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Freshii raises $96M in IPO

Tue, 2017-01-31 23:24

Freshii Inc. raised $96 million in an initial-public offering in its home city of Toronto on Tuesday in what some hope will jumpstart an IPO market that has been stalled for well over a year.

The Toronto-based healthy fast-casual chain sold 10.9 million shares at $11.50 Canadian — raising $125.4 million in Canadian dollars, or $96 million U.S.

Freshii will receive $38.5 million in U.S. dollars from the offering, while shareholders will receive $57.7 million. The stock rose 6 percent on Tuesday, or $12.22 per share in Canadian dollars.

“The IPO is not the finish line for us,” the chain’s founder and CEO, Matthew Corrin, told Nation’s Restaurant News. “This is just the starting line. We plan to triple our store count by the end of 2019. Freshii will continue to execute our brand mission to make healthy eating convenient and affordable to all. Our mission is our North Star.”

No restaurant company went public in 2016, and it’s been more than 18 months since an industry IPO, the longest such drought since Bravo Brio Restaurant Group’s 2010 offering broke a more than four-year dry spell. Chuck E. Cheese operator CEC Entertainment Inc. also is said to be considering an IPO this year.

Corrin opened the first Freshii location in Toronto in 2005. The fast-casual chain has since grown to 244 locations in 15 countries. Franchisees primarily operate the restaurants, which have staked a claim in the rapidly growing market for healthier, fast-casual fare. 

The company has also used an attention-getting marketing strategy, once offering to co-brand with McDonald’s Corp. and offering franchise to owners of frozen yogurt shops. 

In an email interview Tuesday, Corrin said that the company plans to support demand to open more restaurants. The company also plans to invest in mobile technology and its Meal Box effort. The Meal Box provides three meals and two snacks in a box. Customers either pick the boxes up or sign up for delivery. 

“Both initiatives help make our healthy choices more convenient to people on the go,” Corrin said.

He also described his marketing strategy as “grassroots.” The company doesn’t spend anything on franchise advertising. 

“News-pegging has been and always will be a key marketing strategy for our brand,” Corrin said. “We don’t spend a dime on franchise advertising and receive over 4,000 franchise applications in a year. We rely on our creative, bold marketing campaigns to catch the eyes of qualified, potential new franchise partners as well as to increase foot traffic to our stores and convert new guests to become Freshii fans.”

Freshii initially wanted to sell shares for $8.50 to $1, Canadian, but raised the price this week — a sign of high demand in the offering.

CIBC Capital Markets, Jefferies Securities Inc., RBC Capital Markets and Robert W. Baird & Co. were the lead underwriters in the offering.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Hooters franchisee to open fast-casual spinoff

Tue, 2017-01-31 23:06

Would customers go to Hooters without the chain’s famous waitresses?

“We’ll find out soon,” Neil Keifer, CEO of Hooters franchisee Hooters Management Corp., or HMC, which is set to open a fast-casual version of the casual-dining chain in Cicero, Ill., in mid-February.

Hoots, A Hooters Joint, and will serve some of Hooters’ most popular items, including chicken wings, fries and crab legs. Customers will order at a counter, get their food and eat in or take out. The 2,800-square-foot location will have 75 seats and employ 30 people.

Unlike a fully counter-service concept, it will also have a bar area with 12 full-service seats. 

“It’s sort of a flex model,” Keifer said. “But it’ll be predominantly fast casual. We’re anxious to see how that works.”

Keifer was part of the Original Hooters group that opened Hooters in Clearwater, Fla., in 1983. Hooters of America acquired the brand and remains the franchisor and brand operator. Keifer’s company operates 25 locations in three markets, including Florida, Chicago and New York City. 

Keifer said the chain is working with the franchisor on the concept, which could be expanded if the first location succeeds. 

“We are very supportive of this initiative,” Hooters of America CEO Terry Marks said in a statement. “It’s a logical extension of the brand and will provide more people with more opportunities to enjoy our world famous wings. We have a lot to learn, but we are excited about the potential.” 

Hooters is among several casual-dining chains developing fast-casual concepts, with varying degrees of success.

Pizza Inn developed the fast-casual pizza concept Pie Five, which has grown to be among the biggest in its segment. Family-dining operator Cracker Barrel is incubating its Holler & Dash concept. And Buffalo Wild Wings Inc. has invested in a pair of fast-casual concepts, PizzaRev and R Taco.

It’s easy to see why: Casual-dining traffic has fallen in 21 of the past 22 months, and has declined for the most months in at least the last five years, according to MillerPulse. So casual-dining chains have worked to hedge their bets on the segment by taking a page from fast-casual concepts, which have been growing more rapidly in recent years. 

But Hooters is different. The brand was a pioneer in the so-called “breastaurant” segment — bar-and-grill concepts that employ attentive, scantily clad waitresses. That attentive service is vital to the sector, at least theoretically.

Still, Keifer remains proud of the food, and said it can be the centerpiece of a concept that is more flexible — especially given the struggles casual dining has experienced in recent years.

Indeed, his own company’s thriving take-out business gives him plenty of evidence that a waitress-free Hooters could work.

To-go orders represent 14 percent of sales at HMC. And three of the company’s 12 Chicago restaurants do 25 percent or more take-out business. 

Why has takeout worked so well at those locations? 

“I don’t know,” Keifer admitted. “It’s piqued our interest for years. So we thought we’d give it a try.”

And most Hooters customers do order food. 

“About 72 to 73 percent of our sales are food,” Keifer said. “We’ve only had hard liquor on the menu for 11 years. For the first 20 years it was just beer and wine.”

“We’re pretty proud of our food,” he added. 

Keifer said planning for Hoots has been in the works for about three years. The idea would give his company a more flexible model that can translate to more locations than a traditional Hooters, he said. That includes densely populated areas where quicker service and more to-go orders are in higher demand. 

The model is also cheaper.

“This will help us get into neighborhoods where we can’t find a site big enough,” Keifer said. “When you look at the price of real estate, this allows us to be a little more flexible.”

And the owners of HMC are willing to take a risk.

“Being privately owned, and not the franchisor but a perpetual licensee, we are a little more nimble, and we’re still entrepreneurial,” Keifer said. “This is a new venture. We’re cautiously optimistic. We’ll give it the old college try, so to speak.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

New tools for employee retention

Tue, 2017-01-31 22:26

Retaining workers in a tight workforce requires human resources departments to deploy old and new tools more effectively, panelists at the TDn2K Global Best Practices Conference said Monday.

From text-message surveys to old-fashioned handing out of business cards to competitors’ employees, human resources professionals assessed that state of recruitment and retention during the HR Summit at the conference, sponsored by the business analytics firm Sunday through Wednesday in Plano, Texas.

“There’s not much pixie dust here,” said Tom Gathers, chief people officer for Red Lobster. “It’s not that easy. There’s an inverse relationship between the economy and the capacity to hire people.”

“You have to focus on the basics: It’s blocking and tackling,” Gathers said. “I started in this business right out of college 40 years ago. They taught me at the time: hot food hot, cold food cold, smile at the customers, keep the bathroom clean and get the money to the bank.”

Forty years later, Gathers added, it’s the same tactics, “but now you have to use a computer.”

Intent-to-stay interviewers are one tool that companies can deploy to help retain workers, Jamie Griffin, founder of the Good Workforce consultancy and formerly with Raising Cane’s.

In addition, some new tools like text-message exit interviews with hourly employees, “which is pretty phenomenal,” Griffin said.

“Staffing for success is really important across the board,” he added, which includes measurements on staffing levels and the stability of managers.

Surveying employees through annual “climate studies” can measure engagement, he said, but they are hampered by low response rates. Griffin said he might suggest a simplified survey.

“I might move to six to 12 very specific, very short surveys that were based on business problems,” he said. “If I had to get rid of one of those, I’d get rid of the annual and move to, say, five questions right now and ask how we could take action on that and respond to our teams to increase our engagement and satisfaction.” 

Lynne Bartusek, panel moderator and executive vice president for human resources at Cheddar's Café, said her company recently sent out a three-question Survey Monkey poll on Hot Schedules.

“We were hearing a bunch of noise on uniforms,” Bartusek said. “We got 2,500 responses in four days from our team members.”

By comparison, she said, a longer annual survey with “too many questions” yielded only 1,500 responses over two weeks.

Bartusek also said a recently acquired franchise group’s approach to human resources was “to treat employees like volunteers.”

“People notice everything in the way you treat them,” she said. “In our role, we have to have extra-sensitive people to catch those things.” 

