Brand Essence: World's Largest Multi-Concept Operator Plays Well With Others

How do you find the essence of a brand? That's a question Stan Novack asks himself every day.

As vice president of concept development at HMSHost, Novack has his plate full, and seems to relish every bite. In addition to finding brands to franchise and license at more than 100 airports (including 19 of the 20 busiest airports in the U.S.), he also works with popular brand names--Fox Sports, Jose Cuervo, Jack Daniel's, and many more--to develop brand new concepts. And he's begun working with celebrity chefs to create innovative dining venues at airports.

"One of our strengths," says Novack, "is we're able to operate multiple concepts under the same management structure. With more than 300 brands, we're probably the largest multi-concept operator in the world." HMSHost, which provides and and outlets at airports and highway rest stops across North America, reported annual revenues of $2.6 billion in 2007, about half from franchised brands.

HMSHost is a subsidiary of Italy's Autogrill S.P.A., which acquired the former Host Marriott Services in 1999. Autogrill, founded in 1928 in Milan, is the world's biggest provider of food and beverage and retail services for travelers, with 2007 revenues approaching $4 billion Euros (nearly $6 billion USD). HMSHost makes up almost half of that.

Despite the size of HMSHost, one of the most challenging aspects of Novack's job is thinking small. No matter what the concept, whether world-class chef, or concession space at airports is at a premium, so Novack spends much of his time working with brands to devise ways to shrink their 6,000- to 8,000-square-foot street-side boxes into a 1,500- to 2,000-square-foot space.

"How we take that brand essence and modify it to our venue so that it adequately represents the brand is probably the most difficult thing we do," says Novack.

"We sit with each brand and try to identify what the essence of the brand is, what it means to consumers," he says. This involves answering some basic questions: What does the brand mean to the consumer? What is important to the customer? What is essential? The process also can involve challenging any misconceptions franchisors may hold about their concept. "Sometimes what they think is important is not what the customer thinks is important," says Novack.

"The big thing every time you start working with a new franchisor or licensor is explaining our business or business model to them," he says. "It's a big and we're learning from each other."

Once those essential elements are identified, HMSHost incorporates them into a much-reduced airport space to recreate the look-and-feel of the brand. "We try to recreate the street-side experience as much as possible," he says. "We can't execute the full menu on the street, so we follow the 80/20 rule and include those items that mean the brand to the consumer. Then we modify the menu, location, décor, and translate it into the brand."

Initially, Novack says, franchisors are hesitant about the idea of shoehorning their concept into a tiny space, concerned about compromising their brand integrity. But once they look at the track record of the company--and the performance of its airport locations--those worries tend to disappear, he says.

"The important thing for them to understand is how different our business is from the street-side model, and what the challenges are. It's a very specialized business."

In the beginning, translating a concept into a reduced airport space was more a "fly by the seat of the pants" operation. "Now it's much more scientific," he says. "A brand will come in and be amazed at what we're able to do in as small a store as we do."

What's interesting about the process, he says, is that franchisors often gain valuable insights that lead to new opportunities. "Once we look at scaling down the footprint, the brands can take it to the street and develop it into a smaller footprint." This can work in urban environments, where space is scarce and expensive, as well as in smaller markets where the demographics will not support a full-scale unit.

A further complicating factor for brands seeking to make the transition to a successful airport version is adding to the mix--which many brands don't normally serve at their full-sized "The breakfast day part could represent as much as 40 percent of the business," says Novack. Successfully filling that day part can go a long way toward boosting revenue per square foot.

Put simply, says Novack, "We take street-side branded concepts and modify them so they fit into our venue."

Home-brewed concepts

Perhaps the favorite part of Novack's job is devising "internal brands," working with well-known brand names to create completely new concepts for airports. "I develop brands we do internally that you don't see on street, such as Tequileria with Jose Cuervo. We have 16 of those," he says.

