Cue the 'Dragnet' music

After a Jack in the Box in northern California was robbed, assistant manager Jeanette Gallo filed for workers’ comp because of the stress she’d suffered. Under state regulations, it would’ve been a routine situation if Gallo hadn’t had one extraordinary circumstance: She’d helped to rob the place.

Apparently she was no master thief, and an even worse liar. The restaurant’s franchisees were tipped off by her early arrival on the morning of the heist. Their suspicions were confirmed by watching how she handled herself during the robbery, which was caught on a video monitor.

She was arrested first for grand theft, then for two felony counts of insurance fraud, to which she pleaded guilty.

Another criminal mastermind, cut short in the bloom of her career.

Jamba's juiced-up turnaround

This is the final installment of a three-part celebration of the industry's top turnaround stars. You can read the first installment, on Popeye’s Cheryl Bachelder, here, and the second, on Ruth’s Chris’ Michael O’Donnell, here.

Under the cobwebs in some business school’s library is a volume entitled, “Standard Procedures in Restaurant Turnarounds.” It’ll be covered with an inch of dust because anyone who’s spent time in the business will know the prescription: Expand your menu to draw new customers while tapping wholly new sources of revenue like catering.

Rare is the executive who hasn’t thought along those lines. Scarcer still is the one who was able to make the plan work.
So meet James D. White, the CEO of Jamba Juice. You might not know him, or of him, because he’s kept a low profile. But he’s quietly engineered what may be one of the most astounding turnarounds in foodservice.

White took over the chain in late 2008, as its glitter was starting to wear off. It’d drawn considerable attention, from consumers as much as the industry, as a “lifestyle brand”—a Starbucks that sold cold drinks instead of hot ones.

That’s great for a niche brand. But the concept’s limitations were becoming evident. It actually sold a liquid meal replacement in a cup—a relatively high-ticket smoothie that takes a considerable amount of time to finish, if you can consume it all. To say it’s filling is like referring to Lady Gaga as kind of different.

Jamba wasn’t where you’d stop for breakfast, lunch and dinner, day after day after day.

The chain’s management was addressing the problem by adding a smaller-sized serving and adding breakfasts you could suck up through a straw.

Enter White, who, significantly, was recruited from the grocery business, not another restaurant chain. He’d developed proprietary brands for the Safeway supermarket chain.

White quickly came up with a strategy. If you’d stopped any attendee of the Restaurant Leadership Conference and asked them on the spot for a plan, you’d have gotten almost the same thing:

--Cut expenses
--Expand the menu to bolster traffic
--Focus on service
--Emphasize franchising
--Expand overseas
--License your name to food products.

Fast-forward to the present. The chain now features products as diverse as soft yogurt and steel-cut oatmeal. Breakfast wraps are being tested in more than 200 stores.

Jamba’s memorable name appears on retail products ranging from trail mix to toy blenders. G&A costs were cut by more than 14%. Its franchisees include tennis superstar Venus Williams. “And we have zero debt on the books,” White told investors two weeks ago.

As far as we can tell, White didn’t log any time at Hogwarts before joining the restaurant business. He has no pact with the devil that we’re aware of. Nor is he using some special ray gun.

Yet he was able to execute a plan that stymied other chains, of all shapes and sizes. There’s no magic to it. Indeed, the difference was as simple as drinking a smoothie through a straw: He built a team and instilled a culture that enabled the strategy to work. The “how’s” were details that management could supply because of its experience and insights.
White provided the leadership to make the thinking and execution possible.

It sounds like an easy formula. But as Vince Lombardi famously said, You can use my playbook, but you still have to beat me on the field.

Cheesed up

Playing off the never-waning popularity of comfort foods, restaurant chains are elevating a tried-and-true ingredient to Big Lure status this month: Cheese.

Not that the uses are routine. Denny’s, for instance, is currently touting mac & cheese, but as a sandwich topping, not a side or entrée. The result is the Mac ‘n Cheese Big Daddy Patty Melt, a burger dressed not only with the comfort favorite, but also additional cheddar cheese and a mayonnaise-y sauce.

The limited-time selection, a cornerstone of the chain’s new Let’s Get Cheesy menu, is the latest in the chain’s tribute to cheesy excess. Last year it showcased the Fried Cheese Melt, essentially four fried mozzarella sticks inserted inside a more traditional grilled-cheese sandwich.

It packed nearly 900 calories. But that could’ve been a diet selection compared with the Big Daddy. Denny’s hasn’t posted the new sandwich’s calorie count, but a regular patty melt is listed as having 1,040 calories, and other authorities have estimated the count at just about 1,700 calories.

The Big Daddy is one of six new cheese selections. Most of the others consist of familiar items, like a country-fried steak with eggs, garnished with cheese. As part of the promotion, cheese can be added to any menu item for an extra charge of 69 cents.

Denny’s isn’t the only chain on a quest to keep cows at full employment. The Qdoba burrito chain is calling attention to one of its signature ingredients with the launch of the Queso Quest truck in Chicago. A comedian is driving the truck around the Windy City to get locals to try the chain’s three-cheese queso as a topping on popular local foods.

It wasn’t crystal clear, to me at least, how queso on a deep-dish pizza is going to drive more people to Qdoba, and I’m a fan of the chain.

Then there’s the sizzle surrounding The Melt, the grilled-cheese sandwich concept that hit the pan this week in San Francisco.

Intended to serve as a chain prototype, the new outlet probably would have gone unnoticed for some time if it hadn’t been for two things: It’s the brainchild of Jonathan Kaplan, the inventor of The Flip inexpensive video recorder; and it uses what may be the most technologically advanced system in the industry for ordering a sandwich.Patrons use their smart phones to select what cheese, bread and other elements they want in their sandwich. The order is translated into a QR code that’s read at the store, so the order is automatically channeled back to the kitchen.

Cheesy? The initial reports from citizen reviewers have been very positive.

But not all the recent news has been good for cheese lovers. It slipped past the business press, but the industry lost one of its gods last week, and one who owed his notoriety largely to cheese.

Yes, Joey Vento, a.k.a. the founder of south Philly’s Geno’s (cheese) Steaks, died at age 71. Pat’s might be better known, but Geno’s could go onion to onion with its arch-rival, which was situated virtually across the street.

All we can say is, “Whiz, with, Joey. Whiz with.”

A 5.5 on the restaurant Richter scale

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.

The precious need your help

In these extraordinary times, it’s important for the less troubled to help those in danger of falling victim to their circumstances, regardless of what we might feel about them. So, please, try to put your prejudices aside and help foodies recover their perspective.

Some observers have suggested selective euthanasia as a more humane way of helping the self-anointed dining elite. Many who eat dinner before 10 p.m. insist that idea has merit, though it’d be disastrous for merchants who specialize in black clothing and torturous shoes.

Far better would be a drive to show sport diners that the restaurant industry has more important issues to address—staying afloat, for instance—than the two topics currently preoccupying the Urban Spoon set.

Readers of a blog this cool would of course be familiar with the topics, but maybe your connection to Eater was a little balky this week. If so, you missed all the guffaws-in-type about Issue One: Did the celebrated Alan Richman really pat a server’s ass? And what was he thinking when he brought up the accusation, and a spirited defense, in a GQ review of the place where the transgression allegedly occurred?

I have trouble believing that Richman, the Derek Jeter of the reviewing game, would do such a thing. It’s very pertinent that the accusation came from M. Wells, a soon-to-close New York hotspot, after Richman cited some disappointments in his review (he entitled the piece, “Diner for Schmucks.”)

Even harder to believe is that he mounted a defense in print. But that’s just the start of the weirdness. You have to see it to believe it. Not since Michael Jackson got a pet chimp have we seen something this bizarre.

Then again, Lady Gaga’s outfits have nothing over Issue II, which uncomfortably plumbs how far a foodie will go to secure bragging rights about where he or she ate.

To reserve a seat at Washington, D.C.’s new quasi-pop-up, Rogue24, a dining room situated in an alley, you have to sign a two-page agreement. The contract stipulates that you can’t use your cell phone, or even its camera function, and cancellations have to be made at least 72 hours ahead of time. Otherwise, you’re charged a penalty fee.

Great. Formerly, you had to see a loan officer before dining in some of the nation’s hotspot. Now you have to consult your lawyer, too.

Next they’ll be selling tickets to restaurants, instead of giving you a bill.

Wait—did we mention the menu change at Grant Achatz’s Next?

Bankruptcy courts are busy again with restaurants

The restaurant industry is still analyzing the effects of last week’s funhouse ride on Wall Street. But one scream of fright should’ve been audible before the white-knuckle trading began: There’s been another wave of restaurant bankruptcies, this time of franchisees.

The busts tend to get less attention than the filings of a brand’s parent company, which themselves have been less than high-profile in recent weeks (the most recent chain to put creditors at arm’s length: Bill Johnson’s Big Apple, a five-unit chain of family restaurants in the Phoenix area).

Taken together, the bankruptcies prove the industry shakeout is still underway, this time on a market-by-market basis.

It’s tough to read a pattern in the failures. On first glance, fast food is the source for a disproportionate number. This Wednesday, an auctioneer in Dallas will sell off the Burger King units of a bankrupt franchisee. A bankrupt El Pollo Loco operator has nine units on the block in southern California. The weekend brought news that a Rally’s franchisee in Birmingham, Ala., was throwing in the paper napkin.

But the full-service sector has seen its share of failures, too. Chevys, a low-ticket casual chain, lost two stores in St. Louis when an eight-unit franchisee there couldn’t cut the mustard.

A number of family restaurants, including franchises of bankrupt Perkins & Marie Callender’s, have provided the bankruptcy courts with considerable business from that segment.

Here and there, a common element does crop up: Locations rendered unfeasible by the economic downturn. It’s often less a matter of a traffic freefall than a function of a rent that’s tough to cover.

The outcome should be healthier local markets. Supply usually dips, to some degree, and the shuttered stores provide an expansion opportunity if the landlord is more realistic going forward about the lease.

The question, underscored by last week’s roller coaster, is how all this uncertainty is going to affect consumers and lenders.

Ruth's O'Donnell: Making a plan work

This is the second installment of a three-part celebration of the industry's top turnaround stars. You can read the first installment, on Cheryl Bachelder, here.

The turnaround at Ruth’s Chris didn’t start out with a bang. It was more of the resounding-thud variety.

Like a lot of high-ticket concepts, the expense-account chain was kneecapped by the Great Recession. In February 2009, comps fell 23%. And that was after it’d rolled out a cut-rate deal to pull customers back. For a mere $39.99 per head, guests were treated to a three-course meal that included shrimp or a six-ounce fillet.

By Ruth’s-ian standards, it was a Dollar Menu. But the headwinds were too strong. Trade-offs to the discount lowered Ruth’s check average without drawing an offset in traffic. In short, it looked as if the concept was just discounting to customers it would’ve drawn anyways.

At the rate of decline, said CEO Mike O’Donnell, units would each lose $1 million in annual sales.

The next tactic didn’t work so well, either, or at least not at first. The chain put the spotlight on the flattop-grilled steaks and other entrees that had long been its signatures. They were grouped together into a special Classics menu. Customers would recognize the items, but not the prices, since they were lowered to a traffic-stimulating level.

Then came one of those smack-your-forehead moments. To hold down costs, Ruth’s simultaneously cut its advertising. So it had a deal, but no way of telling patrons about it. Guests were already in the unit when they learned of the special promotional session.

It didn’t look good for Ruth Fertel’s brainchild. But O’Donnell proved why he’s one of the toughest execs the industry has ever seen. His lengthy resume included stints during some of the roughest times at Champps, Sbarro and Ground Round. He’s also been fire-hardened by working at such operations as Outback and T.G.I. Friday’s. This is no crème puff.

He stuck with the Classics deal. Today, it accounts for about 30% of Ruth’s sales, which are on the rise. Traffic was up 3.3% in the second quarter, with a 2.4% rise in the average check, yielding an average sales increase per store of 5.8%.

Meanwhile, O’Donnell diversified the chain’s prices. A bistro menu put more affordable choices in front of customers, who could now return even if the company wasn’t picking up the tab.

He also pushed for group business, which had fallen like a stone. The installation of a satellite communication system provided an extra reason for businesses to hold their meetings at a Ruth’s, with banquet service included. In the second quarter, group sales were running 16% above the tally of a year earlier.

Now O’Donnell is trying to work the same program with Ruth’s secondary concept, the Mitchell’s dinnerhouse chain. The home office is diversifying the menu. While the Ruth’s brand is testing TV advertising, the smaller Mitchell’s operation is experimenting with radio.

Still, O’Donnell isn’t crowing about his company’s recent achievements. During a conference call with financial analysts, he was asked where the turnaround stands.

“Our everyday user continues to show improvement. Our business-to-business experience shows improvement,” he said. “So we think that as long as the economy continues or the higher end of the economy continues to do reasonably well, we will continue to track in that regard.”

I wouldn't bet against him.