Smashburger president talks price increases, supply chains, staffing, and restaurant traffic

Smashburger President Carl Bachmann joins Yahoo Finance Live to discuss managing freight and commodity inflations amid the supply chain, improving staffing conditions, and the industry outlook for fast food dining late in the pandemic.

Video Transcript

RACHELLE AKUFFO: Welcome back to Yahoo Finance Live. Now we're talking one of my favorite subjects, food. Now despite COVID, the rise of home delivery, rising product prices, and labor shortages, fast food is emerging as a more resilient industry. For more on that, let's bring in Yahoo Finance's Alexandra Canal to explore the future of fast food. Allie.

ALEXANDRA CANAL: That's right, Rachelle, one of my favorite topics, too. And I'm very excited to be joined by Smashburger president Carl Bachmann. Carl, so much to talk about in this space, but let's start with inflation. Price increases hitting the food industry especially hard. How have you guys battled inflationary pressures? And have you had to pass on any of those rising costs to consumers?

CARL BACHMANN: Well, first of all, thanks for having me. And absolutely, it's a challenge during these times with inflation. And there's a couple strategies that we've taken. We've had to take some very small, minor price increases, but we've been very strategic about that. The key thing here is really focusing in on your supply chain and making sure that you're managing freight costs and all those little pieces of the puzzle kind of behind the scenes to counteract the commodities as they continue to rise.

So we've taken some efforts there through redundant vendors, also through, like I said, freight discounts and combining efforts, and also using our global partners for buying power. All those things have to come in play. And you got to work harder at that to kind of combat that inflation because there is a point where people won't pay. And you want to make sure that we keep our guests happy.

ALEXANDRA CANAL: Yeah, you were just mentioning the supply chain crisis. The last time you were on, you said system redundancies, multiple providers, they were key to surviving these headwinds. Have you seen this situation improve so far this year? And if not, what else do you think needs to be done to really get you to a great spot within the supply chain?

CARL BACHMANN: I think supply chain is probably having the same issues that we are in the frontline operators, and that's with staffing. And I think there was a big staffing crisis, as we all know, across the country late last year and earlier in this year. We are slowly, slowly-- I want to stress that-- seeing some improvement there.

So that's the key, is once our supply chain has better staffing, and they're paying less overtime, they're not struggling for deliveries. I think that's been the key. And that's really how that little bit of a change as people get re-staffed-- and you see it. It's very linear as you see exactly as Omicron started to fade, within days, you saw a little bit of relief from staffing and manpower, all the way from supply chain to the front line.

ALEXANDRA CANAL: Yeah, you mentioned labor, staffing. Obviously, we've been talking about inflation, the supply chain. What do you think is the biggest risk to your business and the fast casual industry at large as we head deeper into 2022?

CARL BACHMANN: Well, I think the biggest risk is if fast casual operators don't realize how important food quality, taste is, vibrant flavors, really making your product line exciting for the consumer. I think people are more careful where they buy, when they buy, how they buy. And so I think that's the biggest risk in the industry. So if you're going to demand a certain price point, you've really got to deliver on, I think, bold, vibrant flavors and really be innovative. And I think that's what people are looking for-- innovation right now.

During the pandemic-- and I think we talked about it last time, but during the pandemic, a lot of restaurants kind of shrunk down their menus and took that as a direction to save cost. And we decided that was the time to really open up the doors and really get exciting, vibrant flavors and bold flavors and let people know that they're really getting value. So I think it becomes a value perception piece more than a price point piece.

ALEXANDRA CANAL: Yeah, we did talk a lot about menu innovation and how crucial that's been in luring customers back. We seem to be off the highs of this Omicron wave. How is foot traffic today? And do you cite some of those new menus and new products as helping bring people back to restaurants?

CARL BACHMANN: Yeah, I think there's pent-up demand. I think people are ready to get out of their houses and get off the Zoom calls and get off-- get back into the offices. We've seen a big jump in just traffic, both inside the restaurants and outside the restaurants. Now you're still working through all the compliance issues around mask mandates and vaccine mandates in certain parts of the country, so that's challenging.

But there has been a rise. Literally, the first weekend that we saw the Omicron numbers drop, we saw an impact in our dine-in numbers. And dine-in is very exciting for the fast casual operator, because the margins are greater. But I would caution you to say that delivery is a big part of our business. And delivery, though it got hyper grown or hyper growth during the pandemic, is going to stay here for forever. It's going to stay, so it's a big part of our business.

So we've seen incremental increases, both in our dine-in traffic, our own proprietary channels. And now I think the most important thing is to really focus in on giving people different channels to get our products. And one of those that we really think is going to be a driver is virtual drive-thrus. I think that's something that you're going to see here in the next few months. And you've seen a lot of the big players already start launching new drive-thru opportunities.

ALEXANDRA CANAL: All right, Smashburger president Carl Bachmann, thank you so much for joining us today. A lot of great insight there. And Brad, I will send it back to you.