A confused figment of my imagination writes, “Hey, Restaurant Reality Check, how am I supposed to tell fact from fiction in the age of The Onion, the Borowitz Report and KFC’s publicity department? Some of their made-up restaurant stories sound more believable than the real thing. How can a non-cynic know when he’s being fed a whopper?” (signed, Believing It—Or Not?)
Dear Believing,
I was discussing the very thing yesterday with Henry Kissinger and the Fonz. You just can’t tell these days who’s pulling your leg and who’s merely covering the Republican presidential candidates.
Fortunately for you and your confused peers, Restaurant Reality Check can recount how a few persistent myths were disproved, decidedly, by recent industry developments.
Wall Street firms have a hammerlock on executive compensation outrages. A Friendly source—note the capital “F”—blew that one away. In case you missed reports in mainstream media like The Wall Street Journal and The Huffington Post, the restaurant industry has its own instance of a CEO enjoying big-dollar privileges while the corporate rank-and-file burn their pink slips for warmth.
According to the reports, Friendly’s CEO Harsha Agadi billed the company for $234,000 in day-to-day expenses in the year preceding the restaurant franchisor’s recent bankruptcy filing. The charges didn’t include the $190,000 Agadi submitted for relocation.
The contrast with the plight of Friendly’s workers is what made the story a hot one. More than 600 lost their jobs when some 60 stores closed.
We can also refute at this time that the Fribble lobby has secured a federal bailout for the family chain.
E-mail is killing letter writing. Not in the restaurant business. Hundreds of stationers could pop for a second home this year because of the business they’re reaping from disgruntled shareholders and the chains they’ve targeted for takeover.
This morning, for instance, Cracker Barrel shareholders were sent a letter from CEO Sandy Cochran, spelling out why they should rebuff Sardar Biglari in his attempts to wrest control of the family chain from current management. She countered Biglari’s assertions by explaining the chain’s business-building strategies, point by point.
The communication was in response to an 11-page letter that Biglari sent last week to the same recipients. Taken together, the two missives might have made Cracker Barrel’s shareholders the most informed in the business.
But that’s not the only volley of letters helping the Postal Service. Cosi and Brad Blum, the Olive Garden alumnus who wants to run the fast-casual chain, have stamp dispensers churning as well.
Ditto for the CEO-turned-advisor of Wendy’s, Roland Smith. Recent SEC filings include Smith’s resignation letter, which in turn referenced other missives during the summer. The communications indicate that Smith stepped down because he didn’t want to leave Atlanta, where the chain is currently headquartered. It’s moving back to the suburb of Columbus, Ohio, where it was founded.
Smith has been succeeded as CEO by Emil Brolick, who’s collecting $1.1 million in salary, with the opportunity to earn another $1.6 as a bonus. Smith was in the same ballpark.
Survival has supplanted concept development. According to the conventional wisdom, restaurant companies are too preoccupied with survival to consider the development of new concepts.
Not any more.
The last two weeks brought announcements of new concepts from such celebrated operators as Starbucks (Evolution Fresh Juices), P.F. Chang’s (Pei Wei Asian Market, which of course has nothing to do with Chipotle’s launch of ShopHouse Southeast Asian Market), IHOP (IHOP Express) and Jamba Juice (JambaGo, the juice chain’s riff on an express format).
Okay, enough myth busting for now. In our next installment, we’ll take on Yeti and the promises of restaurant unions.
Showing posts with label Sardar Biglari. Show all posts
Showing posts with label Sardar Biglari. Show all posts
Monday, November 21, 2011
Tuesday, September 13, 2011
'Attention, Central Casting'
We’ve decided to recount the week’s restaurant-related developments in cinematic form. So heads up, Casting. Here’re the players we’ll need to play the central characters.
Grab a guy in whites and put him in a serious suit. Yesterday’s announcement of a new president for the La Madeleine bakery-café chain probably took no one by surprise. Phil Costner, as COO, was the heir apparent. Still, his appointment is remarkable, especially for industry professionals who make their living in a kitchen. As far as we know, he’s the only chain president to reach that perch through menu R&D, and he’s one of the few chefs to head a system of significant size (Steve Ells of Chipotle and Kerry Kramp of Sizzler being the others).
Put Sigourney Weaver in a Cracker Barrel cap… As tough as she was in “Alien,” the veteran actress will have to show more fortitude in her depiction of Sandra Cochran, the new CEO of the family restaurant chain. On Day Two of the job, Cochran had to contend with a demand by shareholder and takeover artist Sardar Biglari that he be ceded a seat on Cracker Barrel’s board. The demand was put forth on a website created by Biglari to blast the chain’s direction and management. And then, just to add the icing on the cake, Cracker Barrel reported a 36% decline in quarterly net income. You have to wonder if prior CEO Michael Woodhouse called to provide moral support—the Bishop to Weaver’s Ridley.
…And get me one of The Borg guys from “Star Trek” to play Biglari. “You shall be assimilated. Resistance is futile.” The thirtysomething activist shareholder followed the same plan he’s pursuing at Cracker Barrel to wrest control of Steak ‘n Shake and Western Sizzlin’. Clearly he intends to prevail similarly at Cracker Barrel, his most mainstream target to date.
Who’s today’s Jimmy Stewart? Whoever he is, get him to play Craig Meier, the CEO of the Frisch’s family restaurant chain, which also operates a number of Golden Corral franchisees. The company’s sales dropped 4.6%, so Meier took a 26% pay cut. Clearly this guy couldn’t work on Wall Street without being some suit’s bitch. The cut brought his pay down to about $700,000—for overseeing a company that brought in $303 million. Take that, Gordon Gekko.
Okay, who’d be a good Lazarus? See if you can make him look like Craig Nickoloff, the founder of the Claim Jumper chain. Nickoloff sold the chain, second only to Cheesecake Factory in average unit volumes, to private-equity concerns that watched sales drop and drop and drop. Eventually, Claim Jumper went bankrupt and was bought at a bargain rate by Landry Restaurants’ Tillman Fertitta. Nickoloff had it made. But of instead of working up a sweat on a golf course, he just teamed up with the celebrated chef Michael Cimaruti to buy Silver Spoon, a wheezing landmark of the Los Angeles dining scene. They’ve indicated that the West Hollywood outlet will be converted into a restaurant called Connie and Ted’s, but haven’t yet revealed what the new concept will be like.
Okay, time to sketch out the storyboards….
Grab a guy in whites and put him in a serious suit. Yesterday’s announcement of a new president for the La Madeleine bakery-café chain probably took no one by surprise. Phil Costner, as COO, was the heir apparent. Still, his appointment is remarkable, especially for industry professionals who make their living in a kitchen. As far as we know, he’s the only chain president to reach that perch through menu R&D, and he’s one of the few chefs to head a system of significant size (Steve Ells of Chipotle and Kerry Kramp of Sizzler being the others).
Put Sigourney Weaver in a Cracker Barrel cap… As tough as she was in “Alien,” the veteran actress will have to show more fortitude in her depiction of Sandra Cochran, the new CEO of the family restaurant chain. On Day Two of the job, Cochran had to contend with a demand by shareholder and takeover artist Sardar Biglari that he be ceded a seat on Cracker Barrel’s board. The demand was put forth on a website created by Biglari to blast the chain’s direction and management. And then, just to add the icing on the cake, Cracker Barrel reported a 36% decline in quarterly net income. You have to wonder if prior CEO Michael Woodhouse called to provide moral support—the Bishop to Weaver’s Ridley.
…And get me one of The Borg guys from “Star Trek” to play Biglari. “You shall be assimilated. Resistance is futile.” The thirtysomething activist shareholder followed the same plan he’s pursuing at Cracker Barrel to wrest control of Steak ‘n Shake and Western Sizzlin’. Clearly he intends to prevail similarly at Cracker Barrel, his most mainstream target to date.
Who’s today’s Jimmy Stewart? Whoever he is, get him to play Craig Meier, the CEO of the Frisch’s family restaurant chain, which also operates a number of Golden Corral franchisees. The company’s sales dropped 4.6%, so Meier took a 26% pay cut. Clearly this guy couldn’t work on Wall Street without being some suit’s bitch. The cut brought his pay down to about $700,000—for overseeing a company that brought in $303 million. Take that, Gordon Gekko.
Okay, who’d be a good Lazarus? See if you can make him look like Craig Nickoloff, the founder of the Claim Jumper chain. Nickoloff sold the chain, second only to Cheesecake Factory in average unit volumes, to private-equity concerns that watched sales drop and drop and drop. Eventually, Claim Jumper went bankrupt and was bought at a bargain rate by Landry Restaurants’ Tillman Fertitta. Nickoloff had it made. But of instead of working up a sweat on a golf course, he just teamed up with the celebrated chef Michael Cimaruti to buy Silver Spoon, a wheezing landmark of the Los Angeles dining scene. They’ve indicated that the West Hollywood outlet will be converted into a restaurant called Connie and Ted’s, but haven’t yet revealed what the new concept will be like.
Okay, time to sketch out the storyboards….
Saturday, May 8, 2010
Clarifying who's not involved
About two months ago, i speculated here that investor Sardar Biglari may be an unnamed co-conspirator in the effort to take control of Denny's board. Biglari, after all, had used a similar strategy to add Steak n Shake to his holdings. One of his advisors in that takeover, Jonathan Dash, had been one of the three dissident shareholders who were making the run on Denny's director seats.
Today Biglari's company, Biglari Holdings, issued this statement on the matter:
Today Biglari's company, Biglari Holdings, issued this statement on the matter:
Biglari Holdings Inc. wishes to apprise its shareholders as well as Denny's stockholders that we have absolutely no involvement in Denny's Corporation (Nasdaq:DENN - News). Without our approval, references to our company, including its subsidiaries, contain misinformation. However, we do not intend to correct any of these errors.
Tuesday, March 2, 2010
Is Biglari making a run on Denny's?
Two investors in Denny's Corp. announced this morning that they're seeking three seats on the restaurant company's board because of dissatisfaction with the chain's direction and management. If their proxy challenge is successful, we may see the boldest takeover attempt yet by Sardar Biglari, the crafty and intriguing thirtysomething who has set out to build a restaurant empire.
Adding Denny's to his fold, or even attempting it, would be a moonshot compared with Sardari's previous efforts to become the Warren Buffett of the restaurant business. The pillars of his holding company right now are Western Sizzlin, a fairly sleepy steak-and-buffet chain in the Southeast, and Steak N Shake, the retro burger-and-shakes concept he's aggressively trying to turn around, with noticeable success.
Right now, he's ostensibly not involved in the effort to force a change in Denny's board--and, by implication, its management. But one of the gambit's principals is Jonathan Dash, identified as a director of Western Sizzlin and an advisor to the chairman and CEO of Steak n Shake. That'd be Mr. Biglari, folks.
Dash is joined in the quest for board seats by David Makula, the founder of Oak Street Capital Management investment firm, and Patrick Arbor, a futures trading veteran. They and the parties they represent claim to hold a 6.5% stake in Denny's.
Biglari wasn't mentioned by name, just inference.
In announcing their board bids, the challengers commented, "The weaknesses of Denny's management have forced us to seek changes to the board in the interest of all shareholders. If the status quo is maintained, we are deeply concerned that the Company's future will mirror its past. " The announcement proceeds to spell out what should be done to shake the brand out of its purported inertia.
It's deja vu all over again for those who remember the statements Biglari issued before beginning his successful takeover of Steak n Shake. The precise words may be different, but the assertions are nearly identical.
Steak n Shake's parent company, by the way, is changing its name to Biglari Holdings Inc.
Stay tuned for this one.
Adding Denny's to his fold, or even attempting it, would be a moonshot compared with Sardari's previous efforts to become the Warren Buffett of the restaurant business. The pillars of his holding company right now are Western Sizzlin, a fairly sleepy steak-and-buffet chain in the Southeast, and Steak N Shake, the retro burger-and-shakes concept he's aggressively trying to turn around, with noticeable success.
Right now, he's ostensibly not involved in the effort to force a change in Denny's board--and, by implication, its management. But one of the gambit's principals is Jonathan Dash, identified as a director of Western Sizzlin and an advisor to the chairman and CEO of Steak n Shake. That'd be Mr. Biglari, folks.
Dash is joined in the quest for board seats by David Makula, the founder of Oak Street Capital Management investment firm, and Patrick Arbor, a futures trading veteran. They and the parties they represent claim to hold a 6.5% stake in Denny's.
Biglari wasn't mentioned by name, just inference.
In announcing their board bids, the challengers commented, "The weaknesses of Denny's management have forced us to seek changes to the board in the interest of all shareholders. If the status quo is maintained, we are deeply concerned that the Company's future will mirror its past. " The announcement proceeds to spell out what should be done to shake the brand out of its purported inertia.
It's deja vu all over again for those who remember the statements Biglari issued before beginning his successful takeover of Steak n Shake. The precise words may be different, but the assertions are nearly identical.
Steak n Shake's parent company, by the way, is changing its name to Biglari Holdings Inc.
Stay tuned for this one.
Tuesday, December 15, 2009
Shareholders as mystery shoppers
I recently moderated a webinar where the participants cited the need for new ways of gauging customers’ service experiences. The prevailing method, of inviting patrons to take an online or telephone survey in exchange for a freebie, has apparently lost its impact, though they did not explain why. Instead, they suggested there has to be a more effective way of soliciting input, using new technology or at least fresher techniques.
Sardar Biglari, the activist investor who took over Steak n Shake’s corner office last year, told investors yesterday of a feedback mechanism he’s put in place to short-circuit the process between guest experiences and a restaurant’s better financial performance.
The mechanism also fits his self-avowed cheapness. “We are demons on costs,” he proudly told stockholders in a letter posted on Steak n Shake’s corporate website. “Trimming them is
now embedded in our corporate DNA.”
The system he’s set up in effect turns Steak n Shake’s thousands of stockholders into mystery shoppers. As Biglari explained in his letter to those investors, the family restaurant chain set up an e-mail hotline a year ago, owner@steaknshake.com, so any stockholder could recount their experiences in a unit to the home office.
If they spotted something good or bad, executives will take note, Biglari stressed. You can be assured that each message is read, and when necessary the Steak n Shake team is dispatched quickly to remediate any problems,” he said.
In addition to fixing problems before they can fester, the arrangement demonstrates that headquarters will be accountable to the company’s owners, even over such things as the cleanliness of the silverware.
So far, Biglari indicated, the system has been a success: “The email, which goes to all members of the restaurant operation’s senior leadership team, has been both effective and cheap — in line with our motto.”
To keep the system from being commandeered by suppliers trying to flog a product, Biglari has set some stern ground rules: Do it once and you'll be assured of never doing business with Steak n Shake.
Any other non-stockholder who uses the e-mail address will be boiled in oil. Okay, I made that up. But I don't think the response from headquarters will have its i's dotted with little hearts or flowers.
Biglari recently surpassed Nelson Peltz as the gadfly most likely to be covered by Restaurant Reality Check. His prescriptions for reviving a restaurant company, and most definitely his means of putting them forward, are hardly cookbook, as his feedback mechanism and shareholder letter readily attest.
But it’s hard to argue with his approach, given the results. When Biglari assumed control of Steak n Shake, the company was losing money at the rate of $100,000 a day, he told shareholders. For its most recently completed quarter, the concern posted a net profit of $3.4 million, compared with a net loss a year ago of $9.2 million.
The bounce back was even more dramatic on an annual basis. Steak n Shake enjoyed a profit for the fiscal year of $6 million, compared with a loss the year beforehand of $23 million.
Granted, the most recent fiscal year encompassed 53 weeks instead of 52. Still, same-store sales during the fourth quarter leapt 10% on a 20% quantum leap in traffic.
Biglari might ruffle some feathers, but he’s delivering to Steak n Shake’s shareholders, employees and guests.
Sardar Biglari, the activist investor who took over Steak n Shake’s corner office last year, told investors yesterday of a feedback mechanism he’s put in place to short-circuit the process between guest experiences and a restaurant’s better financial performance.
The mechanism also fits his self-avowed cheapness. “We are demons on costs,” he proudly told stockholders in a letter posted on Steak n Shake’s corporate website. “Trimming them is
now embedded in our corporate DNA.”
The system he’s set up in effect turns Steak n Shake’s thousands of stockholders into mystery shoppers. As Biglari explained in his letter to those investors, the family restaurant chain set up an e-mail hotline a year ago, owner@steaknshake.com, so any stockholder could recount their experiences in a unit to the home office.
If they spotted something good or bad, executives will take note, Biglari stressed. You can be assured that each message is read, and when necessary the Steak n Shake team is dispatched quickly to remediate any problems,” he said.
In addition to fixing problems before they can fester, the arrangement demonstrates that headquarters will be accountable to the company’s owners, even over such things as the cleanliness of the silverware.
So far, Biglari indicated, the system has been a success: “The email, which goes to all members of the restaurant operation’s senior leadership team, has been both effective and cheap — in line with our motto.”
To keep the system from being commandeered by suppliers trying to flog a product, Biglari has set some stern ground rules: Do it once and you'll be assured of never doing business with Steak n Shake.
Any other non-stockholder who uses the e-mail address will be boiled in oil. Okay, I made that up. But I don't think the response from headquarters will have its i's dotted with little hearts or flowers.
Biglari recently surpassed Nelson Peltz as the gadfly most likely to be covered by Restaurant Reality Check. His prescriptions for reviving a restaurant company, and most definitely his means of putting them forward, are hardly cookbook, as his feedback mechanism and shareholder letter readily attest.
But it’s hard to argue with his approach, given the results. When Biglari assumed control of Steak n Shake, the company was losing money at the rate of $100,000 a day, he told shareholders. For its most recently completed quarter, the concern posted a net profit of $3.4 million, compared with a net loss a year ago of $9.2 million.
The bounce back was even more dramatic on an annual basis. Steak n Shake enjoyed a profit for the fiscal year of $6 million, compared with a loss the year beforehand of $23 million.
Granted, the most recent fiscal year encompassed 53 weeks instead of 52. Still, same-store sales during the fourth quarter leapt 10% on a 20% quantum leap in traffic.
Biglari might ruffle some feathers, but he’s delivering to Steak n Shake’s shareholders, employees and guests.
Monday, December 7, 2009
A situation to watch, Part I
So many jaw-dropping situations, so little time.
During this extraordinary period for the restaurant industry, you can get a research-worthy case of whiplash from trying to watch all the dramas unfolding in the business. Instead of rubberizing your neck, consider a focus on this standout among the nail biters. Its only rival as a potential tell-all book is the other situation that's not to be missed, detailed in Part II below.
Steak 'n Shake 'n Biglari, or What Would Warren Do?
If Warren Buffett asked business bravehearts who should succeed him as Holding Company Guru, Sardar Biglari would be the guy jumping up and down with his hand in the air, yelling, “Me! Me! Pick me!!”
Instead, Biglari has set out to prove himself the de facto heir to the Bard of Omaha. Buffett became the second richest man in America in large part by spotting repairman’s specials that were undervalued. He gathered them into what’s now Berkshire Hathaway, a holding company he turned into a cash-flow machine by adding insurance companies to the portfolio.
Biglari, a thirtysomething business school grad who has cast a former professor as his Charlie Munger, is apparently trying to follow Buffett’s blueprint to a T-square. First he bought the wheezing Western Sizzlin buffet chain, then turned around and amassed a major stake in Steak 'n Shake, a burgers-and-fries chain with the distinction of offering table service. His investment allowed him to wrest control of Steak 'n Shake from a management team that was likely drawing death threats from investorsecs.
Amazingly, Biglari has been able to bring his two flagging operations together without being lynched by those investors, probably because they welcomed any change in leadership. Among the reasoned objections they might have posed was how a company could turn around both brands simultaneously, when reviving just one of the flatliners would be a Harvard Business case study.
Then again, hasn’t Buffett done that time and again?
Even more of a parallel was Biglari’s use of Steak 'n Shake Holdings to buy about a 10% interest in—surprise, surprise—an insurance company, Fremont Michigan InsuraCorp.
You can read all about Biglari’s efforts when he releases an extended and likely candid letter to investors next week. It’s exactly what Buffett does every year in his legendary reports to Berkshire’s shareholders.
The key question to keep in mind as you munch some popcorn and watch this CNBC saga unfold: Has Biglari actually duplicated Buffett’s magic formula, or is he merely reciting a spell without the mojo to make it work? Is he really going to conjure the money?
During this extraordinary period for the restaurant industry, you can get a research-worthy case of whiplash from trying to watch all the dramas unfolding in the business. Instead of rubberizing your neck, consider a focus on this standout among the nail biters. Its only rival as a potential tell-all book is the other situation that's not to be missed, detailed in Part II below.
Steak 'n Shake 'n Biglari, or What Would Warren Do?
If Warren Buffett asked business bravehearts who should succeed him as Holding Company Guru, Sardar Biglari would be the guy jumping up and down with his hand in the air, yelling, “Me! Me! Pick me!!”
Instead, Biglari has set out to prove himself the de facto heir to the Bard of Omaha. Buffett became the second richest man in America in large part by spotting repairman’s specials that were undervalued. He gathered them into what’s now Berkshire Hathaway, a holding company he turned into a cash-flow machine by adding insurance companies to the portfolio.
Biglari, a thirtysomething business school grad who has cast a former professor as his Charlie Munger, is apparently trying to follow Buffett’s blueprint to a T-square. First he bought the wheezing Western Sizzlin buffet chain, then turned around and amassed a major stake in Steak 'n Shake, a burgers-and-fries chain with the distinction of offering table service. His investment allowed him to wrest control of Steak 'n Shake from a management team that was likely drawing death threats from investorsecs.
Amazingly, Biglari has been able to bring his two flagging operations together without being lynched by those investors, probably because they welcomed any change in leadership. Among the reasoned objections they might have posed was how a company could turn around both brands simultaneously, when reviving just one of the flatliners would be a Harvard Business case study.
Then again, hasn’t Buffett done that time and again?
Even more of a parallel was Biglari’s use of Steak 'n Shake Holdings to buy about a 10% interest in—surprise, surprise—an insurance company, Fremont Michigan InsuraCorp.
You can read all about Biglari’s efforts when he releases an extended and likely candid letter to investors next week. It’s exactly what Buffett does every year in his legendary reports to Berkshire’s shareholders.
The key question to keep in mind as you munch some popcorn and watch this CNBC saga unfold: Has Biglari actually duplicated Buffett’s magic formula, or is he merely reciting a spell without the mojo to make it work? Is he really going to conjure the money?
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