We had an earthquake this week in New York City, but the restaurant business likely felt a few tremors of its own, judging from recent developments.
In short order, we had the most significant executive change in years; further proof the business can be one big hurt for the unwary; and a strong reminder of why you should always wear clean underwear while dining out in the city, if you wear any at all.
Temblor 1: First, the personnel shift. It wasn’t shocking that California Pizza Kitchen named a new CEO after being acquired by a private-equity firm. The surprise was the selection: G.J. Hart, the longtime range boss at the Texas Roadhouse casual chain.
I always figured he owned too much Roadhouse stock to leave. The only way he’d exit would be if a P.E. firm took the company private and installed its own honcho.
Turns out Hart only holds 289,000 shares, or less than 1% of shares outstanding, according to last year’s proxy.
Which will undoubtedly work in CPK’s favor. Roadhouse was a standout among the crowded field of casual faux-honkytonks, a group that also includes LongHorn, Lone Star and at least seven or eight strong regional chains.
The other national brands went through some significant retrenchment. Roadhouse has been the steady ride in the field, the result of what strikes me as a customer as an intense focus on operations and the integrity of the brand. You have a sense of what the concept is all about.
Sometimes when I visit a CPK, I feel as if I’m in a Sbarro with waitress service. Is it a pizza place, a casual restaurant, an Italian dinnerhouse, a café? Hart’s skills will likely play directly into the chain’s needs.
Temblor 2: The MaggieMoo’s mix-in ice cream chain is led behind the barn. The concept will be absorbed into its sister brand (and what most observers cite as the originator of the format), Marble Slab.
Moo’s wasn’t exactly an industry powerhouse. But it did have its moments of interest as a franchise option, particularly when arch-rival Cold Stone Creamery was growing so quickly.
That wouldn’t be such a big deal on it’s own. But there’s also…
Temblor 2.5: A new flurry of media reports about Quiznos financial plight. The Wall Street Journal reported some time ago that the chain was struggling under a whopper of debt. New coverage, including in the Journal, suggest that the problem hasn’t eased at all.
Quiznos is no MaggieMoo’s. It made a splash in the sandwich market, both by growing at head-turning speed and undercutting competitors on price. It was also one of the franchise chains that everyone seemed to be talking about.
Franchise relations within the chain soured long ago. Not the operators are watching a train-wreck of a situation, and one that many of them predicted when the advertised price of sandwiches left crumbs for margins.
The moral here: Restaurant franchising has stepped up appreciably in recent years as franchisors sold off company stores, displaced white-collar workers decided to start their own businesses, and fast-casual emerged as a hot area of growth. Activity increased, but the risk didn’t decline.
Choosing the wrong franchise can still be disastrous, even though the emphasis today is on finding experienced operators who might already have other chain concepts in their brand portfolios.
Temblor 3: New Yorkers have turned their city’s exalted restaurants into one big orgy, according to a story in the most believable tabloid this side of The Onion, the New York Post.
“Tableside naughtiness is so widespread, the issue’s no longer whether you’ve had a dalliance at an NYC eatery; it’s when, where and how,” reported the Ruppert Murdoch-owned daily.
Bragging about where you’ve had sex is now as much of a status setter as being able to namedrop where you ate, or what celebrity works out at your gym, according to the piece.
My favorite quote, from Joseph Couture, the author of a book on public sex: “The only thing people drop faster than their inhibitions after a bottle of wine is their pants.”
Which makes you wonder how many restaurant patrons took the earth moving beneath their feet this week as a completely routine experience.
Showing posts with label Texas Roadhouse. Show all posts
Showing posts with label Texas Roadhouse. Show all posts
Thursday, August 25, 2011
Tuesday, January 25, 2011
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,
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,
Tuesday, April 14, 2009
Party on, Texas Roadhouse
Restaurateurs’ arms must be getting sore from all the self-flagellation.Luckily the truly spasmed can pass the rod to any number of would-be de Sades for a few more licks, from investors to health advocates, politicians, animal-rights groups, eco-terrorists, chain haters or your garden-variety scold. This is no time for high spirits or a positive outlook on a business so hard-pressed,or at least that’s the prevailing sentiment.
