NYC ban plan makes restaurants gulp

The franchisees of fast-food restaurants in New York City are about to be hit with a sales killer they couldn’t have imagined two months ago. In case you haven’t heard, City Hall has decided to prohibit restaurants from selling sugared soft drinks in servings larger than 16 ounces.

If the Board of Health rubber-stamps the directive from Mayor Michael Bloomberg, as it’s universally expected to do, big drinks could be outlawed before the second quarter of next year.

That means no more one-liter bottles in coolers, no more promotions of 20-ounce fountain drinks, and no more upsizing of packaged meals.

Most worrisome, for restaurants everywhere, is what happens next. Will large-sized French fries be outlawed? How about providing more than two sugars for a coffee or tea?

And, remember, this is the city that pioneered menu labeling, transfat bans, a smoking restrictions even in bars. The health measures we hammer out tend to roll across the nation.

Not that the proposed big-drink ban would apply to all foodservice places, even within the city itself. Convenience stores are exempt. Bloomberg said that street carts would be covered, along with movie theaters, but didn’t say if food trucks would be obliged to follow the rules.

In fairness: The regulation would exempt diet drinks and, strangely, given the anti-obesity intention of the proposal, milk shakes. So restaurants could hopefully redirect customers to sizes of sugar-free drinks that would still yield the accustomed margins.  But that’s if customers make the switch.

It could be particularly difficult to keep a beverage sale for takeout orders. If you’re a customer who prefers regular Coke, and you can’t get a 20-ounce bottle from the sandwich shop where you buy lunch, why not pop into the 7-Eleven and grab one?

So why would franchisees be hurt more than, say, McDonald’s Corp.? Well, royalties paid to the home office could indeed be trimmed. But franchisees would really feel the profit loss. They’d be on the front line, both in feeling the sales impact and in having to deal with the city’s enforcement efforts.

Keep in mind that this is New York City, a place notorious for its business-management challenges. So most chains seek out local franchisees who can navigate a grossly irrational marketplace. Chances are high that the local outlets of national brands are franchised.

Just a guess, but many of those franchisees are going to start thinking that Nassau or Westchester Counties’ real estate prices don’t look so bad after all. 

Restaurant news for '50 Shades' fans

Stuck on a particular scene in “50 Shades of Grey”?  Too bad, because you likely missed the real-life caning of several naughty restaurants. But there was nothing salacious about it.

Consider, for instance, the public whipping that Domino’s drew, with good reason, for advertising a new pizza crust as gluten-free. In truth, the chain admits, the dough could pick up traces of gluten since the pies are made on the same surface where conventional pizzas are prepared. Domino’s warns customers on its website that the danger of cross-contamination makes the pies suitable for persons with mild gluten sensitivity; anyone else with a gluten issue “should exercise judgment in consuming this pizza.”

There are clamps for punishing gambits like that.

At least Los Angeles’ Clifton Cafeteria didn’t stand to gain from its errant ways. Indeed, failing to turn off a light for 77 years probably cost the landmark restaurant in the neighborhood of $17,000. And no one could even see the light because the neon fixture was hidden behind a room divider. So, apparently, was the on/off switch, because no one flicked it in all that time

A crew employed by the host building’s new owner, Andrew Meiran, found the artsy neon light in a bathroom-turned-storage-area. Barring any power disruption, the neon had been burning since the second Roosevelt Administration.

Fortunately for the industry, those errors were tempered by strong reasons to give the business an attaboy. For instance, Darden Restaurants restructured its sizable corporate staff, a makeover that affected 75 positions. Efficiency was the stated reason. Yet only three positions were eliminated. In an era of buzz-saw corporate cuts, that’s worth a hurrah.

Ditto for the news that restaurants will hire 450,000 people for the summer crunch, a 1.3% hike over the seasonal employment levels of a year ago. Instead of killing time at the beach, fanning themselves while reading a borrowed copy of “50 Shades,” a significantly increased number of young people will be earning a paycheck and fueling economic growth. Three cheers for that.

Okay, now get back to the book. You won’t believe Chapter 7.

