Schlotzsky's Is Betting On A New Store Model | Fast Five Shorts

Schlasky's Deli, the 55 year old sandwich chain that has been through more name changes than most brands have had menu revamps, is going back to basics re embracing the deli name and launching a next generation prototype designed to slash operating costs by 20 to 25% according to chain storage Goto Foods owns Schlatsky's, officially returned to the Schlastkey's deli name after a 2025 guest survey found 2/3 of respondents already called it a deli and qualitative research revealed many customers didn't even know Schlacky's was a food brand.

Chief Brand Officer Donna Varner said, quote People would say I thought Schlotzki's was a dry cleaner.

I didn't realize it was a food place until I saw Cinnabon on the side.

End quote.

That's a great quote.

The new next generation prototype caps at approximately 2100 square feet versus a previous range of 1400 to 3600 square feet.

Key features include self order kiosk garage, dedicated digital pickup zones, grab and go offerings including premade cold deli subs and an optimized back of house layout.

The model can operate with as few as two employees during slow periods.

For context for those may be unfamiliar with Schlotsky's nationally as some of us may be, it currently operates 290 locations in 25 states and sales have declined 4.7% in its most recent reported numbers.

Joanna, when was the last time you ate at a Schlotzkis number one?

And is the Schlotzki's deli rebrand and prototype something that will move the needle?

I am, I am embarrassed but I will say I've actually never had the pleasure.

Oh my God.

I know, I know.

Gasp.

Pause for gas.

I have had dry cleaning done however, so if that, if Schlotzki's is a dry cleaner then I have had directly

done it probably is a dry cleaner named Fudge Schlotsky or something like that, you know.

Yeah, right, exactly.

But I unfortunately I've never had it.

I am familiar with it with their fresh quality and sort of that round bread that they're known for.

So barring having taste tested it, I will say I think it seems kind of, you know, more along the lines of a smart move to kind of amp up the franchise optionality for them and helping to get their quality and their, their cult like following kind of going again.

They are competing against fast fresh options and and the need to give Easier access to their differentiated freshness is, is important for them.

In our recent AM CRG Crave report, we saw that 83% of frequent QSR orders are done through pickup or delivery or a drive through format.

And so the store, store designs and the considerations, the self serve kiosk and, and the formatting for sort of that gig pickup does seem to align with what we're hearing from consumer sentiments as well.

So I think at the end of the day, I think we need to see a franchisees embrace this and actually expand the footprint in order to know whether or not it actually moves the needle.

I had no idea you guys had a Crave report.

I got to get, I got to get.

We have that one that sounds right up my alley because first of all, it's like a shot to the heart when you tell me you've never had a Schlotzkis, Joanna.

Because like I, I was, I was, I was ride or died with schlotzkis back in 1999 in Tempe, Arizona.

I used to go there all the time and I've been sad that I can't get it anymore.

That's actually, I actually think it's really good.

And so what this makes me think though is I actually, I, I love the moves for you said, I think operation like this is how QSR is moving operationally.

But what, when I hear the quote from her and Cassie want to get you in on this.

Like this feels like the DeWalt Business School case, only for QSR in terms of like the rebranding of Black and Decker to DeWalt and taking over the industry.

I mean, it seems like nothing but upside when, when people are confusing you with, with, with a dry cleaner.

Right?

Yeah, I mean, I think it's the right move for them and I'm excited to, you know, see how this turns out.

But I do think that, you know, store design is a tool for them.

It's not necessarily their strategy to win because it's still, you still need someone to wake up and choose to go to Schlotzki's and where they're having this brand image problem.

Your store design is not going to change that.

So I think there's a little bit of, you know, the jury is out from there and how do they then make sure that everyone is making that choice?

Because especially, you know, Joanne is talking about how 80 something percent are going to be either, you know, delivery orders typically right now or some kind of, you know, doordash of that nature.

And so people are not going.

They're scrolling through their app.

They have to choose you.

And if you don't have that brand name recognition, it doesn't matter that you've saved on your operating costs and you've been able to make it a smaller footprint.

So the math makes a little bit more sense for franchisees if you're not driving the customers to you.

So I think there is another level that they need to make sure that they nail as well to get this.

But I think it's the right first move for them because it is making it more attractive.

But if they don't have that, you know, know, rebrand hit, I think, you know, is this really going to help?

Right?

Yeah.

There's going to be some customer acquisition costs to get people in the door, you know, regardless of what the.

What the physical footprint starts to look like.

Yeah, right.

All right.

Well, I pull in for Schlotzkis.

I don't know, but I guess.

Joy Cassie, have you been to a Schlotzkis?

I also have not, but I feel like I might need to try it next time.

I am.

I'm somewhere that I can get my hands on.

God, it's like, it's like the lowest hanging fruit waiting to be picked up by the Schlotsky's people.