Lori Van Holmes, who before becoming vice president of talent development at United Health Group worked with Buca di Beppo for 10 years, said human resources departments must evaluate legacy processes and jettison those that are no longer useful or germane.

A successful company culture that helps foster retention depends on sharing responsibility, she said.

“How can everybody feel they have a shared responsibility for the organization, from the busboy to the host to the counter worker to the prep cook?” Van Holmes asked. “Everybody is leaning in toward the customer to make sure we are serving them.” 

And Gathers said first-day training and exit interviews remain important to a company’s hiring culture overall. 

“There’s a certain magic as to how people are treated in your business on their first day,” Gathers said. How employees are treated creates the company culture, he said, adding that how the team is treated translates to how guests will be treated.

How employees are handled on their last day is also crucial to the culture, Gathers said, as that shows how a company treats people in general. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

4 ways restaurants can win over Gen Z

Tue, 2017-01-31 17:39

Joseph Szala is a restaurant branding expert based in Atlanta. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

Restaurants have traditionally been a means to an end. But due to mountains of options, they’ve surpassed the basic utility of satiating hunger, and have created new need and want states.

This phenomenon is especially prevalent among Generation Z. For them, brands have evolved into cultural and social statements. Translation: Restaurants are no longer here to simply satisfy hunger.

In today’s world, young diners and would-be brand ambassadors want brands that reflect and contribute to their shared values. Great products and superior customer service are table stakes.

Restaurants that help exert and receive influence among this generation’s peer group get their attention, and eventually their loyalty. The culmination of brand experiences has to be more than just purely transactional. They must connect with authentic participation as the catalyst.

A recent study conducted by iris Worldwide looked at shopping behaviors of Millennials and Gen Z. Overall, this group looks for brands that deliver a unified and genuine message that aligns with every experience, including the transaction of buying. They want seamlessness in all the ways they communicate. After all, these brands do the talking for the consumer.

There are brands that are ahead of the curve and understand this evolution, and others that must innovate or perish. Here are four things restaurants should consider in cultivating more meaningful relationships with Gen Z:

  1. Celebrate communities that share the same values. Focusing on core influencer groups within your market is a stellar way to gain traction and build buzz. Celebrate the things that get them excited inside and outside your four walls. Aligning with their passions will position you as a “friend” and spark more opportunities for word of mouth, social chatter and buy-in from those who have a much larger reach and loudspeaker.

Freebirds World Burrito does a stellar job of connecting the brand to a cause that resonates with the same values as their audience. The chain’s program leverages the power of locality with the help of “tribe members” — staff members who are engaged in the local communities. This effort is honest and effective at aligning the brand with the values in each community.

  1. Present your brand and food within their culture. Too often, restaurants only consider the experience inside their four walls. Instead, they need to consider the potential for their brand to be a lifestyle, not just a hunger cure. This happens outside the four walls and within different subcultures. So ask not how the culture of Gen Z fits into your brand, but how your brand fits into their culture. They want real, authentic experiences that aren’t afraid to be human. That means fessing up to mistakes, listening to people and having a personality.

Many local, independent restaurant brands excel at community integration by having strong showings at local events large and small. It’s more genuine than throwing money at sponsorships and calling it a day. These brands get face to face with the people in their market and create connections with each other and the brand.

  1. Help them experience your brand in their channels. The restaurant industry has been stuck in a rut with old-fashioned dining experiences. Gen Z is tech savvy and tech dependent, and, in the traditional sense, they don’t always want someone to take their order, provide suggestions and interrupt their conversations to ask them how their meal is. They’re well versed at handling the process — and complaining when something isn’t right.

Brands like Domino’s in the U.K. allow customers to build their own pizza with any toppings of their choosing. Then they name them and promote their creation through social media. This example hasn’t only proven engaging — it has driven sales.

Utilizing new features on popular social platforms can also work towards building your brand. For instance, Instagram’s new “shop now” capabilities can quickly convert a passive viewer into a potential customer. It just takes some extra thinking and an attention to creative opportunities.

Many restaurants saw the value in emerging platforms last summer, when Pokémon Go hit like a tidal wave. By setting up PokéStops and using the platform’s lure item creatively, they were able to draw in people quickly, effectively and inexpensively. 

  1. Make dining super simple and super social. Many full-service brands have been hesitant to implement a kiosk or a digital-forward approach to ordering. The rationale usually includes the lack of personal touch and the ability to upsell. However, the industry continues to fail to reinvent the way we grow with ever-changing consumer needs and wants. Rethinking how customers order and engaged could be the disruptive game-changer, akin to Uber’s overhaul of personal transportation. It wasn’t that personal transportation wasn’t available before Uber; it’s that Uber made it simple and intuitive.

For instance, Taco Bell is constantly pushing its cultural relevance by simplifying and streamlining the way customers order tacos. From ordering using taco emojis on Twitter, to simple message-based ordering on popular communications platforms like Slack, Taco Bell obviously understands that simplicity is king.

Attracting Gen Z isn’t an enigma. These customers aren’t mythical beasts that require magic to be found. Above all, they require authenticity from brands across the board. By following the four points above, you can conform your brand to their will and wants effectively. After all, their buying power is only growing. Those who choose to stay ahead of the curve will win.

Joseph Szala is a restaurant branding expert based in Atlanta. His acute understanding of how restaurants operate, where they fail and how to build them into successful brands has launched him to expert status. Szala is currently senior creative for iris Worldwide - Atlanta and principal of Vigor, a restaurant branding studio.

A peek at restaurant 2017 Super Bowl ads

Tue, 2017-01-31 16:22

Restaurants are Super Bowl-ready with showstopping ads aimed to capture fans' attention.

 

Must-see videos: Wendy’s touts fresh beef hamburgers

Tue, 2017-01-31 13:59

NRN editor-in-chief Sarah Lockyer, executive editor Jenna Telesca and senior food editor Bret Thorn introduce The Power List, a definitive guide to the most powerful people in foodservice. See what the 'Othr Guyz' don't want you to see in Wendy's latest fresh vs. frozen beef commercial. McDonald's iconic Big Mac is now being offered in three sizes for a limited time. Panda Express shares the Chinese New Year experience as Z and her family explore new traditions and the true meaning of the holiday. Subway is offering unlimited $6 footlong sandwiches for a limited time.

Inside the making of The Power List

Wendy’s touts fresh beef hamburgers

McDonald's: There’s a Big Mac for that

Panda Express celebrates Chinese New Year

Subway announces Footlong Fest

Guy Fieri revamps sandwich counter at Orlando Planet Hollywood

Mon, 2017-01-30 22:51

Chef, restaurateur and TV personality Guy Fieri has developed a special menu to be served at the refurbished Planet Hollywood that’s part of the Walt Disney World Resort in Orlando, Fla.

The overall menu at the 845-seat restaurant, dubbed Planet Hollywood Observatory, which reopened last week after a yearlong closure, is similar to those at other Planet Hollywood locations in London, New York, Las Vegas, Paris and London, but the sandwich-and-burger section has been developed by Fieri and his team. 

Special sandwiches include the Pimento Grilled Cheese, which comes triple stacked with six-cheese mac & cheese, Fieri’s signature SMC, or “super melty cheese,” and pimento cheese on garlic-buttered sourdough. Also on the sandwich menu is a Championship Pulled Pork, made with pork in bourbon-brown sugar barbecue sauce with coleslaw, pickles, fried onion straws and “donkey sauce” (mayonnaise, Worcestershire sauce, roasted garlic, mustard-salt and pepper) on garlic-buttered brioche. The menu also has a Cajun-spiced grilled-chicken sandwich; a fried-chicken sandwich with ranch dressing, pickles, cheddar, coleslaw and honey hot sauce; a chicken BLT; and a turkey sandwich with cranberry relish, Swiss cheese, barbecue kettle chips, lettuce, tomato, onion, pickle and donkey sauce.

Burgers include The Mayor of Flavortown topped with pastrami on a pretzel bun; a Tatted Up Turkey, which is topped with roasted poblano peppers, smoked gouda, Swiss cheese, caramelized onion jam, lettuce, tomato, onion and pickle on a garlic-buttered pretzel bun; and Morgan’s Veggie, which is a scratch-made vegetable burger of black beans, white beans, chickpeas, oats, artichokes, roasted red peppers and garlic with cilantro aïoli, lettuce, tomatoes, onions and pickles on a toasted wheat bun.

