In the nearly 18 months since FSC Franchise Co. acquired Newk’s Eatery, the brand has taken steps to boost store-level margins and is finding ways to drive top-line sales. On the development front, a new franchisee in Georgia is preparing for his first Newk’s as part of a three-unit commitment.
Frank Paci’s energy was evident as he talked about the future of fast-casual sandwich and salad franchise Newk’s Eatery. Fresh off the opening of the brand’s 97th location, this one in Pascagoula, Mississippi, Paci, the CEO, said the resources of a larger parent company are being put to work in areas such as purchasing, construction and culinary to ultimately improve margins and drive development.
Acquired by Beef ‘O’ Brady’s and Brass Tap parent company FSC Franchise Co. in November 2023, Newk’s is part of an investment portfolio at CapitalSpring, whose private equity arm bought FSC in 2017. Newk’s is based in Jackson, Mississippi, and is the creation of Debra Bryson and Don and Chris Newcomb, the same team that was behind McAlister's Deli. The first Newk's opened in 2004.
“Now between the combined chains, we’re a half a billion dollars in revenue,” said Paci, whereas on its own, Newk’s was doing just over $200 million in sales. “It just really gives you a lot more resources.”
Newk's CEO Frank Paci says the brand's strong AUVs help make it an attractive concept.
FSC Franchise Co.’s purchasing group has proved especially impactful as Newk’s sought to drive down its cost of goods, be it to-go packaging, standard raw ingredients or a 6-ounce sirloin Newk’s may add to its menu.
“We're running much better store-level margins as a result of some of those items,” said Paci as he emphasized overall supply chain benefits under FSC. “And what that does, then it makes our restaurants have better unit-level economics, which then allows us to develop additional restaurants.”
Newk’s is in the process of upgrading its point-of-sale system and it continues to refine its technology stack. The majority of restaurants have ordering kiosks, and the brand is seeing strong digital sales growth, particularly from its rewards program. More than 25 percent of sales come from rewards members, Paci noted, and 55 percent of its business is from off-premises channels. Before the COVID-19 pandemic, about 60 percent of sales were from dine-in orders.
The shift in sales channels prompted Newk’s to reevaluate its store footprint. Restaurants were typically at least 4,000 square feet, but the brand trimmed that to 3,200 square feet and adjusted its kitchen layout to also pull cost out of the package. The cost to open a new location is around $1 million.
Improved sales forecasting tools, meanwhile, help operators plan more efficient labor schedules.
“Every week we forecast for the store, here's what we think your sales are going to be, both catering and non-catering sales this week, and as a result, you should have X number of hours in labor,” said Paci. “We didn't do that before, and now that we're doing that, we've seen our labor costs go down.”
It’s not purely about cutting labor hours, he continued, as the forecasts help target high-volume periods or opportunities to grow sales so operators know when to schedule more workers.
Even as Newk’s looks for cost savings in several areas, its adherence to high-quality food is unchanged. The fresh ingredients and made-from-scratch menu items aren’t going anywhere, said Paci.
“I don't get any pressure at all to degrade the quality,” he said, and it’s with better food and a better customer experience that Newk’s will be able to steal market share.
“You see brands that have struggled, and you kind of say, well, because once you start down that road, there's no way back,” Paci continued. “You get into a death spiral if you say, hey, I'm going to cheapen this because then, what do you do next year? At the end of the day, you’ve got to figure out how to drive the top line. And to me, we do that by offering a better overall offer.”
Though Newk’s will never be cheapest, said Paci—salads cost $12 to $15 and sandwiches and pizzas are in the $10 to $14 range—the brand has various value pairings and runs meal deal promotions. He said he’s constantly looking at the brand’s value scores, and Newk’s is testing a “pick three” combo.
Newk's Eatery has 97 locations and the brand is working to boost development.
Newk’s, which in 2019 had upwards of 120 locations, has seen its unit count decline in recent years to just under 100. The opening near the Gulf Coast in Mississippi earlier this month was the 30th corporate unit, and Paci said the company remains committed to developing its own restaurants because the economics are compelling, something more franchisees are recognizing.
“We're running $2.3 million average unit volumes as a fast casual, which is kind of near the top end, which makes it attractive,” he said.
Skip Russell, a longtime Popeyes franchisee who sold his units in that brand in 2023, is now developing Newk’s restaurants, with his third expected to open in Mississippi late this year. In Statesboro, Georgia, Rick Howard is preparing to open his first Newk’s after signing a three-unit franchise agreement.
Rick Howard is preparing to open his first Newk's restaurant in Statesboro, Georgia.
Howard, also a Wild Wing Café franchisee with four units, is developing his Newk’s restaurant as part of a three-acre parcel near Georgia Southern University that also has Dunkin’ and Popeyes stores in which he has minority ownership. Separately, he has two Window World franchise locations, is a Koala Insulation franchisee and operates his own restaurant concept, Toasted Kitchen + Cocktails.
When he began to investigate Newk’s, Howard said he was impressed with the product quality and strong, tenured leadership. He visited restaurants in Mississippi and later met with multi-unit operator David Weeks at his location in Athens, Georgia.
“He had nothing but great things to say about it,” said Howard. “One of the truest ways to find out is to talk to a franchisee. If they are really happy with it, more than likely it’s going to be a good brand.”
The emphasis on fresh ingredients at Newk’s is “not like a typical franchise,” he added. “At Wild Wing, we pride ourselves on fresh products and we do a lot of prepping. There’s always prep cooks in our store, and Newk’s is the same way.”
In addition to Howard’s location, Newk’s expects to open two or three more restaurants this year. Paci is carefully watching tariffs on steel and aluminum, which he said could affect the cost of restaurant equipment. The Trump administration increased tariffs on all steel and aluminum imports to 25 percent earlier this year before pausing hikes on those products.