Friday, February 27, 2009

Survival tactics 2.0

Restaurant chains agree the economy stinks. But their ways of contending vary more than Sen. Burris’ recounts of his Blago dealings. Here’s a rundown of what several brands have recently identified as their updated coping strategies:

Applebee’s: The near-term emphasis, executives said during their conference call, will be on restaurant operations, both to bolster unit-level profit margins and to provide a better experience for the guest. One of the butt magnets to be used near-term is an updated menu sporting new types of foods and beverages, according to Julia Stewart, CEO of franchisor DineEquity Inc. The introduction is slated for mid-April, with more products to be introduced and promoted throughout the year, she said.

Cracker Barrel: Management spoke less during its conference call about speeding service, the focus of past confabs, and far more about delivering value. The chain is about to roll out a line of lunch and dinner skillet meals that will be priced from $7.99 to $8.99, including salad and bread. Executives acknowledged that their Best of the Barrel initiative, an effort to streamline the menu by loping off less-popular selections, proved a mistake. “Customers were disappointed to see their favorite food items no longer available,” said CEO Michael Woodhouse. It was a lesson, he said, “we learned the hard way.” No mention was made of an initiative to speed service by using holding equipment for items like bacon and sausage.

Domino’s: “We’re working very hard to be a bigger player in the late night business, particularly with some of our new products,” said CEO David Brandon. He asserted that the pizza chain’s initiative for stretching its sales day the other way, into lunch, has been successful. All stores are now open for the meal, which Domino’s is pursuing with its new line of delivered oven-baked sandwiches.

Famous Dave’s: The emphasis appears to be on helping franchisees survive the downturn. The assistance includes a switch to shorter-term purchasing contracts and the development of more secondary suppliers, to increase competition. Meanwhile, development requirements for franchisees have been suspended through 2010. Licensees that open a store get a cut in royalties for the first year of operation. Advertising royalties have been halved, to .5% of sales.

Texas Roadhouse: Management stressed this week that traffic and guest spending levels are the big problems confronting the bargain-priced chain. Longer term, said CEO G.J. Hart, the company is focusing on the cost of new restaurants. Hart said the home office hopes to bring down the current outlay of $4.1 million, or roughly what the unit will do in annual sales, in part by locating stores in strip malls. “We’re also evaluating conversions,” he said.

Thursday, February 26, 2009

IHOP reviews Denny's free breakfast

Julia Stewart, CEO of IHOP’s parent company, has something to say to Denny’s about its loudly trumpeted breakfast giveaway in early February.

“If you’ll indulge me for a moment,” she said yesterday during a conference call with financial analysts, “we want to thank them.”

On the Tuesday Denny’s offered a free Grand Slam platter to anyone who came in, “IHOP sales were significantly up,” and “continued strong for the remainder of that week,” explained Stewart.

She called the arch-competitor’s promotion “a terrific example of the fact no who talks about breakfast, whether it’s a direct competitor, whether it’s the quick-service placers, it nearly always is a great thing for IHOP.”

Stewart spoke the day after IHOP offered its own giveaway, a free short stack of its signature pancakes to anyone who came in on Feb. 24—National Pancake Day, of course—between 7 a.m. and 10 p.m.

Wednesday, February 25, 2009

A sign of the times

This morning the parent of Applebee’s and IHOP posted a net loss of $137 million for the last three months of 2008, the result of having to reset the value of Applebee’s “goodwill,” or the worth of its name and other intangible assets. In other words, DineEquity Inc. determined the brand equity of the company it bought in 2007 for $2.3 billion is worth about $148 million less today. That left shareholders with a loss of $8.15 for every share they hold.

Yet DineEquity’s stock price has climbed about 20% so far today because the company would’ve posted a profit without the write-down—of roughly $5.7 million. That’s for a company that franchises nearly 1,400 full-service restaurants.

Time to pull the plug on Jack

Yesterday I fielded my second text-messaged offer in a week for free food from Jack in the Box. Clearly the chain is missing the leadership of its orb-headed mascot/spokesman/founder, Jack Box, who’s near death after being hit by a bus. I, for one, am pining for his return. Anything to stop the yuck-yuck campaign from continuing for one more day.

I’ve been laughing along since Day One, but the joke is getting a little old. Yet I fear it’ll be milked for a few more weeks. I’m really worried the chain will replace, the website that tracks Jack’s dire state of health, with,, and

Then again, it might be better if they did. Jack’s in a coma. There’s just not that much action to the campaign anymore. The notion may be funny, but I’m not going to watch a cam of a mascot lying in bed. Nor did I fall out of my chair in hilarity when they posted an X-ray of a huge, perfectly round head. One of the more notable restaurant campaigns of recent years is turning into the joke a drunk uncle tells incessantly at a family wedding. After awhile, you just nod.

The considerable talents behind the campaign should’ve considered more twists and turns. For instance, there are mild suggestions that Jack’s assistant, Barbara, may have done more for Jack while he was healthy than maintain his calendar. She seems to be at odds with Mrs. Box. It would’ve been a good detour to have both women unpleasantly surprised to find a mysterious female visitor one day at Jack’s bedside—a tart, clearly, and one with a square head. She could’ve made remarks about Jack resting his large refreshment on her noggin.

Instead, the campaign is getting a little stale and strained. I hate to say it, but it may be time to pull the plug on Jack.

Tuesday, February 24, 2009

Food safety gets off to a bad start in MA

Add another problem to the list for foodservice operators in Massachusetts: A sharp increase in norovirus outbreaks. The state's Department of Health issued an alert yesterday about "a significant number of gastrointestinal illness outbreaks across the state this winter," most likely caused by the food and hand-borne pathogen.

The first six weeks of 2009 brought reports of eight outbreaks in food-handling facilities, compared with none during the same period of 2008 and '07, the department said.

Reported contaminations within schools and daycare facilities are running below prior-year levels, the announcement noted. But outbreaks are up at almost any other common site of contamination, the data show. The increase was particularly high within long-term care and rehabilitation facilities, with an 87% leap in incidences.

The department's statement noted that infected persons who handle food should not be back in the kitchen for three days after they "recover." But studies have shown that persons can still be shedding, or carrying active virus, for a considerable stretch after their symptoms disappear.

Unions and some health officials contend that restaurant workers should be given paid sick leave, to discourage those infected with norovirus from returning to the job prematurely. Many operations grant only a leave of a day or two, typically without pay, for employees who say they've been afflicted with a stomach flu.

This year has been a bitter one for Massachusetts restaurateurs. Gov. Deval Patrick is trying to raise additional tax funds by increasing the levy on restaurant meals by a point, to 6%. His initiative would also allow local jurisdictions to tack on another percentage point for themselves.

The state's restaurant industry contends that consumers will further cut back on dining out if the tax raises their bills by a dollar or two.

Monday, February 23, 2009

Arby's lifts domed lid off Roastburger

The newest addition to Arby's sandwich line-up was unveiled today on the chain's website. It turns out that "the burger done better" is no burger at all. Rather, the Roastburger is a sandwich of thinly sliced roast beef, lettuce and tomato on a ciabatta-style split roll. Alternatives to the core All-American variety feature bacon and cheddar cheese or bacon and a bleu cheese dressing.

The premium item is being positioned as an alternative to burgers, not as a better version of one, as an earlier post here had suggested. The descriptive copy stresses that the sandwich's main ingredient is roast beef, not some fried and greasy meat. The inclusion of bacon is sort of glossed over.

Several mom-focused websites were buzzing today because Arby's is apparently giving away coupons for a free Roastburgers to consumers who sign up for its Arby's Extras loyalty program.

Arby's hadn't revealed as of this posting the suggested retail price of the Roastburger.

$700M loss is just part of Outback parent's woes

Never mind the $506 million that Outback Steakhouse’s parent lost during the last three months of 2008, swelling its red ink for the year to a bloomin’ $739 million. The company is embroiled in enough big-dollar legal and financial complications to change its name to FUBAR.