Planet Hollywood founder and CEO Robert Earl said he teamed up with Fieri because the space, built in a dome and intended to resemble an observatory, requires a larger-than-life personality. What is more, celebrity chefs attract customers. 

“Because of the frequency that they’re on TV, the demand to actually frequent something that they’re involved in is very, very high,” said Earl, who had worked with celebrity-chef Gordon Ramsay at the Planet Hollywood Resort & Casino in Las Vegas, where Ramsay has a burger concept.

He added that some celebrity chefs are more approachable than others, and “Guy fits in with the profile of our guests,” he said. “They feel so comfortable with him that they’d like to hang out with him, that they’d have something to say to him, and they’re just very comfortable being associated with him.”

Earl also said he enjoyed the new menu items.

“It’s really tasty and gooey and healthy. I was joking about the last bit,” he said.

Fieri also has experience working for larger companies: He has restaurants on Carnival Cruise Lines ships among more than 50 other locations throughout the United States.

Fieri said at Planet Hollywood he wanted to offer a variety of different styles, “knowing we’re going to get a melting pot of people coming in,” he said.

“This is a worldwide destination, and with that in mind I wanted to make sure we had a creative offering of burgers on the menu that were going to give people a chance to try something they maybe hadn’t tried before.” 

Contact Bret Thorn at bret.thorn@penton.com

Follow him on Twitter: @foodwriterdiary

Debate rages over Andy Puzder’s labor secretary nomination

Mon, 2017-01-30 22:35

A coalition of conservative groups has come to the defense of CKE Restaurants Inc. CEO Andrew Puzder, as labor activists continue to fight the executive’s nomination as labor secretary. 

In a letter released early Monday, the conservative groups said that Puzder “can foster and encourage the business formation that makes job creation possible.”

The letter was signed by 17 conservative groups, including Kent Lassman, president of the Competitive Enterprise Institute, and Grover Norquist, president of Americans for Tax Reform.

“For the past eight years, the Labor Department has overwhelmed job creators with burdensome regulations, creating immense uncertainty for employers,” the group wrote. “This has led to subpar economic recovery, including gross domestic product growth that has averaged less than 2 percent under President Obama.”

The letter was released amid intense opposition from liberal groups who have made Puzder’s nomination among the business battles over President Trump’s cabinet nominees. The groups said they believe Puzder would work “for the interests of big business over the interests of working people.”

Confirmation of Puzder as Secretary of Labor has been delayed multiple times and is now set for next Tuesday, according to the Washington Post. The approach of the hearing has led for the intensification of the debate over Puzder, and how he would operate the Department of Labor.

A coalition of more than 75 liberal organizations and labor activist groups released its own letter on Monday opposing Puzder’s nomination, saying that it is “rife with conflicts of interest.”

“Puzder’s company has faced numerous Department of Labor violations for failing to pay the minimum wage or overtime: 60 percent of inspections of Carl’s Jr. and Hardee’s restaurants found labor law violations and Puzder has opposed both raising the minimum wage and enforcement of overtime rules and mandatory sick leave,” the group claimed.

“Puzder’s confirmation would ensure that the interests of the fast food industry — and its large meat and food industry suppliers — would prevail over the needs of hard working people in the food system who face some of the highest rates of food insecurity due to low wages and poor working conditions.” 

Restaurant executives and industry groups have largely cheered Puzder’s nomination because it puts one of their own at the top of the federal department responsible for enforcing labor regulations — restaurants employ nearly 11.5 million people and added about 240,000 jobs over the past year. 

Conservative groups believe that the department was overly aggressive in enforcing labor regulations under Obama and believe that Puzder would ease that regulatory burden.

“Under the Obama Labor Department, for the first time in 35 years, more American businesses closed than launched,” the conservative groups wrote. “This decline in entrepreneurship and opportunities has made it harder for people to find work and many Americans have simply given up looking for jobs altogether.”

Puzder, the conservative groups said, would bring “real world experience” to the department.

The labor activists, however, believe that putting Puzder at the top of the department would do little to help improve working conditions in the restaurant business. They said that workers would have to “rely on vocal opponents of labor regulations to protect their basic workplace rights.”

“These workers face disproportionate rates of poverty, discrimination and sexual harassment and deserve a Labor Secretary who believes that, as Dr. Martin Luther King Jr. once said, ‘All labor has dignity,’” the labor groups wrote.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Activist takes aim at Fiesta Restaurant Group

Mon, 2017-01-30 22:18

This post is part of the On the Margin blog. 

JCP Investment Management LLC nominated three people Monday to the board of Fiesta Restaurant Group Inc., complaining about the decline in value at the owner of Pollo Tropical and Taco Cabana in recent years.

The investment firm, which owns 7.1 percent of Fiesta stock, says the company needs new board members before it sells the company or hires a new CEO. JCP nominated its managing director, James Pappas; John Morlock, chief operating officer of Sbarro; and private investor Joshua Schechter.

The nominations promise a proxy fight at Dallas-based Fiesta.

JCP said it has tried to reach a resolution with Fiesta, but the board and management team “have refused to engage meaningfully with us, leaving us little choice but to nominate a competing slate of director candidate.”

“JCP is concerned by the massive decline in value that Fiesta stockholders have suffered over the past several years,” the activist said in a press release.

The move by JCP, which first indicated its activist investment in September, continues what has been a tumultuous several months at Fiesta, which has closed restaurants, seen its CEO go and announced plans to sell Taco Cabana, only to pull them back.

Fiesta was once a highly regarded company on Wall Street. It was spun off by Burger King operator Carrols Restaurant Group in April 2012, and quietly enjoyed a strong run that saw its stock price go from $12.50 per share to more than $60 per share by March 2015.

But since hitting an all-time high of nearly $67 per share that month, Fiesta’s stock has tumbled, losing more than half of its value. 

A handful of issues have dogged the company in the past couple of years. The biggest was the failure of Pollo Tropical in Texas.

In 2014, Fiesta opened its first Pollo Tropical unit in Texas, hoping to make the company’s headquarters state a major market for a chain that had been wildly successful in Florida, Georgia and Tennessee.

But that didn’t happen. The restaurants struggled, far from a market where consumers best know its Caribbean menu. In October, the company closed 10 locations, eight of them in Texas

“A prime example of stockholder value destruction is the board’s misguided decision to allocate more than $70 million for Pollo Tropical’s failed expansion into Texas,” JCP said in the release.

The investor also argued that existing management has failed to capitalize on the Taco Cabana brand. “We … believe that Taco Cabana has significant value and growth potential, which the incumbent board and management team has apparently failed to recognize or, at a minimum, to capitalize upon,” the investor said.

Back in February, the company announced plans to split the chains into two. By September, Fiesta scuttled that plan, saying that, “continued brand ownership is in shareholders’ best interest.”

That came a month after Fiesta announced that CEO Tim Taft would retire by the end of the year. Danny Meisenheimer has been interim CEO since September, while the company looks for a permanent chief executive.

JCP said since Taft’s departure, “stockholders have been left with a company without a permanent CEO that is being run by a board with minimum share ownership and scant restaurant operating experience.”

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

How Ruby Tuesday upgraded its Garden Bar

Mon, 2017-01-30 21:51

Ruby Tuesday Inc. CMO David Skena is shedding light on the casual-dining chain’s path to upgrading is signature Garden Bar after more than a year in test.

The Maryville, Tenn.-based operator rolled out the revamped Garden Bar on Jan. 17, after smaller market tests showed it was an important brand differentiator. 

“The Garden Bar is really the cornerstone of where we want to take the brand and where we want it to be in the lives of our guests,” Skena told Nation’s Restaurant News. “We can be a restaurant concept with better choices on the menu for people to make. We love having the grill-and-bar menu, but we can be more.”

Skena said the customer response has been very positive, but the executive team was unsure when it first tested the upgraded Garden Bar in November 2015. 

“We did a single-unit test near our headquarters, sort of as a proof-of-concept test to see if we could pull it off,” he explained. The company then did a full-market test in Atlanta in early 2016, and expanded it to St. Louis and Charlotte, N.C., in May.

“Altogether, we had a million visits to the Garden Bar,” Skena said. “But in each market, we would vary a price point or vary a selection. By the end of it, we had the ‘Goldilocks Garden Bar’ — it was just right.”

In surveys of more than 6,000 customers, Ruby Tuesday found that 84 percent of Garden Bar users visited specifically because of that offering, Skena said, adding that close to half of all Ruby Tuesday customers get the Garden Bar. 

“It’s a critical part of the restaurants,” he said. 

