Mendocino Farms: A fast casual sandwich shop where “happy” is worth every penny
Mendocino Farms has perfected its restaurant design to deliver gourmet sandwiches at fast-food speeds in a location that feels like a neighborhood hangout.
Mendocino Farms (“Mendo”) is a gourmet fast casual restaurant chain that sells sandwiches, salads, drinks and sides at 12 Southern California locations.[i]
With an average price of $9.90 ($10.85 for salads),[ii] Mendo’s offerings are about 20% pricier than those of archetypal fast casual competitor Panera, where sandwiches average $8.19 at its Santa Monica, CA locations.[iii]
However, Mendo can compete successfully with cheaper rivals by offering gourmet, locally-sourced food, superior customer service, and a fun, communal atmosphere. According to its founder, Mendo’s target customer shops at Whole Foods and is willing to pay a “slight up-charge” for higher quality.[iv] To satisfy this core customer, the company has designed its operations to spotlight the quality of its food, build a community vibe, and deliver exceptional customer service.
History
Mendocino Farms, co-founded by husband and wife Mario Del Pero and Ellen Chen, launched in downtown Los Angeles in 2005.[v] It received an investment from Catterton Partners, a private equity firm, in 2012[vi] and opened its 12th and newest store last month in Santa Monica.[vii]
Menu
Mendo serves healthy, offbeat sandwiches and salads with creative ingredients. According to the employee handbook, company chefs take “traditional and fine dining entrees and convert them to sandwich form.” The current menu includes sandwiches inspired by southern-fried chicken and Indian dosa wraps, in addition to more traditional fare like tuna melts and club sandwiches.[viii] (Mendocino Farms Menu Fall 2015)
Mendo prioritizes local ingredients and promotes local providers by mentioning their names on their menu.[ix] Dishes are labeled if they are vegetarian, vegan or gluten free. Most menu items include pre-cooked ingredients, and the only ovens in the kitchen are a toaster and a panini press. [x]
Customer Experience
According to its employee handbook, Mendo aspires to be a “neighborhood gathering place where we sell happy!”[xi] Every restaurant contains a foosball table or an indoor beanbag toss[xii] and has a custom design to suit its neighborhood.
Arriving customers are greeted by wait staff who explain the menu and submit orders using computer touchscreens.[xiii] Customers then move into a payment line which first passes through a side dish station offering free samples. After they pay for their meals at the register, customers receive a GPS locator to direct servers to their table.[xiv]
Managers wearing casual “farmer attire” (plaid shirts and blue jeans) mill about, attending to customers and refilling drinks.[xv]
Staff Training
Employees must pass a test to demonstrate familiarity with the menu,[xvi] and leaders attend 5.5 hour “coaching happy” workshops to ensure that Mendo’s culture of positivity is passed down the hierarchy.[xvii]
Analysis
Mendo’s promotion of local ingredients on its menu woos customers who are willing to spend more for a healthy, farm-to-table experience. Its broad menu and friendliness to special diets also attracts customers that mainstream competitors ignore, a sizeable segment given that 17% of Americans avoid gluten.[xviii]
Requiring no stoves or ovens enables food to be prepared with less variability in throughput time across different orders. This prevents bottlenecks and allows gourmet dishes to be served at fast-food speeds.
Having staff take orders at the entrance makes customers feel instantly welcome and helps them navigate the quirky menu. Furthermore, immediately sending orders to the kitchen reduces the throughput time from arrival to eating. The GPS trackers also help increase labor efficiency and further reduce customer wait times by helping servers deliver meals more quickly.
Mendo’s practice of serving free side samples to customers also communicates hospitality. It makes waiting in line more fun and hides the time the kitchen spends preparing orders. The samples keep hungry customers “happy” while they wait and provide an opportunity to upsell and advertise catering offerings.
Finally, with its genial and attentive employees and the feel of a neighborhood hangout,[xix] Mendo earns loyalty that allows it to sustain its business with repeat customers.
Success
Mendo has had double-digit same-store sales growth for the past three years.[xx] According to Investopedia, many locations have a 4.5 out of 5 Yelp rating, with reviewers citing a “pleasant interior” and customer service that justifies “not cheap” sandwiches.[xxi] It will open a new store next year in Brea, California[xxii] and was recently selected by Whole Foods Market, Inc. to run a restaurant inside one of its grocery stores.[xxiii]
Few outside of Southern California know of Mendocino Farms today. But if the company continues tightly aligning its operating model with its core business, it will soon be “selling happy” on a much larger scale.