First there’s the courtroom duel with T-Bird Nevada, a business entity formed by the Outback chain’s franchise operators in California. Outback’s franchisor, the privately held OSI Restaurant Partners LLC, guaranteed a $35-million line of credit for T-Bird, which intended to use the funds for securing sites. Last month, according to an SEC filing, OSI learned that T-Bird couldn’t repay the $33.3 million it had run up on the credit line.

OSI bought the credit note from T-Bird’s lender on Feb. 17 for about face value, then filed suit against the franchise group two days later to recover the $33.3 million.

Last Friday, Feb. 20, T-Bird counter-sued OSI for alleged breaking assurances the franchisor would buy the California stores and, apparently, their debt obligations. T-Bird is asking for $100 million in compensatory and punitive damages.

OSI asserted in the securities filing that the T-Bird suit is without merit and would be contested.

The parties don't even agree on how many Outback units have been opened by T-Bird's constituents. OSI says 41, while T-Bird says 53.

OSI also vowed to contest an arbitor’s ruling that OSI owes roughly $98 million to a single-store Outback franchisee in Argentina, American Restaurants Inc. The arbitor apparently decided that an OSI affiliate had wrongly terminated the development agreement. OSI said it filed an action in a court in Florida on Dec. 29 that challenges the ruling, and indicated it would seek a reversal of the award in the courts of Argentina as well as the United States.

But wait—there’s more.

OSI also has to contend with complications from its investment in a Kentucky track, Kentucky Speedway LLC. The SEC filing notes that the restaurant company owns 22% of Kentucky Speedway, and runs its catering and concession operations. It’s also a partial guarantor of $68 million in bonds that were issued by the speedway. Apparently $17 million still has to be repaid to bondholders, and OSI is on the hook for $2.5 million.

You have to wonder how a restaurant company, and one whose principals prided themselves on the simplicity of their operations, could get so entangled in financial wheelings and dealings.

If OSI had one more complication relating to loans and guarantees, perhaps it would’ve qualified for TARP funds.

No need to break a five to burst a belt

If I took advantage of the bargains restaurant chains have flycast into the market just since Saturday, i could have two fish sandwiches, aa Chipotle burrito, a Quiznos sub, and a slice of cake afterward at Caribou Coffee, all for $4.

No doubt I'd be tremendously thirsty. Which means I'd have to decide whether to pop for a 42-oz. soft drink at Carl's Jr., served in a limited-edition skateboarding cup, or wait for my free sample of VIA, Starbucks' new instant coffee, to arrive in the mail.

Some might characterize the situation as discounting run amuck. I prefer to see it as a challenge.

A news round-up

The start of the business week brought the usual flood of news reports from the restaurant industry. Most are merely in-box cloggers, but here are a few worth noting:

A huge I.O.U. for the business: The restaurant industry has a serious debt problem, according to a story posted today by USA Today. The article notes that 20 restaurant and retail companies are on S&P’s list of concerns that are struggling to keep up with their debt-service payments. And it quotes Thomas Reuters as saying that public restaurant companies on average owe 83 cents for every $1 of shareholders’ equity.

Simpler permitting for Gotham: New York City willstreamline the processes that typically delay the opening of a local restaurant or other small business, City Council speaker Christine Quinn promised yesterday. She specifically cited such time-saving steps as having necessary pre-opening inspections conducted on the same day, rather than arranging separate appointments with each agency.

There's no better price: The Quiznos sandwich chain announced it will give away 1 million sub sandwiches “as part of its effort to offer better prices for a better world.” The offer is in addition to the franchised chain’s promotional contest to award free subs for a year to a “hometown hero” nominated by visitors to a new website,

Even Chipotle's giving it away: Subscribers to the Arizona Republic found a collapsed brown paper bag slipped into yesterday's edition. It entitles them to a free burrito at Chipotle, a chain you wouldn't expect to be in need of that sort of traffic help these days.

Alabama restaurants to go dry: Restaurants in Alabama’s Shelby and Houston Counties will likely have to cease selling alcohol on Sundays because of a change in policy by state regulators and the apparent unwillingness of lawmakers to address the situation. Liquor licenses for the two jurisdictions allow establishments to sell alcohol only Monday through Saturday. But most got around that stipulation by also obtaining a permit to operate as a supper club on Sunday. Now state authorities say they’ll not honor the club license, and county lawmakers aren’t rallying to the industry’s defense.

Hey, Elliott Ness is dead: Meanwhile, Pennsylvania’s Cumberland and Perry Counties are reconsidering Prohibition. Some 25 towns there reportedly forbid or severely limit alcohol sales. Apparently there’s still some bad blood about permitting the direct election of senators and giving women the vote.

Size does matter: Carl’s Jr. is offering a 42-oz. soda in a Rob Dyrdek-themed “collector’s cup” as part of its tie-in with the pro skateboarder and reality TV star. The bucket-sized, reusable cup is free with the purchase of a large (?) drink or a combo meal.

Size does matter II: Concept sibling Hardee’s is making a pitch for big eaters with the rollout of new breakfast sandwiches made with Texas toast. The oversized bread holds egg, cheese and breakfast meats, and sells for about $1.69 a la carte or $3.69 in a combo.

Sunday, February 22, 2009

Who said a week had to be seven days--or even 14?

The latest casualty of the Great Recession appears to be the calendar, or at least the one used for restaurant promotions. A week once meant seven days, no exceptions. Now that timeframe can extend to more than a month if we’re talking about Restaurant Weeks, the campaigns where a location’s fine-dining places simultaneously offer multi-course meals for the same bargain price.

In New York City, birthplace of the promotion, “week” was first redefined this winter as two partial weeks—six days in mid-January, followed by a regular Saturday night, then reinstituted for the next five days. It’s a model that’s been widely copied.

But with conditions being what they are, restaurants in New York decided to extend the cooperative promotion—for four more weeks.

The city’s restaurant trade was hardly alone in trying to squeeze a few more bookings out of the promotion. Philadelphia, Baltimore, Denver, San Diego and Los Angeles all extended their timeframes, to name just a few of the places that offer a Restaurant Week.

And I really, really mean those are just a small sampling. Another cultural side effect of the financial meltdown is the spread of the Restaurant Week concept to every nook and cranny where you’ll find a fork and a menu. Ohio’s Miami Valley has a Restaurant Week. So does Norfolk, VA, and Bethesday, MD. They, by the way, all extended their Restaurant Week by at least a…well, a week. As it used to be defined.

Floral Park hasn’t yet lengthened its Restaurant Week. This year marks the first time the promotion has been adopted by the little-known town in New York’s borough of Queens. Floral Park Restaurant Week is in addition to the Queens Restaurant Week that was held late last year.

This year also marks the first Restaurant Week for Orange County, Calif., the restaurant-rich expanse south of Los Angeles.

It’s not as if the proliferation of Restaurant Weeks is watering down their appeal. Denver’s roster of participating places reportedly swelled this year to a record 225 establishments, from 174 in 2008. The Chicago Tribune reported that 130 restaurants are participating in the Windy City’s Restaurant Week, compared with 35 places last year.

Skeptics say a Restaurant Week is nothing more than dressed-up discounting. I’m not sure why that bothers them. By all accounts, the tactic appears to work.

Value menus, varied portion sizes, bundled meals and out-and-out price chopping have become the standard marketing tools for casual-dining and fast-food chains in the current environment. Upper-scale restaurants seem to have found their Vise-Grip in the form of Restaurant Week.

Friday, February 20, 2009

And he didn't even land a plane in the Hudson

I’m studying the news photos of Howard Schultz to see if all that limelight has singed the hair around his ears. In a mere week, the Starbucks CEO has sparked an international incident, figured into an ad for private jets, been hailed as a Braveheart by a god of business journalism, fostered more internet flaming than a virtual Zippo, and been outted for pulling a Folgers Crystals switch on friends. I half-expect to see him looming Zelig-like behind the podium at a Yankees press conference, whispering in A-Rod’s ear.

The one-time resident of subsidized housing was set on the path to hosting “Saturday Night Live” by his chain’s introduction of a new product. Whoa. How often does a restaurant brand make a move like that?

