To Our Valued Subscribers:

My colleagues and I really enjoyed seeing so many of you at “The Show.” We hope you all had a safe and uneventful trip home as well. It is always a pleasure to renew old acquaintances and make new industry connections. I hope your time in our city was productive and successful. As most organizations are now earnestly focusing on their 2020 (and beyond) planning process, I would like to pass along a few tips from well know organization consultant and author Moe Carrick. Her emphasis to not only focus on “the numbers” but on the needs of your employees who will make or break your plan. She details 7 Needs Work Should Fulfill. Here are a few that you might consider in your planning process. Work Should:

• Allow everyone to contribute
• Allow everyone to be recognized
• Allow everyone to learn and
• Allow everyone to feel supported

These are just a few items you and your team might consider as you gear up for the summer push and future growth. Everyone at American Recruiters would also like to wish a belated happy Memorial Day to those who have served, are currently serving and to the families who remember those who made the ultimate sacrifice so we can enjoy our freedom. THANK YOU ALL! Enjoy our latest edition of American Recruiters Global Foodservice News and have a great start to the summer.

Craig Wilson

President American Recruiters

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Pizza Hut Is Changing its Pan Pizzas for the First Time in 40 Years

The company announced that its “Original Pan Pizza” is being completely remade, including a new cheese blend, sauce and a “newly engineered” pan for it to be baked in for a crispier crust. Changes to Pizza Hut’s best-known menu item comes as competition tightens with its closest competitors, Domino’s and Papa John’s. For the first time last year, Domino’s had more ssales than Pizza Hut. And Pizza Hut last year became the NFL’s advertising partner, taking that sought-after title from troubled Papa John’s. Pizza customers aren’t a loyal bunch, as people tend to gravitate to the company with the best promotion. But taste matters too, which is why Domino’s scrapped its 49-year-old pizza recipe 10 years ago. It also rolled out new value offerings and technology for customers to track their orders. Earlier this year, Domino’s opened its 16,000 store and has grown by nearly 50% over the past five years. Pizza Hut has more than 18,000 restaurants worldwide. Papa John’s is experimenting with sandwiches and new technology as it aims to make up for lost ground from its year of scandals. Not to be outdone, Pizza Hut is expanding beer delivery program to 1,000 locations by the summer. It also developed insulated pouches designed to keep delivery pizzas up to fifteen degrees hotter. Its new pan pizza recipe is part of the strategy. “We know that taste is king for our customers, so we’re excited to roll out this new, state-of-the-art pan technology, combined with our perfected blend of cheese and sauce ratio,” said Penny Shaheen, Pizza Hut’s senior director of Culinary Innovation and Strategy, in a release. Pizza Hut said it took three years to develop its improvements to the nearly 40-year old pizza. The company, owned by Yum Brands, said it “focused on combining art, science and culinary expertise” to improve the pan pizza. The relaunched pizza is available nationwide beginning Tuesday and costs $7.99 for a limited time. – Source: CNN Business.

2019 National Restaurant Association Show

Plant-based foods and beverages, technology solutions aimed at optimizing takeout and delivery, and edible alternatives to straws and utensils stood out on the show floor at the 2019 National Restaurant Association Show. More than 2,300 exhibitors showcased their products and services at the association’s 100th annual show.Animal-free alternatives to burgers, milk and more

Plant-based meats have been a top trend at the show several years running, and it’s impossible to ignore their growing presence on the show floor and on restaurant menus. Meat alternatives from Beyond Meat, Impossible Foods and Before the Butcher won FABI Awards this year, and the companies’ booths were consistently surrounded by showgoers seeking to sample the meatless products. Impossible Foods showcased burgers and tacos made with its newly revamped beef alternative made from soy and potato protein. The company announced earlier this week that it created a sausage-alternative for pizza chain Little Caesar’s. The seasoned blend is exclusive to the chain, which will test it in three markets, and Impossible doesn’t have plans to make the sausage widely available, Impossible’s Communications Operations Specialist Esther Cohn said on the show floor. The company recently won $300 million in new funding to increase production in order to keep up with growing demand, and Cohn said it has temporarily suspended production of its patty product to focus on the bulk format. Several plant-based protein companies offer products in bulk format, which is popular for foodservice operations because of its versatility.

