Inside McDonald's new design

I'm sitting in McDonald's new prototype restaurant in the Chelsea section of New York City, watching the arriving guests do a double take. This is the first U.S. outlet of the chain to get the new look, which has apparently been greenlighted already in Europe.

It's so different that it's eliciting a lot of pointing and head nodding as patrons comprehend the changes. But the points of departure actually started outside, with a banner that could be the biggest sacrilege of all to hardcore Mickie D's fans. The flag sports--brace yourself--a new color scheme for the logo.

The Arch in the design is still golden. But it's on a black background, with a bar of red underneath. For traditionalists, this is jarring stuff.

Inside, the most noticeable switch from a conventional store has to be the seating. It's actually padded.

I'll let that sink in for a moment.

No more rock-hard molded plastic. Now the booths have upholstery both on the seat and the back uprights. Stools at the common tables are also padded.

The lighting is far more muted, a pleasant break from the operating-room brightness of conventional units. And the colors are more Yuppie Modern than the brash, almost cartoonish colors of older stores. Lots of deep oranges, rich greens, and off-whites.

Much has been reported about the incorporation of flat screen monitors throughout the unit. There are at least two in the sizable dining room where I'm sitting, but no one seems to be watching, no doubt because you can't hear them. And one's a mere table away from me.

If the more-comfortable seats and more inviting color pattern are intended to foster more hanging out, the new look is an obvious success. A number of youngsters, apparently from a nearby high school, have parked themselves behind beverages of one sort of another (lots of lattes and sodas). There's a lot of conversation going on, as well as considerable munching and sipping.

There's a computer screen downstairs that I couldn't get near. I can't tell if it's a computer portal or some type of ordering device.

More on that in a follow up. Now it's time to finish my sugar-free latte and snoop some more.

Raiding retailers for restaurants' new stars

If recent executive changes are a telltale sign, the restaurant industry is losing trust in its ability to revive sales. Companies determined to crack the formula have looked past the trade’s own talent bench in recent weeks to fill vacancies with code breakers from the world of retailing.

The new CEO of Outback and Carrabba’s parent company was previously focused on selling perfumes, cosmetics and holiday ornaments. Liz Smith, formerly president of Avon Products, seems an unlikely candidate to head OSI Restaurant Partners, a company long led by men who’d worked their way up from restaurant-level jobs. But OSI noted that Smith had experience in running a highly efficient company. They didn’t have to explain that Avon, almost purely a sales company, is light on payroll and structure, heavy on incentive-based performance.

Officials also mentioned that Smith had to keep Avon in touch with customer preferences if its product line was to stay relevant, a skill some say has languished inside OSI’s headquarters.

A talent for embellishing a brand was similarly one of the characteristics cited by Dunkin’ Brands in explaining why it’d reached outside the industry for its new “chief global customer and marketing officer.” John Costello, a veteran of Home Depot and Sears, “is one of the most talented marketers and brand builders in the retail industry in America," crowed Nigel Travis, CEO of the Dunkin’ Donuts and Baskin-Robbins parent. Indeed, Costello is a member of the Retail Advertising Hall of Fame.

The selection underscores that Dunkin’ is less a restaurant than a to-go bakery with extensive food and beverage options. It’s more of a retail storefront than a place where you’d go for dinner, or at least at present.

Even less of a disconnect is the promotion of supermarket vet Susan Shields to chief marketing officer of Jamba Juice, the smoothie chain. A key component of Jamba’s comeback plan is putting its name on more retail products through licensing deals. Those Jamba-branded items already range from a toy blender to a new line of trail mix that’s about to hit stores. Who better to blaze that new revenue channel than someone who worked at the Safeway grocer chain?

At the same time, dollars are dollars and finance is finance. So why not go outside the industry for your next chief financial officer, as McCormick & Schmick’s did in hiring Michelle Lantow? But it’s no coincidence, the upscale seafood chain said, that she came from a retail apparel manufacturer, Lucy Activewear.

Lantow was instrumental in revamping Lucy’s e-commerce operations and plotting its move into brick-and-mortar retail locations, the company noted in announcing her appointment. CEO Bill Freeman observed that those qualifications should serve M&S well as “we continue to focus on greater connectivity with our guests.”

One of those efforts, apparently, was the chain’s development of a group-sales program aimed at companies that are embarking on a road show to hawk their goods and services. M&S is pitching its banquet service as a one-stop shop that spares those road warriors the hassle of having to scout out a function room and banquet facilities at each stop of their dog-and-pony tours.

There’s no word yet if a retailing veteran was tapped to head it up. But if you hear someone mentioning the guests with a “Welcome to McCormick & Schmick’s,” shoot me an e-mail, okay?

Off with The King's head?

There’s probably no truth to the rumor that Burger King headquarters is planning a new line of kids-meal action figures called Butthead Franchisees (“Collect all the dolts--and their lawyers, too!!”) But the home office clearly isn’t friending some of its licensees on Facebook these days, and vice-versa. Though that’s sort of like saying Batman and the Joker had their inter-relational challenges. We’re probably only a snipe away from seeing The King in combat fatigues and camouflage face paint.

