The dough must go on

Domino's is distributing this photo as proof that it's living up to an internal motto, "First to open, last to close." Its supply trucks kept rolling during the heart of the midwestern snow storms, says headquarters, which supplied the snapshot from Bartlesville, Okla., as proof.

Snapshot from southern Cal

Restaurant veteran John A. Gordon was kind enough to pass along what he saw and heard at the recent ICR XChange Conference, a powwow in southern California for restaurant companies and investors specializing in the field. The meeting is different from most financial conferences because the presenters include private companies as well as public ones. In this case, that meant a peek inside such interesting up-and-comers as Le Pain Quotidien, a bakery-café concept, and Ignite Restaurant Group, the multi-concept parent of Brick House Tavern + Tap and Joe’s Crab Shack.

Gordon proved to be as astute in observing as he is in analyzing restaurants’ financial situations, a skill that has made him a popular source for those of us who write about the industry. He passed along these insights from the conference:

The mood of the conference was upbeat, with most of the presenters citing positive sales trends. Generally, they indicated that traffic is still weak, but the damage is being tempered by rising guest tabs.

Smashburger drew the most probing by the investors in attendance, despite the concerns voiced by some that the “better burger” segment may be overcrowded.

One extreme down note: Participant Steve West asserted that casual dining traffic will never rebound to pre-Great Recession levels, a result of the shakeout being too anemic.

Domino’s CEO Patrick Doyle noted that many of the chain’s franchisees are unable to grow because of a funding drought. The stores aren’t throwing off sufficient cash flow to justify a rubber-stamped loan, and banks are reluctant to touch any franchisee except the larger ones with whom they’ve done business over a long stretch.

A Sonic executive offered the hindsight that the drive-in chain should have included fewer items on its dollar menu, and promoted them in a more nuanced fashion. The budget line translated in some patrons’ minds into diminished quality.

Chipotle and BJ’s Restaurants, two of the industry’s high achievers, cited a lack of desirable real estate sites and a shallow pool of labor talent as curbs on growth. Others cited rising gasoline prices and escalating food costs.

Texas Road House, Chipotle and Krispy Kreme all cited an effort to shrink their back-of-the-house areas, part of an overall effort to reduce the footprint of new units.

My thanks to John, a principal in Pacific Management Consulting Group, for passing along his observations. You can get more of his food from thought at John's blog,

Domino's spotlights a farm connection

Who’d have thought Domino’s would jump ahead of the big-chain pack in embracing the local-agriculture aspect of sustainability?

Cheese from Wisconsin is hardly local when it tops a pizza sold by a Domino’s in Alabama, California or Massachusetts. Still, the delivery giant is breaking new ground with the just-introduced Wisconsin 6 Cheese pie and the commercial supporting it.

At the very least, the Michigan-based chain is specifying where a main ingredient was sourced. That’s a marked departure from the usual chain pronouncement that Ingredient X is wholesome, fresh and delicious. In this day and age, those bromides are taken to mean the item is factory-produced, unnaturally consistent and perfect-looking, and muted sufficiently in taste to displease no one.

Domino’s is promising that the cheese on the new pie actually comes from farms, and it’ll even tell you where they are. There’s an implied direct connection between the multinational chain and the mom-and-pop dairy producers of farmland America.

Indeed, the commercial suggests that Domino’s isn’t ashamed of anything it puts on the pies, and is willing to specify where each component was produced.

Perhaps more important, the franchisor has pledged to start a website, “Behind the Pizza,” where consumers can meet the farmers who produce 10 of the ingredients that go into Domino’s products. Visitors will learn about the trip from farm row to delivery box.

Sure, there’s some hype to the promotion. The Associated Press has reported that not all the cheese used on the new Wisconsin pie is actually from that state. And a buyer from Domino’s isn’t toodling down a dirt road in his dirt-caked pick-up, buying a block of cheddar or mozzarella from a guy in overalls named Clem.

Truth be told, the buy-local/sustainability movement is a multi-layered phenomenon. Ideally it’s serving what was produced a turnip’s throw away from the restaurant and picked that morning. If that’s not feasible, the next best thing is serving something seasonal and fresh, regardless of where it’s from. And if that’s not do-able, it’s providing food with a narrative of where it came from and how it got there.