Bibliography
http://nrn.com/emerging-chains/mendocino-farms-receives-investment-whole-foods-market
https://www.panerabread.com/en-us/articles/clean-ingredients.html
Sources
[i] Source: Employee interview
[ii] http://mendocinofarms.com/menu. I took every entree on their menu (accessed 12/5/15) and averaged the prices.
[iii] http://panerabread.com/
[iv] http://www.ocregister.com/articles/mendocino-611183-sandwich-food.html
[v] http://csq.com/2015/10/mendocino-farms-sitting-on-a-cash-cow
[vi] http://www.prnewswire.com/news-releases/mendocino-farms-receives-significant-investment-from-leading-consumer-focused-private-equity-firm-catterton-partners-157285685.html
[vii] http://la.eater.com/2015/10/30/9643490/mendocino-farms-santa-monica-opening-photos-gallery
[viii] Source: Mendocino Farms employee handbook
[ix] Ibid.
[x] Source: Employee interview
[xi] Source: Mendocino Farms employee handbook
[xii] http://www.ocregister.com/articles/sandwich-665847-mendocino-farms.html
[xiii] Ibid.
[xiv] Source: Author. I visited four different Mendocino farms locations over a period from 2009 to 2015.
[xv] Source: Employee interview
[xvi] Ibid.
[xvii] http://csq.com/2015/10/mendocino-farms-sitting-on-a-cash-cow
[xviii] http://www.vox.com/2015/7/23/9023389/how-many-americans-eat-gluten-free
[xix] http://csq.com/2015/10/mendocino-farms-sitting-on-a-cash-cow
[xx] http://nrn.com/emerging-chains/mendocino-farms-receives-investment-whole-foods-market
[xxi] http://www.investopedia.com/articles/markets/102015/whole-foods-bet-mendocino-farms-what-it-means.asp
[xxii] http://mendocinofarms.com/brea/
[xxiii] http://www.investopedia.com/articles/markets/102015/whole-foods-bet-mendocino-farms-what-it-means.asp
Great analysis! I really appreciate the flow diagram, it does give a great overview of how they minimize the actual and perceived wait time simultaneously. Are all these stores company owned? If yes, do you believe that they will be able to preserve this operational control if they choose to franchise?
Hi Jeremy,
Yes, I believe all of the stores are wholly owned and operated by the company. Given the amount of control they maintain over the customer experience and the employee training process, I don’t anticipate they will choose to franchise in the near term, especially since they will continue to fully control their locations in their partnership with Whole Foods.
Adam
Thanks Adam! From your description, it sounds like Mendocino Farms has succeeded due to strong alignment between the customer promise (high-quality, locally-sourced food in a fun, neighborhood-y environment), the people (well-trained employees who dress the part with casual “farmer attire”), culture (positive and customer friendly), and its formal org. In a lot of ways, this company reminded me of MOD Pizza given its Southern California locations and quirky, unique culture. I really enjoyed learning more about the company! The free samples provide a great buffer as well for when the lines get long, as I imagine they do around lunch time.
I think it is only a matter of time before Mendocino Farms expands into adjacent areas like San Francisco or Seattle, which seem to also appreciate upscale locally-sourced ingredients. One question: Do they make the sandwich in front of you? It might help with the customization…
Hi Christine,
Thank you for your comment! Mendocino Farms does not make sandwiches in front of customers. Instead, customers wait at their table and servers bring meals to them once they are ready. Mendo’s menu is much larger and more diverse than restaurants like MOD Pizza or Chipotle, so organizing the kitchen so that meals could be prepared in front of customers in the same way would likely waste space and limit customer choice.
In my opinion, the customization options are actually already better at Mendo than at some of its rivals. Because orders are generated at the front of the restaurant with a special order-taking staff member who can observe the entire order, there is less opportunity for confusion or mistakes, and the staff can ensure that the order is consistent with regards to things like matching gluten-free bread with gluten-free ingredients.
In addition, because of Mendo’s tight integration with local providers, I don’t anticipate that it will quickly expand outside of Southern California. I think it can adopt the same approach with a different set of local partners in other geographic regions, and the ones you mentioned are the best fit culturally, but I anticipate that it may take time.
Awesome post! I love Mendocino Farms sandwiches! When reading this post, the only thing I could think of, and you touched on it very briefly, was how they would support their business by competing with the same target customer as a Whole Foods. Most Whole Foods have their own hot and cold food buffets, so why would a customer who already knows and goes to Whole Foods pick Mendocino over another option that’s equally delicious, has greater selection, and features a similar price point? While Whole Foods has begun to allow Mendocino to operate inside a store, I don’t think that’s a viable business model as they try to expand. It seems to me that Mendo will be fighting an uphill battle against Whole Foods.