Labor was a chief concern in rolling out the Garden Bar systemwide, as were some increased food costs, he added. 

The upgrade offers a more contemporary selection of ingredients, Skena said. 

“You have things like artichoke hearts that weren’t there before,” he said, adding that other items include spicy roasted broccoli, pico de gallo, banana pepper, wasabi peas and candied walnuts.

“It’s not that our Garden Bar before didn’t have all the basics that you needed to make a good salad, but this takes it up another notch,” he said.

And because many products are now made in house, labor costs were also a factor in the rollout, Skena said.

“You are making your dressings in house, hand-squeezing the lime juice. It takes time,” Skena said. “That’s for all eight of the dressings, so it has to be done right. It was finding the balance between things that delight the customers and things we could prep right.”

Capital costs for the Garden Bar rollout were minimal.

“It required some small stuff, minor things,” he said. “We needed to update some small wares.”

With each layer of the tiered test last year, the company conducted customer satisfaction surveys, especially to get the pricing correct, Skena said. 

“We make sure we are sensitive to our target customers,” he said. 

The company ended up getting rid of the free side substation of the Garden Bar in favor of an upcharge. Reactions varied by competitive geography. 

“Folks who were in markets where they were used to going to a salad concept — Salata or Tender Greens — they thought this was an incredible value. Other folks in markets where there isn’t that competition, they were more sensitive to the pricing,” he said.

The enhanced Garden Bar also takes aim at Ruby Tuesday’s target customers: families with children.

“We know moms want better, more healthful options,” Skena said. “They want to be at place where they can make good choices. That’s a real feather in our cap.”

Ruby Tuesday is marketing the new Garden Bar through traditional television ads and billboards, but is layering on other media as well, such as a storytelling video called “Shy Girl” on YouTube, Skena said.

As of Nov. 29, Ruby Tuesday owned or franchised 613 Ruby Tuesday restaurants in 42 states, 14 countries and Guam.

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless 

A peak at restaurant 2017 Super Bowl ads

Mon, 2017-01-30 17:13

Restaurants are Super Bowl-ready with showstopping ads aimed to capture fans' attention.

 

Starbucks plans to hire 10,000 refugees

Mon, 2017-01-30 16:58

Starbucks Corp. founder, chairman and CEO Howard Schultz said Sunday that the company plans to hire 10,000 refugees around the world, in a letter rebuking actions by President Donald Trump’s administration regarding immigration and healthcare.

Schultz, who will step down from the CEO role later this year, released the letter on a day in which protests involving tens of thousands of Americans erupted nationwide over President Trump’s ban on immigration from seven predominantly Muslim countries.

“We are living in an unprecedented time, one in which we are witness to the conscience of our country, and the promise of the American dream, being called into question,” Schultz wrote in a letter to employees. 

Schultz said Starbucks “will neither stand by, nor stand silent, as the uncertainty around the new administration’s actions grows with each passing day.”

Starbucks is developing plans to hire 10,000 refugees in 75 countries around the world, he said, and the company will start in the U.S. by initially focusing on hiring people who served with U.S. troops as interpreters and support personnel.

“We have a long history of hiring young people looking for opportunities and a pathway to a new life around the world,” Schultz said. 

The letter included other efforts Starbucks is making for employees and its Mexico market to counter the new administration.

Schultz declared support for the federal Deferred Action for Childhood Arrivals, in which individuals who came to the U.S. as children and who meet several guidelines could have deportation deferred for two years.

More than 750,000 undocumented immigrants have had deportations deferred through DACA, also known as the “Dreamers” program, since 2012. Schultz declared his support for the program in an earlier letter to U.S. Senators Lindsey Graham, Republican of South Carolina, and Dick Durbin, Democrat of Illinois. The future of DACA is uncertain under Trump’s administration. 

Starbucks offers reimbursement for the fee DACA immigrants must pay to remain in the program.

“We want them to feel welcome and included in our success,” Schultz wrote.

Schultz’s letter highlighted Starbucks’ work in Mexico, where the chain has 600 locations, and where it sources some of its coffee. Last fall, Starbucks announced the creation of a farmer support center in Chiapas and donated more than $2 million to support coffee-producing communities in Oaxaca.

“We stand ready to help and support our Mexican customers, partners and their families as they navigate what impact proposed trade sanctions, immigration restrictions and taxes might have on their business and their trust of Americans,” Schultz wrote.

He also said Starbucks workers who are eligible “will always have access to health insurance at Starbucks.”

Workers who lose coverage under the Affordable Care Act can return to the company’s plan within 30 days of losing coverage, rather than wait for an open enrollment period, Schultz said. The Trump administration and Republican lawmakers have vowed to repeal the act.

Schultz’s letter is unlikely to calm speculation that he is eyeing a bid for the presidency in 2020. It also inspired at least some pushback from conservatives, who vowed to either sell the company’s stock or stop buying Starbucks coffee. Schultz didn’t seem concerned about such a reaction.

“In the face of recent events around the world, let me assure you that we will stay true to our values and do everything we possibly can do to support and invest in every partner’s well-being while taking the actions that are squarely in our control,” he wrote.

He also urged Starbucks workers to get active politically, without alienating the chain’s customers. 

“We are all obligated to ensure our elected officials hear from us individually and collectively,” Schultz wrote. “Starbucks is doing its part; we need you to use the collective power of your voices to do the same while respecting the diverse viewpoints of the 90 million customers who visit our stores in more than 25,000 locations around the world.” 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Restaurants use technology to personalize customer experiences

Fri, 2017-01-27 22:33

Want a look at the restaurant of the future? Try Netflix.

The world’s eateries are vastly different from an online purveyor of movies and television shows. Yet companies like Netflix, or Amazon have thrived over the years based on their ability to personalize the customer experience. They know where you come from and what you order. And they often know where you go when you’re done.

These tech companies take this information and use it to their advantage, targeting customers with advertisements or experiences personalized based on their buying patterns. The result? Netflix put giant brick-and-mortar retailer Blockbuster out of business. For an indication of Amazon’s strength, just look at the number of traditional retailers like Sears, Macy’s and The Limited that have closed stores or filed for bankruptcy since Christmas.

This is where the restaurant industry wants to be: Able to target lapsed customers with specific ads or offers, or menus based on eating habits or allergies. And it’s exactly where the industry is headed.

“Why can’t the menu be personalized?” said John Regal, chief strategy officer with the tabletop tablet company Ziosk. “Why can’t the menu be more like Netflix?”

Restaurants, long the luddites of the consumer world, have been spending millions of dollars in a bid to make their businesses more technologically savvy in recent years. Many of these efforts have focused on ways to give customers new methods to access the restaurant, either through a mobile app or online ordering.

Tied in with all of this, however, is a bid to personalize the customer experience. The savviest restaurant chains now know more about where their customers are coming from, how often they’re coming in, and when those customers are in danger of becoming lapsed users.

Papa Gino’s invests in tech

More than a year and a half ago, Papa Gino’s, made a decision to spend big on technology. At the time, the 150-unit pizza chain based in Dedham, Mass., was a struggling. The company built an online ordering system and revamped its website. It also brought in a digital marketing manager and hired a digital ad agency to push those advertisements.

These investments were a major shift for a chain that hadn’t been associated with technology for much of its history — yet the restaurant had plenty of reason to do so. Market leaders like Domino’s Pizza Inc. and Papa John’s International Inc. had been pushing their digital platforms hard, and customers have been responding by giving those chains strong sales.

“I think there was a continued recognition of who was doing extremely well in the pizza category and what the commonalities were,” said Peter Cronin, senior vice president of brand strategy for Papa Gino’s. “Digital presence and technology investment seemed to be the common thread.

“It was not a huge part of the Papa Gino’s DNA. There was a recognition that it needed to be if we were to keep pace with today’s consumer.”

As part of that effort, Papa Gino’s hired Bridg, an upstart Los Angeles-based company that specializes in targeted consumer marketing. The company promises restaurant companies the ability to find most of a company’s customers for the past three years online, much of it using the company’s own customer data.

Restaurants have been using loyalty programs for years to target customers with individual offers. Yet companies like Bridg and Fishbowl are taking that a big step further by targeting almost all of a company’s customers, including those outside of loyalty programs or email marketing, and even including cash customers.

The service enables restaurants to collect data on their customers, how much they spend and what they order. That enables companies to target these customers — individually — with specific offers and advertisements that could entice them to come in at a certain time or order certain items.

