Yum! Brands, owner of both Taco Bell and Habit Restaurants Inc., has beefed up the leadership teams of its restaurant divisions in the last few years through a series of internal trades.
These moves resulted in the addition of KFC executive Shannon Hennessy to the Habit team in 2022. A year later, she succeeded former Chief Executive Russ Bendel upon his retirement.
Bendel, who joined the chain in 2008, grew the burger chain from 16 locations to more than 350 during his tenure.
“To be able to come in and inherit that–and honestly, I probably never could have built that the way the team built it–is an incredible privilege,” CEO Hennessy told the Business Journal. “It’s continuing what he started.”
Hennessy, after 15 years as partner at Dallas-based firm McKinsey & Co., first joined KFC in early 2020 as global chief financial officer. In mid-2022, she was transferred to The Habit to be president until Bendel retired.
The Habit is Yum! Brands’ smallest restaurant chain in its portfolio; the largest by sales is KFC with the most locations. Yum! (NYSE: YUM) acquired the burger chain in 2020 for approximately $375 million.
“We’ve been on a journey to accelerate profitable growth since Habit joined the Yum! family,” Hennessy said.
Habit, Orange County’s seventh-largest restaurant chain, reported system sales decreased by 1% to $139 million in the 2024 second quarter.
Yum! marks Hennessy’s first stint in the restaurant industry, and she is determined to drive business improvement.
“What we need to work on is the restaurant economic side, and that’s where I felt like I could add a good amount of value with my past coming as the CFO from KFC, and my prior background being a consultant before that,” she said.
Magic and Margins
Hennessy said she had never been to a Habit restaurant until she became president.
“I was literally taking pictures of the food and sending it to my husband,” she said of her first meal.
After testing Habit’s quality of food, the in-restaurant environment and its digital options, Hennessy decided as CEO to make sure all these features would contribute to more profitability.
“I think in the next iteration, it’ll be about making sure that we can really expand that magic that always existed with more margin alongside it,” Hennessy said.
The Habit division’s restaurant margin was 8.5% at the end of 2023, up from 4.7% in 2022, according to Yum! SEC filings. In the most recent quarter ended June 30, the chain’s margin was 10.7% compared to 11.1% a year ago.
“The other thing we need to do is really continue that journey of healthy restaurant economics,” she added.
However, “because of that volume of inflation and the pressure on our profit and loss, there was no one silver bullet for us on our margin improvement initiatives.”
Efforts included working with a support vendor that helped Habit understand how to better offset higher costs of ingredients through pricing. Hennessy has also spent the last year looking at how she can leverage Yum! Brands to help the chain with ancillary costs.
“Being part of the Yum! family means that we now have access to suppliers that are very sophisticated in the approaches that they use, and so we’ve been learning from them about how we can do things differently,” she said.
“We’ve changed suppliers in some cases to be able to have access to folks who just produce in a way that’s more efficient but still incredibly high quality.”
Yum! Accelerator
Hennessy describes Habit as “slightly more premium” than its sister fast-food brands, which include Pizza Hut, Taco Bell and KFC. Another differentiator: 84% of the chains 372 restaurants are company owned, according to Yum! Brands’ Q2 data.
“From a kind of price and positioning standpoint, we cook to order. We own and operate most of our restaurants, so we are unique,” she said.
“We want to be the leader in the better burger space. In order to get there, we absolutely need to continue to grow quite quickly,” she added.
Yum! has helped Habit make better connections.
For example, “we are now part of the North American purchasing cooperative that buys for all of the Yum! brands,” Hennessy said. “Some of it is the scale and access to these innovations that the suppliers have, because they work with our bigger partners.”
Yum! Brands’ franchise network is another access point, Hennessy noted. Habit this year added a Taco Bell franchisee to its business as well as several other franchisees of its sister brands.
“It is amazing to have partners like that who come in and are able to grow the Habit in their geographies,” she said.
Other executives from its sister brands have also contributed to Habit’s current leadership team.
Habit’s current CFO Tiffany Furman came from Taco Bell and the chain’s CMO Jack Hinchliffe also joined from KFC.
“Yum! has been an incredible key ingredient for us to accelerate our growth,” Hennessy said.
Habit Burger’s Saucy Marketing
Habit Burger & Grill’s famed Double Char burger snagged the No. 1 ranking for fan favorite on USA Today’s 10Best fast food burger list, edging out crosstown rival In-N-Out Burger.
The Yum! Brands chain, based in Irvine, didn’t waste any time thumping its chest about the honor by poking fun at local rival In-N-Out, whose Double-Double ranked as the No. 2 favorite burger.
Not being on top is an unfamiliar spot for In-N-Out, a Southern California institution whose made-to-order messy burgers are beloved by local fans and celebrities.
Habit’s saucy, in-your-face ad campaign seized the moment by congratulating the runner-up in a series of billboards spread throughout California.
One of the billboards, which read “Congrats on #2, In-N-Out,” was located right across the street from an In-N-Out restaurant near the Los Angeles International Airport (LAX) on Sepulveda Boulevard.
“The billboard campaign is a great example of us investing more in marketing to raise awareness,” CEO Shannon Hennessy said.
Habit also threw shade at In-N-Out in full-page newspaper ads, as well as social media.
A Los Angeles Times ad said: “Dear In-N-Out, There’s so much emphasis on winning in today’s society.
Let’s take a beat to celebrate the silver medalists. The runners-up. There are hundreds—if not thousands—of burger options out there. And yours was just voted #2 by USA TODAY’s 10 Best. Number TWO! That’s pretty darn good. So, here’s to you, In-N-Out. Congrats on #2. Your friends, Habit Burger & Grill.”
Habit’s Double Char burger currently starts at $8.69 while In-N-Out’s Double-Double costs $5.90.
According to Business Journal research, In-N-Out ranks No. 3 among Orange County-based restaurant chains with systemwide sales rising 16% to $2.1 billion in 2023 while Habit placed No. 7, reporting a 5% increase in sales to $696 million.
—Emily Santiago-Molina
Subtle Rebranding
Diners knew brick-and-mortar locations of Habit Restaurants Inc. as The Habit Burger Grill until a recent refresh.
Dropping ‘The’ at the beginning, the chain will now operate its restaurants under the name Habit Burger & Grill.
The slight rebranding was a project the team considered carefully.
“Some of the aspects of our historic branding weren’t serving us well. They weren’t representing who we wanted to be in the marketplace,” CEO Shannon Hennessy said.
“We thought about a broad range of options. We considered options that were much more dramatic in terms of where we could go, and we considered options that were even more subtle than where we landed.”
Consumer affection for the chain’s side dishes, such as the tempura green beans, inspired the company to market the rest of its menu as efficiently as its charburgers, according to Hennessy.
‘Burger & Grill’ is meant to advertise everything on Habit’s menu, including the sandwich and salad categories.
The change also allows for new visuals in restaurants with updated menu boards and drive-through signage, and even its digital interface.
“It’s fresh enough that it telegraphs something that’s more in line with where we want to stand in the marketplace.”
