New thinking about role of restaurants

Late on a Wednesday morning, an industry savant treated a roomful of restaurant-chain executives to an explanation of his business philosophy. This is the sort of guy who flies in private jets and has serious need of estate planning, with a $4-billion chain in his charge. Yet here’s the magic Ron Shaich said he’d learned from building Panera Bread: Aim for richer lives and a better society, not bigger profits.

Two weeks later, students at New York’s Institute of Culinary Education were completing their foodservice curriculum with a walk-through of the ventures they hoped to start after graduation. By design, these were formal business plans, presented to a panel of industry vets who gently assessed both the ideas and the appropriateness of the presentation. Of the five students who aired their ideas on the day I served as a greybeard, all but one pledged that their businesses would deliver societal benefits along with dollar-and-cents returns.

A stellar success and a handful of aspirants just starting out: They hail from opposing ends of the experience spectrum, but they share a view of what a restaurant business should be. With that mindset evident at both poles, is there any doubt it’ll seep into the mainstream of the business?

There are ample signs that it’s happening already, as you’ll see in our upcoming issue. And more keep coming. This week, for instance, Chipotle scolded the Food & Drug Administration for its regulatory stance on the use of pesticides on food crops. The one-time McDonald’s holding said point-blank that it wants the agency to take a harder line on processes that boost yields and hence temper food costs. It’s just not good for farm sustainability, the fast-food chain said in a press release.

This is no longer Kumbaya stuff. Chipotle and Panera are big corporations owned by Wall Street. It’s not that they’ve veered left toward the nearest ashram. It’s that a broader, more responsible sensibility is shifting into the business world, restaurants included.

You’ll learn in our May issue about Panera’s embrace of this broader-minded strain of capitalism. But how about the students and their business plans?

Here’s how they’re hoping to meld a social consciousness with an old-fashioned profit motive:

Katy Severson, who drove around the country before culinary school to learn regional cuisines firsthand, wants to open a gastropub, The Mayflower, where she can feature the best of what she sampled. “Food has a history and a soul,” she explains in her business plan. “This philosophy will be reflected in the way The Mayflower operates in every facet: from the way we source our food and how that food is treated before it sits on our plates, to the way we treat our staff, to the way we decorate our restaurants, plate our food, and most importantly treat our customers.”

She’d penciled out a pro-forma P&L that allowed for healthcare coverage for employees. “I have experience with not getting benefits,” she explained to her classmates and the judging panel.

Mitchell Dorsey intends to feature only “responsibly sourced” foods in Burg Inn, the farm-to-fork restaurant he plans to open in East Williamsburg, a gentrifying corner of Brooklyn.
Sergio Gutierrez plans to showcase aspiring local musicians in his La Maja, one of the community ties he’s planning for the Monterey, Mexico, gastropub.

A classmate planning a Brooklyn tapas bar pledged that it would be “not just another business in the area, but also a part of [the] local community and its needs.”

Using local ingredients, previously the flag signaling a socially conscious restaurant, was the rule for all the student presenters, not the exception.

Not surprisingly, before Shaich spoke at our Restaurant Leadership Conference, another presenter was asked about the viability of chains purchasing locally.

The industry has sufficiently tempered its cheap-and-easy sourcing mindset to shift local purchasing into the industry consciousness.

All signs say it’s just the beginning of a change in attitudes.

Fast-casual form or substance?

After being kicked in the mints by fast-casual upstarts, a number of full-service restaurants are about to learn why.

To counter the challenge, they’ve trumpeted plans in recent weeks to whittle their concepts into fast-casual versions. So Famous Dave’s now has BBQ Shack. Red Robin has Burger Works. IHOP has IHOP Express. P.F. has two down-market versions, Pei Wei Asian Diner and the just-announced Asian Market—the list goes on and on.

The variations may hale from all sectors, from fine dining (Rick Bayless, with Xoco) to family restaurants (Denny’s, with Denny’s Cafe). But all share the strategy that less is better. Burger Works has a smaller menu. IHOP Express has less service. Virtually all have a smaller footprint.

There’s no doubt that scaled-back service is a big draw for the fast-casual sector, since it spares customers from having to tip. But that 15 or 20-percent saving would mean nothing if the buyer wasn’t getting food of unexpectedly high quality. And that’s where some of the trading-down chains may be deluding themselves.

