To Our Valued Subscribers:
Here it is the middle of October; the leaves are falling, the colors are brilliant and America’s past time is getting ready for the “Fall Classic”. All is looking good. I hope you and your organization is also looking better. One of the ways to keep your organization looking it’s best is thru outstanding leadership. In a recent article in Restaurant Smart Brief noted author and Management Leadership consultant Naphtli Hoff reminded readers the importance of creating a culture of Delegation. He states “existing leaders may use delegation to not only clear their plates of the work that others should be doing (and allow them to do those things that they are uniquely positioned and qualified for,) but also to fill the leadership pipeline with future leaders. When leaders delegate, they train and empower others to take more ownership, strengthen their skill sets, and view organizational leadership as more horizontal than vertical.” Hard to disagree with any of this philosophy.
The Key, however, is to have the right team in place to respond. That is where my colleagues and I can be of great assistance to you and your team. For over three decades American Recruiters has been finding and placing personnel in those organizations that want to be on the forefront of Foodservice innovation. Our team is dedicated to finding those up and coming leaders as well as moving the best to the best. If you have not contacted me or my colleagues in awhile, now is the perfect time, as with the change in seasons, comes a change in corporate cultures. One call can make your organization have an excellent final push to your yearend goals. Another tool for your final push, is American Recruiters Global Foodservice News. Loaded with up to the minute exclusive Foodservice news, it is certainly a must read for your entire team. Enjoy the fall and my team and I look forward to your call!!
U.S. adds 136,000 jobs in September
U.S. employers added a modest 136,000 jobs in September, enough to help lower the unemployment rate to a new five-decade low of 3.5%. Hiring has slowed this year as the U.S.-China trade war has intensified, global growth has slowed and businesses have cut back on their investment spending. Even so, hiring has averaged 157,000 in the past three months, enough to absorb new job seekers and lower unemployment over time. Despite the ultra-low unemployment rate, which dropped from 3.7% in August, average hourly wages slipped by a penny, the Labor Department said Friday in its monthly jobs report. Hourly pay rose just 2.9% from a year earlier, below the 3.4% year-over-year gain at the beginning of the year. The unemployment rate for Latinos fell to 3.9%, the lowest on records dating from 1973. With the U.S. economic expansion in its 11th year and unemployment low, many businesses have struggled to find the workers they need. That is likely one reason why hiring has slowed since last year. But it’s likely not the only reason. The jobs figures carry more weight than usual because worries about the health of the U.S. economy are mounting.
Manufacturers have essentially fallen into recession as U.S. businesses have cut spending on industrial machinery, computers and other factory goods. And overseas demand for U.S. exports has fallen sharply as President Donald Trump’s trade conflicts with China and Europe have triggered retaliatory tariffs. A measure of factory activity fell in September to its lowest level in more than a decade. And new orders for manufactured items slipped last month, the government reported. Persistent uncertainties about the economy in the face of Trump’s trade conflicts and a global economic slump are also affecting hotels, restaurants and other service industries. A trade group’s measure of growth in the economy’s vast services sector slowed sharply in September to its lowest point in three years, suggesting that the trade conflicts and rising uncertainty are weakening the bulk of the economy. The job market is the economy’s main bulwark. As long as hiring is solid enough to keep the unemployment rate from rising, most Americans will likely remain confident enough to spend, offsetting other drags and propelling the economy forward. But a slump in hiring or a rise in the unemployment rate in coming months could discourage consumers from spending as freely as they otherwise might during the holiday shopping season. Consumers are still mostly optimistic, and their spending has kept the economy afloat this year. But they may be growing more cautious. Consumer confidence dropped sharply in September, according to the Conference Board, a business research group, although it remains at a high level. Americans also reined in their spending in August after several months of healthy gains. The 0.1% increase in consumer spending that month was the weakest in six months. Other parts of the U.S. economy are still holding up well. Home sales, for example, have rebounded as mortgage rates have fallen, helped in part by the Federal Reserve’s two interest rate cuts this year. Sales of existing homes reached their highest level in nearly 18 months in August. And new home sales soared. Americans are also buying cars at a still-healthy pace. Consumers would typically be reluctant to make such major purchases if they were fearful of a downturn. – Source: The Chicago Tribune.
F.D.A. Calls Meeting to Discuss ‘New Era of Smarter Food Safety’
The Food and Drug Administration will convene a public meeting on Oct. 21 to discuss its New Era of Smarter Food Safety initiative that the agency says will build on the ongoing efforts to implement the Food Safety Modernization Act by incorporating new technologies to create “a more digital, traceable and safer system to help protect consumers from contaminated food.” Transparency and traceability are the F.D.A.’s chief concerns in developing, with stakeholder advice and comments, a blueprint for its food safety initiative. It hopes to issue a strategic blueprint in early 2020. In its notice published in the Federal Register announcing the public meeting, The F.D.A. “When it comes to food traceability, many in the food system still utilize a largely paper-based system of taking one step forward to identify where the food has gone and one step back to identify the source. The use of new and evolving digital technologies envisioned in the effort will 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.” The F.D.A. indicated it will examine technologies and approaches that include those being used in society and business sectors, such as distributed ledgers, sensors, the internet of things and artificial intelligence. “The F.D.A. will assess how these technologies could create a more digital, transparent and safe food system while also addressing consumer demands for quick access to information about where their foods come from, how they are produced and if the food is subject of an ongoing recall.”