The flexibility to create different dishes with one product was the driving force behind Morningstar Farms’ Signature Protein Blend product, said Kelly Grzyb, marketing manager for Kellogg Company. Morningstar farms offers two flavor varieties of the plant-based product, which can be formed into patties or meatballs. Beyond Meat showed off the new bulk format of its Beyond Beef product, which will be available in 1 lb. bricks for foodservice this summer. Plant-based alternatives to seafood, eggs and dairy also drew crowds at this year’s show. Ocean Hugger Foods, which made waves a couple years ago with its tomato-based tuna alternative, debuted its new eel analog made from eggplant. JUST featured dishes made with its mung bean-based JUST Egg product. Restaurant chains including Silver Diner and Bareburger have begun offering the egg alternative, which is available as a patty or in liquid form. The non-dairy milk of the moment was undoubtedly oat milk. Coffee brand La Colombe handed out samples of its Oat Milk Draft Latte, while Oatly showed off its Barista Edition Oatmilk. Making off-premise easier. One of the top themes at the show this year is the growing role of off-premise in the restaurant industry, and the challenges it creates for operators. Making it easier for consumers to get delivery and takeout orders is key, but high fees from third-party delivery companies and keeping up with the added volume off-premise orders are major pain points for restaurants. Omnivore demonstrated its universal point-of-sale connectivity platform, which aims to streamline operations and create a single source of truth for restaurants. The web-based control panel can help restaurants eliminate the issues that can arise when multiple third-party ordering and delivery partners result in a tangled web of tablets. On the first day of the show, the company announced the launch of its Menu Management Solution developed with The Coca-Cola Company, one of Omnivore’s lead Series A investors. “Creating oversight and control over digital menu management will further allow restaurant brands to increase sales and decrease expenses by streamlining operations and customer experience across all of their third-party partnerships,” Omnivore CEO Mike Wior said in a statement.

While finding a more organized way to deal with third-party orders may be the best way forward for some restaurants, others are seeking a solution that lets them take delivery into their own hands. Almost 70% of restaurants pay more than 10% of delivery revenue back to third-party delivery companies, according to a survey of more than 100 restaurant operators by Foodsby. The Minneapolis-based company launched in 2012 to offer restaurants an alternative to third-party delivery, and its workplace-centric delivery model now operates in more than 150 cities. Foodsby connects restaurants with consumers who work in nearby offices, collecting lunch orders through its app that are then relayed to restaurants so they can make one mass delivery. For consumers, each order has a flat fee of $1.99, and orders generate an average ticket price of $250 a day for restaurants, VP of Marketing Jeff Snyder said. Enabling restaurants to take control of their deliveries through consolidation is also the idea behind Sync Delivery, a software tool that made its debut this week at the show’s Startup Alley. Founder John Martins said he did an initial test at the US Naval Academy where his son was a student, teaming with local restaurants including Chick-Fil-A and Bruster’s Ice Cream.

Colleges and universities are a perfect place for the many-orders-one-delivery model, said Martins, who plans to launch the software at the University of Maryland. For restaurants with a heavy volume of takeout orders, finding counter space for bags and boxes and holding food at the right temperature can be major challenges. Apex Supply Chain Technologies offers several solutions in the form of compartments that let customers scan a code and retrieve their food. The company won a Kitchen Innovations Award this year for its AXCESS 2000.H Pick-Up Station. Developed in partnership with Little Caesars, the system is the industry’s first heated, self-serve order pick-up station. Edible utensils are a creative way to combat waste. The show floor was packed with companies offering straws and utensils made from non-plastic materials from bamboo to hay, but a couple went one step further with utensils designed to be eaten. Edible utensils may not be the answer to preventing plastic waste, but they do provide an intriguing option for restaurants looking to cut back on single-use plastics. Made with Bloody Mary cocktails in mind, Benny’s Original Meat Straws are jerky-like tubes that can act as both a straw and a garnish. Offering an alternative to disposable spoons, Planeteer debuted edible spoons that come in several shapes and flavors to complement different dishes. The spoons have a crunchy, cracker-like texture that will hold up in a bowl of soup for about 20 minutes, and the company plans to launch coffee stirrers in the near future. Source: The National Restaurant Association.

Franchisee: Buffalo Wild Wings’ Resurgence is Well Underway

Every quarter, Diversified Restaurant Holdings—one of the largest Buffalo Wild Wings franchisees—provides a ground-level glimpse into the now-private chain’s turnaround. And for the second consecutive quarter, the comeback proved compelling. DRH chief executive David Burke, who oversees the company’s 64 locations, said, “we’ve elevated our game,” in a recent conference call. This was reflected by an impressive turn in results. DRH’s same-store sales hiked 4.2 percent in the first quarter of fiscal 2019, driven by a 4.9 percent boost in traffic. It marked the second straight period of positive gains. More notable, though, DRH hadn’t turned in a positive quarterly comps figure in three years before the run. The company’s revenue also upped 2.6 percent to $40.6 million despite counting one less location.