At least Domino’s is addressing the mega-trend of the moment.
We’re in the midst of a cultural revolution that’s reshaping the way America eats—and lives. The shift to local foods holds profound implications for parties ranging from the local café to grade schools, parents, banquet managers, community planners, even residential developers.

It’s nice to see that chain restaurants aren’t sitting apart, idly watching truckloads of farm-fresh produce roll past.

How long to revise a menu?

How much time should a chain need to develop new menu items? David Brandon, the outgoing CEO of Domino’s Pizza, disclosed this week how the pizza giant’s R&D expectations have changed dramatically as a result of a home-office reorientation.

When Brandon was recruited to remake the concept’s culture some 12 years ago, the lag time between idea and rollout typically ran 18 months. It was a prime example, he stressed, of the “analysis paralysis” that had cost the chain its alacrity during a time of significant change in the pizza market.

“By the time we had something ready, our competition had often beaten us to market,” he explained at the Restaurant Leadership Conference earlier this week in Scottsdale, Ariz.

Brandon, who recently vacated Domino’s corner office to become athletic director at the University of Michigan, took a pizza cutter to the bureaucracy and inertia. He also overhauled much of the management team, apparently to make the whole operation more responsive to shifts in consumer preferences.

Today, says Brandon, the chain’s R&D operations can have a product on the menu no longer than 90 days after the notion was floated.

Brandon just surrendered the CEO’s title to Patrick Doyle, his longtime lieutenant. He remains Domino’s chairman of the board.

The cutting edge of marketing?

You can sense the pressure on restaurant chains to develop new and preferably inexpensive ways to market themselves, particularly their latest menu choices. The last few days brought a few results worth noting, though for decidedly different reasons. For instance, interrupting consumers’ vacations is at best a risky endeavor. Some might say foolhardy.

Yet that’s exactly what Domino’s did in a stunt to publicize its new Chocolate Lava Crunch Cake dessert. When people think about lava, what comes to mind? Volcanoes, of course. So the pizza delivery chain figured it’d blitz North America’s most famous volcano, the postcard-perfect Mt. St. Helens in Washington State, with a product giveaway.

Because there isn’t a Domino’s in the ultra-green area, the chain hired a helicopter yesterday to swoop in with 1,000 of the new desserts. The surprise delivery was aimed at the unsuspecting tourists “as they enjoyed breathtaking views of Mount St. Helens,” Domino’s announcement explained.

The statement noted that consumers were given a heads-up via Twitter and Facebook. Which, of course, all the visitors were checking as they gazed upon one of the most stunning natural sites in the United States.

Domino’s hailed the event as a huge success. But you have to wonder how a family would react as their reverie in staring at the volcano was interrupted by a 40-decibel fast-food delivery. I'm going to go out on a limb here and suggest the stunt was likely a surprise to the sightseers, and probably not a happy one.

Less controversial are the new marketing programs announced by California Pizza Kitchen last week to its investors. Co-CEO Rick Rosenfield explained that the chain has launched what one financial analyst characterized as a VIP card for CPK fans. The new Adventure Card entitles the bearer to a 20% discount on new products introduced by the chain through Sept. 15. The offer is being supported by a new ad campaign.

That’s hardly a measure that could put vacations at risk. But you have to wonder if it plays into the pratfall of all discounts aimed at fans of a concept: Are you truly drawing additional visits and transactions from loyal followers, or are you merely cutting the take from a sale you would’ve made anyway?

Rosenfield also mentioned a new “business-to-business” campaign. He didn’t explain the program, but the context suggested it may be a telemarketing blitz to boost catering sales.

He did explain that the chain will try an off-premise, centralized call center to boost takeout business, which currently accounts for 14% of CPK’s sales. That test will commence next month, he said.

In discussing the chain’s financial results for the second quarter, CFO/COO Sue Collyns noted that delivery sales tanked for the chain in early July. The chain uses third-party delivery companies to truck its pies to consumers’ homes. The new call-center test is intended to recapture some of that off-premise business, she and Rosenfield indicated in their comments.

Rosenfield cited the company’s determination to reach customers “through all our many touch points.” He didn’t mention any helicopters.

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.

YouTube: Good for the soul?

