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House Republicans pull healthcare bill off the table

Fri, 2017-03-24 21:41

House Republican leaders reportedly pulled the American Health Care Act, or AHCA, off the table on Friday, saying the party failed to win enough votes.

“We came really close today, but we came up short,” House Speaker Paul Ryan said in a livestream press conference. 

The decision came after the vote originally scheduled for Thursday was delayed until Friday, as President Donald Trump and supporters attempted to negotiate a deal on the legislation, which would have repealed and replaced the Affordable Care Act, or ACA.

Shortly before the Friday vote was scheduled, Ryan said he recommended that the legislation be pulled.

As a result, the ACA remains in place, which amounts to a resounding defeat for President Trump, who campaigned on a promise to bring an end to the Affordable Care Act.

The National Restaurant Association supported the AHCA, saying it was a first step toward reforming the employer mandate and lessening the burden employers have faced in complying with the Affordable Care Act.

But the NRA also advocated for additional changes to the bill.

Meanwhile, Ryan said he would confer with Republicans about how to proceed.

“This is a disappointing day for us,” Ryan said. “Doing big things is hard.”

Contact Lisa Jennings at lisa.jennings@penton.com

Follow her on Twitter: @livetodineout

5 ways to ensure a profitable restaurant remodel

Fri, 2017-03-24 17:55

Bob Donofrio is senior vice president of consulting solutions for Revenue Management Solutions. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

So, you’ve decided to remodel a restaurant location.

Beyond questions about design, budget and contractors, you are undoubtedly thinking about some customer-related questions:

Will your longtime customers like the new look and keep coming back? Will the remodel attract new customers? And, just as important, will customers be willing to pay higher menu prices if you spruce the place up?

The good news is that with proper planning and a deep understanding of your customers, a remodel can help you fine-tune your image in a profitable way. And with smart menu pricing decisions, you can offset the costs of the work over time without hurting customer traffic. 

Analysis has shown that customer price sensitivity generally decreases when guests are enjoying an updated restaurant environment.

Customers place added value on a sleeker experience. When you improve the restaurant with an updated design and features such as flat-screen TVs, mobile charging stations and Wi-Fi, the customer experience is transformed. In turn, the customer will be more willing to pay for the added benefits.

How much you choose to raise prices should depend on the extent of the redesign. Simply sprucing up the interior or painting the exterior may not support a significant increase in the pricing structure. However, a complete rebuild at the same location probably will. Also, consider that added efficiencies like an additional register or drive-thru lane will result in more throughput, another way to boost profitability.

Here are some things to keep in mind to make sure your remodel is profitable in the long term:

1. Determine your expectations for return on investment and revisit menu pricing before you reopen. A remodel is a big investment on many fronts. Before you start, it’s important to plan for recouping the expenditures and to be realistic about how long it may take.

Also, as you estimate the return on investment, consider lease terms, lost revenue (should you need to stop operating during the remodel), and whether partnership dollars will be available to cover some of the cost.

The ROI analysis needs to include updated menu pricing in the equation, so when it comes to adjusting menu prices, this should be determined while the remodel is underway, not after reopening.

2. Be mindful of the “decay rate” when it comes to pricing. The “decay rate” is the diminishing opportunity to raise menu prices as a result of a change in customer perception. The rate of decay depends on location, the brand and the extent of the remodel, but your opportunity to make significant menu price changes will generally decline every day after reopening.

As previously mentioned, the goal should be to have new menu prices set for the day you reopen. This is especially true if the restaurant has been closed for a while, since customers tend to forget previous menu prices.

3. Use your demographic and transactional data to reset menu prices. If you don’t have a deep understanding of your customer, changing menu prices could be disastrous to profitability.

First, it’s important to have a clear understanding of customer demographics and income levels in the location’s trade area. As you look at this, consider how close your competitors are to your location.   

But, just as important, understand what your customers are willing to pay for each item. An analysis of transactional data can tell you which menu items have low sensitivity to a price change, along with which items trade with more profitable items. This type of data-driven insight allows you to increase profit per transaction.

4. Realize that a remodel creates a special opportunity for your business. In some cases, you can attract customers who never would have considered your location before. You can also potentially bring back one-time visitors who didn’t feel the previous experience matched what they were looking for. 

To help win these people over, consider an investment in doing more training with your employees to match this new experience with exceptional service. The value of a visit is based on the entire experience — the aesthetics, the technology and the service. If you increase the value of a visit, customers are willing to pay a higher price, and they’ll come back.

5. Do a remodel when the restaurant is doing well. The best time for a refresh is typically when your restaurant is doing well. An old saying goes: “Don’t wait until it’s raining to fix your umbrella.” So don’t wait until your location is in trouble. Rather, make improvements when it’s performing well. 

Nothing is as impactful to same-store sales as a remodel that is done properly. If your location is viable, you can attract and retain customers with a remodel, leading to same-store sales improvement over the long term. Assuming, of course, it’s done in a thoughtful way supported by data.

Bob Donofrio, SVP of consulting services for Revenue Management Solutions, holds an MBA from the University of South Florida and has been with the company since 2004. During that time, he and his team have assisted thousands of franchisees across North America in optimizing their gross profit.

The shift is where the game is played

Fri, 2017-03-24 15:46

If the only new thing we have to offer is an improved version of the past, then today can only be inferior to yesterday. —Robert Hewison

With all due respect to every foodservice executive, owner and operator reading this, you’re compensated not for what you do daily, but for what your unit managers and teams accomplish every shift.

Planning, strategy and budget discussions may occur in the home office, but execution and results transpire in the restaurant, during the shift. What is a successful quarter, after all, if not 180 consecutive, profitable shifts in a row? 

Your marketing department and social media partners may claim responsibility for generating customer visits, but it’s the general manager and junior managers who convert traffic into revenue.

Most foodservice operations have 14 shifts a week, 56 per month, 180 every quarter and 720 each year. Every critical strategy and tactic related to running a profitable operation — service, selling, hiring, retention, food safety, marketing, COGS, training and teamwork — occurs during the shift. It puzzles me that very little thought and even fewer resources are applied to understanding and improving the efficiencies of shift leadership.

What is your company doing to fully understand the architecture of a shift and identify the best demonstrated practices your managers deploy before, during and after each shift? It’s time our managers stop running shifts and start leading them instead.

Shift leadership, like all leadership, is situational. Each shift has its own rhythm, tempo and character, and requires a different management mindset and approach. 

Consider all the variables that affect shift success: weather, staffing, scheduling, inventory, equipment maintenance, lunch or dinner rush, and current promotions, to name a few. As a result, there’s a lot of planning, preparation and play-calling at the line of scrimmage. 

How do your managers approach each shift? Do they know what a great shift looks like, or is it something they recognize only after it’s over, when it’s too late to impact it? Do they know how to apply course-correction during a shift that’s going off-kilter? Do you exchange best shift leadership practices weekly between managers? Your answers to these questions can be a directional signpost to why your revenue and retention numbers are up, down or flat. 

Our research with high-performing general managers shows that great shifts are not planned an hour before opening, or just before the dinner rush. A profitable shift is the cumulative result of what your managers did days, weeks, months and even years before it even commences.

What to do a year before the shift

The connective tissue between preparation and profitability is having the discipline to apply the requisite systems, processes and procedures daily to each and every shift. Spectacular success is always preceded by unspectacular preparation. For instance, we’d all probably agree that a key element of a shift’s success is having the right people in the right places doing the right things. But having your aces in their places today depends on who you hired a year ago, or six months ago, and how well you trained and retained them. 

Do your managers patiently apply the screening tools you’ve given them, or do they panic hire? Do they routinely improve the best, help the rest and prune the dead wood? Do they invest time and tools to train their teams every day? Today’s profitable shift is the end result of yesterday’s habitually applied process.

What to do 90 days before the shift 

In your monthly manager meetings, align and integrate quarterly goals into period goals and period goals into shift goals. For instance, if your target is $40,000 in higher gross sales per unit per quarter, that’s $13,333 more per month, or $238 more per shift. Specify pre-shift meeting topics and targets that will focus on ways servers can exceed $238 more in sales.