DIVERSIFIED RESTAURANT HOLDINGS. You can see in the graph above just how deep the negative stretch went. Burke said the performance came even despite headwinds. In this case, weather souring two football playoff weekends in each of DRH’s three core Midwest markets. So why wasn’t DRH buried by snow, like many of its Rust Belt competitors? Burke said it came down to Buffalo Wild Wings’ renewed focus on guest experience, loyalty attachment, and the continued development of delivery, as well as “the early benefits of the new marketing, media, and latest brand enhancing initiatives around March Madness.” Inspire Brands, Buffalo Wild Wings new ownership—a group formed in the wake of the $2.9 billion deal, and now includes Sonic Drive-In, Arby’s, and fast casual Rusty Taco—has pushed an experience-driven message since taking the reins. New CMO Seth Freeman’s NCAA Tournament campaign was labeled “That’s March Madness,” and targeted dine-in traffic with spots that showed guests watching games in “sub-par conditions,” like on a tablet or sitting in the basement rocking a newborn. The previous football-focused effort, “Escape to Football,” was similar in direction. It placed characters in real-life scenarios, like being stuck at a PTA meeting, before “escaping” to Buffalo Wild Wings. The vision is one Inspire Brands plans to refine: The idea Buffalo Wild Wings is a brand capable of providing far more than food and drink. It’s not a traditional casual-dining chain, but rather one that defines value as the price paid for the experience customers get, not deep discounts or promotions that need to be marketed each launch. Since the March Madness promotions hit, which also included menu changes, like the twin patty All-American Cheeseburger and Ultimate Nachos, as well as enhanced serving options (no more paper boards and plastic cups, but aluminum trays, craft paper liners, and stainless steel cups), Burke said dine-in traffic turned positive and has stayed in the green.

BUFFALO WILD WINGS. Buffalo Wild Wings’ new marketing is driven around dine-in traffic. Comps gained through the end of this past week, he added, and that included the negative impact of the Easter shift. In fact, if you remove it, DRH’s same-store sales have been north of 7 percent, with traffic and average ticket rising. “There were significant number of new branding elements rolled out in March that enhanced our image, value perception, and guest experience,” he said. Burke spotlighted the menu items. A new menu design, too. Also hipper server uniforms and enhancements to the bar program. Buffalo Wild Wings unveiled classic cocktails, like old fashioneds, Moscow Mules, and Mojitos, served in new, proper glassware. Burke said the changes were “truly a [big] change from our legacy.” Also, the products didn’t carry materially higher costs. The plateware, for instance, pays back in just a few months given the elimination of many disposable paper products, he said. “Our guests have recognized that we have stepped up our game and the quality and value perception has been significantly enhanced and we should expect that same type of commitment in the future rollouts,” Burke said. “We anticipate new menu items being added throughout the year.” DRH also took a 1.5 price increase with the new menu rollout in mid-March. The delivery and digital changes are worth exploring. DRH offers the platform at 52 of its 64 stores. This past quarter, delivery contributed $2.6 million in sales—a robust $2 million increase year-over-year. DRH CFO Phyllis Knight said delivery “is a critical channel with significant upside and one that our products and processes are well suited for.” The question, as always, is how does it affect margins? DRH provided more data on this trend than normal. Net delivery expense, as the below chart illustrates, has tracked in the right direction, dropping from 21.4 percent in Q1 2017 to 11.6 percent in April of this year. “The good news is we expect the current quarter could be the last with negative margin percentage impact from this channel,” Knight said. Burke provided some commentary on DRH’s experience with Buffalo Wild Wings’ Blazin’ Rewards loyalty program. He said they’re experiencing attachment rates of nearly 28 percent, which significantly outpaces the company’s franchise system (15 percent average). DRH’s goal is to hit 35 percent loyalty attachment in 2019. He said data suggests that figure is the point where restaurants obtain maximum benefit through higher frequency visits from less regular guests. In addition, over the last year, Buffalo Wild Wings has shared elements of a new, bold store design that also courts the customer experience element. The refresh—its first since 2012—includes a more prominent bar, indoor and outdoor seating, and free-flowing and flexible seating areas. Additionally, VIP spaces, stadium-like A/V technologies with LED modular screens, and a fully enclosed patio with rollup doors and skylights, are part of the model. There’s also a dedicated off-premises entrance and two interior changes that speak to the broader goal: A “Dugout,” designed to turn Buffalo Wild Wings’ waiting area into a lounge with a sporty feel, complete with bleachers; and a “MVP” room that serves guests 21 and older and includes two 80-inch TVs, a third 60-inch TV, gaming consoles, and six self-pour beer taps (the amount could change by location). The goal being to capture not just the esports rage, but also offer a “mini stadium environment” that provides another brand differentiator. Knight said Inspire was “in the process of developing a new building standard and testing a variety of remodel options.” “They’ve communicated to us that they’re targeting a three-tier remodel program with costs ranging from $250,000­ to $650,000 depending on the size and revenue profile of the restaurant,” Knight said. That suggests the new design could be a retroactive effort as much as a new-store one for Buffalo Wild Wings.