Spirits, beer, and sports-themed bars are popular, and include Casa Bacardi, Dewar's Clubhouse, Jack Daniel's Tennessee Tavern, Jose Cuervo Tequileria, Stinger Ray's Tropical Bar, Budweiser Brewhouse, Samuel Adams Brew House, and Karl Strauss Beer Garden. There's also Sam Snead's Tour Tavern, Buckeye Hall of Fame Café, Home Team Sports, Legends Sports Bar, Gervin's Sports Bar, and many more. HMSHost has about 400 bars and lounges and is working on more.

With smaller seats and less food (and lately, pillows and blankets) provided by airlines today, travelers are more stressed than ever, says Novack. "We're giving them a respite from that stress."

Yet success in this area speaks for itself: customers have approached HMSHost about developing some of its internal brands on the street. But the answer, at least so far, is no. That would turn the company into a licensor or franchisor. "That's not our core competency," says Novack. "So we stick to what we know: food and and retailing at and venues."

Cause "celeb"

Always looking to keep pace with the ever-changing tastes (and budgets) of travelers, Novack is working with celebrity chefs to develop innovative concepts bearing their name and signature imprint--names like Wolfgang Puck Airport Café and Wolfgang Puck Express, Todd English's Bonfire & Bonfire Bar, Martin Yan's Yan Can, and Kathy Casey's Dish D'lish. Novack says working with the chefs is "a notch higher" than HMSHost's usual fare. "This is the next evolution of where we're headed," he says.

"Surprisingly we're selling high-end items," he says. "If we do a good job of representing the brand, serve a quality product, and provide a good atmosphere and friendly service, price resistance seems to disappear." This holds, he says, no matter what airline passengers are flying, whether short or long haul.

Operating in airports, Novack says HMSHost has two different customers to satisfy: 1) the landlord (the airport authority); and 2) the passenger. And not all passengers--or airports--are the same. And although operating at airports guarantees a steady, captive audience, volume will vary with airport size, and tastes and spending habits will vary with the airline.

"It really is a target. We have to keep up. Passengers want to see, taste, and eat things that are different than before," he says. They want different flavors, options, and experiences--but not too different.

"We don't want to get too far away from what people like in airports," says Novack. Working with Chef Todd English, for example, they started with the idea that everyone likes nachos and developed lobster and crab nachos. "It's still nachos, he says, "but with a different flavor profile that is unexpected and unique."

Travelers also want the comfort of the familiar, and Novack works with local brands to develop airport versions of locally known eateries. Examples include Eaterna and La Brea Bakery (Los Angeles), Phillips Seafood (East Coast), and Lahaina Chicken Company (Hawaii).

"We do national, proprietary, local, and we're always trying to stay on the cutting edge," says Novack.

Managing Through Change

Despite a constantly evolving stable of 200 brands, keeping them separate and nurturing each does not appear to be a problem for HMSHost. "We keep a firewall between the brands as much as possible," says Novack. "We have individual store managers running the brands who are certified in the brand."

Food and beverage (Novack's domain) operates separately from as two divisions, but travelers can find products from the two divisions in one space: a Starbucks in a newsstand, or adjacent to a Simply Books. HMSHost will also combine franchise brands on the same footprint--a Chick-fil-A, Burger King, and a Cinnabon, for instance. The company even sells its own brand of bottled water in its newsstands.

The aftermath of 9/11 accelerated the evolution of airports from mere stopovers to be tolerated and escaped from as quickly as possible to an international environment rivaling shopping malls and entertainment centers. One result is a shift from to quick casual and full-service sit-down restaurants. "Casual is huge with us right now," he says.

Some brands HMSHost is currently developing include Chili's, Romano's Macaroni Grill, On the Border, Famous Famiglia Pizzeria, California Pizza Kitchen, Johnny Rockets, Starbucks, Quiznos, and Burger King.

The impact of globalization, says Novack, also is driving tastes and changing what travelers are looking for in both food and beverage and And being part of Autogrill is a tremendous advantage in remaining in the forefront of this evolution.

"We work closely with Autogrill on a number of different projects--quick casual, casual, and development of proprietary brands," he says. One example is Ciao, which he describes as "a marketplace kind of concept." He also is working with Autogrill on developing a wine bar that could have application in Europe, Asia, and North America.