The new era of smarter food safety initiative was first announced in a joint statement issued April 30 by Ned Sharpless, M.D., acting commissioner, and Frank Yiannas, deputy commissioner for food policy and response. From that time until the public meeting announcement, F.D.A. teams have been brainstorming to generate ideas and to develop questions to elicit stakeholder comments and insights. Among the most interesting models for dramatically improving food traceability across the industry is the blockchain-based supply chain tracking system. Mr. Yiannas joined the F.D.A. from Walmart, where he implemented and championed a blockchain-based system for tracing some foods from farm to store in a matter of seconds. In an interview related to the public meeting notice, Mr. Yiannas commented, “The emergence of blockchain technology, because of its distributed and decentralized nature that aligns more closely with a decentralized and distributed food system, has enabled food system stakeholders to imagine being able to have full end-to-end traceability. An ability to deliver accurate, real-time information about food, how it’s produced, and how it flows from farm to table is a game-changer for food safety.” Mr. Yiannas gave the example of his participation in a pilot program that traced mangoes back to their source using blockchain technology. “I bought a package of sliced mangoes and asked my colleagues to find out which farm these particular mangoes came from,” he said. “Working with each stakeholder in the supply chain, they identified the farm in a mere 6 days, 18 hours and 26 minutes. And that was pretty good when the average traceback can take weeks. “Fast forward to the pilot using blockchain technology to trace mangoes from farms in Mexico to two stores in North America. For this test, each stakeholder in the supply chain, including farms, packing houses, transportation companies, importers/exporters, processing facilities, distribution centers and stores, put data in the blockchain. The blockchain then linked these blocks of data together to show the journey this mango took from farm to store. The result was a steep reduction in the time it took to trace mangoes — from 7 days to 2.2 seconds.” The F.D.A. also said stakeholders must take into consideration new ways consumers are purchasing their food. “As consumers are increasingly asking for food to be delivered to their homes, there are new methods, packaging materials, temperature control approaches and delivery models in the e-commerce system,” the F.D.A. said. “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.” – Source: Food Safety Monitor.
What Restaurants Can Lose Without Foodborne Illness Outbreak Insurance
Up to 90 percent of U.S. restaurants lack proper insurance coverage, exposing them to significant risk in the event of a foodborne illness outbreak. According to a study from researchers at the Johns Hopkins Bloomberg School of Public Health, a single foodborne outbreak could cost a restaurant millions of dollars in lost revenue, fines, lawsuits, legal fees, insurance premium increases. And that doesn’t even include damage to a restaurant’s reputation. Unfortunately, for decades, restaurants of all sizes including diners, food trucks, cafes and many others that sell prepared, non-packaged food, have not had access to the proper insurance when it comes to legal and financial exposures regarding foodborne illness events. Despite the industry’s seeming lack of preparedness, foodborne illness is nothing new. Perhaps the most prominent foodborne illness outbreak occurred at Jack in the Box locations back in 1994, killing four children and hospitalizing more than 170 people. Jack in the Box recovered, but it weathered the storm with the backing of major corporate resources. Of course, not every restaurant and food service provider has this kind of financial backing. So why aren’t restaurants concerned about lacking significant coverage to protect themselves in the event of an outbreak? Without supplemental insurance that covers foodborne illness, restaurants truly risk it all.
What’s at risk?
Quite simply, the difference between a restaurant that is covered and ready to react and one that is not can be the difference between survival and failure. Great restaurants have folded because they were not prepared to deal with the public and legal consequences of a foodborne illness outbreak. Without an insurance program, the major risks in the event of a foodborne illness event include immediate loss of revenue, long-term harm to the brand and business, liabilities such as salaries and location costs, and potential litigation if serious harm occurs. Aside from the expenses incurred in the event of an outbreak, a foodborne illness event significantly damages a restaurant’s reputation. The eatery or brand loses huge amounts of public trust and stock value when they encounter a foodborne illness event. And brand reputations have never been destroyed faster. In the years since the Jack in the Box outbreak, all the ways in which we share and consume information has changed. Social media enables nearly instant boycott mobs any time a business negatively impacts its customers. A verified foodborne illness outbreak requires immediate public notification by the local public health department. With the speed and reach of social media, especially on a local scale, this means the restaurant’s traffic effectively drops to zero, even if the health department allows them to remain open. While big brands have significant funding to serve their own crisis damage control in the public eye, most restaurants don’t. A good supplemental insurance plan for foodborne illness won’t just take into account the actual expenses incurred and revenue lost, but also assist in crisis PR management that may be crucial to making sure a restaurant can get back up on its feet. Dealing with an outbreak, and managing customer responses, is another consideration for restaurants to grapple with. If an eatery serves 500 people each day, or 3,500 each week, it would be nearly impossible for an owner to manage something as basic as phone calls from that many customers. So, while the restaurant may not technically be shut down, no patrons are coming in, no food is being cooked, and ownership is scrambling to maintain their reputation, their clientele and their sanity.
How does insurance mitigate against the risk?