But Via, Starbucks’ controversial new instant coffee, is no ordinary addition, and its introduction didn’t exactly follow the industry operations manual.

News of the rollout (supposedly) leaked out beforehand via the internet and the current Jonas Brothers of that medium, social media. Once the word was out, Starbucks clearly harried it along. An internal memo purportedly sent to alert employees of the introduction was easier to find than the creepy picture of the octuplets mom while she was pregnant.

I got my confirmation of the instant coffee rumors from Starbucks’ Twitter poster, who added that he/she had tried and liked Via. Later, offered me and 54,200 other tweeters a link we could use to request a free sample (“Just did some math and figured out that we gave away almost 4 sticks of VIA per sec,” a later post noted). Non-stop tweets also spotlighted favorable reviews of the product, from the staff of Ad Age to store managers to individual consumers.

Meanhile, Schultz was making news on a global scale, straining international relations in the process. In an interview with CNBC, he remarked that business conditions for the chain were particularly trying in the United Kingdom because the economy there is in a spiral of decline.

That was enough to set off Britain’s equivalent of our Secretary of Commerce, the stiff-lipped Lord Peter Mandelson. Later, at a diplomatic function in the United States, he reportedly used an unprintable expletive to characterize Schultz and his comment. "Why should I have that guy running down the country?" he was widely quoted as remarking.

A Starbucks spokesman later issued a retraction and reportedly apologized to Mandelson, even though a poll on shows 83% of respondents believe Schultz did nothing wrong.

But controversy has been working in Starbucks’ favor, even when it’s stirred up by someone else. The CEOs of the Big Three auto makers sparked a furor when they flew in private jets to ask Congress for billions in aid. Schultz’s team subsequently announced that Starbucks, which is in the process of cutting 6,700 jobs, would sell its private craft.

Hawker Beechcraft, a private jet manufacturer, is publicizing that fit of frugality in the print ad it just got aloft. “Dear Starbucks,” the copy begins, “You still need to fly. We’re here to help.” The take-away is that Starbucks is being too strident in cutting expenses, an assertion that will likely be sweet music to investors’ ears.

Then again, with the way things have been going, they may have some additional tunes to mix into their iPod playlists. It’s only a matter of time until Schultz is asked to cut an album of duets with Tony Bennett. Maybe after he escorts Jennifer Anniston to the Oscars, and right before his appearance on The Tonight Show.

Thursday, February 19, 2009

What happened to Denny's fast-food experiment?

Sometimes what a restaurant company doesn’t tell Wall Street is more interesting than what it trumpets. Yesterday, for instance, Denny’s CEO Nelson Marchioli stressed to financial analysts that “you will see us being more of a player in the to-go and on-the-go side of things,” in part by pushing a new breakfast sandwich. Yet there was no mention during the conference call of Fresh Express, the restaurant-within-a-restaurant that Denny’s developed about a year ago to compete head-to-head with fast-food chains.

Instead, Marchioli indicated that the push for more carryout business will pivot on the Grand Slamwich, a product quietly introduced last year as part of the Fresh Express experiment. The sandwich features egg, breakfast meats and cheese, flavored with about a teaspoonful of maple syrup.

The conference call revealed that Denny’s will mount a big promotional campaign for the Grand Slamwich during 2009. It’s being positioned as a handheld version of the chain’s well-known breakfast platter, the Grand Slam.

Marchioli noted that Denny’s is now reflecting its drive for more to-go business in the designs of stores, but provided no details. Fresh Express was presented as a separate concept, with its own signage, that had been shoehorned into an existing Denny’s. Other stores featured Fresh Express kiosks.

CFO Mark Wolfinger noted that Denny’s units developed under a collaboration with Pilot, the gas-and-go chain, were averaging about $2 million in sales annually, compared with a mean of $1.6 million for the chain as a whole. He said three were currently open, and that some of the 33 Denny’s stores expected to open during 2009 will be on the pad of the convenience centers.

Marchioli observed that late-night service is another niche that makes sense for Denny’s. Until the chain targeted the wee hours of the night as a growth opportunity, he explained, the graveyard shift was “our most challenged day part.” Now, he said, it’s “our best performer.”

Random trivia fact about Marchioli: He’s the only CEO in the industry who rose to that position from a quality-assurance (industry-speak for “food-safety”) background.

Get real, unions

Restaurant employees’ union to Burger King: You’re cheating taxpayers.

Romeo to union: Oh, shut up.

Sorry, but I’m really tired of watching the Service Employees International Union and its fellow the traveler, Restaurant Opportunties Center of New York (and now Maine), try to manipulate public sympathy with their preposterous Grassy Knoll take on reality. They twist the facts to turn restaurant employers into the sort of mustachioed villains who once tied matrons to railroad tracks.

This time around, for instance, SEIU is hoping to convince the public that Burger King Holdings is siphoning off some of the federal bail-out funds that were channeled to banks. Follow closely, because this has more twists and turns than a day in Illinois politics.

One of the big stakeholders in BK, the union notes in a statement issued yesterday, is Goldman Sachs. And the one-time broker, now reclassified as a bank, was a recipient of some $10 billion from the TARP (Troubled Asset Relief Program) kitty.

Up to this point, we’re still reality-based. But now the acid kicks in.

The Obama Administration and Congress want more accountability for how TARP dollars are used, notes SEIU. But an additional $273 million of taxpayers’ money is being siphoned off by BK. The Bernie Maddoff-like scheme: Not providing healthcare benefits and paying “sub-poverty wage levels.”

Let me review: BK doesn’t provide health care, which means employees have to find other ways of affording medical attention. A significant stake in the company is held by Goldman Sachs, which was given $10 billion in TARP funds. Ergo, Goldman and BK are cheating the American public.


But it gets worse, SEIU says. BK CEO John Chidsey collected $5.4 million in 2008 compensation, including bonuses. Goldman Sachs paid out $6.5 billion in bonuses, the union says. If just the Goldman Sachs performance-based pay had been given instead to BK’s workers, SEIU says, all 360,000 of them would have collected $18,000.

Never mind that BK is a publicly owned company in which Sachs merely holds a stake, albeit a big one. And that BK’s employees aren’t paid by Sachs. Indeed, there’s no flow of money from Sachs to BK, never mind to Chidsey.

I’m not saying that Sachs should have paid big-buck bonuses when it’s collecting government bailout funds. But I’m not sure what that has to do with BK. Might it be because SEIU would like to enlist its employees as members?

Similarly, whether or not BK should provide some type of health-insurance support is a legitimate topic of discussion. If SEIU wanted to start a reality-based conversation on the responsibility of minimum-wage employers, we’d be in a whole different realm. But, here again, it’s just trying to look like the white-hatted cowboy who unties Snidely Whiplash’s knots and frees the maiden from the oncoming locomotive. It’s trying to curry favor by manipulating the facts to make it look like a bravo fighter for right.

Instead, it’s accusing BK and Sachs of “opposing efforts to stop rebuilding the economy” while “taking billions of dollars through taxpayers.”

Why not just accuse the pair of kicking puppies and trying to outlaw American flags?

Wednesday, February 18, 2009

CPAs' PSA: Avoid restaurants

If the restaurant industry was irate over Suze Orman’s recommendation that consumers avoid dining out for a month, it may have to be searched for weapons after it hears about the public service campaign being waged by a national accountants’ group. The program,, is intended to help the public save money through easy, simple actions. Like foregoing trips to restaurants, or bringing your lunch to work instead of buying it.

The message is being delivered not only through the website, but also in a series of ads produced by The Advertising Council, a trade group, in collaboration with the American Institute of Certified Public Accountants. All attempt to help consumers improve their financial situation by cutting expenditures and putting the savings in safe interest-bearing investments.

One of the program’s more intriguing elements is showing consumers how much they can make by changing their spendthrift ways. For instance, a calculator featured on the website allows visitors to compute what they spend on restaurants in a typical month. Using that figure, it then calculates what the money would earn if it was banked. The example cited shows a restaurant patron having squirreled away $22,000 over five years just from skipping restaurant visits.

