I'm live blogging from People Report Best Practices Conference. For clarity, you may want to drop down a few installments and read your way upward.
Here's what's happening right now:
Comments from the stage suggest that restaurants' toughest competitor may not be the convenience store, the supermarket, or even the bank that holds a potential patron's mortgage. From what the presenters have been saying, the challengers really hurting restaurant sales may be the Apple Store and BestBuy.
Several speakers have mentioned the paradox of people cutting their discretionary spending, then lining up to buy iPads. It's part of what seems to be a far more sophisticated trend than the usual straight line indication that the economy is improving or declining. For instance, it was noted that sales of craft beers and wines are improving, at the expense of less expensive choices. They may be dining out less often, but the indulge a little when they do. Or they take the money they saved and go out and get a big flatscreen TV.
That, they suggested, tends to explain why macroeconomic gauges indicate the economy is improving, but things don't look that good when you drill down.
Wednesday, November 2, 2011
Turnaround tale
I'm blogging more or less live from the People Report Best Practices Conference. Here's the first installment for the kick-off afternoon session:
We’re literally 20 minutes into the first general session of the conference, and already we’ve heard a turnaround story that pushed the ROI on attendance into positive territory. It was John Bettin’s account of how The Palm survived during the economic downturn.
In early October of 2008, when the financial community plunged into near-ruin, fine-dining fell like a rock. About a week later, Bettin joined $85-a-head Palm as the first CEO to be recruited from outside the founders’ families. “At least I could claim [the collapse] it wasn’t my fault,” he cracked to the audience of about 300 chain execs.
The private owners of The Palm pulled him aside on Day One and said, point blank, forget about the usual transition into the job. We want you to focus on meeting our obligations to the banks.
Bettin plunged into the task. Given the direction of the economy and fine-dining sales, he realized right away that the venerable steak brand wasn’t going to meet its financial obligations. It was a life-or-death struggle, a crisis that required extraordinary measures.
One of the questions the situation raised was what to tell the Palm’s venerated staff, who could make or break a recovery with their attitudes. “We decided to be 100% transparent,” explained Bettin. “We let them know that we were in trouble, that we would be trying different things, that our plan might change daily.”
As the negative trends continued, the company had layoffs and salary cuts. “Be we also launched a recognition program with Tiffany pens that cost us $100,000 a year. We started a newsletter that cost us $40,000,” recounted Bettin.
The company wanted the employees to stay engaged and play a crucial role in the survival struggle, even as the bad news was communicated to them.
“Your grandmother told you, ‘Honesty is the best policy.’ I can alter that and say transparency is the only path if you want to succeed,” said Bettin. “We celebrated every day we were less negative than we had been.”
As a result, “we came out of it faster than a lot of people,” and same-store sales have remained positive, he said. “It’s not me, it’s not the leaders, it’s our 1,600 employees.”
If you'd like me to focus on particular aspect of the conference, just e-mail me at promeo@cspnet.com, or send me a message via Twitter, @peterromeo.
We’re literally 20 minutes into the first general session of the conference, and already we’ve heard a turnaround story that pushed the ROI on attendance into positive territory. It was John Bettin’s account of how The Palm survived during the economic downturn.
In early October of 2008, when the financial community plunged into near-ruin, fine-dining fell like a rock. About a week later, Bettin joined $85-a-head Palm as the first CEO to be recruited from outside the founders’ families. “At least I could claim [the collapse] it wasn’t my fault,” he cracked to the audience of about 300 chain execs.
The private owners of The Palm pulled him aside on Day One and said, point blank, forget about the usual transition into the job. We want you to focus on meeting our obligations to the banks.
Bettin plunged into the task. Given the direction of the economy and fine-dining sales, he realized right away that the venerable steak brand wasn’t going to meet its financial obligations. It was a life-or-death struggle, a crisis that required extraordinary measures.
One of the questions the situation raised was what to tell the Palm’s venerated staff, who could make or break a recovery with their attitudes. “We decided to be 100% transparent,” explained Bettin. “We let them know that we were in trouble, that we would be trying different things, that our plan might change daily.”
As the negative trends continued, the company had layoffs and salary cuts. “Be we also launched a recognition program with Tiffany pens that cost us $100,000 a year. We started a newsletter that cost us $40,000,” recounted Bettin.
The company wanted the employees to stay engaged and play a crucial role in the survival struggle, even as the bad news was communicated to them.
