Egg is crystalizing. Track guest behavior. Find what they’re seeking. Then reinforce it in a way only Another Broken Egg can.
To put it simply, the chain isn’t chasing operational ghosts.
For all the uncertainty and unprecedented disruption tied to the pandemic, Another Broken Egg has let customers write its comeback blueprint. And the tactic of late is to double down across those areas.
If you go back to Macaluso’s early goals, he devised a three-year plan for Another Broken Egg centered around franchise growth. This isn’t surprising given his tenure with franchise-heavy FOCUS Brands, where he started as VP of marketing at Moe’s Southwest Grill, and progressed into a position as SVP of brand marketing strategy, leading the collective efforts for the company’s six chains (McAlister’s, Auntie Anne’s, Carvel, Cinnabon, Moe’s, and Schlotzsky’s).
Another Broken Egg started to grow in 2018 before slowing. The Beekman Group acquired the company in 2017 and debuted a fresh growth model the following July. Within a year, Another Broken Egg recruited nine franchisees to roll out 31 locations, or a roughly 40 percent increase. And by the time 2020 arrived, there were 68 cafes nationwide, with 14 on deck for the year.
In Macaluso’s plan, Another Broken Egg expected to sell franchises to six to eight new operators in 2020 and then ink deals for about 40 openings over the next three to five years. Thanks to COVID, understandably, it fell short. “We didn’t have a lot of people coming in for discovery days or anything like that in March and April,” he says.
Although the pandemic delayed Another Broken Egg, however, Macaluso says it’s more a reset than a realignment. He says they’ve pretty much just pushed the plan back a year. And in the last couple of months, franchisees started to show renewed interest and some even travelled to visit the company’s remodeled Winter Park, Florida, location. Another Broken Egg recently signed a new deal in Virginia. Some existing operators who didn’t have future plans have decided to explore adding on. “So we didn’t get 40, but it looks like we’re going to get about six or seven new commitments this year for future years,” Macaluso says.
“The momentum is starting to build and we think going into next year, as we come out of this thing and we can really see the full horsepower of the brand, we know we’ll catch up on that three-year plan,” he adds.
Another Broken Egg has 20 operators across its 72 restaurants, including corporate, which runs 10 stores. The company’s average franchisee owns about three, but the spectrum varies. There’s one who directs 23 venues and a “bunch” who have just one. “It is a lot of the smaller ones, the ones who have two or three, who are now excited and reenergized, and are now starting to scale up and add on additional units,” Macaluso says.
Another Broken Egg’s profitability initiatives during COVID, like menu simplification, renegotiating contracts with suppliers, and improving food costs, drummed up interest as well.
“One, they see the improvement on the top line. I think they’re surprised. Holy crap, we’re growing? You hear all the stories about closures and stuff,” Macaluso says. “It kind of reconfirmed how strong the brand is and how much the customers love the brand and our food. Two, they see the focus in the middle of the P&L, we’re improving profitability. So not only is their top line getting stronger, but they’re actually flowing through more.”
Beekman directed the brand before it hired Macaluso. Since, he’s put on face on the franchisor-franchisee relationship. Another Broken Egg started a profitability committee with operators and opened lines of communication. For instance, it stopped calling corporate headquarters the “home office.” It’s now labeled the “café support center.” Sounds like a subtle fix, but it goes a long way to change the culture of support, Macaluso says.
Another Broken Egg plans to expand concentrically and infill as much as possible. It entered a couple of new markets in 2020, including Kansas City. Virginia will be a fresh territory as well. “We’re kind of going up the Eastern Seaboard and Southcentral U.S.,” Macaluso says.
Behind the scenes, Macaluso is putting focus into CRM and improving Another Broken Egg’s loyalty and consumer engagement tools. It’s going to zero in on local store marketing in particular.
“We have a bunch of different ways to talk to people today. We’ve got email. We’ve got online ordering through Olo. We’ve got social media, obviously,” Macaluso says. “But trying to make sure all of the ways we talk to people are connected and relevant so that through the loyalty app and the loyalty program will be able to have a more strategic approach with how we talk to people and understand when they come to us, why they come to use, and speak to them in a more relevant way.”
Think of it as loyalty outside of buy one, get one. Rewards that make guests feel part of the brand. In one example, Another Broken Egg doesn’t take reservations (it has a waitlist system). But it’s offering more frequent diners a chance to do so. “Give them real value,” Macaluso says. “Save them time and save them money.”
Moving into 2021, Macaluso says Another Broken Egg will push forward with all of these developments and continue to focus on profitability, differentiation, and future growth.
“I don’t think I’ve ever been so excited for what we’re going to do next year. I think it’s all going to be amazing,” he says.