One of the criticisms leveled at Orman, the popular personal-finance guru, was her singling out of restaurants as the luxury that should be skipped. (the name is a reference to feeding a piggybank) is not nearly so selective. It recommends a reconsideration of everything from buying gadgets to splurging for makeup.

“Which spending habit are we gonna smash first?” asks Benjamin, the piggybank icon that narrates the web site.

But five of the broad advice categories squarely hit restaurants: Dining Out (“Instead of going out, cook at home with friends.”), Lunch Buying, Latte-a-Day, Takeout (“Buy instant meals at the grocery store, they are cheaper and efficient.”) and Bottled Beverages (“Get a counter-top carbonator and make your own, healthy soft drinks.”)

The website is aimed at adults, but links to a site for “tweens,” where a game teaches children how to save. The AICPA and the Ad Council have also set up a password-protected site as a resource for teachers.

The knee-jerk reaction would be to turn Benjamin into bacon. But the sort of anger shown by the business over Orman’s recommendation needs to be put aside. is well intentioned, and helping consumers cut their expenses, including their outlays for restaurant food, is no more diabolical than restaurateurs trimming their light bills, labor expenses or supply charges. The industry has to bear in mind that everyone is struggling in this environment. The effort by the AICPA and the Ad Council is merely striving to help the public in that effort.

But, of course, restaurants are part of the public, too. Still, if the foodservice industry wants to counter efforts like, it has to focus on what marketers dub the value proposition—why it’s still worthwhile for consumers to dine out. Maybe restaurateurs need to remind hard-pressed patrons that restaurant meals are still a relatively inexpensive indulgence, all the more appreciable in these trying times. Or a great way to save time. Or an opportunity for the family to share quality time, instead of having Mom or Dad frantically slapping together a meal while everyone else snorks down their meal.

But finding a noose and a stout branch? Nah. That’s just not the way to go. The industry has to start fending off the dining-out naysayers with a counterargument, not an how-dare-you attack.

Tuesday, February 17, 2009

Popeyes' parent seeks court help with founder's co.

Col. Harland Sanders would probably be comforted to learn his fast-food brainchild, KFC, recently built a sturdier vault to safeguard the formula of herbs and spices he concocted to give the chicken a distinctive taste. Over at the rival Popeyes Louisiana Kitchen chain, dealings with the founder's legacy aren't going nearly as well.

Popeyes' current parent, AFC Enterprises, asked a court today to arbitrate a dispute between the company and the concern that supplies the spices for the Cajun-style chicken that sets the chain apart. The spice mix is supplied by Diversified Foods & Seasonings, a concern started and overseen by Popeyes founder Al Copeland until his death last year. AFC contends that Diversified is charging too much for the peppery blend that gives Popeyes' chicken its kick.

AFC is also seeking a declaration from the court that the franchisor has the right to determine if the spice blend should be changed for regulatory, nutritional or economic reasons. IIf the court grants the declaratory judgement, Diversified couldn't cheapen the mix without AFC's okay. Or, coming at it from the other direction, AFC could determine if some cost should come out of the spicing.

What's more intriguing is the stipulation that AFC has a say over nutritional or regulatory-related changes in the recipe. New York City is pressing fast-food chains voluntarily to cut the salt in their recipes. If they don't go along, they'll likely be hit by a a government mandate to reduce the sodium. Is AFC setting the groundwork to comply with NYC's demand, or a similar insistence from jurisdictions that follow Gotham's ead?

AFC and various Al Copeland proxies have often been at odds. Indeed, AFC came into being in large part to distance Copeland from his chain and another fried chicken chain he acquired back in the 1980s, Church's. The purchase remains one of the strangest foodservice deals ever. Popeyes and Church's were direct competitors, had largely overlapping markets, and showed every indication of being incompatible siblings. What prompted Copeland to even consider such a deal? Many, many observers suggested it was a function of ego.

He ended up losing so much money that he was forced to step away from the two-concept company. However, he continued to supply spices and foods to Popeyes, even as he dabbled with other restaurant concepts, including the Copeland's dinnerhouse chain.

Diversified had yet to issue any public comment on the matter as of this posting. The court request was filed by AFC roughly at the end of the business day.

"While awaiting the decision of the court and the arbitrator, it is business as usual at Popeyes," said AFC CEO Cheryl Bachelder said.

Smudging the line between restaurants, retailers

Once upon a time, restaurateurs and their investors questioned the wisdom of dabbling in retail. If consumers can eat your specialties at home, they reasoned, why bother visiting the restaurant?

But today, with supermarkets sporting all sorts of products emblazoned with restaurant logos, investors are asking a decidedly different question: Why aren’t you jumping on that (Bob Evans-brand) gravy train?

David Overton, CEO of The Cheesecake Factory, was grilled on that point by a financial analyst last week. “Well, we haven't decided to sell any of our actual dinner items or restaurant items yet,” danced Overton. “It's something that we could look at. We have been asked to do so…[but] the 70-something million people that came in the restaurant last year is where we're concentrating. I still think that's our greatest game at this point.”

Cheesecake, which just recently made concessions to such profound trends as discounting and offering mini-portions, may find the ranks of retail holdouts to be a lonely place. Panera Bread Co. ran through enough menu initiatives during an investment conference call on Thursday to suggest steroids testing for its R&D staff. One of the bigger ones, literally, mentioned by CEO Ron Shaich was a possible move into the retail sale of bulk baked goods.

He explained that units of the bakery-café chain have started retailing multipacks of muffins, scones and bagels. “You will see us focus on selling more seasonal breads at retail,” added Shaich. “We will regularly celebrate our gift worthy breads, things like Panettone, holiday bread, Irish soda bread, hot cross buns and a variety of sweet breakfast breads. We will also merchandise our breads to our guests for everyday use.”

Panera will be selling the baked goods through its own retail outlets rather than supermarkets, a twist that’s also being embraced by Starbucks. Its new retail push, the sale of Via instant coffees for home mixing, will be undertaken through the coffee giant’s own cafes, not a Piggly Wiggly or a King Kullen.

Other restaurants chains recently conferring with investors about retail initiatives include Bob Evans and California Pizza Kitchens, neither of which is a stranger to that alternative sales channel.

Indeed, Bob Evans is as much of a grocery-product supplier as it is a restaurant operator, a role it continues to expand by adding heat-and-eat products bearing the brand of its namesake restaurant chain. In its most recent quarter, for instance, the company added nine new retail choices, including “family-sized” portions of such comfort foods as mac and cheese and mashed potatoes.

But it also raised what should be a yellow light for restaurateurs branching into retail: During the most recent quarter, supermarket sales of Bob Evans-brand products decreased on a volume basis for the first time in more than seven years, executives noted.

Atlanta restaurant workers learn to fight back

I posted an entry Friday in my blog on Fohboh, the foodservice social networking site, about the recent flurry of legislative proposals that would allow consumers to carry weapons into restaurants serving alcohol. Predictably, a presumed sympathizer with the other NRA assailed the contention that mixing guns and booze isn't a good idea. It's not as if people are being killed inside the restaurants of Georgia, where the laws were changed last year to let patrons come a-packin', he sniffed.

But, actually, and unfortunately, they are. Indeed, a local TV station reports that restaurant employees in Atlanta are taking precautions to protect themselves following the murder of a restaurant bartender in January. They reportedly held a two-hour self-defense class outside an establishment, while patrons looked on.

Just the sort of publicity the industry needs these days.

Monday, February 16, 2009

Arby's burger isn't available, but merchandise is

Arby's isn't expected to roll out its entry in the burger market, the Roastburger, until March. But some entrepreneur apparently got his or her hands on some of the promotional materials a little early. For sale on eBay are tee shirts emblazoned with the announcement, "New! Roastburgers are here," emblazoned above an Arby's logo. They're selling for $22.77.

The back of the shirts carries the boast, "the burger done better."

The rollout of the Roastburger, Arby's foray into the prime market of sister brand Wendy's, hasn't exactly followed the usual steps. Free samples of a product bearing the Roastburger name were provided free to anyone who voted last November, a giveaway widely reported on the internet. A highly publicized commercial depicts a unit being warned via a frozen burger patty hurled through the plate glass window to "stop making the new Arby's Roastburger--or else." "The competition's nervous," remarks the voice-over.

