Sbarros quietly build another Italian chain

The Sbarro family must have tomato sauce running through its veins. Seven years after selling its namesake pizzerias to a private-equity firm, the clan is chain-building again.

Its new Italian growth vehicle is Matteo’s, a small full-service chain in the family’s backyard of Long Island, NY. Full disclosure: As a Long Islander myself, I’ve frequented the Matteo’s outlets for years. It’s good, solid Italian fare, with a menu devoted to the classics. The Sbarros apparently bought a controlling interest in the family-style concept a few years ago from New York’s Sorrentino family.

Now the collaboration has 10 Matteo’s restaurants in operation, including three in Florida. A fourth is under development in Orlando, according to a report today on the website of The Orlando Business Journal.

That story notes that Matteo’s isn’t the Sbarro family’s lone restaurant venture. Years ago the second and third generations diversified into the steakhouse business as co-owners of Rothman’s, Long Island’s version of the Morton’s brand (which, curiously, was headquartered on Long Island at the time—a few blocks from an original Matteo’s), and as operator of the far more casual Boulder Creek Steakhouses. They eventually sold the Boulder Creeks but continued to build Rothman’s outlets.

The first outside of New York will be built in Orlando near the Matteo’s, according to the Business Journal report.

Meanwhile, the largely mall-based Sbarro pizza chain finished 2009 with about 785 units, after shuttering more than 100 because of the downturn in shopping and airport traffic, according to QSR magazine.

News roundup from the long weekend

Holiday cheer…
Mall restaurants should be in a jolly mood after watching retail neighbors host 8.7% more shoppers on Black Friday than they did a year ago, according to the National Retail Federation. Presumably some of those shoppers rested their tired feet while munching a sandwich, salad or slyder. The 212 million bargain hunters went home with wallets lighter by $364.34 on average—$22 more then they typically spent last year on the traditional start of the holiday shopping season. The NRF termed the turnout an “encouraging” sign for the rest of the year.

But a touch of the Grinch
But there’s at least one “bah, humbug!” for restaurants this year. The NRF projects that sales of restaurant gift cards will hold at last year’s depressed levels. The association didn’t cite a reason, but a survey of consumers found a high percentage who believe they can get more for their buck by buying merchandise on sale.

Natural instinct
“Natural” is emerging as the menu descriptor of the moment. Panera Bread Co.’s newest menu item is a chili made with brisket trumpeted as “all-natural.” It’s served with chunks of cornbread on top. The introduction follows Wendy’s rollout of what it’s touting as natural-cut French fries, with the skin left on.

Something fishy to the BK deal?
The Securities Exchange is investigating the $4-billion purchase of Burger King Holdings for evidence of insider trading, according to HuffingtonPost columnist Dan Dorfman. The veteran deal-watcher reported Friday that the SEC and another watchdog group are asking brokerages for information about customers’ purchase of BKH shares prior to the announcement of the takeover by the Brazilian private equity group 3G.

Random scuttlebutt
Nation’s Restaurant News is being sold to Penton Media, the parent of Restaurant Hospitality and Food Management magazines, according to a blog posting on MediaBistro…Jack in the Box should spin off its Qdoba burrito chain to focus on its core business, asserts stock-picker Ryan C. Fuhrmann.

Beans spilled in BK deal?

Financial columnist Dan Dorfman reported yesterday that the $3.4 billion purchase of Burger King is being investigated by the Securities and Exchange Commission and another Wall Street watchdog for possible insider trading.

In a Huffington Post column, the longtime deal-watcher reported that the SEC and the Financial Industry Regulatory Authority have asked brokerages for information about clients’ purchase of BK Holdings stock prior to the announcement of 3G's intention to buy the fast-food brand.

Dorfman did not suggest that 3G, a Brazilian private equity firm, is suspected of any wrong-doing.

Another rough patch for restaurants?

The job to have these days is supplying restaurants with “For sale or rent” signs. The last two months alone would’ve made your year.

The bankruptcy of CB Holdings, parent of the Charlie Brown’s, Office and Bugaboo Creek steakhouse chains, snagged the headlines. But it was hardly the only operator to shutter restaurants (about 32 of its 80 outlets).

A Sonic franchisee in Florida benched the carhops at its 11 stores. Ted’s Montana Grill put nine of its 55 restaurants out to pasture. Jack in the Box shut 40 restaurants.

