Sunday, August 30, 2009

Ted Kennedy & the restaurant industry

The restaurant industry lost one of its steadfast adversaries last week, the legendary Sen. Ted Kennedy. Even his bitterest opponents wouldn’t disrespect such a man by relishing his passing. But some in the business may secretly harbor relief, remembering Kennedy’s ardent fight for minimum wage hikes, worker benefits like parental leave, and any number of measures that foisted new costs and responsibilities on the trade.

It’s a shame their ideology blinds them from learning two key lessons from a 46-year public servant who undoubtedly ranks among the most committed ever to serve in the U.S. Senate.

At the very least, they should appreciate the fervor that drives someone who’s acting out of conviction to his ideals. Often, though less so today, restaurateurs oppose a law, regulation or social movement solely on the basis that it’ll cost them money, time or aggravation. They seem flummoxed that an undue burden on business isn’t enough of an objection to halt the other side.

The fallback is to equate the burden to lost jobs, as if anyone would really believe their motivation is keeping entry-level employment at the highest possible level.

Financial hardship is certainly a valid reason to oppose a measure. But some restaurateurs fail to appreciate that their opponents may, like Kennedy, be pushing a measure because they burn with the certainty it delivers a higher good. Arguing that something will cut profits just seems callused when the other side is insisting with conviction that a change in the status quo will help families, children, education, the underprivileged, social well-being, upward mobility, the hungry, or just leveling the playing field. Shortchanging investors or business owners is hardly the kryptonite counterargument against such righteous zeal.

It’s especially important for the trade to appreciate that ardor as values are reshaped by the recession. In a great social paradox, being harder pressed for money has prompted many people to downgrade its importance and elevate intangibles like connection, quality of life or having purpose. The industry can see it in dynamics like youngsters accepting lower wages for a position that resonates more with their principles. Is working for a greener company worth collecting 50 cents less an hour? How many of you would doubt it?

Similarly, survey after survey has shown that consumers are willing to pay more at a business that assumes a responsibility to the environment. Even with less to spend, they want to spend it with principle. Economics are trumped by values.

So what’s the industry to do to protect its business interests in a reasonable fashion?

As the posthumous tributes have all noted, Kennedy was the master of compromise and coalition-building. For too long, the industry’s lobbying position could be summed up as, “No.” No way, no how, no further discussion. Pitched opposition was the default setting.

Wouldn’t it be better to be a little Kennedy-esque? To work with adversaries and allies alike to find alternatives that protect business without drowning out other concerns, or refusing to shoulder some of the burden needed to benefit society as a whole?

The trade did it with the menu-disclosure bills that were introduced last year—accepting the concept of calorie counts being posted on chain menus, but tempering the requirements to ease the wallop.

Some industry old-timers must’ve clutched their chests when they saw the business calling for menu labeling, once the trade’s Freddie Krueger of causes.

But it will hopefully serve as a working model, in part because attitudes are changing within the industry’s workforce. An associate who works with tomorrow’s management says his young charges can’t understand why the business is always lining up on the wrong side of issues—matters like health, or worker benefits like sick leave, or, most pointedly of all, the environment. They’re often dismayed, if not embarrassed, by the trade’s political stance.

You can readily see it in the greening effort. Staffs are impatient with their employers’ commitment to sustainability. More expensive? So what? Many would no doubt favor government mandates to force the movement along.

The industry should do itself a favor and harness that zeal. With a little of what Kennedy practiced, it could use their ardor to hammer out a solution, instead of fostering a split between old and new attitudes.

Wednesday, August 26, 2009

600 Calif. restaurants sent back to food-safety class

A food-safety scandal has erupted in the San Francisco area , judging from the coverage that’s pouring out of the city this morning. This time the culprit isn’t a virus or bacteria, but three apparent knuckleheads employed as test administrators by the San Francisco Department of Public Health.

The trio reportedly undermined the tests they administered to more than 600 restaurant employees who sought to be certified as grasping the principles of food safety. Many states, counties and municipalities require that at least one person at a restaurant earn a so-called safe handler certificate by undergoing one of several accepted courses, virtually all of which require a final exam.