They’re still working the old fast-casual formula: Food like you’d get in a casual restaurant, sold at a price closer to what you’d pay in a fast-food joint, served at a speed somewhere between grab-and-go and sit-and-order.

They should’ve learned in their market research that much of today’s fast-casual fare surpasses what customers expect from casual chains. Yet the companies hatching fast-casual formats haven’t said anything about the food being better than what the mother brand sells. They wouldn’t dare.

The closest they’ve come is touting the greater convenience and portability of what’s available from the spin-offs. If those benefits were key attractions, traditional quick-service concepts wouldn’t be losing fans to fast-casual.

Instead of standing pat, many of those conventional fast-food sellers are upgrading their menus and designs to compete with the likes of Panera Bread and Chipotle. Like the down-traders, they’re turning fast-casual themselves, but by aiming higher.

So Tim Hortons is testing a variation called Café & Bake Shop. Subway franchisees have more than 20 Subway Cafes open, and Burger King is growing its collection of Whopper Bars. Pizza Inn has lined up $4 million in to build Pie Five Pizza Co., a fast-casual riff that’s generating sales at an annual rate of $920,000, with operating margins of more than 20%.

One of the strange things about this economic downturn has been the boost it’s given to quality. Customers want value, but often that means higher caliber food for an attractive price.

So which fast-casual interloper is better addressing that need, the casual chain that enters the market without a significant food upgrade, or the fast-food specialist that trades up? I know how I'd bet.

2011: A year of less?

The new year is only a few days old, but a 2011 trend is already showing on restaurant menus. If the trajectory holds, this is going to be 12 months of subtraction, as in yanking out calories or additives—or, in the case of Panera Bread Co., both.

This week my local Panera mixed a new option into its rotation of soups: All-Natural Chicken Noodle, with a mere 130 calories per serving. I can attest that it was good. Darn good, in fact, though I acknowledge a bias toward anything that reduces guilt and the consumption of nasty chemicals.

But it wasn’t as good as the store’s previous addition, an all-natural steak chili made from brisket and served with cornbread cubes. It gets a higher grade despite having a higher calorie count.

I know about the calories because they’re now posted on the menu board, as they’ll soon be depicted in California because of mandates passed some time ago. You have to wonder if that’s a factor for this latest less-is-more movement.

Then again, I don’t think Culver’s operates in any areas with calorie-disclosure requirements. Yet the Midwestern burger and frozen custard specialist officially kicked off a promotion today of what it’s calling Mindful Choices, or meals containing fewer than 500 calories. The components were already offered. What’s new is spotlighting them as a packaged meal.

The other factor clearly coming into play is the propensity of consumers to include losing weight among their New Year’s resolutions. Indeed, Applebee’s is playing off that wave of pledges with its newest menu additions, which include two reduced-calorie cocktails. The mojito and Long Island Iced Tea join a 100-calorie margarita introduced last year to form a new SkinnyBee drink line.

The chain also extended its array of entrée selections with fewer than 550 calories.

All in all, 2011 is shaping up to be a year of shaping up.

Set a spell--and buy, buy, buy

Restaurants once competed with home kitchens. Now the challenge is shifting to the living room.

Fast-food places wove themselves into the social fabric in part by moving customers in and out before their French fries could cool. The faster the service, the faster the meal could be consumed, the quicker fast-paced lives could resume.

But now the quick-service sector is recasting itself as a place to sit for a spell. New design packages invite patrons to kick back and relax. Sip your cappucino! Surf the net! Check out our new entertainment features! What's the rush, Bunkie? Rest up a bit before resuming the grind.

That about-face is evident in the new prototypes of virtually all the major chains, from McDonald's to Panera Bread, Jack in the Box, Burger King, even Baskin-Robbins and Krystal. Today brought news that Taco Bell is similarly turning part of its dining rooms into a living-room-away-from-home, at least on a test basis. A new store in Baton Rouge, La., will outfit a portion of its eating space with cushy seats and computer hook-ups, so students from nearby Louisiana State University can hang out and study.

Some contend the residential trend in fast-food design was set in motion by Starbucks, which wanted to be a lifestyle destination, not the place to gulp down a $4 coffee. Not surprisingly, the java king continues to outpace all others in positioning its units as away-from-home dens. It's not only experimenting with highly localized cafes, each sporting a unique name inspired by the localation, but also Starbucks-branded units where you can nurse a beer or sip a chardonnay while chatting online.

If any retailer should be worried about the trend, it's Barnes & Noble, a lounge that just happens to sell books. I'd love to see the analysis of how it's come-and-linger strategy has affected sales.

But I think my desire would be second to Taco Bell's at this point. You have to wonder if kids shopping for a $2 meal will want to give their skateboards a prolonged rest.

Putting more fiber in boards

As you probably suspected, restaurant CEOs are constantly pestering me for advice on exterior shrubbery and other headquarter flourishes. Consider this recent missive, for instance:

Dear Pietro, as I like to think of my design muse,

Like a pack of other restaurant companies, we recently recast our board to silence the jackals who’ve been yipping that our directors are too chummy with management. Just because they’re shareholders, these whiners figure they can tell us what to do. As I was griping to the board during our weekly poker game, the outsiders have no idea how to run a restaurant business, particularly one as tight-knit as ours.

But we did what they wanted—this is proxy season, after all. Like Panera Bread, Red Robin, Spicy Pickle, Noble Roman's (and soon Denny’s), to name a few, we tried to put more fiber in our board by seating some fresh blood.

So now we have plenty of newbies to haze on our quarterly fishing trips. But I was thinking we should dazzle the big-name additions by upgrading the board table itself. No more Ikea for us, my man!

But I don’t know what’s “in” with the big-bonus crowd this year. Cherry or teak? Modern or Art Deco? Reclining chairs or beanbags? And what about the ice buckets?

Please, tell me how to upgrade our board in a meaningful way. Help us deliver the professionalism that investors are badgering us to deliver.
--Designing exec

Dear Designing,

Since dueling is no longer in vogue, I can only aim a pistol at your reasoning.

For one thing, why do you even want a table or boardroom? Why aren’t the directors gathering in a restaurant, at a secluded table that would otherwise be hosting guests guests? Why not take a look at the business from the perspective of customers and employees?

And why would you want a table that could star in a Pledge commercial? A tabletop should reflect the work that’s done on it. Yours should look rougher than Keith Richards face.

Coffee rings would attest that this was the scene of late-night marathons to hammer out tough decisions, not the setting for some quick rubber-stamping between tee times. A bloodstain here or there would suggest that many an Armani had been torn in the bare-knuckled brawls over strategic direction. It’d reassure shareholders that the chairs—purposely weighted to prevent throwing—were inhabited by independent thinkers, not human bobble-head dolls that perpetually nod yes.

And the whole room should be speckled with enough food stains to make the cleaning staff throw in their scrub rags. Restaurants companies are in the business of selling food and beverage, yet menu issues are seen as trifling matters beneath the dignity of a board. Leave that to some senior citizens you lure in from the mall for a focus group.

You’ll find plenty of distribution experts serving as restaurant-company directors (including two in the past week’s wave of new appointees). But except for Steve Ells of Chipotle and Kerry Kramp at Sizzler, are there any true menu specialists, any trained chefs or R&D pros, currently serving on the board of a public restaurant company? Directors in whites are rarer than good Martin Short movies. And that’s just wrong.

Indeed, there’s a lot that’s wrong with restaurant boards. This season has brought more changes in composition than the industry has seen in years. The incoming class includes such standouts as Lloyd Hill, the longtime CEO and director of Applebee’s (now at Red Robin’s table); Mo Siegel, founder of the Celestial Seasonings tea company, now advising the Spicy Pickle chain; and Thomas Lynch, who’s returning to a seat on Panera’s board after proving during a Kona Grill conference call that he’ll speak up when he sees something that troubles him about the management of a company.

Still, the industry has a lot of work to do. Insiders say there’s the lingering tendency to keep someone in a board seat because he’s been with the company from its inception and deserves to be recognized as an elder statesman. Never mind that he made shakes or managed the prototype unit, flexing skills that have little to do with directing a big public company.

That situation is certainly far less common today, a testament to how far the industry has come. But it still has a ways to go, and that’s a movement that can’t be tabled.

What's in Panera's oven, Grasshopper?

After Ron Schaich resigns this May as CEO of Panera Bread, maybe he’ll grow a long white beard and sit atop a mountain somewhere, dispensing wisdom to chain execs who make the climb. Consider the profundities he uttered after Panera posted the sort of fourth-quarter results that would’ve prompted whispers of steroid use if this were baseball.

