A-ha's that might've slipped past you

You can’t miss a wave that’s reshaping the restaurant business. Harder to spot are the ripples that could swell into powerful forces. Consider these recent developments, for instance:

‘Menu disclosure’ is redefined. The term was once synonymous with posting calorie counts and other nutritional metrics so consumers could make an informed choice. Now we’re seeing a secondary designation.

Amid all the hoopla over the opening of Chipotle’s ShopHouse Southeast Asian Kitchen was a little-noticed detail brought to light by the Washington Post: Not everything on the menu was what it purported to be. Two of the sauces for vegetarian were actually made with fish stock, a huge no-no to the more orthodox non-flesh-eaters.

As the Post subsequently reported, ShopHouse quickly rectified the situation by adding an asterisk to the menu listings, alerting customers that the sauces are non-vegetarian.

It must’ve been déjà vu all over again for the concept’s parent. About a week beforehand, a tweeter with a large following voiced 140 characters’ worth of indignation that Chipotle’s pinto beans were flavored with bacon. Co-CEO Steve Ells called the tweeter (he’s an editor of Maxim, the breasts-and-beer magazine), apologized, and explained that the menu description had been corrected.

Meanwhile, Wendy’s drew fire because of its switch to buttered hamburger buns for the new Dave’s Hot ‘n Juicy line. Websites pointed out that the butter could be a hazard to consumers who are allergic to dairy products, and faulted the chain for not flagging the newfound danger more clearly on its website.

Franchisors could be seriously ding’d by the tax man. It slipped past almost unnoticed, but KFC lost a landmark court decision this week that should worry every franchisor. The U.S. Supreme Court rebuffed an attempt by the Yum! Brans holding to keep Iowa from assessing it for state income taxes.

The franchisor pointed out that it doesn’t operate a single restaurant in the state; all the units there are franchise stores. It doesn’t even have a single employee.

But the Supreme Court rejected the appeal. KFC will have to pay the $250,000 that Iowa says it’s due in income taxes on the franchise royalties and fees that were channeled to chain headquarters in Kentucky.

Two days, two bankruptcies of Sun Capital holdings. Are economic realities catching up to the private-equity raiders?
No PE investor gobbled up as many restaurant brands before and during the Great Recession as Sun, whose portfolio extends from Captain D’s to Bar Louie. The acquisitions included stakes in Friendly’s and Real Mex, parent of the Chevys, El Torito and Acapulco chains, both of which are now being run under the scrutiny of a bankruptcy court. Sun is undoubtedly the owner of more concepts than any other entity in the business, and is likely one of the bigger operator-franchisors as well.

It’s become an industry parlor game to speculate about what Sun will do with those holdings. An IPO for a select chain? Or for several, packaged together? How about a sale to other PE companies? Or to a strategic buyer? Maybe some will be crunched up and sold piecemeal for their locations, the way an auto is sold for parts.

It’s safe to say that Sun didn’t buy anything with a hope of seeing it go bankrupt. What does that portend a company with that much vulnerability to a restaurant downturn on its books?

Looks as if the parlor game has just been updated.

The rejuvenation effort to watch

When I heard Dick Rivera had been named CEO of Real Mex Restaurants, I shrugged and figured, A job’s a job. He’d already diamond-studded his reputation by leading such big-name brands as Red Lobster, T.G.I. Friday’s and Longhorn Steakhouse. So what if he was stepping back now to what anyone in the business would regard as second-tier concepts? He’d help such relics as Acapulco and El Torito play a little Bingo in the home for aged restaurant chains.

Then Rivera tapped Lowell Petrie to lead Real Mex’s marketing efforts. It’d be like the Mississippi Mud Hens putting Derek Jeter in as shortstop, after slotting Ivan Rodriguez as the clean-up batter. Petrie has earned mountains of respect in similar roles at concepts large and small, from Denny’s to his most recent employer, the much-watched Daphne’s Greek fast-casual chain.

Then came the announcement that Craig Miller, a longtime casual-dining leader, and Jeff Campbell, perhaps foodservice’s biggest marquee name during the 1980s, had been appointed to Real Mex’s board.

And along the way, Rivera lined up $130 million in debt financing.

Suddenly, what sounded like a reshoot of “Going in Style” was emerging as the story to follow. Indeed, it may be the most intriguing situation in all of foodservice right now, with more drama and audacity than the saga of Starbucks. Wisdom, financing, talent, determination and old but extremely well-known brands, all blended into a comeback effort that would make Lance Armstrong look as if he was back on training wheels. This is one for the Harvard Business Review.

Of course, there’s no guarantee of a happy outcome. As one close observer put it, Real Mex’s concepts come with plenty of baggage. El Torito can boast of being the granddaddy of Mexican dining in the U.S. But that’s like touting a Walkman in the age of the iPod. Freshness, novelty and perceived authenticity are what seemingly pull consumers to today’s Tex-Mex outlets. Can Real Mex promise real Mex?

Then again, it has a gem in Chevys, a brand that touted freshness while Steve Ells was still toying with the idea of a Mexican concept that could offer food with integrity. Long before Chipotle Mexican Grill, it was boasting that it used nothing canned or frozen, and entertained guests by cranking out fresh tortillas on a signature machine visible from the dining room. In short, it was fresh before fresh was cool. With only 68 restaurants in operation, it has plenty of room to grow.

Real Mex also has a few youngsters in its nine-brand, 189-restaurant fold. It opened a concept called Sinigual last fall in New York City, for instance. There’s also what’s now a single-outlet concept in Laguna Beach, Calif., called Las Brisas.

In any case, it’ll be interesting to track the turnaround efforts of Rivera and his team—a line-up that presumably hasn’t yet been completely drafted. That alone will be something to watch, given the talent available and how many all-star acquaintances the current recruits enjoy.

It’s also a buyer’s market for top-grade development sites, or even acquisition candidates.

Clearly this’ll be no checkers game at Shady Acres Retirement Village.

Lend a shoulder for headhunters to cry on

I’m holding a tissue drive for the industry’s executive placement specialists, commonly known as headhunters. They’ll likely be burning through Kleenex this week after what must’ve been excruciating months of watching the grass grow, the bills pile up, the accountants nixing luxuries like a communal box of nose dabbers. Now that the tears are being shed in joy instead of despair, why not let them sob and honk a bit?   

The week is less than 48 hours old, yet we’ve already seen two screaming indications that companies are making big hires again. Lane Cardwell, a longtime veteran of casual dining, was appointed CEO over the weekend of Boston Market. On Monday evening, Carin Stutz, a standout who seemed on the CEO track at Applebee’s, was named COO of Global Business Development for Chili’s parent, Brinker International. They’re the sort of placements that give headhunters the vapors, a giddiness they likely haven't felt in awhile.  

Both of the week’s marquee recruits are huge talents, and, interestingly, both were previously under-employed. Their return to full-time duty suggests the smart companies are starting to raid the considerable bench of talent that’s been formed by the cut, cut, cut imperative of the last nine months. The mindset might be shifting back to assembling a standout team, instead of hacking one to bits for the sake of a budget.  

That possibility seems more likely when you consider a few big-name hirings in April, like Bennigan's recruitment of David Goronkin as its new leader, or Real Mex Restaurants' appointment of Dick Rivera as CEO. They, too, were previously under-employed What seemed at the time to be exceptions to the rule may in hindsight be the early indications of an emerging trend.

If the recent developments are indeed the first signs of a shift, it’ll be high-five-worthy news for headhunters. So, please, do your part as they cry for joy. Steal all the tissues you can from your accounting department, and donate them to a worthy placement agency.