The certificate awarded to 345 restaurant managers in San Francisco and 183 elsewhere in the Bay Area were revoked because of what the health department termed “irregularities” in the testing process. The department explained that the alleged shenanigans included presenting the certificates without requiring the test and providing the answers either before or during the exam.

In any case, the certificates were invalidated. Letters sent to the affected restaurants instructed them to re-certify their managers within 60 days, this time by passing a legitimate test.

Dr. Rajiv Bhatia, the occupational and environmental health director of the DPH, said he has brought the situation to the attention of state health officials and his counterparts in California’s 57 other counties. He explained that some persons holding the unearned certificates might have moved to jobs elsewhere in the state. Neither he nor the department specified the time frame during which the suspect certificates were awarded.

His department called the situation and its investigation “unprecedented.”

In announcing the situation, the DPH noted that two of the test administrators “are no longer employed with the City,” and the third is still being investigated. One news report asserted that the two ex-employees are being fined.

Press reports indicated that the affected restaurants were mostly chain-affiliated places.

There were no indications of anyone having gotten sick as a result of the certification problems.

Monday, August 24, 2009

‘Hook-up on aisle 9’

Last Friday, Milwaukee’s lovelorn were invited to hunt for Mr. or Ms. Right at a singles event featuring salsa dancing, party games, and an enticing array of Mexican nibbles. The mixer would’ve been just another night on the prowl if it weren’t such strong proof that supermarkets are encroaching on restaurants’ unique social role. Because this mating ritual was held not in an eatery’s dining room, bar or function room, but inside a Roundy’s grocery store.

The event, held from 10 p.m. to midnight, was the fourth On the Market at the Market night convened by Roundy’s, a $4-billion operator of five retail food chains in all. The company has yet to say how many people turned out on Friday, but the prior three each drew about 500 people, according to headquarters.

The attractions Friday included such ice-breaking activities as Turkey Bowling (you use a frozen turkey instead of a bowling ball), Oreo stacking, and a Pin the Tail on the Donkey tournament. The refreshments included quesadillas, chorizo-stuffed peppers, guacamole, shrimp and other appetizer-type fare.

But the real pull was undoubtedly the chance of meeting someone, and that’s what should have restaurants particularly concerned. Supermarkets have tried for years to position themselves as a dinner option on par with a night out. Consumers could either buy prepared meals and eat at home, or, in any number of experimenting groceries, try the on-premise restaurant.

Yet it had been tough sell. Supermarket food just didn’t seem to be of the same quality. And how romantic would it be to dine 20 yards from where you buy your laundry detergent and mouse traps? Not exactly the place to chill the bubbly and light the candles.

Research and chains’ sales results leave little doubt that the perceptions of supermarket’s take-home meals have changed.

Now Roundy’s special event suggests the latter mindset may be cracking, too. One singles series hardly constitutes proof. But that’s not the sum of the evidence. Hit any Whole Foods’ dine-in areas at lunch or dinner and you’re likely to wait for a seat.

Meanwhile, regional chains like Wegmans in upstate New York are packing their onsite dining rooms. Ditto for Sheetz, the Atlantic Seaboard c-store chain that has been outfitting its shops with tables and seating.

The restaurant industry has been too preoccupied with day-to-day survival to focus on looming threats. But at some point it’ll have to recognize that its relationship vis-à-vis supermarkets may be changing dramatically for the worse.

The art of the slam

And now, a public service warning to the goliaths of restaurant advertising: Put on a helmet. A pack of would-be David’s is betting that a bucket of stones can be an effective marketing program.

Second-tier chains have been hurling more disparagements at bigger rivals than Don Rickles serves up in a month. Look at the more memorable campaigns of recent weeks. Carl’s Jr. took aim at McDonald’s revered Big Mac by introducing a “Big Carl” in commercials that all but taunted na-na-na-na-na-na. The commercials define the new premium sandwich by highlighting how the Mac can’t measure up in heft (the Big Carl boasts twice the meat and cheese) and price (it costs roughly 50 cents less).

Then there’s the absolute trash-talk. In a confrontation between talking sandwiches, all Mac can offer in its defense is having been born with a third bun.

Another installment makes fun of McDonald’s two-all-beef-patties Big Mac jingle, and a third features a Big Mac asking a Big Carl about the size of his beef, explaining that he's considering a patty enlargement to make his buns look smaller.