On the sales impact of operations: “Though operations are never given credit for driving sales, I am convinced we would not be having the success we are without improved operations,” said the Wise One. (That success, by the way: comp sales increases of 8.4% for company stores and 9% for franchised units for the first six weeks of 2010, even with bad weather depressing intake by an estimated 4%.)

On the zen of catering: “In my view our weakness in catering [during the first half of 2009] was a good thing. It forced our team to determine what really mattered in building catering sales.” Shaich noted to investors that 2010 catering sales are running 17% year to date above the comparable period’s for 2009.

On the addition of dinner-type items, like the new Mac and Cheese and a salmon-topped salad: “People often make this mistake. They think of the evening business as dinner. We don’t. We think of the evening business as lunch in the evening. Panera is never going to be in the business of serving what would be considered classically casual dining fare for date night.”

Shaich also offered a few glimpses into Panera’s future, including the introduction of a new customer loyalty program in company-operated units in April, and the possibility of licensing its name to retail products. He noted that a Panera-brand soup is already being sold on an experimental basis by Costco, one of 30 to 50 tests currently underway for the chain.

Thanks to Seekingalpha.com for making available a transcript of Panera’s fourth-quarter conference call. It spared me from having to scale a mountain.

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Mind the recent signs of improvement

Be careful where you drop your gloom because you don’t want to crush any of the green shoots that sprouted in the restaurant industry last week.

Let’s recap:

McDonald’s, a chain that looked as if it’d finally been tripped up by the economy, explained to investors that it’s paying attention in 2010 to building check averages, a surprising admission given the discounting that’s still rampant in fast-food. The segment’s leader isn’t abandoning its quest for bargain hunters. To the contrary, it’s rolling out a Dollar Menu for breakfast and the Mac Snack Wrap, an item so low priced that execs term it a “fourth-tier” item, below your run-of-the-mill bargain.

Still, officials are pushing items like the Angus burger and continuing the rollout of frappes and smoothies because of the boosts they’ll deliver to tabs and profits. Even the Mac Snack, essentially a Big Mac served in a tortilla wrap, fits the strategy. The chain believes the item’s low price will convince customers to buy it as an add-on to what they normally get, putting more money in the till.

McDonald’s wouldn’t be devoting attention to that end of the pricing barbell if it didn’t feel the opportunity is there.

Panera Bread, meanwhile, said the restaurants it manages took in 9.4% more year-to-date in January than they did during the same period of 2009, after rising 9.6% in December. The January figure is particularly encouraging because McDonald’s mentioned to investors that bad weather probably depressed sales for the first half of the month by 3% a day.

Starbucks’ comp sales increase for late 2009 wasn’t quite as robust, with “just” a 4% gain. But a full percentage point came from increased traffic, a term that wasn’t been heard much last year, unless you were talking about the situation at unemployment offices.

In the full-service sector, Chili’s lifted the dome off a new menu that’s as radical—and sensible—as anything the chain’s ever done. What makes it so bold is the surrender to simplicity. For one thing, the bill of fare runs to only eight pages, a 50% cut from the tome it replaces.

But what’s really significant is the Doh! that must have precede it. The chain is basically a grill, like a neighborhood bar, with good burgers, ribs and other relatively simple preparations. The items left on the menu aren’t cutesy-named knock-offs of the trendy stuff someone dressed in black might hunt in the casual hotspots of New York or Chicago. Chili’s recognized what it was, and what it should become again, and shifted back there.

A smaller, simpler menu means better execution and a shot at better food. The side benefit is presumably quicker service, since the kitchen staff can prepare more of a relatively few items, which become that much more familiar.

Quicker kitchen output gives customers an option of getting in and out of the restaurant quickly, if that’s what the occasion warrants, or hanging back with a few more margaritas, if that’s the preference that night. Executives of the chain’s parent company, Brinker International, have been talking for some time about the need to let patrons decide the pace and extent of a visit. Presumably that objective was brought to light by research. In any case, it appears the chain has taken a big step toward complying with the desire.

Chili’s traffic and sales are still declining, executives acknowledged, but the downdraft has moderated appreciably. And they cited the new menu as a foundation for the chain’s identity going forward. The brand appears to have found itself.

Is salmon the new twofer?

Forget sliders, bundled meals and mini desserts. The hook for restaurant bargain hunters is being re-baited these days with lobster, crab and salmon.

