Reality Check is going tropical--if it goes at all

I may be unemployed, but I'm still going on vacation. Restaurant Reality Check is heading south to find warmth, beach front and (hopefully) authentic Caribbean cuisine. I hope to write about that experience here, but could be thwarted by technology issues, scolding fellow travelers and, most threatening of all, acute insobriety. So if the postings thin out until Jan. 11, or cease altogether until then, don't fear a kidnapping.

However, my first post will consist of words cut from other postings and pasted together into a note.

Happy New Year.

A good Starbucks rant, completely wasted

I was set to unload on Starbucks for embracing tea as its next big thing when a Jimmy Stewart moment took hold. My inner O’Reilly wanted to fume, “A coffee company doing tea? C’mon, folks, this is the dumbest thing I’ve ever heard! Why not just roll a keg of Budweiser behind the counter?” But the more I considered how McDonald’s and Dunkin’ Donuts kicked Starbucks in the beans by adding comparable brews, the more I wanted to say with a charming stutter, “Now wait a gosh-darned minute here. I love tea! Everyone loves tea! And now you won’t be able to get the really good stuff anywhere but Starbucks. It’s a brilliant idea, I tell ya!”

Which, of course, leads to two surprising conclusions: Jimmy Steward could’ve stomped Bill O’Reilly’s any time, even if Sean Hannity joined in. And the next major point of differentiation for a chain synonymous with coffee may indeed be exotic tea-based drinks like infusions and tea lattes. The concoctions sound far too complex for quick-service places to whip out along with chicken nuggets and snack wraps.

Ah, you counter, wasn’t that once said about lattes and other coffee-based craft drinks? And doesn’t even the local bowling alley now offer cappuccinos?

Sure, anyone can prepare those drinks today. All you do is push the button on the automated dispenser. But would you want a Vanilla Rooibus Latte or a Berry Chai Infusion coming out of an idiot-proofed machine, three steps from a deep fryer? It’s like grabbing a martini in a plastic bottle from a C-store’s cooler. The experience is just different.

Vanilla Rooibus, for the record, is a hot combination of caffeine-free “botanicals,” including rooibus, an exotic red tea that’s only grown in a pocket of Africa. When the world’s ready for McRooibus, Starbucks would probably need to embrace the next drink line.

The Berry Chai Infusion consists of aronia berry and black currant juices blended with the now-familiar flavors of chai.

There’s also an Apple Chai Infusion, a Black Tea Latte, and a London Fog Latte, incorporating lavender and bergamot, a pear-shaped Asian citrus fruit.

Are drinks of that complexity and ambition really going to show up soon on the menu boards of Jack in the Box, 7-Eleven or McDonald’s?

Of course, it’s an assumption that Starbucks can cultivate a market for those beverages.

On a recent visit to my local unit, I was the fourth person in a row to order a chai latte. I’ll bet most people never heard of chai until they saw it listed on a Starbucks board. Now I can choose from four varieties in my neighborhood King Kullen (go for Good Earth or Stash, by the way).

So I’m betting that, yes, it can.

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.

A genetically altered Cheesecake Factory?

Cheesecake Factory opened the first of its new downsized restaurants this month, a departure from the pricey cathedrals that’ve been a hallmark of the concept since its earliest days. Now it has a smaller, less-expensive prototype, just like everyone else in casual dining.

That concession to the times follows the addition of a menu section consisting solely of bargains, an asterisk to the chain’s positioning as a place of indulgence, as its luscious cakes or huge portions attest. Now deal hunters will find the same sort of values they might seek on other Friday or Saturday nights at Red Lobster, McCormick & Schmick’s, Outback or Mortons.

Point by point, the once high-flying chain is addressing the issues that have tempered its phenomenal financial success. But, in the process, is it engineering its way into one of casual dining’s biggest problems? Is it sacrificing dramatic points of differentiation to become like everyone else in the pack?

If I’m typical of Cheesecake’s fan base, patrons go there because the experience is over-the-top, from the 200-item menu to the portions, the unusual choices (Navajo Sandwich, anyone?) and the dramatic settings (insider’s note: Look for a sky scene in your local unit, a concession to the religious orientation of longtime leader David Overton). It’s not an overstatement to say it provides a sense of awe.

But awe doesn’t sell in this tight-walleted environment. Bargains, economy and accessibility are today’s stock in trade. Still, by curbing what’s been in its DNA to embrace those head-turning qualities, is Cheesecake thinking merely for the short term? Certainly this economic situation is a crisis, and hence by definition a passing pain.

I’ll be the first to admit that it’s easy for me to second guess one of the industry’s most successful executive teams. I don’t have investors, executives, landlords and employees looking to me to pull the concept out of the doldrums.

But I hope Cheesecake doesn’t sacrifice the counter-intuitiveness that made that brand a stellar success. When everyone was going for streamlined menus, it maintained a tome of fare. When nods to healthfulness were the order of the day, it continued to serve selections that could have fed whole Caribbean islands. When competitors shotgunned units into the market like space invaders focusing on street corners and malls, it grew slowly and with painstaking selection of sites (to the best of my recollection, it’s never had to close a restaurant).

It needs to think in evolutionary terms—how to tailor the brand to the times. Merely co-opting what’s worked for other casual-dining concepts is de-evolution of the worst kind. I hope the folks in Calabasas Hills are careful about how they navigate these perilous times. Otherwise, they’ll just be jumping the shark.

And he could collect unemployment, too

Russ Owens may have lost one of the most coveted jobs in the business, but he probably had a nice holiday nonetheless. After announcing in late November that he would step down as president of the Pei Wei Asian Diner fast-casual chain, Owens and concept parent P.F. Chang’s agreed 10 days ago the longtime industry veteran would collect $800,000 in severance for his “resignation.”

The money is being paid in one lump sum. In addition, all stock options or other equity awards were vested immediately, according to the agreement, which was detailed in an SEC document filed on Christmas Eve.

In exchange, Owens agreed not to sue Chang’s, reveal its trade secrets or take a position that puts him in competition with Pei Wei. That could be a breeze, given that the concept’s direct competition is usually characterized as local Chinese restaurants.

Pei Wei is widely regarded as one of the more promising concepts to come out of the fast-casual boom in the first half of the decade. More recently it’s been battered by the same sales slowdown that has stymied chains at the higher end of their respective segments' price range.

Because Pei Wei is more of an everyday kind of place than a special-occasion option, some of us have viewed its sales problems as a reflection of the public’s shift back to cooking at home.

But at least Owens will have a fair amount of change to spend on dining out.

Restaurateurs couldn't say 'no' to Madoff

The alleged Ponzi scheme run by New York investor Bernard Madoff counted at least two restaurateurs among its pigeons. The Los Angeles Times reported today that La Brea Bakery founder Nancy Silverton invested millions in what investors believe was a scam of historic proportions. The exact amount she lost was not revealed by Silverton, now a co-owner with Mario Batali of Hollywood’s Pizzeria Mozza and Osteria Mozza hotspots. But figures cited in the Times web posting suggest the amount exceeded $5 million.

Silverton told the Times she was warned by her father not to park all that dough with Madoff, but she spurned the advice.

The revelation follows a report yesterday by Bloomberg News that a Florida restaurateur was also stung—and may be taken a second time. The story noted that the restaurateur asked to remain anonymous in hopes of recovering the $1.5 million that is still held by Madoff’s firm. It also raised the possibility that the restaurateur will have to return $500,000 he withdrew as profits from the account and used as a mortgage before the scandal broke.

The story quotes the restaurateur as saying he would rather go to jail than give back the money, arguing that he didn’t know Madoff might’ve been running a scam.

Even restaurants that put no money in Madoff’s hands may be a bit poorer for the purported scam being busted. Reports indicate that Madoff enjoyed high-end restaurants like The Palm, and was pleasant to the staff as well as free-spending.

More (sea) changes at the top

This morning brought the news that Greg Burns, a leader of the O’Charley’s dinnerhouse chain for 25 years, will step down early next year as CEO and chairman. It’s the latest indication that a changing of the guard is quietly taking place in the restaurant industry as executives who spent a lifetime in the business surrender the helm to newer and presumably more mainstream talent.

O’Charley’s said it hasn’t yet chosen Burns’ successor. But look at some of the replacements that have been named for exiting long-timers. Nigel Travis is stepping into the CEO’s job at Dunkin’ Donuts’ parent company with deep experience in internet sales, international business and retail marketing. The internet wasn’t even known when the standout he’s succeeding, Jon Luther, was starting his career.

Wendy’s had a long tradition of putting operational specialists in the corner office, starting with Dave Thomas, continuing through the legendary Jim Near and the highly respected Gordon Teeter, and then ending with Jack Schussler. Leading the company since its acquisition by Arby’s owner is Roland Smith, a veteran of the golf, bowling, soft drink and pharmaceutical industries. He’s a West Point grad.

Not all of the long-timers exiting top posts are being followed by newcomers with such extensive resumes. Dick Frank, for example, is surrendering his leadership of Chuck E. Cheese to Mike Magusiak, a protégée and longtime exec of the pizza-and-games chain. But Magusiak has a background in finance, having served as CFO. Frank was hailed for his operational and marketing know-how.

And not all the replacements have been named yet. Big Boy, for instance, said it’s still searching for a replacement for Tony Michaels, its longtime leader and an even longer-time veteran of the restaurant industry, including stints with Marriott.

The list of other industry greybeards to step down in recent months include Russ Owens, the casual-dining vet who had been leading P.F. Chang’s Pei Wei Asian Diner fast-casual operation; and Paul Motenko and Jerry Hennessey, the co-founders of BJ’s, who have left the board of that seemingly recession-resistant frontrunner to rev up for a new venture.

I’d be remiss if I didn’t note the counter-current of long-timers getting back into the business. Yesterday, for instance, the new owners of Romano’s Macaroni Grill released the stunning news that the chain would now be led by Olive Garden vet Brad Blum, a brilliant move on the buyer’s part. And Ned Lidvall, perhaps best known for his leadership of Rock Bottom Breweries, will now be leading Friendly’s.