The kick-the-Arches effort coincides with a Carl’s publicity campaign aimed at McDonald’s new Third Pounder Angus burger. The effort encourages consumers not to be taken in by “the McHype,” and notes that Carl’s has been featuring big Angus burgers for years.

A similar don’t-you-wish-you-were-me? Campaign raged this summer as the El Pollo Loco chicken chain took aim at the king of the coop, KFC. After the bigger chain introduced its grilled chicken, EPL, a grilled-chicken specialist, ran a series of commercials that pecked at KFC’s honesty.

One noted that KFC stores still don’t have grills, so how authentic could the new product be?

Others asserted that the new chicken was flavored in part with beef, without any heads-up to consumers.

Still another replayed comments that were supposedly left on an EPL answering machine by consumers who had tasted both EPL's grilled chicken and KFC's new product. Patrons had been asked to sample the two products side by side and recount their preference.

Several of the comments slammed EPL's product, asserting that Kentucky Grilled Chicken was superior. The ads point out that the callers' numbers had been traced to KFC's headquarters in Louisville, Ky., where EPL had no stores.

Not all of the snapping comes from regional chains like Carl’s and EPL. Burger King, for instance, ran commercials in some markets earlier this year to promote its double cheeseburger as a better deal than McDonald’s comparable item. The ads featured a young man who balks at his friend’s suggestion that they hit Burger King for the two-patty sandwich. Under pressure, the kid admits that he has tiny hands, which he then displays. How can he hold a behemoth like the BK double burger?

The commercial closes with the friend holding the BK burger so his tiny-handed friend can take a bite.

The campaign was reportedly resurrected in Chicago, and New York stations are airing a variant where the tiny-handed youngster objects to getting a $1 Jr. Whopper.

(If you’re over 27, you may not be aware that there’s a series of tiny hand videos on free vid-sharing sites that have nothing to do with BK. The clips show a guy with tiny hands trying to do things like audition for an antacid commercial or work as a babysitter. Apparently this is high humor among the same people who find The King to be hilarious.)

Sometimes the sniping even creeps into familial situations. The Arby’s sandwich chain is promoting its new Roastburger sandwiches as “the burger done better.” The concept is a sister of Wendy’s a burger chain.

Then again, it’s hard to have sympathy for Wendy’s. The tagline for its burgers and other specialties: “It’s waaaay better than fast-food.”

Friday, August 21, 2009

Getting bounce from 'balance'

Wipe “locavore” and “natural” off the whiteboard. A new buzzword for restaurant menu planners is starting to take hold: “Balance.”

That’s the underlying principle of True Food Kitchen, the new concept that P.F. Chang’s has decided to back with a $10-million infusion of growth capital. If the emperor of Asian casual dining likes what it fosters, it has the option of buying a controlling stake in the brainchild of Sam Fox, the Rich Melman of Phoenix. The young concept creator’s earlier hatchlings include the Sauce pizza and wine fast-casual chain and one-offs like Olive & Ivy.

True Food is a foodservice retreat for those seeking “a more balanced lifestyle,” according to Fox’s company, Fox Restaurant Concepts. It was created in collaboration with a New Age medical guru, Dr. Andrew Weil, who advocates a blend of conventional medicine and alternative aids like herbs and moderation.

It may be the most visible proponent of the new balance sensibility, but it’s hardly alone. Across the Atlantic, Sodexo, the contract-feeding giant, is featuring a menu based on “balanced nutrition” at 500 of the institutional feeding operations it manages. The aim of the new Vitality line-up, according to the France-based company, is to provide healthy dining options without sacrificing the enjoyment. In short, it aims to strike a balance.

The strategy is hardly unknown on this side of the pond. Seasons 52, Darden Restaurant’s brilliant play for aging Baby Boomers, promises the same sort of balance between taste, indulgence and health concerns. You can have a low-calorie entrée, finish it off with tiny shot-glass-sized desserts, and wash it down with a few selections from the concept’s extensive wine list.

“Balance” also figured into Mimi’s selection of the winner in a customer recipe contest. Patrons were asked to come up with a Meaningful Muffin that could be added to the casual chain’s menu. The winner was a Pineapple Coconut Crumb preparation, praised in part by celebrity judge/chef Gale Gand for its “perfect balance of flavors and textures.” In part because of that distinction, “we felt it would appeal best to a wide audience,” said the Chicago restaurateur.