INSPIRE BRANDS. Off-premises remains a key driver for Buffalo Wild Wings. And now there’s a sauce wall in the new design. One troubling trend, however, was the cost of wings, which partly sank the company’s profits in 2017. It led to the much-maligned shift of the half-price wing Tuesday deal from high-cost traditional wings to higher-margin boneless wings—a move that provided mixed results, to put it lightly (check the earlier traffic chart). Knight said traditional wings as a percentage of total cost of sales increased to 23.9 percent at DRH this past quarter, close to the 24 percent level it saw in the first quarter of 2017. Wing prices in March, April, and May are not only well ahead of 2018 prices, they’re higher than 2017 as well, Knight said. “While it remains to be seen how wing prices will trend in the typically lower summer months, we’re concerned about this current market and taking an off-cycle price increase on wings to help combat the pressure,” she added. The price increase, pulled forward from the typical August take, will land later this month. Knight added wing costs did drop a bit last Friday, although the category remains volatile. Typically the wing market dips a bit in spring toward summer. Burke added that Inspire Brands’ effect on the company is helping with retention. “As we start to see the brand change, the tone down at the restaurant level, the excitement revolving around new products and the changes going on with new uniforms, new plating, it’s definitely more appealing, I think, to stick around and work with Buffalo Wild Wings and DRH for that matter,” he said. – Source: fsrmagazine.

“Blueprint for a New Era of Smarter Food Safety”

The U.S. Food and Drug Administration will develop a “Blueprint for a New Era of Smarter Food Safety” for how the agency applies new and emerging technologies to advance food safety. Traceability, digital technologies and evolving food business models are among the areas the blueprint will address, the agency explained, and a public meeting scheduled for later this year will be a platform for stakeholders to share ideas about the agency’s strategy. The F.D.A. said “…we’re announcing a ‘New Era of Smarter Food Safety’ to augment our efforts implementing important FSMA requirements while also leveraging, among other things, the use of new and emerging technologies.” In the area of food traceability, the agency seeks to transition to digital tracking from the paper-based systems currently in use throughout food supply chains. “The use of new and evolving digital technologies may play a pivotal role in tracing the origin of a contaminated food to its source in minutes, or even seconds, instead of days or weeks, when contamination does occur,” the agency said. “Access to information during an outbreak about the origin of contaminated food will help us conduct more timely root cause analysis and apply these learnings to prevent future incidents from happening in the first place.”

Other digital technologies the F.D.A. is considering include blockchain, sensors, the Internet of Things and artificial intelligence. Officials proposed an assessment of how these technologies and others will help create a more digital and transparent food safety system. As part of this strategy, the F.D.A. will conduct a new pilot that leverages artificial intelligence and machine learning to review imported foods at U.S. ports of entry. “The number of import food lines is increasing year after year and applying the best predictive and analytical tools will help ensure we’re targeting the greatest risks to protect consumers,” the F.D.A. said. “This pilot will build upon F.D.A. initiatives already underway, which are also looking at how use of these new technologies may be able to help us continue meeting our public health mission.” Finally, the F.D.A. will look for opportunities to collaborate with stakeholders in the e-commerce space for food to account for the increase in home delivery of foods. “These evolving business models present food safety challenges as well as novel considerations around regulatory framework and oversight at the federal, state and local level,” the F.D.A. noted. “Our blueprint will discuss areas for collaboration in this space as we work to identify the appropriate standard of care in this rapidly growing sector.” – Source: Food Business News.

Recalls by the Food and Drug Administration

Food and beverage recalls initiated by the Food and Drug Administration during the first quarter of 2019 fell 36.5% to 99, the second lowest quarter since the third quarter of 2015 and the third lowest total since at least 2010, according to Stericycle Expert Solutions’ Recall Index. Stericycle Expert Solutions attributed the decline primarily to reduced oversight as a result of the government shutdown earlier this year, which stopped or limited many government safety inspections for food and beverages. “While it’s usually good news for consumers when recall rates decline, the Q1 2019 numbers are misleading,” said Chris Harvey, director of recall solutions at Stericycle Expert Solutions. “Fewer inspections mean more potentially dangerous products entered the market unnoticed during this period, which could also have an impact in the months ahead. Having a recall plan in place could never be more important as we track the repercussions.”

During the quarter, 30.8% of F.D.A. recalls based on units were due to undeclared allergens, the second consecutive month that undeclared allergens have been the top cause of F.D.A. food recalls and recalled F.D.A. food units. Foreign material accounted for 30.8% of F.D.A. recalls, and no inspection was 17.9%. The top food categories based on recalls was prepared foods, at 24, followed by produce (12), baked foods (11) and dairy (9). The top U.S. Department of Agriculture category based on recalls was poultry, at 41%. It was followed by pork, at 23.1%; seafood, 15.4%; beef, 10.3%; and multiple, 10.3%. According to Stericycle Expert Solutions, 17.2% of the F.D.A. food recalls were of products that had been distributed nationwide, which marks the second highest percentage since the fourth quarter of 2016. – Source: Food Business News.

Burger King to Increasing Store Count by 55%

In the next eight to 10 years, Restaurant Brands International plans to surpass 40,000 locations globally, increasing its store count by 55% in a move to become one of the world’s largest restaurant companies. The parent company of Burger King, Popeyes Louisiana Kitchen and Tim Hortons had 25,809 locations open as of March 31. McDonald’s is nearly at 40,000 stores already, with 37,971 open at the end of the first quarter. Yum Brands is nearing 50,000 locations with the global expansion of Taco Bell, KFC and Pizza Hut. Toronto-based Restaurant Brands opened 1,300 locations last year, the equivalent of a new store every seven hours. More than 900 of those openings were new international Burger King locations; 260 were in China and Russia. To reach its goal of 40,000 stores in the next decade, it would need to add roughly 1,400 stores annually, Chief Operating Officer Josh Kobza said at the company’s investor day Wednesday. “RBI is fundamentally a growth company, with three amazing, iconic brands that we believe have a very long runway for growth — both at home and around the world,” CEO Jose Cil said in a statement.

Restaurant Brands was formed five years ago by the Brazilian investment group 3G Capital, also known for creating Kraft Heinz and Anheuser-Busch InBev. 3G Capital has a 41% stake in the company. The group is know for a focus on cost-cutting, but Restaurant Brands has the additional benefit of being able to franchise its stores, enabling it to expand its global footprint quickly while being cost effective. Since the start of the year, the company’s stock has gained nearly 27%, pushing its market value to more than $30 billion. At that level, the company’s value is about even with Yum Brands’, but it is still a fraction of McDonald’s $152.6 billion market capitalization. It is unclear if the 14,200 additional stores will be spread equally across its three brands. With 17,823 stores at the end of March, Burger King has more than triple the number of stores as Tim Hortons, the company’s second largest chain. Popeyes, which RBI acquired two years ago, had 3,120 at the end of its first quarter. Restaurant Brands had previously announced plans for Tim Hortons’ expansion in China. The Canadian coffee chain accounted for nearly 60% of its first-quarter revenue, but growth in its home market is slowing. It will join Starbucks and the soon-to-go-public Chinese chain Luckin Coffee in the battle to win over customers in the rapidly expanding Chinese coffee market. Tim Hortons plans to open 1,500 locations across the country in the next decade. Tim Hortons’ same-store sales declined its first quarter. In comparison, Burger King’s 2.2% same-store sales increase and Popeyes’ 0.6% indicate that the brands are still growing.

However, both chains’ same-store sales growth has slowed from last year, which could be a potential cause for concern. In the U.S., other fast food chains have also seen growth slow as consumer tastes change to favor healthier options. International expansion has also posed a challenge to some due to differences in regional tastes and difficulty translating the brand to a new market. Source: CNBC. Correction: A previous version of this story misstated Restaurant Brands’ same-store sales during the first quarter.

American Express Considers Dining Perks One of the Main Benefits for its Card Members

American Express has considered dining perks one of the main benefits for its card members, helping them book tables at hot spots and offering them rewards points for doing so. Now it is taking a new step into the industry — by buying the country’s biggest privately held restaurant reservation service. American Express announced on Wednesday that it had agreed to buy Resy, whose services allow customers to book reservations and restaurants to manage them. It is part of the card company’s effort to expand in the hospitality industry, with earlier acquisitions like the travel-assistant app Mezi and the airport-lounge booking service LoungeBuddy. “Putting Resy and American Express together will give Resy valuable scale,” Ben Leventhal, Resy’s co-founder and chief executive, said in a telephone interview. Founded in 2014, Resy has 4,000 restaurants on its platform in 10 countries. The company has already made moves to consolidate the industry, having agreed to buy Reserve in November. Yet it remains smaller services 50,000 restaurants worldwide. Resy and American Express had already been partners, but the card giant decided several months ago that buying Resy made sense, said Chris Cracchiolo, American Express’s senior vice president for global loyalty and benefits. “American Express wants to be more central in our customers’ everyday lives,” he said in an interview. American Express is hoping that the deal works out better than Booking Holdings’ $2.6 billion takeover of open table in 2014 — which was followed by a $941 million write-down of the acquisition two years later. Mr. Cracchiolo declined to comment on the OpenTable deal, but said American Express was committed to helping Resy expand. Financial terms of the transaction were not disclosed. Resy will continue to be led by Mr. Leventhal, and, at least in the short term, its existing offerings will remain unchanged. Source: The New York Times.

Taco Bell’s 35 Stores in India Are Operated as a Mix Between Burman Hospitality and its Own Equity Stores

Yum Brands Inc. co-owned Mexican cuisine chain Taco Bell named Burman Hospitality as its exclusive national franchise partner, a deal that makes Burman Hospitality one of the largest Taco Bell franchisees globally by store count. So far, Taco Bell’s 35 stores in India were operated as a mix between Burman Hospitality and its own equity stores. “We expect India to be operating over 600 outlets by 2029, making this market the largest outside of the US,” Taco Bell Corp international president Liz Williams, currently on an India visit, told ET. Taco Bell is Yum India’s newest and smallest brand. Yum-promoted Pizza Hut and KFC operate a combined 800-plus outlets in the country. The Southern California headquartered Taco Bell debuted in the Indian market in 2010, and tied up with Burman Hospitality in 2015. Burman Hospitality director Gaurav Burman said investments on stores would be in the range of Rs 3 crore each. “As part of the master franchise agreement, Burman Hospitality will create employment for over 20,000 people including entry level team members, restaurant management, and store positions. We will create additional jobs in multiple outsourced functions across partner companies in functions like IT, finance, supply chain and maintenance,” he said. Taco Bell Asia-Pacific managing director Ankush Tuli said India is a “massive opportunity market” for the brand. “While the core cuisine remains global, the menu has been localised for Indian consumers,” Tuli said. The Indian restaurant industry employed 7.3 million people in 2018-19, and the organised food services sector contributed Rs 18,000 crore in taxes in 2018-19, National Restaurants Association of India (NRAI) said in its Food Services Report released last week. The report estimates the Indian food services market at Rs 4,23,865 crore in 2018-19, forecasted to grow 9% to reach Rs 5,99,782 crore by 2022-23. Source: Economic Times of India.

John Schnatter Has Been Selling his Shares but Remains its Largest Shareholder

Shares of the pizza chain fell 2% in premarket trading. The stock, which has a market value of $1.5 billion, is up 16% so far this year. Earlier this month, Schnatter said in a regulatory filing that he had solicited financial advisors for help selling all or part of his stake in the company he founded. Since then, he has sold 3.8 million shares and now owns about 6.1 million shares, according to a regulatory filing Thursday. Schnatter’s stake in the company is now about 19%, down from roughly 31% before he began selling shares. But he will not be selling any more of his shares until Aug. 19 as part of a private placement sale with UBS, which purchased roughly 3.4 million shares from him Tuesday. He netted $157.5 million from the sale. Schnatter sold the other roughly 400,000 shares on the open market. Ten months ago, the pizza chain ousted Schnatter as chairman after it was reported that he used a racial slur on a conference call. Sales tumbled, and Papa John’s has struggled to recover. After his ouster, Schnatter filed several lawsuits against the company in a bid to regain control but eventually agreed to dismiss the claims as part of a settlement with Papa John’s. Until April 30, he served as a director on Papa John’s board but agreed to not seek reelection. Source: CNBC.

IHOP is changing its name—again.

Last June, IHOP, known to many as International House of Pancakes, ran a risky PR stunt, “changing” the company’s name to IHOB, International House of Burgers for a short period. Now, as the anniversary of that attention-grabbing temporary move nears, the chain is teasing another switch on social media. “What could the P be?” a tweet from the company reads, showing the now long-outdated IHOB logo flipping from a “b” to a “p.” Underneath that is the saying “we heard you.” The bio on the company’s Twitter page also now reads “When we changed our name to IHOb, the internet had a lot to say. Well, we heard you. Stay tuned for June 3.” The announcement is certainly having just the reaction the IHOP marketing department was hoping for. Social media is teaming with speculation, reactions and a little bit of nervousness. (Consumers, after seeing how last year’s name change, which lasted just a few days, know the chain isn’t likely making any drastic menu focus changes.) Source: Fortune.

What Delivery has become in the Restaurant Business

Greg Flynn says he’s received almost no pushback in a three-market no-delivery test, says RB’s The Bottom Line, arguing that the service should be margin-neutral. Here is how far delivery has come in the restaurant business in just two years: Companies are now testing what it’s like not to have it. Flynn Restaurant Group, Applebee’s largest operator, is testing going without the service in a trio of large markets. And the results thus far have been surprising: almost no pushback, and in-restaurant sales increased in those markets. “So far, we’re seeing our dine-in and carside-to-go business rise faster in the markets where we canceled delivery than in markets where we still maintain it,” said Greg Flynn, the company’s CEO and chairman. Flynn said the company will continue testing it before expanding the no-delivery test at his other Applebee’s locations.

Flynn Restaurant Group isn’t just some random Applebee’s franchisee. The company is the largest franchisee of any sort in the U.S., and it operates more than 400 Applebee’s locations, or about a quarter of the system. That alone makes the test a big one for Applebee’s as a brand, not just for Flynn Restaurant Group. Flynn is not anti-delivery—his company operates Taco Bell, where delivery is going “great” thanks to that chain’s Grubhub partnership, as well as Panera Bread, which has its own service and can control pricing. Nor is he anti-delivery when it comes to Applebee’s. The problem, Flynn said, is margins. He doesn’t believe the service is worth the disruption it can cause to the in-store business if it’s not going to at least be margin-neutral. “As an industry, we may be in a good position to take business” away from grocers, he said. “But for that to be attractive to us, given that there is lower incrementality and it’s disruptive to our dine-in business, it needs to be a margin-neutral channel.” That means the cost must either come from the delivery provider or, more likely, the consumer. And restaurants have to be able to charge their full prices. Flynn’s test is the latest demonstration of a shift in thinking by restaurant chains when it comes to delivery.

Chains are far more willing to take a hard line when it comes to delivery margins. As the service emerged two years ago, chains accepted costly commissions from third-party providers, believing that they needed to start offering the service quickly. The industry was dealing with traffic challenges, and many executives saw the service as a potential sales-generating strategy. Those executives believed the incrementality of the sales they received from delivery would offset those commissions. But more companies are shifting their focus to profitability, getting bolder in their demands in the process. Some chains such as Habit Burger charge higher prices for delivery orders. Delivery surcharges have become more common. And larger concepts, notably McDonald’s, are renegotiating their delivery deals to reduce commissions. “I believe the restaurant industry is at an inflection point,” Flynn said. Flynn said he has the support from Applebee’s, noting that Steve Joyce, CEO of parent company Dine Brands Global, had previously worked in the hotel industry with Marriott International and Choice Hotels. Years ago, online travel sites such as Expedia and Priceline emerged to take hotel reservations. Hotel companies got on board, hoping to get that business. But those sites have since come to dominate the business and have hurt hotel companies’ profitability in the process. Many see restaurants’ current challenges with delivery in the same vein. “He saw the rise of the online travel agencies,” Flynn said of Joyce. “They permanently took 10% out of the profit structure of the hotel industry as traffic came through their channel. He knows you need to resist that.” Flynn’s Applebee’s no-delivery test also provides some evidence behind the idea that delivery is not quite as incremental as it seems. Executives have long argued that delivery customers decide they want delivery, and then they decide on what they want to get. That seems likely. But a delivery sale today could eliminate a sale tomorrow. That is, if someone gets Applebee’s on a Friday night, they may be less likely to dine there on Saturday. Even if it is incremental, restaurants should take care before they sacrifice some of their margins. They may come to regret it down the line, as hotel companies did. – Source: Restaurant Business.

How Burger King Plans to Boost it’s Breakfast Business

Burger King has long struggled to match the sales-generating power of its top rival, McDonald’s. That’s never truer than it is at breakfast. Miami-based Burger King wants to change that. The fast-food chain, owned by Canadian operator Restaurant Brands International, is planning more innovation and marketing in the morning, believing it can quickly add sales and profitability in the process. “Breakfast has been an opportunity for us for a long time,” Chris Finazzo, president of Burger King in the Americas, told analysts earlier this month. “We haven’t been as successful as we could be.” Burger King has already started an a.m. push. It started a coffee subscription program, for instance, giving customers the opportunity to get unlimited coffee for $5 a month. It also started the BK Cafe, a platform with upgraded beverages important to morning commuters and similar to rival McDonald’s McCafe platform. But Finazzo promised additional strategies, including more innovation and better marketing. “If we’re to grow breakfast, we need to invest our fair share of media behind the category,” he said.

A typical Burger King location generates less than $1.4 million in revenue per store, or roughly half of the nearly $2.8 million volume of a typical McDonald’s restaurant, according to data from Restaurant Business sister company Technomic. And that comparison is even more lopsided in the morning. A typical Burger King generates about 15% of its sales at breakfast, or about half of the percentage of sales from breakfast at McDonald’s. Thus, that average Burger King location generates only about $205,000 in revenues at breakfast. By comparison, the average McDonald’s generates four times that much: about $800,000. In the restaurant business, where unit volumes are critical for success, it’s like starting a 100-yard dash 150 yards from the finish line. “If we’re able to capture around half of this gap, it would equate to more than a $100,000 improvement in average restaurant sales,” Finazzo said. Burger King isn’t catching McDonald’s sleeping.

The Chicago-based burger giant is focused intently on improving breakfast sales, believing it to be a primary culprit in traffic declines for the past five quarters. It introduced new sandwiches last year and is now shrinking its all-day breakfast menu, which is mostly about reducing in-store complexity, but at least in part is being done to prevent the loss of some morning sales. And Burger King faces other competitors, notably Taco Bell, which introduced breakfast six years ago and has gradually improved sales in the daypart. But Finazzo says there is ample opportunity for the chain to improve its position in the morning. He said the breakfast daypart has grown by 7% a year for the past five years. And, he said, “It has strong margins, which makes it attractive to our franchisees.” The company also has the room inside its restaurants in the morning and in its drive-thrus to serve more customers, given the comparatively weak business during that time frame. Finazzo said the company has a base of products that appeals to customers. He said the chain’s Croissanwich is its second highest-selling sandwich behind the Whopper. He also said that coffee, which is a key element in any breakfast offering, tests well against the chain’s competitors. “We have a good cup of coffee,” Finazzo said. “What we don’t have is a great coffee experience.” He said the BK Cafe platform, with better packaging, has helped its coffee unit volumes grow by 50%. He also said the chain has an opportunity to introduce new entrees, using new types of bread and flavor profiles “to differentiate ourselves from our competitors.” “You can expect more on the innovation from us in breakfast, and we’ll have plenty of compelling reasons to talk about the daypart in the coming year,” Finazzo said. But maybe the biggest challenge for Burger King is simply getting people to realize that the chain has breakfast in the first place. “If you look at the daypart, you’ll find we under-invested in media,” Finazzo said. “We haven’t established a credible coffee program, and we haven’t offered the variety our guests expect. So for us to win at breakfast, we have to be much more deliberate and aggressive.” – Source: Restaurant Business.

Smoothie King Names New CIO

Smoothie King Franchises Inc. has named Chris Andrews as chief information officer, the company said. Andrews, most recently CIO at Pei Wei Asian Diner, succeeds Adam Zeitsiff in the information technology role at the Dallas-based smoothie brand, a spokesperson said. Andrews will oversee Smoothie King’s information technology strategy and develop the franchise group’s digital infrastructure. Wan Kim, Smoothie King CEO, said in a statement that Andrews “brings a wealth of knowledge and experience in both IT and the restaurant industry, and his technical skills are second to none.” Prior to joining Pei Wei two years ago, Andrews served in IT roles at On The Border Mexican Grill and CEC Entertainment Inc., parent to the Chuck E. Cheese’s brand. Andrews becomes the third C-level executive to join Smoothie King’s leadership team this year. Earlier this spring, the company hired Rebecca Miller as its chief marketing officer and Thomas Kim as its chief financial officer. Smoothie King was founded in 1973 in Kenner, La., and now has more than 1,000 locations in 34 states as well as several countries abroad. For the 2018 fiscal year ended Dec. 31, Smoothie King reported $415.7 million in U.S. systemwide sales, up 10.4% from the Preceding Year, according to NRN Top 200 data. The company reported U.S. year-end systemwide unit count of 901 in the period, with 29 of those company-operated, for growth of 10.6% over the Preceding Year. – Source: NRN.

Tijuana Flats Names 3 New Executives

TJF USA LLC, the parent company to the fast-casual Tijuana Flats brand, has named three new executives, including a CEO and a chief financial officer, the company said. The Altamonte Springs, Fla.-based fast-casual brand said Brian Wright, most recently CEO and board member at Northborough, Mass.-based Bertucci’s Italian Restaurant, would succeed Rick Van Warner in the CEO position. The company said Van Warner would continue to serve on the company’s board. The company also named Louie Psallidas, former CEO and president of Boston-based Uno Restaurant Holdings, as chief financial officer. Uno is the parent of the Uno Pizzeria & Grill brand. Psallidas previously worked with PGHC Holdings, parent of Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches restaurants. In addition, Tijuana Flats named Steve Culbert, who has worked with such brands as Carrabba’s and Au Bon Pain, as senior vice president of operations. “Tijuana Flats is a unique brand with a fantastic people-first culture,”Wright in a statement. “I’m honored to have the opportunity to continue moving the company forward alongside Louie, Steve and the rest of our dedicated and passionate team and franchisees.” In addition to Bertucci’s, Wright has served in leadership roles at Au Bon Pain, Chevys Restaurants, Einstein Noah’s Bagels (now Einstein Bros. Bagels) and Boston Market. Tijuana Flats, founded in 1995 in Winter Park, Fla., has 135 restaurants, including 18 franchised units and 117 that are company-owned. They are located in Florida, Georgia, Indiana, North Carolina, South Carolina and Virginia. The brand has been owned since 2015 by New York-based AUA Private Equity Partners LLC and its affiliates. – Source: NRN.