“It enabled us to engage with our customer base on a very direct, one-to-one basis, leveraging our transactional database to be able to tailor very, very specific messages to get people and reach them in high impact media,” Cronin said. “We knew we could get impact if we could tailor that message to somebody very specifically, based on past purchase behavior, product preferences and emotional response.”

The system can also tell when customers are in danger of becoming lapsed users. “We don’t have to wait three months,” Cronin said. “Bridg knows if we have a weekly user who we don’t see in a couple of weeks, they’re in danger of being a lapsed user.” And that gives Gino’s the power to target that customer with offers to prevent that from happening.

Targeting customers closely could help put restaurants on the same playing field as online retailers.

Many companies online will “follow” their visitors with advertisements. Look for a video game on Amazon, for instance, and ads for that game will follow you on Facebook and other websites. Their ability to individually target customers has given them a huge advantage. That targeting, plus the ability to keep costs low and the inherent convenience associated with online shopping, has helped shift more spending to the Internet and away from brick-and-mortar retailers.

“It’s easy for e-commerce,” said Amit Jain, founder of Bridg. “They know every customer. They know where the customer came from.”

Restaurants have an advantage because you simply can’t replicate the experience of a restaurant on a website. So, while traditional retailers are having problems competing with the Internet, the Internet has the potential to enhance restaurants’ business.

“We believe restaurants are rich deposits of untapped potential,” said Chris Comparato, CEO at point-of-sale provider Toast. “You can build fantastic experiences at restaurants.”

That said, the industry is largely viewed as saturated. The number of locations is growing faster than demand for that business. Same-store sales at restaurant chains fell most of the year in 2016, a year in which the industry was more technologically savvy than it’d ever been.

The industry decline has inspired many restaurants to start spending on digital to defend their business and get customers back.  

Chipotle focuses on digital for turnaround

Digital is a big part of the strategy that Chipotle Mexican Grill Inc. plans to use in its bid to get customers to return following foodborne illness outbreaks in 2015. The fast-casual chain is promising to boost customer-facing efforts, but it’s also using data. At the ICR Conference in January, the company provided investors with detailed numbers of the company’s customers. That information showed that lapsed customers of the chain increased from 37 million in November of 2015 to a peak of 53.4 million by last April. New customers over that time declined from 49.5 million to 37.3 million over that same period.

What’s more, Chipotle knows how much those customers are coming in. “We have yet to see customers build maximum frequency,” Chief Marketing Officer Mark Crumpacker said at the conference. “Frequency takes time to build.”

Crumpacker said that Chipotle plans to target these customers this year. “We’ve significantly improved our data capability, which enables us to target lapsed customers with very great accuracy,” he said. “We’re now able to target more than 60 million customers who are very infrequent or lapsed. And we can target them with advertising and other offers.”

This move toward personalization, of course, has been going on for years, mostly in the form of the loyalty programs that have grown more sophisticated in their targeting of customers.

Point-of-sale providers — like Toast, Breadcrumb or NCR — and tablet companies like Ziosk or E la Carte — have been working to make it easier to get customers to sign up for those programs, making the effort seamless. Many mobile apps are designed first with loyal customers in mind.

Toast’s Comparato noted that loyalty members visit a restaurant 35 percent more often and spend 46 percent more than non-loyalty customers.

And restaurants are learning that it’s not all about discounts, either. Ziosk’s John Regal noted that a company that collects data on customers could know, for instance, that certain customers are wine drinkers. So when that restaurant gets a new cabernet in stock, the concept can send those customers personalized messages talking about the new wine.

“Loyalty doesn’t have to be about a financial incentive,” Regal said.

Then there are the electronic versions of menus, as companies with tabletop tablets or perhaps even self-ordering kiosks that could one day offer menus tailored to a specific customer.

“Say you’re allergic to shellfish,” Regal said. “You can customize the menu and see what items there are that you can eat. Or if you’re gluten sensitive, you can look at the menu and find there are 30 items that are gluten free. This capability is not that far off.”

Ziosk has been working with large casual-dining chains to put tablets on tables, such as Chili’s Grill & Bar and Red Robin Gourmet Burgers. He said these restaurants are starting to see the benefits of the devices’ ability to gather data.

“When we started working with companies, they started seeing over time the value of business intelligence — how to use the information to modify how they interact with guests,” Regal said.

Does all of these digital initiatives work? That remains to be seen. Yet it’s clear, even now, that some of the top performing restaurant chains in the country are working on such efforts, including Domino’s, Papa John’s, Panera Bread Inc. and Starbucks.

Dominos and Papa John’s use technology to make it easier to order the chains' pizzas. Starbucks has been at the forefront of technology using gift cards and mobile app, and Panera Bread is overhauling stores to add kiosks and table service and use its mobile app more effectively.

Or just ask Papa Gino’s. The company’s move to more digital ordering is starting to pay dividends, and Cronin says that data collection service has “one of the strongest” returns on investment in its marketing arsenal. 

“In the ideal world, I’d be able to have one-on-one conversations with all our customers individually and tell them the great things going on in the brand,” Cronin says, noting that radio and television is more of a one-size-fits-all blast. He said Bridg gets the company “a lot closer to an individual dialogue.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Chili’s president discusses company restructuring

Fri, 2017-01-27 22:17

Chili’s Grill & Bar’s recent restructuring and layoffs were approached with an eye to keeping the management staff close to the restaurants and guests, the brand president said Wednesday.

Kelli Valade, president of the Dallas-based Brinker International Inc. division since June, said the 1,606-unit casual-dining brand approached the restructuring to as a part of its ongoing evaluation of the business. 

Company executives, in releasing second-quarter earnings on Wednesday, said the reorganization had reduced its head count by 70. 

“It’s really about delivering what the guest wants, when the guest wants it and where the guest wants it,” Valade said later Wednesday in a phone interview. “We continue to focus on relevant and differentiated in the space.”

As of Dec. 28, Brinker had 1,658 restaurants, including 1,606 Chili’s units and 52 Maggiano’s Little Italy locations.

Here is Valade’s conversation with Nation’s Restaurant News:

How did you approach this restructuring?

We are constantly evaluating our business model. These were not easy decisions, but we’re continuing to look at and think about what we can do differently given the environments and the volatility of the industry. These were tough calls that we made. The goal, from the very beginning — it has been from the beginning — is to get closer to the restaurants and help those operators do everything it takes to really delight the guests and make them feel special.

What has happened with your area-director level?

It’s hard to explain when you are not looking at an org chart. We had a senior vice president level basically. That was eliminated. That was just three people. Then we had a regional director level beneath. We basically combined that senior vice president level with those regional directors. That involved about 30 or so people in the field, both area directors and that senior level.

Where does that leave the field structure? 

Our multi-unit level — at what we called area directors or now directors of operations — they oversee anywhere from seven to 10 restaurants. Here and there, we took that average number of restaurants slightly up to be able to do that. It’s really a “right sizing” of the organization. And, again, the focus is on helping them do everything possible to deliver a great guest experience and get them in the restaurants more.

And changes at the headquarters? 

The restaurant support center had the same approach and same goal, which was to make sure that, if we had any redundancies of service, it was all about making sure we were focused on the restaurants and helping them deliver on our passion.

What are the changes in Chili’s value platform?

Earlier in the year, we made some changes in marketing. Three courses for $10 is our current value proposition that we are advertising on TV and digital. That is doing very well for us. 

How about delivery and to-go, which Wyman Roberts, Brinker CEO, said inched up to 10.5 percent of Chili’s sales in the second quarter ended Dec. 28?

It’s about taking advantage of this occasion. We know convenience is really critical to our guests. That to-go occasion today is a growing daypart and one that we, like many, are trying to capture as much as we can.

Where are you tapping into that?

Our online platform is where we are seeing a lot of that growth. We are a leader in technology in casual dining, being ahead of our competitors. This is another area where we will continue to focus energy: on getting our great food when the guest wants it.

How is the Olo mobile platform being incorporated into the online offerings? 

It is now in all of our corporate restaurants. [As of Dec. 28, Chili’s had 935 company-owned domestic Chili’s restaurants and 14 international company owned restaurants.] We are implementing it with our franchisees this quarter and next quarter. They soon will be done as well. 

How do you communicate this restructuring plan to your employees?

We spend a lot of time communicating with our people. I’ve talked to dozens and had amazing conversations. We said goodbye to lifelong friends and family. I personally did as well. … We are now focused on making the improvements that this restructuring should allow us to do.

What’s next for Chili’s?