What to do 30 days before the shift

Compile a database of pre-shift meeting topics for the next 30 days. Base it on topics surrounding your key result areas, like service, selling, cost control or teamwork. No manager should ever wonder what to talk about at a team huddle. Put those pre-shift topics on your manager’s calendars and make sure they’re all clear on the targets and focus area.

What to do one hour before the shift

Review the schedule and assess your rookie-to-vet ratio, which will affect who and how you coach; conduct a thorough line check for food safety compliance; do a ready-for-revenue walkabout outside, then inside, the building, seeing what the guest sees, and correct any problems; greet team members; and make sure inventory is aligned with anticipated business, deliveries are in and equipment is working. 

What to do 10 minutes before the shift

Gather teams for a pre-shift huddle, or alley-rally. Detail the specific focus and objectives for that shift. If you don’t share specific shift goals with your team, your team will rightfully presume you have no goals, and will substitute their own. Detail the behaviors necessary to achieve the target and solicit the team’s ideas, too. For instance, if your focus is that $238 incremental sales bump, you might begin by reminding them why we sell (better customer service and the low profit margin on the dollar), then practice what to sell, and finish by asking each person how to sell it. Pump them up and spread some energy.

Your paycheck and bonus directly depends on how successfully your teams execute the 180 shifts you have each quarter. Why would you prefer chance over choice relative to shift strategy and execution? If your team measurably improved in just one thing every seventh shift, they’d still be better at 100 things a year from today.

Jim Sullivan is the author of two books that have sold over 400,000 copies: Multiunit Leadership and Fundamentals. Check out his videos, podcasts, apps and product catalog of training resources at Sullivision.com. You can follow him on LinkedIn, YouTube and Twitter @Sullivision 

CEO: U.S. restaurants in position to ‘export America’ abroad

Fri, 2017-03-24 15:15

John D. Harkey Jr., CEO of Dallas-based Consolidated Restaurant Operations Inc., said U.S. restaurants are in a great position for “exporting America” to the rest of the world.

Many American restaurants have expanded overseas, and Harkey said CRO’s El Chico and Cantina Laredo brands have shown strength abroad. The company opened its first units overseas in Egypt, in 2008.

CRO has 109 units across eight brands in the U.S., Egypt, Saudi Arabia, the United Arab Emirates and the U.K. The company’s first unit in Turkey is under construction, Harkey said, and its first unit in Puerto Rico will open in June.

Harkey discussed international expansion with Nation’s Restaurant News: 

How did you get started abroad? 

It wasn’t so much a vision as a pull. We were approached to go there. We had hired a franchise sales person. It was a bit of an afterthought. We didn’t have a franchise department. We had a few franchised stores, all domestic. That was in 2004, 2005. We didn’t even think to give him a defined territory. He found someone in Cairo, but I said no. He asked what it would take to be convinced. I said, tell them to wire me $100,000, non-refundable. It cost that much money to attempt what is a very hard thing to do. … It took months to get all the documents prepared.

Why do American brands do so well in the Middle East?

The Middle East approach is that brands matter. That’s similar to Asia. They have found that branded restaurants — rather from the deliver mechanism, or from the way the food is the prepared, or the service model, or the quality of the ingredients — get more sales than local [brands]. Diners, whether they are expats or locals, see it as a way to get a better quality dining experience, so restaurants do better.

What do you liken the growth to?

It’s a lot like the U.S. was in the 1960s. In the ’60s, it was a field of dreams. You opened it; they would come. Women were entering the workforce. The trend of more meals being eaten outside the home was starting. That’s where the Middle East is. That’s where Asia is. They are underserved.

What cautionary signs do you see for international development?

We’ve had a change in America’s position. As I visit with friends around the world, there is a cautious eye about how easy it will be to transact business and whether there will be additional obstacles. But we are continuing business as usual and going forward with our partners. We’re exporting American technology and know-how. We’re on the right side of the trade equation. 

How are your restaurants positioned for further expansion abroad? 

Casual dining, which is where a lot of our restaurants are, is one of the toughest, challenging sectors. While that’s happening domestically, we still see a lot of opportunities to American around the world.

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Dunkin' Brands CFO Paul Carbone resigns

Thu, 2017-03-23 21:25

Dunkin' Brands Group Inc. chief financial officer Paul Carbone will resign effective April 21 to take a management position in the specialty retail industry, the parent to Dunkin' Donuts and Baskin-Robbins said Thursday.

Canton, Mass.-based Dunkin’ Brands named Kate Jaspon, the company’s vice president of finance and treasurer, to serve as interim CFO upon Carbone’s departure. Jaspon will report directly to CEO Nigel Travis.

The company said it “is undertaking a comprehensive search for a permanent CFO and will consider both internal and external candidates.”

Jaspon has been with Dunkin’ Brands for 11 years, joining in 2005 as assistant controller. She was later promoted to vice president, controller and corporate treasurer, and has held her current title since 2014.

“Kate is a talented financial executive with a deep understanding of Dunkin' Brands,” Travis said in a statement. “She has helped lead us through a number of important transactions, including our IPO and follow-on equity offerings, securitization and several debt restructurings, and has overseen the implementation of our enterprise risk management program.” 

As of Dec. 27, Dunkin' Brands' fully franchised business included more than 12,200 Dunkin' Donuts locations and more than 7,800 Baskin-Robbins units. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Here come the fast-casual closures

Thu, 2017-03-23 19:55

This post is part of the On the Margin blog.

The fast-casual bubble has popped.

Earlier this month, I discussed reasons for the challenges facing fast-casual restaurants, which averaged a same-store sales decline of 1.1 percent in the last quarter of 2016.

The sales problems are starting to result in unit closures. To wit:

Last year, Cosi Inc. filed for federal bankruptcy protection and closed 29 locations.

Red Robin Gourmet Burgers pulled the plug on its 12-unit Burger Works concept.

Pollo Tropical shuttered 10 locations.

In February, Noodles & Company said it plans to close 55 restaurants.

Last week, Chipotle Mexican Grill Inc. shut down its ShopHouse Asian Kitchen concept.

More recently, the fast-casual pizza chain Pie Five closed nine locations.

Neal Sherman, president of RestaurantEquipment.Bid, which helps sell equipment from closed restaurants, said that he’s been selling more equipment from fast-casual concepts recently. He specifically mentioned closed better burger restaurants and shuttered fast-casual pizza units. 

To be sure, the closed locations are providing openings for other brands, as noted by news last week that Bibibop Asian Grill will move into the 15 closed ShopHouse Asian Kitchen locations — more than doubling the size of that chain virtually overnight.

One interesting nugget in that piece: Bibibop is considering “similar deals.”

The closures are likely a natural outgrowth of weak segment same-store sales and aggressive development, fueled by private-equity investment and pushes by many chains to be first in their respective markets.

That expansion intensified competition for leases, driving up costs and increasing the supply of such restaurants at a rate faster than demand. The closures are an outgrowth of this phenomenon.

“There has been such an over-expansion in recent years,” Charley Shin, founder of Bibibop and Charleys Philly Steaks, told me. “It might have been a little too aggressive. There might be weaker players falling off, especially in the fast-casual industry.”

To be sure, these closures are not quite the level that appears to be happening in casual dining, which is faring worse and has for far longer.

And, as the Bibibop case indicates, there are frequently restaurant chains eager to move into the closed locations. Bibibop wasn’t the only company that was bidding on the ShopHouse leases — which included some high-profile areas. “Chipotle really picked the prime sites,” Shin said. There is always demand for strong sites.

Also, not all closures are created equal. In the case of Burger Works and ShopHouse, the chains were experimental concepts started by larger companies that ran into problems and opted to shut down the brands. Shutting such brands down can be more advantageous to the companies than it would be if they simply sold the brands outright.

Still, the weakness recently in the fast-casual segment could portend to broader problems.

Consider one example we didn’t include, My Fit Foods. My Fit Foods sold prepared foods in locations that didn’t have dine-in seating, making it different from your typical fast-casual concept. But it had received significant investment over the years, expanded heavily and competed in the fast-healthy space with many fast-casual restaurants.

In February, My Fit Foods closed all 50 of its locations.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

For Checkers, sale validates company’s growth

Thu, 2017-03-23 19:33

The best way to generate profits in the restaurant industry is to sell more food.

