The US QSR category spends as much on marketing each year as the GDP of Colombia. National brands are often global, and regional brands, such as the southeastern brand Krystal, are growing their footprint, and influence. In this interview, US Commissioning Editor Cathy Taylor discusses the quirky Krystal brand with CMO Alice Crowder.
This article is part of the March 2022 WARC Spotlight US series, “For QSR brands, a menu of disruption, digital, and dazzle”. Read more
- There’s a difference between how much prices should rise to cover costs and what consumers are willing to pay. Understanding that there is elasticity at a unit level, and with the customer base, Krystal prices items so that there are options for the widest range of customers.
- By hiring the rapper 2 Chainz as Head of Creative Marketing, Krystal is tapping into QSR’s celebrity partnership trend, and has found that its association with him has led to results that are up in the double digits in the Atlanta market, where the partnership is currently focused.
- As Krystal expands beyond its southeast US home base, into Puerto Rico and New Jersey, it is tweaking its menu selections to fit local tastes. For instance, the Krystal slider, which is usually served with mustard, onions and pickles, will contain a ketchup version to cater to the northeast market.
- As delivery orders have become a bigger part of Krystal’s business, it has changed its approach to product development, testing new menu items in two groups, one which tries them right away, and one which tries the food after 20 minutes, mimicking the deliver experience.
Could you first give an overview of Krystal? As a regional QSR, mainly in the southeast US, many people might not be familiar with it.
Krystal is the second oldest fast food chain in the country. White Castle, in the northeast, is the oldest. We started in the Depression as a way to offer a good amount of food for a value. The first Krystal order was six "Krystals" which are sliders, and a cup of coffee, for 35 cents. White Castle, which also offers sliders, owns pretty much the Northeast, and we own the southeast, so there's not a lot of overlap between the two. For 90 years, the menu has been built on these small, handheld, high-flavor indulgences. There's the Krystal and the cheese Krystal. We have a "little Chik" -- a fried chicken sandwich -- and a small hotdog we call a ‘pup’. We make it in a chili cheese form. We have shakes. Loaded fries.
What people love about the brand is that you have this opportunity to mix and match, according to your budget, your palate, your cravings. We do have a Southern flavor to our food, but I wouldn't call us a ‘southern’ brand. What people associate us with is really the fun and joy of this quirky, high crave-ability experience.
How are you dealing with the inflation issue?
I would say easily 25% of my meetings right now are supply-chain related. There's the problem of getting things, period, but the costs are so widely fluctuating and escalating so quickly, it's really a challenge for us. Just this week, we were looking at prime costs [main pantry and labor costs] and what we would have to do to match that with our pricing. My finance friends were like, "Well, we think prime costs are going to go up, so you need to increase pricing by ‘Y’". And my pushback as a marketer is always, "Totally hear you, but there's what the consumer will bear, too."
We've just done a huge study to figure out, on a unit-level basis, what the elasticity looks like, and what you can actually expect guests to pay. We all have to be a little smarter on what we choose to promote, and how we put those deals together.
We try to serve two masters, understanding there's elasticity at a unit level, but also within the consumer base. When we bring in a product, for example, pulled pork, I have a value version that goes on to my value menu, but I also have a premium version for people who can afford to pay more. I'm trying to get the best of both audiences where if you can really truly only afford "X" I have a solution for you, but if you have a little more money in your pocket this month, check out this option that has more to it. All of my promotions are structured that way.
In terms of your marketing, can you give a broad overview of what channels you use?
We want to meet our guests wherever they're willing to be connected with us. So, we have a traditional marketing output with television, OTT, digital, a lot of Facebook, a lot of YouTube, a little bit of billboard, a little bit of radio. Social is increasingly important to us. We have a growing group of influencers we use to get the word out about the brand. Some of those are partners with us; some are independent. We do our own social posting, but we also have a partnership with several SEC [Southeast Conference, one of the US' collegiate athletic associations] entities that launched last year. We have about 40 SEC athletes and we use those voices, and their relationship to the brand, to reintroduce or strengthen the relationship we have with our guests. We see incredible engagement with them. The campaign we did last fall had a 17,000 index compared with our regular social posts.
A lot of people enter their relationship with Krystal in their college years, when they are pulling an all-nighter, or perhaps they've been partying a little bit. Everybody has a Krystal story in the southeast and many of those stories start with some late-night shenanigans that end up in a Krystal parking lot.
What social channels do you find most effective?
We're on just about anywhere. Facebook is for an older crowd, but Instagram is huge for us and for our influencers. Our relationship with the rapper 2 Chainz really blossoms on Instagram. We're a little bit on Twitter. We're starting to talk about things like Snapchat, and platforms like that.
Do you use TikTok?
Yes! In fact, the influencer content we have been gathering for the spring with the athletes – some of them have signed up to do some TikTok footage for us.
You mentioned 2 Chainz, who you recently named Head of Creative Marketing. That relationship is emblematic of the innovative ways QSR brands are using celebrities. What do you anticipate from the partnership?
I'm so interested in how celebrity is lending its halo to different brands, though one of the things I don't like is when it's just putting their name on something, and then moving on to the next thing. That's not something we wanted to do. One of our owners, Jonathan Childs, met 2 Chainz through a mutual friend. They started talking about how important that Krystal relationship was in their formative years, and it really grew out of that.
2 Chainz is becoming integrated into a lot of pieces of the business, so certainly he will have an influence on product. He's going to have a couple of restaurants in Atlanta that are 2 Chainz Krystals, if you will. They're decorated in his style, and have his memorabilia. We used one of the restaurants recently to launch his new album, "Dope Don't Sell Itself.” We created a pop-up event that lasted a little over a week in the parking lot and rewrapped the restaurant in the album art. We wrapped the little Krystal slider boxes at that location in the album artwork. He really introduced his fan base to Krystal through his eyes. Now we're starting to talk about, "How do we keep the connection at this restaurant going? How do we amplify it for the rest of the system?
