Restaurant franchising has experienced incredible growth in the burger and pizza segment for years.
However, there is a smaller slice of the restaurant industry that is receiving a lot of attention from investors, the Mongolian section. In the past month, HuHot Mongolian Grill’s largest franchisee was acquired by an affiliate of private equity firm, Sun Capital, and BD’s Mongolian Grill purchased Flat Top Grill.
Asian concepts are one of the fastest growing segments in the restaurant industry and these transactions point to a new trend. The Mongolian division is moving out of mom-and-pop operations and finally gaining traction with the introduction of new, sophisticated players like Sun Capital.
The Mongolian Grill segment started as a grill in the corner of the average Chinese buffet. Guests would pick and choose from a few ingredients and then attempt to create a sauce from scratch. The experience was high risk, and the appeal to the average customer was lackluster. That is not the case anymore. With the introduction of domestic players such as HuHot, customers finally have a food profile and dining experience that they continue to want.
HuHot is a create-your-own unlimited Asian stir-fry concept. Customers choose from a variety of meats, seafood, noodles, more than 20 vegetables, and 12 signature sauces. It is at the sauce bar where the experience evolves from earlier versions of Mongolian grills. The founders, Andy Vap, and his parents Dan and Linda Vap wanted to take the fear out of Asian food. They created fully developed pan-Asian sauces that significantly elevated the experience and the quality of the food.
At HuHot customers choose from sauces they are familiar with, such as mild selections, like Sweet & Sour and Teriyaki, and on the spicy end of the spectrum, Kung Pao, and Szechuan. The fully developed sauces ensure great meals even from rookie Mongolian grill goers. Customers at HuHot are comfortable with the food profiles and enjoy the experience from start to finish.
As restaurant trends continue to point toward dining as entertainment, the Mongolian grill certainly accommodates that trend. It is a reliable and fun experience, with a meal that can be hundred percent customized by each guest.
HuHot Mongolian Grill established their franchising presence in 2001. Since then they have opened 57 locations and created a restaurant format with a unique combo: a nearly 2:1 sales to investment ratio and a success rate of more than ninety percent. Their motto, “Do it right, the right way” appears to be working.
“The development plan for HuHot has always been strategic and steady,” said Molly Vap O’Shea, Chief Brand Officer at HuHot. “In an industry where the appetite in the market is to acquire high performing restaurant units, the acquisition of our largest franchisee proves that our model is working.” O’Shea continues, saying that “the HuHot transaction stands out from the rest of the segment movement.” Why? “An investment of this caliber is a clear sign that the HuHot concept is hitting the sweet spot with today’s consumers. The HuHot concept resonates with Millennials and easily captures industry trends on customization, healthy food, a unique dining experience and customer control. HuHot is poised for growth.”
She goes on to say, “Sun Capital Partners, a successful private equity firm with plenty of experience in the restaurant world known for acquisitions such as Johnny Rocket’s and Bar Louie, saw this potential too.”
The branded chain Mongolian segment only has about 200 total locations in the country. HuHot’s COO, Jeff Martin, believes there is room for hundreds more, maybe thousands, and HuHot is adding steadily to that number.
There comes a time in every successful brand when development can take off, and HuHot appears to be at this point. Corporate growth has accelerated recently with as many as four locations planned for 2016, and HuHot corporate expects at least that many locations year after year after that. Combine that with development projects from Sun Capital, existing franchisee growth, and new franchisees that have recently signed and it’s easy to see the brand growing at a fast pace. As with all restaurant concepts, this lends to economies of scale that can propel HuHot to the next level.
“We see each of our franchisees as an investment,” said Molly Vap O’Shea, Chief Brand Officer at HuHot. “We aren’t in the business of selling franchises; we are in the business of creating a successful restaurant brand. This means training and supporting our franchisees well so that they are successful with their first location and grow the brand the right way. We’ve seen our restaurant counts climb. Sometimes more slowly than our competitors, but our very low restaurant failure rates have proved this to be the right decision.”
When asked about the recent franchisee acquisition and the future of the company, Jeff Martin, COO of HuHot Mongolian Grills said, “This is a concept that lets diners create and customize their meal. It’s an option that accommodates all dietary trends, restrictions, and allergies. It’s easy to see why this is such a fast-growing segment. The purchase of our largest franchisee by Sun Capital highlights the opportunity. This gives us a huge step up on our competition, and we are excited.”