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.