Oct 24, 2002 By Bill Poovey Associated Press Writer 4 min read

CHATTANOOGA, Tenn. (AP) – It’s a simple enough combination: miniature square patties on steamed rolls, topped with onions, mustard and pickles. People in the South order Krystal burgers by the sackful, and that’s helped the fast-food company succeed for more than 70 years, even amid the ever-growing competition from other big chains. The appeal of Krystals – a southern rival to White Castle burgers sold in the North – seems to be a mixture of economics and nostalgia.

Ryan Ingram and Seth Anderson, both 14-year-old ninth-graders at Chattanooga Christian School, dashed to a Krystal after class, picking it over a Wendy’s and Popeye’s Chicken within walking distance of the school.

“It’s a heck of a lot less expensive than Popeye’s,” Ingram said of the 53-cent Krystal burger.

Jeanette Crawley, and her husband, Mark, both 69, enjoyed a senior citizens meal at the restaurant – two Krystals, chili and a Coke.

“When we used to date, we would take a sackful of Krystals to the movie. I think everybody did,” Mrs. Crawley said. “We ate together for less than $5.”

Rody Davenport Jr. and J. Glenn Sherrill opened the first chrome and white porcelain Krystal in downtown Chattanooga in October 1932, during the Great Depression.

The company’s 423 restaurants still use the same burger recipe, but the menu has since expanded. In addition to the Krystal, Double Krystal, Cheese Krystal and Double Cheese Krystal, there are breakfast sandwiches, the Krystal Chik and small hot dogs with chili and cheese.

On average, each customer buys more than three of the 1-ounce burgers. A sackful contains a dozen.

Dennis Lombardi, executive vice president of Chicago-based Technomic Inc., a consulting firm that closely monitors the fast-food industry, said the privately held Krystal Co. has remained “pretty recession resistant.”

Although Krystal Co.’s growth rate of 5 percent to 6 percent before 2000 has dropped to about 3 percent, “a lot of other industries would love to make that statement,” Lombardi said.

Lombardi said his reports show Krystal in 2001 had sales of about $372 million, up about 4.7 percent from the previous year. That compares to McDonald’s Corp. sales of some $20 billion, with a 2.4 percent increase from 2000.

Overall, the fast-food industry’s sales totaled $46.6 billion in 2001, a 2.7 percent increase over the prior year.

Lombardi said Krystal is “outgrowing the key player” and the fast-food industry generally.

The company appears to have put financial problems of the mid-1990s behind it. In 1995, Krystal, which was then publicly held, filed for bankruptcy to try to settle lawsuits brought by 6,000 former employees who claimed they never were paid for overtime.

Krystal emerged from bankruptcy after paying $13 million to settle the claims, and in September 1997, the Port Royal Holdings Inc. investment group, headed by former Coca-Cola Enterprises Inc. executive Phillip Sanford, paid $108 million for Krystal.

Since then, the company has gone private and opened 67 restaurants since 2000. Sixteen more are planned this year. More than 6,800 employees work at restaurants – most open around the clock – in Tennessee, Alabama, Kentucky, Arkansas, Virginia, Georgia, Florida, North Carolina, South Carolina, Mississippi and Louisiana.

Franchisees currently operate 175 of the company’s restaurants.

Lombardi said that while fast-food customers are typically loyal to certain restaurants, many times “the determination happens to be which one is closest, or most convenient.”

Krystal believes its affordable menu and nostalgia keep the chain in business.

The company’s promotions and advertising generally feature three generations of customers talking about Krystal food, rather than tie-ins with movies or toys that the bigger burger chains use.

One of the company’s new ads promotes a longtime fixture on its menu, the $1.59 chili cheese fries. In the first two weeks of that promotion, Krystal said sales of chili cheese fries tripled.

Sanford, who is the company’s chairman and CEO, said Krystal customers are “our best sales people.”

“We have customers of every age, male and female, of every demographic background and ethnic background there is,” he said. “What that says is brands come and go but to have a brand that has been successful and growing for 70 years means that you have to have wonderful, loyal customers.

“They keep coming back generation after generation.”

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On the Net:

www.krystal.com