We have lots of things in the works. We have great ideas, a strong in food pipeline, ideas around the to-go occasion and around leveraging technology, menu innovations and some simplifications that will just allow us to run faster. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Operators tap into equipment evolution

Fri, 2017-01-27 19:21

Restaurant equipment is undergoing an evolutionary creep that is providing economy for operators.

Equipment innovations are providing broader options for operators in both the front and back of the house. The right equipment choices can increase labor savings, accommodate dietary-restriction food prep and lead to more efficient footprints.

“It’s an interesting time for restaurants when it comes to equipment,” said Charlie Souhrada, vice president for regulatory and technical affairs, North American Association of Food Equipment Manufacturers.

“Labor is definitely at the forefront of everyone’s minds because of the difficulty of finding people to do the work but also in the cost of labor and healthcare benefits,” Souhrada said.

“We’re seeing more and more tools to try to do jobs more efficiently, faster and better.”

Bojangles’ Inc spent more than a year planning out a Greenville, S.C., prototype to ensure the design would hold up years into the future. That especially included the equipment choices, said Randy Icard, Bojangles vice president of construction and development.

Photo: Bojangles'

Equipment got a starring role. The 699-unit Charlotte, N.C.-based quick-service company created a “Biscuit Theater” to showcase its signature product — the in-house biscuits made every 20 minutes throughout the day — and the equipment was part of that stage.

“We’ve really designed this Bojangles to take us into the future,” Icard told NRN. “We started in the kitchen, because Bojangles is all about the food.”

The company paid careful attention to the kitchen design before the prototype launched in January.

“The biscuit-making and baking were moved to become the centerpiece,” he said. “We’ve made biscuits from scratch since we started in 1977, and we felt like we were known for that in a lot of markets.”

While the restaurant didn’t make many changes to the biscuit-making equipment, it moved that function into the “theater” area behind the order counter, which allowed Bojangles room to make strides in kitchen design, Icard said.

Photo: Bojangles'

The restaurant moved a six-burner stove with separate egg grill and griddle top for breakfast menu items and fryers under a dual-sided venting hood. Menu items prepared there now shift into a double-side T-shaped line for order preparation. The design was incorporated after the company made a number of time-and-motion studies.

“During high volume periods, there’s a line for drive-thru production and there’s also a line for front-line production,” Icard said. “During lower-volume times, they can be combined as needed.”

As Bojangles streamlined the back of the house, it also updated the so-called “middle of the house,” or the counter service area. 

“Our food used to be in steam tables there, so it was basically being held in standard one-third size pans,” Icard said. “From a holding perspective, you can tend to overcook food, even if you think you have temperature set correctly.”

A new system of custom-manufactured round, multi-colored crocks provides visual rustic appeal and maintains the temperature for holding, Icard said.

Photo: Bojangles'

Digital menu boards have been in test for two years, and the new Bojangles prototype offers what the company plans to use going forward. “We’ll put digital menu boards in all the stores that we build,” Icard said. “Being able to manage all the updates offsite was very important for us.

A significant shift in the Bojangles prototype has been in the lighting throughout the restaurants — moving from incandescent to more energy efficient light-emitting diode fixtures.

“This new prototype is almost exclusively LED, especially in the kitchen,” he said. Bojangles now uses digital timers throughout the restaurant, and LED lighting is used in all exterior fixtures, he said.

The restaurant company phased in tankless hot water systems into many Bojangles units as well, he said.

“As equipment and technology in equipment as changed, we’ve tried to stay on top of it,” Icard said. “We may not be the first adopter, but we’ll invest in what will best suit what we need in our restaurants.”

Photo: Ron Ruggless

Equipment for labor savings

NAFEM’s Souhrada said manufacturers are embedding more technology into their equipment to provide labor savings, both for monitoring and maintenance.

“More companies are emphasizing labor savings, but it’s usually something that’s multi-use equipment or something that can reduce food or prep cooking times,” Souhrada said. “There’s also a much greater emphasis on simplicity in terms of training or servicing the equipment.”

When the Richardson, Texas-based Golden Franchising Corp., owner of the 165-unit Golden Chick brand, redesigned its prototype restaurant in 2011, it especially looked for equipment that would reduce labor in maintenance.

Brian Gilbert, Golden Chick’s director of development, said the company sought out equipment that would easy to clean or self-cleaning.

“Part of it is in saving time,” Gilbert said, but another piece was knowing the cleaning maintenance was built in. “We know it will get done,” he added.

The chain is adding new combi ovens, said Matthew Parmerlee, Golden Franchising’s construction manager.

“It can cook six pans of roasts rather than the one that we traditionally had,” said Parmerlee. Mark Parmerlee, Golden Franchising’s chairman, added that roasted chicken menu items have been a growing part of the chain’s menu mix, so expanding roasting capabilities was required to meet consumer trends.

Brian Gilbert (left), Golden Chick's director of development, Matthew Parmerlee (middle), Golden Franchising’s construction manager and Mark Parmerlee (right), Golden Franchising’s chairman. Photo: Ron Ruggless

Menu trends and diet changes always mean equipment has to adapt, Souhrada said.

“There’s always a concern about making sure equipment can focus on dietary restrictions that have become more prevalent,” he said. “Can it be label uniquely in a gluten-free or allergy-free zone? There are increased codings. We’re seeing equipment move beyond allergen-free cutting boards to knife handles and allergen kits that are colored purple.”

Equipment manufacturers and operators are also looking at ways to do more with less space, especially as real estate costs increase. 

“Space savings is probably the most creative category in equipment,” Souhrada said. “It’s incredibly important. It’s not just equipment like a rapid-cook oven with a small footprint. It’s also stacking condiment guns in a tower so that it takes up less space on a cook or prep line. Operators are using the air above the prep tables.”

Gilbert said Golden Chick, in the most recent unit that opened in Dallas in January, made use of the space above the double-sided prep line to store paper goods in the 975-square-foot kitchen.

“We always look at cost effectiveness,” Gilbert said. “It’s much more cost effective to add a foot or two of ceiling height than add square footage, especially as materials costs have gone through the roof.”

Photo: Ron Ruggless

Green equipment moves

Another category of innovation in kitchen equipment has been to make it more environmentally friendly.

“That reaches back to the early 2000s when NAFEM members worked with the Environmental Protection Agency to develop the Energy Star program for commercial foodservice equipment,” Souhrada said.

“It has been growing in importance over the past five years, thought there isn’t really a threshold. Operators have been looking at energy for a while, but it has been getting a lot of attention and regulatory restrictions.”

The latest changes have been in refrigeration equipment, he said, with manufacturers moving to the use of natural refrigerants like versions of propane.

“We put a lot of time and energy into our new prototype,” said Icard of Bojangles. “We’ve reached a milestone, but there’s always something new on horizon in equipment. You just have to be open to taking the blinders off and looking at the possibilities.”

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Starbucks says mobile ordering slowed service in 1Q

Fri, 2017-01-27 18:47

Starbucks Corp. has had some impressive success evolving into a digitally enhanced coffee chain.

But maybe it was too successful. Now the company is blaming mobile order and pay for slow service last quarter. 

Use of Starbucks’ mobile order and pay skyrocketed in the first quarter ended Jan. 1. At a time when many restaurant chains are just testing the digital waters, 7 percent of Starbucks’ U.S. consumers used mobile ordering and payment — up from 3 percent a year ago. And 27 percent of transactions at company-operated locations involved mobile payment.

Starbucks is outperforming, “by significant margins anyone of scale in the restaurant and retail industry, engaging more deeply, frequently and expanding our base of customers more effectively and reliably,” CEO Howard Schultz said on the company’s earnings call Thursday.

The problem is this: So many people used mobile order and pay in many locations that it had the opposite effect that the chain intended. Rather than speed orders and improve service, mobile ordering actually drove some customers away by crowding the counter where people get their drinks.

So, while same-store sales increased 3 percent in the U.S. in the period, including 5 percent higher average check, transactions fell 2 percent. The 3-percent number was Starbucks’ lowest same-store sales number since the financial crisis, according to Buckingham Research analyst John Zolidis.

“A growing number of stores are challenged to keep up with volume demands,” Schultz said. “We are now laser focused on fixing the problem. The nature of it is too much demand. Operational challenge is a problem we have solved before. I assure you we can solve it again.”

Kevin Johnson, tapped to succeed Schultz as CEO later this year, noted on the earnings call that 1,200 locations now get 20 percent or more of their orders through mobile order and payment. By comparison, only 13 locations were at that level a year ago.

The skyrocketing use led to “significant congestion at the handoff,” he said.