Learning from 9/11

The post-9/11 world has been good to HMSHost--though not without some frantic post-event scrambling, followed by a dramatic change in how the company must operate in airports. When U.S. airports reopened after the disaster, knives were forbidden in the kitchen unless they were chained down. Tweezers in first-aid kits were forbidden. Even cutting lemons and limes in the bar was a problem. But the company quickly adjusted, moving to prepared foods, more frequent deliveries, and other operational changes to comply with tightened security.

"Right after, we were shut down for three to four days. Within that period, we were able to figure out how to be up and running, in business, with I think we were one of the first to come back after a very stressful situation," says Novack. "We found ways of doing it."

On the plus side, increased has resulted in a new environment at U.S. airports that has been highly favorable to the company. "Our business is the emplaning passengers," says Novack. That's a captive audience numbering in the millions. "We have people in the airport a fairly lengthy time, post-security," he says. These "dwell times," averaging about 75 to 90 minutes, provide plenty of time to sit down, have a drink, and enjoy a full-service meal.

Additionally, flight delays, shorter flights with longer, more frequent stopovers, and cutbacks in airline amenities--combined with an increase in the number of travelers--have driven revenues ever higher in the past six years.

"We're a learning organization," says Novack. "We have a live lab, open 365 days a year and have learned how to change very quickly." At one point, he says change at the company was like turning the proverbial battleship, but that's changed now too. "We're much more nimble now in terms of recognizing trends, and being out--but not too far out--in front of them."

Omigod! or You Can Have It!

"A lot of people want to get into airports," says Novack. They should think twice, he says. "People who never operated in an airport are totally surprised," when he tells them what it's like. Unique problems include logistical nightmares (frequent, complicated deliveries and distribution), myriad security issues, even weather-related flight delays and cancellations--all of which can add to operational costs.

Employee recruitment and retention at airports also is a challenge. Although the employee base is the same as in other beverage, and retail outlets, airport workers face unique problems: transportation, parking, TSA background checks (which can take weeks), drug testing, and daily delays passing through security--just to get to work.

"Most people don't realize that working in an airport is not at all normal," says Novack.

"A lot of times a franchisor or franchisee wants to get into the airport business, and says, 'Omigod, what have I done? I had no idea,'" says Novack. "Every time I went to a Chili's franchisee meeting, they asked what are the challenges, etc. After they heard me out, the consensus among the franchisees was 'You guys can keep it.'"

And in recent years, there's increased competition as well as continuing airline consolidation and internationalization. "If you look at the airport business, it's almost like technology: it was the same for 40 or 50 years, and now it changes every 2 to 3 years," he says. As a result, the company is constantly studying and analyzing new concepts, what airports require, airlines, competition, and what customers want. "We spend a lot of time trying to figure that out," says Novack.

Masters of Space

Optimizing space is a key consideration for HMSHost, driving the company to continually experiment with new ideas--based, of course, on long years of experience and a massive compilation of data.

"We try to develop things that can fit in very small footprints," he says. In many of its casual concepts, the company has added tables and chairs out in the concourse. "It's a way of expanding the footprint without really expanding the footprint," he says. "It's a European thing, watching the traffic go by." And it increases sales.

Kiosks are another way to wring the most dollars from the smallest spaces. A new mojito bar in Miami, which makes the popular drink from scratch, is "going gangbusters," says Novack--all in a 150-square foot space.

And after the company's success with Chili's (30 successful airport locations nationwide), he's now trying to distill its "essence" even further, building a 900-square-foot walkup version in Las Vegas. "You walk to order, and bring it to your table," he says. "From an 8,000 square foot box, that's something!"

Recently, the company has begun exploring opportunities in baggage claim areas. They've opened a Ciao at O'Hare in Chicago, for take-home, and have installed a Starbucks in the baggage areas at JFK's Delta terminal in New York. "It's new," says Novack. "We're providing something in an unexpected space." And passengers preparing for a long ride home are glad for the convenience.

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