Clearly “balance” is being used in a variety of ways, just as “health,” “fresh,” “wholesome” or “homestyle” once carried more definitions than a pocket-sized Webster’s. But all the applications suggest it’s a word that resonates right now with the public. For that reason, it’s certain to show up on more menus.

Thursday, August 13, 2009

The cutting edge of marketing?

You can sense the pressure on restaurant chains to develop new and preferably inexpensive ways to market themselves, particularly their latest menu choices. The last few days brought a few results worth noting, though for decidedly different reasons. For instance, interrupting consumers’ vacations is at best a risky endeavor. Some might say foolhardy.

Yet that’s exactly what Domino’s did in a stunt to publicize its new Chocolate Lava Crunch Cake dessert. When people think about lava, what comes to mind? Volcanoes, of course. So the pizza delivery chain figured it’d blitz North America’s most famous volcano, the postcard-perfect Mt. St. Helens in Washington State, with a product giveaway.

Because there isn’t a Domino’s in the ultra-green area, the chain hired a helicopter yesterday to swoop in with 1,000 of the new desserts. The surprise delivery was aimed at the unsuspecting tourists “as they enjoyed breathtaking views of Mount St. Helens,” Domino’s announcement explained.

The statement noted that consumers were given a heads-up via Twitter and Facebook. Which, of course, all the visitors were checking as they gazed upon one of the most stunning natural sites in the United States.

Domino’s hailed the event as a huge success. But you have to wonder how a family would react as their reverie in staring at the volcano was interrupted by a 40-decibel fast-food delivery. I'm going to go out on a limb here and suggest the stunt was likely a surprise to the sightseers, and probably not a happy one.

Less controversial are the new marketing programs announced by California Pizza Kitchen last week to its investors. Co-CEO Rick Rosenfield explained that the chain has launched what one financial analyst characterized as a VIP card for CPK fans. The new Adventure Card entitles the bearer to a 20% discount on new products introduced by the chain through Sept. 15. The offer is being supported by a new ad campaign.

That’s hardly a measure that could put vacations at risk. But you have to wonder if it plays into the pratfall of all discounts aimed at fans of a concept: Are you truly drawing additional visits and transactions from loyal followers, or are you merely cutting the take from a sale you would’ve made anyway?

Rosenfield also mentioned a new “business-to-business” campaign. He didn’t explain the program, but the context suggested it may be a telemarketing blitz to boost catering sales.

He did explain that the chain will try an off-premise, centralized call center to boost takeout business, which currently accounts for 14% of CPK’s sales. That test will commence next month, he said.

In discussing the chain’s financial results for the second quarter, CFO/COO Sue Collyns noted that delivery sales tanked for the chain in early July. The chain uses third-party delivery companies to truck its pies to consumers’ homes. The new call-center test is intended to recapture some of that off-premise business, she and Rosenfield indicated in their comments.

Rosenfield cited the company’s determination to reach customers “through all our many touch points.” He didn’t mention any helicopters.

Wednesday, August 12, 2009

P.F. Chang's bets $10M on new 'balance' concept

Food with integrity, the effective rallying cry of Chipotle Mexican Grill, has a high-profile new proponent. P.F. Chang's announced today that it's providing a $10-million loan to fund expansion of True Food Kitchen, a restaurant concept aimed at consumers who want a "more balanced lifestyle," in Chang's words. Among the new brand's signatures is the use of ingredients grown locally or at least within the store's region.

In announcing the deal, Chang's noted that it has an option to buy a controlling interest in the now-single-unit concept.

True Food was developed by Phoenix concept creator Sam Fox and the popular author Andrew Weill, an M.D. who runs a Tempe health facility called the Arizona Center for Integrative Medicine. He's the parent of integrative medicine, which holds that true wellness entails balance in mind, body and spirit. No doubt he burns a lot of incense.

The relationship is probably making Chang's feel better already. The parent of a namesake casual chain and a fast-casual sidekick, Pei Wei Asian Diner, has been struggling with those brands as of late, as have most of its competitors.

