To Our Valued Subscribers:
Here it is the middle of September and we are all gearing up for the final push to the end of the year. (Where has the time gone?) Most of us are also in the throes of finalizing our plans for 2020. To assist our subscribers in making the best plans for the coming year (s) below are a few questions to address authored by Todd Ordal of Applied Strategies. My team and I found them useful and hope you do as well. Here they are:
- What will our business environment look like in ___ (pick the number you wish to address) years? Include topics such as Technology, Interest Rates, Government Regulations, and Competitors etc.
- Is our return on invested capital above or below our industry’s mean? Could we get a much better return elsewhere?If you can you have a problem.
- Are we seeing any of our most profitable customers jumping ship?Look at evidence, not your sales team’s opinions. And finally
- How can we design a company that would eat our lunch?Kind of an out of the box view but well worth the effort. Ask the tough questions for best results.
Here’s the toughest question of all: does my company have the best talent in all functionalities to address the challenges of the upcoming year? If not, keep in mind that American Recruiters specializes in sourcing STEALTH Talent. It costs you NOTHING to compare the talent we can provide to you versus the talent you have secured on your own. We’re the perfect litmus test to ensure you have the best company. Have a great rest of September and hope (with me) that my CUBS hang on to a playoff berth!!
Can Ruby Tuesday Stage a Comeback?
Like many casual-dining icons, Ruby Tuesday has faced some hard times of late. In 2018, its revenue dipped nearly 13 percent. In 2016, it shuttered 95 stores alone and in 2018 it closed an additional 50 locations. Similar to many chains, Ruby Tuesday is shrinking its overall footprint and strengthening its top performers. Today, there are 486 locations in 39 states, along with 11 countries and territories from around the globe. As of September 2017, there were 599 stores. Ruby Tuesday had 724 units in May 2016. Its new owner, NRD Capital Management, an Atlanta-based private equity firm, opted to take it private through a $148 buy-out in early 2018. Named after the Rolling Stone song “Ruby Tuesday,” it too may have to “change with every new day” as the lyric goes. But a reading of some of the Yelp reviews of one Knoxville location of Ruby Tuesday indicates its highs and lows. One reader said, “The quality was higher than expected, and our server was excellent.” But another Yelp reviewer complained about the lack of plates provided at the salad bar, waiting 5 to 10 minutes to have them replaced, empty entrees at the salad bar, and general disarray in the restaurant. Another Yelp responder talked about being served cold food, which needed to be returned to the kitchen.
Naturally, a makeover at Ruby Tuesday is needed if it’s going to bounce back from recent setbacks. And that’s why Jenifer Boyd Harmon was hired in June as its new chief marketing of fiver. A former senior director of advertising for Denny’s, she’s worked with a slew of restaurant brands, including quick-service chains El Pollo Loco and Hardee’s. Still known for its signature burgers, Ruby Tuesday is now highlighting its Endless Garden Bar, as more Americans count their calories and watch their weight. Promotions include kids under 10 dine free on Tuesday nights, and new cheese and chicken minis to draw in millennials and others who don’t want a full meal. Larry Reinstein, president of LJR Hospitality, a Dallas-based consultant, and former CEO of Fresh Concepts, says it’s not just Ruby Tuesday that is facing rocky waters but the entire sector. “… You name it, that category had a great run in the 1980s but it doesn’t resonate with today’s consumer [as much],” he says. The traditional bar and grill that Ruby Tuesday and other likeminded brands exemplify doesn’t provide the specialized dining experience that some contemporary customers want, which has led to recent evolution. Currently, Reinstein says, casual-dining competitors that simply chase value deals will struggle to sustain long-term consumer interest. “You need revolution,” he says, and that entails providing a special experience and food the consumer can’t get anywhere else. Restaurant locations need to be converted “to represent 2019, not the 1980’s,” he says. Ruby Tuesday’s menu offers “chicken, steak, burgers, sandwiches, appetizers, but what exactly are they known for? That’s a problem,” Reinstein says. Many Ruby Tuesday locations are situated near or in shopping malls and unless they’re A-plus spots that still drive foot traffic, “malls are no longer the draw they once were, though there are some exceptions,” Reinstein says.When a private-equity company acquires a restaurant chain, the biggest issue, Reinstein says, is “with capital structure investment that people are willing to make with restaurants.” He suggests that each location would have to be transformed so it appeals to current consumers, and that takes an injection of major dollars. With labor costs rising and qualified staff difficult to hire, the whole casual restaurant space is very tough to crack, he says. – Source: Ruby Tuesday.
Vegetarian Burgers Developed Locally
Burger King will launch a plant-based burger imitating meat called the “Rebel Whopper” in Brazil in November, the company said, amid an international rush for mass-market chains to cater to vegetarian and vegan diners. Burger King will sell the vegetarian burgers developed by meatpacker Marfrig Global Foods SA for 29.90 reais ($7.26) in Brazil, representatives of the two companies said at a press briefing in São Paulo. The hamburger will be produced by Marfrig in partnership with U.S. commodities trader Archer Daniels Midland Co.). The launch of plant-based products comes amid heightened consumer concerns over health, the environment and even animal welfare, forcing companies to adapt to consumers wanting to eat less meat. The trend has given rise to non-meat start-ups like Beyond Meat Inc. and Impossible Foods Inc. in the United States, with Brazil-based traditional meat-packers like Marfrig and JBS SA (JBSS) following suit. Burger King, owned by Brazilian-controlled 3G Capital via its majority stake in Restaurant Brands International, will launch the burger in São Paulo city on Sept. 10, expanding to São Paulo and Rio de Janeiro states in October, and elsewhere in November. The chain found in a survey that 69% of Brazilian consumers were likely to buy a plant-based burger if offered at Burger King, ranking first ahead of China with 41%, the company’s Brazil CEO Iuri Miranda said. He estimated Brazil’s fast food market is worth 400 billion reais ($97 billion). In the United States, Impossible Foods supplies the plant-based burgers sold in Burger King stores, while Marfrig will be the chain’s exclusive supplier in Brazil. Executives at Burger King and Marfrig declined to comment on details or duration of that contract. Marfrig’s chief executive for South America, Miguel Gularte, said the company is developing other plant-based products which may be sold in supermarkets, but they will not use the same recipes as the Burger King burgers. – Source: Reuters.
Guillermo Perales Takes on Taco Bueno
Guillermo Perales knows he has to be patient with the turnaround that he wants for Taco Bueno. That’s difficult for Perales, who built his 1,000-unit franchisee, Sun Holdings, with a particular aggressiveness. He builds dozens of new restaurants every year under brands such as Burger King, Arby’s, Popeyes Louisiana Kitchen and Krispy Kreme. Since buying the Dallas-based Taco Bueno out of bankruptcy in January, he hasn’t opened one, though he has chosen a new prototype and has four restaurants under construction. “We’ve been slow at it,” Perales said in an interview with Restaurant Business. “We’ve built over 200 stores in the last three years (as a franchisee). I like to build. But (at Taco Bueno) we haven’t been able to build a single one.” To be sure, “slow” is a relative term. Since the purchase, Taco Bueno has improved its ingredients, started working on remodels and is marketing and advertising the brand again. And turnarounds take time. It took years for Taco Bueno to land itself in bankruptcy last year. It’s not a quick fix. Nor does the brand have just one issue that needs attention. “If we remodel but we don’t have a good product, it won’t work,” Perales said. “If we have a good product but a bad facility, it won’t work. If we don’t have good advertising, it won’t work. “It’s like the perfect storm. To get it working again we have to fix everything. And if we don’t fix everything, some customers will get upset.”
Taco Bueno filed for bankruptcy protection last November. The chain had been struggling and hired a restructuring consultant in August so it could find a buyer. Heavy rains led to a steep decline in sales last September, prompting last September filing. “I would say the last two years were brutal,” Perales said. “Not just September.” Indeed, system sales at the brand declined from $192 million in 2013 to $170 million in 2018, the year of the bankruptcy filing. Since then, the brand has shed locations. It has fewer than 150 today, compared to 169 at the time of the filing. Most of the restaurants are company-owned. The brand had a ton of debt—$130 million—so it likely cut corners to make enough money to make those payments. That led to a lot of problems that ultimately did the brand in. “It wasn’t just one thing,” he said. He noted the quality of the tortillas was poor, and the company changed the recipe of its popular queso as well as the beef for its tacos and burritos. “The food wasn’t at its peak,” Perales said. The company didn’t invest in its facilities, and it cut advertising as its financial problems worsened. Taco Bueno was also owned by a succession of private-equity firms that Perales said hoped to turn the brand into a big national chain. “Every private-equity firm has come to this brand thinking it could be Taco Bell,” Perales said. “I doubt that could really be possible.” There are only two major nationwide Mexican chains: Chipotle Mexican Grill and Taco Bell. Other chains have struggled to make it nationwide, and the category is filled with regional competitors that do well in certain parts of the country. As such, Perales has no lofty goals of making Taco Bueno the next Taco Bell. “For us, being such a small brand with 150 stores, we can still double sales in every market,” he said. “So why expand in multiple states when you have a lot of work to do where you’re at? “I would prefer to stay at home, make sure we operate better closer to home, and have better food closer to home.”
It’s more work for Perales to operate a brand rather than the franchised restaurants he had operated for more than 20 years. He has to worry about marketing and product development, things that he doesn’t have to worry about at his franchise locations. “It’s a big weight to make sure you get good products and good advertising to increase sales,” he said. “If you’re a franchisee, your products and marketing are done by the brand. Here, we do that.” That said, Perales said he is learning from the brands he operates and taking best practices and applying them to Taco Bueno. He’s also learning from the other brands’ mistakes. “We learn from the other brands, what’s good and what’s bad,” he said. “We need to find that home-run product to move forward. And if we go back to the basics—good food, fresh food, good, remodeled stores, good products and advertising, we’ll be successful, and Taco Bueno becomes great again.” – Source: Restaurant Business.
Huddle House Agrees to Buy Perkins
Huddle House Inc. agreed to buy 342 Perkins Restaurant & Bakery locations, the company said. The Atlanta-based family-dining brand said it expected the deal to close on Oct. 21. Terms were not disclosed. In early August, Perkins & Marie Callender’s Inc. filed for bankruptcy protection and closed 29 Perkins Restaurant & Bakery and Marie Callender’s restaurants. The company said Huddle House executives will manage the Perkins units out of the company’s Atlanta headquarters. “There are no plans to convert any existing units to Huddle House restaurants or vice versa,” the company said in a statement. “Strategically, this is a very good fit,” said Michael Abt, Huddle House CEO, in the statement. “Both Huddle House and Perkins are breakfast-first concepts, and we pride ourselves on our ability to bring families together through remarkable food and home style meals.” Abt added that “we believe that we can further utilize Huddle House’s existing platforms and financial backing to strengthen the growth of the Perkins brand.” Sentinel Capital Partners sold Huddle House in February 2018. Abt added that “this acquisition is by careful design and calculation, as the brands fit well together serving complementary markets but supported by similar resources.” Combined, Huddle House, which had 344 units at the end of its fiscal year in April, and the Memphis, Tenn.-based Perkins restaurants would total nearly 700 locations. Huddle House said the two brands would generate more than $800 million in sales. For Nation’s Restaurant News’ annual Top 200 census, Huddle House executives projected U.S.-systemwide sales of $245 million from a year-end 344 restaurants, including 42 company-operated units, for the fiscal year ended in April, while Perkins reported U.S.-system wide sales of $592.6 million from a year-end 356 locations, including 117 company sites, for fiscal 2018 ended in December. Perkins repored U.S. average unit volume was essentially flat for the past four completed fiscal year, fluctuating up and down between $1.67 million and $1.68 million, as its U.S. store base declined by 7.7% across that period. The Perkins system has 342 restaurants in 32 states and Canada, of which about 100 are company-owned. – Source: NRN.
McDonald’s Acquires Apprente to Bring Voice Technology to Drive-Thru
As of today, it’s announcing that it’s buying Apprente, a startup building conversational agents that can automate voice-based ordering in multiple languages. If that sounds like a good fit for fast-food drive thru, that’s exactly what McDonald’s leadership has in mind. In fact, the company has already been testing Apprente’s technology in select locations, creating voice-activated drive-thru (along with robot fryers) that it said will offer “faster, simpler and more accurate order taking.” McDonald’s said the technology also could be used in mobile and kiosk ordering. Presumably, besides lowering wait times, this could allow restaurants to operate with smaller staffs. Earlier this year, McDonald’s acquired online personalization startup Dynamic Yield for more than $300 million, with the goal of creating a drive-thru experience that’s customized based on things like weather and restaurant traffic. It also invested in mobile app company Plexure. Now the company is looking to double down on its tech investments by creating a new Silicon Valley-based group called McD Tech Labs, with the Apprente team becoming the group’s founding members, and Apprente co-founder Itamar Arel becoming vice president of McD Tech Labs. McDonald’s said it will expand the team by hiring more engineers, data scientists and other tech experts. “Building our technology infrastructure and digital capabilities are fundamental to our Velocity Growth Plan and enable us to meet rising expectations from our customers, while making it simpler and even more enjoyable for crew members to serve guests,” said McDonald’s president and CEO Steve Easterbrook in a statement. “Apprente’s gifted team, and the technology they have developed, will form McD Tech Labs, a new group integrated in our Global Technology team that will take our culture of innovation one step further.” Apprent was founded in 2017 and raised a total of $4.8 million from investors, including AME Cloud Ventures, Morado Ventures, Pathbreaker Ventures, Point72 Ventures, Greylock Partners and StageOne Ventures, according to Crunchbase. The financial terms of the acquisition were not disclosed. – Source: TechCrunch.
Chick-fil-A. Inc. has Reached its Goal of Serving “No Antibiotics Ever”
The quick-service restaurant made the commitment in 2014 and arrived at the mark early, serving no antibiotics chicken since May 2019. Packaging at more than 2,400 restaurants will change in October to reflect the commitment to customers. “We know consumers care about how their food is made and where it comes from, including the use of antibiotics,” said Matt Abercrombie, director of menu and packaging Chick-fil-A. “Because it was important to our customers, it was important to us. Chick-fil-A has always been committed to serving customers delicious food made with high-quality ingredients and offering No Antibiotics Ever chicken was the next step. Our goal was to pursue the highest standard and partner with the U.S.D.A. to verify it.” Chick-fil-A worked with suppliers to convert the entire supply chain, Mr. Abercrombie said. The company said it is the largest quick-service restaurant to implement No Antibiotics Ever chicken across all its restaurants. – Source: Chick-fil-A, Inc./Food Business News.
Reducing Food Waste is the Next Big Thing for Inspired Chefs and Food Organizations
Last year, the James Beard Foundation (JBF) announced its multi-year Waste Not initiative, which encourages chefs and home cooks alike to adopt more full-use cooking methods. “Around the world, we waste more than 40 percent of the food we produce,” says Katherine Miller, vice president of Impact for JBF. “This means we also waste the precious resources—such as water and countless human hours—needed to grow, package, and prepare our food. It’s a big problem, but it is also relatively easy to fix.” According to Miller, food waste is costing the restaurant industry hundreds of billions of dollars annually, and is also a major contributor to climate change. A 2018 global study by the American Hotel & Lodging Association also found that reducing food waste can help ensure restaurant profitability: for every $1 an operator invests to reduce kitchen waste, on average the business saves $7 in operating costs. By speeding up their own food waste reduction efforts, the James Beard Foundation hopes to provide chefs and consumers with the resources they need to actively address food waste on a daily basis.
The Foundation is moving all of its operations to zero waste events and service, including dinners at the historic James Beard House in New York. “Restaurants should start by better understanding their food waste,” Miller says. “It’s as easy as measuring the number of food scraps each week. Then, they can set a goal to reduce that amount by 40 percent. Assessing inventory, looking at portion size, and examining whether you’re fully utilizing every part of a product can help.” Prosciutto, for example, is used in a variety of places on a menu—in sauces, as a garnish, and in whole dishes, like pastas and pizzas. By planning for various uses of prosciutto, chefs can ensure that every bit is used. Food organizations such as the Consorzio del Prosciutto di Parma are doing their part in reducing food waste, too. The organization recently launched an educational initiative and digital training hub for chefs wanting to know more about fully utilizing the prized ham. Its campaign, The Whole Leg, provides extensive insights and resources for menu development, including videos that showcase breaking down the leg, and recipes that incorporate everything from the bone and the fat—which can both be used to intensify the flavor of broths, sauces, or stews—to the bottom and the skin—which can be incorporated into dishes ranging from meatballs to risotto. At Miami’s Macchialina restaurant, Chef Mike Pirolo has embraced the push to get more out of each product in his kitchen, starting with Prosciutto di Parma. “I grew up in an Italian family, and there’s no such thing as waste,” he says. “For restaurants, reducing waste ultimately helps to make the business more profitable. But also, chefs are pretty competitive. We like to show our customers how we’re thinking outside the box and getting creative with food parts that no one ever thought to use.” Once a month at Macchialina, Chef Mike and his team take the scraps left over from the restaurant’s charcuterie program—the nub ends of the salami and Prosciutto di Parma that are too short to shave or slice—and grind them together to make Bolognese sauce. The signature pappardelle dish that results has become wildly popular with customers. “We’re taking something that most chefs usually throw away or just chop up and put in a stock,” he says. “And it’s actually developed a cult following. People go crazy for it, and when you’re creating something like that, as a chef, that’s really special.” The Macchialina menu has featured Prosciutto di Parma in a number of other unique, underutilized ways, with a Creamy Polenta with Prosciutto and Mushroom Ragu, and as an add-on to their Local Burrata dish with heirloom tomatoes and arugula. Similar to TheWholeLeg.com, the Waste Not initiative has created a free online curriculum for chefs on how to develop a full-use kitchen, as well as launching a cookbook with more than 100 recipes and insights for using every stem, leaf, root, and rind possible to create delicious meals. “At the James Beard Foundation, we know from our own experience that reducing food waste can be complicated,” Miller says. “But we also recognize that the effort to do so will positively impact our business, people in our community, and the health of the planet—so it’s something we all must do.” – Source: Sapore Magazine/Consorzio del Prosciutto di Parma.
No Wonder Popeyes Ran out of its New Chicken Sandwich
KeyBanc analyst Eric Gonzalez says Popeyes stores sold about 1,000 chicken sandwiches a day before the new product sold out.
- Sandwich sales also accounted for about 30% of Popeyes sales in the time it was available while store traffic doubled, Gonzalez adds.
- Popeyes officially launched its chicken sandwich on Aug. 12 but it wasn’t until a week later that the fast-food chain’s new product took off, fueled by a Twitter feud with rival Chick-fil-A.
An analyst at KeyBanc Capital Markets estimates the fast-food chicken restaurant sold about 1,000 chicken sandwiches per store a day. Sandwich sales also accounted for about 30% of Popeyes sales in the time it was available while store traffic doubled, the analyst said, citing proprietary tracking data. For this reason, the firm is bullish on the parent company, Restaurant Brands International, and raised its earnings estimates. The sales boom got its spark after a Twitter feud with Chick-fil-A in August led consumers to try the new sandwich. The chicken sandwich’s massive popularity also sent ripples through the fast-food industry as Popeyes same-store sales skyrocketed. “Unbeknownst to [parent Restaurant Brands International] at the time, the launch of a new chicken sandwich at Popeye’s and subsequent twitter debate would be a viral sensation that would disrupt the fast food industry and likely shape the outcome of 3Q19 results for some of the category’s largest players,” analyst Eric Gonzalez said in a note. – Source: CNBC.
Growing Plant-Based Food Industry
Much of the research into and news coverage of the growing plant-based food industry has focused on retail sales and new products on supermarket shelves, but foodservice channels are increasingly becoming a key focus of plant-based culinary innovation. Plant-based protein shipments to foodservice outlets grew 20% last year, according to NPD Group. The growth comes as outlets including restaurants, corporate cafes, campus dining halls and assisted-living facility dining rooms are expanding their plant-based options in response to growing consumer demands and the changing tastes of their customers. Burgers were the biggest seller according to NPD, but food makers and foodservice providers are increasingly looking for innovative new products in the plant-based space. Just this month, Tyson Foods’ investment arm announced an investment in New Wave Foods, to create a version of plant-based shellfish to debut in foodservice channels next year.
New Wave worked with the Culinary Institute of America to create a plant-based version of shrimp made from plant protein and seaweed. The Plant Based Foods Association has developed a guide to plant-based meat, egg and dairy alternatives for the foodservice industry. The digital booklet offers foodservice operators a primer on products including seitan, tofu, tempeh and soymilk and how to use them. And corporate and campus catering companies including Aramark and Sodexo have been expanding their use of plant-based meat alternatives on their menus in response to customer demand. Last month, Aramark cited data showing that 60% of consumers aim to cut down on meat eating for reasons including health, weight management and climate change. The company has been expanding its plant-based menu with new recipes featuring Beyond Meat products, including Gumbo bowls made with Beyond sausage for hospital menus and Beyond Burgers at the ballparks it serves, the company detailed in an August news release. Sodexo has also created a whole plant-centric menu and teamed with the Humane Society of the United States to teach its chefs the ins and outs of cooking with plants. The partners launched a menu last year that’s continuing to evolve and now has about 300 different items. The menu is a mix of vegan and vegetarian items, and items like blended burgers that are made with mushrooms that replace about 25% of the beef that would be in a traditional burger. And recently the company partnered with Impossible Foods to develop new menu items featuring that brand’s plant-based meats.
That partnership is different for Sodexo in that it’s unusual for the foodservice operator to highlight a brand name ingredient on the menu, Senior Director of Culinary Development Rob Morasco said. “Impossible fits in nicely from the standpoint of plant-forward and plant-based, and we’re really excited about the relationship,” he said. Offering options and continuing to innovate is key for foodservice operations like Sodexo because, unlike restaurants, their cafeterias, dining halls and other facilities are feeding largely the same group of people each day. And, especially on college campuses, customers are always clamoring for new flavors and innovative menu items. “Customers are eating with us because we are where they are, so we have to look at not just their needs for today but their needs for down the road,” Morasco said. “About 86% of people who order an Impossible Burger are not vegan or vegetarian, they are just looking to eat less meat.”The partnership with Impossible Foods and putting the brand on the menu could also be an entry point into plant-based for some consumers, said Ted Monk, Sodexo’s vice president for sustainability. “I don’t have any data to prove this point, but it seems to me that the Impossible Burger has strong brand recognition,” he said. “If it leads people to try it and then to try other plant-based items, that will continue to strengthen the growth of plant-based.” Customers who seek out more plant-based options for health and increasingly for the environment don’t want to sacrifice taste, and Sodexo’s chefs developed the new menu items with that in mind. “The beauty of these plant-based items is that they let you introduce new textures and flavors,” Monk said. “It tastes great and helps you reduce food waste.” – Source: SmartBrief.
Despite the Trade War, China is Still an Alluring Market
China has just about everything you’d want in a restaurant market: a massive population with a growing middle class, pioneering concepts that have shown it is accepting of Western cuisine and, of course, roads that aren’t pockmarked by too many competitors. None of that is likely to change because of a lingering trade war between that country and the U.S., and Western brands will likely keep flocking there. “China is basically the market outside the U.S. for any chain that wants to grow,” said Aaron Jourden, senior research manager, global, for Restaurant Business sister company Technomic. “The number of stomachs in China, and the growing population that is middle class, you’re not coming anywhere close in the next decade. There’s no way to replicate what China is right now.” For global fast-food chains in particular, China is a vital market, one long proven to be a strong one thanks to the success of KFC—it’s the chicken chain’s biggest market. The coffee chain Starbucks has targeted China as a major growth market. Fast-food chain operator Restaurant Brands International, meanwhile, recently opened the first Tim Hortons location there this year, and already operates 30 restaurants in the country. “That’s pretty impressive for a chain built around a hockey player in a market that doesn’t know doughnuts all that well,” Jourden said. RBI has also recently reached a deal with TFI TAB Food Investments, Burger King’s largest global franchisee, to develop 1,500 Popeyes locations in China.
It’s not just big brands. Fatburger just opened its sixth location in the country. Shake Shack in January opened its first location in China’s mainland, in Shanghai, and the company believes it has a “tremendous growth opportunity” in the country. To understand the allure of China, just look at the coffee business. “It’s a huge consumer market where per-capita coffee consumption has grown about 15% per year,” Tim Hortons President Alex Macedo said earlier this year, according to a transcript of the RBI Investor Day presentation on the financial services site Sentieo. “We know density is good for our brand.” Starbucks is rapidly growing in that market—the chain has 4,000 locations in the country, and it represents about a third of its total global unit count growth this year. CFO Patrick Grismer told investors on Wednesday that the chain generates 80% cash-on-cash returns on new units in the country, enabling the brand to pay off a new location in just over a year. Still, Grismer said, competition in the market is growing more difficult, as noted by the emergence and rapid growth of the tech-centric coffee chain Luckin Coffee, which in just two years has become the second largest coffee chain in China. “Starbucks has demonstrated in China the appeal of the premium coffee specialty category,” Grismer said, “and that has attracted a lot of competition.” The development has come despite an escalatingtrade war between China and the U.S. Last month, President Trump urged businesses to leave China – saying in a tweet that businesses are ‘hearby ordered” to leave the country. The dispute could hurt relations between the two countries. Jourden, however, doesn’t believe it will impact U.S. chains’ sales in China, at least anytime soon.If the trade war lingers, however, or the severity of the rift between the two countries depends, it could open the door for some local or regional brands to “prove themselves.” Philippines restaurant operator Jollibee Foods has opened a couple of chains in China, as have brands from Japan and South Korea. And local concepts are starting to gain favor, as the ultra-fast-growing coffee chain Luckin Coffee has demonstrated. “There are opportunities to grow share if American brands get their image tarnished,” Jourden said. “But we haven’t seen that at this point.” Indeed, Starbucks has seen its sales recover in China this year as it has expanded its own digital and delivery capabilities. Executives on Wednesday cited competition and its own aggressive development for any recent slowdown. Maybe the bigger problem is economic. A trade war between the two countries has already sparked recession fears in the U.S. and worries about a slowdown in China. A deepening rift and subsequent economic recession would “hurt everybody involved.” For now, however, “we haven’t seen any information where the consumer in China is thinking the trade war with their purchases,” Jourden said. “Quality and price point are still top of mind.” – Source: Restaurant Business.
Canada, US Listeria Outbreaks Possibly Linked
An outbreak of Listeria monocytogenes under investigation in Canada could be linked to a Listeria outbreak that has claimed the lives of two people and affected two dozen other individuals in the United States. As of Aug. 23, a total of 24 people infected with the outbreak strain of Listeria have been reported from 13 states, the Atlanta-based Centers for Disease Control (CDC) and Prevention said. Two deaths related to the outbreak have been reported. However, public health officials have not identified a specific food item, retail outlet or restaurant chain as the source of the illnesses, according to CDC. “Listeria specimens were collected from ill people from July 20, 2017, to Aug. 1, 2019,” the CDC said. “Ill people range in age from 35 to 92 years, with a median age of 72. Sixty-three percent of ill people are female. Of 23 ill people with information available, 22 hospitalizations have been reported. Two deaths have been reported.” Further, the CDC reported that “…Whole genome sequencing showed that the type of Listeria making people sick in Canada is closely related genetically to the Listeria making people sick in the United States.” On Aug. 18, the Canadian Food and Inspection Agency (CFIA) stated that Rosemount Sales and marketing recalled Rosemount brand cooked diced chicken meat due to possible Listeria contamination. The Public Health Agency of Canada said whole genome sequencing identified the product as the likely source of the outbreak which was reported in three Canadian provinces. As of Aug. 23, there have been seven confirmed cases of Listeria in British Columbia (1), Manitoba (1) and Ontario (5). The case patients became sick between November 2017 and June 2019. Six individuals were hospitalized. Public Health Agency of Canada said whole genome sequencing revealed that two listeriosis cases from November 2017 were identified as having the same genetic strain as illnesses that occurred between April and June 2019. More recently, Rosemount Sales and Marketing launched a recall of additional diced chicken products on concerns the items may be contaminated by Listeria monocytogenes. CFIA said the products were sold in British Columbia, Manitoba and Ontario and may have been distributed to other provinces and territories. – Source: Food business news
Navigating the non-G.M.O. Landscape
Bakery foods, bread and prepared meals are among product categories generating increased demand for non-G.M.O. options, said Bethany Rahja, commercial analyst for Cargill’s global edible oils business in North America. Cargill offers an extensive non-G.M.O. ingredient portfolio that includes texturizers, sweeteners, fats and oils, starches, fibers, flour and ancient grains, cocoa and chocolate, Ms. Stauffer said. “Cargill has been helping our customers navigate the non-G.M.O. landscape for nearly 20 years,” she said. “Today, we offer the industry’s broadest non-G.M.O. ingredient portfolio, enabling customers to source multiple ingredients through a single supplier. For example, we offer non-G.M.O. stevia, erythritol and chicory root fiber, three key components for many reduced-sugar products. “As a one-stop shop for non-G.M.O. ingredients, we save customers time and help them get to market faster.” The company sees continued demand for both non-G.M.O. and G.M.O. crops, said Jana Mauck, marketing manager for Cargill’s global edible oils business in North America. “We believe the two can and will co-exist to feed a growing population,” Ms. Mauck said. “We believe G.M.O.s are proven safe and help deliver a number of benefits. Cargill believes that biotechnology will play an important role in feeding a growing global population. “We also recognize that some consumers want choice when it comes to the ingredients used in the products they eat. The demand for choice also provides additional markets and options for producers.” Manufacturers should consider key challenges and implications before pursuing non-G.M.O. product verification, said Randal Giroux, vice-president of food safety, quality and regulatory for Cargill. “From a supply chain perspective, companies generally move away from highly flexible and efficient commoditized agricultural supply chains to an identity-preserved program,” Mr. Giroux said. “This increases the risk of potential volume or supply disruptions, can remove transparent price discovery opportunities and requires significant upfront forecasting and planning to meet supply needs. “With a growing number of unique and private certification schemes, it’s important to recognize access to existing non-G.M.O. supplies is not a given as certification criteria may be different. From a sustainability perspective, non-G.M.O. agronomics have been shown to negatively impact several sustainability metrics, including greenhouse gas emissions, environmental impacts and soil biodiversity.” Additionally, he said, the cost of non-G.M.O. ingredients may be significantly higher than conventional inputs. “If those costs cannot flow through to a consumer willingness to pay, these are likely added costs to food manufacturers,” Mr. Giroux said. Food Business News.
Anthony’s Coal Fired Pizza Builds a Brand with Lasting Power
Wayne Jones visited 38 Anthony’s Coal Fired Pizza locations before signing on as chief executive in 2017, succeeding founder Anthony Bruno. Each stop tugged at his roots. Jones grew up in California, with little money, and got into restaurants so he could eat. And there was a local pizza place where the owner would put pies in the oven and take them out a little burnt. Well charred, you could say. It was the foldable, thin, but not soggy pizza purists search for. “When I took the first bite at Anthony’s, I was transported back like 50 years,” he says. “It was a visceral experience for me.” That kind of testimonial isn’t uncommon among guests, Jones says. It’s why the brand garnered local renown 30-plus years ago when Anthony’s Runway 84 debuted not far from the Fort Lauderdale, Florida, airport.
In 2002, Bruno, who took over from his father, introduced the first Anthony’s Coal Fired Pizza as a more casual, accessible version of the original upscale, classic Italian spot. Anthony’s has since scaled to 67 company-owned restaurants across Delaware, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania, and Rhode Island. In late 2015, private-equity giant L Catterton, the same firm with investments in Noodles & Company, Uncle Julio’s, Hopdoddy, Chopt, and soon Del Frisco’s following its $650 million deal, scooped up Anthony’s, setting the stage for what it now calls a “new phase of guided growth.” Anthony’s dartboard objective is to hit 100 locations by 2024 or so. It plans to open three, five, and seven restaurants, respectively, in the coming years before reassessing. Jones says Anthony’s can scale in a controlled manner within its current footprint “without going crazy,” and remain on an upward climb. The brand expects to add a 10th market—the Virginia-D.C. area—but otherwise sees ample room to cluster in DMAs where it already appreciates brand awareness. Florida, as many restaurateurs can attest, is like an entire country in itself when it comes to testing varied demographics. Twenty-seven of Anthony’s units are located in the Sunshine State, with more to come. And the company will refine its strategy through an executive team that feels like it belongs to a 2,000-unit chain. The same qualities that inspire loyal customers attracted Anthony’s C-suite, Jones says. He arrived after three years as president and chief operating officer of PF Chang’s. Before, Jones spent six years at BJ’s Restaurants and two decades with The Cheesecake Factory. In June, the company announced four new appointments. John Reale, who worked four years apiece as COO at Cheddar’s Scratch Kitchen and FOCUS Brands, took over the same duties with Anthony’s. Katie Knight, the former CMO of Carrabba’s Italian Grill, grabbed the marketing reins. Late last year, Anthony’s also hired Dean Courtelis as chief culinary officer. Courtelis was a Cheesecake Factory vet, too, having clocked 12 years at the polished-casual empire, managing operations for eight restaurants. He then spent two years at Amazon’s Seattle headquarters, where he designed, opened, and oversaw the company’s first FDA-certified food manufacturing facility. Lastly, Anthony’s added Claudia Schaefer to its board of directors. Schaefer served as CMO of Jamba and Cheddar’s Scratch Kitchen, and also worked for Chili’s. The hires joined chief people officer Michele Zavolta, who hailed from Logan’s Roadhouse and Ted’s Montana Grill, and CFO Rebekah Cooksey, a former DentalOnePartners and Michaels leader. Jones says it’s not surprising to see top-tier executives lining up to join Anthony’s. They’ve tried the pizza, too. “I think that really speaks to the quality of Anthony’s as a brand,” he says. “You can look at the loyalty from guests and it makes all the sense in the world.”
Anthony’s top-tier executive team is leading its growth.
In 2015, USA Today wrote an article asking, “Is Anthony’s the best pizza chain in America?” The story described the experience: “Imagine pizza so good that seasonal snowbirds from New York—the most pizza-defensive city in the country—liked it so much they imported it from their winter stays in Florida. If you think of a chain restaurant as spanning multiple states and being accessible to a goodly amount of people, it is easy to say Anthony’s is the best pizza chain in the country …” The following year, USA Today, in its “Field guide to American Pizza,” called Anthony’s “easily the nation’s best pizza chain.” Anthony’s 800-degree coal oven is the centerpiece. It produces a crust that’s thin and crisp and not soggy, a differentiator from the “New Haven-style pizza” often associated with this cooking style. The pizza is lightly sauced and comes out of the oven literally smoking, with black spots and char on the edge and bottom. But it doesn’t taste burnt. “Our ovens are a real art form,” Jones says. “There are no knobs on the ovens. It’s a pile of coal. It’s on fire. And it takes work to navigate that.” When Jones arrived, he asked how much coal the brand used daily. The answer: somewhere between eight and 12 bags. “I said, that’s a pretty wide range,” he jokes. Anthony’s got the number down to a science, which is important as the brand grows and courts consistency. “We now know what the temperature should be at various times of the day. And when we should be cooking certain things throughout the day,” Jones says. “Because the oven temperature does fluctuate as its rebuilt every morning.” The oven typically hits its peak midday and then cools overnight. Jones says Courtelis’ hire was essential to keep the quality quotient humming. “That voice is incredibly important,” he says. “If you don’t have it, you need that champion. I’m that champion but I need someone whose sole focus is to make sure the food is great in the restaurant.” One thing about growth, Jones adds, is Anthony’s wants to stoke its cult status, not dilute it. And that boils down to ensuring each new spot feels like a local pizza joint. “We have to have people who have been in it before,” he says of the operators. “You only get one shot at it.”
Anthony’s locations are relatively small for a full-service operation—2,800 to 3,000 square feet on the interior with 350-square-foot-plus patios (where possible). They look to residential populations of 120,000 and above, with daytime numbers of 20,000 within 2 miles, and median annual household incomes of $75,000 in the trade area. Naturally, Florida’s been a snug fit for Anthony’s, Jones says, because of New York transplants. The smaller footprint also fosters a vibrant environment that guests feel comfortable in. “Keep the energy in the dining room,” Jones says, “because nobody wants to sit in an empty dining room, right?” Restaurant décor and design reflects Bruno’s upbringing and often features framed photos of celebrities, like Marilyn Monroe, Frank Sinatra, and former New York Yankees captain Derek Jeter. Anthony’s also counts NFL Hall of Famer Dan Marino as a partner. Jones says the brand is working on a remodel program to bring a more elevated feel into restaurants, yet still keep the approachable theme. Anthony’s also continues to push forward into off-premises, including third-party delivery, and currently offers a family bundle for four ($25). Yet regardless of what changes, the core of Anthony’s won’t flinch. “As a team, our goals are always to differentiate ourselves from everybody else,” Jones says. “Blaze Pizza has opened a lot of restaurants. MOD has opened a lot. They serve a purpose. But we’d put our quality up against anybody, any day of the week.” “So when you think about the secret sauce,” he adds, “we don’t stray from what got us to the dance.” – Source: Sapore Magazine.
How Dave & Buster’s Modernized its Workforce Management Experience
As the digital revolution sweeps across the globe, impacting employees, organizations, and industries in its wake, restaurants have a unique opportunity to measure technology’s impact on not just the way work gets done, but the way people work. On one hand, the benefits of automation are endless, particularly in the restaurant and hospitality industry, where self-pay tablets, automated kitchens, and robotic food runners can mean speedier service, decreased employee burnout, and instant gratification for consumers. However, the slope from automated technology to an impersonal experience is a slippery one. While robots aren’t taking over all jobs—like many headlines might compel you to believe—the age of digitization is certainly hitting the restaurant workforce in a big way. In many ways, automation can lead to an impersonal interaction, like using an iPad to place an order at the airport or choosing your meal from an in-booth tabletop tablet. What if you’re looking for personal recommendations, or need to request a tricky substitution in your entrée? Or what if, in a vastly digital landscape, you’re just looking for a real-life, spoken “hello?” This is an especially tricky conversation when it comes to full-service restaurants. We all know that guests count on employees—not touchscreens —to deliver the incredible experiences the industry was built on. To continue to make good on the shared mission of providing exceptional customer experiences, restaurants across the board must engage their employees and empower them to do just that. Embrace automation to empower—not eliminate—your most strategic advantage: your people.
Organizations looking to further engage their workforce and deliver memorable guest experiences should ask themselves: “How can I enrich the employee experience so my people feel inspired at work?” Investing in new technology that automates routine tasks and surfaces business insights using machine learning and analytics is a great place to start. With the right technology, managers can be freed from the cumbersome or manual processes that, before, may have prevented them from fully engaging with the people in the restaurant. Likewise, this technology can leave frontline staff with the flexibility and bandwidth to foster an exceptional guest experience and boost customer loyalty as a result. The backbone of any organization’s success is its people, rather than its functionality. Therefore, investing in foundational workforce management tools is critical to ensure long-term, human-oriented success. Eatertainment giant Dave & Buster’s has made impressive strides in its journey to optimize employee engagement and productivity across its 110 restaurant locations by launching a modernized workforce management experience. According to Jeff Weiss, IT director of store systems at Dave & Buster’s, there’s no room for employee disengagement. “Our business is centered around creating uniquely fun guest experiences,” Weiss says. “It’s incumbent on us to implement technologies that empower our employees to delight customers with a friendly human touch—the kind many of us seek out or expect when interacting with a company or brand.” “When we recently set out to reimagine and reinvest in our workforce management process,” Weiss continues, “we focused on untethering managers from the back office by streamlining basic tasks like approving employee timecards, forecasting and building schedules, and reviewing time-off requests. Once we automated the basics, we could then turn our efforts to empowering managers to spend more time interacting with employees and guests, with the goal of creating a consistently optimal customer and employee experience.” Cultivate an unforgettable guest experience by investing in resources to enrich the workplace for managers and employees.
Because nearly half of employees wish their work technology were as easy to use as their personal technology, organizations can meet this need by adopting employee solutions that feature a modern user experience and reflect the ease of use their staff experiences when using everyday consumer applications. “We’ve seen first-hand how mobile-first and self-service solutions provide greater flexibility for our staff to address issues when and where they arise,” Weiss says. “This is saving our employees time while providing them with a level of convenience that aligns with the quality guest experience we pride ourselves on at Dave & Buster’s.” In addition to being easy to use, workplace technology should also tackle the tasks that take up the greatest amount of time and energy. Take staffing accuracy and scheduling: A whopping 90 percent of employees believe their organization can fundamentally improve scheduling processes. Particularly in the hospitality industry, where most employees work hourly shifts and expect their employer to provide fair and predictable schedules, workforce solutions that enable schedules to be built or customized based on employee preferences offer an enormous differentiator in both attracting and retaining great talent and advancing workforce engagement overall. Automation may be here to stay, but so are people. Whether they realize it or not, customers depend on engaged employees to foster those unforgettable experiences that keep them coming back for more. By leveraging high tech to wick away basic work, humans are left to do what only the high touch can do: engage, understand, and connect. – Source: fsrmagazine.
New Pick-up Locations to be Tested
Starbucks Corp. Chief Executive Officer Kevin Johnson, in the role for more than two years now, is ripping up the old store blueprints in a bid to revitalize growth. First on the list: a pick-up cafe in New York set to open this fall to cater to busy coffee-drinkers on the go. The Manhattan store, which is still in development, will build off of the chain’s success with its Starbucks Now concept in China that lets customers order in advance on mobile phones and collect their items in a specialty “express” shop without the wait. Starbucks could eventually roll out similar pick-up locations in other cities including Boston, Chicago, Seattle, San Francisco and Los Angeles, Johnson said. They aren’t intended to replace the existing cafes, which give consumers a “third place” to relax that’s away from home and work. “What we’re using Starbucks Now for, and what will be Starbucks pick-up stores in the U.S., is to blend them in where we have dense urban areas where we have a lot of Starbucks third-place cafes,” Johnson said in an interview at Bloomberg’s Chicago bureau. “Think of it as a Starbucks pick-up.” Barista Support
Johnson, 58, is also reimagining the chain’s nearly 15,000 U.S. locations by leaning heavily into automation. Shift scheduling and counting inventory are among the tasks being moved off of human workers through automation, which means baristas and managers will have more time to come out from behind counters to tidy up tables and offer free drink samples to customers. They’ll also have more time to plan community events outside of those prescribed by the company, Johnson said. For example, a Starbucks manager in Trenton, New Jersey, used her freed up time to host open-mic nights on Saturdays to boost weekend traffic, the company said. The coffee behemoth is gathering 12,000 store managers and other employees in Chicago this week in its largest worker meeting ever for workshops, classes and lectures on the automation and other changes ahead, plus sessions on mental health and sustainability. It’s a $50 million investment for the Seattle-based company. “Helping partners spend more time with customers — it’s really at the core of driving growth,” Johnson said. “As we grow, one of the investments we have to make is that investment in labor.”
Starbucks, the world’s second-largest restaurant company by market capitalization, has been refocusing on its priority markets of the U.S. and China in a push to underpin more vigorous growth. Earnings in the company’s most recent quarter were a step in that direction, with Starbucks posting its fastest global sales growth in three years.
These aren’t the first big changes from Johnson, who has held the CEO title since 2017. He already expanded delivery in both China and the U.S., and he has prioritized getting new food and drinks into the hands of customers faster by slashing development times to as little as 100 days, whereas before it may have taken as long as 18 months. He has also closed poorly performing locations in densely penetrated U.S. markets and turned over some foreign operations to partners. Last year, the company announced it would cut about 5% of its corporate workers in order to boost profit and streamline decision making. Investors have applauded Johnson’s efforts: Starbucks shares have surged nearly 50% so far this year.
In China, where it operates about 4,000 restaurants and plans to have 6,000 by 2023, the chain is still expanding at breakneck speed with a new location every 15 hours. Globally, the company is opening a store roughly every four hours. While Starbucks has been in China for two decades, more rivals are popping up, including plucky Luckin Coffee Inc. To compete, Starbucks is experimenting more with ghost-kitchen locations in Shanghai and investing in the pick-up and delivery stores in Beijing that will help model the U.S. version. Tim Hortons is also betting big on China’s large and growing middle class that is drinking more java. “It’s no surprise there’s going to be more competitors, and that’s okay,” Johnson said of the Chinese market. “More competitors help accelerate the introduction of premium Arabica coffee to Chinese consumers and ultimately, that’s good for the industry. And ultimately what’s good for the industry will be good for Starbucks.” – Source: BNN Bloomberg.
New Chain Items Include a Massive Quad-Patty Chicken Sandwich
McDonald’s and Jack in the Box have joined the Great Chicken Sandwich War with the introduction of limited-time chicken meals that include a massive “quad” patty chicken sandwich. San Diego-based Jack in the Box debuted its first-ever quad chicken sandwich this week. The Really Big Chicken Sandwich combo, with four stacked breaded chicken patties, comes with fries and a drink for $5.99. Triple and double combo versions go for $4.99 and $3.99, respectively. On Thursday, McDonald’s said Spicy BBQ Glazed Tenders and a Spicy BBQ Chicken Sandwich are new limited-time menu additions coming to restaurants Sept. 11. “The excitement that spicy flavors bring is something we know our customers have always loved,” Todd Manisco, manager of menu innovation at McDonald’s, said in a statement. “And we’re thrilled to now be offering up that excitement nationwide with a tasty kick to our chicken menu.” The new sandwich comes amid complaints by a group of McDonald’s operators that the brand has failed to offer fans a proper premium chicken sandwich that can compete with Chick-fil-A. Last week, the chairman of the National Owners Association hinted that a new chicken sandwich is coming. It’s unclear if the latest chicken sandwich LTO — a buttermilk crispy fillet topped with slivered onions, pickles and a spicy BBQ glaze — is the item NOA chairman Blake Casper is referring to. Casper could not be reached for comment. The Chicago-based chain and Jack in the Box join the fray of quick-service and fast-casual restaurants taking advantage of the media frenzy that led to the sellout last month of a new chicken sandwich by Popeyes Louisiana Kitchen. At first, the Aug. 12 marketing launch of the permanent menu item was lackluster, until the internet took control. The chicken sandwich exploded on social media after Chick-fil-A stated on Twitter that they were the home of the original chicken sandwich. The gloves were off, and an epic social media spat over who makes the best chicken sandwich ensued. Chains from Wendy’s to emerging brands such as The Crack Shack have since weighed in. On Aug. 30, the San Diego-based fast casual concept from Top Chef star Richard Blais launched a Change.org petition to plea for humanely raised chickens. The brand, a 2019 NRN Hot Concept winner, also poked Popeyes for not having enough product to meet demand. “Worried about chicken sandwiches selling out? Don’t. The Crack Shack has plenty of options,” the company said. Popeyes, in a statement, said demand in the first few weeks for its new chicken sandwich “far exceeded our very optimistic expectations.” “It has been amazing to see our guests share their love for our brand and for the new Chicken Sandwich on social media and beyond, and we are truly humbled and grateful for their support,” the company said this week. “Popeyes aggressively forecasted demand through the end of September and has already sold through that inventory. We, along with our suppliers, are working tirelessly to bring the new sandwich back to guests as soon as possible.” – Source: NRN.
Wendy’s is Taking its Breakfast Menu Nationwide
Wendy’s is taking its breakfast menu nationwide in 2020 and will hire 20,000 new employees to support the morning meal, the company announced. The fast-food chain, which has been a holdout in the breakfast area among major national chains, currently has breakfast in 300-plus restaurants. Items on Wendy’s breakfast menu includes the Breakfast Baconator, Frosty-ccino and Honey Butter Chicken Biscuit. “Launching breakfast in our U.S. restaurants nationwide provides incredible growth opportunities,” said Todd Penegor, Wendy’s president and CEO, in a news release. “We are well-positioned to pursue it. We believe we have the right team and structure in place, and we put Wendy’s fan favorites on our breakfast menu to set us apart from the competition.” This is not the first time Wendy’s has tried out a national breakfast menu. In the mid-1980s, the chain’s morning menu included omelets, French toast and toasted sandwiches. But because the items took too long to make, it was discontinued, and there have been small tests going on across the nation for several years. Wendy’s is making a one-time investment of $20 million to prepare for the launch and also cutting its 2019 forecast, the company said in its announcement.More details about the breakfast expansion are expected to be shared during Wendy’s Investor Day on Oct. 11. The battle for breakfast has been in full force for a couple years with chains including Burger King, Taco Bell, Sonic and Starbucks continuing to grow their morning-inspired menus. – Source: USA TODAY.
Evergreens and Garden Bar to Merge
Seattle-based health-oriented concept Evergreens has purchased a similar concept, Garden Bar in Portland, Ore., for an undisclosed sum, the two chains announced. Garden Bar is being renamed Garden Bar by Evergreens and its staff will become Evergreens employees. Its founder, Ana Chaud, will be the restaurants’ new vice president of brand development. The price of the purchase was not disclosed. There are currently 18 Evergreen restaurants and nine Garden Bars. “I could not think of a better outcome for sustaining our commitment to our guests, our team and the overall community,” Chaud, left, said in a release announcing the merger. “This partnership is a huge win for the Pacific Northwest region and I am excited and honored to be joining the outstanding leadership team at Evergreens.” In a joint statement, Evergreens co-founders, CEO Todd Fishman and president Hunter Brooks, said, “We are absolutely thrilled to be partnering with Ana and the Garden Bar family. It’s a true privilege to officially create ties with a brand that is such a staple in the Portland community and whose values align directly with ours. We are committed to continuing the vision that both companies share and are extremely motivated to help our communities eat healthier, better food.” Both chains are customizable salad concepts with a focus on health, nutrition, seasonality and sustainability. Salads at both restaurants start at $9. Source: Restaurant Hospitality.
Employees Come First in Noodles & Company’s Comeback
Noodles & Company’s comeback doesn’t discard the playbook. There are complex components, from a massive menuboard initiative to one of the most successful product launches in recent fast-casual history, but the foundation sparks a familiar tale. And that’s why it’s lasted well beyond the burst stage. Noodles & Company’s turnaround has sustained, chief executive Dave Boennighausen says, as opposed to just bouncing off the bottom of its own 2017 plummet, because the brand didn’t need to reinvent itself. “We’ve just had to leverage what are already inherent strengths within it,” he says. And Boennighausen would know better than most. He’s been with the company 15-plus years, taking over as Noodles & Company’s permanent CEO June 2017, a summer after Kevin Reedy stepped down. Boennighausen held the interim role from the previous summer. “It’s much easier to turn around when you’re saying let’s get rid of the ancillary things, like sandwiches, and let’s just focus on the things we do well,” he says. Noodles & Company’s road back isn’t a mirage, either. In the second quarter of fiscal 2019, announced August 6, the brand turned in same-store sales growth of 4.8 percent at company-run units, year-over-year, which marked five straight periods of positive gains (395 of Noodles & Company’s 457 restaurants are corporate). More impressively, though, it built a two-year stack of 9.8 percent—the chain’s best performance in six years. From July 2018 to July 2019, average-unit volumes climbed to $1.148 million from $1.092 million. Net income in Q2 was also $400,000 compared to a net loss of $5.9 million in 2018. Revenue upped 2.4 percent to $120.2 million from $117.4 million, thanks to the same-store sales boost. And it isn’t that long ago that Noodles & Company’s strategy was an urgent, comeback-worded call to action. The chain swung a hefty net loss of $37.5 million in fiscal 2017. It reported six consecutive quarters of year-over-year declines (at locations open at least a year) heading into the winter of 2017. The brand then shuttered 55 restaurants in Q1 2017, funded in part by two capital raises—a period where revenue dropped 2.4 percent and net loss totaled $26.8 million. Emerging from that crater with a positive 2018— which Noodles & Company notably accomplished—was one thing. It’s the equivalent of standing upright after being bed-ridden for a while. Progress, but you wouldn’t exactly call it walking. Noodles & Company’s 2019 performance to date is something else entirely. Admittedly, there were a lot of things going wrong during Noodles & Company’s slide. nderperforming stores dragged the base. There were real estate missteps. Menu misfires. Sandwiches and flatbreads come to mind. They added complexity, created operational fat, and didn’t generate guest value. Yet the issue Boennighausen always returns to is another brand DNA staple: People. Noodles & Company fronted turnover north of 200 percent in its restaurants when Boennighausen grabbed the reins. Fifty percent at the manager level. It was nearly impossible to reengage the brand’s customer base and impart real changes with employees flipping over two-fold each calendar year. If Noodles & Company’s staff wasn’t sticking around long enough to buy in, how could it convince guests to do so? Boennighausen says Noodles & Company’s has made significant strides in the past two years. It realized that its labor goals weren’t all that different from its Zoodle directives, in terms of the audience. “What we have embraced,” Boennighausen says, “similar to our guest, which leans a bit Generation Z and millennial, so does our team member. So, the benefits that we’ve introduced over the last couple of years … we’ve been much more millennial friendly and Generation Z friendly with those types of benefits.” Here’s a vivid example. In September 2018, Noodles & Company bolstered its Life@Noodles platform with what it termed a “groundbreaking” maternity leave program. Effective January 1 of this year, qualifying expecting and postpartum mothers were given the option to phase out and in to their maternity leave, allowing them to work an 80 percent schedule for the four weeks before and after maternity leave, while receiving 100 percent pay. According to the Centers for Disease Control and Prevention, one in nine women experience postpartum depression after giving birth in addition to sleep deprivation and difficulty managing breastfeeding. Noodles & Company’s aim was to provide a work-life balance that eased the transition, and took into account an issue many competitors ignored. What’s been the response? Through April 2019, the company says, it’s seen a 93 percent retention rate for those employees who have used the maternity leave transition program. It’s witnessed 85 percent retention for workers who have gone on maternity leave, and it’s reported roughly 90 percent retention for those who have used Noodles & Company’s paternity leave option. What this shows, Boennighausen adds, is something employers across all industries have noticed in today’s gig-driven and exceedingly-tight labor environment—there is simply more to the equation than money. Workplace happiness is one of the most important factors in today’s retention quest. In a survey of about 2,000 restaurant professionals from 7shifts, a scheduling software platform, nearly 40 percent of respondents said they would like “public kudos” from management. More than 35 percent said the amount of recognition they were receiving was inadequate. Those planning to quit (at-risk workers) rated recognition from management a 3.5. This is another concept Noodles & Company went directly after. Each restaurant now has a consistent recognition board, Boennighausen says. The company invested in awards for employees. Noodles & Company even has a “Super Noodler” honor, which is peer-nominated and given out monthly. “A lot of qualitative work around showing team members that we care about their future and that we care about their experience with us,” he says. Noodles & Company instituted “people-time meetings,” where managers spend 10–15 minutes once a month with employees and clue them in. It also opens the door for communication and allows workers to make suggestions and feel connected. In the past, Boennighausen says, there were inconsistencies across Noodles & Company’s system in terms of how new general managers were oriented and trained to new roles. Now, GMs get a chance to spend time with Boennighausen and the rest of the brand’s executive team, as well as other GMs to learn from the top down what Noodles & Company’s expectations truly are. The brand is testing hourly team bonuses as well, Boennighausen says, and leveraging technology to remove some menial tasks from GM’s plates. GM training classes are now all iPad and tablet based and Noodles & Company introduced a labor management system in Q1 that allows employees to share schedules, swap shifts, and stay in touch. It’s the classic situation where a worker can’t make it last minute and the manager scrambles to fill the spot, many times left covering the role themselves. With the mobile changes, an employee can ask the group if anybody’s available and if someone is capable of taking that shift, they see the alert. The manager approves the swap and gets back to other duties. Even with all of the changes, Boennighausen says, Noodles & Company is just scratching the surface of its employee-value proposition. In addition to the maternity policy, the brand provides adoption assistance of up to $10,000, flexible time off for corporate employees (there is no set number of days employees at its central support office are able to take off per year, allowing them to better control their work/life balance and take off the time they need rather than save it for illness or emergency), student loan debt assistance (GMs get a contribution of $1,000 per year), and competitive standard benefits, such as dental and vision coverage, employee assistant programs, and 401(k) retirement plans. Assistant general managers and above are also eligible for Noodles & Company’s medical and life insurance and disability coverage offerings.
Some other benefits:
GMs and assistant GMs receive 10 paid time off days per year for their first five years and 15 days after five years.
Shift managers earn PTO for every hour they work
GMs and assistant GMs receive five “health days” at the beginning of the year to be used as desired
After 10 years of consecutive employment, GMs and assistant GMS accrue 20 days of PTO and an additional 20 consecutive paid days off
GMs can access a “Balance Bucks” program that provides reimbursement toward health and fitness expenses. Things like hiking shoes, yoga classes, gym memberships
Ten scholarships of $3,000 are awarded every year to employees and/or employees’ children
All of these initiatives are critical, Boennighausen says, to achieve everything else Noodles & Company wants to accomplish. And it’s a widespread issue he thinks affects the future of restaurants in general. “The industry for so long, even when I grew up, working in restaurants was something that had a pretty bad stigma attached to it. That needs to change,” he says. “And the way that changes is really through the general manager. And our general managers, one thing that I try to stress, is for all those high schoolers that work for us, aside from their parents, maybe a teacher, but probably not, there’s nobody in that person’s life having more of an influence on how they form their work ethic, their belief system around serving other people [than the GM]. Once you get GMs to really buy into that and recognize that, the retention seems to follow because those team members feel much more cared for.”
The future of the Zoodle, technology, and more
In Q2, off-premises sales represented more than half of Noodles & Company’s total sales. It jumped 500 basis points, year-over-year to 56 percent. Growth was led by digital ordering, which, inclusive of delivery, lifted 47 percent versus 2018 and represented 22 percent of total sales. In September, the brand plans to launch a cauliflower-infused noodle to give customers a plant-based, healthier-for-you option that might not be as extreme as the zucchini noodles. It has a similar mouth feel to regular pasta and more aligned with the “I can’t tell the difference” mantra than something that surprises guests. Concurrent with the introduction, Noodles & Company will relaunch its entire digital platform, including its app, online ordering experience, and rewards program. The goal is to reduce friction, particularly around customers’ ability to customize meals. The rewards program will move from a “surprise and delight” setup to one that provides a points and tier system to better reward guests and allow for more personalized customer engagement. This is a significant shift, Boennighausen says. Recently he received an email with a subject line of “rewards.” The customer’s complaint: they kept spending and kept receiving deals for zucchini noodles, which they were allergic to. “So, it’s a waste,” Boennighausen says. “That’s the type of thing that we want to get away from, where we have the same message to Danny to Danielle to Dave. We need to be much more customized based on people’s purchase behavior and what they’re showing that they’re interested in about our brand.” In time, Boennighausen believes, Noodles & Company’s healthier-for-you options could eclipse the mix of its most popular item—mac and cheese—which currently totals 20 percent or so. This is one area the menuboard makeover, which spread systemwide in early May, was important. Boennighausen says about 7 percent of guests on any given day are first-time Noodles & Company customers. So, having menuboards that help them navigate more quickly and guide them toward the right dishes, the ones with high food scores, repurchase intent, and are favorable from a margins and operations perspective, was helpful. The new additions—Signature Flavors and Make It a Meal—positively impact average check, too. In Q2, overall restaurant margins improved 160 basis points to 17.1 percent, their highest level since Q2 2015. Cost of goods sold as a percentage of restaurant sales also decreased 110 basis points to 25.6 percent, which was a reflection of the change, as well as pricing initiatives. And there’s room to grow. Boennighausen says only 20 percent of its current rewards members have even tried zucchini in a dish yet. “So, we know there’s really long runway,” he says. “We’re really only just getting started. – Source: QSR.