For Checkers Drive-In Restaurants Inc., sales growth over the past eight years has led to a 700-basis-point improvement in profits and enviable unit volumes that have operators building new units, or, about $70,000 per location, said CEO Rick Silva.

That helped set the stage for the chain’s recent unit growth and, on Thursday, the announcement that the company has been sold, to the private-equity group Oak Hill Capital Partners, for $525 million.

To company executives, the deal sets the stage for further growth, with Oak Hill set to invest in the chain and help further its expansion.

“We’ve been on a journey for 10 years,” Silva told Nation’s Restaurant News. “We’re driving topline sales, improving restaurant profitability and adding new restaurants to the system. This is really one more step on a long, successful journey. The exciting part is still to come.”

Oak Hill “is going to invest heavily in the next phase of growth,” he added.

Checkers operates the Checkers and Rally’s brands, which have more than 840 locations.

Silva said same-store sales last year grew 3 percent, and same-store sales are up 3.5 percent so far this year. The company has added 100 new operators over the past two years, and has 130 locations in the pipeline, plus commitments for another 120 units.

“We have a tremendous amount of momentum,” Silva said. “Oak Hill is smart for joining at this time. 

Sales have helped generate the increase in profits, and much of those sales have come at night. Late-night business at the chain has more than doubled over the past 10 years, Silva said, from 10 percent of revenue to more than 22 percent today.

The company is known for value, and has worked to innovate on many of those offers, including a $2 Box, which includes fries and a protein, such as the Cheddar Biscuit Shrimp. It also introduced a 4-for-$3 value, giving customers an option of four different sandwiches, fries, a drink and an apple pie.

“We start with two wonderful brands that have core competitive advantages in our space,” Silva said. “We are leaders in value and craveability. We’ve done a nice job leveraging that. Those are inherent benefits, and it drives a huge amount of differentiation in the category and in sales.” 

At the same time, the company has worked to improve profitability by adding technology and back-office systems to eliminate waste and operate more productively.

Restaurant design also helps profitability. The chain is drive-thru only, so it can go into smaller spaces and operate with fewer employees because restaurants don’t have dining areas. Workers can focus on getting cars through.

Checkers has long used modular buildings, but introduced a freestanding building that can be opened for a total cost of $530,000. 

That’s less than half the chain’s average unit volumes, meaning an operator can pay off a new unit relatively quickly. 

“For a very low investment, in return you get average unit volumes of $1.2 million,” Silva said. “That’s very exciting for franchisees.” 

And the company can go into tight spaces of as little as a third of an acre.

“They’re incredibly efficient,” Silva said. “It allows us to squeeze into very high visibility parcels that others can’t get into.”

Silva said the chain has plenty of runway to grow, even if it doesn’t expand beyond the 29 states in which Checkers or Rally’s restaurants are located. Consultants have estimated that the company could add another 3,000 locations in those states. 

Such estimates can be notoriously optimistic, but to the company it reveals that the brand has plenty of growth in the coming years.

“We’ve got a huge, huge runway of growth without entering new states,” Silva said. “The brand is already proven in those states to be successful. It’s exciting for franchisees.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

How immigration laws impact the restaurant industry

Thu, 2017-03-23 19:09

In this ongoing in-depth investigation, NRN looks at how the current political environment could affect immigration and what it means for restaurant operators.

U.S. immigration law is notoriously complex, and its application is growing murkier. To put it simply, individuals who do not legally reside in the U.S. may not be employed in the country.

Of course, we know that this is not the case in practice. 

The sheer number of undocumented immigrants who work in U.S. restaurants is so high — 1.1 million people, according to a 2014 Pew Research study — that their presence is ubiquitous. This is despite the fact that restaurant operators are in violation of the law if they employ undocumented workers.

We take a look at eight pieces of legislation, existing and proposed, that cover immigration and the workforce, and how they affect restaurant operators.

Photo: Spencer Platt/Getty Image

1. Immigration and Nationality Act (INA)

What it is: The main body of law that regulates immigration policy was enacted in 1952. The INA is divided into many sections and covers the full breadth of immigration topics. This includes, but is not limited to: immigration quotas, visas, asylum, refugees, documentary requirements, ports of entry and removal. 

How it is enforced: The INA is enforced at all levels of government, from the president to the courts and through individual agencies, such as Immigration and Customs Enforcement (ICE). Recent executive orders signed by President Trump signal that his administration will take a tougher stance in enforcing INA laws. 

How it affects restaurants: The restaurant industry has a high proportion of workers who are immigrants. INA regulations impact their legal residency status in the U.S. and eligibility to work. Employers may not hire or employ persons who are in the U.S. illegally.

Photo: mrdoomits/iStock/Thinkstock

2. Employment-based immigration

What it is: Some immigrants may use visas specifically for employment to enter the U.S. These range from “persons of extraordinary ability” (artists, researchers, business people, etc.) to skilled and unskilled workers. As of 2014, “other unskilled labor,” which can include restaurant workers, was capped at 5,000 visas annually. By comparison, 40,000 visas were available annually for skilled workers holding college degrees.

How it is enforced: The U.S. Citizenship and Immigration Services (USCIS) oversees employment-based immigration. Recent reports indicate that H1-B visa applications by skilled workers may now be scrutinized more closely. | How it affects restaurants: Regulations covering unskilled labor apply to the restaurant industry’s workforce.

Photo: David McNew/Getty Images

3. Enforcement

What it is: Ensuring that regulations of the Immigration and Nationality Act are carried out.

How it is enforced: Immigration laws are enforced across the three branches of government. Agencies that deal with immigration laws include the Department of Homeland Security, Immigration and Customs Enforcement, USCIS, Customs and Border Protection, the Department of Labor and the Department of Justice. Examples of enforcement include questioning at ports of entry, the hearing of legal cases and detention.

How it affects restaurants: President Trump has recently called on his administration to take even stricter enforcement measures, such as publicizing crimes allegedly committed by undocumented immigrants and tapping police officers to enforce immigration laws. These measures could impact restaurant workers who are undocumented.

Photo: John Moore/Getty Images

4. Detention

What it is: The holding by a government official of any migrant, including refugees and asylum-seekers, for the purpose of establishing their identity, carrying out an immigration claim, or removing them from the country.

How it is enforced: The agencies responsible for the enforcement of immigration laws, mentioned in No. 3, are also charged with carrying out detentions. Recent Department of Homeland Security documents show that President Trump is encouraging his administration to build new detention facilities.

How it affects restaurants: Immigrant employees of restaurants may face detention if their immigration status changes and they are no longer able to legally reside and work in the U.S.

Photo: Spencer Platt/Getty Images

5. Sanctuary policies, DACA and the DREAM Act

What they are: Laws protecting certain groups of immigrants who may have entered the U.S. illegally. Sanctuary policies intend to limit the ability of law enforcement to arrest undocumented persons, but they do not prohibit arrest. DACA, or Deferred Action for Childhood Arrivals, allows some undocumented immigrants brought to the U.S. as children to defer deportation. The DREAM Act creates a pathway for young, undocumented immigrants to obtain permanent residency.

How they are enforced: Enforcement for each law varies. Despite Trump’s hard line on immigration during his presidential campaign, a recent expansion of immigration enforcement will not affect so-called “dreamers.”

How they affect restaurants: Immigrant employees of restaurants, particularly younger workers, may be affected by this legislation. Individuals covered by the DREAM Act will not be impacted by recent changes. However, Trump has indicated that he does not support sanctuary policies.

Photo: John Moore/Getty Images

6. Executive order on secure borders

What it is: In late January, President Trump signed an executive order that intends to heighten border security by constructing a wall along the U.S.-Mexico border, hastening deportations and creating partnerships between federal agents and local law enforcement.

How it is enforced: While construction of a border wall has not yet begun, and while partnerships between local and federal entities is not yet official, news of deportations has escalated.

How it affects restaurants: It’s not yet clear how a border wall will impact current immigration trends. But restaurant workers who are undocumented may face a greater chance of deportation.