Catholics use the confessional to ask for forgiveness. Restaurant executives seem to prefer YouTube.   

The latest mea culpa was posted Thursday by KFC, after it infuriated freebie hounds by suspending a much-ballyhooed giveaway of grilled chicken.  “On behalf of all our employees and franchisees, I just wanted to apologize to you. The response to our Kentucky Grilled Chicken has been overwhelming,” chain president Roger Eaton says in the video. “So we can’t redeem your free coupon at this time.”   

Translation: Our chicken was so good that the moochers scarfed up all the samples we were willing to give away. But here’s a raincheck and a promise of a soft drink for your troubles.   

He should’ve studied Domino’s handling of the employee shenanigans at a North Carolina unit to see what a regretful chain executive looks like. Patrick Doyle, the pizza chain’s U.S. president, came across as genuinely sorry and outraged that two knucklehead employees would mess with a restaurant’s food. “It sickens me,” says Doyle. “We sincerely apologize for this incidence…We are taking this incredibly seriously.”   

Let that be a lesson to any chain that’s considering a YouTube apology for lapses like, oh, maybe serving a snake’s head in some broccoli, or selling a Happy Meal with a condom inside.

That’s assuming T.G.I. Friday’s and McDonald’s will turn to the Tube for their make-nice efforts. Several other chains didn't use the video-sharing site to explain their big-time blunders. Instead, Quiznos just let its recent free-subs fiasco reek in public for awhile.  Crain’s Chicago Business quoted an official as charactering the Million Subs Giveaway as a marketing home run despite the fallout with some customers.   

Burger King apologized via more traditional media for its “little Mexican” depiction in a European ad campaign, but it has yet to address parents who are outraged by the chain’s SpongeBob SquarePants commercial for U.S. youngsters.   

Hey, it’s worth 15 minutes and the investment in a Flip video camera. 

McD's own private Domino's

By now, even people with analog television service are likely aware of the shenanigans two Domino's employees pulled last week, tarnishing the image of the the chain (and some say all of foodservice). Now it looks as if McDonald's may have to do some damage control because of a YouTube posting.

The video shows a garbage-strewn interior of a McD's unit in Australia. The camera scans a dining area that's ankle-deep in trash, then pans to a counter where customers are nonetheless still being served. The postings on YouTube (they were still there as of this morning) carry headlines along the lines of, "The Worst McDonald's."

Although the clip was filmed in Australia, it's reportedly getting big play in the United States because it was picked up by The Drudge Report, the popular muckraking (some say scandal-mongering) website.

But it's hardly the only posting on YouTube that casts a fast-food brand in an unfavorable light. Search around enough and you can probably find some bashing of virtually all the quick-service giants.

Two days ago, in the course of reporting unrelated stories, I spoke with a quick-service exec who brought up the Domino's situation. He wondered aloud if chains will now have to come up with a social media code of conduct for their employees. He didn't have to explain how thorny that would be.

But he's undoubtedly correct that the industry has to do something to address the situation. As the New York Times reported yesterday, Domino's initially figured the controversy would fade away if headquarters just ignored the original post and the early fallout. Big mistake.

I wrote to an industry association yesterday, suggesting it take the lead in airing the issue and encouraging chains to hammer out a list of best practices for addressing the situation. I have yet to get a response, which makes me think I may have to peddle the notion elsewhere.

Somehow, someway, the industry has to pool its brainpower to deal with the issue. In the meantime, the doorknob-headed perpetrators are going to continue to act, since they already have their own associations. They're called YouTube and Twitter.

May the Noid befoul them

The disguise shouldn’t affect my typing, though the fur is starting to itch. I had to go incognito the instant I heard about the Domino’s video, and a Chewbacca get-up from the Halloween of ’84 was the only dodge I could find. It was no picnic, people. Twenty-five years will definitely shrink a hair-covered jumpsuit.

But losing circulation is preferable to hearing my knuckleheaded friends spout urban myths about the restaurant business, as they’re prone to do after an industry gross-out like the YouTube posting. Who knows how far they’ll stretch after an ewww of that dimension? In case you missed it, a thirtysomething making sandwiches in a North Carolina unit shoves cheese up his nose and waves the cold cuts under his butt for what I’ll politely call a crop-dusting. Then the ingredients go back on sandwiches.