Those are among the lures Ruby Tuesday is flycasting with its much-publicized new menu (the bill of fare landed lengthy features from The New York Times and AOL). The dinnerhouse chain added a lobster tail in late summer. Now it’s mixed the pricey protein into several dishes, including a classic surf and turf platter. Two tails share the plate with a seven-ounce sirloin, vegetables and a potato. This isn’t your two-dinners-for-$20 draw.

Nor is the new lump-meat crab cake, or the just-added Salmon Florentine platter. The chain is betting that a special-occasion dinner priced at an everyday rate—relatively speaking—will still be taken as a deal by consumers obsessed with economy.

It’s the credo being followed with considerable success by Panera Bread Co. Not coincidentally, the bakery-café chain has also used lobster as a draw, albeit a regional one. This summer units in the New England area offered a half-pound lobster salad sandwich for about $17 (at least in my area). CEO Ron Shaich explained at the time that the chain was focusing on the 90% of consumers who were employed, not the 10% that lost or couldn’t find a job.

Now, Shaich told investors last month, the chain is adding salmon, both as a sandwich and salad ingredient. He noted that the addition will boost profits while presenting customers with another high-quality choice.

Salmon is already on the menu of Panera’s arch-competitor (and Shaich’s former charge), the Au Bon Pain bakery-café chain. It recently added a sandwich of smoked salmon, egg and guacamole. Already on the menu was a breakfast sandwich of smoked salmon and wasabi, served on an onion dill bagel.

Touting quality in a pitch for deal hunters is a risky strategy, as Cheesecake Factory can attest. It’s a casual-dining leader in quality and portion size, yet it had to re-engineer the tome it calls a menu to include more straightforward bargains. Virtually every other casual chain has done the same, to varying degrees.

But there are signs the approach can work. Ruby Tuesday’s lobster tails, for instant, were generating 3% of a typical restaurant’s sales at the end of August, according to CEO Sandy Beall. That’s at a price falling between $17 and $19, he noted to financial analysts a few weeks ago.

He noted at the time that the chain’s emphasis on quality was helping to boost check averages, the Holy Grail for an industry limping through a steep drop off in customers.

Panera told the Wall Street Journal for a mid-August feature that its hefty lobster sandwich was selling well, but balked at disclosing the specifics.

Will it work? Well, there’s a reason chains have to give away new menu items to get them tasted. A quality item for a reasonable price has its appeal. But the absolute dollars are still going to be a yellow light for those of us who no longer find ourselves in a position to dine out regularly.

A candy dish of info treats

Panera Bread Co. is having a bang-up October, according to CEO Ron Shaich. He told investors yesterday that comp sales for company stores were running 6.9% above last year’s tally for the first 27 days of the month, and franchisees’ sales were tracking at a 6.3% rise.

Meanwhile, the bakery-café chain is busy plotting some significant menu changes. First on the list is the introduction of salmon, both as a sandwich ingredient and a salad component, said Shaich. That will be followed by the revamp of the concept’s panini sandwiches, which are currently pre-made, he said. New presses to be added around the middle of next year will enable units to make the grilled sandwiches to order because of their speed.

Nearer term, units will start merchandising holiday baked goods, from gingerbread men to Panatone to “holly cake,” at their registers.

Three days, three restaurant-chain bankrutpcy filings. Max & Erma’s efforts to secure Ch. 11 protection from creditors has been well-publicized. The bankruptcy of sister operation Damon’s International has been far less so. And largely unnoticed has been the Ch. 11 filing of Ham’s, operator-franchisor of a 20-unit namesake chain in North Carolina and Virginia.

More evidence that the Japanese fast-food market is whack-o: Authorities have reportedly concluded that the manager of a McDonald’s there worked herself to death by logging 20 hours a week of overtime. News reports say she’s one of about 150 people who work to the point of demise in Japan every year.

That news of course follows the introduction of a new Burger King Whopper that features seven beef patties, a tie-in with Microsoft’s new Windows 7 operating system. There are so many reasons for head-shaking over that one that it doesn’t pay to start.

