Monday, April 26, 2010

A thin sliver of Cheesecake Factory news

Cheesecake Factory has given its newest concept a menu overhaul. The Asian flavored Rock Sugar, still in the single-store test phase, has just been outfitted with a new bill of fare, though company CEO David Overton didn't divulge details during Cheesecake's recent conference call with analysts.

He did divulge, however, that Cheesecake may not be interested in opening more than one additional Rock Sugar at the current time.

"I’m only going to maybe look for one [more], and it’s going to be a very, very special prime location because we have to build that brand in the right places," said Overton, as recounted in a transcript provided by the website
"It’s not just one of those things that we’re just going to open in any mall at this particular time."

During the call late last week, Overton also revealed the company plans to scale down the size of its secondary concept, Grand Lux Cafe. Cheesecake is also interested in "bringing the decor down a little."

A downsizing of the company's namesake brand has yielded a new prototype that "is here to stay," said Overton. "We’ve built a couple of them and we’re very happy with the size, with the volume that they’re able to do, so we’ll move forward with that." He projected that 10 to 12 of the smaller Cheesecakes will be constructed during the next two years.

A thaw in big-chain thinking?

Slowly but audaciously, big restaurant chains are starting to address the public’s interest in localized ingredients and preparations.

You can see it in two high-profile introductions of the past week: Cheesecake Factory’s relaunch of its burgers as regionalized “Glamburgers,” featuring ingredients associated with a particular place, and Applebee’s debut of what it describes as “neighborhood-inspired Realburgers,” with flavors ascribed to three local preferences.

No, these aren’t products made with West Virginia ramps or Jersey peaches. A cynic would say the burgers embody culinary clichés of certain regions—pulled pork as a topping on Cheesecake’s Memphis burger, for instance, or the hoagy roll used for Applebee’s Philly Burger, which is dressed with the standard cheesesteak fixings.

But at least the big systems are trying to get away from their One Bland Taste Fits All myopia, an orientation that’s clearly less feasible today. Cheesecake is actually using goat cheese and arugula on its Sonoma burger. By big-chain standards, this is bold stuff.

Connecting an ingredient or item to a region, or using components actually sourced locally, isn’t completely alien to the chain market. Small systems like Burgerville and Smashburger have been doing it for some time. As RestaurantRealityCheck noted last fall, New England’s D’Angelos and Papa Gino’s now use cheeses from Vermont for a number of their selections. Louisiana officials were delighted when local Outback Steakhouse units decided to stick with locally caught shrimp.

But those noble efforts were undertaken on a relatively small scale. Bigger chains just couldn’t overcome the logistical issues, much less the need to be one thing to all people. That coast-to-coast consistency is viewed as absolutely necessary when you’re spending millions of dollars to advertise via national media.

The new endeavors of Cheesecake and Applebee’s are hardly bungee jumps off that safe ledge. But they may signal a change in the hoary thinking that a chain should offer what works for its well-grooved systems, instead of serving what consumers want.

Friday, April 23, 2010

How long to revise a menu?

How much time should a chain need to develop new menu items? David Brandon, the outgoing CEO of Domino’s Pizza, disclosed this week how the pizza giant’s R&D expectations have changed dramatically as a result of a home-office reorientation.

When Brandon was recruited to remake the concept’s culture some 12 years ago, the lag time between idea and rollout typically ran 18 months. It was a prime example, he stressed, of the “analysis paralysis” that had cost the chain its alacrity during a time of significant change in the pizza market.

“By the time we had something ready, our competition had often beaten us to market,” he explained at the Restaurant Leadership Conference earlier this week in Scottsdale, Ariz.

Brandon, who recently vacated Domino’s corner office to become athletic director at the University of Michigan, took a pizza cutter to the bureaucracy and inertia. He also overhauled much of the management team, apparently to make the whole operation more responsive to shifts in consumer preferences.

Today, says Brandon, the chain’s R&D operations can have a product on the menu no longer than 90 days after the notion was floated.

Brandon just surrendered the CEO’s title to Patrick Doyle, his longtime lieutenant. He remains Domino’s chairman of the board.

