Monday, January 14, 2013

Companies Phoning It In - Krystal

For the 2nd time ever, I recently went to a Krystal fast food.  I had to do some digging, but Krystal is owned by Argonne Capital Group, which is HQ'd in Atlanta, although Krystal's headquarters remains in Tennessee.  Why do I say Krystal is phoning it in?  First, their drive thru menu is a hot funky mess.  Sure, people who frequent there will probably know the menu by heart, but if they do then they don't need a menu. Who needs the menu?  NEW CUSTOMERS!

Ok, why is it a mess?
First, it's way too busy. It's like the person who built it played a lot of Tetris.
Second, it's trying way to hard (and too obvious) to steer you towards the combo meals.  All I wanted was a single burger and it wasn't listed. But every combo meal you can imagine was listed. I had to ask how much was a Krystal burger ($.79 in case you're wondering).  I consider myself to be reasonably intelligent, so I can imagine more than a few potential customers have given up and pulled off.  When I got to the drive thru window I commented on the mess of a menu. The response I got was "I agree, that's why I go to McDonalds."  Not oh snap. Double oh snap.

You might ask, how can I evaluate a whole chain based on one visit to one location?  Simple, and I'm going to make a few assumptions....

  • The drive thru menu was not designed by the location I went to. Any company worth more than $20 would have menus at all locations consistent, so the menu board is the same at every, if not most of their locations. Someone in the corporate office signed off on this box of 64 Crayola Crayons. I think it is blatantly designed to push you towards buying combo meals. Did it even go through consumer testing?  
  • The location is within 50 miles of Atlanta, where the parent company is headquartered.  If you let a location this close to the mother ship go, I can only imagine what more remote locations are like. Again, one of the employees felt no concern in referring a competitor. That says to me that there is no consistent hidden shopper program to assess quality. If there where, this employee would never have said that to a customer.


For most of my analysis, I consider 2 corporate models : Apple and Bradlees.  Why? Apple is doing it right, at every Apple Store, every minute of the day. Bradlees, before it closed down, was a perfect example of employees going through the motions (at half speed) and a corporation just trying to hang on long enough the distribute senior exec bonuses.

Avis used to have a slogan "We're #2, we try harder." I don't know where Krystal falls (not in the top 10) but I don't think their trying harder. They exchanged owners last year, so it might be that they are in the process of a massive redesign. The scary part is the current image was most likely part of some massive redesign.

As for an investment opportunity, Krystal is not publicly traded so even if I wanted to invest I could not. Why even write about it? Because the problems it has are not problems that would only be seen in a privately held company.  Sears (full disclosure, I used to work there) (SHLD) was $200 a share a few years ago, it's now $44. Have you been in a Kmart lately? Yeah, exactly.  I digress.
My point is if you consider investing in a company, one thing you need to consider is the customer experience.  When companies stop caring about what the customers experience, they've taken their eye off the ball. But I would imagine the corporate bonus structure is probably still intact.

Oh yeah, the burger was pretty good.

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