Recent times have been particularly lethal for landmark one-offs, like 91-year-old Lahiere’s in Princeton, N.J.; 53-year-old Terri’s in Portsmouth, Va.; nearly-40-years-old Stratton’s Dairy Dip in Ashland, City, Tenn.; and Elisha’s in Milford, N.H., a youngster with just three-and-a-half decades of operation.

Add in the bankruptcy of The Glazier Group, operator of the Michael Jordon’s and Strip House steakhouses, and it’s difficult to deny that the shakeout has intensified again.

The question is, how long will that rev-up continue? Is this just a year-end blip, a result of places assessing where they stand for the year and realizing they’re too far in the red?

Or is this an indication the recession could be a double-dipper for many restaurants? Did too many places bet they could ride out the downturn without adjustments, only to learn this is more of a new reality than a temporary departure from the business they knew?

Come January and February, we’ll know for sure.

Reports of Jared's death--well, you know

Mark Twain once quipped that a lie will spread halfway around the world before the truth can get its boots on. With the internet, that’s obviously a gross under-estimation, especially with a hot area of interest like restaurants.

We’ve already heard about the young man who supposedly left a McDonald’s burger in his coat pocket in 1989 and forgot about it. When he discovered it years later, according to the urban legend, the sandwich looked and smelled the same. Intrigued, he bought a bunch of burgers and stored them in his basement, where they failed to decompose during the next 12 years and counting. The assertion: There are more preservative than ground meat in those patties.

I know this because the burger preserver caught his experiences on videotape, including the purchase of the original sandwich back in 1989. You can see it here, in a YouTube posting called The First Bionic Burger.

But that whopper is nothing compared to the myth that one prankster put forth this morning, much to the presumed chagrin of the Subway sandwich chain. According to that carefully cultivated rumor, Jared Fogle, the volunteer spokesman who lost a ton of weight on Subway’s fare, has munched his last footlong, dying last week precisely at 4:43 EST, just a few days short of his 33rd birthday.

The cause: Complications from a gastric bypass in 1998. In other words, he lost weight through a surgical fix, not a diet built on Subway turkey heros.

A website has already been set up to support the fib: http://jaredremembered.com. Visitors can leave their memories, not only in the form of reminiscences, but even poems.

Better check it out before the authorities shut it down. It’s a hoax of superb craftsmanship.

Another leap

A fiftysomething friend confessed yesterday that social media is where he’s watched the rocket pull away. My acquaintance has spent decades in the restaurant industry. But web capabilities are advancing faster than his ability to grasp the implications for the business. “It’s just happening too fast,” he lamented.

Mercifully, he didn’t know the trade was taking another quantum leap while we were munching our fiber-rich breakfasts.

You likely missed it, too, though a significant portion of the consuming public probably is probably aware by now of McDonald’s social-media scavenger hunt, the event it’s staging to introduce a seasonal caramel-mocha coffee. Clues to the whereabouts of 27 oversized McCafe coffee cups—three in each of nine U.S. markets—are delivered to Twitter followers of the brand. The first ones to find the cups win the contests.

A promotion built on social media is still rare in the restaurant business. One taking the form of a scavenger hunt is decidedly novel. But what makes the program revolutionary is the structure on which it’s based.

The restaurant industry is by its nature a local phenomenon. Brands may be national, but consumers interact with branches in their area. They deal with neighborhood businesses.

The chain sector has had a hard time addressing that reality in its use of social media. The chains typically entrust tweets about a brand to a corporate staffer in headquarters, often thousands of miles from some units. How does that tweeter foster a relationship between a far-removed unit and its local customers?

The obvious solution is letting the units do the tweeting. But the possibilities have been too daunting for all but a few foodservice companies. How do you keep thousands of voices singing the same song? And what about franchisees who might have different ideas about products, services or promotions? How do you make sure they’ll even tweet anything?

McDonald’s broke new ground with the scavenger hunt by letting the nine participating regions tweet individually, each with its own Twitter ID. Their messages are tailored to the region.

It’s the bold move that few chains have been willing to take—a national program executed on a regional, almost local basis. It’s the chain equivalent of letting a teenaged son take the car on a Friday night for the first time.

Barring disaster, the move will no doubt convince other systems that they can take the risk. Eventually that risk will be re-evaluated, and a major, more effective use of social media will become part of the marketing mix.

If so, I’ll need to break it to my friend gently. I may have to use sock puppets.

Discounting = heresy?

A week later, the mob has yet to form. But it’s just a matter of time until torch-wielding restaurateurs chase down Walker Smith, the eminent trend reader, for challenging their conviction that the earth is flat.

Indeed, the heretic sledge-hammered a foundation of the industry’s belief system right before the trade’s eyes, at the People Report Best Practices Conference. Frugality is not the default mode of today’s consumers, he thundered. Cheap isn’t the fix they’re craving.

You could almost hear the gasps of everyone in the room with a dollar menu or a you-pick-three deal. I half expected them to bar the doors and shout, “We can’t let this get out. The board will have our hides.”

Yet Smith, a mesmerizing speaker, had the evidence to keep nooses from being tied. This is not a recession where consumer spending was eroded, he asserted. Rather, confidence ebbed as the risk of losing a job or a home grew exponentially.

But marketers would be foolhardy to equate that fear with stinginess, he continued. Look at sales of smart phones and high-tech entertainment equipment. Indeed, Smith predicted that the iPad, the gizmo of the moment, “will quickly replace the PC.”

“The major lesson from this recession,” he told the 250 restaurateurs in attendance, is “risk translates into prioritization. Your job is to get back on their priority list.”

The Number One way to do it, Smith contended, is through innovation. Left unsaid: “…not a price you can’t refuse.”

Second, surprisingly, in the Gospel of Smith: “Do something that helps people control their health.”

And third: Make it something that the buyer enjoys.

I’m sure it was just a coincidence that Smith left the conference as soon as his speech concluded, ostensibly to head out for another engagement.

I swear I could hear a posse being formed.

Playing with an anti-restaurant message

Health advocates blast restaurant chains for using toys to influence kids’ thinking. But it looks as if the industry is being victimized by the same dynamic.

Snap on the TV during Saturday morning cartoons and you’ll likely see a commercial for what promises to be a popular toy this holiday season. It’s called Pop the Pig, and it features a sizeable plastic pig sitting on its haunches, mouth agape. It’s the centerpiece of a game where the players take turns feeding fast-food-style hamburgers into the pig until the belt around its balloon-like belly pops open.

The indirect message is clear: Keep wolfing down those burgers and you’ll burst like an overstuffed pig.

Menu-labeling information is apparently not included.

Another edge to social media

Using Twitter to promote the McRib seemed like a no-brainer for McDonald’s. Before the pork sandwich was reintroduced nationally this week, diehard fans were already relying on the social network as an instant notification system. If one spotted the product on the menu of a local store, tweets and retweets would soon be flying from parties like McRibWatch, McRibSandwich, McRibNews or CatchTheMcRib.

McDonald’s decided to stoke the buzz by using Twitter’s new paid-promotions function. For a fee, the system’s operator will put the payer’s tweets atop the search results for a certain word or phrase, or on the list of the network’s hot topics for the day. Each is marked “Promoted” so Twitter peeps know there’s a commercial aspect to the situation.

McDonald’s is using the function to promote tweets that begin "McRib Is Back." So, when I looked at what topics are showing up most often today in my area’s Twitter traffic, I saw "McRib Is Back" topped the list. So far so good, at least from the chain’s standpoint.

Then I clicked on the link to see what had been tweeted about the topic. Sure, there was a notice from McDonald’s about the roll-out, with a link to learn more about the sandwich's first national availability since 1994.

But that’s about as good as it got for the brand.

“McRib is Voldemort's nickname because Creepy Unicorn Blood Fed Cauldron Baby is too long to say,” asserted a party called RABTweets.

“Now with 23% less rat meat,” declared LMalfoy, as in Lucius Malfoy, one of the villains in the Harry Potter books. For reasons that weren’t clear to me, many of the McRib bashers used the popular wizard tale as a point of reference.

There was a second mention of the sandwich being made with unicorn meat, too.

Worst of all for McDonald’s was the entry from a poster who used the ID Jesus_M_Christ, who likened the sandwich to herpes: “Just when you forget about that mofo....BAM! It's back again.”

On two screens of posts, 17 of the 41 tweets were decidedly negative. Many of the others were a marketers dream, but it’s amazing how a bad shout-out can grab your eyeballs.

Granted, the product could have been slagged with or without McDonald’s use of the Promoted function. But you have to wonder if the "Promoted by McDonald’s" notification put more of an edge on the bashers’ comments.