“When those orders come in at that volume, it’s creating congestion at handoff,” Johnson said. “If the line looked too long, customers decided not to do the transaction.”

Johnson noted that Starbucks has had this problem before, when its soaring popularity led to long lines at the point-of-sale line. Now those problems are developing at the drink handoff line. 

“I think that’s the most significant, contributing factor to our 3-percent” same-store sales number, Johnson said.

Per Schultz’s vow, executives on the call said they are working on plans to deal with the problem. Some locations are already working on solutions on their own, and the company is analyzing those solutions to see what works, and what could be expanded chainwide.

Starbucks is also testing new digital enhancements, such as text message notifications that let customers know when their drinks are ready.

Still, Starbucks executives said the company’s digital strategy is giving it a leg up in an evolving market. Schultz has been warning of the digital encroachment on retail traffic for years, and says Starbucks’ digital strategy has helped protect it from that issue.

This week, Starbucks touted numerous figures in the first quarter that many other restaurants and retailers could only dream of: 40 percent of transactions in the U.S. came through the Starbucks Card. Consumers loaded $2.1 billion onto their cards. And there’s $1.5 billion on those cards that customers haven’t used yet, all but guaranteeing future revenue. There are now 12.9 million members in Starbucks Rewards loyalty program.

“We are going to be one of the true winners, regardless of what happens from those retailers suffering from a downturn of traffic,” Schultz said.

Investors were not totally buying into the idea. Starbucks’ stock fell more than 4 percent in Friday morning trading. And analysts were decidedly mixed on the company’s explanations for its traffic problem. 

Bernstein Research analyst Sara Senatore said difficult comparisons helped fuel the weak same-store sales number. 

“We see evidence that digital initiatives have increased the difficulty of forecasting, but we have confidence [Starbucks] can address this,” she wrote in a note Friday. 

But Zolidis was skeptical, saying, “it’s also undeniable that the business is slowing.”

“We struggle with this explanation,” Zolidis said of the idea that mobile order and pay is hurting traffic. “Our view is that traffic across the industry was terrible and [Starbucks] was simply not immune.”

He also wondered whether Starbucks’ prices had grown too much for some customers.

“The divergence in traffic and ticket leads us to speculate whether the price-value offer is getting lost in the quest for ever-increasing premiumization,” he said. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Imagining life without restaurants

Fri, 2017-01-27 17:09

One of my favorite sportswriters, Steve Rushin, wrote a story last year called “A World Without Mookies,” in which he imagined how different life might be without sports.

The piece got me thinking: As a pastime, sports are thousands of years old, but restaurants didn’t really take root until early 19th century. Yet restaurants are just as ingrained in our lifestyles, books, film, music, art and popular culture. Playing or watching sports is optional, but eating is not. To me, it’s much more difficult to imagine a world without the foodservice industry.

Without restaurants, you wouldn’t be able to pronounce chipotle, shiitake, charcuterie, quinoa, souvlaki, half-caf, barista or venti, much less use them in a sentence. Without restaurants, brunch would be a typo, and only baseball would have starters. There would still be breakfast, lunch and dinner, but without restaurants, they would be miserable. To meet a friend for coffee or lunch would mean going someone’s house or hosting, every single time.

There would be no chefs — or celebrity chefs. No James Beard, Paul Bocuse, Jacques Pepin, Wolfgang Puck, Auguste Escoffier, Thomas Keller, Emeril Lagasse, Alain Ducasse, Jonathan Waxman, José Andrés, Nobu Matsuhisa or Alice Waters. Gordon Ramsay would be a carnival sideshow barker and Guy Fieri would be running the Tilt-a-Whirl down the midway. Anthony Bourdain’s parts would be known.

Instead of having buildings named after them, Howard Johnson would just be a character in Blazing Saddles, Harry Caray a dead baseball announcer, and Mike Ditka and Michael Jordan would have to eat at home. John Daly would have to nowhere to go after a celebrity tournament to chug beer, ogle waitresses and down wings. Eggrolls would be strictly a White House lawn activity at Easter. Farm to table would be called food, and all diners would be locavores. Williamsburg and Wicker Park would be blighted neighborhoods. Every worker, student and commuter would brown bag at noon.

The Two Broke Girls would both be unemployed; Cheers would be set at an AA meeting; and Ross, Joey, Chandler, Monica and Rachel would meet at the local Kinko’s instead of Central Perk. Delhi would only follow the word “new,” and the most famous scene in When Harry Met Sally would take place in a community center, not a table. Placemats would be found only in Cleveland’s NFL franchise.

Without restaurants, Five Guys would describe how many people you needed for a men’s league basketball game, not your favorite lunch spot. You’d take a Subway, not eat at one. Dominos would be played, not delivered. Shake Shack wouldn’t be a place; it would be a prank you play on a friend using the outhouse. Drive-thru windows would be a New York Post headline describing the actions of a Long Island drunk driver, not the car’s involvement in fast food. The Cheesecake Factory would be a business that manufactured pinup girl posters, calendars and t-shirts. “Ruby Tuesday” would a Rolling Stones hit from 1966. The only time you’d visit a hut is if you lived in Bora-Bora or needed a pair of sunglasses. DiGiorno’s would have no tag line for their commercials.

General Tso’s Chicken would be a historical reference to military cowardice, not No. 14 on the takeout menu. Potstickers would be price labels in a California medical marijuana dispensary, instead of Asian dumplings. The Early Bird special would refer to discounted 6 a.m. hot yoga classes, not two fried seafood platters for $12.99. A frequent diner would be a Weight Watcher’s member, not a target market. A salad bar would be the upper limit of how many chopped vegetables you could eat in a sitting, not a traffic generator. Point of sale would reference the tip of a jib, not a cash register. Eighty-six would merely be a number between 85 and 87, and not refer to running out of anything. There would be no bustubs, busboys, monkey dishes or salamanders. The only thing in the weeds would be your lost Frisbee, not the new waitress. Windows and doors would open and close, but not managers.

Technology would be radically different sans restaurants. UberEats would be fruit or nuts you plucked from a tree, not an app-based delivery system. Grubhub would describe your fridge or pantry. Yelp is what your dog would do if the rocking chair leg caught his tail. TripAdvisor would just be a detour sign.

Only computers would have menus. The only tips would come from bookies or brokers. “Surf and turf” would be the marketing slogan for Del Mar racetrack in Southern California, not a steak and lobster combo. A side of mushrooms would be a witty remark about fungi that Oscar Wilde muttered to a friend, not a sliced vegetable blanched in red wine and beef stock to accompany a medium-rare ribeye. A New York Strip would be a new inmate processing procedure at Riker’s Island.  

Without restaurants, you could die for your beliefs or your country, but not for the Molten Fudge Flan with raspberries and powdered sugar. You could experience death by malaria, but not chocolate. The only weekend “reservations” my wife and I would have would center around our daughter bringing her new boyfriend home. Without restaurants, Ireland and Scandinavia would no longer be embarrassed by their culinary absence, and return to their dual proficiencies at drinking and depressing filmmaking.

A greasy spoon would describe something to stir chili with, not a roadside diner. Without restaurants, the CIA would be an agency you’d avoid, not a program you’d matriculate in. A well drink would be a dipper or bucket of water. Prime rib would be an Old Testament explanation of how God made woman, and the most popular Buffetts would be Jimmy or Warren, not Bellagio’s. Casual-theme would refer to your college roommate’s sartorial choices, not the architecture and menu of a branded restaurant group. A chain would restrain your dog, or secure your wallet. It would not describe a string of identical franchised restaurants. There would be no full service or quick service, just self service. And fast food would refer to rabbit.

Meanwhile, if there were no restaurant business, there would be no Greensboro Four on Feb. 1, 1960, to jumpstart the Civil Rights movement with its most influential and significant sit-in. And our nation would most likely be in a Depression, because 14.4 million people would be unemployed, 1.7 million new jobs would not be created annually, and an additional 16.5 million citizens would be jobless because the manufacturing, distribution and brokerage industries that directly support foodservice would be nonexistent.

This is a world I would not like to live — let alone eat — in.

The restaurant business is far from perfect, but it is ingrained in our national fabric and has given hundreds of thousands of immigrants a start, tens of millions of teenagers their first jobs, and countless people a second chance. Foodservice has jumpstarted juveniles, made mavens of misfits and built the greatest industry on earth.

