Monday, April 25, 2011

McDonald's quietly adopts handhelds

The proliferation of iPad-based menus and wine lists is generating buzz, but far more interesting is the quiet adoption of hand-held ordering devices by several quick-service giants.

McDonald’s revealed to investors last week that one advantage of its new POS system is adaptability to handhelds, “which we're beginning to implement more and more [in] the restaurants,” commented president Don Thompson. He also noted that the new POS system is compatible with dual drive-thrus.

mcDonald's is updating its sales technology in large part because the next generation requires less user input. Franchisees say an order can be input with fewer keystrokes and screens, speeding up service during crunch periods.

The operators have groused a little about the cost, which they have to absorb after investing in equipment to produce coffees, frappes and other high-ticket beverages.

Meanwhile, I can attest firsthand that Chipowithin using handhelds at some stores, including the one near Restaurant Business' headquartersb in the Wall Street area of New York. A staffer was using one recently to take orders from the queue of 35 or so people. You placed your order and payed. Then, when you got to the serving area, less info had to be provided, and the line did move faster.

The revelation about McDonald's use of handhelds came during a conference call on Friday with financial analysts. During the call executives also offered these news nuggets:

--The January offer of a 20-piece serving size of Chicken McNuggets led to a double-digit increase in sales of the product.

--McDonald's sales of hot coffee rose 17% year-over-year during the just-concluded winter.

--A frozen strawberry lemonade will be introduced in May, a part of the chain's efforts to match new drinks with the season. Thompson noted that a new smoothie flavor is also in the works.

Friday, April 22, 2011

Lawsuit still hurting Taco Bell, Yum says

Taco Bell has drawn praise inside and outside the restaurant business for the way it handled a lawsuit loudly proclaiming its ingredients to be crap. The measure sought to block the chain from calling describing the content of its tacos and burritos as ground beef, arguing that there was more filler than meat in the mix.

Taco Bell’s aggressive response, waged in ads and a publicity campaign, prompted the plaintiff quietly to drop the suit earlier this week. But the chain’s franchisor acknowledged yesterday that considerable damage has been done.

“Our positive sales momentum was reversed when we were thrown a curveball with the false claim around our food quality,” David Novak, the CEO of parent company Yum! Brands, told financial analysts.

He asserted that “heavy users” of Taco Bell continued to frequent the chain as the lawsuit (and Taco Bell’s response) generated headlines in the major media. But “light users” stopped visiting and have yet to resume their earlier levels of patronage, Novak said.

“We do not expect the second quarter in the U.S. to get better,” added CFO Rick Carucci. “We have not yet been able to reverse the negative sales trend at Taco Bell.”

Analysts seemed skeptical of the assessment.

“I'm a little surprised that Taco Bell has weakened as it's gotten away from the lawsuit,” said Jason West of Deutsche Bank. “Do you think there's any other issues going on out there with the [quick-service restaurant] consumer and that are new any way in terms of gas prices or whatever it may be?”

Gas prices haven’t helped, acknowledged Carucci. But the publicity stirred up by the lawsuit was the determining factor, he contended. Taco Bell’s same-store sales were running about 4% above the year-ago tally before the story broke. Bad weather tempered that in some areas, but the decline wasn’t early as severe as what happened after the lawsuit became widely known.
If anything, he added, the damage was probably mitigated by the promotion of a shrimp-filled taco for Lent.

“We just need a little bit of time to get further away from the event,” said Carucci, as quoted in a transcripted posted by

“We just don’t know how long it’s going to take us,” added Novak.

He assured the analysts on the call that the situation would not affect Taco Bell’s plans to add breakfast and remodel its stores.
“Better not,” he stressed.

The call just about coincided with Taco Bell’s announcement that it wanted a public apology from the Alabama law firm that had handled the lawsuit.

The Yum executives indirectly explained why. The attorneys had stirred up as much publicity as they could when the suit was filed and was still alive. But they very quietly withdrew it, leaving ample chatter still underway.

Taco Bell apparently wants the firm to publicly renounce its actions and to make some publicity about it withdrawal of suit.

There was no mention during the call of Long John Silver's or A&W, the restaurant brands Yum is trying to sell.

Tuesday, April 19, 2011

This just in from the courts

Chipotle’s design draws fire…
Chipotle may have to reconsider its standard design after the U.S. Supreme Court let stand a lower court’s ruling that customers in wheelchairs can’t be denied the experience of seeing their meals prepared.

Customers who walk through the serving line interact with the prep staffers on the other side of a glass partition, specifying what they want in their burrito and watching as the elements are added. The experience was cited in court actions as an essential part of the Chipotle experience.