The flashpoint is the $1 Double Cheeseburger that the chain decided to promote systemwide despite a forceful don’t-you-dare from franchisees. In a gambit that drew more media coverage than Michael Jackson’s funeral, a group claiming to represent three-fourths of BK’s licensees filed a lawsuit to halt the promotion, arguing that the franchisor was fixing prices. The National Franchise Association said a franchisee stands to lose a dime on every double that’s sold.

By franchising standards, that move was the equivalent of asking Mike Tyson if he prefers women’s clothing. But the association took the further step of sending a letter to each director of Burger King’s parent company, asking that they intervene to reverse management’s decision and set the home office on a more intelligent strategy. The elevated middle finger was leaving CEO John Chidsey, the director who crafted the current plan, on the mailing list.

That’s when things started getting really ugly.

Yesterday, someone leaked an e-mail to the Associated Press that had been sent to Franchise Association members over the weekend by Chuck Fallon, the Chidsey direct report who oversees BK’s North American division. It cautioned the dissidents that they could be limiting their growth opportunities with all the public grumbling.

“Bankers, landlords, suppliers and potential new franchisees are watching and listening,” the A.P. quoted Fallon as warning. The upshot, he said, could be less lending and less attractive terms—or a lower price should the malcontents look to sell their businesses.

A return volley has yet to be fired by the franchisees, or at least it’s not yet come to the attention of the media. But give it time.

Not that they’re the only franchisees who are ready to string up their franchisors during these trying times. NPC, Pizza Hut’s largest franchisee, told its shareholders in an earnings statement last week that the pizza brand and its marketing need to be handled differently, a veiled criticism of franchisor Yum! Brands. Making that observation in a financial statement is like telling a soccer mom that her kid couldn’t hit a barn with three free kicks.

And Quiznos franchisees probably have a rule that you have to pay a dollar everytime you mention the franchisor or otherwise cuss.

Because of its sheer size, BK is going to be the fracas in the spotlight. It’s just a matter of time until the feud starts snagging covered on CNN.

Outback's designs on another traffic builder

Studding the menu with lower-priced options hasn’t reversed a traffic fall-off at Outback Steakhouse, but another potential remedy is definitely putting more butts in seats, according to an executive of the chain’s parent company, OSI Restaurant Partners.

CFO Dirk Montgomery told financial analysts today that design tweaks at 50 test outlets are bringing “traffic lifts ranging from the low single digits to the mid single digits, say five, 6%.”

Those increases coincided with a 10.7% drop in Outback’s comps for the third quarter.

Montgomery explained that a variety of alterations to the outside and interior of the steakhouses is being tried. The packages range in cost from $100,000 to $400,000 per store, he added.

He stressed that the various features are still being tested, and that more elements will be tried in the field through 2009 and into next year.

Among the variables yet to be pinned down, he said, is the right level of spending, the correct balance of investment and payback.

The chain also isn’t certain about what features to combine into a renovation package.

“It’s still too early for us to form conclusions about what the ongoing renovations strategy will be in terms of what elements we pick,” he explained.

Montgomery did not cite any specific design features but commented, “consumer perceptions of overall atmosphere have improved significantly.”

Published reports indicate that at least some of the interior designs play down the concept’s Australian theme.

What's that about actions and words?

Kudos to People Report for breaking the mold and starting its annual Best Practices conference with a giveback to the community. As a number of participants noted with obvious enthusiasm via Twitter, they packed more than 24,000 meals this morning at the North Texas Food Bank for the disadvantaged.

Everyone says the restaurant industry is a business that gives back. Joni Doolin and her crackerjack People Report team provided attendees with a chance to prove it. And I bet you didn’t hear a word about it via the industry or local media. This wasn’t a publicity stunt.

Indeed, I’d say it was more of a firsthand business lesson. The conference is themed “Mixing Money & Meaning” this year. If it’s anything like the past gatherings, it’ll be looking at the many, many things beyond money that matter to those of us who chose restaurants as our field.

And it starts off Day 1 by giving the high-level attendees a chance to feed those who are less fortunate. I believe that’s called walking the walk.

Joni, they should rename a constellation for you and your group.

Restaurants fight panic along with the flu

The last thing restaurants need is a bad (and untrue) rap about being incubators for H1N1. Yet those assertions are out there. Traffic may be down dramatically for the business, but not enough to reassure the nervous sorts who see the lines at a fast-food place as a modern-day malarial swamp.

It’s bunk, of course. The experts have said again and again that the virus causing swine flu can’t be passed through the ingestion of food. That reduces the risk to airborne contact with the virus or touching a contaminated surface, or the same peril a person faces in any public place with a lot of people moving through.

Yes, restaurants collectively serve much of the population on any given day. But, if memory serves me correctly, the average adult stops at a supermarket more than three times per week. The worrywarts aren’t calling for masks and gloves on the checkout line.

