Ruffling feathers about KFC

It’s a canon of the chain-restaurant world that you speak of a concept’s founder with a reverence usually reserved for saints and Mickey Mantle. The only party held in higher esteem might be franchisees, typically lauded as the embodiment of entrepreneurship and operational know-how. They’re best mentioned with a bowed head.

So let us celebrate the honesty that Yum Brands CEO David Novak bravely showed yesterday in uttering what would normally be stigmatized as heresy on the grandest scale. He dared to speak candidly about the DNA of KFC.

That meant—steel yourself—voicing what could be construed as a criticism of Col. Harland Sanders.

Novak had been asked by financial analysts for “more color” (finance-speak for “the full story”) on the glaring discrepancy between KFC’s performances at home and abroad. Why was it such a favored son in China but a problem child here in the States? Couldn’t some of the best practices from overseas be programmed into domestic operations? After all, the questioner noted, that’s what McDonald’s does.

“I think there's just been a lot more innovation and breadth built into the menu in KFC in most countries outside the United States,” responded Novak. “I think Colonel Sanders kind of set the U.S. up with a heritage of small-box [stores serving] chicken on the bone, stay focused on your knitting. And so I do think that it's a little harder for us to transform the brand.”

While analysts were no doubt clutching their chests and donning garlic necklaces to ward off the bad juju, Novak went further: “And frankly, we don't have a franchise system that is as enlightened as our franchisees are outside the United States as well. So that's something that we have to deal with as well.”

Relations between KFC and its franchisees have likely served as inspiration over the years to Hatfield and McCoy kin. So it was doubly bold of Novak to be candid and deliver the transparency that investors deserve.

He’s probably in an office right now, holding his head as he screens calls and e-mails from irate parties. But he did the right thing.

As he noted during yesterday’s conference call, One of the things I take a lot of pride in on our company is we don't really like storytelling.

“Stories equal excuses.”

You can read the account yourself in the transcript posted by SeekingAlpha.com.

Lawsuit still hurting Taco Bell, Yum says

Taco Bell has drawn praise inside and outside the restaurant business for the way it handled a lawsuit loudly proclaiming its ingredients to be crap. The measure sought to block the chain from calling describing the content of its tacos and burritos as ground beef, arguing that there was more filler than meat in the mix.

Taco Bell’s aggressive response, waged in ads and a publicity campaign, prompted the plaintiff quietly to drop the suit earlier this week. But the chain’s franchisor acknowledged yesterday that considerable damage has been done.

“Our positive sales momentum was reversed when we were thrown a curveball with the false claim around our food quality,” David Novak, the CEO of parent company Yum! Brands, told financial analysts.

He asserted that “heavy users” of Taco Bell continued to frequent the chain as the lawsuit (and Taco Bell’s response) generated headlines in the major media. But “light users” stopped visiting and have yet to resume their earlier levels of patronage, Novak said.

“We do not expect the second quarter in the U.S. to get better,” added CFO Rick Carucci. “We have not yet been able to reverse the negative sales trend at Taco Bell.”

Analysts seemed skeptical of the assessment.

“I'm a little surprised that Taco Bell has weakened as it's gotten away from the lawsuit,” said Jason West of Deutsche Bank. “Do you think there's any other issues going on out there with the [quick-service restaurant] consumer and that are new any way in terms of gas prices or whatever it may be?”

Gas prices haven’t helped, acknowledged Carucci. But the publicity stirred up by the lawsuit was the determining factor, he contended. Taco Bell’s same-store sales were running about 4% above the year-ago tally before the story broke. Bad weather tempered that in some areas, but the decline wasn’t early as severe as what happened after the lawsuit became widely known.
If anything, he added, the damage was probably mitigated by the promotion of a shrimp-filled taco for Lent.

“We just need a little bit of time to get further away from the event,” said Carucci, as quoted in a transcripted posted by SeekingAlpha.com.

“We just don’t know how long it’s going to take us,” added Novak.

He assured the analysts on the call that the situation would not affect Taco Bell’s plans to add breakfast and remodel its stores.
“Better not,” he stressed.

The call just about coincided with Taco Bell’s announcement that it wanted a public apology from the Alabama law firm that had handled the lawsuit.

The Yum executives indirectly explained why. The attorneys had stirred up as much publicity as they could when the suit was filed and was still alive. But they very quietly withdrew it, leaving ample chatter still underway.

Taco Bell apparently wants the firm to publicly renounce its actions and to make some publicity about it withdrawal of suit.

There was no mention during the call of Long John Silver's or A&W, the restaurant brands Yum is trying to sell.

Chinese check-in

A high-level conference on Asian opportunities drew plenty of investors, bankers, portfolio managers and other financial experts to New York yesterday morning. Too bad there wasn’t a restaurant-chain executive among them.

Today, that lone soul would understand the profound economic changes afoot for China, undeniably the restaurant market of choice right now. When the dislocation hits, and peers scramble in panic, the attendee could sit back, pour another cup of coffee, and relish knowing the downturn might not be so bad for the foodservice business.

Any U.S. chain with a presence in China has probably heard the dire predictions that were explored in depth yesterday. There’s a consensus that China’s torrid economic growth can’t be sustained. At the very least, there’s the risk of steeper inflation. There’s also the not-so-little matter of pushing the environment past the point of recovery. And other nations will surely look to curb unfair advantages like the lax enforcement of intellectual-property rights, or what one speaker euphemistically deemed “the migration of ideas.” Counterfeiting is huge there, and corruption is still a common practice in some areas, as one panel noted.

But the real sand in the gears, several speakers noted during the Asian Century Forum, is the unique imbalance of China’s economy. Here in the States, most of our economic activity takes the form of consumption—people, businesses or governments buying things.

In China, most of the Gross Domestic Product is generated by investment—the capitalization of factories and other means of producing products. Consumption accounts for less than 40% of China’s GDP, as one speaker noted.

The reason, Asian authority Michael Pettis explained, is the low buying power of Chinese workers. Output has exceeded wage growth, yielding more and more goods and services, but insufficient wealth to buy them. And it’s all the result of a government-controlled economy.

Pettis, a professor of finance for the Guanghua School of Management at Peking University, said the strange situation will probably prevail for some time to come. He expects a new five-year growth plan to revealed by the government next month, and doubts there’ll be any component to boost consumption.

The nation can’t stay on that course without risking social and political upheaval, other speakers suggested. More emphasis will have to shift to consumption and growing household income at one point or another.

Before the imbalance is righted, Pettis said, the economy will gag more than hiccup. “We should be prepared for a growth rate in China of three 5%. The days of a 10% growth rate are over,” he predicted, dropping what may have been the conference’s biggest bombshell.

A slowdown in the economy would no doubt be chilling for chains like Starbucks and McDonald’s, who have factored a penetration of China’s emerging consumer market into their near-, mid-, and long-term growth strategies.

I bet that Yum! Brands, parent of KFC and Pizza Hut, wouldn’t mind selling those brands’ U.S. presence to focus more resources on their expansion in China, where both are market titans with a jetpack on their backs. The franchisor already has a brand that operates only in China, East Dawning, and has an investment in a second, Little Sheep Hot Pot.

Halving China’s economic growth would have to be a serious worry to big U.S. operators like those. But, as attendees learned yesterday, the drop-off would be the price for shifting more of China’s economy to a consumption base. The emphasis would be on raising workers’ wages and household income, fostering a larger middle class.

For restaurants, that means putting more money in the pockets of consumers with a hunger for American culture, including its fast food. It’s a silver lining that was mentioned repeatedly yesterday.

Too bad no one from the industry was there to hear it.

Full disclosure here, as per the FCC’s blogging regulations: I was paid to live-blog and tweet from yesterday’s Forum, which was co-sponsored by the Paul Hastings lawfirm and the Financial Times. You can review the highlights here.

Yum's second thoughts

What a difference a year makes.

David Novak, the CEO of Yum! Brands, speaking to financial analysts on Feb. 4 about the company’s vision for Long John Silver’s and A&W All-American Food:

Our goal with Long John Silver and A&W is to make those brands stronger and to build them working with our franchisees.

Novak, as quoted in a press release issued today by Yum, the parent of Taco Bell, Pizza Hut and KFC:

We do not believe Long John Silver’s and A&W All–American Food restaurants fit into our long–term growth strategy. Accordingly, we have decided to put these two great brands up for sale.