Those of us in the business would probably laud McDonald’s for trying a new promotional medium. But clearly social media is a whole new ballgame, without any of the guarantees and control that usually come with paying for exposure.

A health check on franchising

The economy may still be a tough slog for restaurateurs, but franchise specialists are betting the recovery is far enough along to nudge veteran operators and newcomers into opening places again.

“It’s starting to ease, yes,” says Russ Umphenour, the quick-service industry who currently serves as CEO and president of Focus Brands. “People are starting to take their heads out of the sand, to look around and say, ‘What’s out there for me to try?’”

Focus, the franchisor of Moe’s Southwest Grill, Schlotzsky’s, Cinnabon and Carvel, has noticed stepped-up interest in particular from professionals who were forced by the times to switch livelihoods.

“A lot of people who have been laid off or who walked away with packages, they’re looking at what they want to do with themselves,” explains Umphenour. After being burned by the corporate world, they’re interested in going into business for themselves. “We’ve gotten our share of those people,” he says.

At the same time, according to Umphenhour, seasoned franchisees have started sniffing around for expansion opportunities after a near-hibernation. “Like everyone else, they were hunkered down and not looking for growth.”

Focus recently armed itself with a new option for both parties: the Auntie Anne’s pretzel concept. It bought rights to the bakery chain a few weeks ago.

About six months earlier, the private-equity firm that owns Focus, Roark Capital, added the WingStop chicken-wings chain to its portfolio. (WingStop operates independently of Focus, as does McAlister’s Deli, another franchisor in Roark’s fold. Indeed, all of the parent company’s holdings are franchisors.)

Roark and its affiliate are hardly alone in expanding their stables of franchise concepts. As Focus was grabbing Auntie Anne’s, the Wayne Gretzky of franchising, Subway CEO Fred DeLuca, was buying rights to the bankrupt Taco Del Mar chain through his little-known second company, Franchise Brands, licensor of Mama DeLuca’s Pizza Now.

Clearly franchisors are betting the classic foodservice development model is about to be refueled. It’s a vote of confidence in the business.

We interrupt this broadcast...

I’ll be straying from Restaurant Reality Check tonight to live-blog the election results for Nation’s Restaurant News. Follow the results and learn what they mean for the restaurant industry by surfing over to www.nrn.com/policy.

And if there’s a race you’d like me to follow for you, just e-mail me at peterjromeo@aol.com.

There's an app for that--or will be soon

A technological revolution is sneaking up on the restaurant industry, and it promises to be a pleasant though dizzying one. Not long ago, the most advanced human resources tools were training materials printed in Spanish as well as English. Tonight at the kick-off cocktail party for People Report’s Best Practices Conference, I learned about products that could truly up-end the way restaurants recruit, train, reward, schedule and even observe their employees. Much of it can be done via smart phone or texting.

That includes a new capability to train a camera on employees, analyze the footage through a sophisticated algorithm, and then send a text alert to the manager if the system detects a situation—a food handler who’s casual about wearing gloves, for instance—that needs to be addressed through training. The set-up apparently recommends what that training should be.

That’s just on the personnel front. I also heard about a sales aid, about to be deployed by a major chain, that enables restaurants to pitch their empty seats to consumers virtually in real time—“come in at 9:30 and the drinks are on us.” That promise has been raised a gazillion times as a blue-sky possibility for the industry. As of tomorrow, it’ll be a real option, actually in place, as it widely is in Europe.

Then there’s the new sales benchmarking service that shows subscriber restaurants how their volumes compare with the intake of their peer group. That’s hardly revolutionary. But this one adds the why’s, based on other collected data, and delivers the information and an analysis quickly to a computer dashboard. The demos are even being given on cell phones, so apparently that capability is either there or in the near future.

Then there’s the start-up that intends to give employees what they’ve earned before payday. If hourly staffers clock shifts on Saturday, Sunday and Tuesday, they wouldn’t have to wait until Friday’s payday to get the money. Technically it’s loaned to them, secured against the wages they’ve already earned. This new supplier handles the process with minimal involvement by the employer.

All of that came from conversations with perhaps a half-dozen people. There were probably other examples to be encountered, but, hey, there was an open bar.

But I heard enough to realize the industry is entering a new technology era, where far more intelligence can be gleaned, far more control can be exercised, and far greater capabilities will be put in the hands of restaurant managers and corporate supervisors, quite literally. It’s heady when you think that some places are still regarding their VHS training tapes as Buck Rogers stuff.