Red Robin plays personnel hawk

There’s no confirmation that Red Robin hired a special forces team to pull off today’s stunning raid, but the evidence speaks for itself: In one big swoosh, the full-service burger chain stole a new culinary chief from Cheesecake Factory, a better-foods specialist from Chipotle, and a new master mixologist from T.G.I. Friday’s.

If the chain had landed Sir Paul McCartney as its new musical director, the sweep would’ve been complete.  

But, ob-la-di, ob-la-da. Instead, Red Robin ended up with a kitchen R&D staff of New York Yankees star power.

Already on the roster were two well-known figures in the R&D world: Scott   Schooler, a 25-year veteran  of the chain, who continues as vice president of food and beverage; and Dave Woolley, executive chef.

Bolstering the team are Scott Weaver, director of culinary and previously executive manager of culinary operations for The Cheesecake Factory; Laurie Scanlin, director of R&D, formerly manager of nutrition and food improvement for Chipotle; and Donna Ruch, master mixologist, who came to the post after heading Friday’s food and beverage innovation team.

There have been some high-profile executive changes in recent months, including the appointment of new CEOs for Wendy’s, McDonald’s, Baja Fresh and even Aramark, the contract-feeding giant where Joe Neubauer occupied the corner office for 29 years. The remake of Red Robin’s menu development team may be the biggest jaw-dropper of all.

Best (and Not So Best) of the NRA Show

Here is my highly opinionated, completely idiosyncratic handicapping of experiences from the National Restaurant Association Show in Chicago. The candidates for inclusion where limited to what I saw and did, so there could be some stellar omissions. If one galls you, please let me know via e-mail, promeo@cspnet.com.

Hottest trend evident at the show: Interest in catering, from operators of all shapes and sizes. Look for food trucks to plow into that market in a big way. Ditto for casual-dining chains. Packaging exhibitors played to the interest, as did newcomers like Nissan, which exhibited trucks, and software firms.

Best unsubstantiated rumor of the show: McDonald’s is among the chains considering a big push into catering.

Best party idea: The made-on-the-spot flipbook at the Marlin Breakfast. Attendees were invited to step over to a mock kitchen where they could pretend to be whipping up a dish. For seven seconds they were videoed, and the movie was turned into a flipbook that attendees could take with them.

Most adorable mascot at the show: The Land O’ Lakes gal who directed people to its breakfast event. Honorable mention: Spuddy Buddy, the cuddly, perennial favorite from the Idaho Potato Commission. The Spud-ster had to compete for attention this year with the giant potato on display at Idahoan Foods’ booth. But he’ll still get our hugs.

Outstanding maverick at a podium: Jimmy John Liautaud, who spoke with refreshing candor about how he operates his fast-growing Jimmy John’s chain. His stories ranged from telling a major potato chip manufacturer to fuck off, to selling unattractive deli ends late at night to heavy drinkers because, hey, “it’s not going to stay in their stomachs long in any case.” Other pearls he offered to illustrate his management style: “I am the master of toilet-bowl cleaning, baby,” and “I don’t have any education. I have to do what works.”

Best wine array at a show party: The spread at the International Corporate Chefs Association’s annual fete, which could’ve doubled as a top-drawer, big-ticket tasting. When they’re pouring Veuve Clicquot, pull up a glass. And don’t miss the crab claws, either.

Best cocktail: The pineapple margaritas at the Noble Color Party. So juicy you could have one for breakfast. Just a thought.

Best setting for a party: The rooftop bar at Zed 451.

Best dressed executive on the show floor: David Groll of McAlister’s. GQ needs to know about this guy. Even when he’s wearing chef’s whites he could pass for Thurston Howell III. Honorable mention: The Dot-It guy in royal-blue-checked pants. Clowns would look at that outfit and mutter, “Dude is stylin’!”

Bitterest pill to swallow: The NRA closing its board meeting to the press. Attending the general session, where each committee reports its doings to the board as a whole, was an invaluable way to keep apprised of the Association’s initiatives and challenges. Informing the industry about the activities of its largest and most important advocate was a point of pride, and my schedule was always built around the Sunday morning meeting. Why the secrecy now? After all, we’re members. Honorable mention: No longer being able to swipe a cup of Diet Coke of a counter as you’re dashing off to a booth. Samples are now dispensed through the Freestyle machines. The lines move quickly, and you have a far greater choice. But you do have to stop long enough to press the buttons. Second honorable mention: Nathan’s no longer providing a whole hot dog as a sample.

Most poignant moments: Hearing first-hand accounts of how our industry is providing veterans from the last two wars with the means to start a second career when they re-enter civilian life.  During a session on recruiting vets as restaurant franchisees, one audience member explained that she was looking to enter the private sector of the business after 25 years of feeding fellow Marines. A former Air Force mechanic described how he’s started a coffee company. And a mother of two service people noted how she was there for more than just an opportunity to cover the session for one of the industry publications. 

Best change evident at this year’s show: The casualization. Good-bye neck ties and dresses, hello comfortable yet casual business attire. Bonus trivia point: This is the first of my 32 NRA shows where I didn’t have to wear a suit, or even a tie.

Next year, shoeless!

Wendy's sandwich flub

One of the first products launched by Wendy’s after CEO Emil Brolick took the helm was the W cheeseburger, a new sort of draw for the big burger brands. As Brolick explained right before the December launch, the W packed 4.5 ounces of beef at a price of just $2.99—significantly below the $3.50 price of the chain’s Dave’s Hot ‘N Juicy, but with better margins than the sandwiches on Wendy’s 99-cent menu. The chain was betting that a mid-tier burger would convince bargain-hunters accustomed to paying a dollar to trade up for a different sort of steal.

But the gambit backfired, Wendy’s execs acknowledged today. “While the goal of the W was to drive trade up from the 99-cent price value products, it turned out that we saw the opposite effect, causing trade down from our premium hamburgers,” CFO Stephen Hare told investors.

The chain tried to temper the impact by raising the price of the W to $3.19 in March, Hare explained, “it did not achieve the desired results.”

Financial analysts figuratively scratched their heads when they heard the news. As Hare observed, the W contained 4.5 ounces of beef, compared with a 4-ounce patty for the Dave’s. Twelve percent more meat at a 15% lower price. Hmmm. Why, exactly, did they think the Dave’s drawing power would hold?

Asked Mitchell Speiser from Buckingham Research Group, “Just the fact that it has more beef than the more premium sandwiches, can you just give us a sense of what the strategy was behind pricing it lower even though it has more beef in the sandwich?”

“We recognized that this was not the right thought process and this was the thought process that was in place,” responded Brolick.

Indeed, he continued, the impact of the trade-down was amplified if you looked at the average checks. W buyers bought fries and a soda less often that the purchasers of a Dave’s.

Hare noted that the W would no longer be promoted. No one sounded very surprised.

Full-moon developments at the NRA Show

Attention, Ripley’s Believe It Or Not: Here are a few tidbits from the NRA Show that easily bests the banjo-playing cow with two heads.

--The restaurant industry suspended its rabid pro-Republicanism to hoot and cheer for a Democratic keynoter—and a promoter of President Obama’s healthcare bill at that. Would-be attendees were turned away because of the crowd that had turned out hours ahead of time for the 1 p.m. speech by former President Bill Clinton.

--Attendees also had to be turned away from a seminar on the fast-casual sector, even though it overlapped Clinton’s presentation. The hotbed of innovation and growth more than held its own against the draw of a former president.

--Size does matter when it comes to booth attractions. One of the must-see stops on the exhibit floor was the giant potato showcased by Idahoan Foods. Attendees were stumbling over one another to have their pictures taken with the mega-tuber, which was the size of a semi-hauler’s trailer. Marveled RB editor Sam Smith: “That is the second largest potato I have ever seen.”

--Seemingly less T&A was used this year by exhibitors to pull operators into booths. Alcohol, on the other hand, appeared to be employed more often as a draw. For instance, a small booth on the 100 aisle was drawing a sizeable crowd with samples of a “scientifically enhanced” beer. An education session on bar trends drew a standing-room only crowd, prompting one presenter to observe that the offer of a free Bloody Mary probably didn’t dampen turout. And then there was The Tilted Kilt chain, which featured both free beer and buxom young women at its booth. Or so a friend told me.

--The fashion accessory of the show had to be the bright green shoulder bags emblazoned with the logo of F.O.H. The bags were given out at all access points to the show, and rare was the attendee who didn’t have one draped over his or her shoulder.

--The show floor also abounded in trucks, but not necessary food trucks. Commercial rigs are apparently the new big breasts, because plenty of exhibitors featured an eye-catching buggy as a customer draw. They ranged from the vintage farm truck at Farmer Bros., to an array of catering and general-hauling vans at a Nissan booth, to several distribution-sized trucks parked in several booths. It’s as if the exhibitors said, “Aw, screw it” after failing to find a parking space outside McCormick Place.

--My personal bizarre moment: When someone ran up to a group of us and implored, “There’s a 12-year-old chef about to start a cooking demo. Come see her! Come see her! Hurry” I felt like Lassie, and Timmy had just fallen down the well again.

Buzz at NRA: Where are the leaders?

If anyone at the NRA show can spare a necklace of garlic, preferably size large, please e-mail me. I feel an acute need for protection against blood-sucking evil after engaging in so many conversations last night about private equity stealing the industry’s soul.

The discussions were triggered during the conference’s opening round of cocktail parties by mentions of industry leadership and how it’s changing. In 32 years of attending the show, I can’t recall that topic ever arising. Yet if there was the equivalent of a water-cooler topic on Night One of the show, it had to be the state of the CEO office.

There’s a sense out there that the business no longer abounds in the colorful entrepreneurs who started at the drink or fry station and worked their way up to a private jet and executive assistant. Wistfully mentioned were such bygone examples as Dave Thomas, Joe Lee and, cited more often than anyone, Ray Kroc, the onetime blender salesman.

The consensus: Chain management has become more professional and sophisticated, but we’ve lost something unique to the business in the process. There are fewer stars out there with ketchup in their veins.

From there, it was a short hop to bemoaning the short-term dollars-and-cents mentality that many private-equity companies prefer in the management they put atop an acquisition. There’s a conviction, at least among tonight’s revelers, that those leaders tend to think flatly of tomorrow’s financial returns, not next year’s or the next decade's. It’s like squeezing as much milk from the cow as you can today, even if it that leaves the animal dry tomorrow.

The most critical observers wondered aloud about the longterm implications for the business. What they didn’t mention was how few of those financial hard-noses were attending the show to learn about the business and how best to manage their charge. 

Random observations: Burn appears to be the new hot ingredient in cocktails, judging from the drinks that were moving at last night's events. Habanero and chili peppers flavorings figured large in the drinks I dutifully sampled for research purposes, and fellow researchers observed that they’re finding more of those kicked-up selections whenever they do field work at finer bars and restaurants. 

Shopping for integrity at this year's NRA show

At one of my first NRA conventions, the must-see product was a packet of catsup-flavored crystals that consumers could sprinkle on their fries and burgers like salt. I was expressly forbidden by my then-publisher to ask a well-known cheese advertiser if its DayGlo-orange cheese slices really wouldn’t melt if you left them in a sealed car all day in Florida. A similar gag order was in place when we called on a dairy supplier whose new shake mix was rumored to never lose its thick texture, even if you blow-torched it.

This year, I can grab one of Dunkin’s Artisan Bagels before I board my plane to Chicago. If Domino’s advertises Sunday morning on Headline News, I might be tempted to try one of its Artisan Pizzas that night, while I work on stories in my hotel room. And an Angus quarter-pounder might be a lunch option if I hit the McDonald’s in McCormick Place. Otherwise, I can head out to a nearby Wendy’s and go for one of its new premium burgers, made with “real North American beef.”

The restaurant industry, and restaurant chains most dramatically, has come a long way food-wise in the 32 years since I first pinned on an NRA Show name badge. Once, a new menu item seemed more the result of clever chemistry than culinary creativity. Most menus still abound in factory food, but mad science has given way to far more emphasis on quality, or even food integrity when it can be adapted to a chain kitchen. 

Yesterday I tried McDonald’s newest oatmeal variation, which was packed with plump, obviously fresh blueberries—the sort you’d pick on a weekend in the country and hand-sprinkle onto your cereal the next morning. The seasonal produce movement hasn’t been lost on the king of fast-food.

Then again, all the descriptive press materials alluded to a “hint” of banana. I kept wondering if that was euphemism for using banana flavoring, or maybe pureed banana instead of a sliced fresh one.

The proof of chains’ stride toward better food is the backlash it’s evoked from social commentators. They’ve blasted chains like Dunkin’ and Domino’s for using “artisan” as a descriptor, wondering how a big corporation can truly do something of high art or craft.

Comedian and playwright Lewis Black, for instance, reeled off quip after quip on The Daily Show, wondering aloud if Dunkin’s new Artisan Bagels are made by someone named Donutswitz. He also wondered if Domino’s had somehow mistaken itself for Gordon Ramsay.

A bakery in Queens, NY, an authentic-bagel stronghold, reportedly filed a lawsuit to block Dunkin’ from using “artisan” in the name of its new bagels.

Meanwhile, New York magazine devoted a cover story to the meaninglessness of “artisan” in an age where everything from cheese to fast-food rolls are being touted with that description.

The examples go on and on. A big part of the criticism is the assertion that anything offered by a restaurant chain almost by definition cannot be artisan, since the required volume couldn’t be met through handcrafting.

Unfortunately, those critics are usually correct on that point. But they’re missing the significance. Many consumers aren’t going to hit the farmer’s market to get truly artisan cheese or breads. They may not have the coin to pay for truly chef-made pizza. Chains are their source of indulgence, whether the dressed-all-in-black crowd likes it or finds it amusing. And for those people, chains are clearly providing more quality, at a realistic price.

Yeah, artisan is over- and mis-used. But the important current here is that chain food is getting better and more authentic, albeit more slowly than many sophisticates would like. It’s not a bad thing for  huge swath of the population.

I’m eager to see how exhibitors at the NRA Show are going to hasten the process along. So stay tuned for blogs from the convention, which begins Saturday.

Making sense of a big week

After the restaurant developments of Monday and Tuesday, some gumption had to be mustered to view the news wires this morning. What other jaw-droppers might an intrepid industry-watcher find? If there was any way of tabulating the biggest news week, this might be the topper for 2012. And maybe 2011.

The import has been less about the announcements per se, though they’ve been blockbusters, and more about what they suggest for the future. The purchase of P.F. Chang’s for $1.1 billion, for instance, has already sparked speculation about what chain might next be in the scopes of private equity’s elephant gun. At that level of spending, certainly all the mid-to-big restaurant companies are feasible wall trophies. Are we about to see yet another hunting spree?

Less discussed has been the potential impact for the fast-casual sector. Pei Wei Asian Diner, the Chang’s chain’s little sister, was an early pacesetter in that fast-growing, high-sales sector. But its noodles have wilted as of late.

One component of the rejuvenation effort has been the development of a Pei Wei variation pitted directly against Chipotle Mexican Grill’s new ShopHouse Southeast Asian concept. PE companies have little patience for tests and experiments, and even less for investments with delayed paybacks. If the fast-casual Asian sector heats up, you know Chang’s will likely channel more of its attention and resources to the upstart brand, setting up a dandy brawl with Chipotle.

The same dynamic might come into play at the high end of casual dining, where Darden is claiming considerable ground with Seasons 52. Chang’s has a potential challenger in True Food Kitchen, another upstart that promises freshness, flavor and health.

Meanwhile, private-equity firms aren’t the only shoppers perusing restaurant concepts.  Buffalo Wild Wings, which had ample cash on hand through the Great Recession, has revealed that it might use a bushel or two to buy another brand. The chain has been a model of how a brand should grow and evolve. Might it apply the magic to another contender?

The targets likely won’t be Joe’s Crab Shack or Brick House Tavern. Their parent, Ignite Restaurant Group, has filed for an initial public offering, proving that PE companies or strategic buyers aren’t the only source of capital these days. With Outback going back to the public equity market, there’s no doubt that Wall Street is paying attention to restaurant issues. With Chipotle trading above $400 a share and McDonald’s flirting with $100, how could it not?

Finally, there was the announcement this week of a new president for Yum Brands—ironically the holdout in the changing of the guard at the giant fast-food chains. McDonald’s, Burger King and Wendy’s have all seen a new CEO come or go in recent times. Not so with Yum’s Taco Bell, KFC or Pizza Hut.

Instead, Yum is giving all of them a new boss. You have to wonder how the PE firms are viewing that news.