Overlooked news of the day

Here are some stories you might’ve missed on what’s proving to be a big news day:

NOW, NOW: Hooters can't say it's adult entertainment and then feed kids
The National Organization of Women reportedly petitioned authorities in the San Francisco area to shut down local Hooters restaurants because they were licensed as hootchie-koochie places but actually fed kids along with the drooling lechers in raincoats. Actually, the lawyers might’ve used different language, but that was the essential contention of the legal action. Hooters doesn’t deny that it’s become more of a family place, acknowledging that 10 percent of its parties are families.

KFC lightening up?
KFC units in the United Kingdom will switch to a healthier frying oil next year, according to a report yesterday from Marketing Week. The online story didn’t say if the change would be chainwide or just an undertaking by British stores. A switch like that for KFC would be like Burger King tinkering with its ground beef mix or McDonald’s fiddling with its fries.

But the Colonel didn't like mood lighting!
The same story reported that KFC is testing a new and surprisingly upscale design across the pond. It sounds like KFC’s take on the trend of quick-service giants making their dining rooms more comfortable and inviting for young people, with amenities like entertainment and more bar-like features. In KFC’s instance, that means a room with red glass walls and red lighting. There again, Marketing Week didn’t say if the new prototype would be peculiar to the U.K. or something that could appear here in the United States.

The King's demand were a royal pain, bankrupt zee says
One of Burger King’s larger franchisees filed for bankruptcy protection, contending that it was bled dry by the capital outlays required by the brand’s former owner. Duke and King reportedly operated 92 stores in the Midwest. It also hissed at the franchisor for blocking the purchase of 66 stores in 2007, arguing that those units were healthier and could’ve provided the cash flow to rejuvenate units elsewhere. The situation underscores that one of the bigger challenges for BK’s new owner is winning the support of the franchise community.

Luby's nickel and dime ops
The most surprising tidbit in Luby’s quarterly financial report is the $153,000 in revenues ascribed to vending operations. Who knew it had any? They must’ve been picked up in the Fuddruckers and KooKooRoo acquisition because there’s no vending revenue listed for the first quarter of the prior year.

Buyer's remorse?
The revelation followed the little-noticed news that a court has directed Luby’s to buy nine Fuddruckers franchises, as the cafeteria operator agreed when it bought Fudd’s parent, Magic Brand, back in June. Luby’s had balked at that part of the deal, contending that it hadn’t been given an accurate account of the franchises’ financial health.

More assessments of health-care bill

Executives of Yum! Brands, the parent of Taco Bell and KFC, are less pessimistic than McDonald's franchisees about the likely impact of the omnibus health-care reform law (see item below). Indeed, said CEO David Novak, the initial impact will likely be a $6 million tax savings on the medical benefits that are provided to Yum retirees.

Longer term, Novak told investors during a conference call, franchisees will be stung by an additional cost of $10,000 to $15,000 per unit. But that burden won't be dropped on them until 2014.

"We are going to work with them to mitigate the cost," Novak said. "WE have plenty of time, I think, to deal with the issue."

Who is that masked bidder?

You have to wonder why the second company to tender a bid for Carl’s Jr. and Hardee’s is hell-bent on masking its identity. Suitor No. 1, after all, is all but hiring skywriters to tout its interest: “Thomas H. Lee wants to do burgers!”

So why the secrecy for would-be buyer No. 2? After thinking about it at length today, I’m convinced there are three possible answers:

1) The bidder is actually Bruce Wayne, who's thinking of the possible movie tie-ins. It’s always dicey when you live over a secret cave and have an alternate crime-fighting ego in the age of YouTube. Besides, Alfred’s not getting any younger, and he could spill the beans about the capes and all those nifty toys if reporters come a-calling.

2) The would-be buyer doesn’t want to drive up the price of CKE Restaurants, the chains' parent, by sparking a bidding war. That, in turn, could be the case if the acquisition is a strategic one. If the addition of those brands makes terrific sense for the suitor, the market might bet the second party would be willing to sweeten its offer.

So what companies fit that fit that bill?

How about Yum Brands? Burgers are a gaping hole in its franchise portfolio, and both Carl’s and Hardee’s have geographic room to grow.