A new siting imperative?

The old adage holds that there are few things more essential to a retail business’s success than “location, location, location,” as hotelier Conrad Hilton famously put it.

So true, agreed a speaker at the Restaurant Leadership Conference. But no longer does that apply merely to the placement of brick and mortar.

“Today, you have to be concerned about where your app comes up, or how high you end up on a Google search,” asserted Paul Langenbahn, president of the hospitality division of Radiant Systems.

Mitt's big joke

The keynote speaker at this year’s Restaurant Leadership Conference was Mitt Romney, the former Massachusetts governor and Republican presidential candidate. Romney is also the founder of Bain Capital, the private-equity firm that has invested billions of dollars in such restaurant chains as Dunkin’ Donuts, Domino’s and the parent of Outback Steakhouse.

A proclaimed fiscal conservative, Romney concluded his speech with a humorous illustration of why the federal government should be cautious about overtaxing business. He told this story:

Two men were talking when a young boy started coming toward them. “This kid is so dumb,” remarked one of the men. “What this.

He dug into his pockets, fished out two quarters and a dollar bill. He put the coins in one hand and the paper in the other, while the other man and the boy avidly watched.

“Okay, boy,” he told the kid, “you get to keep whatever’s in the hand you choose.” Then he closed his fists and held them both out toward the lad.

The boy chose the hand that was closed around the two quarters.

“See? What’d I tell you? He does that every time,” the man remarked in amazement to his acquaintance.
Later, that other man saw the boy in town.

“Kid, why’d you take 50 cents when you could’ve had a dollar?” he asked the youngster.

The boy looked at him with a sage look. “Think about it,” he said. “The minute I take the dollar, the game’s over.”

Thursday, April 22, 2010

What management tech can do for employees

Enough with all the talk about technology’s payback for restaurants. How about the benefits it’s delivering to the employees?Like leaving them less time-starved, more valuable on the job market, and more aware of the big picture? In short, how it’s leaving them more satisfied and engaged while distinguishing their restaurant as a superior place to work.

I, probably like you, have attended plenty of industry events where the pay-off from high-tech management tools was explored solely from the perspective of the restaurant operator. The panel discussion I was fortunate to moderate at the Restaurant Leadership Conference went beyond that viewpoint to look at the considerable advantages for the business’ changing workforce.

As the panelists stressed, the foodservice labor pool has been remixed considerably by the economic downturn. No longer is it a pack of youngsters looking to earn a few fast bucks before heading off to something else. High unemployment has put more heads of households on the payroll, including a number of economic casualties from other fields. Turnover has braked dramatically, and workers are thinking in longer-range terms.

Technology is helping restaurateurs manage that new workforce more adeptly and cost-consciously, the panelists agreed. They cited such capabilities as being able to gather more information from job applicants, or to coordinate scheduling more astutely with the labor needs of any given shift.

But the technology is also helping restaurants address the sensibilities and preferences of their changed workforce. Values have shifted, with staffers showing more appreciation for variables like how much time is left for their families, or even the caliber of the technology they wield on the job. If the restaurant industry was once a haven for techno-phobes, the panelists stressed, it’s done an about-face, with young people now picking a position in part because of the technology education it affords. They don’t want to fall behind the rest of the job market in their familiarity with the latest HR software and equipment.

Free time and the more enjoyable life it affords are particularly important, and will be even more prized as the economy recovers, the panelists stressed. The families of restaurant employees will have discretionary dollars again, and managers and hourlies will want the time to indulge and enjoy.

“Being an employer of choice will be all about giving the team the best quality of life, and the time to be with their families,” said Jeff Maier, the former restaurant operator who now heads retail and hospitality marketing for Kronos, the panel’s sponsor.
He cited the trend of using technology to provide more information to restaurant employees while they’re on the go. Instead of calling or stopping by the restaurant to see when they’re scheduled or what vacancies they might be able to fill, staffer can look at their smart phones or laptops.

Jacqueline O’Rourke-Smith, senior manager of payroll operations for Red Robin, spoke of her chain’s use of technology to provide employees “a gift of time.” Recently, for instance, it rolled out a streamlined, paperless payroll system “to make the payment process as quick as possible,” she said.

The company also strives to hold the line on administrative work. For every HR initiative that’s added, “we try to simplify the business process by two or three steps,” she explained. Technology has to deliver that benefit to the employee, along with a return to the company.

Employees will challenge a new technology-based responsibility to ensure it’s not been casually dropped on them, noted Andrew Van Ermen, director of information systems for Levy Restaurants. “They will ask you, ‘Why am I doing that? What’s the purpose?’” he said.

He noted how the restaurant operator and sports feeder uses technology to shave time and aggravation off employees’ non-work time. The 750 employees who work at Dodger Stadium, for instance, are now given explicit communications about when and precisely where to report for work on a game day, he explained. They don’t have to scurry anxiously to find their outpost for that shift.

Having them punch in at stations close to where they’ll be working also averts the cost of paying an employee to walk halfway around the stadium because he or she used a distant time clock.

Van Ermen observed that employees are demanding that sort of additional, more precise information. They want their employers’ technology to provide them with the intelligence to make informed decisions, instead of relying on intuition and possibly being faulted for a bad call.

The panelists agreed that new HR technology can generate that sort of information. Indeed, they noted, it can provide data in reams if an employer wanted it. Smart users work with their vendors to provide intelligence, not numbers or unnecessary information.

“You have to get the right data in the right hands at the right time,” said Maier.
“It’s all about trying to make their lives easier,” said O’Rourke-Smith.

Friday, April 16, 2010

RIP, Restaurants & Institutions.

I've cursed it as a competitor since I started covering restaurants in 1981. But I was deeply saddened to hear that the parent of Restaurants & Institutions and Chain Leader has pulled the plug on those pubs. A heart-felt wish of good luck to the very talented people who were still on the mastheads of the final issues.

Here's the notice that's posted right now on R&I's website:

Restaurants & Institutions has closed
No additional print issues will be published, and this web site will close on April 30, 2010.

RBI Staff -- Restaurants & Institutions, April 16, 2010

Our parent company, Reed Elsevier, announced in July of 2009 its intentions to substantially exit its Reed Business Information-US publishing business, while retaining specific businesses. Over the past several months, multiple publishing brands were divested. As of April 16, 2010, the remaining publishing brands and their associated products and services have closed.

As a result Restaurants & Institutions has closed. No additional print issues will be published, and this web site will close on April 30, 2010

More assessments of health-care bill

Executives of Yum! Brands, the parent of Taco Bell and KFC, are less pessimistic than McDonald's franchisees about the likely impact of the omnibus health-care reform law (see item below). Indeed, said CEO David Novak, the initial impact will likely be a $6 million tax savings on the medical benefits that are provided to Yum retirees.

Longer term, Novak told investors during a conference call, franchisees will be stung by an additional cost of $10,000 to $15,000 per unit. But that burden won't be dropped on them until 2014.

"We are going to work with them to mitigate the cost," Novak said. "WE have plenty of time, I think, to deal with the issue."

Thursday, April 15, 2010

Quick calculations of health bill's impact leaves some restaurateurs feeling ill

If interpreting the new healthcare law is a point of comparison, Talmudic scholars have a cakewalk. But while the experts infer the mega-bill’s precise impact on restaurants and other small businesses, a few down-and-dirty assessments are arising from the field. The tip-offs are the screams of horror and the obscenity-laced vows to find another profession.

McDonald’s franchisees, for instance, were asked in a just-completed survey to estimate the new law’s cost to their businesses. The assessments provided by 16 of the 30 participants averaged more than $55,000 per restaurant annually, with a median response of $50,000. The other 14 demurred at providing a figure, but indicated they expect a permanent increase in costs.

“This implies that, in effect, this new law could wipe out 15%-20% of a franchised McDonald’s store’s annual profits,” noted Mark Kalinowski, the Janney Montgomery Scott restaurant analyst who periodically canvasses a sampling of franchisees on their near-term business expectations.

“We will increase prices across the board to pay for this increased cost. We cannot continue to have the bottom line shrink,” one respondent anonymously responded.

Restaurateurs flying the flags of other chains may be just a pessimistic, Kalinowski has suggested. “Over the last several months, we have spoken with dozens of U.S. franchisees in a variety of systems, and not a single one of them has mentioned in a favorable way the healthcare legislation that was recently made into law,” he wrote in an earlier report to clients.

Kalinowski himself is clearly not a fan of the Obama Administration and its policies, as indicated by postings on his Facebook page. He’s characterized the President as “an empty suit.”

Thursday, April 8, 2010

Headlines can sometimes make strange neighbors

Here, virtually verbatim, is an excerpt from today's PR Newswire, a wire service for journalists. The excerpts appeared exactly this way, precisely in this order:

* Rep. Loretta Sanchez Calls for Investigation of Military Food Services Contract
WASHINGTON, April 8 /PRNewswire-USNewswire/ -- Congresswoman Loretta Sanchez (CA-47) today announced that she is asking the Government Accountability Office (GAO) to investigate the U.S. Marine Corps' primary food services vendor for excessive waste and possible food safety concerns. Sodexo, which is currently nearing the end of its eight-year, $881 million contract with the Marine Corps, has been under scrutiny following multiple reports of food safety non-compliance and a drastic, mid-contract change to its food operations.

* Sodexo-operated Mess Hall at Parris Island Wins Top USMC Honors
GAITHERSBURG, Md., April 8 /PRNewswire/ -- Sodexo-operated Mess Hall 590 at Marine Corps Base Parris Island in S.C. earned the highest honor for a food service operation in the United States Marine Corps (USMC) recently when the operation was named the winner of the 2010 W.P.T. Hill Memorial Award. This marks the first time ever a recruit mess hall that serves thousands of Marine recruits everyday, three times a day has won the designation.

More on the masked bidder for CKE

Reuters reported this morning that the second bidder for CKE Restaurants, the parent of Carl's Jr. and Hardee's, is Apollo Managemet, a private equity firm with a stake in the Garden Fresh buffet chain. Reuters cited unidentified sources, and noted that Apollo neither confirmed nor denied its involvement.

Apollo has also been a lender to U.S. Foodservice, the restaurant distribution giant, and Kronos, a supplier of foodservice time-management technology.

The amount of the second bid was not disclosed in the Reuters report.

Wednesday, April 7, 2010

Who is that masked bidder?

You have to wonder why the second company to tender a bid for Carl’s Jr. and Hardee’s is hell-bent on masking its identity. Suitor No. 1, after all, is all but hiring skywriters to tout its interest: “Thomas H. Lee wants to do burgers!”

So why the secrecy for would-be buyer No. 2? After thinking about it at length today, I’m convinced there are three possible answers:

1) The bidder is actually Bruce Wayne, who's thinking of the possible movie tie-ins. It’s always dicey when you live over a secret cave and have an alternate crime-fighting ego in the age of YouTube. Besides, Alfred’s not getting any younger, and he could spill the beans about the capes and all those nifty toys if reporters come a-calling.

2) The would-be buyer doesn’t want to drive up the price of CKE Restaurants, the chains' parent, by sparking a bidding war. That, in turn, could be the case if the acquisition is a strategic one. If the addition of those brands makes terrific sense for the suitor, the market might bet the second party would be willing to sweeten its offer.

So what companies fit that fit that bill?

How about Yum Brands? Burgers are a gaping hole in its franchise portfolio, and both Carl’s and Hardee’s have geographic room to grow.

Or how about an East Coast brand that could suddenly have a big presence in the West and Central West? That description could apply to a few brands, including Chick-fil-A. Then again, that’s not the type of operation to do something rash. But it would have the wherewithal.

3) This cloaked suitor doesn’t want to alarm its current employees, or possibly even its investors. It’d rather complete the deal before it needlessly worries key constituencies and creates a nightmare for itself.

But that sounds unlikely. So I’m putting my money on the likelihood that the challenger is a restaurant company who sees the two regional burger chains as good complements to its current holdings.

Then again, I had Kansas winning the NCAA championship.