Tired of Losses, Naugles Hopes Radio Ads Will Add Up
Naugles Inc. executives have reversed a 15-year-old corporate policy and initiated the Mexican fast-food chain’s first-ever advertising campaign.
The move by the struggling Fullerton-based company is an attempt to turn the tide on continued losses, said Naugles Chairman Harold Butler in an interview Wednesday. Losses topped $2 million in the third quarter and company officials have projected that losses will continue through at least the next quarter. Naugles has more than 200 restaurants, nearly half of which are in Southern California.
The ad campaign, which has been limited to radio spots and test-marketed in Sacramento and St. Louis, is expected to carry into the Las Vegas area next week and the Southern California market by September, said Butler.
For years, Butler has been the company’s strongest opponent of advertising. “I’ve never had a lot of confidence in getting market share from advertising, “ he said, “but I won’t keep my feet in cement.” The former chairman of Denny’s Inc. said that while he was at Denny’s the company spent heavily on advertising, “yet I never saw much in the way of results.”
But the prospect of continued losses at Naugles for the 1986 fiscal year--along with strong lobbying from Naugles’ President Michael D. Mooslin--has convinced Butler to give advertising a whirl.
The campaign, however, will be a far cry from the multimillion-dollar advertising budgets of McDonald’s or Burger King. Naugles will spend about $200,000 for spot radio advertising in Southern California, Butler said.
L.A. Agency Chosen
The company has already spent nearly $200,000 for radio campaigns in Sacramento and St. Louis that have met some success, Butler said. But a cohesive market like St. Louis can be much more easily penetrated than the sprawling Southern California market.
After listening to pitches from a parade of advertising agencies, Naugles recently selected Los Angeles-based Dentsu, Young & Rubicam (DYR) as its agency. From its Los Angeles office, DYR also handles such accounts as PSA, Security Pacific National Bank, U.S. Suzuki Motors Corp. and Gemco.
Some of the Naugles radio spots are humorous and try to push the chain’s more unusual fast food products, such as its egg burrito. But Chuck May, vice president and management supervisor at DYR, said that a future Naugles campaign probably will concentrate on the freshness of its products.
Because Naugles has not advertised before, May said, “we have no legacy to overcome in the minds of consumers.”
Won’t Reduce Prices
Despite the venture into advertising, Naugles’ officials do not foresee a major turnaround this year. And while the company opened about 30 new restaurants in fiscal 1985, it may open as few as 15 in fiscal 1986, Butler said.
Naugles, however, will not mimic the recent cost-cutting campaign that Anaheim-based Carl Karcher Enterprises instituted at its Carl’s Jr. restaurants.
Carl’s Jr. officials say the lower prices have improved hamburger sales. But Naugles, which is known for charging premium prices but delivering hearty portions, will not budge on price. “Too many other costs are hitting us to allow that,” Butler said.