“Your grandmother told you, ‘Honesty is the best policy.’ I can alter that and say transparency is the only path if you want to succeed,” said Bettin. “We celebrated every day we were less negative than we had been.”
As a result, “we came out of it faster than a lot of people,” and same-store sales have remained positive, he said. “It’s not me, it’s not the leaders, it’s our 1,600 employees.”
If you'd like me to focus on particular aspect of the conference, just e-mail me at promeo@cspnet.com, or send me a message via Twitter, @peterromeo.
'So, what do you remember about him?'
So many industry leaders have been called by reporters for comment on Herman Cain that the solicitations were a topic of conversation at the People Report Best Practices Conference party last night.
Cain would be pleased to know he’s remembered by his former colleagues in foodservice, but all professed they declined to reminisce about him with the media.
Cain would be pleased to know he’s remembered by his former colleagues in foodservice, but all professed they declined to reminisce about him with the media.
Tuesday, November 1, 2011
What's the right way to grow overseas?
Wally Doolin, chairman Of Black Box Intelligence and a recovering chain executive, doesn’t flinch at bringing up the sometimes controversial issue of brand ownership. At last year’s People Report Best Practices Conference, he lobbed the firebomb observation that control of a concept by an investor, like a private-equity company, might prove a troubling change for an industry that was built largely on entrepreneurship. “Usually,” he noted at the time, “enterpreneurs make the decision that’s right for the business.”
At this year’s conference, which started today with a new session on the international market, he touched on a sensitive issue again by asking two U.S. brands what ownership model they’d have preferred to use in their overseas expansion. If they could do it over again, he asked officials of Starbucks and T.G.I. Friday’s, would they do more franchising? Less? How about joint ventures? What do they see as the ideal ownership model when you head abroad?
Nick Shepherd, CEO of Friday’s parent company, said it’s not a matter of what was right or wrong. Friday's chose a particular route because of factors that prevailed at the time. Any U.S. chain looking to grow abroad may have to make compromises because of it's situation, like not having enough capital to blitz a market. That would suggest franchising. But to woo a local partner, and maybe local financiers, a chain might have to hold a stake in the overseas stores. That'd mandate a joint venture.
Joint ventures can work beautifully, he stressed, but it’s important to structure it correctly. Having less than a 50% stake can mean surrendering too much control of the brand to the local operator.
You might have to start with a smaller stake, just to have some skin in the game, but it doesn’t make sense to have 15 or 20 percent because it puts you in a passive position, agreed Shepherd’s fellow presenter, Joe Canterbury.
Canterbury, Starbucks’ VP of international business development, noted that the coffee giant now wholly owns its restaurants in a number of foreign markets, a far cry from the small stake it held when it established its first beachhead, in Japan. But back then it needed to "have some skin in the game" because the brand was untried outside of the United States.
Franchising provides more control, they suggested, but at some point the local operator’s interests are going to diverge from the franchisor’s. Canterbury characterized it as inevitable.
Whatever model is pursued, they agreed, the key is finding the right local partner. The tenor of that relationship will be crucial in good times and in bad. A good partner can get you the sites and people that ensure success, stressed Shepherd. And even when interests diverge, a strong relationship enables you to resolve the situation amicably.
Shepherd noted that everyone in the room has had the experience of picking a franchisee who looked great on paper but failed to meet expectations as a business partner. It happens overseas, too, but what goes wrong in a store in Singapore can spread across the globe in a flash.
Doolin ended the session by asking the pair to recount one of the humorous instances that U.S. chain executives invariably encounter abroad.
Canterbury recalled how Starbucks worked with local authorities to resolve a trademark dispute. During the negotiations, they sat in front of a 20-foot-high portrait of Russian strongman Vladimir Putin, trying not to show the intimidation they felt.
Shepherd recalled a business presentation he co-hosted before his days with Friday's. His boss stressed at the time that they were not to mention an obscure sporting event to the 500-plus Europeans in attendance because it might offend them. Instead, he made a reference to Nazis in jackboots. Then he threw the emcee duties over to Shepherd.
At this year’s conference, which started today with a new session on the international market, he touched on a sensitive issue again by asking two U.S. brands what ownership model they’d have preferred to use in their overseas expansion. If they could do it over again, he asked officials of Starbucks and T.G.I. Friday’s, would they do more franchising? Less? How about joint ventures? What do they see as the ideal ownership model when you head abroad?
Nick Shepherd, CEO of Friday’s parent company, said it’s not a matter of what was right or wrong. Friday's chose a particular route because of factors that prevailed at the time. Any U.S. chain looking to grow abroad may have to make compromises because of it's situation, like not having enough capital to blitz a market. That would suggest franchising. But to woo a local partner, and maybe local financiers, a chain might have to hold a stake in the overseas stores. That'd mandate a joint venture.
Joint ventures can work beautifully, he stressed, but it’s important to structure it correctly. Having less than a 50% stake can mean surrendering too much control of the brand to the local operator.
You might have to start with a smaller stake, just to have some skin in the game, but it doesn’t make sense to have 15 or 20 percent because it puts you in a passive position, agreed Shepherd’s fellow presenter, Joe Canterbury.
Canterbury, Starbucks’ VP of international business development, noted that the coffee giant now wholly owns its restaurants in a number of foreign markets, a far cry from the small stake it held when it established its first beachhead, in Japan. But back then it needed to "have some skin in the game" because the brand was untried outside of the United States.
Franchising provides more control, they suggested, but at some point the local operator’s interests are going to diverge from the franchisor’s. Canterbury characterized it as inevitable.
Whatever model is pursued, they agreed, the key is finding the right local partner. The tenor of that relationship will be crucial in good times and in bad. A good partner can get you the sites and people that ensure success, stressed Shepherd. And even when interests diverge, a strong relationship enables you to resolve the situation amicably.
Shepherd noted that everyone in the room has had the experience of picking a franchisee who looked great on paper but failed to meet expectations as a business partner. It happens overseas, too, but what goes wrong in a store in Singapore can spread across the globe in a flash.
Doolin ended the session by asking the pair to recount one of the humorous instances that U.S. chain executives invariably encounter abroad.
Canterbury recalled how Starbucks worked with local authorities to resolve a trademark dispute. During the negotiations, they sat in front of a 20-foot-high portrait of Russian strongman Vladimir Putin, trying not to show the intimidation they felt.
Shepherd recalled a business presentation he co-hosted before his days with Friday's. His boss stressed at the time that they were not to mention an obscure sporting event to the 500-plus Europeans in attendance because it might offend them. Instead, he made a reference to Nazis in jackboots. Then he threw the emcee duties over to Shepherd.
What do you want to know?
On Thursday morning I’ll be moderating a panel on what restaurateurs need to know to participate in the political dialogue leading up to the 2012 elections. During the session of the People Report Best Practices Conference, we’ll be fielding questions about issues of particular interest to the business. We want to arm the trade with the knowledge and confidence to counter partisan bickering with reasoned, substantive discussion.
If that brings to mind any questions you’d like me to ask the panel, please drop me a line via e-mail (promeo@cspnet.com) or Twitter (@peterromeo). The group consists of Dawn Sweeney, CEO of the National Restaurant Association; Craig Miller, the former restaurant-chain chief who’s campaigning to become Florida’s next U.S. Senator; and Josh Davies, the Sage Hospitality executive who ran for a seat on Denver’s City Council.
I look forward to hearing what you’d like me to ask. If your question is posed to the panelists (and I’ll do my best to get them heard), I’ll try to cover the responses here.
If that brings to mind any questions you’d like me to ask the panel, please drop me a line via e-mail (promeo@cspnet.com) or Twitter (@peterromeo). The group consists of Dawn Sweeney, CEO of the National Restaurant Association; Craig Miller, the former restaurant-chain chief who’s campaigning to become Florida’s next U.S. Senator; and Josh Davies, the Sage Hospitality executive who ran for a seat on Denver’s City Council.
I look forward to hearing what you’d like me to ask. If your question is posed to the panelists (and I’ll do my best to get them heard), I’ll try to cover the responses here.
Friday, October 28, 2011
Raising a glass to Happy Hours
If you doubt the Happy Hour is making a comeback, consider the sales elixirs two heavy-pouring restaurant chains are currently sucking down.
The pair acknowledged this month that they’d uncorked what’s again becoming the most common sales lubricant in casual dining. Brinker International was the more recent to join the likes of P.F. Chang’s and Cheesecake Factory, announcing Wednesday that its Chili’s chain was rolling a “full-blown Happy Hour program,” in the words of CEO Doug Brooks.
Speaking to investors, Brooks was sketchy on details. But he divulged that the lures for the post-work crowd would include sangria, an upgraded version of Chili’s signature margaritas, and new food offerings at the bar.
He described the push for evening guests as one of Chili’s “very big initiatives” for rebounding from the Great Recession, which walloped all of casual dining. The rollout is right up there in strategic importance with the redesign of the concept and the changeover to more efficient kitchens, he stressed.
The financial analysts listening to Brooks refused to let his tease pass without amplification. Pressed a bit, Brooks described the new program as a natural outgrowth of Chili’s re-imaging, which extends to such bar enhancements as the installation of better flat screen TVs. He also spoke cryptically about changes that put the bartender in a position to field more drink orders.
But Brooks rebuffed requests for any sales info from the program’s market tests, which he characterized as having just concluded.
Three weeks earlier, Ruby Tuesday provided a few details about its Happy Hour program, which is already in place at the diversified company’s namesake chain (Ruby Tuesday now has more brands in its portfolio than some of the bigger private-equity firms.) CEO Sandy Beall noted that the draws include half-price appetizers and $2 tacos and sliders.
“The investments we've made in our beverage lineup and bar program should help us reach our long-term goal of increasing alcohol sales to 12% of revenue,” Beall said in Ruby’s conference call with investors.
Looks as if Ruby Tuesday is going to have a lot more competition in getting there.
The pair acknowledged this month that they’d uncorked what’s again becoming the most common sales lubricant in casual dining. Brinker International was the more recent to join the likes of P.F. Chang’s and Cheesecake Factory, announcing Wednesday that its Chili’s chain was rolling a “full-blown Happy Hour program,” in the words of CEO Doug Brooks.
Speaking to investors, Brooks was sketchy on details. But he divulged that the lures for the post-work crowd would include sangria, an upgraded version of Chili’s signature margaritas, and new food offerings at the bar.
He described the push for evening guests as one of Chili’s “very big initiatives” for rebounding from the Great Recession, which walloped all of casual dining. The rollout is right up there in strategic importance with the redesign of the concept and the changeover to more efficient kitchens, he stressed.
The financial analysts listening to Brooks refused to let his tease pass without amplification. Pressed a bit, Brooks described the new program as a natural outgrowth of Chili’s re-imaging, which extends to such bar enhancements as the installation of better flat screen TVs. He also spoke cryptically about changes that put the bartender in a position to field more drink orders.
But Brooks rebuffed requests for any sales info from the program’s market tests, which he characterized as having just concluded.
Three weeks earlier, Ruby Tuesday provided a few details about its Happy Hour program, which is already in place at the diversified company’s namesake chain (Ruby Tuesday now has more brands in its portfolio than some of the bigger private-equity firms.) CEO Sandy Beall noted that the draws include half-price appetizers and $2 tacos and sliders.
“The investments we've made in our beverage lineup and bar program should help us reach our long-term goal of increasing alcohol sales to 12% of revenue,” Beall said in Ruby’s conference call with investors.
Looks as if Ruby Tuesday is going to have a lot more competition in getting there.
Tuesday, October 25, 2011
Only yawning over new products is coming from the R&D team
Here’s a link that restaurant chains might want to check out for the well being of their menu development staffs. It’s an eBay listing for army cots. Clearly R&D teams have little time to swap chef’s whites for PJs when they’re cooking up new customer draws at the current pace.
Oh, and don’t forget to visit this site, too. It’s an online pharmacy that extends a price break on big tranquilizer orders. The products coming from the big brands’ test kitchens have typically been make-or-break products. Did the team come up with a new menu milestone, or will their handiwork be remembered as the new New Coke?
Burger chains are changing their burgers, pizza chains are reformulating their pizza, coffee chains are re-percolating their core coffee line, Mexican chains are rethinking what they put in a tortilla.
Think about it: With McDonald’s about to add a new chicken finger food called McBites, and Burger King introducing the Chef’s Choice this week as its new premium burger, almost all of the major fast-food chains are fiddling with their menu signatures.
What’s more, the alterations are introduced with direct or implied criticisms of the versions they replaced. Domino’s has made the most noise on that front, all but asking customers, “How could you have eaten what we formerly sold you?”
But Wendy’s isn’t much more discrete in its push of new French fries and burgers. Ditto with KFC and Kentucky Grilled Chicken. The only one showing subtlety is Taco Bell, which is quietly taking some salt out of its signatures.
McDonald’s hasn’t revealed what sort of noise it’ll make about McBites, a chicken version of popcorn shrimp (essentially deep-fried pieces of chicken meat, like the popcorn selections that have long been on the menus of KFC and Popeyes.) You can bet it won’t knock Chicken McNuggets or Chicken Selects in the introduction, but you have to wonder if customers will nonetheless regard McBites as an obvious alternative to McNuggets.
We’ll find out when McDonald’s rolls the new product next year.
The remake of fast-food signatures won’t end there. As RestaurantRealityCheck noted last week, Burger King is trying a new, thicker fry. Its stated goal of appealing to more women and children portends even more changes in products.
Might there even be some riffs on the Whopper?
This isn't the first time that such a thing has happened. In the mid-1980s, BK indeed changed the specs on its holiest of signatures, revamping the size of the Whopper's patty.
McDonald's tried to rejigger its bigger burgers so they could be garnished with lettuce and a tomato slice that wouldn't be rendered unpleasant by the heat of the patty they topped. Later, KFC introduced a bone-in roasted chicken, and Taco Bell tried reduced-calorie versions of its main items.
They all joined the Edsel in the annals of product failures.
But there are different dynamics--and learnings from those misfires--in play this time. Technomic noted in releasing some research yesterday that the fast-casual sector is influencing restaurants of all stripes. No where is that impact more obvious than in the traditional quick-service market, which has the most to lose from fast-casual's rise. Is it really a surprise that former Wendy's CEO Roland Smith publicly compared the chain's new burger line to what's available at Five Guys?
Talk amongst yourselves about it. But try to keep the noise down. The R&D teams need to catch up on their sleep.
Oh, and don’t forget to visit this site, too. It’s an online pharmacy that extends a price break on big tranquilizer orders. The products coming from the big brands’ test kitchens have typically been make-or-break products. Did the team come up with a new menu milestone, or will their handiwork be remembered as the new New Coke?
Burger chains are changing their burgers, pizza chains are reformulating their pizza, coffee chains are re-percolating their core coffee line, Mexican chains are rethinking what they put in a tortilla.
Think about it: With McDonald’s about to add a new chicken finger food called McBites, and Burger King introducing the Chef’s Choice this week as its new premium burger, almost all of the major fast-food chains are fiddling with their menu signatures.
What’s more, the alterations are introduced with direct or implied criticisms of the versions they replaced. Domino’s has made the most noise on that front, all but asking customers, “How could you have eaten what we formerly sold you?”
But Wendy’s isn’t much more discrete in its push of new French fries and burgers. Ditto with KFC and Kentucky Grilled Chicken. The only one showing subtlety is Taco Bell, which is quietly taking some salt out of its signatures.
McDonald’s hasn’t revealed what sort of noise it’ll make about McBites, a chicken version of popcorn shrimp (essentially deep-fried pieces of chicken meat, like the popcorn selections that have long been on the menus of KFC and Popeyes.) You can bet it won’t knock Chicken McNuggets or Chicken Selects in the introduction, but you have to wonder if customers will nonetheless regard McBites as an obvious alternative to McNuggets.
We’ll find out when McDonald’s rolls the new product next year.
The remake of fast-food signatures won’t end there. As RestaurantRealityCheck noted last week, Burger King is trying a new, thicker fry. Its stated goal of appealing to more women and children portends even more changes in products.
Might there even be some riffs on the Whopper?
This isn't the first time that such a thing has happened. In the mid-1980s, BK indeed changed the specs on its holiest of signatures, revamping the size of the Whopper's patty.
McDonald's tried to rejigger its bigger burgers so they could be garnished with lettuce and a tomato slice that wouldn't be rendered unpleasant by the heat of the patty they topped. Later, KFC introduced a bone-in roasted chicken, and Taco Bell tried reduced-calorie versions of its main items.
They all joined the Edsel in the annals of product failures.
But there are different dynamics--and learnings from those misfires--in play this time. Technomic noted in releasing some research yesterday that the fast-casual sector is influencing restaurants of all stripes. No where is that impact more obvious than in the traditional quick-service market, which has the most to lose from fast-casual's rise. Is it really a surprise that former Wendy's CEO Roland Smith publicly compared the chain's new burger line to what's available at Five Guys?
Talk amongst yourselves about it. But try to keep the noise down. The R&D teams need to catch up on their sleep.
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