And, perhaps most famously, the chain teased the Roastburger earlier this month by running a provocative full-page ad in Sports Illustrated's annual swimsuit issue. The spot has generated considerable buzz on the web.

Part of the unusualness is the product's name, which apparently was recycled from an earlier item. All the indications suggest the Roastburger will indeed be a new hamburger. But the same I.D. was apparently used in the past for an Arby's sandwich made with thinly sliced roast beef. It was touted as an alternative to the hamburger.

Then, of course, there's the matter of family complications. The Roastburger ad suggests the new item may be made with fresh rather than frozen beef, a signature of the Wendy's concept since its inception.

There must've been some interesting boardroom discussions down in the headquarters of their parent, Wendy's/Arby's Group.

Sunday, February 15, 2009

Tip laws draw new scrutiny

Raise a glass in sympathy to the industry’s public affairs officers. It’s bad enough they’ll be rooting for days through Congress’ stimulus package, looking for possible boons to their companies or the business overall. Now there’s the Whack-a-Mole marathon that statehouses commenced last week, with new tip bills popping up faster than peanut product recalls. And if their chain has any restaurants in the U.K., they might as well start pounding the Red Bull right away. Cut with a little vodka, perhaps.

Most of the proposals deal with the tip credit, a provision of wage-and-hour laws that assumes servers earn most of their income in gratuities. In states where a credit is on the books, employers have to pay only a portion of the mandated minimum wage, with the rest coming from what customers leave on the table as tips. Many of the jurisdictions follow federal law, which requires employers to pay tipped staffers only $2.13 an hour, compared with the full minimum of $6.55.

The waiter, waitress or bartender makes no less than he or she would if they collected the full minimum wage—and, indeed, they often make considerably more. Rather, the credit merely allows some of that pay to come directly from patrons.

But movements afoot in states like Maine, Kansas and Missouri aim to change that situation, which has been the norm in all but eight states since the 1980s. Labor proponents say it’s unfair for servers to collect only a small fraction of what their non-tipped colleagues are paid under state wage requirements. Whatever they get in tips, the advocates argue, is icing on the cake, a gift they should be entitled to keep in addition to their hourly pay.

Restaurants, of course, argue that they can’t afford to pay more in wages right now. Some also point out that the traditional tip is 15%, whereas the profit margin for most restaurants is in the single digits, and often under 5%.

Indeed, the trade cited its dire economic conditions in trying, unsuccessfully, to institute a tip credit in Montana. The proposal was just defeated in the state Senate by a 29-21 bipartisan vote.

The industry was more successful earlier this month in Wyoming, beating back a proposal to adjust the tip credit there. The measure would have raised the hourly minimum wage for servers by $3 an hour.

Yet to be decided is a proposal in Maine, where a new union-like group patterned after one in New York City, the innocuous-sounding Restaurant Opportunities Center, is pushing to raise the minimum wage of servers to 60% of the mandated rate for other workers. The current floor for servers is 50% of the full hourly wage.

A measure under consideration in Kansas would raise servers’ minimum to $4.35, from the current $2.13.

In Hawaii, restaurateurs are leading the charge to change the state’s tip credit, which allows them to lower servers’ minimum pay by just a quarter an hour, to $7. They’re arguing that the island state’s laws shouldn’t be out of sync with the pay scale of the mainland, and cite the long and growing list of restaurants that have been shuttered there by the economic freefall.

If you ask me, both sides have compelling arguments, given the state of the economy. There just aren’t enough dollars going into restaurants, so employers and employees are trying to adjust the split in whatever way is most favorable to them. It’s understandable, just not easily resolved.

So let’s hope those public affairs officers find plenty of hopeful indications within the stimulus package. In the meantime, send ‘em a whole bottle of the good stuff. Charge it to the bankruptcy lawyers, whose industry seems to be the only one doing better in this environment.

Friday, February 13, 2009

New star of '30 Rock': Mickey D's

McDonald’s should have gotten a writing credit for last night’s episode of “30 Rock.” The show pushed product placement to a new level, with Mickey D’s figuring into the plot, the dialogue, and even the series’ signature self-deprecation and snarkiness.

The episode pivoted on romance, particularly the scorching relationship between Alec Baldwin’s smarmy character, NBC honcho Jack Donaghy, and his mother’s former nurse, Elisa, played by Selma Hayak. Jack wants to take Elisa to a restaurant on Valentine’s Day “where even the Pope couldn’t get a reservation.” It's called Plunder, and its signature is a dessert of John Thain decadence. “Imagine a dessert for two with Tahitian vanilla bean ice cream in a pool of Cognac, drizzled in the world's most expensive chocolate, covered with shaved white, black and clear truffles, and topped with edible 25-karat gold leaf,” coos Jack. He breathlessly whispers its name: The Lover’s Delight.

That conversation takes place as he and Elisa are lustily enjoying two of McDonald's McFlurries, which they declare to be a dessert of dreams. But, of course, it’s no Lover’s Delight. Or so you suppose at that point.

But Jack and Elisa have a falling out in church, which Elisa insists they attend for St. Valentine’s Day. Jack heads off to Plunder alone, disparaging the Roman Catholic faith as he goes. Capitalism, he explains, is his true religion.

Jack gets his Lover’s Delight, but it’s not the same when consumed solo.

Elisa goes to church. When the collection basket comes around, she spots what looks like a coupon among the donations.

The next scene: Elisa heading into a McDonald’s with the coupon, where she finds Jack in line. She declares the coupon was a sign from God that they should be together. Jack counters that it was just a ploy by a giant of capitalism, and asserts that Ray Kroc, not The Big Guy, is the deity that reunited them.

"Maybe it was the Hamburglar," retorts Elisa.

The fade-out suggests they’re going to enjoy their Valentine’s Day with a McFlurry--especially delicious since it's purchased at a discount. Who needs The Lover’s Delight?

One of 30 Rock’s signatures is poking fun at its reliance on advertisers, with clumsy, sometimes creepy product placements figuring prominently in the early episodes. The coupon and subsequent meet-up fit that tongue-in-cheek approach like a burger on a bun.

The episode’s true commercials included—-surprise, surprise—-new spots for McDonald’s Quarter Pounder. The ads depict a young single person looking on lustily as a stranger devours one of the burgers. A voice-over provides a few mildly salacious observations, a sort of Barry White Lite, about what a mouth craves.

And what should that burger craver have for dessert? Why does a McFlurry come to mind?

BJ's focuses on operations, including the bar

BJ's, one of casual dining's stronger performers, hopes to add sales momentum during the current downturn through a series of operational and menu tweaks. Those initiatives, detailed to investors this week, include a new high-speed, energy-saving pizza oven, as well as a new centralized reservation system for large parties.

The chain is also testing catering and new dining-room configurations that aim to maximize seating capacity.

On the menu side, BJ's is experimenting with a new roster of craft beers, a new children's menu, higher quality wines, non-alcoholic beverages and "new signature menu items," said CEO Jerry Deitchle. He did not provide details.

Cheesecake tries snacks

Fast feeders aren't the only chains trying to lure more customers with snacks. Executives of The Cheesecake Factory say the new winter menu now in 36 of its stores features an array of snacks and small plates.

"They are very, very well priced," CEO David Overton commented during yesterday's conference call with financial analysts. "You can order two or three of them as you would one."

He indicated that the menu would be rolled to all stores within the next month.

The value appeal of the snacks and small plates is apparently meant to complement the bargains offered on what the chain calls its "special menu," an array of toothsome entrees priced at $11.95 to $12.95. Those selections are currently in "most of our restaurants, [but] not 100%," Overton said.

Instant coffee, long-term implications for Starbucks

Starbucks’ introduction next week of instant coffee will certainly mark a turning point for the lifestyle brand. The question is, in what direction is it veering?

The chain’s leadership has chanted with near religious zeal that the concept has to recapture the special-ness of visiting a Starbucks—the aroma of coffee, the showmanship of the barista, the indulgence of a perfectly crafted artisan brew. It’s critical, they’ve stressed, to the brand’s turnaround.