Photo: Mark Runnacles/Getty Images

7. Executive order on foreign terrorist entry

What it is: President Trump signed an executive order in March that revised an earlier executive order from January that barred visa- and green-card-holders from seven Muslim-majority countries: Iran, Iraq, Syria, Libya, Somalia, Sudan and Yemen. The updated executive order removes Iraq from that list, but still requires “additional scrutiny” for nationals of the remaining countries who wish to enter the United States. The stated purpose of the executive order is to protect the U.S. from foreign terrorists.

How it is enforced: The first iteration of the executive order saw enforcement at border crossings by ICE agents. Some individuals were detained and eventually deported, but some eventually gained entry into the U.S. The order was also enforced at the judicial level after several lawsuits were filed on behalf of detained persons. The lawsuits resulted in the reversal of the original version of the executive order.

How it affects restaurants: Restaurant workers may have ties to the six countries included in the latest version of the executive order. For those in the U.S., it could prevent them from leaving the country. Those outside the U.S. could be prevented from re-entering the country.

Photo: Justin Sullivan/Getty Images

 8. Tariffs on food

What it is: President Trump has proposed a tariff on all imports, across the board. Some reports estimate the tariff at 10 percent for all goods, but others report a 20-percent tariff on goods imported from Mexico.

How it is enforced: This proposal has not yet been enacted.

How it affects restaurants: Countless restaurants in the U.S. rely on imported food and beverage items. For instance, in 2015, the U.S. imported $4.8 billion of fresh vegetables from Mexico, the office of the Trade Representative says. Wine and beer account for $2.7 billion of imports.

For operators, labor costs remain a huge concern

Thu, 2017-03-23 16:19

Optimistic operators continue to be in expansion mode, remodeling restaurants and building new ones, despite weak same-store sales and concerns about rising labor costs. 

That’s the conclusion from Nation’s Restaurant News’ latest Operators Survey, which suggests operators believe their traffic has hit bottom and will improve.

They are confident enough that they plan to expand this year: 51 percent of operators told our survey they expect to add more locations in 2017, while 20 percent plan to close locations.

This year’s survey includes the views of 319 respondents, who have a range of titles and come from a broad cross-section of industry sectors and company sizes. Nearly half, 48 percent, represented small-scale concepts with fewer than 9 locations.

Respondents gave mixed views of their current traffic results, but a strong plurality felt things were likely to get better. 

According to the survey, 42 percent of operators said traffic was improved so far this year, while 39 percent it was worse and 19 percent said there was no change.

Yet 47 percent of operators expect improved same-store sales in the first half of 2017 while just 16 percent expect worse same-store sales. The remainder felt it would be the same (26 percent) or it’s too early to tell (11 percent). 

Much of the optimism stems from the election, said Steve Crichlow, a former franchisee turned consultant who works with numerous operators. Franchisees expect the Trump Administration to reduce regulations, which could improve their profits, end the Affordable Care Act and its associated health care costs, and reform the tax code.

“From what we’ve heard, it’s based a lot on expectations and hopes the new administration is going to carry through with their promises,” Crichlow said.

Tax code reform, he said, would give consumers more money, which they could in turn use at more restaurants, Crichlow said.

Indeed, 40 percent of operators felt that improved disposable income would do most to help their sales this year.

Operators’ biggest concern, by far, was over labor-related issues.

More than half, 51 percent, said that recruiting and retaining workers was their biggest challenge heading into 2017. 

The second biggest concern? Rising minimum wages, listed as the top concern by 24 percent of respondents. By comparison, food costs were listed as a concern by 11 percent of operators, while real estate (4 percent) health care (3 percent) and “other” (7 percent) rounded out the listed worries.

The survey results reflect other surveys showing labor to be the predominant issue of 2017. Restaurants have been hiring at a faster-than-average clip in recent years, and have added 250,000 jobs over the past 12 months, according to federal data.

This is driving up wages. Average hourly earnings in the leisure and hospitality industries over the past 12 months have increased by 4.2 percent, according to federal data. That’s higher than the 3.4 percent, overall rate. 

The higher wages are leading restaurants to raise prices despite falling commodity costs — which, coming as grocery stores have lowered prices, has been suggested as an excuse for weak sales in recent months.

Prices for food away from home have increased 2.4 percent over the past year, according to federal data, while prices for food at home have fallen by 1.7 percent — an unusually high, 410-point gap between the two largest purveyors of food to consumers. 

Labor costs could be hampering operators’ abilities to be more aggressive, Crichlow said. And he believes that the labor issue is broad-based, encompassing not only the tight labor market but several labor regulations under the Obama administration, like the joint employer ruling and overtime regulations.

“It’s keeping them cautious on what to do or not to do for growth,” Crichlow said. “There are big things out there impacting labor for restaurants and probably retail, too.”

Perhaps not surprisingly, one of the biggest areas of investment for operators heading into 2017 is on recruiting and training. Eighteen percent of operators said they plan to invest in this area.

Many operators believe that investing in recruiting is vital at a time when consumers are fickle, sales are hard to find, and good workers are scarce.

Another 18 percent of operators said they plan to invest in a redesign this year, continuing a major trend of restaurants upgrading their facilities to attract customers. Meanwhile, 12 percent said they plan to upgrade their equipment, and 11 percent are planning to invest in marketing.

Digital remains a big source of investment, as 11 percent plan to invest in digital or mobile technology. Interestingly, just 3 percent of operators said they are investing in delivery this year, suggesting a wait-and-see approach for the broader industry as big players like Panera Bread Co., McDonald’s Corp., Darden Restaurants Inc. and others invest in the service

That said, 12 percent of operators said their brand is planning to make delivery part of their mobile capabilities this year.

Overall, just 20 percent of operators said they don’t plan to tackle mobile technology this year. And 26 percent said they plan to add ordering on their mobile apps, while 20 percent view the service as a marketing tool. Six percent plan to add payment technology, and 9 percent plan to use apps for staffing and scheduling.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Graphics by Leigh Anne Zinsmeister 

Checkers sold for $525M to new private-equity buyer

Thu, 2017-03-23 08:33

Oak Hill Capital Partners has agreed to buy Checkers Drive-In Restaurants Inc., from Sentinel Capital Partners in a deal valued at $525 million, the companies said on Thursday.

Oak Hill, the New York-based private-equity group, is partnering with Checkers management on the deal.

“Checkers is a unique concept that is outpacing the growing QSR industry,” Kevin Mailender, partner at Oak Hill, said in a statement. “The company has been able to win share in this large, stable industry through its differentiated value proposition and attractive franchised business model. With a proven brand, a loyal customer following and strong unit-level economics, we are confident that the business will capitalize on its large white space opportunity for new units.”

Checkers operates Checkers and Rally’s brands, which are typically operated as one concept. The Tampa-based company has 840 locations in 29 states under the two brands.

That is up by 68 locations since 2014, when Sentinel acquired the company. Checkers was founded in 1986.

“We are delivering record growth at Checkers and Rally’s, and our franchisees, operators and employees are more excited than ever about our future,” Rick Silva, CEO of Checkers, said in a statement. “Oak Hill Capital Partners is a perfect partner to help us further accelerate our growth.”

The transaction is expected to close in the second quarter of this year. 

The deal for Checkers continues a brisk pace for mergers and acquisitions in the restaurant space so far in 2017, following earlier deals for Bob Evans Restaurants and Popeyes Louisiana Kitchen Inc. Other chains, including Ruby Tuesday Inc. and perhaps Bravo Brio Restaurant Group Inc., are looking at potential sales of their companies.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

 

Chili’s names new marketing chief

Wed, 2017-03-22 22:12

Brinker International Inc. has named Steve Provost as chief marketing and innovation officer of Chili's Grill & Bar, the company said Wednesday.

Provost most recently served as president of Brinker’s Maggiano’s Little Italy division and succeeds Krista Gibson in the role.

He will lead Chili’s consumer insights, culinary innovation and marketing teams.

"In looking for the right leader for our Chili's culinary and marketing teams, we were fortunate to reach within Brinker's talented senior leadership team," said Kelli Valade, Chili’s president, in a statement. 

"I've had the pleasure of working alongside Steve for the past eight years,” Valade said. “His tenure as a BrinkerHead, coupled with his thorough understanding, experience and love of marketing, made it an easy decision for him to lead our Chili's marketing and innovation efforts." 