True Food sounds like shares more in common with Seasons 52, Darden Restaurants' smash hit of a casual concept, than with any other chain restaurant out there. And the name suggests it professes the same aversion to heavily processed food that has set Chipotle apart in the limited-service sector.

True Food's menu includes pastas, pizzas, salads, tuna sliders, house-made sodas sweetened with agave nectar or honey, 13 vegetarian selections, and 10 gluten-free choices.

It's a mix that Chang's apparently finds irresistible.

Tuesday, August 11, 2009

Ripple or the real thing?

Every trend starts with a single proponent and builds from there, adapter by adapter. Unfortunately, the process is no different for fads and flashes. The challenge for opportunity-spotters is distinguishing between the two. What, for instance, are we to make of these recent ripples in the market?

The Amway marketing approach: T.G.I. Friday’s broke a campaign in late July called BYOB, or Bring Your Own Buddy. Recruit a pal to join you at the granddaddy of casual dining and they’ll each get $5 off their meal. Apparently you can steal one of their fries, or just bask in the glow of having done something nice for a friend.

It would’ve been nothing more than a one-off for the industry is Arby’s hadn’t begun a campaign this month called Friends and Family Feast. If a group of five visits a unit together, they get five roast beef sandwiches for $5, and all sides for a mere $1 each. The more, the thriftier.

As Wendy’s/Arby’s CEO Roland Smith explained, the program is intended to bolster frequency, apparently through peer pressure. The chain has qualified 50% of its patrons as “medium users” who might be coaxed to add another trip here or there. Getting them to visit just one more time a year can boost a store’s comp sales by 3%, according to Smith.

So is this patron-as-guest-recruiter approach a trend or a fad? My projection: It’ll be another marketing tactic, another arrow in the quiver that’s put in play from time to time because of its novelty. So my final answer: Neither.

New product mania: Back in the spring, Quiznos CEO Rick Schaden sent a scooter to every headquarters staffer, explaining that they had to move faster in adapting to market trends. He cited product development as an area of focus, but left unaddressed the matter of how.

Yesterday, Schaden detailed the process for making that happen. Or so he attests. It’s called Flex Plan, and it aims to match new items to patrons’ financial situation. “The key is to provide the right food at the right time for the right price,” he said.

If times are tough, Schaden explained, the chain’s R&D department will churn out bargain items like the $3 Toasty Bullet or $4 Toasty Torpedo. And when better times return, he continued, the focus will shift to indulgence items, like double-meat sandwiches.

And regardless of what’s coming down the pipeline, he says, the set-up will streamline the process, yielding fast, more efficient introductions.

While that system is being adopted chainwide, Wendy’s is already reaping the benefits from an R&D overhaul, according to CEO Smith. The chain has “developed a very strong new product pipeline,” he assured investors. “By the end of the year we will have tested at least 14 new products, which is more than Wendy’s has tested in a single year in quite a long time.”

Then there’s the hyperactivity of chains like Mimi’s, Carl’s Jr./Hardee’s, Jack in the Box, McDonald’s and Burger King. New products are flying into the market like a pack of third-graders being released for recess. Is this heightened R&D activity a wave that’ll be with us for awhile? You betcha. Definitely a trend.

Commence the shopping spree: In what should have been a routine earnings release, The Steak n Shake Co. revealed yesterday that it’s restructured itself into a holding company with assets consisting of a lone restaurant chain, the Steak ‘n’ Shake retro brand. Why a holding company with one business?

“The company may pursue investments in the form of acquisitions, joint ventures, and partnerships either related or unrelated to its ongoing business activities,” explained a passage of the earnings release that was probably penned by securities lawyers.

That development followed a report in Saturday’s Atlanta Journal-Constitution about Roark Capital, the private-equity firm that owns McAlister’s Deli and a group of restaurant brands (Moe’s Southwest Grill, Schlotzsky’s, Carvel, Cinnabon) franchised by Focus Group. The story explained that Roark expects to complete as many deals in the current year as it consummated in the previous eight, with several set to close by November.

“We feel like we’re ready to start investing again,” Roark managing partner Neal Aronson told the AJC’s Joe Guy Collier.

Sandwiched between those two instances of check-book rattling was the announcement that Church’s fried-chicken chain had officially been sold, some three months after a deal was announced.