When you enter into a partnership like this, what are your KPIs?
For me, it's a bottom-line sales number. The restaurant we have started co-running with 2 Chainz, we're seeing results up in the double digits from the rest of the market, and we're seeing that the market, Atlanta, is doing better than the rest of the system.
We've been around 90 years, so our aided awareness and even our unaided awareness is super high, but we may not be as high in their consideration set, so folks like 2 Chainz who can say, "You may not have been in a while, but this place is still relevant. It's still craveable. It's still awesome” – that translates into shortening that visitation cycle.
How do you navigate being a regional brand, where you can highlight cultural touchstones, with competing against national players?
It's a fine balance. We're not a brand that screams "Southern," like a Cracker Barrel. A lot of our guests just assume Krystal is everywhere. They don't see it as a southern brand, and so we don't necessarily want to be seen that way.
That said, our grits are made from scratch. Our sweet tea is very sweet. They're important to a southern palate.
Where are you expanding?
Wherever there's a crave! We are working with a franchisee in Puerto Rico. One of the things we're talking about with their team is, "How do you take the palate expectations of a Krystal and modify them, so that in Puerto Rico, those guests feel the same way about Krystal as guests in Georgia or Chattanooga?" We want to be home, to wherever we are, to the people there. With our relationship with former New York Giant Victor Cruz, we're going to be opening five restaurants in New Jersey. I'm not sure my homemade grits are as important up there. A Krystal is made with three of the most polarizing flavors, you can think of – mustard, pickle, and onion. It's a pretty specific combo, so one of the things we've learned from research is that up in the northeast, we're going to have to have a ketchup version.
It's going to be an iterative process. We start with, "What do we want Krystal to be wherever it operates?” We want it to be a dining spot that feels like an extension of home, but that is fun, a little quirky. We can give you five or 10 minutes of fun, a little bit of indulgence, so whatever the menu needs to be to serve that emotional mission, we're going to do it.
How are you researching different regions?
We're working with the franchisee [in Puerto Rico], who has their own marketing firm they work with for other brands they've built in the area. We're going to them and saying, "You help us get up to speed on what's important, not just from a messaging standpoint, but a palate standpoint.” We do a lot of concept testing. We do a lot of simulated market testing, so we're going to take the inputs we get from experts in the DMA [designated market area], and put it through a traditional research funnel with some custom research.
How did your customers change during the pandemic?
Not just specific to Krystal – people in general got a lot more comfortable with off-premise dining. Two years ago, the percent of Krystal’s sales that were off-premise, people ordering through Uber, DoorDash, or GrubHub, was about 2% of sales. Today, that sits at about 8.5%. We think by the end of the year, it'll be 15%, so something that wasn't in the guest consideration set largely, has now become a mainstream dining solution. It's been interesting because for those guests, it's the crave-ability and convenience that comes first, and they're almost willing to sacrifice quality for that.
When we first started with this program, we were not going to put french fries on third-party [deliverers] because fries don't travel well. But then, as we rolled it out, people are like, “If I'm going to get Krystals, I need fries.” We put them on, fully expecting there would be this huge outcry, and people didn't care. They were like, "I expect my fries to be a little soggy and a little cold. I know you're doing the best you can.”
Nevertheless, we've tried to improve our packaging and our offering, so a lot of our product development now is what travels well. When we do a central location test, which is a quantitatively significant taste test, we test part of the group by having them eat the item right away and rate it. With the other tranche we wait 20 minutes, and then have them eat the item, and rate it – because we know that a significant portion are going to be experiencing the food that way. It has to be good immediately, but also has to be good 20 minutes old.
How else have the last few years changed your marketing in terms of messaging and channel selection?
Like the guest experience, marketing has become much more nimble. Now there's this proliferation of platforms. We try to use the best mix we can to reach the highest number of people the most effectively, but it has shifted. We did not have an app until late last year; it was one of the first things I worked on when I rejoined the brand [in April 2021, having previously served as vp/marketing from November 2014 to October 2018].
We transformed our app and website into being much more oriented towards orders, because that's what people demand. The patience with getting your food is pretty low, so If my app is not immediate, I'm going onto the next app. We've focused a lot on user experience with our own apps, as well as with our third-party providers.
It's also important to build first-party relationships, especially with what's going on with cookie deprecation.
One hundred percent. I love my aggregators, but they control the data, so when I can get somebody to come to my app, first of all, I'm not competing with every other food service provider out there, but I'm also learning about my guests, and how to communicate more effectively with them with every interaction I can push towards my app.
Do people ordering from you think about that DoorDash is delivering the food, not Krystal?
If something goes wrong, it's 100% on us. whether it was the brand's fault or not. The onus is on us to make it as foolproof on our side as possible, so that means having the food there when the Dasher gets there, making sure it's packaged properly, making sure we've checked the order before we seal it up, and taking as much of that variability out as we can.
Read more in this Spotlight series
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As delivery services disintermediate, QSR brands should build emotional engagement
Mingthoy Sanjur, Jeremy Cline, and Bret Smith
Using branding, menu development and under-used equipment and staff to launch virtual restaurant concepts
Daniel Carpenter, Jennifer Jones, and Amy Shipley
How to please QSR's most demanding cohort: Gen Z
O'Keefe Reinhard & Paul
The shift to restaurant delivery inspired by COVID-19 is unlikely to stick for most consumers
WARC Infographic: US QSR by the data – Where people are eating, how brands are spending, and the chicken wars