Many restaurant owners falsely believe that their general liability or standard business interruption insurance covers foodborne illness events, since they cover injuries or maintenance on the premises. But in reality, these restaurant policies do not cover the full scope of needs that arise from foodborne illness outbreaks. Independent restaurant owners, managers and administrators should be aware of this significant lapse in their insurance plans and can look into programs that will protect them from the legal, financial and public effects of a foodborne illness event. By supplementing standard business insurance with a targeted policy for foodborne illness outbreaks, restaurant owners are assured that their costs will be covered, and the rebuilding process will be assisted by experienced professionals. In addition to covering costs such as employee salaries, mandatory cleanings or sanitizing, equipment replacement and more that don’t fall under most business interruption policies, the industry’s best foodborne illness insurance packages offer a third-party crisis communications team to help deal with media and public sentiment. These teams may also provide customer support for anyone who is affected by the outbreak, arranging health services such as vaccinations and doctor visits, and an information hotline where operators ensure every step is taken to satisfy the needs of every customer to assuage their concerns. By doing everything in its power to help those affected and alleviating any complaints or issues, while documenting the process, a restaurant and its insurance carrier helps prepare against potential litigation. Every business that sells prepared food from a deli to a buffet, has just as big a need for coverage as the largest brands in the country. It may be even more important for small owners with one location, or a handful of locations, because major chains have enormous resources to protect and rebuild from negative public sentiment. A single location owner doesn’t have the revenue support from other locations to keep afloat during a downturn. After the insurance carrier handled paying employees and guaranteeing every affected customer is taken care of, they would focus on helping to rebuild the brand. – Source: fsrmagazine.
New program Aims to Create More Restaurant Cooks
The National Restaurant Association Educational Foundation (NRAEF) has been awarded a $450,000 grant from the private sector to ease restaurants’ shortage of cooks. The funds will be used to create an apprenticeship program with twin purposes, both aimed at addressing the mismatch between the industry’s labor needs and the availability of personnel. By providing a clear route for hourly level workers to advance into one of the higher-skilled and better-compensated positions within a restaurant, the new program promises to hold more young people in the business instead of losing them to other industries abounding in entry-level positions.
The validity of that theory has been proven by the NRAEF’s successful apprenticeship program for turning crew-level employees into restaurant managers, which currently enjoys an enrollment of nearly 1,500 industry workers. Second, the program promises to address the industry’s severe shortage of cooks. About 200,000 of the restaurant business’ 900,000 unfilled positions, or more than one-fifth of the vacancies, are cook jobs, according to the NRAEF. Hiring back-of-house staffers has been particularly difficult because server jobs and other tipped positions tend to be much more lucrative, even if they require less technical skill than prepping and cooking. “Developing a Registered Cook Apprenticeship program will allow us to expand apprenticeship and reach a larger and more diverse pool of entry-level talent,” NRAEF President Rob Gifford said in a statement. “This will lead to improved educational and employment opportunities for people from all backgrounds in the restaurant industry—it’s a win-win.” The grant was awarded by the Lumina Foundation, an Indianapolis-based group committed to creating post-high school educational opportunities of all types, particularly for persons of color and Native Americans. The NRAEF was chosen for the grant from among 78 applicants. The Association was the only restaurant group among the nine parties that were awarded funding. “We need to think in new ways about the recognition of learning after high school,” said Haley Glover, Lumina’s strategy director and leader of the grant program. “We must see that all college-level learning, regardless of how and where it is gained, can be applied toward meaningful post-high school credentials.” Apprenticeships have drawn renewed attention in recent years as a way of fostering careers without burdening young adults with the high cost of attending college. The approach usually provides participants with the opportunity to earn an income while they amass the skills for advancement.
The NRAEF has been on the forefront of the movement. Using pilot funding from the U.S. Department of Labor, the group launched its management apprenticeship program in July 2017. In addition to steering crew-level restaurant employees toward management jobs, the initiative convinced 94% of enrollees to remain with their employers, Gifford told Restaurant Business in December. Source: Restaurant Business/The NRAEF/The National Restaurant Association.
Overcoming the Harsh Realities of Employee Turnover
Imagine having 100 percent turnover, where no one in your restaurants lasts a year. Many brands deal with this, but others have surpassed this theoretical limit with turnover higher than 100 percent. This means the people they hire replace those who left also leave within the same year, and this phenomenon is reaching catastrophic levels. Recently, Panera bread CFO Michael Bufano spoke at a conference where he declared that some restaurants experience staff turnover as high as 130 percent. This jarring number is obviously a major concern among many restaurant professionals, because not only is turnover rising, it’s becoming increasingly expensive. Part of the problem is that high turnover is considered part and parcel with running a restaurant. Rosemary Batt, chair of HR Studies and International & Comparative Labor at the Cornell School of Industrial Labor Relations, says that since turnover is inevitable, it is deemed acceptable. As a result, its costs were not taken seriously enough. That is now changing as the problem worsens.
Putting turnover costs into context
The cost of employee turnover is rising. Today, Batt says that half of an employee’s salary during training should be considered a loss. When factoring in the time required to find recruits, interview them, and bring them aboard, brands quickly learn how unsustainable high turnover really is. The National Restaurant Association estimates that turnover now costs roughly $2,000 per employee. According to the research firm Statista, fast casual restaurants average 15 employees per establishment, and that number rises in full service concepts. At 130 percent turnover, a 100-unit restaurant is replacing almost 2,000 employees per year at $2,000 per person. That’s at least a $4 million problem.
So how do you solve this expensive challenge?
There are two ways to solve restaurant turnover – entice employees to stay, or lessen its financial impact. Most brands opt for the latter because it’s considered more realistic. They create a ‘turnover-proof’ environment where employees are easily replaced in a cost-effective manner. The problem is, this can cause employees feel undervalued because they’re so expendable, which has escalated the problem. That’s not to say turnover-proofing your restaurants is a bad thing. It just depends on how this strategy is used. The key is to put people into roles where they excel, while leveraging technology in areas where it can execute better than humans. Automating tasks like scheduling, sales forecasting, food prep, ordering, and receiving can benefit brands in a number of areas. Back office automation lessens the need for expensive training when new employees are brought on board and it helps with retention by allowing team members to work in roles that best utilize their skills. Minneapolis-based Caribou Coffee understands this all too well. With advanced scheduling, it has created an environment where team members are in the best roles, which has improved both the employee and guest experience. “We have the best people in the best positions for every shift,” says Kim Olson, product manager for BOH systems at Caribou Coffee. “Our CrunchTime labor management solution is a major part of increasing our guest satisfaction scores, because our team members are happier and we’re able to work more efficiently with our team.” In situations like this, technology helps the brand tackle turnover from multiple angles. Employees are in the right roles, which improves workplace happiness, and tasks are automated, which mitigates the financial impact when turnover takes place. Ultimately, when team members are empowered by technology, restaurants can create a sustainable environment that fights increasing labor challenges. – Source: Restaurant Business.
Illycaffe to Open 200 Cafes in the USA
Italy’s Illycaffe could reach its goal of opening 200 cafes in the United States within five years as part of a broader drive to expand its business outside its home market, Andrea Illy, the chairman of the premium coffee maker said. The project – which would mark a significant expansion overseas for the Italian roaster – is conditional on finding an ally with deep knowledge of the U.S. market, sound experience in the high-end retail sector and no previous engagement in the coffee business, the entrepreneur said. The group announced last week that it had picked Goldman Sachs as an adviser to find a partner for its retail expansion in a strategic market where it faces giants including Starbucks. The group, which made its name as a coffee roaster, currently operates 23 cafes in North America, part of a network of nearly 220 Illy-branded outlets outside Italy. “Our target is reaching 200 Illy-branded cafes in the United States,” Andrea Illy, the grand-son of founder Francesco Illy, told Reuters. “With an operating partner we can get there in five years at the latest,” he said. The Illy family is considering the sale of a minority stake in the group for the first time in its 86-year history as a way to cement the planned partnership, he said. “To align our goals with the ones of the prospective partner, we are ready to offer it a minority stake in Illycaffe or, if it prefers, in our U.S. subsidiary,” Illy said. The roaster, which is well-know around the world for its top-quality coffee blend made by nine varieties of Arabica beans, has always considered its independence a top priority. Illy said that although the group was considering taking on board an investor from outside the founding family, it did not want to team up with a direct competitor. “We don’t want to sign a partnership with one of our rivals in the coffee sector,” Illy said. That would exclude as potential partners JAB holding, with which Illycaffe signed a licensing deal to produce and sell Nestle-compatible NESN.N coffee pods. For Illycaffe, the U.S. market accounts for sales of nearly 100 million euros out of a total 483 million euros last year. Massimo Della Ragione, co-head of Investment Banking for Goldman Sachs in Italy, told Reuters he was confident the bank would present a shortlist of potential partners for Illycaffe by year-end. – Source: Reuters.
Jollibee Plans to Triple Number of U.S. Restaurants in Just Four Years
The Filipino fast food chain is known for its fried chicken, halo halo, and spaghetti, among other fan-favorite items. For most of September, the average overnight temperatures in Calgary, Canada usually slip into the mid-forties, which is nice if you like to burrow deep into your duvet cover, but downright chilly if you’re sleeping outside the Pacific Place Mall. The weather forecast wasn’t enough to stop some seriously dedicated (and seriously warm-blooded) Jollibee fnatics from spending an entire night outside the fast food chain’s first-ever Calgary store as they waited for it to open. Marivic and Augusto Heraldo told the Calgary Herald that when they saw people already in line at 11:30 p.m. the night before, they decided that they needed to do it too. “When I saw there was people already there, I said, ‘OK, let’s put our chair [down], I’m going to stay,’” Marivic said. Counting the overnighters, more than 400 people were in line by the time a Jollibee worker unlocked the doors at 7 a.m. Playtime is especially important.
Help spark your kid’s creativity with the LEGO DUPLO Number Train. That scene repeated itself in Hayward, California on Friday night—although with slightly warmer weather. More than 100 people were waiting by the time that brand-new Jollibee served its first orders of Chickenjoy and Jolly Spaghetti (topped with ham and sliced hot dog, of course). “Knowing that accessibility is important to our customers, we’re so excited to be able to expand our reach across the state and bring additional Jollibee locations to the communities that have already shown us support and expressed their love for the brand,” Maribeth Dela Cruz, President of Jollibee Foods Corporation North America Brands, said. The beloved Filipino fried chicken chain has promised an “aggressive expansion strategy” to go with its pineapple-and-cheese Amazing Aloha burgers, pledging to have at least 150 locations in the United States by 2023. Considering that Hayward is just its 38th restaurant, it’s going to take a lot of work to launch 112 more in the next four years. Before Hayward, it hadn’t opened a U.S. location since October 2018, when the 37th Jollibee opened in Manhattan. But we’re not doubting the power of the ‘bee (or of its wide-eyed, eternally smiling bee mascot). It already has more than 4,600 locations scattered throughout 21 different countries, and describes itself as “one of the largest and fastest-growing Asian restaurant companies in the world.” Earlier this summer, Jollibee dropped $350 million to buy The Coffee Bean & Tea Leaf chain, and before that, it spent $210 million in its acquisition of Smashburger, as part of an expensive effort to raise its profile in the States. (It’s okay, Jollibee. We went through a Smashburger phase too). Jollibee execs told Reuters that within a decade, it wants to earn 30 percent of its revenue in the U.S.; before it bought the Coffee Bean, that number was closer to 15 percent. Almost three-quarters (73 percent) of its sales come from the Philippines; in its home country, Jollibee has outsold McDonald’s every year since 1984. “How are you going to do it? Our formula is very simple. Offer the best tasting food at the right price and you’re going to make it,” Chief Financial Officer Ysmael Baysa said. Regardless of how they do it, the promise of several dozen additional Jollibee locations is great news for those of us who already adore that chicken—and for the uninitiated. The next Jollibee grand opening will be in October in Artesia, California. It might not be a bad idea to just go ahead and get in line now. Source: Food & Wine.
Matthew Slaine Named CEO of Newly Formed Quality Restaurant Group
Quality Restaurant Group, a quick-service firm formed last year after buying more than 200 Pizza Hut locations, has acquired 27 Arby’s restaurants under newly tapped CEO Matthew Slaine. The Raleigh, N.C.-based operator closed the Arby’s deal with Bentley-Miller Group this week for an undisclosed price. The Arby’s restaurants are in Colorado, Montana, Nebraska, Wyoming and South Dakota. The restaurants will operate under the Quality Meats LLC division of QRG. The Arby’s locations will be run by Jon Bentley, director of operations. Bentley will report to Slaine, who was named the company’s first CEO in August. He was previously the CEO of marketing services company, Progressive Business Media. “Slaine will focus on building corporate leadership, culture, strategy, system integration and franchisor relationships for the brands in the portfolio,” the company said in a statement. He will also oversee operations, financial reporting and human resources at the company, which employs about 5,000 workers. “As a hospitality driven organization dedicated to our communities, my first priority will be to ensure a positive guest experience by continuing to build a world class team,” Slaine said in a statement. QRG’s Pizza Hut restaurants are in various Midwest and East Coast markets including Chicago, Indianapolis and South Bend, Ind., Baltimore and Pittsburgh. GenRock Capital Management is the majority owner of QRG. – Source: NRN.
Burger King Franchisee GPS Hospitality buys 75 Pizza Huts
GPS Hospitality, the Atlanta-based multi-unit operator of nearly 400 Burger King locations, has bought 75 Pizza Hut restaurants in four states bringing its quick-service empire to nearly 500 restaurants. The Pizza Hut acquisitions were made in two separate undisclosed deals, GPS CEO Tom Garrett told Nation’s Restaurant News in an exclusive interview. The deal widens the company’s Southeast footprint as the 75 Pizza Hut locations are spread throughout Georgia, Alabama, Kentucky and Tennessee. Kentucky and Tennessee are new to the firm’s portfolio, which includes 388 Burger Kings and 19 Popeyes Louisiana Kitchen. “The addition of the third brand and expansion into new territories are major milestones for our company,” Garrett said in a statement announcing the acquisition.
GPS has tapped industry veteran Kent Dawdy, left, as vice president of operations of the Pizza Hut division. Dawdy worked for Arby’s for 20 years. He most recently came from Atlanta-based Sterling Restaurants, which operates Shane’s Rib Shacks and Moe’s Southwest Grills. As GPS looked to acquire a third concept, Garrett said Pizza Hut checked all the boxes it was looking for in a well-established brand. “We think it fits very well within our strategy,” Garrett said. “We really like owning mature restaurant concept versus the trendy, cool and hip flavor of the month.” Garrett declined to reveal the value of each deal, but the former Arby’s CEO said the Pizza Hut acquisition brings his company, founded in 2012, one step closer to a goal of reaching $1 billion in sales by its 10-year anniversary. The company’s yearly sales are roughly $650 million, he said. This year, GPS also plans to open 15 new Burger King locations: two each in Georgia and Pennsylvania, one in Michigan and 10 in the Gulf region, which includes Louisiana, Florida, Alabama, and Arkansas. The Pizza Hut buy marks a milestone for GPS as it grows its portfolio by acquiring a brand that doesn’t belong to Restaurant Brands International, the parent company of Burger King and Popeyes Louisiana Kitchen. Pizza Hut is a division of Yum! Brands Inc., which also owns Taco Bell and KFC. Garrett said he had known for some time that he wanted to diversify the GPS portfolio. To be clear, he said he wasn’t looking “away from RBI.” Rather, he’d been scouting for a big opportunity within the pizza space. He said buying Pizza Hut was more of a “category decision” not a franchisor decision. Still, Pizza Hut is a brand in transition, having struggled with same-store sales and brand relevance in recent years. At a 2018 investor conference, Artie Starrs, president of Pizza Hut’s U.S. division, said many consumers don’t realize Pizza Hut delivers. The sentiment applies mainly to consumers who are more familiar with the brand’s older “red roof” dine-in restaurants. Roughly 40 percent of the Pizza Huts acquired by GPS are red roof restaurants. Garrett is not concerned. He said Pizza Hut, in many ways, is in the same position as Burger King was when GPS formed in 2012. Burger King, he said, was lagging McDonald’s. “[Pizza Hut] has underperformed Domino’s for several years, and we think there’s tremendous opportunity to close the gap,” he said. He said the company will review the portfolio and begin making certain changes with the 75 restaurants, including refreshing stores, remodeling and “transitioning out of red roofs” in select locations. Each location will be treated on a case-by-case basis, he said, adding that GPS has one overarching goal: providing a great customer experience. “Ultimately, it’s about delivering hot food on time,” Garrett said. – Source: NRN.
Dow Drops More than 300 points After Weakest Manufacturing Reading in 10 Years
The Dow Industrial Average closed 343.79 points lower, or 1.3% at 26,573.04 after rallying more than 100 points earlier in the day. The S&P 500 slid 1.2% close at 2,940.25. The Nasdaq Composite was down 1.1% at 7,908.68. Tuesday marked the worst one-day performance for the Dow and S&P 500 since Aug. 23. That day, the two indexes fell more than 2% each. The Institute for Supply Management said U.S. manufacturing activity contracted to its worst level since June 2009. The ISM report follows the release of weak manufacturing data from Europe. Shares of manufacturers such as Honeywell, 3M and Eaton rolled over on the data release, with each losing at least 2.8% lower. President Donald Trump blamed the strong dollar and high interest rates for the weakness in U.S. manufacturing. In a tweet, he said the Federal Reserve and Chairman Jerome Powell were “pathetic” in their handling of the economy. As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic! ISM Chair Timothy Fiore pointed to trade weighing on manufacturing in a statement. “The manufacturing side is telling us something. It’s a combination of global growth and we’ve got a trade war that’s been going on for a year and a half,” said Christian Fromhertz, CEO of The Tribeca Trade Group. “That’s been freezing things up. The longer this trade war keeps going, the more damage it does.” U.S. and Chinese negotiators are expected to meet next week in Washington to discuss a potential trade deal between the world’s largest economies. The two sides have slapped tariffs on billions of dollars worth of each other’s goods. However, sentiment around those talks improved recently. A spokeswoman for the U.S. Treasury said the White House “is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” Treasury yields reversed earlier gains as investors dumped equities in favor of the traditionally safer U.S. bonds. The 10-year yield was down at 1.64% after rising to around 1.75%. The 2-year rate dropped to 1.54% from about 1.68%. Yields around the world initially rose after an sovereign debt auction in Japan saw weak demand. “The volatility you’re seeing is reflective of the fact that the themes affecting the market are pretty broad based and they’re global and they’re changing day to day,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities. “You’ve got news coming out of Washington, auctions coming out of Japan … The market is going to have to adapt day to day to these themes.” Investors entered the fourth quarter with the major averages struggling to reach record highs set earlier in the year. The indexes were within striking distance of their all-time highs for most of September, but Tuesday’s losses pushed them further away from those levels. “Historically, the fourth quarter has tended to be one of the best periods for stocks,” said Keith Lerner, chief market strategist at SunTrust Private Wealth, in a note. “We could certainly see another setback before year end. There have only been two pullbacks of more than 5% for the S&P 500 this year versus an average of about three historically.” “However, unless we see a sharp escalation in trade tensions, we do not anticipate anything in the magnitude of the 2018 selloff,” Lerner said. In corporate news, Charles Schwab shares dropped nearly 10% after the brokerage said it’s ending commissions on stock tradig. TD Ameritrade plunged more than 20% on the news while E-Trade slid 16.4%. – Source: Apple News.
Three Executives to Leave Jack in the Box
Three longtime executives are set to depart Jack in the Box Inc. as the organization’s leadership structure evolves to support a single restaurant brand following the divestiture of Qdoba Mexican Eats to private equity firm Apollo Global Management L.L.C. last year. Phillip Rudolph, executive vice-president, chief legal and risk officer and corporate secretary, will leave the company on Feb. 28, 2020. Mark Blankenship, executive vice-president and chief of staff and strategy, and Paul Melancon, senior vice-president, controller and treasurer, will leave on Jan. 3, 2020. Their responsibilities will be absorbed by others within the organization. “Phil joined Jack in the Box Inc. 12 years ago with an impressive, well-rounded resume earned after years of experience in private practice and corporate law,” said Lenny Comma, chairman and chief executive officer of Jack in the Box Inc. “In addition to his skilled stewardship of the company’s legal and risk functions, Phil’s commitment to ethics and corporate responsibility has strengthened the culture of integrity throughout the organization. On behalf of our board of directors, I cannot thank him enough for his wisdom, sharp wit and guiding conscience. “Mark has been one of my key ‘go-to’ resources for as long as I’ve been with the company, and he’s one of our true culture champions. We’re a better organization as a result of his vision and leadership, and I will miss him tremendously, as will others whose lives he’s touched during his 22 years here. “Paul has been an integral part of our finance organization for more than 14 years and was essential to the successful execution of several of the company’s key initiatives, including, most recently, our sale of Qdoba and our just-concluded securitization transaction. Like Phil and Mark, Paul also serves with me on the board of The Jack in the Box Foundation and has been unwavering in his support of our community partners.” Jack in the Box Inc. operates and franchises more than 2,200 Jack in the Box restaurants in 21 states and Guam. The company owned the Qdoba brand for 14 years, during which time the fast-casual Mexican-style restaurant chain grew to more than 700 locations with system-wide sales of more than $820 million from 85 locations with system-wide sales of $65 million. – Source: Food Business News.
Shake Shack CFO Promoted to President
Shake Shack announced the latest in a series of leadership appointments and promotions, naming Tara Comonte, chief financial officer, to the expanded role of president and CFO. As president, Ms. Comonte will focus on scaling the burger chain’s infrastructure, broadening support and guidance on day-to-day operations, the company said. She will continue overseeing finance, accounting, technology, internal audit and legal. Ms. Comonte has more than 20 years of strategy, finance, technology and operations experience, primarily with global media and advertising companies. Since joining Shake Shack in 2017, she has helped lead an increased focus and investment in digital technology as well as diversity and inclusion initiatives. “We are in the midst of exciting growth and I’m thrilled for Tara to play an even larger role in helping lead Shake Shack to its full potential,” said Randy Garutti, chief executive officer of Shake Shack. “She’s had a tremendously positive impact across the company over the last few years, and combined with her proven track record, Tara’s expanded role will now benefit so many other areas of our business while allowing me to focus even more on where we’re headed.” Ms. Comonte’s new role reflects Shake Shack’s expansion both domestically and internationally, including first-in-market openings in Mainland China and Mexico. The company has focused on strengthening its leadership team, adding a new chief development officer, chief global licensing officer, chief information officer and chief marketing officer earlier this year. – Source: Food Business News.
Yum! Brands Promotes Chawla to President of Pizza Hut International
Vipul Chawla has been promoted to president of Pizza Hut International, effective Dec. 3. He will succeed Milind Pant, who will step down at the end of November to pursue opportunities outside of the company. Mr. Chawla has been with Pizza Hut for seven years, most recently as managing director of Pizza Hut Asia-Pacific. Earlier, he was general manager of Pizza Hut Asia as well as chief marketing officer of KFC Asia. Prior to joining Yum! Brands in 2011, he spent 20 years at Unilever P.L.C. in various leadership positions. “Vipul Chawla is an extraordinarily talented leader and highly respected global marketer with a proven track record of growing Pizza Hut across the Asia-Pacific region with our franchise partners,” said Greg Creed, chief executive officer of Yum! Brands, the parent company of Pizza Hut. “He’s the ideal person to take Pizza Hut International to the next level by ensuring that each market has strong operations and digital execution in place, offers compelling value and consistently communicates the brand positioning. I’m confident Vipul and his team are well positioned for a seamless transition and will continue to build on the strengths of Pizza Hut with our franchisees.” – Source: Food Business News.
Cracker Barrel Acquires Maple Street Biscuit Company for $36 Million
Cracker Barrel is dipping deeper into the fast-casual industry. The casual leader announced Friday it’s agreed to acquire 33-unit Maple Street Biscuit Company in an all-cash transaction for $36 million. Founded 2012 in Jacksonville, Florida, by Scott Moore and Gus Evans, the emerging brand has 28 corporate and five franchised units. The stores report targeted average-unit volumes of $1 million and store-level EBITDA of 17 percent of net sales. Notably, Cracker Barrel said it will convert its Holler & Dash Biscuit House units into Maple Street Biscuit Company locations in the coming months. Moore will remain CEO of Maple Street Biscuit Company and report directly to Cracker Barrel CEO and president Sandy Cochran. “The breakfast and lunch-focused fast casual category is an attractive segment, and our experience with Holler & Dash has reinforced this belief,” Cochran said in a statement. “We have long admired Maple Street Biscuit Company with its emphasis on made-from-scratch food and hospitality. It is a proven brand with attractive unit economics and strong growth potential, and it is positioned to become a leader in this category.” “The acquisition accelerates our penetration in this segment and provides growth for delivering shareholder value. I look forward to working with Scott and his team as we further grow this brand together,” Cochran added.
Maple Street is known for selling biscuit dishes at flat-dollar prices and is not open on Sundays. It uses premium ingredients such as fried goat cheese, sausage and shiitake mushroom gravies, and makes jams and jellies in-house, as well as biscuits. Fresh-squeezed orange juice and mimosas are available at select stores. The brand also features salads, bowls, waffles, artisan coffee, and other Southern-focused items, like fried green tomatoes and collard greens. “From the beginning, Maple Street Biscuit Company has focused on serving its communities through comfort food with a modern twist and gracious service,” Moore said in a statement. “Our brands share many similarities such as scratch cooking and an emphasis on hospitality. I’m excited about this opportunity, and I believe Cracker Barrel will help us grow our brand and further achieve our mission of helping people, serving others, and being a part of the community.” Cracker Barrel debuted Holler & Dash in 2016. There are seven locations—two in Alabama, one in Florida, two in Tennessee, and lone units in North Carolina and Georgia. This past March, activist investor Sardar Biglari urged Cracker Barrel to divest or eliminate the fast casual, saying it would reduce general and administrative expenses. Cracker Barrel has not released financial results for the fast casual in past quarterly reports. In Q4 of fiscal 2019 Cochran said, “We continue to work on the Holler & Dash business model, and we believe there is great opportunity in the breakfast and lunch focused fast casual segment.” That was the only mention of the concept. Cracker Barrel has been busy recently. The company purchased about 59 percent of eatertainment chain Punch Bowl Social’s economic interest and roughly 49.7 percent of its voting interests in July. The surprising move cost Cracker Barrel $89 million for an initial non-controlling stake, with the company agreeing to provide upward of $140 million. Broken down, the chain forked up the $89 million in fiscal 2019, which left $51 million for growth capital—of which Cracker Barrel provided $15 million or so already. Another $36 million remains. The stake Cracker Barrel acquired was previously held by private equity giant L Catterton, which has investments in Noodles & Company, Anthony’s Coal Fired Pizza, and many others. It’s also the firm that recently agreed to but Del Frisco’s for $650 million. Cracker Barrel’s deal with Punch Bowl Social also left the option open to buy the brand outright. The 667-unit chain’s same-store sales lifted 3.8 percent, year-over-year, in Q4 comprised of 0.2 percent traffic growth and average check of 3.6 percent. – Source: fsrmgazine.
Wendy’s will Roll Out Breakfast in 1st Quarter 2020
The Wendy’s Co. will debut its new breakfast daypart nationwide in the first quarter of 2020 and expects the new daypart eventually to contribute a 10% growth in sales, executives said. The Dublin, Ohio-based burger brand, which hosted an Investor Day on Friday, said the new breakfast platform which has been tested in 300 stores from 6:30 a.m. to 10:30 a.m., is expected to contribute 6% to 8% of sales in the partial 2020 fiscal year and has been tailored, with help from franchisees, to simplify operations. Kurt Kane, Wendy’s president for the U.S. division, said the brand was “going big in breakfast and really delivering against a long-standing opportunity for the Wendy’s business and doing it right.” In 2020, Wendy’s expects breakfast sales to be $600 million to $800 million, according to Gunther Plosch, the company chief financial officer. Wendy’s breakfast menu includes croissant and biscuit sandwiches, burritos and coffee drinks. The signature offering is the Breakfast Baconator, a sandwich with grilled sausage, American cheese, applewood smoked bacon, eggs and a swiss cheese sauce. Kane said breakfast is providing organic traffic growth in the quick-service segment and Wendy’s cannot “continue to sit on the sidelines.” He said the company worked with franchisees to build the new breakfast platform, making it operationally simple, limiting it to 18 unique stock keeping units rather than the as many as 45 in earlier tests, requiring no new equipment rather than $10,000 in earlier versions, focusing it on the pick-up window, requiring staffing of three workers rather than four or more and supporting it with national marketing for incremental media. Wendy’s is also layering in an improved coffee platform that includes cold “Frosty-ccinos” in vanilla and chocolate. “It’s based off a new iced coffee blend,” Kane said, and that will be expanded to other dayparts. The company is investing $20 million in 2019 to get the daypart started in 2020, Kane added, and also invested in new small wares for franchisee restaurants. In test restaurants, the breakfast daypart has not cannibalized other customer occasions, Kane said, “so we believe this is incremental to our business overall.” Todd Penegor, Wendy’s president and CEO, added that Wendy’s, which has done isolated tests of the morning menu before, is “committed to the breakfast line. We are in this for the long run.” In other topics from the wide-ranging Investor Day, Wendy’s addressed:
– Third-quarter same-store sales. For the U.S. restaurants, Penegor, in a preview, said third-quarter same-store sales were 4.4%.
– Alternative proteins. Wendy’s is currently in final testing of a black bean burger. The product, if approved, could be on menus by early next year, Kane said.
– Value meal bundles. Kane said the 4 for $4 and Biggie Bag promotions have driven engagement, with the 4 for $4 customer visiting a Wendy’s twice as often as a typical consumer.
– Third-party delivery. Laura Titas, Wendy’s chief digital experience officer, said the company would be expanding its third-party delivery beyond DoorDash, which the company has worked with since December 2017, to Grubhub and Uber Eats. Delivery orders will also interface directly through Wendy’s point-of-sale system.
– Points-based loyalty program. Titas said Wendy’s will be introducing a loyalty platform in 2020, and that it will be based on accrued points. The company will be also layering in geolocated messages and breakfast reminders into its app.
– Dark kitchens. In the biggest U.S. cities, Wendy’s is underpenetrated, said Abigail Pringle, Wendy’s chief development officer and president of international, which includes Canada. “We believe urban cities are places where folks are going to work, live and play in the future,” Pringle said. “And we want to be there.” As a result, Wendy’s is evolving its business model to allow for kiosks and cloud kitchens, which would be solely for delivery. “We believe this is an important unlock to our growth going forward,” she said. Two “dark kitchens” will be open before the end of the year, Pringle said.
– New York restaurants. Pringle said the company is looking to refranchise the New York area market. Wendy’s expects the exit from that market to cost the company $5 million to $10 million in 2020, Plosch said.
– International growth. Pringle said Wendy’s currently has about 950 restaurants abroad in 32 countries, including Canada, with more than $1 billion in sales. The company is looking to double that with an entry first into the United Kingdom, where it pulled its brand in 2000, and then more generally Europe. Currently, Wendy’s units are 40% in Canada, 35% in Latin America and 25% in the Asia Pacific-Middle East region. By 2024, she said Wendy’s expects to double international sales to $2 billion. Wendy’s, founded in 1969, has more than 6,700 restaurants worldwide. – Source: NRN.
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