units. And it enabled the compa- ny to make that big blowout at the ICSC event. “No. 1 is capital, No. 2 is intelli- gence,” Dollarhyde said. “That in- telligence plus that much capital, plus hiring really good people in the business, just put Chipotle on the map.” One of the concerns with Baja Fresh was its speed, or at least the perception of it. Baja Fresh operated in a more traditional fashion. Customers paid for their order and it was handed to them some time later. But Chipotle had taken the assembly-line meth- od pioneered by chains like Subway. Customers chose their own ingre- dients for their burritos and paid at the end. “There was a perception that Chipotle was faster,” Dollarhyde said. And maybe it was. “It was ac- curate up to a point.” Yet he also ar- gued that sometimes Chipotle cus- tomers walked in, saw the queue of customers waiting for their shot to create their own burrito. Nevertheless, going up against McDonald’s and Chipotle would take cash. And Dollarhyde relayed a sit-down conversation he had with Schuessler.
Dollarhyde wanted capital for Baja Fresh. “We’re going to grow this thing. We need capital,” he quoted himself telling the Wen- dy’s CEO. “I have to fund some marketing for franchisees, because we have brand new franchisees in brand new cities like Detroit and Boston. They don’t know what this green stuff is. It’s on the side. And we call it guacamole.” “We didn’t have the available funds to do that,” he added. “We had the financial plan. And our fi- nancial plan had to fit in with Wen- dy’s financial plan.” Dollarhyde ultimately wanted $20 million to $30 million to invest in the brand. “Greg, you don’t un- derstand, we already put the money in when we bought the company, you’re just going to have to figure it out,” Dollarhyde recalled being told. Wendy’s wanted Baja Fresh to spend its revenue to build the busi- ness and wouldn’t put more money into the company. “You go from 28 restaurants to 280 in four years and you’re mov- ing, the team’s moving, and they’re throwing a lot of heart and soul in it, and they were getting kind of a little deflated. And then my senior man- agement team found out that we’re
not going to get some cash from Wendy’s.” Greg Dollarhyde would leave the company by April 2004.
MANAGEMENT AND OTHER CHANGES
Bill Moreton, a former Panera Bread executive, joined Baja Fresh in Feb- ruary 2004 and was named CEO in April to replace Dollarhyde. At the time, Schuessler said the change would help Baja speed its growth and get to 600 to 700 restaurants by the end of 2008. The move didn’t lift same-store sales. They declined 6.3% in 2004. Brion Grube, a longtime Wen- dy’s executive, was named CEO in April 2005. Baja Fresh’s same-store sales de- clined 3.7% that year. Dollaryhyde described a pair of changes made under Wendy’s that would ultimately damage the brand. Baja Fresh had prided itself on its fresh salsas. Old salsa was thrown out at the end of the day and made again the next. The chain created a quality-con- trol team to oversee both compa- ny-operated and franchised restau- rants, to ensure that operators maintained brand standards. That team was dismissed. Franchising as a rule can be a highly successful business model, and most of the 10 largest restau- rant chains in the U.S. are a fran- chise. But Baja Fresh was going up against a well-funded, corporate organization in Chipotle that had its own reputation for excellence. That made quality control vital. “You got to keep the franchisees honest,” Dollarhyde said. “It’s too easy to keep the salsas overnight.” The chain also changed some of its product sourcing, buying some Wendy’s products. “There’s not that many economies of scale in a handmade, fresh product,” he said. The changes in food sourcing damaged brand quality, Dollarhyde noted. Baja Fresh customers no- ticed this.
Same-store sales at the Mexican fast-casual chain fell shortly after Wen- dy's bought the chain, and stayed negative through its sale. Numbers for 2006 are from the first half of the year. BAJA FRESH SAME-STORE SALES
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JANUARY 2025 RESTAURANT BUSINESS
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