Thursday, February 28, 2013

How Domino's cut its telephone costs

The benefits of online ordering can extend beyond a restaurant’s savings in time and labor, according to Domino’s Pizza. As the off-premise specialist explained today to investors, it’s realizing significant margin gains through lower outlays for older unit technology.

We “realized, as we're taking fewer orders in the stores, we don't need as many order-taking stations and we don't need as many phone lines into the stores,” explained CEO Patrick Doyle. “And it's about $30 a line.”

The revelation was one of several aha moments for listeners. Among the other interesting tidbits that came to light during management’s quarterly call with financial analysts:

--Domino’s is synonymous with delivery, but carryout has grown more quickly during the last three to five years, according to Doyle.

--Rising gas prices have relatively little immediate impact on Domino’s sales or costs. “We have not seen a lot of change in the consumer’s behavior,” said CFO Michael Lawton. “There is more reimbursement to drivers, but it’s not a huge additional cost to stores.” The real wallop, said Doyle, is the spike in commodity costs.

Those revelations were in addition to the much-covered news that Domino’s franchisees voted to raise their commitment to the chain’s national marketing fund to 6% from sales, an increase of half a percent. 

Monday, February 25, 2013

Keeping the polystyrene ban in perspective

Chain haters are singing hosannas to Mayor Bloomberg for proposing a New York City ban on polystyrene food containers, a measure they see as an elbow to the windpipe of McDonald’s and its ilk.  If they’d ventured into those places anytime recently, they’d have learned the major brands dropped Styrofoam years ago for almost every product except coffee.
It’s not the huge corporations that will catch a wallop, but the countless bodegas, Korean delis, salad bars and Chinese takeout joints that provide a first rung to many foreign arrivals. Take a stroll at lunch through almost any New York office, be it filled with lawyers or telemarketers, and you’ll see desktop diners picking at all sorts of ethnic or street foods in clamshell boxes.
The places that rely on that packaging often lack the scale to switch painlessly to other takeout options. Maybe that’s why they’ve lagged behind the big chains in making a change already.
The containers have to be phased out. The Mayor’s economic and environmental reasons are valid.
But hopefully he and City Council Speaker Christine Quinn will move slowly enough to let demand climb, raising production to the point where recyclable or biodegradable packaging is affordable for all places offering takeout service.

Tuesday, February 12, 2013

DOJ clarifies ADA/allergy requirements--sort of

As Restaurant Reality Check reported earlier, the U.S. Department of Justice recently dropped a bombshell when it publicly stated that food allergies could qualify as a disability under the Americans with Disabilities Act.
The declaration sent a shiver through the restaurant business. As public facilities, restaurants are mandated by law to make accommodations for consumers with disabilities. Would places now be required to stock alternatives for people who can’t eat gluten, soy, dairy or seafood? Would they need special prep areas to prevent cross-contamination, or refrigerators reserved for allergen-free ingredients?
The fears weren’t far-fetched. The Department of Justice turned its attention to food allergies because students at Massachusetts’ Lesley College had complained that the school’s meal plan didn’t accommodate their gluten intolerance. Justice stepped in and filed a lawsuit under the ADA, but the matter was settled out of court after Lesley agreed to make a number of major concessions, including $50,000 payments to each of the offended students.
The college also had to add gluten-free choices and to set up a separate prep area—in effect, a kitchen reserved for gluten-free items.
In case other foodservice establishments missed the implication, DOJ said it point-blank in the Lesley lawsuit settlement: “Food allergies may constitute a disability under the ADA.”
Justice must’ve heard the fretting that followed because it quickly (but quietly) posted a clarification in Q&A form.  Kudos to the National Restaurant Association for spotting the commentary and commenting on the comments.
The central question that DOJ addressed, in its own words: “Is a food allergy considered a disability under the ADA?”
As a reminder, here’s the answer Justice put forth in the Lesley settlement: “Food allergies may constitute a disability.”
In the recent amplification: “It depends.”
“The ADA does not require that every place of public accommodation that serves food to the public provide gluten-free or allergen-free food,” DOJ explained.
Rather, “reasonable steps” can be expected. According to Justice, those actions can be as simple as offering information about a dish’s ingredients. If a place customizes what it serves, it may not be unreasonable to expect the tweaks to include the removal or avoidance of allergens, the agency continued.
What is not necessary, Justice specified, is “a fundamental alteration,” a change that changes the character of a dish or a concept. “For example, a restaurant is not required to alter its menu or provide different foods to meet particular dietary needs,” it wrote.
So a restaurant should provide allergen-free versions of menu items if it can do so without too much trouble, but it’s not necessary to offer options that a sufferer can eat?
Oh, yeah, that’s clear.

Friday, February 8, 2013

Two Italians taking to the mattresses?

 If Olive Garden hadn’t hit a slowdown, the acquisition of arch-rival Romano’s Macaroni Grill would’ve been just another restaurant deal (albeit one to notice; the buyer, Ignite Restaurant Group, expects to collect at least $180 million in revenues during the second half of the year from a business it’s buying for  $55 million in cash.)

But the growth plan sketched for investors on Tuesday by Ignite’s CEO suggests Mac Grill is plotting a high-road challenge to Olive Garden, once Darden’s big earner. Many observers believe Olive Garden’s problems stem in large part from an attempt to push the brand upscale. Ignite says it’s convinced the 210-unit Grill chain is the right concept to claim that higher ground and fill a role once occupied by the Garden: providing an affordable yet “fine Italian dining experience for Middle America,” in the words of CEO Ray Blanchette.

As he explained, the heartland consumers who flocked to Olive Garden in the chain’s earlier days have become much more sophisticated. He estimates that 80 million Millennials “are coming into the marketplace with an enormously high food IQ. They know quality. They understand service. They’ve been raised in restaurants and with the Food Network.”

At the same time, “you look at the boomers on the other side, [who] have tremendous disposable income…their palate has evolved along with everyone else’s.”

So, Blanchette stressed, Mac Grill will focus more on “new product news” than discounting or bargain flycasting. He aired plans, without getting too specific, to add “more interesting” pastas, along with braised meats and other center-of-the-plate lures.

A big part of the effort, he said, will be a re-invigoration of Mac’s wine program. One of the concept’s signatures was the presentation of a jug of wine to customers right after they’re seated. Patrons are invited to help themselves, then tell the server what they owe at the end of the meal. It was a neat differentiator.

“Over time, that sort of fell away from the business. We think it’s really important to bring that back to the nucleus,” say Blanchette. But Ignite plans to take a higher-ground approach by using a more elegant vessel, like a carafe.

That will be a springboard, he suggested for selling bottles of wine for $30 to $50. Vintages purchased at the higher end of that spectrum will be decanted tableside, part of an effort to provide more polished service, according to Blanchette.

Right now, he noted, about 80% of a Mac Grill’s sales are generated by food, posing a revenue and profit opportunity on the beverage side.

Blanchette indicated that the Grill chain shares Olive Garden’s challenge at lunch. Almost two-thirds of Mac’s sales come in the evening.

But, he stressed, Mac’s locations are “really unbelievable,” a key consideration for any chain going up against Olive Garden. When Brinker International owned the chain, Blanchette explained, they picked sites and negotiated leases that “we couldn’t replicate” today.

“There’s just not enough activity in the commercial real estate market for us to go out and recreate what they’ve done,” he remarked. “These are high quality locations.”