The escapade was caught for posterity by a uniformed co-worker of equal vintage, who regards the prank as the biggest knee-slapper since Jerry Lewis was in his prime. With presumed pride, the clip was posted on YouTube, where the wedgie-loving crowd can detect such things the way a starved spaniel can sniff out a chewy.

And who said our younger generations have lost their way?

But back to my friends, who tend to view such outrageous transgressions as validation of their worst restaurant fears. They haven’t had fodder quite this rich since rats were spotted in a halftime dance routine inside a New York Taco Bell two years ago. Now they’ll be absolutely certain that servers would as soon spit on the food as swallow, that restaurant ice harbors more bacteria than a germ-weapons research center, that listed calorie counts are about a tenth of the actual content, and that valet attendants have a non-stop demolition derby underway a few blocks over.

Never mind that the Domino’s vid stars were instantly fired, criminal complaints were later filed, and the pair ultimately gave themselves up to authorities, who charged them with food-tampering. Here's what Domino's had to say about the situation in its follow-up YouTube post:

Yet people are going to look at the shenanigans of two lowlifes employed by a chain in one North Carolina restaurant as symptomatic behavior, not an aberration. And they’re going to tell me all about it as they tsk-tsk my naivete about what happens on the other side of kitchen doors.

So I’d just as soon hide in my modified ape suit and marvel at how much damage two wing nuts can do to the industry’s reputation with so many enablers waiting on the sidelines.

Memo to Domino's: Think AIG, dammit

Domino’s has been hooking its marketing efforts to high-profile developments in Washington, like Obama’s appointment of a cabinet (the pizza chain now has a Secretary of Taste) or the bank bailout (today it launched the Big Taste Bailout, a promotion of $5 pizzas and sandwiches). But it’s squandering an opportunity by not jumping on the obvious take-off: The AIG Bonus Package.

“A deal so good they’ll try to overturn it,” the voice-over would explain. “No matter how badly you’ve screwed up, you deserve a payout for the ages. Now, at Domino’s, a soda’s only $1.65 for the first million served—or until the government stops us.”

Think I’ll send it off to Domino’s CEO David Brandon. There could be a free pizza in this for me.

That kind of a week

Some weeks you might as well use a reporter’s notebook to level wobbly restaurant tables. The industry just isn’t making any news.

This, clearly, is not one of them.

Before Day One was officially two hours old, we already had McDonald’s posting another Ripley’s-caliber financial result (domestic comps rising 5.4% in January, a month regarded by most restaurant-chain execs as a possible violation of the Geneva Convention); Starbucks’ unveiling of new breakfast bargains; Domino’s launch of a new ad campaign that humorously riffs on the economic stimulus package and the formation of a new White House cabinet; and Applebee’s getting hit with bad news that few could have imagined (it's not meeting the thresholds needed to maintain its 90% tax abatement on the office it kept in Kansas after being sold to DineEquity in California).

This is also the week KFC is scheduled to introduce its value menu, which will almost certainly be backed by a huge marketing push.

More definitely to follow. Buckle your seatbelts.

New trend in marketing: Flipping lawyers the bird

Another day, another restaurant commercial that plays off a cease-and-desist letter. This one has Domino’s CEO David Brandon refusing to comply with a directive from lawyers for Subway, whose sandwiches fared poorly in taste comparisons with the pizza chain’s new oven-baked subs. The new spot shows Brandon incinerating the demand that his chain stop airing commercials based on the taste tests. Fittingly, he uses one of the ovens in which the new Domino’s subs are baked.

“This is as much fun as a good, old-fashioned school cafeteria food fight,” Brandon declares in a statement, even though you can sense he’s never tossed a hotdog or flung a dish of Jello in his life. I’d bet his idea of high school hijinks was reading in bad light.

But you have to give him (or his PR person) credit for adding, “I think I did what any red-blooded American always wants to do with a letter from a lawyer: burn it to a crisp.”

Indeed, rebellion against lawyers is very “in” in restaurant marketing right now. Yesterday brought Captain D’s new anti-C-and-D spot, where a spokesman shreds a cease-and-desist communication from counselors for Darden Restaurants, parent of the Red Lobster sit-down seafood chain. Captain D’s has been featuring Lobster patrons in a spot that unfavorably compares the full-service chain’s value to what’s offered at the smaller fast-food operation. The ad, like the new commercial that shows the letter being destroyed, is shot in front of a Red Lobster.

Like Captain D’s, Domino’s is refusing to pull its comparative spots, which assert that consumers preferred its sandwiches 2-to-1 over Subway’s specialties in a taste comparison.

If this keeps up, lawyers are going to start levying a creative-services fee. And then sue if they don't get it.

Subway has not yet publicly responded to the new Domino's commercials, which started airing last night on "American Idol."

Since we last met...

Sorry if I sound a little rusty. Since Nation’s Restaurant News laid me off Tuesday, I’ve not been blogging, at least about the restaurant business (though I have been doodling about my new status at Pink-slipped). I figured I’d clear some of the cobwebs by offering a few observations about the industry’s week that was:

Pretty soon T.G.I. Friday’s is going to start giving away living room sets with every meal you order. The casual chain’s frequent-guest program, Give Me More Stripes, started out with the usual bonuses for heavy traffic. Then it tried to sweeten the deal by throwing a free helping of chips and dip into the mix. Now the sector’s granddaddy is adding the whipped cream of a free dessert to any card carrier who visits a unit next weekend and buys an entree. I’m holding out for a steak-knives offer.

Taco Bell president Greg Creed has cajones bellgrande. First the chain proves it’s a badass by dissing 50 Cent. Last summer it suggested the mega-star reprise a Chihuahua’s role by serving as an unlikely pitchman for the Bell. Change your name to 79 Cent, 89 Cent or 99 Cent, the home office publicly offered, and we might be able to come through with bling-bling—a $10,000 payment to the charity of your choice [Thugs Without Bullets, perhaps? Teeth Grills for the Disadvantaged?). The proposal was put forth just as Taco Bell was rolling out a new value menu, an event that may not have snagged much publicity on its own. But Taco Bell tweaking a nasty mother like 50 Cent? Big news, dog.

50 Cent, the only rapper whose music I refuse to let my wife play when I’m in the car, responded with a lawsuit. He may try hard (and convincingly) to come off as a gangsta in the hood, but he’s a brilliant businessman who’s not going to let his name be used gratis as part of a publicity ploy.

Taco Bell should’ve been grateful that the response wasn’t a drive-by. But instead of dropping the matter, it filed a blistering defense that accused the Gangsta Formerly Known as Curtis James Jackson III of not being able to take a joke.

Indeed, the Sept. 19 court filing, brought to light yesterday by the gossip site TMZ was one big bitch-slap (Fast Company called it “counter-blathering.”) Taco Bell alleged in its filed response that 50 Cent nee Jackson “has a well-publicized track record of making threats, starting feuds and filing lawsuits,” and that his suit was merely an attempt to “burnish his gangsta rapper persona.”

“Instead of responding to Taco Bell's sincere offer in the friendly and humorous spirit in which it was issued,” the suit reads, “Jackson launched an aggressive, offensive attack on Taco Bell in the press. In a heavily publicized sound bite, Jackson threatened legal action against Taco Bell stating, "When my legal team is finished with them, Taco Bell is going to have a new
corporate slogan: 'We messed with the bull and got the horns.'"

The filing—technically an “affirmative defense”--disputes or denies each on of 50 Cents’ assertions in turn. It then asks the court hearing the action to dismiss it and make the the rapper pay Taco Bell’s legal fees.

A heads up to Creed: Remember Tupac, my man.

Just think ‘pizza’ and your delivery order will be placed. Maybe we’re not there yet, but the major delivery chains are certainly inching closer to that Isaac Asimov-ian vision. Domino’s, a leader in online ordering, added the option last week of letting TiVo users put in for a pie via the set-top box. Papa John’s announced that it would try to protect IM fanatics from malnutrition by allowing them to buy a delivered pizza without leaving Facebook, an option that Pizza Hut started added in mid-Oct.

So, let us review. Want to order a pizza? You can now do it via your phone (cell or landline), computer, Facebook account, TiVo, video game, or text-messaging capability.

My money’s on Pizza Hut as the first to accept brainwave orders. The chain should just hope it doesn’t intercept any that were beamed by 50 Cent at its sister brand.