Pleasantly, the coverage of restaurants’ reactions to the threat has been overwhelmingly positive. Yesterday, for instance, a spokesperson for the Florida Restaurant & Hospitality Association was given airtime on a Tampa TV station to reassure the public that staffers with symptoms of swine flu are being directed to stay home.

In the same report, the operator of a local independent mentioned that she’s now sanitizing everything from tabletops to salt shakers, and an official of Sweet Tomatoes noted that the serving utensils on the chain’s buffet tables are now changed hourly.

Last month a Texas TV station quoted the same sort of reassurances from a Cici’s franchisee who heads the Texas Restaurant Association. Bob Westbrook stressed that any employee with flu symptoms is sent home. He also noted how kitchen workers are randomly dispatched at five-minute intervals to go wash their hands.

The report added assurances from the local sanitation department that it will check to see if restaurants are wiping down tables between uses and that enough supplies are on-hand to cover the increased handwashing by the staff.

Of course, highlighting the actions of responsible operators makes the irresponsible ones seem all the more loutish. Good deal. Hopefully they'll be stigmatized as the public dangers they are. Sen. Christopher Dodd told a Senate subcommittee yesterday that an employee sick with swine flu could spread it to 10% of his or her co-workers, a statistic he attributed to the Centers for Disease Control and Prevention.

The Connecticut Democrat cited the factoid to bolster his argument that all businesses should be required to provide paid sick leave, something that’s virtually unknown in the restaurant business. It's something the industry will eventually have to adopt. But the trade isn't currently in a condition where it could absorb the cost. So, in the meantime, turn up the peer pressure.

Then again, it’d be difficult for many restaurants to match the efforts of some colleagues. For one thing, some of the steps could be illegal. A restaurant in Canada was reported to the authorities for allegedly turning away the husband of a local woman who was known to have contracted swine flu. The proprietor contended that she was just trying to protect the staff and other patrons.

And then there’s the germophobic effort of Silk and Soya, a new Thai restaurant in Madrid, Spain. To safeguard its guests and employees, the place reportedly takes each staffer’s temperature before a shift starts. News reports indicate that menus are wiped clean after every use, and that servers use cloth napkins to handle plates. Those safeguards are touted as points of distinction for the place--and the focus of its publicity efforts, judging from the coverage it's garnered.

An unrealistic reaction to a manageable risk is apparently not just an American thing.

Is salmon the new twofer?

Forget sliders, bundled meals and mini desserts. The hook for restaurant bargain hunters is being re-baited with the likes of lobster, crab and salmon.

Those are among the lures Ruby Tuesday is flycasting with its much-publicized new menu (the bill of fare landed lengthy features from The New York Times and AOL). The dinnerhouse chain added a lobster tail in late summer. Now it’s mixed the pricey protein into several dishes, including a classic surf and turf platter. Two tails share the plate with a seven-ounce sirloin, vegetables and a potato. This isn’t your two-dinners-for-$20 draw.

Nor is the new lump-meat crab cake, or the just-added Salmon Florentine platter. The chain is betting that a special-occasion dinner priced at an everyday rate—relatively speaking—will still be taken as a deal by consumers obsessed with economy.

It’s the credo being followed with considerable success by Panera Bread Co. Not coincidentally, the bakery-café chain has also used lobster as a draw, albeit a regional one. This summer units in the New England area offered a half-pound lobster salad sandwich for about $17 (at least in my area). CEO Ron Shaich explained at the time that the chain was focusing on the 90% of consumers who were employed, not the 10% that lost or couldn’t find a job.

Now, Shaich told investors last month, the chain is adding salmon, both as a sandwich and salad ingredient. He noted that the addition will boost profits while presenting customers with another high-quality choice.

Salmon is already on the menu of Panera’s arch-competitor (and Shaich’s former charge), the Au Bon Pain bakery-café chain. It recently added a sandwich of smoked salmon, egg and guacamole. Already on the menu was a breakfast sandwich of smoked salmon and wasabi, served on an onion dill bagel.

Touting quality in a pitch for deal hunters is a risky strategy, as Cheesecake Factory can attest. It’s a casual-dining leader in quality and portion size, yet it had to re-engineer the tome it calls a menu to include more straightforward bargains. Virtually every other casual chain has done the same, to varying degrees.

But there are signs the approach can work. Ruby Tuesday’s lobster tails, for instant, were generating 3% of a typical restaurant’s sales at the end of August, according to CEO Sandy Beall. That’s at a price falling between $17 and $19, he noted to financial analysts a few weeks ago.

He noted at the time that the chain’s emphasis on quality was helping to boost check averages, the Holy Grail for an industry limping through a steep drop off in customers.

Panera told the Wall Street Journal for a mid-August feature that its hefty lobster sandwich was selling well, but balked at disclosing the specifics.

Will it work? Well, there’s a reason chains have to give away new menu items to get them tasted. A quality item for a reasonable price has its appeal. But the absolute dollars are still going to be a yellow light for those of us who no longer find ourselves in a position to dine out regularly.