So is this the start of a buying trend? Are companies shopping for restaurant companies again?

After a virtual halt this year in restaurant deals, it certainly feels that way. But it’s all relative. For one thing, private-equity companies are usually the wheeler-dealers in such a spree. They buy, they sell.

This time around, many of them are stuck on the seller side of the table, trying to peddle the chains they amassed in better times. Foreign companies may be the new shoppers. But how active will they be?

My prediction: There’ll be a flurry of activity that feels like a cut-rate auction. But it’ll take awhile to see M&A come close to the level we saw before the Great Recession.

But what’s your assessment? I’d love to hear some discussion about which might be a fad and which might be the start of an actual trend.

Monday, August 10, 2009

An exception worth a rule break

This’ll ruin my tough-guy image for sure, but the heart-warming tidbit deserves to be covered. It also up-ends my longstanding rule of not reporting fundraisers or other charitable restaurant events. There are just too many. Open that door, and you could end up covering nothing else.

But this one is special, in part because of its simplicity. It could also be more of a boon to kids this fall than you might suppose. No matter how ennobling Abraham Lincoln and other legends found childhood disadvantage to be, it really sucks when your family can’t afford the snazzy new supplies that all your classmates unwrap on that first day of school. We’re not talking about a new iPhone. It’s a bummer to inherit a spiral notebook that’s an eighth of an inch thick because you had to yank out all the pages that were used by a sibling the year before. Ditto for a binder covered with a brother or sister’s doodlings, or pens that were filched from a relative’s office.

This year, of course, the economic situation will undoubtedly land more kids in that esteem-smashing plight. But some—and apparently a big sum, judging from the program’s extent—will be spared thanks to Operation Backpack. Children who qualify are provided with a backpack full of implements and supplies no different from what their more privileged age mates will be toting to class this fall. They won’t have to feel stigmatized or geekoid, regardless of their family’s financial situation.

The program appears to be a national effort affiliated with Volunteers of America and administered by parties ranging from TV stations to churches. Restaurants like McDonald’s units in the Indiana area are doing their part, either by contributing the supplies or serving as collection centers. The McD’s units there are doing both, probably like many of the other participating foodservice establishments.

Kudos to all of the participants for leveling the schoolyard for more kids this fall. And if others of you would like to participate, just do an internet search or check out the Volunteers of America website. You may be surprised at how prevalent the program has become.

Friday, August 7, 2009

Busted at belly bombing

The con’s over for the 10-year-old desperados who profess to be my nieces. The adorable little flimflammers have been playing me for years, laser-targeting those doe-eyed looks of sainthood to wheedle a pre-dinner soda or ice cream bar. After all, I’d think as I slid some sugary snack their way, the little dears don’t know any better. Why not indulge their misguided innocence, just this 15th time?

Then I read a research report from Technomic and C3, an agency that specializes in kids’ marketing. Seems that kids are well aware of what’s healthful to eat. But, just like lots of adults, they don’t want to eat it.

Nearly nine out of every 10 ankle-biters know that fresh vegetables and fruits are good for them, for instance. The problem is that many prefer the fruit filling of a PopTart or jelly doughnut.

Similarly, 78% cited salad as something they should eat for health reasons, and 76% mentioned steamed vegetables, no doubt as they were munching on some fries.

One of the more intriguing questions raised by the research is how the kids might’ve learned what’s healthy. Indeed, that unanswered point of interest could turn the data into a weapon for both sides on the obesity debate.

Those who assert the industry should be required to offer healthier options for kids can underscore the finding that salads are now among the most common items on the kids’ menus of full-service restaurants. Put salads on the menu, and the youngsters learn this is what they should be eating. The push-what’s-good-for-them proponents can point to that and claim victory.

Yet the restaurant industry can just as readily contend that, first, they are providing plenty of healthful choices to kids and their parents, and, second, that doesn’t mean behavior is going to change. The kids have to want the healthier fare, or be taught to eat it by their parents. Public health advocates can demand all the healthful menu choices they want, but it doesn’t mean the little folk are going to order them.

Indeed, the study found that children aged 9 and under—the ones who are most likely to depend on Mom or Dad for guidance in ordering within a restaurant—are more likely than their older siblings to order the type of stuff that drives Michael Jacobson crazy. Technomic found that those kids will go for the fries, chicken fingers and pizza, while children aged 10 to 12 will opt for dinners like salads, seafood or steak.