Now they’re going to make it possible for some schlub in his underwear to snort down a cup by tossing some water and concentrate into a stolen Denny’s mug. It’s the equivalent of selling toaster-oven pizza to consumers you’re simultaneous coaxing to buy a duck-sausage-and-truffles pie at the little café on the corner.

The home office is insisting the instant, reportedly to be called Via, will be every bit as good as what patrons could get from a Starbucks storefront. “We have been working on this project for over 20 years, and have a patent pending on the technology that enables us to absolutely replicate the taste of Starbucks coffee in an instant form,” Vivek Varma, senior vice president of public affairs, said in a memo sent to employees yesterday.

And how did that news go over with the Starbucks aficionados who frequent, a gathering point of sorts for their ranks?

“I want to cry now,” wrote Keith Maxwell.

“Jesus Christ. Are they serious? This is sad. Very sad. Ugh,” lamented someone who identified his or her self as Scribelus.

Varma noted that the instant coffee market is a $17-billion business. The Wall Street Journal reported that Starbucks will sell its entrant for $2.95 for a package of three servings and $9.95 for a 12-pack.

The official announcement is expected to come at “exclusive events” next week in New York and other cities, and samples will start arriving at Starbucks units on Wednesday, Varma said in the memo.

Thursday, February 12, 2009

What're the pacesetters trying next?

Three of the industry’s most closely monitored performers conferred with their investors yesterday in quarterly conference calls. Apparently the SEC has quietly changed its regulations to require that each confab include questions about bundled meals and other ways of coaxing open tightly clutched wallets. Here are some of the highlights:

McDonald’s is the indisputable king of fast-food, based on its consistently strong financial results. By the same gauge, you’d have to give the crown in casual dining to Buffalo Wild Wings.

Comp sales for the first three months of Wild Wings' fiscal 2009 are running at 7% for franchises, 8% for company stores, CEO Sally Smith told investors yesterday. No one else in the sector is coming close to those sorts of gains.

Smith also detailed some of the new products slated for rollouts, and they’re absolutely brilliant—because they’re so simple. For instance, one of the new items is merely a twist on chicken fingers, quite literally. Twisted Chicken is exactly that.

Those products are being readied after the introduction late last year of flat-bread items that intended to be dipped before they're munched. Sauces, developed for BWW’s wings, are one of the chain’s signatures.

The other new items—barbecue-flavored nachos and Pepperoni Kickers, presumably a type of appetizer—are also simple extensions, which promise to keep serving times tight.

Executives noted that BWW opened 67 stores last year, and has $44.5 million in cash and marketable securities on hand.

Chipotle clearly feels it’s no bank in a bailout situation. The chain said categorically that it would not cut 2008 bonuses across the board for restaurant managers, a reflection of that position’s importance and the stellar performance of many doing the job. If they excelled, execs indicated, they’ll be collecting their promised incentive pay-outs.

Nor is the chain following the lead of Starbucks and virtually the rest of the industry by bundling menu items into bargain-priced packages. The approach would work against Chipotle’s founding principle of customizing each order, executives explained.

But, they acknowledged, the chain is experimenting with new menu boards that may be less intimidating to first-time visitors. A new set-up might also help regulars discover new flavor or meal combinations, they added, though they weren’t forthcoming with details.

P.F. Chang’s is testing several ways to underscore value at its Pei Wei Asian Diner fast-casual concept, including portion cuts with an accompanying price rollback, executives said during their conference call yesterday.

“We’re looking at offering some of the existing products in a smaller portion, smaller price opportunity. We are looking at the possibility of doing some more all-inclusive dining opportunities. And then we are also evaluating the general format of the menu as it sits today in relationship to its current price,” said co-CEO Rick Federico.

He also cited the possibility of doing bundled meals, where a drink, cup of soup, side salad or spring roll could be offered as part of the meal. And, he said, nine stores are offering certain meals as bowls instead of a plated offering.

Federico said the concept has evolved into more of a low-priced alternative to casual restaurants instead of a true quick-casual place, which has been “a bit of a competitive disadvantage.” Part of the remedy, he said, will be a step-up in the development of new menu items.

He also acknowledged under questioning that the company may hire someone out of the fast-casual sector to lead Pei Wei, which has been without a president since Russell Owens resigned late last year.

P.F. Chang’s closed 10 Pei Weis last year.

Wednesday, February 11, 2009

Arby's new swimsuit issue ad

Darren Rovell of CNBC spotted this ad from Arby's in the new edition of Sports Illustrated's annual swimsuit issue:

It's a teaser for a new "Roastburger." The copy suggests it'll be a premium choice, but provides no details as to what precisely differentiates it, or what it might cost. The headline taunts, "We're about to reveal something you'll really drool over."

Rovell confesses that he read the whole ad.

Jack Box's nearly dead? Buy his shoe on eBay!

Jack in the Box once famously blew up its mascot. Now it's merely putting him on a death watch and selling his clothes on eBay.

The West Coast burger chain has been waging an online marketing campaign that pivots on a tragic accident suffered by its mascot and purported CEO, Jack Box, the orb-headed character whose visage adorns a gazillion car antennas in California. As regular readers will remember, Jack was supposedly hit by a bus last Monday. His head was fractured, prompting some delicate work with a glue gun. His executive duties are being shouldered by the mysterious and bumbling Phil, who was caught on video ordering from a hot dog cart, and Jack's assistant, Barbara, who's chronicling the situation via Twitter. She's also added some sauciness by citing tensions between herself and Jack's wife. "Jack’s wife Cricket is a lovely woman who I have nothing against at all, no matter what anyone says," writes Barbara.

Now the chain is pushing the campaign a step further by reporting that a shoe Jack was wearing at the time of the accident has turned up on eBay, with bidders already offering in excess of $500 for the macabre souvenir.

Meanwhile, well-wishers are being invited by the chain to send their regards to Jack via a website tracking his hospital stay, which apparently isn't doing well. A nurse explains that a doctor's pass at a nurse triggered a dead silence in the ward. "You could hear a pin drop," she recounts. "I heard Jack flat-lining."

No showing of the green? Seriously??

Proponents of the green movement probably relished yesterday’s disclosure that Carl’s Jr. had opened its first eco-friendly restaurant, a prototype studded with such advances as a rain-capture system, a high-tech smoke eater, and even a perch for a local hawk. But they likely missed today’s more significant announcement, from 26-unit Granite City Food & Brewery.

The regional brewpub chain trumpeted the opening of its latest outlet with all the reserve of a parent whose second grader just made the honor roll. “Highly detailed” and “contemporary décor” that make the place veritably buzz! A “fun and family-friendly dining atmosphere,” apparently for those who’d rather not vibrate during dinner!! Set in Carmel, IN, “one of the top ten places to live in the Midwest,” with “excellent schools, safe neighborhoods, an award-winning public library and an expanded park system” !!!

The description went on and on—without a mention of a single green feature. No LED lights in the parking lot. No motion-sensor-based light switches in the bathroom. No high-efficiency equipment in the kitchen, or flooring recycled from waste materials. Heck, not even a low-flow pre-rinse valve at the dish station, which would’ve set the facility back about $80.

How can a chain open a restaurant today that doesn’t incorporate at least the most fundamental devices and processes for conserving energy and water and cutting waste?

I’m picking on Granite, but it’s no different than almost every other restaurant chain that recently announced the opening of a new branch, from Chick-fil-A to Max & Erma’s.

Perhaps those restaurants really have green touches. If so, and the operator or franchisor merely isn’t crowing about it in their announcements, a public relations boon is being squandered. If not, they’re ignoring the genetic engineering that’s underway in the industry. A green gene is fast becoming a part of restaurants’ DNA. To ignore that is to risk being a freak, and having to fix the problem down the road with a potentially costly rehab.

More dark clouds, but is that a glimmer of sun?

The financial results released this morning by P.F. Chang's, once one of the industry's over-achievers, are less interesting than the company's projections for 2009: "a significant reduction in average weekly sales" of about 6 percent for both if its concepts. And, actually, that might be good news.