Provost joined the Brinker family in 2009 as senior vice president of marketing for Maggiano's and later that year was named brand president. Prior to Brinker, Provost held various leadership positions at Quiznos, KFC, Long John Silver’s and A&W. 

As Provost transitions into his Chili’s role, the company said Maggiano’s will be led by Genifer Gray, who has been promoted to chief operations officer, and Larry Konecny, who has been promoted to chief concept officer.

Gray and Konecny have held various leadership positions within Maggiano’s over the past 15 years and they most recently oversaw the development and launch of the brand’s menu.

Brinker has 1,606 Chili’s and 52 Maggiano’s restaurants. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless 

Starbucks plans to give even more jobs to veterans

Wed, 2017-03-22 20:10

Starbucks Corp. is doubling down on its commitment to hire veterans, vowing on Wednesday to hire 25,000 military veterans and their spouses by 2025. 

The goal, an expansion of a plan set in motion three years ago to hire 10,000 veterans by 2018 — a goal it has already reached. Overall, Starbucks wants to hire 240,000 people globally, including 68,000 in the U.S., by 2021, as part of the company’s expansion plans.

The military hiring plans come amid protests from conservative groups over the company’s hiring plans.

Those protests, including threats of a boycott, have come since January, when the Seattle-based coffee giant pledged to hire 10,000 refugees worldwide.

“They are extraordinary people who’ve done extraordinary things,” Howard Schultz, Starbucks founder and CEO, said at the company’s annual meeting on Wednesday. “They have skills, leadership, integrity, and not an ounce of entitlement. Every one of them who have worn the green apron on their own merit have done a great job. They have made us a better company.”

In addition to veterans, Starbucks is said it has also reached its goal of hiring 10,000 “Opportunity Youth” by 2018, and that it plans to hire 100,000 of these youth by 2020. Opportunity youth are young people, often African American or Latino, who are not in school or are unemployed.

And the company said it plans to work with several groups to continue hiring 10,000 refugees globally. The company is working with the United Nation’s Refugee Agency to scale up its hiring of refugees.

Earlier this week, the conservative, free-market think tank National Center for Public Policy Research raised concerns about what it says is Starbucks’ “liberal political stances and attacks on President Donald Trump.” The think tank vowed to question Schultz about this agenda at the meeting.

“Coffee has no political allegiance, but Starbucks under Schultz’s leadership has been unwavering in its support of liberal causes to the detriment of its brand and shareholder value,” National Center General Counsel Justin Danhof said in a statement earlier this week. 

There have been some concerns that Starbucks’ political stance is taking a toll on the company’s sales. The YouGov Brand Index said the chain’s “Buzz score” fell by two-thirds since the Jan. 29 announcement. Meanwhile, the data firm Sense360 said that visits to Starbucks fell by 9.3 percent in February when compared with the period before Christmas. 

“There is zero, absolutely no evidence whatsoever that there is any dilution of the Starbucks brand, reputation or core business as a result of being compassionate,” Schultz said in response to a question from Danhof.

Schultz noted that someone who invested $1,000 in 1992, at Starbucks initial-public offering, would have $180,000 today.

The company said it doesn’t plan to slow down. Starbucks announced plans to open 12,000 new locations globally by 2021. That includes another 3,400 in the U.S., including 100 Military Family Stores to support military families in the U.S.

The new stores would increase Starbucks’ unit count by 50 percent. The chain has 26,000 locations globally. 

The annual meeting was Schultz’s last as the company’s CEO. Schultz is moving into an executive chairman role in April

His replacement, Kevin Johnson, highlighted Starbucks’ plans to boost sales inside the company’s stores. 

“I know I have venti shoes to fill,” Johnson joked, referring to what Starbucks calls its largest size beverages.

The company said it plans to start testing a new line of lunch items, salads and sandwiches, called Starbucks Mercato. The items will be made fresh daily, with the night’s leftovers going to local food banks. Johnson said the company plans to test the products at more than 100 locations in Chicago in mid-April, with plans to expand into other markets. 

Those plans follow the chain’s launch of Sous Vide Egg Bites. “I can tell you they are a hit, when you can find them,” Johnson said. “We’re adding capacity to not only catch up, but keep up, with consumer demand.” He also announced plans to create more gluten-free choices, such as a gluten-free Smoked Canadian Bacon Breakfast Sandwich.

Johnson said Starbucks has already deployed measures to improve the customer experience and reduce congestion inside its stores. For instance, the company has dedicated staff at busy stores to handle mobile orders.

Meanwhile, the chain said it plans to integrate its mobile order and pay platform with Amazon’s Alexa and Ford vehicles later this year. It is expanding its My Starbucks barista program, which enables voice command on the mobile app.

This April, the company plans to enable people to give one another Starbucks gift cards over Apple’s iMessage app. It also enables people to give one another gift cards through Microsoft Outlook.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Pie Five closes 9 restaurants amid lawsuit

Wed, 2017-03-22 19:30

Pie Five Pizza Co. has closed nine restaurants in Chicago and Minnesota amid a lawsuit from a franchisee who claims the company provided misleading information about the chain’s sales and profitability.

Seven of the closures are in Chicago and two are in Minnesota. The locations are company-owned units, and they represent about 10 percent of the brand’s 87 locations.

But the closures aren’t slowing Pie Five’s growth. A spokeswoman for the company said the chain plans to open 40 new locations this year.

“We made the very difficult but operationally necessary decision to focus development on our growing markets,” the spokeswoman said. “It was truly in the best interest of the brand, our franchisees, shareholders and other team members.” 

Pie Five is facing the biggest sales challenge in its brief history. Same-store sales in the second quarter ended Dec. 25 fell 17.4 percent, and declined 19 percent on a two-year basis.

Meanwhile, a franchisee of seven locations in Indiana, Illinois and Iowa has sued the Dallas-based chain over disclosures regarding sales and profits. 

Carl Dissette, who operates a pair of suburban Chicago locations, among others, claims that the company’s Pie Five locations are losing money, and that its parent, Rave Restaurant Group Inc., is in “financial distress.” 

In the lawsuit, filed in December, in a federal court in Illinois, Dissette claimed that Pie Five misrepresented the financial performance of its restaurants in financial disclosure documents. 

The lawsuit also claimed that the disclosures did not calculate royalties franchisees pay, nor did it reveal geographic differences in sales or the difficulty in generating sales in new markets.

In addition, the lawsuit said the company inflated sales at a location in suburban Chicago through the use of 3,000 unlimited buy-one, get-one coupons. It then sold that location to Dissette, who said he bought the unit based on stated sales.

The lawsuit said the promotions were done “to inflate net sales without regard to profitability, making this restaurant appear more attractive than it was.” 

Dissette also claimed that Pie Five entered into a “commercially unreasonable vendor relationship” with Performance Food Group, collecting a 2.5-percent rebate on food PFG sells to franchisees. The lawsuit said PFG “does not provide below market pricing or even fair market pricing” to franchisees.

Pie Five would not comment on the lawsuit, but the company has moved to dismiss the case.

In its response, Pie Five disputed Dissette’s allegations, noting that many of the company’s documents contradict them. The company called Dissette “an experienced franchisee who knows the risks in operating a restaurant franchise.”

“Apparently unhappy with the results he has achieved, Dissette and his wholly-owned corporations … have filed suit against Pie Five Pizza Company,” the company stated in a response. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Chipotle launches kids’ video series

Wed, 2017-03-22 19:14

Chipotle Mexican Grill Inc. has released an original video series to help educate families and kids ages 7 to 10 about where their food comes from and how it is prepared, the company said Wednesday.

The Denver-based fast-casual operator said the unbranded series, called “RAD Lands,” is available for download exclusively on iTunes. It was created in partnership with CAA Marketing and The Magic Store, which created the Emmy-nominated series “Yo Gabba Gabba!”

The series features such celebrity chefs, musicians and YouTube personalities, including Amanda Freitag, Michael Voltaggio, Duff Goldman, the Neon Trees, Wayne Coyne of the Flaming Lips and rapper Biz Markie. Segments also include instruction on preparing snacks and meals. 