Kerrii Anderson, the CEO of Wendy’s International during the chain’s final meltdown and subsequent sale, is being paid $175,000 a year to serve on the board of P.F. Chang’s. Anderson also serves on the board of Chiquita Brands International, the banana importer, where she’s paid at least $160,000 a year. And she was expected to make about $4.6 million from the company’s 2008 sale to Triarc, the parent of the once-rival Arby’s fast-food chain. In short, if you’re scheduled to have lunch with her in the near future, there’s no question of who’s paying.

Hotel unions have voted to strike at a handful of properties in both San Francisco and Chicago. It’s not clear whether its coincidental harrumphing or a concerted effort to prove that the union’s strength isn’t being undercut by the economy, as conventional wisdom holds.

Trends from U.S. chain menus, words from N.Y.

Fast-food, that most American of social constructs, is turning downright jingoistic in its sourcing.

Cock an ear to Wendy’s new ad campaign and you’ll hear the chain boast of using only North American beef in its square burgers. Fuddruckers, the chain that was fast-casual before fast-casual was cool, is more pointed in its nationalism. Units in Texas and New Mexico have switched to a proprietary grind called Fudds Prime, made exclusively with “All-American” prime beef from “select U.S. ranches,” the announcement sniffs. Chew on that gristle, Canada and Australia.

The rah-rah mentions of homefront ingredients are part of a larger struggle by the chain business to accommodate the public’s insistence that it be told the source of what it’s eating. Ideally, that point of origin would be a local one. Indeed, the demand for locally grown produce was forecast by chef-participants in a National Restaurant Association survey to be the Number One consumer trend of 2009.

The menus of many independent restaurants show those respondents were dead-on. The shorter the distance from field to fork, the louder the establishment tends to crow about it in menu descriptors. Not that it’s obnoxious at all. Guests want that sort of horn blowing. Why not brag about the seasonal items you’re putting on the plate?

But it’s hard to serve up that kind of lingo when you’re a sprawling chain with a nationwide supply system. Their economics call for low-cost ingredients hyper-processed to the point of absolute consistency and cooking readiness. Just add heat, forget about seasonal freshness. It was a trend many figured they’d watch independent counterparts enjoy without challenge.

Wrong. It took awhile, but regional chains are clearly finding religion. And even the national ones are buying local ingredients in some spots—or at least spotlighting the instances where that’s been the practice. Outback Steakhouses in the Louisiana area have apparently always used shrimp harvested by the state’s Gulf shrimpers. It briefly changed its mind because imported shrimp was selling at a lower price, then opted in the eleventh hour to stay local. The news prompted Louisiana Gov. Bobby Jindal to hold a press conference where he lauded the casual chain as the video cameras hummed.

Last month, New England-based Papa Gino’s Pizzeria and its sandwich-serving sister, D’Angelo’s, added a bunch of products that feature Cheddar cheese produced in Vermont. The chains were aiming for what one executive called “a distinctive New England flavor,” which you don’t usually associate with pizzas or subs. Yet “Vermont Cheddar” is included in all but one of the new products’ names (the exception, a Bruschetta, incorporates just “Cheddar”).

This summer, the New England outposts of Panera Bread Co. featured a lobster sandwich, a local favorite usually described as a lobster roll. It was priced at $16.99.

Units of the Smashburger fast-casual chain feature reginal riffs on burgers and hot dogs (i.e., Colorado units feature the popular local topping of green chilis), and the Kona Grill casual chain told investors that it'll introduce a menu next month that includes a section for local favorites from any given store's host area.

Then there’s the poster-concept of the localization movement among chains, the Pacific Northwest’s 38-unit Burgerville group. Right now the brand is featuring sweet potato fries made from local sweet potatoes, which are currently in season. It’s also featured Washington State cherries, in a Cherry Chipotle Pulled Pork Sandwich, and is currently touting a hotdog garnished with a slaw made of local apples.

The novelty of finding local ingredients on chains’ menus should start to wear off as several large-scale players start shopping closer to their stores. Chipotle Mexican Grill, for instance, has pledged to purchase 35% of at least one produce item per restaurant from local farmers.

With roughly 900 branches, Chipotle may be the largest chain to pursue seasonal fare. But it’s certainly not the first, nor the model example. Critics have noted that its so-called local fare may be drawn from a 250-mile radius, which certainly stretches the definition.

Contrast that with Eat’n Park, the Pittsburgh-based family dining chain. The company has a director of sourcing and sustainability who goes out to find farmers who can supply the chain. When local items like radishes are used by any of the brand’s 75 stores, notice is often given to customers via the chain’s blog.