That’s why you have to give a big woot-woot to G.J. Hart and his team at Texas Roadhouse, the publicly traded steakhouse chain. Last week the company spent upwards of $2 million to gather 1,000 chain standouts for a five-day fest in San Francisco. They stayed at The Fairmont and The Ritz-Carlton, enjoyed events like a barbecue and a Summer of Love-themed party, and cheered on the five contenders in the annual Roadhouse Meat Cutting Challenge (the top cleaver heaver wins $20,000 and a year’s worth of bragging rights for his store.)
The celebration was so out of sync with the dourness of the times that it snagged coverage on CNBC’s Squawk Box, the financial network’s primetime show for investors. Reports also showed up on the CBS affiliates of major cities and in media like the High Plains Journal in Sioux Falls, S.D., and station KXMB in Bismark,N.D.
The coverage posed an obvious question: Isn’t this kind of indulgence inappropriate for the times? Was the 325-unit chain pulling the sort of move you might have expected from an AIG?
“People are the biggest asset we’ve got,” CEO Hart explained on Squawk Box. “The investment in our people will yield us big returns.”
He indicated that the investment may be even bigger than other coverage let on. In addition to spending from $2 million to $2.5 million of the company’s travel budget on the five-day event, another $1 million in supplies and effort would be put into local charities; a full day would be spent by the participants in a giveback to the host community, even though Texas Roadhouse has only three restaurants in all of California. Just one is in the greater San Francisco area.
But giving back, Hart explained, is part of the company’s philosophy and culture. It’s all about feeding that spirit and nurturing a sense of hospitality, which will ultimately help with sales and traffic.
Gauging the effects on morale and motivation while the conference was still underway, Hart told Squawk Box that he was already seeing “a great return on investment.” You have to raise a cold longneck to leadership like that.
That’s why you have to give a big woot-woot to G.J. Hart and his team at Texas Roadhouse, the publicly traded steakhouse chain. Last week the company spent upwards of $2 million to gather 1,000 chain standouts for a five-day fest in San Francisco. They stayed at The Fairmont and The Ritz-Carlton, enjoyed events like a barbecue and a Summer of Love-themed party, and cheered on the five contenders in the annual Roadhouse Meat Cutting Challenge (the top cleaver heaver wins $20,000 and a year’s worth of bragging rights for his store.)
The celebration was so out of sync with the dourness of the times that it snagged coverage on CNBC’s Squawk Box, the financial network’s primetime show for investors. Reports also showed up on the CBS affiliates of major cities and in media like the High Plains Journal in Sioux Falls, S.D., and station KXMB in Bismark,N.D.
The coverage posed an obvious question: Isn’t this kind of indulgence inappropriate for the times? Was the 325-unit chain pulling the sort of move you might have expected from an AIG?
“People are the biggest asset we’ve got,” CEO Hart explained on Squawk Box. “The investment in our people will yield us big returns.”
He indicated that the investment may be even bigger than other coverage let on. In addition to spending from $2 million to $2.5 million of the company’s travel budget on the five-day event, another $1 million in supplies and effort would be put into local charities; a full day would be spent by the participants in a giveback to the host community, even though Texas Roadhouse has only three restaurants in all of California. Just one is in the greater San Francisco area.
But giving back, Hart explained, is part of the company’s philosophy and culture. It’s all about feeding that spirit and nurturing a sense of hospitality, which will ultimately help with sales and traffic.
Gauging the effects on morale and motivation while the conference was still underway, Hart told Squawk Box that he was already seeing “a great return on investment.” You have to raise a cold longneck to leadership like that.
Friday, February 27, 2009
Survival tactics 2.0
Restaurant chains agree the economy stinks. But their ways of contending vary more than Sen. Burris’ recounts of his Blago dealings. Here’s a rundown of what several brands have recently identified as their updated coping strategies:
Applebee’s: The near-term emphasis, executives said during their conference call, will be on restaurant operations, both to bolster unit-level profit margins and to provide a better experience for the guest. One of the butt magnets to be used near-term is an updated menu sporting new types of foods and beverages, according to Julia Stewart, CEO of franchisor DineEquity Inc. The introduction is slated for mid-April, with more products to be introduced and promoted throughout the year, she said.
Cracker Barrel: Management spoke less during its conference call about speeding service, the focus of past confabs, and far more about delivering value. The chain is about to roll out a line of lunch and dinner skillet meals that will be priced from $7.99 to $8.99, including salad and bread. Executives acknowledged that their Best of the Barrel initiative, an effort to streamline the menu by loping off less-popular selections, proved a mistake. “Customers were disappointed to see their favorite food items no longer available,” said CEO Michael Woodhouse. It was a lesson, he said, “we learned the hard way.” No mention was made of an initiative to speed service by using holding equipment for items like bacon and sausage.
Domino’s: “We’re working very hard to be a bigger player in the late night business, particularly with some of our new products,” said CEO David Brandon. He asserted that the pizza chain’s initiative for stretching its sales day the other way, into lunch, has been successful. All stores are now open for the meal, which Domino’s is pursuing with its new line of delivered oven-baked sandwiches.
Famous Dave’s: The emphasis appears to be on helping franchisees survive the downturn. The assistance includes a switch to shorter-term purchasing contracts and the development of more secondary suppliers, to increase competition. Meanwhile, development requirements for franchisees have been suspended through 2010. Licensees that open a store get a cut in royalties for the first year of operation. Advertising royalties have been halved, to .5% of sales.
Texas Roadhouse: Management stressed this week that traffic and guest spending levels are the big problems confronting the bargain-priced chain. Longer term, said CEO G.J. Hart, the company is focusing on the cost of new restaurants. Hart said the home office hopes to bring down the current outlay of $4.1 million, or roughly what the unit will do in annual sales, in part by locating stores in strip malls. “We’re also evaluating conversions,” he said.
Applebee’s: The near-term emphasis, executives said during their conference call, will be on restaurant operations, both to bolster unit-level profit margins and to provide a better experience for the guest. One of the butt magnets to be used near-term is an updated menu sporting new types of foods and beverages, according to Julia Stewart, CEO of franchisor DineEquity Inc. The introduction is slated for mid-April, with more products to be introduced and promoted throughout the year, she said.
Cracker Barrel: Management spoke less during its conference call about speeding service, the focus of past confabs, and far more about delivering value. The chain is about to roll out a line of lunch and dinner skillet meals that will be priced from $7.99 to $8.99, including salad and bread. Executives acknowledged that their Best of the Barrel initiative, an effort to streamline the menu by loping off less-popular selections, proved a mistake. “Customers were disappointed to see their favorite food items no longer available,” said CEO Michael Woodhouse. It was a lesson, he said, “we learned the hard way.” No mention was made of an initiative to speed service by using holding equipment for items like bacon and sausage.
Domino’s: “We’re working very hard to be a bigger player in the late night business, particularly with some of our new products,” said CEO David Brandon. He asserted that the pizza chain’s initiative for stretching its sales day the other way, into lunch, has been successful. All stores are now open for the meal, which Domino’s is pursuing with its new line of delivered oven-baked sandwiches.
Famous Dave’s: The emphasis appears to be on helping franchisees survive the downturn. The assistance includes a switch to shorter-term purchasing contracts and the development of more secondary suppliers, to increase competition. Meanwhile, development requirements for franchisees have been suspended through 2010. Licensees that open a store get a cut in royalties for the first year of operation. Advertising royalties have been halved, to .5% of sales.
Texas Roadhouse: Management stressed this week that traffic and guest spending levels are the big problems confronting the bargain-priced chain. Longer term, said CEO G.J. Hart, the company is focusing on the cost of new restaurants. Hart said the home office hopes to bring down the current outlay of $4.1 million, or roughly what the unit will do in annual sales, in part by locating stores in strip malls. “We’re also evaluating conversions,” he said.
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