“Chipotle is ensuring that better food is accessible to everyone,” Mark Crumpacker, Chipotle chief marketing and development officer, said in statement. “We created ‘RAD Lands’ to educate young eaters and their parents about food in an entertaining and engaging way.

“We don't advertise to kids, so the show is completely unbranded. We hope that it sparks conversation and curiosity among families, ideally leading to smarter and more informed choices about food.”

“RAD Lands” episodes feature an animated segment called "The Cultivators" that follows a small rebel squad’s journey to help save the galaxy’s plants and animals.

Season one is available exclusively on iTunes in the United States and Canada for $4.99. Alternatively, families can download the first episode for free, and the remaining five episodes for $1.99 each. 

As part of the “RAD Lands” launch and to support school lunches, Chipotle will donate $100,000 to the Chef Ann Foundation, a nonprofit organization that works with schools nationwide to provide the tools and resources they need to serve healthful and nutritious meals to students. 

To enhance the program’s reach to educators and students, Chipotle has partnered with Discovery Education, a leading provider of digital education content for K-12 classrooms, for RAD Lands In School. That online program for elementary students will launch later this spring, pairing “RAD Lands” episodes with lesson plans and activities.

To see more about “RAD Lands,” visit chipotle.com/radlands.

Chipotle, which was founded in 1993, has more than 2,200 restaurants. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Lack of skilled immigrant labor could cause higher food prices

Wed, 2017-03-22 19:08

In this ongoing in-depth investigation, NRN looks at how the current political environment could affect immigration and what it means for restaurant operators.

American agriculture has long depended on immigrant labor — particularly labor by undocumented workers.

A 2014 study commissioned by the American Farm Bureau Federation put the percentage of undocumented farm laborers at between 50 percent and 70 percent of the total workforce. 


Illustration: NRN/Anna Kang

President Donald Trump has vowed to crack down on illegal immigration. Shortly after his election in November, he told CBS’s “60 Minutes” that he planned to deport millions of undocumented immigrants immediately.

“What we are going to do is get the people that are criminal and have criminal records, gang members, drug dealers, where a lot of these people, probably 2 million, it could be even 3 million, we are getting them out of our country or we are going to incarcerate,” Trump said.

He then said that once that initial group was eliminated and “the border is secure,” immigration officers would make a “determination” about the remaining undocumented workers.

The current admiration’s rhetoric on illegal immigration and reports on crackdowns on undocumented workers have brought jitters not only to immigrant workers, but to their employers.

It’s unclear exactly what a crackdown on labor would do to produce pricing, particularly considering other trade-related and taxation issues that are up in the air. Those potential initiatives include mentions by the Trump administration of a tax of up to 20 percent on imports from Mexico to pay for the proposed border wall, and a new corporate tax structure proposed by Congress that would give tax breaks to exporters and remove tax exemptions from importers. The border adjustment tax would basically change how goods are taxed, taxing them where they’re consumed rather than where they’re produced.

Several companies have come out in support of a border adjustment tax of some kind, according to the American Made Coalition. The group lists MillerCoors and Blue, Diamond Growers among the list of supporters. 

“While our global competitors continue to improve their tax codes by cutting rates and encouraging investment and job creation, our tax code remains frozen in place. The result is lost investment, fewer jobs, and lower wages,” the American Made Coalition states in its press materials.

Although the idea behind the tax is to encourage domestic production, the National Retail Federation opposes it, saying in a statement on Feb. 28 that the costs on “everyday necessities like food, gas, clothing and prescription medicine” for the average American household would go up by $1,700 in the first year. 

American Farm Bureau Federation president Zippy Duvall also expressed concerns about the tax. 

“We’re still studying that tax reform, and we’re hoping some common sense comes to that area. We want to make sure it doesn’t roll over into a trade situation and cause a trade war that would not be good for anyone in agriculture,” Duvall told agriculture publication AgFax.

How exactly such shifts in import and corporate taxes would affect restaurants depends, of course, on what kind of food they serve, according to Wade Winters, vice president for supply chain at Consolidated Concepts, a cost reduction firm based in Waltham, Mass.

“Any restaurants that use large quantities of avocados will be greatly affected by the border tax since the U.S. gets a large percentage of their avocados from Mexico,” Winters said in an email. 

“Restaurants may choose to implement a change to the pricing on their menus to adjust for the higher costs, but this is always a difficult decision. Competition is already tight so nobody wants to increase prices and lose market share. So the reality is that most restaurants will absorb these cost increases, and find other ways to offset the higher costs.”

DeWayne Dove, vice president of purchasing for purchasing cooperative SpenDifference, said other items that would be affected by a tax on imports from Mexico would include Brussels sprouts, strawberries, tomatoes, “wet vegetables” such as broccoli and cilantro, peppers and squash. 

“The earliest experts say [such a tax] could occur, based on the need to work itself through the legislature and then be executed, is the end of 2017,” Dove said.

With the more than $115 billion in agricultural imports, according to the U.S. Department of Agriculture, possibly being squeezed (of which $9.5 billion are fresh fruit and vegetables from Mexico), laborers in the United States become even more important, and past crackdowns on undocumented workers have not gone well. 

After Georgia passed HB 87 in 2011, economists and marketing professors at the University of Georgia surveyed farmers and calculated that the state’s farming sector lost $140 million due to labor shortages that meant crops weren’t harvested. Add to that other segments affected, such as distributors and retailers, and the figure was estimated to be as high as $400 million.

“The potential impacts to the supply chain of zealous enforcement are real,” said Joe Kefauver, managing partner of public affairs firm Align Public Strategies.

“The White House may want to look at what happened in Georgia and other southern agricultural states. … [A] significant portion of their crops went un-harvested and literally died in the fields, greatly impacting both price and availability of products,” Kefauver said.

“Those jobs were not back-filled by non-immigrants as anticipated by state lawmakers, and, in fact, were not filled at all.”

Those jobs couldn’t have been back-filled, according to Kathy Means, vice president of industry relations at the Produce Marketing Association, noting that farm workers are skilled laborers performing jobs that native-born Americans don’t want.

In a speech on Feb. 28, Trump advocated implementing a merit-based immigration system focused on skilled workers. Experts say farm workers would fit into that category.

“It does take a special person to get out and work in the fields in the hot sun, stooping, lifting. It’s just hard work,” said Charles Hall, executive director of the Georgia Fruit and Vegetable Growers Association. He added that you have to know what you’re doing to harvest properly.

“You have to know when that peach or tomato or pepper is ripe. Someone who is not skilled with that sense of touch, they’re going to be picking product that’s not ripe, and consumers will not appreciate it.”

Since farm workers are paid by the amount that they pick, he said, it’s not uncommon for skilled workers to earn $15 to $18 per hour. Unskilled workers would earn less, he said, making the job undesirable to locals.

Produce isn’t the only food likely to be affected by a labor shortage.

The National Milk Producers Federation said half of the workers on U.S. dairy farms are immigrants, and, according to a report released in September 2015, losing them would increase retail milk prices by 90 percent and cost the U.S. economy $32.1 billion in economic output. However, it should be noted the survey does not distinguish between undocumented and documented immigrant workers. 

Means of the Produce Marketing Association said her industry is used to adjusting to changes in everything from weather to labor to economic policy.

“We deal with everything from freezes to hurricanes to port strikes. … It’s not that [the current situation] is situation-normal, it’s that the produce industry is highly adaptable,” she said.

But it’s a global industry, and disruptions in long-established networks might not just devastate individual farmers and packing lines, but pricing as well.

“It’s an inter-tangled web,” said David Anderson, a livestock and dairy economist at Texas A&M University.

He noted that the United States imports about one million head of calves from Mexico, which go to ranches, and then to feedlots, and then to packing plants, from which they could then be exported back to Mexico or other countries that buy beef from the United States. 

“We’ve got both sides of that, benefiting from importing feeder cattle, which helps us keep up our processing capacity, and then we export the [finished] beef back,” Anderson said.

None of these factors takes into consideration the possibility of retaliatory tariffs by other countries, he said.

“I think in the food context, that’s really important,” he said.