The figures are consistent with the comps posted for P.F. Chang's and Pei Wei Asian Diner for the last three months of 2008. Since the numbers reflect year-over-year comparisons, they suggest the downturn is leveling off. Might the industry be finding the bottom?

The announcement follows several promising additional developments, including yesterday's disclosure by beleagured GE Capital that it has lent $5.8 million to the eight-unit Boston Blackie's casual chain for expansion. Any loan extended to a restaurant company in the current environment is an encouraging sign, given how scarce capital has been. It's especially noteworthy because GE Capital has been the poster company for lenders that have been hurt by the banks' liquidity crisis.

This morning also brought the news that Tremblant Capital, a New York hedge fund, has increased its stake in Chipotle to 5.7%. Clearly the well-known, multi-billion-dollar fund believes shares are under-valued, or soon may be.

Similarly, fund manager John Hussman has greatly increased his stakes in Panera Bread Co. and Starbucks, and purchased shares of Darden for the first time.

A brightening view of restaurant stocks could only help the industry.

Still, the trade has a long way to go before it can claim the recovery is underway. P.F. Chang's profits for the last quarter of 2008 fell about 23%, to just $5.4 million.

Tuesday, February 10, 2009

List cites restaurant companies among the near-dead

Six contributors have collaborated on what amounts to a dead pool of consumer brands: “15 Companies That Might Not Survive 2009.” Regulars on the heavily trafficked site won’t be surprised to see Krispy Kreme on that critical list, given how much skepticism its turnaround efforts have met. Landry’s may not prompt a lot of visitors to fall out of their chairs, either. But Sbarro?

“It’s not the pizza that’s the problem,” writes lead author Rick Newman, whose day job is serving as chief business correspondent for U.S. News & World Report. Rather, he says, “many of this chain’s 1,100 storefronts are in malls, which is a double whammy.” A drop in retail traffic has thinned the eastern pizza specialist’s stream of potential customers, Newman explains. And without streetside facings, it can’t embrace some of the traffic draws that work for fast-food competitors, like snacks or breakfast.

The list is based on a review by Newman and his collaborators of Moody’s ratings of various bondholders, as well as unspecified other factors. The list was published on Sunday. Two days later, one of the cited companies is already flat-lining. Sirius XM, the subscription radio service, was reported today to be preparing for a bankruptcy filing.

Other familiar names on the death watch roster include Chrysler, Rite Aid, Blockbuster and Six Flags.

Of course, just publishing a list of companies you expect to go under can hasten the process. And no doubt some Old Media defenders will be citing the posting as a prime example of why blogging is the handiwork of Satan.

But there’s still the question of why the various companies cited haven’t posted comments challenging their designation of being not quite dead.

Monday, February 9, 2009

'Hi, my name is Rodney and I'll be your lifesaver tonight'

A bill under consideration in Maryland would require restaurants to have an employee on the premises throughout business hours who could administer CPR, the Heimlich maneuver and other forms of first aid.

The server, busboy, manager or whoever is on call as first responder would have to prove with certification from the Red Cross or a similar agency that they knew how to save lives. The training would presumably be funded by the employer, though the bill doesn’t specify as much.

The measure, introduced by State Sen. Bobby Zirkin, a Democrat from Baltimore, would take effect Oct. 1.

Zirkin told local TV station WBAL that he was prompted to introduce the measure last week because a constituent had choked to death inside a restaurant. “Nobody knew what they were doing,” Zirkin is quoted as saying.

The local media hasn’t done much handicapping of the bill’s prospects. Nor has the Restaurant Association of Maryland commented on the measure via its website.

But it may be hard for the industry to argue against a measure that could save lives, even if there's a cost of a few hundred dollars.

That kind of a week

Some weeks you might as well use a reporter’s notebook to level wobbly restaurant tables. The industry just isn’t making any news.

This, clearly, is not one of them.

Before Day One was officially two hours old, we already had McDonald’s posting another Ripley’s-caliber financial result (domestic comps rising 5.4% in January, a month regarded by most restaurant-chain execs as a possible violation of the Geneva Convention); Starbucks’ unveiling of new breakfast bargains; Domino’s launch of a new ad campaign that humorously riffs on the economic stimulus package and the formation of a new White House cabinet; and Applebee’s getting hit with bad news that few could have imagined (it's not meeting the thresholds needed to maintain its 90% tax abatement on the office it kept in Kansas after being sold to DineEquity in California).

This is also the week KFC is scheduled to introduce its value menu, which will almost certainly be backed by a huge marketing push.

More definitely to follow. Buckle your seatbelts.

Saturday, February 7, 2009

Ah-nold, what are you doing?

You have to question the wisdom of furloughing employees of California's Department of Public Health during the ongoing four-alarm salmonella outbreak. Yet the staffers were among the thousands who were forced to skip work on Friday.

At least schools and other foodservice facilities could look for assistance on the department's website.

The Division of Workers' Compensation, another agency known to many California restaurateurs, was also shut for the day.

Governor Schwarzenegger ordered the two-days-a-month furloughs as a way of contending with the state's gaping financial deficit. The next furlough day is set for the second Friday from now.

Friday, February 6, 2009

More news (and specifics) from BK

Burger King’s new Steakhouse XT (for “extra thick”) burger will be introduced region by region beginning this month, Burger King CEO John Chidsey said yesterday during a conference call with financial analysts. He also revealed that a multi-market test of ribs is about to commence.

Both items are prepared on BK’s new batch broiler, which apparently eliminates the necessity to cook one item at a time on the chain’s signature flame broiler. Because the traditional flame broiler has only one conveyor-belt track, each item gets the same cooking treatment. The new broiler has several tracks, with variable speeds, enabling some items, like a thicker burger or ribs, to get more cook time.

The batch broiler is currently in about 62% of the chain’s North American units, Chidsey said. The new equipment, he noted, also uses less electricity and gas.

When the new broilers were unveiled in 2007, executives said the devices use about half the energy of the equipment they replace. That yielded savings quantified back then at $600 per store per year. Presumably that payback is even higher today, given how energy prices have changed in two years.

In addition, technology experts have talked about a new generation of BK kitchen equipment that gives off less heat than what it would replace. With less ambient heat coming from the kitchen, a unit’s air conditioning system doesn’t have to chug as hard to maintain a comfortable temperature, yielding additional efficiencies. It’s unclear if the new batch broiler is among that batch of heat-retaining apparatus to which the experts were referring.

In trying to sweet-talk investors, Chidsey also disclosed that at least 20% of North American BK restaurants, or roughly 200 units, would be open 24/7 by the summer.

But the most astounding revelation was his off-hand remark about Flame, the Whopper-inspired cologne that was initially offered around the year-end holidays. It sold out within three days, Chidsey said.

Thursday, February 5, 2009

Michael Dell proxy gets say in Applebee's management

Insiders have been saying for months that Michael Dell of Dell Computer fame has been closely scrutinizing Applebee's and the operation of its parent, DineEquity. Those parties say Dell has become interested in the restaurant business, and in a turnaround of Applebee's in particular.

But the only outward sign had been the announcement in December that Southeastern Asset Management, an equity company affiliated with Longleaf Partners Fund, was planning to take an active role in the management of DineEquity, in which it holds a significant stake. Dell was an investor in various funds affiliated with Longleaf, which in turn has held a significant number of shares in Dell Computer.

SAM is reportedly DineEquity's largest shareholder. Michael Dell is the second largest.

Now Dell's interest is out in the open. DineEquity announced today that it has appointed Howard M. Berk to its board of directors. Berk is a partner in MSD Capital LP, a fund that manages the wealth of Michael Dell--the MSD of MSD Capital--and his family.

Julia Stewart, meet Michael Dell. And that's not a Mac your using, is it?

DineEquity franchises IHOP as well as Applebee's.

Menu labeling works, industry researcher finds

Four out of five New Yorkers are rethinking what they order in chain restaurants because of the calorie counts that are now posted next to each item on menus and menu boards, according to a survey by the foodservice researcher Technomic Inc.

