Naugles Chain Bets on Its Ad Campaign : TV Spots, Coupons Help, Officials Say
When Naugles Inc. first offered Wayne Jones a job in 1983, the Southern California native said his first question was, “What’s Naugles?”
Jones, now Naugles’ chief financial officer, said his reaction three years ago characterizes the essence of why the Fullerton-based chain of Mexican fast-food restaurants continues to struggle: Too few people know they’re out there.
But in a campaign orchestrated to a large extent by its new parent, Los Angeles-based Collins Foods International Inc., the financially troubled Naugles, which has lost more than $45 million in the past three years, now is intent on trumpeting its existence.
By spending at least $6 million this year to forge an image, executives hope to turn around the company’s fortunes in the fiercely competitive Mexican food market.
The campaign--Naugles’ first try at mass advertising in 16 years of existence--so far includes a pair of television commercials, a $600,000 program to repaint the exterior of most of its 170 restaurants to make them look more like Mexican food outlets, a $200,000 direct mailing of discount coupons and a few additions to the chain’s already hefty menu.
“It’s quite a change in direction for us,” Jones said. “But I think we all are in agreement that it was clearly the right thing to do.”
One of the few industry analysts that continues to track Naugles--most dropped out of sight along with the company’s earnings--was upbeat about future prospects.
“I really feel that they’re making some really good progress in turning things around,” said Barry Ziegler, an analyst for Tucker, Anthony & R. L. Day in New York.
A big part of the effort is concentrated in Naugles’ television campaign--two 30-second ads now airing in Los Angeles and other markets. The spots cost $250,000 to produce and so far it has cost Naugles $1.3 million to air them in the Los Angeles market alone. An additional $300,000 is being spent to air the ads in the Salt Lake City and Las Vegas markets.
Naugles also has restaurants in St. Louis, Reno, and in San Diego and Northern California.
Jones said the company has budgeted a minimum of $5.7 million in the next year for television ads and, possibly, more mass-mail campaigns.
The current TV ads feature Senor Naugle, a tongue-in-cheek, south-of-the-border version of Ronald McDonald, who hypes two recent additions to the chain’s primarily Mexican-style menu.
In one ad, Senor Naugle is sitting on Plymouth Rock, soft taco in hand, when a Mayflower full of hungry Pilgrims arrives. He says they liked the taco so much that they threw a thanksgiving dinner to commemorate the event.
In the second spot, the historic battle of the Alamo rages around a fajitas -clutching Senor Naugle. The fight, he tells viewers, began because there wasn’t enough of the spicy dish for the Texans to share with the Mexican army.
“We took the humorous approach,” explained Alan Pando, president and chief executive of the ads’ producer, Doyle Dane Bernbach West in Los Angeles.
Pando said the producers also took some “poetic license” in the ads: Senor Naugle wears white socks with his sandals at Plymouth Rock. And waving atop the Alamo is an upside-down version of the Texas flag--which didn’t even exist at the time.
“A lot of people noticed” the upside-down flag, Pando said. “They thought they had a ‘gotcha.’ Bt we did it purposely.”
(Naugles’ rewritten history lessons haven’t hurt sales in Massachusetts and Texas, either. The chain doesn’t operate restaurants in either state.)
Naugles executives said they are considering more promotions and alterations to the menu and the design of the restaurants.
“The entire concept of how we’re presenting ourselves is being looked at,” Jones said.
The company lost $45.1 million in the 33-month period that ended March 31 and expects to post yet another loss for the final quarter of its fiscal 1986. But the chain is enjoying an upswing in business since the ad campaign began, according to Wayne Withers, Naugles chairman and chief executive.
He estimated that Naugles’ 108 Los Angeles-area restaurants have seen a 20% revenue jump since the commercials and mailings hit the market in June.
“We have an awful lot of confidence right now,” Jones said. “But we don’t want to become overly optimistic.
Jones said that other driving forces--like summer’s cyclical boost for most fast-food operations--also could be pushing sales.
Naugles is considering putting chicken-based entrees back on the menu in early 1987, a year after withdrawing them. Company executives insist that Collins’ position as a major Kentucky Fried Chicken franchisee is not the driving force behind that decision.
Collins, which acquired a 50.1% interest in Naugles last November, is the driving force behind the image campaign, however.
Collins executives now sit on Naugles’ board of directors and work with the marketing and other departments. Under founder and former chairman Harold Butler, Naugles relied almost exclusively on word-of-mouth advertising.
Naugles also has reversed a vigorous expansion program that, most industry analysts said, caused most of the financial troubles that have plagued the company for the past two years.
The company closed 34 restaurants earlier this year, and has plans to shut down 36 more. A sizable portion of the funds for the marketing campaign was generated by the closings, Jones added.