Yet, the study found, restaurants are continuing to develop menu options that are perceived as healthy, particularly certain beverages and natural or organic items.

Meanwhile, I have to perfect my withering comeback for the next cupcake request. They already (successfully) put the bite on me for ice cream, including a cone of some fluorescent pink flavor called Crazy Cotton Candy.

Wednesday, August 5, 2009

Don't bogart that financial statement

This week's earnings reports are giving the restaurant industry a new riff for its all-night blues jam. And, man, it's a killer. If the business could find enough green shoots, its best shot at solace might be to smoke 'em.

Consider, for instance, the meltdown at the high end of the casual market. The comp sales figure provide the slide work on this one: Morton's, down 26.1%; Ruth's Chris, down 23%; McCormick & Schmick's, down 17.3%; Benihana, down 13.1%. Keep in mind that several of those big-ticket players have already armed themselves with steep discounts relative to their usual prices. There's just not enough expense-account and top-ticket tourism business to avert a sales plummet. Ruth's Chris, for instance, said a continuation of its comps trend would cost each store about $1 million a year in sales.

But that's casual dining, and the top drawer at that. Surely it's a different story for fast-food.

Sure enough, comps ebbed only a little more than a percentage point for company-run Jack in the Box restaurants, and the damage wasn't much worse for the burger concept's little sister of a brand, Qdoba.

But in analyzing the factors for the benefit of investors, Jack in the Box CEO Linda Lang acknowledged that breakfast, one of the areas of growth for the whole sector, had been weak.

"We also saw some fall-off in sales [of] side items, carbonated beverages, and shakes," added Lang. Throw coffee in there, and you have the key profit drivers of fast-food.

Jack's solution: Discount deeper. The chain recently added a head-turner called the Big Deal, a cheeseburger, taco, fries and a drink, for $2.99. And, says Lang, "We currently have additional value-priced product or promotions in test elsewhere in our system." She described them as "margin neutral or margin friendly," without revealing specifics.

BurgerBusiness, Scott Hume's site devoted to all things burgers, noted in a recent posting that $2.99 is the new $5, the rockbottom threshold where everyone wanted to be earlier this year. As he pointed out, White Castle and Sonic are already offering meals at that price level.

Even Hardee's, a proponent of heft, is dabbling with bargain-priced snacks, vis-a-vis its new biscuit holes.

Product giveaways have become a routine way for chains to flycast for more customers. But if an everyday meal costs a mere $2.99, will that hook stay as irresistible? Or might "cheap" become irreversibly associated in the public's mind with "quick-service"?

I don't know, but I bet we're going to find out.

Monday, August 3, 2009

The newest jolt on quick-service menus

McDonald's isn't convinced that energy drinks would make a good addition to its beverage mix. Indeed, it's betting the public will more readily embrace liquid snacks like frappes or smoothies, or thirst quenchers like flavored waters.

But that hasn't stopped three of its quick-service rivals from taking the plunge. Carl's Jr. and its brother in burgers, Hardee's, jointly announced today that they're adding Monster-brand energy drinks to the menus of all stores starting this month. The statement noted how popular the jolt in a can has become among young people. "You can’t walk down the street without seeing a young guy holding a can of Monster," remarked Andrew Puzder, CEO of the chains' parent, CKE Restaurants.

CKE's decision to start selling cans of Monster follows the introduction last month of a proprietary energy-drink brand for Krystal, the regional square-burger specialist. Krystal not only decided to market its own drink, called Blitz, but to offer it in fountain form. Patrons can either have it served over ice, or "frozen," like a slush.

They're clearly seeing opportunity where McDonald's reads at best a possibility. "The jury is still out relative to energy-based drinks," McDonald's USA president Don Thompson reportedly remarked after the company's annual shareholders meeting.

What seems to be missing from the deliberations is how the public will perceive the chains' addition of the highly caffeinated and often heavily sweetened drinks, which are clearly aimed in part at high-schoolers and older teens. Some watchdogs are going to equate the sales push with peddling espresso to children. There very well could be a backlash.

But first, watch for other chains to follow the leads of Carl's, Hardee's and Krystal.