The study found that 60% of restaurant customers base their choice of establishment in part on the posted information, which is now required from local outlets of chains with at least 15 branches nationwide.

Worst for the industry, nine out of 10 consumers said the calorie content of items was higher than expected.

The findings will likely stifle the industry’s assertions that calorie counts are already widely available in a variety of other forms and should be no mystery to those who care about such things.

Label mandates have already been approved in California and the Washington State county that includes Seattle. Proposals are pending in a slew of states, including West Virginia.

The industry, realizing it’s trying to hold back a movement that’s not likely to be stopped, has shifted its strategy to promoting a national labeling mandate that would be less costly and difficult for restaurants to satisfy. Called the Labeling Education and Nutrition Act, or LEAN, it was introduced into both chambers of Congress last year.

New menu-item roundup

A few leads have leaked out about the next round of chain menu additions. Here’s a sampling as of early this afternoon:

--Carl’s Jr. may be bringing back its chili dog, judging from a few non-committal posts on Twitter.

--Burger King plans to add a thicker burger, called the Steakhouse XT (the “XT” apparently stands for “extra thick.”

--KFC will roll out its value menu next week. What it touts as a game changer, the addition of chicken that’s supposedly grilled (it’s actually flash-baked on a plate that imparts grill marks) is slated for April.

--Dairy Queen will introduce its value menu next month.

--O’Charley’s will introduce several new brunch items when it changes menus later this month.

--Hardee’s is pushing an “authentic” Chicken Parmesan sandwich.

Clouds in industry's coffee this morning

The bad news is starting early today, with Burger King disclosed a 10% drop in profits for its most recent quarter and O'Charley's posting a $103-million loss for 2008. The standout number: an 18% decline in same-store sales for O'Charley's Stoney River steakhouse chain, and the $7.99 price tag on new promotional items at the company's namesake brand.

O'Charley's said it has cut costs by cutting back its headquarters staff, freezing salaries and undertaking a "redesign" of benefits for hourly employees.

BK blamed its financial disappointment largely on unfavorable currency exchange rates. It stressed that North American comps had increased 1.9%, and noted that it will introduce in some areas a new, "extra thick" burger called the Steakhouse XT.

On Tuesday Yum! Brands also posted a double-digit drop in profits for its most recent quarter. Among the gems delivered in its follow-up call with analysts was the disclosure that KFC will introduce its value menu next week and will roll out the much-ballyhooed Kentucky Grilled Chicken line in April.

Wednesday, February 4, 2009

BK multiplies its slider choices

Burger King's announcement today of a sliders rollout comes as no surprise, since selected stores have been featuring the Burger Shots for months. But the chain might've caught some competitors unawares with the simultaneous introduction of a mini breakfast sandwich, the BK Breakfast Shots.

BK has also adjusted the price and serving options for the Burger Shots. A packet of two sells for $1.39, not the $1.49 that had been the going charge. A packet of six is also being offered, for a suggested retail price of $4.09. The barbell pricing strategy in action, with a single product serving both ends.

The Breakfast shots are sold in two-packs for $1.49, and four-packs for $2.89, landing both of those items toward the premium end of BK's morning roster.

The Breakfast Shots consist of egg and either ham, bacon or sausage, all topped with egg and served on mini-rolls.

The rollout comes as Jack in the Box is testing sliders, and McDonald's is offering two versions, including a sausage sandwich that could serve as a breakfast item, in the United Kingdom.

The times, they are a-shrinkin', though not every burger specialist is moving down that Yellow Brick Road to Munchkinland. Here's what Carl's Jr. had to say in response to my Twitter query about when it might try sliders: "Why do itty-bitty sliders when young hungry guys want a big juicy Six Dollar Burger? We don't so tiny, we do premium quality."

What did Denny's get for its giveaway?

Denny's ended one of the more extraordinary giveaways in the history of the restaurant business--a free Grand Slam breakfast to anyone who showed up at any store, albeit within a set timeframe--by divulging enough stats to choke a fantasy football league.

The cost: $5 million, including the outlay for the Super Bowl spot trumpeting the freebie. The traffic: 130 free breakfasts an hour per store for the eight hours of the offer. Average wait time for a table during that window: An hour, with tables turned every 20 minutes. Every store was filled to capacity, according to the home office.

All in all, Denny's said, about 2 million of the breakfasts were given away today (though other numbers suggest it might've been closer to 1.5 million, or 130 meals per hour X 8 hours X 1500 stores).

And the lasting effects? Two of my esteemed former colleagues at Nation's Restaurant News spoke with customers about the giveaway's impression on theme. It's food for thought.

Tuesday, February 3, 2009

Misted-over news from Starbucks--and some's good

We’ve all heard Starbucks’ latest tactics for surviving the economic downturn: Cut more staff, close more stores, generally retreat and retrench. But the plan goes much further than that, particularly in regard to its secondary brand, Seattle’s Best Coffee.

An admittedly late reading of the transcript from last week’s investor conference call indicates the 300 stores slated for closing may not actually end their Starbucks affiliation. CEO/godfather Howard Schultz revealed plans to find franchisees willing to keep those stores open under the Seattle’s Best banner.

That effort, he said, is part of an overall ramp-up of franchising for the brand, which is also extending its reach through supply deals with other chains. This month marks the introduction of Seattle’s Best coffee in 2,800 Subway units, Schultz noted.

He also disclosed plans, albeit cryptic ones, to launch a bargain-priced, bundled breakfast. Starting in March, “we will offer several breakfast pairings in company-operated stores at attractive price points,” he revealed. Schultz noted that the pricing of the packaged deals will be uniform nationwide. That standardization would facilitate a full-scale ad blitz.

Investors also learned of a plan to press all of Starbucks’ landlords for a rollback in rent.

There was also some good news obscured behind the reports of 700 more people being laid off—or “separated from the company,” in Schultz’s euphemism. For instance, the Steve Jobs of coffee said, Starbucks’ gift card sales increased during the holiday sales by 8%, with $560 million loaded on electronic wallets usable only at one of the chain’s outlets.

He quantified the savings from defrocking 300 Starbucks stores and laying off 700 people at $100 million

Monday, February 2, 2009

Caribou Coffee joins the parade of peanut recallers

Caribou Coffee has become what appears to be the first restaurant chain to recall a product because it may contain peanuts contaminated with salmonella.

The Food and Drug Administration disclosed the recall of Caribou Fruit & Nut Blend Trail Mix this afternoon via Twitter. The announcement explains that Caribou, the (distant) Number Two coffee chain behind Starbucks, was informed the peanuts in the mix were supplied by Peanut Corp. of America, the Georgia processor implicated as the source of the two-months-long-and-counting salmonella outbreak. No one has reported being sickened by the product, which Caribou was selling in three-ounce, sealed cellophane packets, the announcement noted.

It also noted that the mix, supplied ready-to-sell by Marra Brothers/Marich Confectionary, was still being distributed as of last Friday.

Starbucks had earlier pulled some of its peanut-containing products, but had not issued a recall. The items were merely taken off store shelves or no longer sold.

More than 500 people have been sickened by salmonella that was traced back to Peanut Corp.

I.C.U. for Jack in the Box?

One of the weirdest advertising tacks ever taken by a restaurant chain was commenced last night by Jack in the Box. A commercial airing during the Super Bowl announced that Jack, the regional burger chain's orb-headed mascot, had been hit by a bus, his fate uncertain. "In lieu of flowers," says an official "spokesman," "visit a Jack in the Box restaurant."

Follow-up spots posted on a special website,, note that the mascot had suffered massive head trauma. "I don't mean he has a massive head. Though he does," jokes Jack's "surgeon."

The site indicates the chain has been left in the hands of Jack's supposed Number Two guy, an exec named Phil. Jack's assistant, Barbara, has taken over the laid-low chairman's Twitter account,, and promises to provide updates on the mascot's condition.

The circumstances of the accident have yet to be revealed. But a supposed cell-phone video, captured at the scene, have a bystander yelling into a phone, "It's really, really bad."

Nothing makes me want to eat fast-food more than a critical accident involving a humorous mascot.