Or how about an East Coast brand that could suddenly have a big presence in the West and Central West? That description could apply to a few brands, including Chick-fil-A. Then again, that’s not the type of operation to do something rash. But it would have the wherewithal.

3) This cloaked suitor doesn’t want to alarm its current employees, or possibly even its investors. It’d rather complete the deal before it needlessly worries key constituencies and creates a nightmare for itself.

But that sounds unlikely. So I’m putting my money on the likelihood that the challenger is a restaurant company who sees the two regional burger chains as good complements to its current holdings.

Then again, I had Kansas winning the NCAA championship.

Some blunt words about Pizza Hut & KFC

It’s not unusual for chain executives to pass long customers’ opinions of their brands. It’s another matter for the officials to relate the slams along with the gushing praise, especially while talking to investors. Yet, in a refreshing burst of candor, that’s exactly what the CEO of Yum! Brands did Thursday during a conference call about the company’s fast-food chains, Taco Bell, KFC and Pizza Hut.

Chief executive David Novak had the harshest words for Pizza Hut’s domestic operations, whose same-store sales fell a head-turning 12% during the last three months of 2009. Oh, sure, the American public loves the chain’s pizza, said Novak, but “the consumer has told us frankly that we are simply too expensive.” He noted that the venerable chain is also focusing on service speed and kitchen operations, so you have to suspect that customers aren’t tossing bouquets in those directions, either.

Novak said the chain is countering its high-price stigma with the “successfully tested” Any Way You Want It promotion, where patrons can get a customized pie for $10.

And how about KFC’s domestic operations? Oy, don’t ask.

“There is no question we have our work cut out for us,” Novak told analysts on the conference call. He ticked off the chain’s three main perception problems in the U.S.: Too much fried food, not enough value, and lousy operations.

The first two objections from customers have been addressed, he said. Indeed, KFC’s new Kentucky Grilled Chicken now accounts for a fourth of all the chicken on the bone sold by the chain.

But operations still have a ways to go, particularly in terms of service speed and not running out of some menu items before the next batch of supplies arrive, Novak acknowledged.

He had nothing but praise for Taco Bell, describing it as one of the company’s sales and profit workhorses, with ample room left to grow in the U.S. market.

The domestic arms of Pizza Hut and KFC, on the other hand, weren’t even addressed when Yum! gathered analysts in New York a few months ago for a close-up look at the company’s inner workings. “we made the conscious decision to not even cover Pizza Hut and KFC U.S. at the December analyst meeting,” he noted.

Then again, those pieces of the business still seem to be held in higher regard than Yum’s two other American fast-food brands, Long John Silver’s and A&W. “[I’m] wondering whether there is a potential to sell those brands or whether we'll see those brands continue to operate here as it relates to generating incremental cash,” Jeffrey Bernstein, the restaurant analyst for Barclays Capital, asked the Yum officials on the call.

“Our goal with Long John Silver and A&W is to make those brands stronger and to build them working with our franchisees,” countered Novak.

Restaurants show their hearts. My friend told me.

As a journalist who covers the restaurant industry, I of course have to remain absolutely, positively objective about the companies and chains that make up the business. Show appreciation or regard for even a single member and someone might suspect you lack the cold-heartedness to tell it like it is.

But I have this friend who covers the business, and he wants me to publish a few of the reasons why he’s particularly proud today to be affiliated with the trade. Here they are:

--McDonald’s pledged to donate $500,000 to relief efforts for Haiti, and its Latin American franchisee offered to match whatever the home office provides. That’s $1 million in aid.

--Burton’s Grill, a four-unit chain in the Boston area, announced that it would donate 15% of its revenues for the day to buy food for the Haitians. You could argue that giving away one of every six dollars that’s slipped into the till by a company of that size is a bigger sacrifice than the McDonald’s million.

--Yum! Brands, the parent of Taco Bell, KFC and Pizza Hut, pledged to send $500,000 from its standing hunger-relief fund to Haiti.

--Burger King's standing charity has pledged $50,000 in relief.

--In Chicago, independent restaurants are forming a Donate a Dollar program to fund a Haitian relief effort called Wake of the Quake. Apparently patrons will be asked to make contributions that will then be aggregated and shipped to the earthquake-devastated nation.