Jim Sullivan is a popular keynote speaker at leadership conferences worldwide. His two books, Fundamentals and Multiunit Leadership, have sold over 400,000 copies. You can get his free catalog, apps, podcasts, insight and more at Sullivison.com. Follow him on LinkedIn, YouTube and Twitter @Sullivision

 

Is mobile payment really the future?

Fri, 2017-01-27 16:16

Mobile payment is a huge trend in the restaurant business. Consumers like their phones after all, so enabling them to use those phones to pay for their food seems a no brainer.

Or is it? 

“It’s a solution in search of a problem,” said Christopher Sebes, president of payment systems company Heartland Commerce. “It’s not hard to pull out your wallet and swipe a credit card.”

As companies invest millions of dollars in mobile apps and mobile payment technology, it’s important to examine how much potential this capability truly has. And many believe it’s inherently limited, at least for now, because it’s just not that hard to pay with a credit card.

Yet there is only so much space on a phone for an app. Most customers will only use a couple of restaurant company apps, and those apps are for companies they frequent. As such, chains like Starbucks and Domino’s are easy beneficiaries of mobile apps and mobile payment.

“If I’m going to download an app, I have to have a reason to download the app,” Sebes said.

And mobile wallet services haven’t exactly taken off, either, because they’re either not broadly offered or customers don’t always know about them. This is where it gets back to the problem that mobile payments are basically trying to correct.

Because it’s not difficult to pay now, there’s no real need to adopt a simpler solution. And as long as we have physical drivers licenses, there will still be a need to carry an actual wallet.

“It’s still a nascent technology,” Sebes said.

To be sure, this doesn’t mean it won’t take off down the line as consumers — and businesses — grow more accustomed to the idea. “We’ll get there,” said Steve Fredette, cofounder of the point-of-sale system Toast. He noted that it takes years for a system to adopt a new payment format. “In five years, you’ll see the numbers creep up.”

And Fredette added that there is a need for the speed that mobile payment can provide many restaurants. He said that customers at family dining restaurants could download the mobile app so they can pay their bill and avoid the line that can develop at the cashier at the end of the meal.

“An app can improve customer experience and help a restaurant win in their market,” said Chris Comparato, CEO at Toast. “We’re still in the early adopter phase.” 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Labor groups amp up Andy Puzder protests

Thu, 2017-01-26 23:31

Restaurant worker activist groups on Thursday amped up their protests against the Secretary of Labor nomination of Andy Puzder, CEO of CKE Restaurants Inc., filing 33 complaints against Carl’s Jr. and Hardee’s franchisees.

"This is more fake outrage from the unions and special interests which will stop at nothing in order to push their own self-serving agenda," a Puzder spokesman said in an email. "Fact is, Andy is a job creator and has provided opportunity for advancement for thousands of employees. His record of creating jobs is exactly what this country needs."

A CKE spokesperson emailed a response Thursday on behalf of the company. “While we do not comment on pending litigation, we’d like to offer a reminder that CKE Restaurants is nearly 95 percent franchised,” the company said. “Each of these 2,769 franchise stores are run independently and solely responsible for their employees, management and adherence to regulations and labor practices.”

In a phone conference with two current Hardee’s workers and one former Carl’s Jr. employee, the organizing Fight for $15 said workers on Wednesday and Thursday filed complaints of wage theft with state departments of labor, sexual harassment complaints with the U.S. Equal Employment Opportunity Commission and unfair labor practice charges with the National Labor Relations Board.

Fight for $15 organizers also held protests at quick-service restaurants in 31 cities, from Los Angeles to St. Paul, Minn., amplifying pressure started earlier this month.

Kendall Fells, organizing director for Fight for $15, said the 33 complaints included 22 wage-and-hour complaints, four sexual harassment charges and seven unfair labor practices claims filed with the National Labor Relations Board by local Fight for $15 chapters.

“We’ve been collecting violations at the stores for quite a while,” Fells said, adding that Fight for $15 is looking at other restaurant chains like McDonald’s as well.

Meanwhile, the Senate on Thursday delayed for a third time its confirmation hearing for President Trump’s nominee to allow Puzder more time to submit his paperwork, the Washington Post reported.

The hearing is now scheduled for Tuesday, Feb. 7, according to a statement Thursday from Sen. Lamar Alexander (R-Tenn.), the chairman of the Senate Health, Education, Labor and Pensions committee.

Earlier confirmation hearings had been scheduled Jan. 12, Jan. 17 and Feb. 2. George Thompson, a spokesman for Puzder, issued a statement that said: “Mr. Puzder’s nomination paperwork is progressing and he is looking forward to the hearing.”

As part of Thursday’s Fight for $15 protests and complaint filings, Catherine Ruckelshaus, general counsel and program director for the National Employment Law Project, said it was galling that CKE restaurants “chisel wages from the workers that are the face of the brand across the country. CKE should be setting standards and not undermining them.”

Today fast food workers spoke out against Trump Lab Sec Nominee and @Hardees CEO Andy Putzner in St. Paul. We'll be back! #NotOurLaborSec pic.twitter.com/EZexqssnph

— CTUL (@CTUL_TC) January 26, 2017

With these complaints, Ruckelshaus said, “It’s clearer now than ever that Andy Puzder presides over a fast-food empire that routinely exploits and abuses the workers who build its profits.

She said the Senate had all the reason it needs to reject Puzder’s nomination “and demand a labor secretary who will look out for working Americans instead of one who looks for ways to keep them down.”

The press conference also included statements from: Caetana Cardona, a 28-year-old former Hardee’s worker from Tampa, Fla., and single mother of four, who recounted an incident of alleged sexual harassment; Ivan Nava, a 24-year-old Carl’s Jr. worker in south-central Los Angeles; and Torrance Chambers, a Hardee’s cook from Birmingham, Ala., for the past three years. 

Joe Kefauver, managing partner of the Align Public Strategies public-affairs firm, said the protests and complaints would add fuel to the fire of Puzder's and the industry's detractors and elevate the rhetoric, but the actions would “likely make little difference on the outcome.”

“I doubt they expect to scuttle Puzder’s confirmation, they are simply using the process to continue driving their message,” Kefauver said in an email to Nation’s Restaurant News. “Republican leadership in the Senate is wholly committed to confirming the president's nominees, and I think this nomination is no different. Barring something unforeseen, he will likely be confirmed.”

Kefauver said the claims and protests are “a double-edge sword” for the industry and restaurateurs. 

“Puzder's nomination, the confirmation process and his tenure in office will provide the industry with a significant platform to demonstrate that we are an industry of opportunity for millions of Americans, a critical player in the national economy and an important part of the communities we serve,” Kefauver said.

On the other hand, he said, Puzder’s nomination gives the industry’s detractors ammunition to criticize the business model, call into question the value of jobs that restaurants create and perhaps tarnish the reputation of the leading employers.

Puzder’s nomination and potential service as labor secretary will heighten the stakes for both sides, Kefauver added.

“At the end of the day,” he explained, “I think the opportunity for us to reset the narrative around our industry is far greater than theirs and I'm hopeful that we will take full advantage of this opportunity.”

Update: This story has been updated to include a comment from Andrew Puzder's spokesman.

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Starbucks U.S. transactions fall 2%

Thu, 2017-01-26 23:19

Starbucks Corp. served fewer customers in the fiscal first quarter ended Jan. 1, but customers spent more money per order, helping Starbucks generate a 3-percent domestic same-store sales increase in the period, the company said Thursday. 

The Seattle-based coffee giant said U.S. same-store transactions fell 2 percent in the period, but the average ticket rose 5 percent.

The company said that, adjusting for the impact of “order consolidation” related to its new loyalty program, the average ticket grew 3 percent and transactions for the period were flat.

The stock fell 1.5 percent in after-hours trading on Thursday.

The company highlighted strong results from its loyalty- and mobile-ordering programs. Customers loaded $2.1 billion on Starbucks cards in the U.S. and Canada in the quarter, up 15 percent. Starbucks Card transactions represented 40 percent of transactions at company-owned locations. 

Mobile ordering also gained traction. Mobile order and payment represented 7 percent of transactions, up from 3 percent a year ago. Mobile payment represented 27 percent of domestic transactions.

“Starbucks is engaging more deeply — and more frequently — and expanding its base of loyal customers faster and more consistently today than ever before,” said CEO Howard Schultz in a statement.

Same-store sales increased 3 percent worldwide. Revenues rose 6.7 percent to $5.7 billion, up from $5.4 billion. Net earnings increased 9.3 percent to $751.8 million, or 51 cents per share, from $687.6 million, or 46 cents.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze