How do you tactfully offer a bargain when your customers view you as a Mercedes-class experience? That’s the quandary facing Ruth’s Chris Steak House, a longtime favorite of the expense-account crowd.
The chain tried a bundled-meal deal—the equivalent of a Dollar Menu to the Gold Card set—in February. Patrons could have shrimp, a six-ounce filet or several other upscale entrees, packaged with a side and a dessert, for a mere $39.95. By the standards of that segment, this was dangerously close to a tie-in with a blockbuster summer movie.
The nod to value played well with Ruth’s clientele. “It has been well received by our guests and is representing a sizable portion of our sales mix,” CEO Mike O’Donnell told analysts during a conference call today.
Indeed, he seemed to suggest, the promo might’ve been too well received. The chain’s typical guest check fell 6.5%, to $70. Ruth’s was getting less per guest, which would’ve been fine if more guests were drawn by the head-turner.
But comp sales fell by more than 23%. The numbers indicate that traffic was down as well as the average check.
So what’s a high-end chain to do?
The chain is currently testing a bistro menu in the lounges of six restaurants. A second possibility, a $19.95 steak-and-fries platter, is being tested during the normally slow beginning of the week at three locations.
But the chain’s not abandoning its prix-fixe deal, at least not this summer. Apparently the company feels it was enough of a brake on the traffic decline to keep it in place. O’Donnell cited expectations that the value offer might catch on and hit an “inflection point,” where it becomes a boon to traffic, even though the average tab might slip by a few more dollars. And as he noted in response to a question on that point, patrons can “buy up” to a $49.95 version.
I guess it’s like trading up to a large drink.
Friday, July 31, 2009
Monday, July 27, 2009
The rejuvenation effort to watch
When I heard Dick Rivera had been named CEO of Real Mex Restaurants, I shrugged and figured, A job’s a job. He’d already diamond-studded his reputation by leading such big-name brands as Red Lobster, T.G.I. Friday’s and Longhorn Steakhouse. So what if he was stepping back now to what anyone in the business would regard as second-tier concepts? He’d help such relics as Acapulco and El Torito play a little Bingo in the home for aged restaurant chains.
Then Rivera tapped Lowell Petrie to lead Real Mex’s marketing efforts. It’d be like the Mississippi Mud Hens putting Derek Jeter in as shortstop, after slotting Ivan Rodriguez as the clean-up batter. Petrie has earned mountains of respect in similar roles at concepts large and small, from Denny’s to his most recent employer, the much-watched Daphne’s Greek fast-casual chain.
Then came the announcement that Craig Miller, a longtime casual-dining leader, and Jeff Campbell, perhaps foodservice’s biggest marquee name during the 1980s, had been appointed to Real Mex’s board.
And along the way, Rivera lined up $130 million in debt financing.
Suddenly, what sounded like a reshoot of “Going in Style” was emerging as the story to follow. Indeed, it may be the most intriguing situation in all of foodservice right now, with more drama and audacity than the saga of Starbucks. Wisdom, financing, talent, determination and old but extremely well-known brands, all blended into a comeback effort that would make Lance Armstrong look as if he was back on training wheels. This is one for the Harvard Business Review.
Of course, there’s no guarantee of a happy outcome. As one close observer put it, Real Mex’s concepts come with plenty of baggage. El Torito can boast of being the granddaddy of Mexican dining in the U.S. But that’s like touting a Walkman in the age of the iPod. Freshness, novelty and perceived authenticity are what seemingly pull consumers to today’s Tex-Mex outlets. Can Real Mex promise real Mex?
Then again, it has a gem in Chevys, a brand that touted freshness while Steve Ells was still toying with the idea of a Mexican concept that could offer food with integrity. Long before Chipotle Mexican Grill, it was boasting that it used nothing canned or frozen, and entertained guests by cranking out fresh tortillas on a signature machine visible from the dining room. In short, it was fresh before fresh was cool. With only 68 restaurants in operation, it has plenty of room to grow.
Real Mex also has a few youngsters in its nine-brand, 189-restaurant fold. It opened a concept called Sinigual last fall in New York City, for instance. There’s also what’s now a single-outlet concept in Laguna Beach, Calif., called Las Brisas.
In any case, it’ll be interesting to track the turnaround efforts of Rivera and his team—a line-up that presumably hasn’t yet been completely drafted. That alone will be something to watch, given the talent available and how many all-star acquaintances the current recruits enjoy.
It’s also a buyer’s market for top-grade development sites, or even acquisition candidates.
Clearly this’ll be no checkers game at Shady Acres Retirement Village.
Then Rivera tapped Lowell Petrie to lead Real Mex’s marketing efforts. It’d be like the Mississippi Mud Hens putting Derek Jeter in as shortstop, after slotting Ivan Rodriguez as the clean-up batter. Petrie has earned mountains of respect in similar roles at concepts large and small, from Denny’s to his most recent employer, the much-watched Daphne’s Greek fast-casual chain.
Then came the announcement that Craig Miller, a longtime casual-dining leader, and Jeff Campbell, perhaps foodservice’s biggest marquee name during the 1980s, had been appointed to Real Mex’s board.
And along the way, Rivera lined up $130 million in debt financing.
Suddenly, what sounded like a reshoot of “Going in Style” was emerging as the story to follow. Indeed, it may be the most intriguing situation in all of foodservice right now, with more drama and audacity than the saga of Starbucks. Wisdom, financing, talent, determination and old but extremely well-known brands, all blended into a comeback effort that would make Lance Armstrong look as if he was back on training wheels. This is one for the Harvard Business Review.
Of course, there’s no guarantee of a happy outcome. As one close observer put it, Real Mex’s concepts come with plenty of baggage. El Torito can boast of being the granddaddy of Mexican dining in the U.S. But that’s like touting a Walkman in the age of the iPod. Freshness, novelty and perceived authenticity are what seemingly pull consumers to today’s Tex-Mex outlets. Can Real Mex promise real Mex?
Then again, it has a gem in Chevys, a brand that touted freshness while Steve Ells was still toying with the idea of a Mexican concept that could offer food with integrity. Long before Chipotle Mexican Grill, it was boasting that it used nothing canned or frozen, and entertained guests by cranking out fresh tortillas on a signature machine visible from the dining room. In short, it was fresh before fresh was cool. With only 68 restaurants in operation, it has plenty of room to grow.
Real Mex also has a few youngsters in its nine-brand, 189-restaurant fold. It opened a concept called Sinigual last fall in New York City, for instance. There’s also what’s now a single-outlet concept in Laguna Beach, Calif., called Las Brisas.
In any case, it’ll be interesting to track the turnaround efforts of Rivera and his team—a line-up that presumably hasn’t yet been completely drafted. That alone will be something to watch, given the talent available and how many all-star acquaintances the current recruits enjoy.
It’s also a buyer’s market for top-grade development sites, or even acquisition candidates.
Clearly this’ll be no checkers game at Shady Acres Retirement Village.
Thursday, July 23, 2009
Another sort of carrot for being healthier
An unusual social experiment is underway in Albert Lea, Minn., a small city apparently chosen because it’s so typical of the Midwest. Such big names as AARP and United Health Foundation joined forces in January to launch the Blue Zone Vitality Project, a pilot program aiming to add 10,000 years to the lives of Albert Lea residents. The effort is also intended to challenge the ways restaurants serve their communities, with 30 local eateries now taking part in the experiment.
The program is comprehensive, extending to exercise, social interactions, eating habits, even non-tangibles like residents’ self-interest and sense of purpose. Already, the town has added community gardens, walking trails, “walking school buses” (a group-walk to school, led and shepherded by grownups), and “walking moais,” a program that encourages residents to walk in groups and get to know their neighbors.
Indeed, dear readers, I apologize for not noticing such a sweeping program until it’s in the seventh of its 10 chartered months.
The most recent development is what finally snagged my attention. Thirty local restaurants have agreed to meet the stipulations of the Vitality Project pledge, a commitment seen as the businesses’ contribution to making Albert Lea “America’s healthiest home town,” in the words of the promotional literature.
They apparently took the plunge after attending workshops presented on behalf of the Project. The educational sessions reportedly showed the operations how they could bolster the community’s health through relatively painless adjustments, like offering the option of smaller portions, or offering fruit or a salad as an alternative to French fries or chips.
The pledge is more than a pinky shake. The restaurateurs apparently sign a document, solemnly committing themselves to the effort.
But, already, they’re being identified locally as healthier places to eat and responsible members of the community. In short, not all of the carrots are served on a plate.
As pledging supporters, they’ll presumably be active participants in the festivities commencing Sept. 8. That’s the kick-off of a six-week “online experience,” in the words of the Project, that was drafted to teach the fundamentals of living longer. Included will be materials like videos and daily communiqués. Given the involvement of restaurants, dining-out habits may be part of the focus.
It’s interesting to see a community embrace such a novel approach to health. But it’s certainly refreshing to see that commitment rising from Main Street, instead of seeing it imposed on communities by lawmakers and carpetbaggers-cum-consumer advocates.
The program is comprehensive, extending to exercise, social interactions, eating habits, even non-tangibles like residents’ self-interest and sense of purpose. Already, the town has added community gardens, walking trails, “walking school buses” (a group-walk to school, led and shepherded by grownups), and “walking moais,” a program that encourages residents to walk in groups and get to know their neighbors.
Indeed, dear readers, I apologize for not noticing such a sweeping program until it’s in the seventh of its 10 chartered months.
The most recent development is what finally snagged my attention. Thirty local restaurants have agreed to meet the stipulations of the Vitality Project pledge, a commitment seen as the businesses’ contribution to making Albert Lea “America’s healthiest home town,” in the words of the promotional literature.
They apparently took the plunge after attending workshops presented on behalf of the Project. The educational sessions reportedly showed the operations how they could bolster the community’s health through relatively painless adjustments, like offering the option of smaller portions, or offering fruit or a salad as an alternative to French fries or chips.
The pledge is more than a pinky shake. The restaurateurs apparently sign a document, solemnly committing themselves to the effort.
But, already, they’re being identified locally as healthier places to eat and responsible members of the community. In short, not all of the carrots are served on a plate.
As pledging supporters, they’ll presumably be active participants in the festivities commencing Sept. 8. That’s the kick-off of a six-week “online experience,” in the words of the Project, that was drafted to teach the fundamentals of living longer. Included will be materials like videos and daily communiqués. Given the involvement of restaurants, dining-out habits may be part of the focus.
It’s interesting to see a community embrace such a novel approach to health. But it’s certainly refreshing to see that commitment rising from Main Street, instead of seeing it imposed on communities by lawmakers and carpetbaggers-cum-consumer advocates.
Domino's assesses damage from YouTube prank
The infamous YouTube video shot by two Domino’s staffers cut the chain’s comp sales for the first quarter by 1 to 2%, CEO David Brandon explained during the pizza company’s conference call yesterday with analysts. However, the chain was able to collect $2 million from a business-interruption insurance policy, he added.
The clip showed an employee of a franchised unit in North Carolina fouling the ingredients of a sandwich. After being posted on the internet, the spot became a viral hit, spreading quickly and apparently scaring Domino's patrons.
The chain initially waited for the brouhaha to blow over, then realized its mistake and jumped into action. It filmed its own YouTube video, featuring company president Patrick Doyle blasting the two knuckleheads and apologizing for the food-safety lapse. He assured consumers that such shenanigans are not tolerated by the brand.
Brandon noted yesterday that the culprit and his colleague, the woman who held the camera, are being prosecuted.
“If the stupid incident down in North Carolina wouldn't have happened, we'd be here reporting significant traffic uptick,” he told the analysts.
Brandon was asked if the damage might've been more severe than a $2-million drop-off in business. Brandon indicated that the chain wanted to move quickly and put the incident behind it, so apparently didn't dicker over the settlement.
The clip showed an employee of a franchised unit in North Carolina fouling the ingredients of a sandwich. After being posted on the internet, the spot became a viral hit, spreading quickly and apparently scaring Domino's patrons.
The chain initially waited for the brouhaha to blow over, then realized its mistake and jumped into action. It filmed its own YouTube video, featuring company president Patrick Doyle blasting the two knuckleheads and apologizing for the food-safety lapse. He assured consumers that such shenanigans are not tolerated by the brand.
Brandon noted yesterday that the culprit and his colleague, the woman who held the camera, are being prosecuted.
“If the stupid incident down in North Carolina wouldn't have happened, we'd be here reporting significant traffic uptick,” he told the analysts.
Brandon was asked if the damage might've been more severe than a $2-million drop-off in business. Brandon indicated that the chain wanted to move quickly and put the incident behind it, so apparently didn't dicker over the settlement.
Chipotle offers update on value-menu test
Chipotle Mexican Grill said it will maintain the test of its new lower-priced menu items at the current single-market extent, though “we are seeing some encouraging signs,” co-CEO Steve Ells told financial analysts Wednesday. One of the more reassuring finds of the Denver sales trial, he explained, was the effect on check averages: Customers tended to spend the same amount, even though they could trade down to less-expensive options.
Co-tested with those value-oriented selections was a kids’ menu. “We have seen enough demand for our kids menu that we plan to test that part of the menu in all of our Salt Lake City restaurants as well,” Ells said.
CFO John Hartung noted that at least half of Chipotle’s new stores in 2010 will be conversions rather than newly built outlets.
Co-tested with those value-oriented selections was a kids’ menu. “We have seen enough demand for our kids menu that we plan to test that part of the menu in all of our Salt Lake City restaurants as well,” Ells said.
CFO John Hartung noted that at least half of Chipotle’s new stores in 2010 will be conversions rather than newly built outlets.
Monday, July 20, 2009
MIA: Something new
Send out an A.P.B. and snap on the Bat Signal. Some scoundrel has run off with the restaurant industry’s love of innovation. And it looks as if it might be an inside job.
The authorities have their suspicions about the culprits. They’re looking for glassy-eyed numbers fiends who wield machete and scalpel with equal zeal, slashing costs the way hopped-up jungle guides would blaze a trail.
But the real scourges are the accomplices—the CEOs, marketers and ops specialists who know better than to stifle new ideas. Instead of nurturing green shoots, they’re standing by while the bean counters prune anything with an expense. It’d be like a dairy farmer trying to offset a dip in production by feeding the cows less silage.
You can only hope the cut-and-kill mindset will be arrested. Here’re the questions that should be put to the innovation throttlers during the interrogation:
Where are the new concepts? Except for a few upscale riffs on established brands—think The Whopper Bar, Baja Fresh’s new dinner-focused prototype, or Baskin-Robbins’ new cafes—we’ve seen virtually nothing in the way of new restaurant ideas from the chains. That’s an historic shift, especially for casual dining, where the big brands were always scouting the hinterlands for The Next Big Thing.
Everyone agrees that this is an unprecedented time that could forever change the business. Isn’t it foolhardy to think that yesterday’s concepts are going to meet tomorrow’s tastes?
Ironically, we did see a new entrant in the market in early July. Unfortunately, it’s something called Crazy Girls Café, a strip club that also serves food. There’s a novel notion.
Where are the aha! moments? Consider this obvious one: Craft condiments. Soft drinks, a staple of the business, are being reconsidered as the public shifts to options promising more uniqueness, character and quality. Smaller, highly crafted brands are gaining favor.
The same dynamic holds true in the beer business. Would any new restaurant not offer a craft brew today, if not a beer that can only be purchased there?
So why not ketchups and mustards? Why aren’t we seeing the proliferation of high-craft selections with different flavors and consistencies? There’s a burger boom underway. Why not a ketchup craze?
For a glimpse of what might have been, look at the barbecue-sauce and marinade sections of your local grocery. There are more options than what you’ll find in the salad dressing aisle.
The exception that underscores the non-trend is Ketchup, the multi-outlet concept of The Dolce Group in California. The restaurant features five house-made ketchups to accompany its heavily local menu of comfort foods with contemporary twists.
Where’s the urgency in casual dining to come up with something new? The innovations of the last two years could be summed up as sliders, $9.95 filets, micro-brews, mini-desserts and better full-sized burgers. Whoa.
Why isn’t the sector at least staying current with the trends? For instance, other than Seasons 52, is any concept addressing the fresh and local trend? Organics? Or even green? Name one chain that’s as active as the fast-feeders are in greening their facilities.
Clearly the economic climate is taking its toll, stifling creativity that could distinguish an operation. But the real lost opportunity may not be evident until conditions improve. By that time, many established brands are going to regret that they weren’t trying yesterday to come up with what’ll fly tomorrow.
The authorities have their suspicions about the culprits. They’re looking for glassy-eyed numbers fiends who wield machete and scalpel with equal zeal, slashing costs the way hopped-up jungle guides would blaze a trail.
But the real scourges are the accomplices—the CEOs, marketers and ops specialists who know better than to stifle new ideas. Instead of nurturing green shoots, they’re standing by while the bean counters prune anything with an expense. It’d be like a dairy farmer trying to offset a dip in production by feeding the cows less silage.
You can only hope the cut-and-kill mindset will be arrested. Here’re the questions that should be put to the innovation throttlers during the interrogation:
Where are the new concepts? Except for a few upscale riffs on established brands—think The Whopper Bar, Baja Fresh’s new dinner-focused prototype, or Baskin-Robbins’ new cafes—we’ve seen virtually nothing in the way of new restaurant ideas from the chains. That’s an historic shift, especially for casual dining, where the big brands were always scouting the hinterlands for The Next Big Thing.
Everyone agrees that this is an unprecedented time that could forever change the business. Isn’t it foolhardy to think that yesterday’s concepts are going to meet tomorrow’s tastes?
Ironically, we did see a new entrant in the market in early July. Unfortunately, it’s something called Crazy Girls Café, a strip club that also serves food. There’s a novel notion.
Where are the aha! moments? Consider this obvious one: Craft condiments. Soft drinks, a staple of the business, are being reconsidered as the public shifts to options promising more uniqueness, character and quality. Smaller, highly crafted brands are gaining favor.
The same dynamic holds true in the beer business. Would any new restaurant not offer a craft brew today, if not a beer that can only be purchased there?
So why not ketchups and mustards? Why aren’t we seeing the proliferation of high-craft selections with different flavors and consistencies? There’s a burger boom underway. Why not a ketchup craze?
For a glimpse of what might have been, look at the barbecue-sauce and marinade sections of your local grocery. There are more options than what you’ll find in the salad dressing aisle.
The exception that underscores the non-trend is Ketchup, the multi-outlet concept of The Dolce Group in California. The restaurant features five house-made ketchups to accompany its heavily local menu of comfort foods with contemporary twists.
Where’s the urgency in casual dining to come up with something new? The innovations of the last two years could be summed up as sliders, $9.95 filets, micro-brews, mini-desserts and better full-sized burgers. Whoa.
Why isn’t the sector at least staying current with the trends? For instance, other than Seasons 52, is any concept addressing the fresh and local trend? Organics? Or even green? Name one chain that’s as active as the fast-feeders are in greening their facilities.
Clearly the economic climate is taking its toll, stifling creativity that could distinguish an operation. But the real lost opportunity may not be evident until conditions improve. By that time, many established brands are going to regret that they weren’t trying yesterday to come up with what’ll fly tomorrow.
Tuesday, July 14, 2009
A duel with teensy-weensy swords
Hi, my name is Peter, and I’m a sample-holic.
(This is where you yell back, “HI, PETER!”)
I never thought I’d end up this way. One day a matron in a hairnet is spraying cheese on Triscuits and offering a taste in the dairy aisle. The next thing I know, I’m cut off at Costco’s perogi and turkey-sausage stations. The kid at the deli won’t even listen to my plaintive, “Is the bologna better than the ham? Could I try a slice of each?”
But there’s no shortage of freebies to be had. Supermarkets will probably be setting up carving stations soon, or allowing you to order samples ahead of time by fax. And we’re practically being pelted with free menu items—the whole damned things—by the big fast-food chains.
Which is why I’m speaking out to you casual dining specialists, before it’s too late. Get yourself a box of those toothpicks that look like little swords and start cubing your sliders, $9.95 sirloins and other center-of-the-plate additions.
It’s no secret that other food channels are eating your lunch. Supermarkets and the quick-service horde are both offering meal choices close to your league in quality—if not squarely in it. The way they whet an interest is by sampling, a concept you’ve virtually left alone because you're not willing to swallow the bump in food costs as a marketing investment.
Meanwhile, you’re adding items with cutesy names and suspect heritage, like Cheeseburger Pizzas or Mediterranean Egg Rolls . They sound like something you’d find on a c-store rack next to the Ho-Ho’s, Sour Cream & Maple Waffle Chips, and Hawaiian Pork Rinds. In short, abominations that were invented by chemists and processors, not discovered on the tables of some mountain town that had passed down the dish through umpteenth generations. They sound contrived, fake and definitely lacking in integrity. And that perceived artificiality of your menu is a big part of the problem.
Your hope is winning patrons with the taste of what you’re developing. The way to do that is with sampling.
I know firsthand that it’s an effective sales technique. When my wife sees 10 or 15 samples of the same item stacked in my shopping cart, she’ll often buy the product without trying it herself.
But I’m not sure if she sees me as a one-man focus group, or if she’s motivated by pure guilt.
(This is where you yell back, “HI, PETER!”)
I never thought I’d end up this way. One day a matron in a hairnet is spraying cheese on Triscuits and offering a taste in the dairy aisle. The next thing I know, I’m cut off at Costco’s perogi and turkey-sausage stations. The kid at the deli won’t even listen to my plaintive, “Is the bologna better than the ham? Could I try a slice of each?”
But there’s no shortage of freebies to be had. Supermarkets will probably be setting up carving stations soon, or allowing you to order samples ahead of time by fax. And we’re practically being pelted with free menu items—the whole damned things—by the big fast-food chains.
Which is why I’m speaking out to you casual dining specialists, before it’s too late. Get yourself a box of those toothpicks that look like little swords and start cubing your sliders, $9.95 sirloins and other center-of-the-plate additions.
It’s no secret that other food channels are eating your lunch. Supermarkets and the quick-service horde are both offering meal choices close to your league in quality—if not squarely in it. The way they whet an interest is by sampling, a concept you’ve virtually left alone because you're not willing to swallow the bump in food costs as a marketing investment.
Meanwhile, you’re adding items with cutesy names and suspect heritage, like Cheeseburger Pizzas or Mediterranean Egg Rolls . They sound like something you’d find on a c-store rack next to the Ho-Ho’s, Sour Cream & Maple Waffle Chips, and Hawaiian Pork Rinds. In short, abominations that were invented by chemists and processors, not discovered on the tables of some mountain town that had passed down the dish through umpteenth generations. They sound contrived, fake and definitely lacking in integrity. And that perceived artificiality of your menu is a big part of the problem.
Your hope is winning patrons with the taste of what you’re developing. The way to do that is with sampling.
I know firsthand that it’s an effective sales technique. When my wife sees 10 or 15 samples of the same item stacked in my shopping cart, she’ll often buy the product without trying it herself.
But I’m not sure if she sees me as a one-man focus group, or if she’s motivated by pure guilt.
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