--A roundup of what other restaurateurs are doing to help was compiled by The New York Times' Kim Severson and published in paper's Diner's Journal Blog . Among the contributors are such gods of the business as Danny Meyer, Jean-Georges Vongerichten and Mario Batali.

There are undoubtedly dozens of other programs that restaurants are undertaking to help quake victims, and each deserves to be celebrated. It's a good feeling to be part of this business.

I was referring to my friend, of course.

More thinking outside the bun

The news seeping out of Yum! Brands' annual financial conference in New York suggests 2010 could be a year of hyperactive menu development for Taco Bell, the franchise company's biggest brand.

Among the changes previewed was the Mexican chain's use of two proteins that have yet to appear on its regular menu: carnitas, or Mexico's version of pulled pork, and shrimp, which is scheduled to be used in a premium ($2.79/each) taco.

Among the other products already been greenlighted, according to Janney Mongtomery Scott analyst Mark Kalinowski, are a bargain priced (89-cent) 5-Layer Burrito, and Taco Bell's first soft taco, which will feature the new carnitas.

Every year Yum holds a meeting with restaurant analysts like Kalinowski to familiarize them with the strategies of the company's chains. For the benefit of those who've been caught in a pesky time warp for the last four decades, the other brands include Pizza Hut and KFC.

Off with The King's head?

There’s probably no truth to the rumor that Burger King headquarters is planning a new line of kids-meal action figures called Butthead Franchisees (“Collect all the dolts--and their lawyers, too!!”) But the home office clearly isn’t friending some of its licensees on Facebook these days, and vice-versa. Though that’s sort of like saying Batman and the Joker had their inter-relational challenges. We’re probably only a snipe away from seeing The King in combat fatigues and camouflage face paint.

The flashpoint is the $1 Double Cheeseburger that the chain decided to promote systemwide despite a forceful don’t-you-dare from franchisees. In a gambit that drew more media coverage than Michael Jackson’s funeral, a group claiming to represent three-fourths of BK’s licensees filed a lawsuit to halt the promotion, arguing that the franchisor was fixing prices. The National Franchise Association said at the time of the filing that a franchisee stands to lose a dime on every double that’s sold.

By franchising standards, that sort of gripe is the equivalent of asking Mike Tyson if he prefers women’s clothing. But the association took the further step of sending a letter to each director of Burger King’s parent company, asking that they intervene to reverse management’s decision and set the home office on a more intelligent strategy. The elevated middle finger was leaving CEO John Chidsey, the director who crafted the current plan, on the mailing list.

That’s when things started getting really ugly.

Yesterday, someone leaked an e-mail to the Associated Press that had been sent to Franchise Association members over the weekend by Chuck Fallon, the Chidsey direct report who oversees BK’s North American division. It cautioned the dissidents that they could be limiting their growth opportunities with all the public grumbling.

“Bankers, landlords, suppliers and potential new franchisees are watching and listening,” the A.P. quoted Fallon as warning. The upshot, he said, could be less lending and less attractive terms—or a lower price should the malcontents look to sell their businesses.

A return volley has yet to be fired by the franchisees, or at least it’s not yet come to the attention of the media. But give it time.

Not that they’re the only franchisees who are ready to string up their franchisors during these trying times. NPC, Pizza Hut’s largest franchisee, told its shareholders in an earnings statement last week that the pizza brand and its marketing need to be handled differently, a veiled criticism of franchisor Yum! Brands. Making that observation in a financial statement is like telling a soccer mom that her kid couldn’t hit a barn with three free kicks.

And Quiznos franchisees probably have a rule that you have to pay a dollar everytime you mention the franchisor or otherwise cuss.

Because of its sheer size, BK is going to be the fracas in the spotlight. It’s just a matter of time until the feud starts snagging covered on CNN.

Yum! steers its chains onto surprising turf

Yum! Brands has previewed some scrambles it’ll try in the next few months to juice up sales at its three major fast-food chains. But most were unrelated to the breakfast initiatives being plotted for Taco Bell and KFC.

Instead, the franchising giant is trying to remix its concepts' sales by venturing into some surprising territories. Here are some of the brand-bending undertakings Yum! described to financial analysts during a conference call on Wednesday:

--If you think Taco Bell is all about stuffing skateboarding dudes with as much bulk as they can buy for a buck, steel yourself. The chain will kick off 2010 with a national advertising for its Fresco line, a nine-item array of lower-fat and less-caloric selections.

If that's not enough of a departure from Taco Bell's traditional image, consider what looms on the horizon: "Longer term, we are most excited about breakfast," said Yum! CEO David Novak.

If the Taco Bell chihuahua hadn't passed away, he'd be letting out a Klingon death howl right about now.

--KFC--that's shorthand for Kentucky Fried Chicken, in case you're of a vintage that thinks Col. Harland Sanders was some Civil War hero--now derives 30% of its sales from Kentucky Grilled Chicken. "We have driven awareness to 75% of quick service restaurant users," said Novak, noting that the product is transforming the brand's image.

"We needed to broaden the appeal of this brand and we have done it," he said. Nevertheless, "continuing to drive trial is our top job."

--A major reason for Pizza Hut's 13% same-store sale drop in the third quarter was its image as a place for premium pizza, according to Novak. It shouldn't be a shocker, then, that the chain's new ads focus on chicken wings and a concept-within-the-concept, the bolted-on WingStreet wings brand. WingStreet is being positioned as a separate concept that piggybacks on Pizza Hut's delivery service.

Novak was far less effusive than he has been in past conference calls about Pizza Hut's new Toscani pasta line. He gave no reason why, but did note that the pizza chain has to do a better job of stressing the new diversity of its menu.

Novak noted that Yum! is in the process of choosing a new ad agency for Pizza Hut, precisely "to give the brand a fresh, more differentiated positioning." But he acknowledged that pastas already account for 10% of Pizza Hut's sales and figure into 30% of all transactions.

He also disclosed that breakfast is seen as a big international opportunity for KFC.

"When you look at KFC outside the United States, the only competitor we have is McDonald’s, so why can't we do breakfast?" he commented. "I mean, who is closer to the egg than Kentucky Fried Chicken?"

Novak also mentioned that Taco Bell is working on "a bigger beverage program," without divulging details. But the Orange County Register reported Wednesday night that at least two units in California are testing a juice bar featuring smoothies and a new frozen shake called the Frostbite.

Also available are fingerfood snacks like Mini Crispy Empanadas and Bacon Belly Bombers, along with cupcakes and cookies.

Have enough seagull eggs in the fridge?

Yum! Brands’ investment in an Asian “hot pot” concept is a reminder that the global culinary world has yet to be fully mapped and catalogued. We have a fondue specialist or two here in the United States, but I can’t recall anyone talking about the new hot pot place that just opened over on Main Street, next to the Mongolian barbecue outlet. Indeed, the very notion sounds exotic and alien: Giving patrons a caldron of hot broth so they can cook their own meat and vegetables at the table.

All the continents may have been found and explored long ago, but TV and the internet haven’t erased profound differences and outright peculiarities in regional fare. For instance, while foodies on this side of the Atlantic were off “ramping,” a rite of spring not even familiar to many in the States, their counterparts in the United Kingdom were bemoaning this year’s shortage of seagull eggs. More precisely, the eggs of black-headed seagulls, a delicacy enjoyed by the British upper crust and sports diners.

The problem isn’t a lack of eggs, it's the shortage of harvesters. According to a report in the London Telegram, only about 25 U.K-ers are licensed to gather the eggs, which, the article points out, can cost around $7 each in U.S. dollars. Because a license is a privilege of class, few new ones are granted, and the current ones are held by old sots with thick monocles and a proclivity to remember that dodgy fox hunt of ’59. Only about a third of the holders still prowl the coast marshes looking for the eggs, according to the Telegram.

Meanwhile, fashionistas in Budapest had to add a new restaurant to their must-try list. It specializes in meats that are cooked with an old-style iron, apparently a venerable Hungarian method. That distinction is reportedly conveyed in the place’s name, Husvasalo, but my Hungarian is a little rusty.

Other specialties of the place include a dessert called milk cake, which is likened to a U.S. pancake, and potato donuts.

The world may be getting smaller, but the list of known local specialties just keeps getting long and longer.

Diet group vows to go gut-to-gut with fast food

An advocacy group called Corporate Accountability International sent letters today to the Big Four U.S. fast-food companies, basically telling them, “You’re mine, bitch.” As a simultaneous press announcement explained, the group is commencing a war to secure such concessions as having McDonald’s, Burger King, Wendy’s/Arby’s and Yum! Brands pick up the health-care expenses for diet-related illnesses.

The Boston-based organization has targeted those companies and their nine chains, but its mission extends to the whole fast-food sector. For instance, it wants to stop fast-food advertising and promotions aimed at minors. It’s also calling on the business to “not interfere” in efforts to ban or limit fast-food sales.

“The campaign aims to stem the global tide of diet-related disease, in which fast food giants are playing a central role,” states the press release.

The 32-year-old CAI claims it’s been successful in curbing past abuses by corporate giants (and foodservice industry vendors) like Nestle and General Electric. Tobacco and bottled water, a major product line of Nestle, seem like particular areas of pressure.

The text of the letters was not disclosed, so it’s unclear if the tone was cordial, demanding or out-and-out threatening. I’m putting my money on the latter. Check out the group’s special industry-related website to find out why.

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.

Forget the auto bailout. Send Pizza Hut instead.

Yum! Brands should do the patriotic thing and lend Pizza Hut’s menu development team to the Big Three auto companies. The wheezing giants desperately need innovation to make their products competitive again. Pizza Hut, as Sunday’s football broadcasts revealed, has nailed that ability to meet mainstream America’s preferences, before the public even senses the desire. The decades-old concept has transformed itself from a commodity seller into a consumer products business that just happens to use bargain-priced food as its means of satisfying a need.

The most recent bit of evidence is the pie that was advertised here in New York during the Jets’ meltdown Sunday against the Dolphins. A commercial showed a pleasant, brick-walled little pizza-and-pasta-type eatery, like you’d find in the artsy section of any city. The proprietress of Elizabeth’s, as I think the place was named, is offering samples of her newest item, a pizza made with all-natural ingredients. Customers rave about it.

Then Elizabeth reveals she didn’t make the pie. The camera cuts to a Pizza Hut delivery guy, carrying a stack of the chain’s new pizza, The Natural.

Okay, maybe the spot was a bit hokey, and a complete rip-off of the old Folgers Coffee commercial (persons of a younger vintage could probably find it on YouTube, mixed in with videos of jousts, barbershop quartets and other cultural phenomenon of that pre-historic time). But it got across the message that this was a pizza made with a whole-wheat crust, additive-free sauce and cheese, and “all-natural” pepperoni and sausage (i.e., both are free of nitrates, nitrites or other nasty-sounding preservatives). The message stressed that the sauce was made from vine-ripened tomatoes without any added sugar. It’s a convincing bid for validity.

Clearly, this is not your Folgers drinker’s pizza.

There’s nothing about Pizza Hut being the first mega-sized restaurant chain to offer an all-natural product. After all, who cares about that sort of huckster-ism.

And it wasn’t about price, though the spot did indicate the pies sell for $11.99 (a “rustic” version, with whole tomato slices) and $9.99 (the basic pie).

No, the hook is clearly the all-natural aspect. As that sensibility has gone mainstream, convincing consumers that “natural” is better, many would-be converts were likely frustrated by the lack of access to reasonably priced examples. They likely wouldn’t have found an all-natural pizza in the corner joint. And places that carried such a pie may have come across as too nuts-and-berry.

I’m betting Pizza Hut has found a true sweet spot. Of course, that’s easy to say when you consider all the year-end predictions that health and wholesomeness will have a profound impact on restaurant menus in 2009. The National Restaurant Association, for instance, cited “nutrition/health” as Number 11 on its list of hot trends for the new year.

The Natural, which has been in test for eons, follows the rollout earlier in the year of the Tuscani line of takeout and delivery pastas, in my estimation the restaurant industry’s best new product of 2009. In the latest estimate by Yum executives, the $12.99 trays of pasta, each of which feeds four, have generated in excess of $100 million in sales since their introduction in April.

That adeptness at reading the market may be what the auto industry needs to come up with the next Mustang, SUV or small pickup.