Those early adapters are being joined by the likes of Darden Restaurants, best known as the parent of Red Lobster and Olive Garden. Its youngest brand, Seasons 52, features seasonal ingredients blended into entrees with fewer than 475 calories.

P.F. Chang’s, a strong competitor to Darden, has invested in a start-up concept called True Food Kitchen. Like Seasons 52, it features seasonal fare, but goes a step further to use local and organic foodstuffs.

Where chains can’t tout the use of local ingredients, they’re doing the next best thing of highlighting the source. Seasons 52, for instance, is currently featuring Colorado Buffalo Chili, Canadian Black Mussels Marinara and a Gulf Shrimp Cocktail.

Is there any doubt that the source-naming trend, and the local variant in particular, is going to continue?

Indeed, there’s one form in particular that we’re likely to see. It’s not widely known by the public, but outlets of the giant burger chains buy their buns from a network of regional or local bakeries set up by the home office. Those suppliers aren’t exactly mom-and-pop shops. But they do offer an opportunity for the behemoths of the business to tout a little localization. I bet we see that start to happen, sooner versus later.

Panera keeps a cooler head

Panera Bread Co. is betting it can make more lettuce by boosting the quality of the garden variety. 

 The fast-casual chain has adopted “much tighter quality and much tighter temperature controls over our lettuce, all the way from the field through distribution to the bakery-café,” CEO Ron Shaich explained to investors during the franchisor’s quarterly conference call today. “Our lettuce will be far superior to anything you’ll find in the marketplace.”

Tighter management of the supply chain is a common objective of restaurant chains these days, though usually with the intent of squeezing out cost or better protecting the food from contamination or spoilage.  Shaich did not mention either of those advantages.

The fresher lettuce, he said, will help Panera offer $12-caliber salads for $8. Included will be two new ones: a chopped Cobb, and a barbecue chicken chopped salad. 

Smudging the line between restaurants, retailers

Once upon a time, restaurateurs and their investors questioned the wisdom of dabbling in retail. If consumers can eat your specialties at home, they reasoned, why bother visiting the restaurant?

But today, with supermarkets sporting all sorts of products emblazoned with restaurant logos, investors are asking a decidedly different question: Why aren’t you jumping on that (Bob Evans-brand) gravy train?

David Overton, CEO of The Cheesecake Factory, was grilled on that point by a financial analyst last week. “Well, we haven't decided to sell any of our actual dinner items or restaurant items yet,” danced Overton. “It's something that we could look at. We have been asked to do so…[but] the 70-something million people that came in the restaurant last year is where we're concentrating. I still think that's our greatest game at this point.”

Cheesecake, which just recently made concessions to such profound trends as discounting and offering mini-portions, may find the ranks of retail holdouts to be a lonely place. Panera Bread Co. ran through enough menu initiatives during an investment conference call on Thursday to suggest steroids testing for its R&D staff. One of the bigger ones, literally, mentioned by CEO Ron Shaich was a possible move into the retail sale of bulk baked goods.

He explained that units of the bakery-café chain have started retailing multipacks of muffins, scones and bagels. “You will see us focus on selling more seasonal breads at retail,” added Shaich. “We will regularly celebrate our gift worthy breads, things like Panettone, holiday bread, Irish soda bread, hot cross buns and a variety of sweet breakfast breads. We will also merchandise our breads to our guests for everyday use.”

Panera will be selling the baked goods through its own retail outlets rather than supermarkets, a twist that’s also being embraced by Starbucks. Its new retail push, the sale of Via instant coffees for home mixing, will be undertaken through the coffee giant’s own cafes, not a Piggly Wiggly or a King Kullen.

Other restaurants chains recently conferring with investors about retail initiatives include Bob Evans and California Pizza Kitchens, neither of which is a stranger to that alternative sales channel.

Indeed, Bob Evans is as much of a grocery-product supplier as it is a restaurant operator, a role it continues to expand by adding heat-and-eat products bearing the brand of its namesake restaurant chain. In its most recent quarter, for instance, the company added nine new retail choices, including “family-sized” portions of such comfort foods as mac and cheese and mashed potatoes.

But it also raised what should be a yellow light for restaurateurs branching into retail: During the most recent quarter, supermarket sales of Bob Evans-brand products decreased on a volume basis for the first time in more than seven years, executives noted.