But a barrier by the serving line prevents wheelchair-bound patrons from being able to see their meals being assembled.
In 2005, a California resident in a wheelchair sued Chipotle, asserting that he was the victim of discrimination because of his disability.

Chipotle had countered that the plaintiff, Maurizio Antoninetti, had sued a number of businesses because of alleged inaccessibility. Antoninetti is described in an online bio as a teaching associate at San Diego State University and a former “accessibility consultant,” with a degree in architecture.

The chain had also argued that it accommodated patrons who couldn’t walk the line. Staffers would in effect bring the assembly process to them, holding spoonfuls of ingredients and assembling the burrito so they could watch.

The lower court had decided that the remedy wasn’t fair to Antoninetti. The Supreme Court refused to hear the appeal, letting that ruling stand.

Chipotle has yet to issue any public statement about how it intends to respond to the action.

…while McD’s argues parents are the bosses
Meanwhile, McDonald’s is arguing that a lawsuit challenging its use of toys as kids-meal giveaways should be dismissed because the plaintiff acknowledges she wasn’t conned by the offer.

Monet Parham, a California mother of two, has admitted she knew exactly what was offered in the Happy Meals her children desired, and often refused their pleas to buy the bundled meals. McDonald’s asserted in court that the advertising was straightforward, and that a purchase wasn’t based on any misleading information from the chain.

Parham is represented in the suit by the Center for Science in the Public Interest.

An attorney for the plaintiff countered that McDonald’s was making Parham the victim because she couldn’t always counter the brainwashing that McDonald’s does with its advertising.

McDonald’s was still awaiting a reaction from the federal court as of this writing.

Service as a concept differentiator

Once upon a time, restaurant innovators focused on the menu as their means of differentiation. But look at today’s innovators and there’s no denying that modes of service are the way of standing out.

Consider, for instance, ZED451, one of the more upscale (and interesting) concepts in the portfolio of Tavistock Group, also the parent of Freebird World Burritos and the ethnic concepts formerly run by eBrands.

The company describes ZED as “a contemporary, internationally inspired steakhouse,” but it’s really a high-end, ultra-high-quality riff on the old Sizzler steak-and-buffet format. Guests help themselves to an extensive spread of fresh, seasonal sides, often with ethnic roots. Included in the spread are salads, vegetables, soups, breads and cheeses.

As you munch what you took, chefs roam the tables with platters of steak, seafood, poultry and game. They carve the proteins for you and explain how it was made, since they were the ones who prepared it.

Servers are still part of the mix. They take and serve drink orders, and presumably clear away empty dishes.

But clearly the concept takes the notion of a display kitchen one step further, bringing the kitchen out to the table to discuss what he or she made for you.

Vapiano, a German chain featuring Italian food, has a similar objective. Like Rich Melman’s FoodLife in Chicago, guests go from station to station for the elements of the meal, charging what they get to a card holding a smart chip. For instance, they can stop at a pasta station and have something made expressly for them. The food is prepared by a “cook-tainer” who converses with them as he or she whips up the serving. The guest brings the food to his or her table.

The U.S. arm of the company describes it as “somewhere between the nicest of fast casual and hippest of casual.”

Of course there’s no shortage of more-conventional entrants in the fast-casual sector, sometimes in decidedly unexpected pairings. Ruby Tuesday is moving away from full service with its development deal with Lime Fresh, a Mexican concept that some might label Chipotle 2.0.

But perhaps the winner in service uniqueness has to be the handful of avant garde places that Technomic has dubbed non-food restaurants. We at prefer to think of them as B.Y.O.F. places, as in have getting the food from elsewhere.

As Technomic’s Darren Tristano explained at our Restaurant Leadership Conference, these new places are basically bars without a kitchen. They encourage you to have food delivered, maybe from a preferred nearby restaurant, or to bring it in from the restaurant trucks or carts outside. Then they sell you the accompanying drinks.

They don’t have to invest in a kitchen or devote space to ovens and the like. Nor do they need the usual venting and exhaust fixtures that render many urban spots unfeasible for a restaurant.

Restaurants without the food. Who’d have thought it? It’s the non-menu menu.

Sunday, April 17, 2011

Size does matter in social media

Okay, we heard you.

We know now that you really liked our ranking of restaurant operators by their social media activity. But several of you had a problem with one aspect of our methodology for the report, which appeared in print and in an expanded version online.

As you’ve pointed out, sometimes forcefully, how can a six- (or 600-) unit chain compete with the likes of Starbucks or McDonald’s? So is it fair to rate them with the same criteria?

Why not adjust the scores so size is negated—maybe basing the ratings on some sort of per-unit scale instead of by brand name?

What was suggested, in essence, was the equivalent of ranking chains’ marketing budgets by the percentage of their sales, not their absolute dollars.

I promise you that we’ll try to find a way to do that next time. But in the meantime, here’s some solace.
We heard from about 25 operators who used our social media index calculator to see where they’d be on our charts. We added 18, with two yet to be posted. The others were either outside our geographic area—i.e., operating entirely within another country—or not using our criteria to compute their score.

A few social media consultants, apparently upset that neither they nor their clients figured into our report, lectured us about how the research should’ve been done.

The additions are starred on our updated ranking of operators, which now number close to 140. If you take a look at those addenda, you’ll undoubtedly see some unfamiliar names.

Who would’ve thought that Gringo’s, a regional Mexican chain, would finish ahead of brands like Church’s or Tony Roma’s?
It’s a few positions ahead of Iguana, another regional Tex-Mex specialist.

Along with the strong finishes of competitors like Chipotle (#14) , Moe’s (#53) and Qdoba (#58), they prove that New Mex chains are second only to the frozen-yogurt sector in their avid use of social media as a way of connecting with customers. Both those segments are young, growing, and still relatively small, countering the impression that giant brands are the mega-forces in that new realm.

We’ll continue to tweak and evolve our ratings to make our gauges as meaningful as possible.
You may also find yourself being solicited for media-related stories you’d like to see on our website,

But in the meantime, I encourage you to look beyond the rankings at some of the intelligence that’s embodied in the chart. Recently, for instance, we were part of a Twitter discussion that grew out of the live coverage of the Restaurant Leadership Conference, our top-to-top meeting for chain executives.

One of the speakers suggested that only two social-media postings per month are needed to maintain a conversation with Twitter followers or Facebook fans. It was such a shockingly low number that he was questioned about it during the presentation. Yep, he said. Make one posting a strategic statement, an indication of the brand’s character, and use the other for tactical purposes.

I still disagree with him. But look at the column in our chart that recorded the number of tweets a brand had posted in a 24-hour stretch. You’ll be surprised not only by the low numbers for some big players, but also how much of a disconnection there was with the operator’s overall social media score.

Finally, one correction of sorts: I was informed by a reader that Rick Bayless, one of the industry’s more avid users of Twitter, does have a public Facebook page. We noted that his main Facebook presence, listed under the name Rick Bayless, was open only to friends. A page listed under Chef Rick Bayless had some 16,000 fans.

We think Bayless is making a mistake with that approach. With each of the operators we ranked, I went to considerable lengths to ensure we were scoring the rate-ee’s official page. If that public Bayless page didn’t come up during my hunt, and I was putting in more effort than a casual Facebook user, isn’t he losing an opportunity to connect?

And of course he wasn’t alone in making a Facebook page or Twitter ID difficult to find. If your IDs aren’t prominently featured on your homepage, with links, you’re missing an opportunity.

If you have any other thoughts on our social media report, please drop me a line at And if you haven’t yet tried our calculator for gauging your social media index, please do so and let us know the results.

Thursday, April 7, 2011

An update on Ruby's concept-athon

By now you’ve probably heard that Ruby Tuesday’s has opened the prototype of its new Marlin & Ray’s concept, or what management has previously described as a seafood version of its namesake brand.

Management hasn’t been forthcoming with details about the first M&R, noting only that it was converted from an old Ruby in Tennessee. But it’s pleased enough to project as many as 14 more conversions during the next fiscal year.

Executive vice president Kimberly Grant told investors that the initial restaurant opened to “higher-than-expected sales.”
CEO Sandy Beall divulged that the store is “very casual, with low rent.”

He added that the company is more excited about the seafood concept’s prospects than it is about the outlook for its other new growth vehicles, which include Truffles, Jim ‘N Nicks, and Wok Hay, all of which are full-service. It’s also developing franchises of a Chipotle-like fast-casual brand, Fresh Lime.

Beall said Ruby’s first Truffles restaurant is “performing fine. Not better than we thought, but it’s fine.”

A Jim ‘N Nick’s unit was converted from a Ruby that generated annual sales of $1.1 million. With the new I.D., the location is running at a $2.2-million annual sales rate, “and we haven’t even started catering yet,” said Beall.

He wasn’t exactly brimming with enthusiasm about Wok Hay, a fast-casual concept that Ruby bought a few years ago and gussied up into a full-fledged casual brand specializing in Asian fare.

Two will open by July, so by fall “we'll know about those and we'll either have something to grow or we'll close us down or convert it with something else too.”

Easy way to get loans for franchisees?

The International Franchise Association didn’t over-promise in pitching its Small Business Lending Summit as an opportunity to hammer out solutions to restaurant franchisees’ capital crunch. A packed room of attendees heard repeatedly today that lenders would extend loans more readily if applicants’ franchisors provided detailed data about the brand’s overall performance.

Bank representatives said the rusted machinery would be greased significantly if brand headquarters shared such nitty-gritty info as long-term sales plans, what failed stores are fetching when they’re sold, and what HR support is available to franchisees.

Several noted that medical-related small businesses are having an easier time than restaurants and other franchised businesses in securing growth capital. “The reason is there’s a tremendous amount of data available in that sector,” said Joe DiNicola of Bank of America.

“Today’s underwriting is different than yesterday’s underwriting. When the story can be supported with the franchisor’s data, that story becomes stronger,” he asserted.

The discussion prompted one member of the audience to grab a microphone and suggest that franchisors put systems into place and standardize the information they pass along to potential sources of licensee loans.

The give-and-take grew out of what panel moderator and celebrity business journalist Geoff Colvin called a “giant disconnect between lender and borrower.”

He noted that the conference was convened because franchisees are starved for financing. Yet lenders on the program attested that they not only are willing to lend more money to franchisees, but are aggressively prowling for those sorts of deals.

Ironically, they asserted that a major part of the problem is insufficient demand.

“We’re seeing a lot of hesitancy,” said Mary Navarro, a senior EVP for the Midwest’s Huntington Bank. “A low sales volume might be part of that hesitancy, and [franchisees] have learned to do more with less.”

The discrepancy between franchisees’ complaints and lenders assertions had Colvin scratching his head. He asked Navarro, “What explains the perception that franchisees can’t get credit?”

After some give-and-take, lenders acknowledged that they’re using different criteria post-Great Recession to decide who gets money. They’re looking for a convincing track record and far more detailed information about the ventures they back.

“Document, document, document,” advised Tony Wilkinson, CEO of the National Association of Government Guaranteed Lenders.

Banks are also looking for an on-going relationship, not a one-off transaction. Her company is loath to make one-shot loans because it wants to lend money on an ongoing basis with businesses in the neighborhood.

A representative of Regions Financial Corp. suggested that franchisors choose a dozen banks nationally, educate those institutions about their concept, and then work exclusively with then.

Pens were scribbling furiously as she spoke. I bet the notation was starred and underlined a few times.

Monday, April 4, 2011

Social studies, c. April

If you’re one of the holdouts who suspects there’s more hype than substance to social media, consider a story behind the story of the Social Media 50, our ranking of the restaurant industry’s most avid and successful users.

I collected the data with a few days of help from an intern beginning in mid-January. As we tabulated the Twitter and Facebook posts of some 120 operators—chains, independents and celebrity chefs—we noted the aberrations, thinking they’d make a good sidebar.

There were plenty of them, including a number of big brands that have yet to embrace one or both of the two major social media channels.

Similarly, there was a rough correlation between an operation’s size and the amount of buzz it generated online, but not a perfect one. Who’d have thought Buffalo Wild Wings would promote more keypad activity than some of the fast-food giants?

But perhaps the biggest surprises were the numbers for In-N-Out, the burger chain whose die-hard fans define a restaurant cult, replete with its own secret ordering language. It seemed cut out for social media, yet its voice wasn’t nearly as loud as even a casual observer might’ve expected. Twenty-thousand Facebook fans? Pffft. We even called attention to the situation in our roundup of curious findings, or what we termed Jaw Droppers.

Fast forward to a few days before the release of the report via our April issue and exclusive content on One of my colleagues sent me an e-mail with the subject line, “Rut-roh.”

She explained that some work on another project took her to In-N-Out’s Facebook page, which indicated the regional chain had more than 1 million fans. Clearly we’d made a mistake.

Still, I was puzzled. We’d checked the numbers several times. Was it possibly a mistake? Had we visited one of the unofficial pages that fans set up for a brand they adore or abhor (OliveGardenHate had more than 300 fans)? Was it just a typo, a number misread off a list and mis-entered there?

It might indeed have been a mistake of one sort or another. But in researching mini-profiles of the social media strategies wielded by the Top 50 finishers, I started noticing other discrepancies.

Numbers had soared in the few weeks since we conducted our first canvass of Twitter and Facebook. Jumps of 2,000 Twitter followers weren’t unusual. Neither were leaps of 10,000 or more “likes” on Facebook pages.

In the case of Buffalo Wild Wings, the increase was in the 600,000-fan range.

Might In-N-Out have really seen its numbers jump by nearly 2 million in a month? Consider that Charlie Sheen collected 2 million Twitter followers in a night.

I’ve yet to get a clarification one way or another from In-N-Out, a chain notoriously uncommunicative with the press.

But I’m thinking that we just saw a market rectification of sorts. The power of social media is gravitating to the more powerful of brands in some sort of online natural evolution.

Skeptics will have to change their argument. The preferred form of social media might change. But the phenomenon is growing, not waning.