Contact Bret Thorn at bret.thorn@penton.com

Follow him on Twitter: @foodwriterdiary

Americans’ beef consumption drops 19%

Wed, 2017-03-22 17:00

Americans reduced their beef consumption by 19 percent between 2005 and 2014, which was the equivalent of avoiding the annual tailpipe emissions from about 39 million cars, according to a report on Wednesday by the Natural Resources Defense Council.

Using data from the U.S. Department of Agriculture, the report analyzed the carbon-footprint impact of the production of certain foods. The NRDC has long argued that beef in particular contributes more climate-warming pollution than other foods in the American diet.

The National Cattlemen’s Beef Association, however, challenged the NRDC’s connection between consumption and the carbon-footprint impact, saying the reduction in per capita consumption more likely reflects population growth.

Per capita consumption of beef has declined, according to independent market research firm CattleFax, reaching a low of 54 pounds per person on average in 2015, down from an average of 65 pounds per person in 2005.

But that’s more likely tied to cycles of supply and demand, said Duane Lenz, general manager of CattleFax.

“You can’t eat what you don’t have,” he said.

Graph: Food consumption trends tied to greenhouse gas reductions, courtesy of Natural Resources Defense Council.

Following years of drought in the West, herd sizes contracted, but are now in a rebuilding phase, he said. As a result, beef consumption will likely increase. 

“We are projecting that, by 2018, average consumption will be back up to 57.5 pounds per person,” Lenz said.

Still, beef production has remained relatively steady during that period, said Sara Place, the Cattlemen’s Association’s senior director of sustainable beef production research. 

Global demand for U.S. beef has grown, and a growing amount of meat produced domestically is exported.

That doesn’t mean the industry isn’t concerned about its impact on the environment, Place said. 

The carbon-footprint impact of beef production has decreased by 6 percent, she said. Beef production contributed total emissions of 135.7 million metric tons of carbon dioxide in 2005, according to the Environmental Protection Agency. By 2014, that dropped to 127.5 million metric tons. 

“We’ve made some tremendous progress,” Place said. “But there’s work to do. I’ve been hired because the industry is curious about sustainability and getting better over time.”

The NRDC report did not offer a reason for the decline in beef consumption. 

According to the NRDC’s report, beef comprised about 34 percent of total diet-related per capita climate-warming pollution in 2014.

Producing a kilogram of beef emits 26 kilograms of carbon dioxide, the NRDC said.

Meat and dairy production requires large amounts of corn- and soy-intensive animal feed. Dairy cows emit large amounts of methane gas, and the use of fertilizers and manure deposits release nitrous oxide, a climate pollutant more powerful than carbon dioxide, the environmental advocacy group contends.

Overall, Americans shrunk their diet-related carbon footprint by 10 percent during that nine-year period. In addition to beef, Americans ate less milk, pork, shellfish and high-fructose corn syrup.

 At the same time, Americans ate more carbon-intensive foods like cheese, yogurt and butter, the report said.

Contact Lisa Jennings at lisa.jennings@penton.com

Follow her on Twitter: @livetodineout

NRA voices support for Republican health care proposal

Wed, 2017-03-22 15:16

The National Restaurant Association voiced its support for the Republican plan to reform the Affordable Care Act on Wednesday, calling it an “important first step” in reducing employers’ health care costs.

“Costly compliance issues, a shrinking risk pool and higher healthcare costs have made the current structure of ACA untenable for restaurants,” Cicely Simpson, executive vice president of policy and government for the association, wrote in a letter to House Speaker Paul Ryan. “We support passage of the American Health Care Act as a way to move us forward in reforming the employer mandate and encourage members of Congress to support this bill through Congress.”

The Republicans’ American Health Care Act, or AHCA, would repeal the tax penalty on large employers that do not provide coverage, and would make the repeal retroactive to Jan. 1, 2016. The bill would also repeal tax credits for low-wage, small employers with 25 of fewer employees that credit up to 50 percent of the employer’s premium contribution. 

Details of the changes the Republicans’ plan would make to the ACA can be found on the Kaiser Family Foundation website.

The AHCA has run into difficulties in Congress, among Democrats who strongly oppose it and from some Republicans.

But employers, eager to ease regulations increased under the Affordable Care Act, have been pushing to get the law passed. And earlier this week, the U.S. Chamber of Commerce lent its backing to the reform proposal. The National Retail Federation also supports the AHCA.

Restaurants have been a vocal opponent of the ACA, particularly the employer coverage mandate and the definition of full-time work as 30 hours per week.

The industry is one of the largest private employers, with nearly 15 million workers. Many of the jobs it provides are low-wage, low-skill and often part time. Health insurance requirements have driven up costs for operators, complicating efforts to keep prices down. 

“Restaurant operators who can provide health insurance benefits to their employees often find these benefits to be critical tools in recruiting and retaining employees,” Simpson wrote. “However, since the enactment of the ACA and the law’s employer mandate, restaurants have spent hundreds of additional administrative hours managing and delivering these benefits. The added time, money and resources have not improved the quality of health insurance benefits restaurants offer their employees.”

Simpson wrote that the percentage of restaurant employees covered by health insurance increased from 59 percent in 2010 to 76 percent in 2015. But she said that much of the coverage had come from sources other than the restaurants themselves. The percentage of workers covered through an employment-based plan fell from 67 percent in 2010 to 59 percent in 2015.

In addition, health care costs have risen “much faster than restaurant sales in recent years.” 

Between 2006 and 2016, employer contributions for health insurance rose 51 percent, Simpson said, quoting Kaiser Family Foundation statistics. At the same time, average sales per restaurant increased 33 percent.

“This indicates that health insurance costs are taking up a larger share of the restaurant dollar,” Simpson said.

While the association is backing the AHCA, it made clear that it wants further steps taken down the line. 

“Once this initial phase is complete, we look forward to working with you on additional fixes that are needed, including repealing the 30-hour rule, streamlining the employer insurance reporting requirements and repealing the seasonal worker definition,” Simpson wrote.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

How to improve local store marketing

Wed, 2017-03-22 14:17

Maria Topken is director of client leadership for Sunrise Advertising in Cincinnati. She has previously served as marketing director at Long John Silver’s, and has worked with Wendy’s and Steak ’n Shake. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

As a savvy franchise owner, you understand the importance of Local Store Marketing, or LSM.

There have likely been many times when you've implemented local marketing plans that were solid hits. But there probably were strikeouts, too.

In today’s world of tight margins, leaner marketing budgets and increased competition, the need to improve your LSM batting average is imperative to overall success. That’s true whether you have one unit or manage a down-trending location in a large national chain.

So, how can you improve your LSM success rate?

First, an LSM program should never interfere with your operations. The last thing you want is to negatively affect the customer’s experience. When developing ideas and objectives, be sure to get your operations team involved. They are best suited to know if the marketing program could affect speed of service or any other element of customer satisfaction. Also, involving them in the process helps ensure that they will be all in, which is important to success.

Next, establish clear goals and objectives. Are you looking to gain trial? Increase frequency? Fight off new or enhanced competition? The goal will help determine your strategy. For example:

  • Gain trial: Consider giving your employees five coupons each for a new product. Ask them to give the coupons to family and friends. Your employees look like heroes, and you have implemented a quick and easy way to get trial.
  • Increase frequency: Loyalty-focused plans that reward customers for their business typically result in increased traffic. Just remember that the rewards should be relevant and timely.
  • A competitive attack plan: Thwart the new guy’s opening by focusing on your customers’ experience. Invest in a few extra hours of labor a day in the dining room. Put your best face forward and make customers feel special as you refill their drink, take their trash or just ask, “How’s your day going?”

You'll note that these suggestions are rather simple. This is important: If you can’t explain the program succinctly to your target audience, the chances of success are slim. Life is complicated: Don’t make it hard for me to be your customer.

In addition to being clear and simple, it's critical that you consider your trade area and those who live in it. Is your customer base mostly families? Create a program that caters to convenience for time-starved moms, or sponsor the Little League team. One day, these young ballplayers may be your customers, or even part of your team.

Do you have a lot of Millennial customers? They look for places to hang out, so Wi-Fi and snacks make for a win, because Millennials are clockless eaters. Three square meals a day isn’t really in their vocabulary.

Don't be discouraged if your marketing budget is small. There are creative ways around that. For example, we recommended to one of our restaurant clients that they become the “Unofficial Pizza Provider” for a local radio station. We approached a popular radio station in the market and made a deal for our client's pizza to be available for all station events in exchange for the station mentioning the restaurant location when promoting the event on air. The restaurant was able to get numerous radio mentions for free, while boosting food-in-mouth opportunities at the events.

Be sure to connect with your guests through social media, not only to keep them posted on what’s happening at your restaurant, but also to engage and reward by asking them to share what they like best about your establishment. Randomly choose a winner to dine with you so you can learn even more. Customers will respond to brands they like.

Social media can also amplify your efforts. For example, you can invite people to sign up to win tickets to a VIP event. In addition to generating awareness and traffic, this will get you email addresses that you can use at a later time. At a minimum, post pictures while the event is taking place, and consider posting live for better engagement. Provide relevant hashtags and Snapchat filters. Ask people to write reviews on Facebook, which gives you an opportunity to engage and also gain consumer insight. You might want to partner with a local radio station and ask them to promote your LSM on the station's social channels, as well as on air.

Speaking of partnering, consider teaming up with another brand in the community. But ask yourself: What do our brands have in common? Do we have the same values? The same target audience? Do we complement each other?

If the answer is “no” to any of these questions, pass, and pass quickly! 

Lastly, don’t be shy about asking for support from the corporate office. They may have a tool kit with existing marketing tools that can be used or customized to meet your needs. Don’t recreate the wheel if you don't need to. Ask your corporate partner to review your program with an eye toward making suggestions on how it can be more effective.

Local Store Marketing programs start with a strategy and require focused discipline. Start small, understand what’s working and what’s not, and apply that insight to your next program.

Done correctly, LSM will not only grow sales, but can also create brand influencers who can turn LSM into a long-running success story.

Maria Topken is director of client leadership at Sunrise Advertising in Cincinnati. Before joining Sunrise in May 2015, she was SVP/partner, client leadership, at Empower MediaMarketing. She also served for four years as marketing director at Long John Silver’s, where she oversaw communications for more than 500 restaurants. Topken has additionally worked with Wendy’s and Steak ‘n Shake. Her work for Wendy's included serving as the strategic lead for more than a third of Wendy’s local markets, collaborating with more than 50 franchise groups. Contact her at mtopken@sunriseadvertising.com.

CKE picks Andy Puzder’s successor

Tue, 2017-03-21 20:32

CKE Restaurants Holdings Inc., parent company of Carl’s Jr. and Hardee’s, has named Jason Marker as CEO, succeeding Andy Puzder, the company said Tuesday.

Marker most recently was president of Kentucky Fried Chicken U.S., and his successor there, KFC chief marketing officer Kevin Hochman, was named earlier Tuesday. Marker is expected to start as CEO in April, Franklin, Tenn.-based CKE said in a statement.

Puzder was President Donald Trump’s nominee as U.S. Secretary of Labor, but he withdrew his name after opposition to his appointment grew.

“Jason has tremendous experience in franchising, in the QSR sector, and in positioning and growing iconic brands,” said Puzder, who served as CKE’s CEO since 2000.

“I expressed my desire to have CKE plan for succession approximately a year ago, and I could not be more pleased to have Jason Marker selected to be the company’s next leader,” Puzder said in a statement. “He is an outstanding executive who will continue to build the Hardee’s and Carl’s Jr. brands both internationally and domestically.”

Marker said: “It is a privilege to lead an organization that has pioneered the quick-service restaurant space for more than 75 years.” 

Before becoming KFC president in 2013, Marker served at KFC and Yum! Brands International in various marketing leadership roles, including general manager for KFC U.S., chief marketing officer for KFC U.S., vice president of global marketing for KFC, and chief marketing officer for KFC and Pizza Hut South Pacific. 

Carl’s Jr. and Hardee’s have more than 3,800 franchised and company-operated restaurants in 44 states and 41 foreign countries and U.S. territories. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Should franchisees get a seat on McDonald's board?

Tue, 2017-03-21 19:50

This post is part of the On the Margin blog.

Franchisees are running an increasing number of the country’s restaurants. So should they have a say in running the actual companies? 

It’s a question shareholders at McDonald’s Corp. could get a chance to decide, after the Securities and Exchange Commission last week said the company had to let shareholders decide on a proposal to let franchisees pick a board member. McDonald’s has appealed the decision.

The proposal came from shareholder Segal Marco Advisors, a firm that works with large investors like pension plans. The proposal, which few expect to be approved, would nevertheless have big implications for a restaurant business increasingly operated by franchisees. 

“Any time McDonald’s moves, it creates precedent,” said John Gordon, a restaurant consultant who has long advocated for franchisee board representation.

Under the proposal, franchisees would get a special class of stock and would vote on a person to represent them on McDonald’s board of directors. It’s a proposal unique to corporate governance in the U.S., said Maureen O’Brien, vice president and director of corporate governance at Segal Marco. 

“McDonald’s doesn’t have much franchise experience on its board,” O’Brien said. “We really think, given it comprises such a huge part of the success of the company, there needs to be somebody on the board who is familiar with the challenges and issues that franchisees have.” 

McDonald’s, for its part, gives franchisees some say in many of the company’s initiatives. The company itself said in a statement that its franchisees have plenty of communication with the board and management. 

“The board has a fiduciary duty to act in the best interests of all shareholders,” the company said. “In selecting director candidates, the board seeks individuals who, among other things, display the independence of mind and strength of character to effectively represent the best interests of all shareholders. Existing robust lines of communication already exist between the board, management and franchisees, and all stakeholders are able to communicate directly with the board.”

Franchisees operate a growing percentage of the country’s restaurants, a long-term trend dating back at least two decades. As of 2015, according to Nation’s Restaurant News data, franchisees operated 76 percent of the restaurants in the 100 largest chains. That was up from 75 percent two years earlier.

Investors have pushed brands to sell company stores to franchisees. Applebee’s, IHOP, CKE Restaurants Inc., Yum Brands Inc., TGI Friday’s, The Wendy’s Co., Burger King and many others have all sold off company stores. McDonald’s is in the process of doing so, with plans to have 95 percent of the company’s restaurants franchisee owned by 2018.

Yet few companies go so far as to put franchisees on their boards.

Bojangles’ Inc., and Famous Dave’s of America Inc., both have operators who serve on the board. CKE Restaurants Inc., a private company, has had franchisees on its board for years — including its time as a publicly traded company a few years ago.

“They're great additions and have been meaningful contributors,” CKE's CEO, Andy Puzder, told me in 2015. “Plus, the franchisee community feels more involved and confident in how the company is run.”

Gordon believes that companies have feared giving up control, which has kept more of them from putting franchises on their boards. “There’s always this us-versus-them mentality,” he said. “There is a fundamental fear baked into the franchisor DNA that somehow they are going to lose control.”

Gordon believes that putting franchisees on the board could improve communications between brands and their operators. He also believes it would promote internal ownership of the company, while also giving the board a more long-term focus. 

“It could create a larger pool of committed shareholders over time, as opposed to mercenary ownership who might not be invested in the brand.”

O’Brien, for her part, acknowledged that McDonald’s and its franchisees do communicate regularly. But her firm’s proposal would elevate that line of communication, putting the operators on more of an equal footing with the company.

“McDonald’s has some experience, with directors from different countries, and it certainly has a diverse board,” O’Brien said. “It just seems like this is an obvious piece of experience that the company is missing.”

Few, however, ultimately see the proposal winning. Shareholders and franchisees are different constituents whose goals might not always coincide with one another. Concerns that shareholders’ own votes could be diluted under the proposal might keep them from giving it the go-ahead.

And there are other potential landmines in the idea of franchisee board membership. Richard Adams, a former franchisee turned consultant, believes there would be intense pressure on the franchisee who received that seat. 

“The political pressure on such franchisees would be unbearable,” he said. “If the franchisee doesn’t support the CEO’s direction it’s going to impact the way the franchisee is treated by McDonald’s employees in the field. 

“And, if the franchisee representative appears to be getting any perks from corporate they will become distrusted by their fellow franchisees. It’s an impossible position.”

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze