The agreement calls for more than 2,000 stores . . . .

Subway Inks One of the Biggest Franchise Agreements in History

Subway announced Tuesday that it signed a deal to open more than 2,000 stores across South Asia, a move the fast-food chain called one of the “largest master franchise agreements in quick-service restaurant history.” The sandwich concept will work with Everstone Group, a South Asia-focused private investment firm, to open the locations in India, Sri Lanka, and Bangladesh over the next 10 years. Currently, those markets have nearly 700 Subway Restaurants. “Today’s announcement represents a significant step in Subway’s transformation journey and global expansion plans,” said Subway CEO John Chidsey in a statement. “Everstone, with extensive knowledge and proven restaurant operational expertise in the region, is the ideal partner as we begin this new chapter for Subway in India and South Asia.” The incoming stores, as well as existing units, will upgrade to the chain’s “Fresh Forward” design, which features bright colors, digital menu boards, kiosks, LED lighting, new wall art and seating package, and several other enhancements. Subway claims to be the largest restaurant brand in the world in terms of units, with nearly 40,000 restaurants in more than 100 countries. The chain’s franchise network includes more than 20,000. “The scale of this agreement is unprecedented and will ensure that Subway’s presence across India will more than triple over the next 10 years,” Mike Kehoe, Subway’s president of Europe, the Middle East, and Africa, said in a statement. “We’ve seen huge demand from existing Subway guests in India and couldn’t be more excited to partner with Everstone to strengthen our presence and bring our beloved subs to even more Indian guests.” Everstone has $6 billion worth of assets in private equity, real estate, credit, green infrastructure, and venture capital. Within the quick-service space, the firm is also the master franchisee of Burger King India, Burger King Indonesia, and Domino’s Indonesia. “Subway is an iconic brand and its philosophy of freshly made-to-order and better-for-you food delivered at-home and in-store is central to one of the greatest structural consumer trends we see in South Asia,” Sameer Sain, founder, and CEO of Everstone Group, said in a statement. “Everstone Group is delighted to be a partner and custodian of Subway in the region. We strongly believe that our significant experience in the [quick-service restaurant] space, our strong digital focus, our ability to innovate, as well as our proven execution capabilities, will enable Subway to become a dominant player in the region.” The move comes about a month and a half after Subway signed a master franchise agreement in the United Arab Emirates with development partner Kamal OsmanJamJoom Group. The 34-year-old company oversees 675 stores across seven countries in the Middle East. Also, in August, Subway inked an agreement with PT Sari Sandwich Indonesia to begin opening Indonesian locations in the fourth quarter. – Source: QSR.

KCL Adds 22 New Manufacturers in 2021 . . . .

Record Growth as the Foodservice Industry Recovers

KCL, the industry leader in foodservice design technologies, announces 22 new manufacturing partners who now host their equipment content– PDFs, CAD blocks, Revit families, and supporting images, and documents– on KCL software. Designers, consultants, and dealers around the world appreciate the convenience of KCL’s best-in-class design tools. KCL software is used in 174 countries and continues to grow its international base of end-users and manufacturers. In fact, the new manufacturers represent a healthy mix of North American and European brands: Afinox, Atosa USA, Axis Designs Inc. Micro-Market Fixtures™, Cadco, Comenda, Crem, Friginox, GA Systems, Gico, Georgia Pacific Pro, Hallde, Inox-Bim, Kold-Draft, Krupps, Migali Industries, Moduline, Orved, Precision Refrigeration, Rosinox Grandes Cuisines, Spaceman USA, Valentine, and Vivreau North America. Part of this worldwide growth is fueled by Luca Salomoni, KCL’s VP of Sales in EMEA and APAC. “KCL has always enjoyed an international audience. I know our software offers powerful solutions that European designers commonly face while also helping manufacturers in the region grow. Luca is the perfect person to help us achieve that,” said KCL President Kevin Kochman. “Many foodservice manufacturers want to reach North American audiences and KCL is the perfect way to do that,” said Salomoni. “On the other hand, even manufacturers who are not interested in the US understand that KCL is a superior design tool with useful Integrations and are growing the number of users in the EMEA region and know they can benefit from KCL, even offering KCL tools right on their website.” Kochman added, “After a tough year, things are looking up. From Afinox’s blast chiller to Valentine’s fryers, we look forward to helping these companies and all KCL manufacturers boost their sales.” Learn more about KCL’s twenty-two new manufacturers on their blog. Source:  KCL.

The first recovery from the pandemic gave optimism and hope for a brighter future for hospitality workers. Then the Delta variant hit. But still, the industry is showing signs of growth if only in starts and stops . . . .

Why Hospitality Workers Won’t Be Returning to Their Jobs

Now comes the fun part: getting hospitality workers back to their pre-pandemic posts. This can be quite challenging. Not only are industry leaders competing with unemployment and stimulus payments, but also with the same obstacles that were in place before the virus. Nothing to Do with Covid-19 According to a recent Joblist survey, hospitality workers who lost their jobs due to the pandemic will not return to work. This is even if they lose their unemployment payments. Just over 50 percent of those surveyed said they’re switching industries in pursuit of a different job setting. A recent Bloomberg cites a few reasons why hospitality workers won’t be coming back to their jobs. According to a cited survey, these include:

52 percent want a different work setting

45 percent are looking for better pay

29 percent want better benefits

19 percent are seeking a more flexible work schedule

16 percent prefer remote work opportunities as opposed to showing up on-site every day

Many of these reasons existed long before Covid. These were workers who were going to bail whether there was a pandemic or not. Interestingly these weren’t the only reasons for changing jobs.

The Real Reasons

The motivation for a worker to return back to their hospitality job is slim to nonexistent. And it’s not all because of the desire for a change in pay and benefits. Instead, it is the desire to avoid the unpleasantries of the past. Unfortunately, there exists in the hospitality industry an underlying current of distasteful, and even illegal actions against employees. These include not only disrespectful customers but also sexual harassment by managers and customers, as well as emotional abuse by managers. A survey of 4,700 hospitality workers conducted by Snagajob and Black Box Intelligence found that disrespect in the workplace was their main reason for not going back to their job. 15 percent surveyed said they were sexually harassed by customers. Another 15 percent stated they were sexually harassed by managers and coworkers. Harassment has been going on for years in the hospitality industry without much reporting of incidents. In fact, in a report dating back to 1993, the Human Rights Commission found that “Harassment levels in hospitality are certainly higher than those in other industries.”

Unreported and Accepted

Sexual harassment is so prevalent in the hospitality industry is because it is tolerated. Many of the respondents stated in the report, “It is just joking and having fun,” and “We are all an open-minded bunch of people.” Part of the problem is that the hospitality industry is comprised mostly of young adults. The median age is 31 according to the Bureau of Labor Statistics. The harassment, as well as the emotional abuse from managers, is accepted by many industry workers. Unfortunately, the lingering effects of the treatment are carried by the employee to other jobs. This leads them to tolerate sexual assault associated with accepted workplace behavior. Some workers may carry the scars they received from the industry for a very long time, and the hospitality industry is typically the first door many workers use to begin their working lives. In fact, the Restaurant Opportunities Centers United report finds that one out of three Americans enters the workforce through the restaurant industry, and one out of two works in the industry at some point in their life. In other words, between one-third and one-half of all Americans learn acceptable workplace behavior in the restaurant industry. If they deem various forms of harassment as acceptable, they will take it with them to other jobs. This doesn’t have to continue.

What Operators Can Do Now

Leaders can begin turning around or at least slowing down the exodus of workers. By focusing on implementing the following initiatives, you should be able to curb the turnover rate and increase attraction to your business.

Institute zero toleration policies- Put in writing, separate from your Employee Handbook, policies that explain a zero-tolerance for anything disrespectful. This includes sexual harassment, any form of discrimination, and any hint of emotional abuse by managers. And enforce it!

Train managers- Hold weekly or monthly training sessions to train and retrain managers on how they should treat their subordinates. Capture the training on the video to simplify future training.

Train employees- Training is not always a convenient task, but it is necessary. Give employees resources so they know how to report harassment or abuse and let them know that they will be respected and protected. Train employees to report abusive behavior by the customer. The customer is not always right in these situations.

Place posters in the workplace– Communicate your message of zero tolerance by placing posters where employees can see them every day. Send out emails and texts with reminders about respecting others.

These are simple steps to take to try to turn around decades of tolerance of harassment. It will take time to change this soiled reputation found in the hospitality industry. However, it at least conveys the message that your business is trying to do the right thing.

Bringing Back the Workforce

There is a lot of work to do in the hospitality industry to lure back workers. Some Changes are already taking place with increases in wages, sign-on bonuses, child care, career advancement plans, and more.

The pandemic gave time for workers to reflect on their workplace and ponder their future. Given the availability of jobs today, it is no wonder many of those in the hospitality field are jumping ship. But it doesn’t have to be that way.

Industry leaders will need to take a stand. The tolerance of yesterday will need to be replaced with swift action against abusers and harassers. The change in money and benefits is an easy fix, but not if workers don’t feel they are protected and respected. Source: Bloomberg.

Hazardous chemicals found in food from chains like McDonald’s and Pizza Hut . . . .

A group of researchers analyzed different food chain products and found plasticizer compounds that can cause cancer, infertility, and asthma.

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

George Washington University conducted a study in which they found alarming information about the food offered by various fast food restaurants. In addition to the fact that they are harmful to health due to the amount of fat and sugar they contain, toxic elements have been found within them.

Giorgi Iremadze vía Unsplash

To obtain the results, the group of scientists analyzed 64 different products from McDonald’s, Burger King, Pizza Hut, Domino’s, Tex-Mex Taco Bell, and Chipotle chains. They ordered everything from nuggets to burritos and found that 81% of the food contained DnBP phthalates and 70% DEHP phthalates. Both compounds are used as plasticizers, they are used in the production of things like industrial pipes, rubber gloves, shampoos, soaps and vinyl floors. Obviously, they are not suitable for consumption, and doing so can be very harmful to health, causing cancer, thyroid disease, smaller testicles, infertility, as well as behavioral problems and attention deficit disorders in children, among others.

Ami Zota, who is the co-author of the study, mentions that her greatest concern is towards low-income Americans as they often do not have access to other food options. Source: Entrepreneur. By Entrepreneur en Español October 29, 2021Best Business

Books 2021: Old man and the C-suite . . . .

Excellence Now: Extreme Humanism

by Tom Peters (Networlding Publishing and un/teaching, 2021)

Tom Peters is an older man in a hurry. In his short new volume, he tells us things he’s told us in his many previous books, and he insists we need to run out and do every one of them right now. He tends to rant. Exclamation points and capital letters abound. The phrase “damn it” appears 19 times by my count. But the book, the best business book of the year on leadership, is significant for one big reason: it is the avowed summa of a man who has been the nation’s premier management guru for decades. And at the heart of his new volume is the urgent recognition that above all else, leaders will have to pay far more attention to people from here on out. To do that, they may well have to rethink their business’s presumed purpose. For the traditionally loquacious Peters, the book is a model of economy. Excellence Now captures the highlights of a lifetime of reading, thinking, and making observations by the man who rocketed to fame in 1982 when he and Robert H. Waterman published In Search of Excellence, one of the most successful business books of all time. Some of the quotes are pretty good, such as this crack by economist Paul Ormerod, which reflects Peters’s love of small and medium-sized enterprises: “I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself?’ The answer seems obvious: Buy a very large one and just wait.”

At the heart of this new volume is the urgent recognition that above all else, leaders will have to pay far more attention to people from here on out. Many of Peters’s traditional themes are here, including a conception of excellence as a way of life and business as a path of virtue. Small is preferred to large, and action to inertia. Get your hands dirty, damn it! Treasure your frontline managers, and treat your part-timers right, too. For heaven’s sake, get out and talk to customers, and listen to people. Apologize when you need to, and do so as you mean it. Profit is hardly mentioned; business here is about making the world better, about beauty and compassion and meaning. Peters has never ignored the human factor in business, and his contention that a focus on people will be paramount going forward couldn’t be timelier. For one thing, birth rates are plummeting in much of the world, often in countries that were already aging. So working-age people, although still numbering in the billions, will grow more scarce and expensive in many areas. That means firms will have to compete harder to win and retain both workers and customers. Businesses will also have to maximize the productivity and adaptability of their existing workers, who may be hard to replace. “Your principal moral obligation as a leader,” Peters writes, “is to develop the skill set of every one of the people in your charge—temporary as well as semi-permanent—to the maximum extent of your abilities and consistent with their ‘revolutionary’ needs in the years ahead.”

Second, in a world of growing affluence, more people will simply demand better treatment, and they can afford to pay for it. They also have new tools for demanding it, such as social media, where they can broadcast a company’s callousness toward staff or indifference to customers. A third reason for a focus on people is the growing sense that free enterprise as we know it might be skating on thin ice. Last year, in an Edelman study of more than 34,000 people in 28 countries, 56% of respondents agreed that “capitalism, as it exists today, does more harm than good in the world.” In the United States, for example, economic populism has been on the rise, along with skepticism toward free trade and market concentration. In sum: leaders are likely to find it imperative that they demonstrate concern for citizens instead of just shareholders if they hope to retain the support of voters, legislators, and consumers. Fourth, there is the earthshaking and long overdue rise of women throughout society and especially in business. This phenomenon is not lost on Peters, who insists that women are better managers than men, and who opens the book by dedicating it to 11 women. “This is not a dedication to ‘the women in my life,’” he writes. “This is a dedication to 11 of the extraordinary professional women who have shaped my views about effective, diverse, humane, and morally focused enterprises.” His insistence in the book that business needs to pay more attention to communications, aesthetics, empathy, meaning, and most of all people is an implicit acknowledgment of the tremendous importance women have assumed as workers, customers, and voters. Finally, although rapid advancements in artificial intelligence could eradicate worker shortages—by eradicating jobs—firms and societies alike will have to deal with the social, economic, and political ramifications of a technology that increasingly does the judgment-based things people have traditionally done, only better. Peters, always the optimist, hopes businesses can use AI to augment and empower staff. Meanwhile, his advice to executives is to engage all parties, including customers, in discussions. “Do not run and hide when you hear the chant, ‘AI is coming around the bend.’… This should be a personal priority.”

Peters is passionate about diversity and climate change, too. But one wishes the 78-year-old author had more directly faced up to some of the challenges implicit in his enthusiasms. Prioritizing people is great, but which people? If a family-friendly auto shop closes Friday at 5 p.m. sharp and reopens on Monday morning at 9, how friendly is that to the families of working single parents and other customers whose only window for getting cars fixed is the weekend? Are inclusiveness and excellence never at odds? What should you do if they are? No one truly in search of excellence in business and leadership should ignore these sorts of difficult questions. The value of Peters’s book—so brimming with optimism, enthusiasm, and belief in people—is in the way it grabs us by the lapels and reiterates one last time, in the most direct possible way, the humanistic message of his work. “Take care of people.” “Make uplifting…products and services that inspire our customers and make us smile and be proud.” “Embrace the urgency required to deal with—in your sphere of influence—the catastrophic implications of climate change.” “Behave honorably at all times and be an excellent and vigorous community member and moral leader.” “Aim for excellence day in and day out, not as a grand aspiration, but as a way of life.” Peters’s latest and perhaps last book—there is a valedictory air about this one—offers not so much argument as inspiration. And at this juncture, that’s more than good enough. When it comes to the very big things in business, Peters is right. Damn it! Source: Tom Peters’s Excellence Now exhorts leaders to focus on the needs of people. By Daniel Akst/Strategy and Business.

3 Skills New Managers Need to Succeed . . . .

To start, recognize that entire teams—and not just individuals—require clear feedback.

BASED ON INSIGHTS FROM Stephen King / Lisa Röper

Making the leap from individual contributor to manager can be fraught: for the new manager, their direct reports, and the organization as a whole. New managers tend to rise into their position based on past success. But few have the experience or training to effectively manage a high-performing team. Add Insight to your inbox. We’ll send you one email a week with content you actually want to read, curated by the Insight team. This is a huge problem for organizations large and small, according to Steve King, an adjunct professor of executive education at Kellogg and former Executive Vice President of Human Resources at Hewitt Associates, where he oversaw HR for the firm’s 25,000 associates. “Senior executives count on frontline managers to make things happen,” King says. After all, the vast majority of a firm’s employees report to frontline or middle managers, not those at the top of the organization. Yet, executives often overlook frontline managers’ need for clear guidance and direction about change efforts. Leaders often mistakenly presume that managers are already trained and proficient at rolling out changes with their teams—and that the benefits of the changes they are proposing are self-evident—so there is little need to explain or clarify things to managers and teams. In King’s view, new managers need to master three critical skills to succeed in their roles. Know What Kind of Team You Are Leading Frontline managers need to understand whether their team is comprised primarily of individual contributors or whether it is highly collaborative. And then, they need to set goals accordingly. “For example, a wrestling team and a football team have a very different kind of team dynamics,” King says. “They’re both teams; they just need to be managed differently.” Some sales leaders set revenue goals for each salesperson and offer financial incentives for their individual efforts. Others set team revenue goals and reward the team when they collectively hit their target. Neither approach is inherently more effective, but the team approach drives greater collaboration. Early in the pandemic, teams comprised of individual contributors were more nimble than highly collaborative teams because they had already established processes to work independently, come together as a group, and share information. Interdependent teams that relied on face-to-face interactions had to establish new ways to collaborate. But individualized teams require special attention, too. Many frontline managers fail to articulate what King calls “metagoals,” or the shared goals among individual contributors. If individual contributors don’t see their work in the context of the company’s larger goals, it’s easy for conflict to arise. It may also be a sign that the team … isn’t really a team. “More often than not, what presents as a relationship problem—people blaming one another, bad group dynamics in meetings—is the result of the manager failing to clarify the team’s goals.” – Source: Steve King

Papa John’s Finds Strength in Third-Party Partnerships . . . .

Third-Party Delivery Sales Have Lifted Nearly 50 Percent in the Past 12 Months

Two and a half years ago, Papa John’s made the call to solidify a third-party national relationship with DoorDash to bolster its delivery capabilities. It was a period in which the pizza concept’s same-store sales fell in the mid-single digits, year-over-year, as it reeled from the public fallout of founder John Schnatter’s exit from the brand. Lynch, though, always believed in the power of third parties, even before the pandemic. “The customers have spoken. These apps are growing really rapidly because the customers want these services,” the CEO told CNBC two years ago. “So, yes, they have had an impact on our industry, an impact on our business. But we believe that’s because we haven’t worked strategically with them. We don’t think it needs to be that way.” Since then, the company integrated with the likes of Grubhub, Postmates, and Uber Eats and increased its digital mix from 60 to 70 percent. While Papa John’s doubled down on this path, competitors haven’t, specifically Domino’s, which even rolled out a promotion denouncing third-party delivery aggregator’s surprise fees by giving away free items to delivery customers. Papa John’s, however, has consistently found third-party delivery provides an incremental contribution to strong same-store sales and industry outperformance, Lynch said. In Q3, comps lifted 6.9 percent in North America or a two-year stack of 30.7 percent. The numbers are significantly higher than the performance of Pizza Hut (plus 8 percent over two years) and Domino’s (plus 15.6 percent over two years). Last year at this time, Lynch told analysts sales through delivery aggregators grew by a factor of over three times, with the mix lifting from 2 to 6 percent. In August, Papa John’s revealed domestic sales through third-party delivery channels lifted nearly 50 percent in the past 12 months. The CEO said Papa John’s saw the business become “very incremental” and “very profitable.” It’s about a 2:1 ratio between sales from the third-party marketplace and outsourced delivery via the app, according to Lynch. “Others chose not to go down that path, and it’s definitely helped us during these challenging times,” Lynch said during the brand’s Q3 earnings call. The benefit is showing up in multiple areas. For one, third-party delivery allows the brand to take advantage of new customers coming through each of the aggregators’ websites.

The best evidence of this growth is the acceleration of Papa Rewards loyalty members, a group that’s surged from 12 million in 2019 to more than 22 million this year. Lynch said rewards customers are “significantly” more profitable than non-loyalty consumers because Papa John’s is able to use targeted, personalized offers that drive frequency, higher average tickets, and better satisfaction. The chain continued to draw these new customers into the loyalty program with multiple rounds of innovation, including Epic Stuffed Crust, Papadias, Jalapeño Popper Rolls, Bacon Mania, and Shag-a-Roni Pizza. Lynch noted much of Papa John’s transaction growth over the past two years came from new consumers as opposed to increased frequency of current guests. “Our partnerships with aggregators bring additional customers to the brand, driving incremental and profitable transactions for us and our partners,” Lynch said. Despite headwinds with labor and supply chain, Papa John’s has continued to open restaurants at a brisk pace. In addition to providing a funnel of new guests, Lynch said third-party drivers supplement Papa John’s slimmer labor pool during its busiest times. The help of those extra drivers prevented stores from closing early in the third quarter and kept restaurants from turning off ordering mechanisms. Lynch previously explained drivers are Papa John’s No. 1 bottleneck and adding a significant number of drivers through models like DoorDash helps the chain manage labor and throughput. “Obviously that allows us to deliver greater sales when we’re not shutting things down,” Lynch said.

Similar to many in the industry, staffing shortages proved to be a challenge for the pizza chain. During the quarter, Papa John’s hosted a National Hiring Week in which the company and franchisees held more than 800 recruiting events in more than 60 markets. The chain hoped to add more than 20,000 new employees for full-time and part-time roles, including pizza makers, delivery drivers, shift leaders, managers, and more. Lynch said Papa John’s is understaffed relative to last year, but added employees have “picked up the slack” and that general managers are “working harder than they ever have.” He emphasized workers are inspired to do so because of the improved working conditions the company implemented in the past couple of years. “The foodservice business is always struggling and working to find people to come in and that’s not a new dynamic,” he said. “Obviously, this is exacerbated at this point, but our people have just really taken it to heart and have done a great job managing through it.” Despite headwinds with labor and supply chain, Papa John’s has continued to open restaurants at a brisk pace. The chain opened 46 net new locations in Q3, including 32 internationally and 14 in North America. Year-to-date, the brand has added 169 net new units. It expects to finish the year with 220 to 260 net new stores, which would represent year-over-year growth of 4.5 to 5 percent. Future expansion is backed by large agreements. Papa John’s struck a deal with PJWestern Group to open 250 restaurants in Germany, and inked an agreement with Drake Food Service International to open more than 220 units in Latin America, Spain, Portugal, and the U.K. Then in September, Sun Holdings agreed to debut 100 stores across Texas through 2029, the largest domestic deal in Papa John’s history. The brand finished the third quarter with 5,569 outlets systemwide, including 3,323 in North America and 2,246 internationally. “We are very bullish in our ability to continue to deliver these large development agreements,” Lynch said. “I think we’ve consistently said that we have evolved our development strategy, both domestically and globally, away from opening up any store that anyone is willing to build to a much more strategic approach around bringing in new franchisees that are well-capitalized, have operational experience.” “Sun Holdings is the first one and frankly, it’s a great one,” he added. “But we are currently in discussions with both new and current franchisees on big development agreements, and we’ll continue to announce those as they come to pass.” Total company revenues increased 8.4 percent to $512.8 million in Q3, and global systemwide restaurant sales lifted 11.2 percent to $1.2 billion, fueled by innovation strategies and accelerating unit growth.

Source: QSR.

Wendy’s is Now the No. 3 Breakfast Player Among Burger Chains . . . .

The chain continues to grab share despite COVID challenges

Offering a glimpse into the state of quick-service breakfast, Wendy’s two biggest half-hour stretches remain the 9:30–10 a.m. and 10 to 10:30 a.m. blocks. Guests are eating breakfast as a late-morning snack, which, as much as anything, relates to how COVID shook up the workplace. Per an estimate from Upwork, one in four Americans, or some 26 percent, expect to stay remote throughout 2021. Since 2009, the number of people working from home climbed 159 percent, according to Global Workplace Analytics. It’s been well-charted how Wendy’s faced this trend on the front step. It launched breakfast—the company’s fifth run at the daypart—in March 2020. The move spiked domestic same-store sales by 16 percent in the first week of the month. Then, COVID arrived, and breakfast consumption in the category plunged 35 percent in April, year-over-year, per The NPD Group. Dinner took a 22 percent hit. Wendy’s spent $20 million pre-launch and hired roughly 20,000 people. Not to mention, it was ready to pull the lever with March Madness (Wendy’s is a sponsor of the NCAA). That, naturally, never happened. But all things considered, Wendy’s managed to finish the year with breakfast mixing 7 percent of sales, and the category contributing roughly 6.5 percent to its U.S. comps in Q4. Breakfast drove a meaningful increase to AUVs and created a profitable channel franchisee felt confident investing in for the long-haul the recovery topic, though, continues to center on “mobility.” CEO Todd Penegor Wednesday said Wendy’s has begun to see “a little more mix” in the 7–9 a.m. window, yet it remains uncertain how guests’ routines will ultimately settle. That fact is only reinforcing Wendy’s approach. From the outset, the brand differentiated from past breakfast efforts on profitability, low labor (drive-thru only), speed, and ensuring the company had marketing powder available to throttle trial. COVID hasn’t slowed those efforts. Penegor said Wendy’s breakfast awareness today is at Burger King’s levels, “and they’ve been in breakfast business for a long time.” “Our repeat is really strong,” he added. “So if we can get the trial to happen, we can help get a lot of repeat [visits], which will help ingrain the habit going forward.” Wendy’s ended Q3 with breakfast mixing 7.5 percent of total sales. The upward result is encouraging, Penegor said. Wendy’s always suggested it would take three years to drive awareness to breakfast.

And that outline didn’t factor in a global pandemic. “But it is coming back,” Penegor said of the daypart overall. “And we want to stay ahead of the curve.” Throughout Q3, Wendy’s pulsed deals like a $1.99 croissant and 2 for $4 offer. Now, there’s a $1 breakfast biscuit promotion. “We’re trying to be fast, we’re trying to be accurate. We’re creating the highest customer satisfaction during that daypart in our restaurant today,” Penegor said. “And as we look forward to next year, it will give us an opportunity to finally start to innovate and bring some news to the category with the support and success we’ve had to bring our franchise system along for that journey.” Wendy’s gained morning meal traffic share in Q3 within the quick-service burger category. It’s to the point, Penegor said, where the brand has moved into the No. 3 spot overall (presumably behind McDonald’s and Burger King). That took only a year and a half, Penegor said. In April, when Burger King executives told investors the brand was putting breakfast “square in its insights the daypart mixed about 13 percent of sales. RBI CEO Jose Cil said then: “We think it could be a much bigger part of our business long-term, and we’re making the similar investments in terms of quality and making sure we have a broader offering, both on product and beverage and making the commitments for investing behind that with media as well as with digital.”

Where Wendy’s and Burger King Stacked up in 2020

Wendy’s expects year-over-year breakfast sales to grow about 20–30 percent in 2021. The chain also plans to invest $25 million in advertising this calendar as it chases long-term goals of 10 percent mix or a $1 billion business. Wendy’s breakfast advertising is currently about 20 percent higher than last year. Penegor said the effort halos back to the rest of the day with a strong quality message. “The folks that are trialing our breakfast are getting some very high-quality food that gets them confident in the rest of the day,” he said. As a business, before COVID, Wendy’s guests visited about 5.5 times a year. That’s upped to 6.5. Breakfast played a role, Penegor said, as well as digital and Wendy’s omnichannel efforts across all dayparts. Very early on, the pandemic shot drive-thru mix north of 90 percent of Wendy’s business. While an anchor the brand was happy to lean on, it had to consider outlets to alleviate pressure as lines kept getting longer. And so mobile grab-and-go and curbside picked up. “I think all of those things will help drive our business moving forward just on a core operational metric perspective,” Penegor said. “And I think that’s where the consumer wants to go. They expect speed, convenience, and affordability from Wendy’s, and we want to continue to deliver that on that and differentiate with quality.” If you consider those drivers, he continued, there’s clear whitespace for breakfast, which is why Wendy’s is driving so hard on trial. And the quality differentiator sits atop the priority list. It’s led to innovation in the company’s Made to Crave lineup and, perhaps more noticeably, a “game-changing” fry innovation that focused on a hotter and crispier product that holds better for off-premises. Announced in October, Penegor said consumers prefer the option 2:1 to McDonald’s fries. “We believe we have a winner with this product,” he said.

Sales, labor, growth in the outlook

Wendy’s U.S. same-store sales increased 2.1 percent in Q3 after lifting 7 percent in the year-ago period (the best result of 2020 for the brand). The somewhat muted quarter was tempered by “several macroeconomic factors that others across the industry experienced related to staffing and shipping mobility due to the Delta variant,” Penegor said. Without these realities, CFO Gunther Plosch added, Wendy’s believes its same-store sales would have been line with expectations. Year-over-year company restaurant margin decreased 250 basis points thanks to higher than expected labor rate inflation of nearly 9.5 percent, commodity inflation of about 3 percent, lower local advertising spend in the prior year, and customer count declines. These were partially offset by higher average check, bolstered by digital orders and premium products like the Bacon Cheddar Cheeseburger. Wendy’s domestic digital sales mix exited Q3 at 8 percent. Loyalty program members hiked 10 percent, quarter-over-quarter, to roughly 19 million. Wendy’s has increased its loyalty base by 7 million since the start of the year. Plosch doesn’t expect pressures to lessen near-term. The company predicted an increase in commodity and labor rates, “which we are now expecting to be inflationary approximately 4 percent and 7 percent to 8 percent, respectively,” he said. The trickle-down nature of the staffing shortage is hard to miss these days. Penegor said Wendy’s faced “inconsistency” in Q3 stemming from the fact it operated with fewer dining rooms than Q2, on average—85 versus 95 percent. So consumer demand was moving one way up the recovery curve while labor worked downstream. “That does put pressure or our digital business,” he said. “When you think about mobile grab-and-go when you think about delivery folks coming into the restaurant. [When] you think about throughput that happens in the drive-thru. You do see throughput challenges with staffing tighter.” Getting new employees constantly trained affects that equation, too. While applicant flow is picking up, Penegor said, and staffing is improving a bit, it’s still not enough to get ahead of where the brand wants to be. “One of the big keys for us is to get our dining rooms open to really support taking pressure off of the drive-thru and support our digital business moving forward,” Penegor said. Staffing slowed late-night business as well. “And that’s a big growth area where we think there’s a lot of opportunity when we get ourselves staffed in those hours open,” he added. As a company, Wendy’s is still pacing toward 7,000 restaurants by the end of the year. Its pipeline of nearly 200 potential franchisees lays the groundwork for 8,500–9,000 by year-end 2025. In 2021, Wendy’s expects 2 percent-plus growth and 1 percent in the U.S. (10 percent international). An agreement with REEF adds 700 delivery-only units over the next five years. The chain opened 50 stores net in Q3 but 90 percent of the units needed to get to that 7,000 figure are under construction, Penegor said. The remaining 10 percent is nontraditional stores and REEF builds, which typically move much quicker. Source: QSR.

The Dine-In Experience: Still the Heart of the Restaurant Industry  . . . .

Will the Pandemic Kill Dine-in As we Know it? The Answer Isn’t so Simple

In the current day and age, how do we define what is or isn’t a restaurant? It is a straightforward question, yet difficult to answer. Industry professionals and consumers alike could debate this for days and never arrive at a consensus; a point proven by looking at definitions from several dictionaries. When I turn to my old-school yet trusty 2001 edition of Webster’s Desk Dictionary, I find a very simple entry: an establishment where meals are served to customers. Fast-forward to a contemporary resource at Dictionary.com, and the definition is identical. The most recent Webster’s definition found online says –  A business establishment where meals or refreshments may be purchased. Cambridge? A place where meals are prepared and served to customers. What of Oxford? A place where people pay to sit and eat meals that are cooked and served on the premises. I could cite additional sources, and the result would be a compilation of nuances that add fodder to the debate. If the most general textbook definitions were applied, the list of establishments qualifying as a restaurant would extend deep into the world of retailing. Virtually every convenience store, grocery store, and cafeteria would make the list, as would every store that sells food within its four walls. Every food truck, snack stand, and kiosk earn a spot. Why does any of this matter? Because to answer the question of whether dine-in is “dead,” we must consider the universe within which the dine-in experience resides. Herein lies the challenge: arriving at a consensus of what a restaurant is. Some would argue that a dine-in experience is at the core of being a restaurant. If you aren’t preparing and serving a meal to a guest on-site, then you are … well, something else; perhaps the close relative of a true restaurant, or maybe a distant cousin.

But not an authentic restaurant. I find merit in this point of view. The kitchen may be the engine, but it is the dining room where we feel the pulse of the business; where we see the satisfaction on the faces of our customers; satisfaction derived from great food and the value of communion, not only among the patrons at the table but with those who serve them. It is where we find the true heart of the business; where we experience the joy and pride derived from providing delicious food and heartfelt service. Yet at the same time, our industry has evolved in ways that have moved restaurateurs further and further from the classic restaurant experience. The evolutionary tale spans decades, and many are the restaurant variants we find in today’s marketplace. A myriad of factors has driven these changes. The pandemic has punctuated the evolutionary tale, but thankfully, it is not akin to an extinction event. Restaurants, and the dine-in experience that define the industry more than any other element, have not gone the way of the dinosaur. It is too early to predict whether a post-pandemic world will bring with it the release of pent-up demand coupled with a renewed appreciation for the dine-in experience. Early in the pandemic, some were predicting just that, and latching on to the idea that we would have a redo of the “Roaring Twenties” of a century ago. But much time has passed, and as the weariness of the pandemic grates on us, we seem to hear less of such prognostications. There is a fascinating aspect to all this, courtesy of the pandemic. At its lowest point, the dine-in business was almost extinct. Virtually down to zero. To survive, many restaurants had to, at least temporarily, reinvent themselves. Many borrowed from the playbook of their brothers and sisters from the outer fringes of the restaurant community, including the universe of grocery and convenience stores. And now, the traditional community is building back; rising to the point that it would have presumably fallen if not for the intervention of the pandemic. Prior to 2020, there was arguably too much dine-in capacity relative to demand. Traffic counts and average unit volumes for casual dining brands and independents alike had been in decline, yet new restaurants perpetually appeared, which cut the pie into smaller and smaller slices. The pandemic has changed that. The opportunity now exists for a reset when it comes to restoring health to the world of traditional restaurants and the dine-in experience. If I were a full-service restaurateur, I would relish the thought that the segment was headed for a renaissance. Granted, there is much discussion within those circles about how their fortunes are tied to the retention and even growth of off-premises business during the months and years ahead.

But if I were in their camp, I would be placing my bet on the winners being those who excel at providing the elements of a guest experience that comprise the heart of the restaurant—in the dining room.  But what of the dine-in experience for quick-service and fast-casual restaurant brands in the post-pandemic world? Every brand is faced with sizing up the role that dine-in business plays in their future; a one-size-fits-all strategy is not in the cards. Some fast-casual brands will lean into a post-pandemic revival in their dining rooms; the nature of their cuisine and the culture of their brand will lead them in that direction. On the other hand, brands that have experienced disproportionate success in growing their off-premises business will likely double down on that success. To date, it does not appear that the increases in dine-in business seen during the rebound of casual dining are coming at the expense of off-premises transactions. It is not to say that a brand cannot aggressively seek to grow their business for both off-premises and dine-in, but my prediction is that most brands will assess their opportunity as being stronger in one arena or the other and invest their resources accordingly. Will some brands abandon dine-in altogether? Possibly, but I think this will be rare. Even if their dine-in business has been in decline in recent years, most brands do not have the luxury of summarily dismissing a double-digit portion of their average unit volume. Some operational benefits may be realized, but it is unlikely that it produces enough cost savings to offset the contribution margin generated from the dine-in portion of the business. Operators may experience a paradigm shift and view their dine-in business as generating the cream of their profitability, even if it represents a proportionately lower percentage of their overall sales. In the end, I believe that the industry will reach a new, healthier point of equilibrium. It is difficult to cite many positives that stem from the pandemic, but one of them may well end up being the opportunity to hit the reset button, and a better dine-in experience may come about as a direct result. Our industry will be better off for it. Don Fox is Chief Executive Officer of Firehouse of America, LLC, in which he leads the strategic growth of Firehouse Subs, one of America’s leading fast-casual restaurant brands. Under his leadership, the brand has grown to more than 1,190 restaurants in 46 states, Puerto Rico, Canada, and non-traditional locations. Don sits on various boards of influence in the business and non-profit communities and is a respected speaker, commentator, and published author. In 2013, he received the prestigious Silver Plate Award from the International Food Manufacturers Association (IFMA). — Source: QSR.

IHOP wants to double its historical rate in two years, while Applebee’s hopes to return to growth. . . .

Applebee’s, IHOP Seek ‘Audacious’ Growth Goals

IHOP and Applebee’s have spent a significant period putting net growth on hold and removing underperforming, lower-volume restaurants. When Applebee’s president John Cywinski took over in March 2017, the brand had a little more than 2,000 restaurants systemwide. Four and a half years later, the chain cut a net of more than 300 units and slimmed to 1,689. The executive described the timeframe as “optimizing the brand” and “pruning up the system.” IHOP witnessed a similar decline, although more recent. After reaching 1,841 restaurants at the end of 2019, the breakfast chain removed a net of 91 stores, leaving it with 1,750 to conclude this year’s third quarter. But as Dine Brands CEO John Peyton examines the casual-dining landscape more than 18 months after COVID struck the U.S., he can’t help but feel bullish on the future. Applebee’s same-store sales lifted 12.5 percent in Q3 compared to 2019, up from 10.5 percent growth in the previous quarter. IHOP’s comps dipped 0.4 percent, but it’s an improvement from the 3.4 percent decline in Q2. Both chains outperformed their respective categories in the third quarter versus 2019, according to Black Box Intelligence. Research tells Peyton casual and family segments will fully recover by 2023. Also, he found 44 percent of consumers will increase visitations to restaurants as COVID recedes, and 35 percent will go as often as they did before the pandemic. With those metrics in mind, Applebee’s and IHOP feel as if though they see the ever-elusive light at the end of the tunnel. In turn, the chains are focused on long-term growth, with “audacious goals,” including Applebee’s returning to net unit growth in 2023 and IHOP doubling its historical unit growth by the same time. To fuel this effort, Dine Brands recently hired three new vice presidents of development, Jake Barden (IHOP), Don Rayburn (Applebee’s), and Enrique Kaufer (international), who have combined experience from Burger King parent Restaurant Brands International, Starwood Hotels, Brinker, Yum! Brands, GNC, and John Bajus. “Our hopes and expectations for Jake and for all of our VPS are to bring a strategic approach to the way in which we develop our restaurants, and the way in which we work with our franchisees,” Peyton said during Dine Brands’ Q3 earnings call. “And when I say strategic I think that we can be much more assertive as an organization in bringing opportunities to our franchisees and doing extensive analysis of the markets to demonstrate the potential for new restaurants and that we can move from being order takers to bringing the market and the opportunities to our franchisees.”

Sun Holdings recently acquired 131 Applebee’s across 14 states

Peyton said Applebee’s plans to close fewer than 1 percent of its portfolio next year. The chain has deals in place for a number of franchisees to build more than 15 restaurants in the near term, with some being traditional, and others being conversions. He described operators as having a “high level of enthusiasm,” and he expects growth to accelerate moving forward. “We’ve been building to this and setting the system up for this new level of growth and this very modest closure rate for quite a while; pandemic got in the way of us activating it,” Peyton said. “But we’re ready now, and we’re moving forward beginning next year.” The enthusiasm Peyton referenced is best exemplified by Sun Holdings, a large franchisee that recently acquired 131 Applebee’s across 14 states, becoming the second-largest operator of the brand. The company certainly has the resources and scale to push for development; it operates more than 1,000 locations in over a dozen states, including Taco Bueno, Burger King, Arby’s, McAlister’s, IHOP, Popeyes, T-Mobile, GNC, and a number of airport restaurant locations. “We are impressed with Applebee’s comeback and double-digit same-store sales growth in Q1,” Guillermo Perales, president, and CEO of Sun Holdings said in a statement. “Their long-term performance combined with a plan for continued growth has not only cemented Applebee’s leadership position but has prepared the brand for an expanded leadership role, in the segment.” “We see tremendous opportunity in this premium brand, backed by an innovative culture and highly attractive economics,” he continued. “This vertical significantly expands Sun Holdings’ infrastructure and potential for future growth and expansion opportunities.” For IHOP, the development will become more strategic, brand president Jay Johns said. The executive explained it will be less about hitting numbers and more about how the chain is completing market planning for existing and new territories. Historically, IHOP has developed about 40 units per year, but the plan is to increase that to 80 by 2023. In August, Johns revealed a four-platform growth strategy of traditional units, nontraditional stores, a smaller prototype that will start testing later this year, and the roll-out of fast-casual spinoff Flip’d by IHOP. The company has already made progress on more than one of those fronts. Earlier this year, IHOP announced that it signed a deal with investment company K2 Group to open at least five nontraditional restaurants across Ontario, Canada in the next five years. The first will be a truck stop location at the start of 2022. Additionally, in September, the first Flip’d by IHOP outlet opened in Lawrence, Kansas, after plans for the first casual were initially unveiled at the end of 2019. The next location is expected to open in New York City in the “very near future,” Johns said. The original strategy was focused on metropolitan cities, but now the plan is to debut the concept in suburban areas and nontraditional locales, as well.

IHOP’s fast-casual spinoff has designs to grow.

The key, Johns said, is that each of the four formats can be completed through conversions, an opportunity that has greatly increased given the thousands of restaurants that have closed during the pandemic. “Obviously the economics are very good on conversions,” Johns said. “And we’ve been seeing about half of the pipeline over the last year or so has been conversion opportunities. We’ve got about 600 restaurants in our system now that are conversions. So we’re very good at doing this.” We’ve got a lot of experience doing it,” he added. “And then we’ve got our new platform I’ve been talking about with Flip’d and our small prototype. And I think that’s going to open up more territory still. And I think in some markets there’s a lot of opportunities to bring in some new franchisees, as well, into the system besides the ones that we already have.”As Applebee’s and IHOP move into their next development phase, both will do so with an operating model built to handle convenience. Applebee’s off-premises sales increased by 3.3 percent year-over-year in Q3 and accounted for 27.5 percent of sales. Overall, the chain’s breakdown was 73 percent dine-in, 15 percent car-side to-go, and 12 percent delivery.IHOP’s off-premises mix dropped by 3.2 percent, but still accounted for 23.3 percent of sales, more than double what it was in 2019. The overall sales mix for IHOP in Q3 was 76.7 percent dine-in, 13.1 percent delivery, and 10.2 percent to-go. To build its off-premises presence, the breakfast concept plans to dive into virtual brands and launch a loyalty program. Johns said the goal is to pilot the loyalty program in Q4 and roll it out systemwide in the first half of 2022. Applebee’s earned $51,400 in average weekly sales per restaurant in Q3, growth from $45,000 two years ago. IHOP saw $36,2000 in average weekly sales per restaurant, a slight bump from $35,700 in 2019.

— Source: FSR.

Sabir Sami, new chief executive officer of Yum! Brands’ KFC Division . . . .

KFCT New CEO for 2022

When KFC rings in the new year it will do so with a new leader. KFC’s parent, Yum! Brands Inc. announced on Sept. 22 that Sabir Sami has been promoted to the chief executive officer of the KFC Division, effective Jan. 1, 2022. Sami will succeed Tony Lowings, who will step down as CEO at the end of 2021 in advance of retirement in early 2022. Sami currently is the chief operating officer of the KFC Division and managing director of KFC Asia. In his new role, he will assume global responsibility for driving the brand strategy and performance of KFC. “Sabir is an exceptional leader with deep expertise and knowledge of our business and has a strong, proven track record of growing KFC’s physical and brand presence in markets around the world,” said David Gibbs, CEO of Yum! Brands. “As a highly-respected strategic brand builder, operations expert, and heart-led leader, Sabir is a natural choice to continue successfully executing KFC’s long-term global growth strategies in close partnership with our franchisees and further elevate KFC as a relevant, easy and distinctive (R.E.D.) brand.” Prior to his most recent role, Sami was managing director for the Middle East, North Africa, Pakistan, and Turkey markets. He also has worked as general manager for the KFC Canada and Turkey businesses. Prior to Yum!, he held various leadership roles at Procter & Gamble, the Coca-Cola Co. and Reckitt Benckiser. “I’m incredibly privileged and excited to continue working with our talented and dedicated KFC leaders and amazing franchise partners around the world to keep strengthening and accelerating the development of our powerful, iconic brand,” Sami said. “KFC is uniquely positioned around the world as a well-loved, well-trusted brand with millions of fans — the future is certainly bright.” Yum! Brands also announced Dyke Shipp has been promoted to president of the KFC Division, effective Jan. 1, 2022. Shipp currently is the chief development officer and chief people officer for the KFC Division. In his new role, Shipp will partner with Sami on KFC’s global people and growth agenda and support the general managers of its businesses in the Americas, including Canada, the United States, and Latin America, and the Caribbean.

Shipp has more than 30 years of experience with Yum! Brands. “Dyke brings a wealth of knowledge, expertise, and strategic acumen to this role, along with a commitment to nurturing an inclusive, high-performing culture,” Sami said. “Dyke is a seasoned leader with a strong track record of delivering impactful results. I look forward to partnering with Dyke as we work toward the next chapter of growth for KFC.” Lowings has been with Yum! Brands and KFC for more than 27 years, leading the KFC brand since 2019. Throughout his career with the company, he has held a number of leadership positions, including president and COO of the KFC Division, managing director of KFC Asia-Pacific, and managing director of KFC SOPAC (Australia and New Zealand), among others. He will remain CEO of the KFC Division through the end of 2021 to ensure a smooth and seamless transition. He will remain with the company in another capacity supporting transition needs into the first quarter of 2022, the company said. “I want to thank Tony, a trusted colleague and dear friend to many, for his decades of service, commitment to excellence, and significant contributions to our business,” Gibbs said. “Tony’s unwavering focus on ensuring restaurant excellence, building a R.E.D., Always Original brand, and winning on KFC’s delicious taste and quality will leave a long and lasting imprint on our company. While we will miss Tony, we wish him well as he enjoys this new phase of life with his family.” Source: Yum! Brands, Inc.

McDonald’s to test US ‘McPlant’ in November

McDonald’s Corp. will launch a small-scale test of the McPlant in eight select stores for a limited time starting Nov. 3.

“The McPlant includes a plant-based patty co-developed with Beyond Meat that’s exclusive to McDonald’s and made from plant-based ingredients like peas, rice, and potatoes,” the company said. “The patty is served on a sesame seed bun with tomato, lettuce, pickles, onions, mayonnaise, ketchup, mustard and a slice of American cheese. It has the iconic taste of a McDonald’s burger because it is one.” Cities with test locations will include Irving and Carrollton, Texas; Cedar Falls, Iowa; Jennings and Lake Charles, La.; and El Segundo and Manhattan Beach, Calif. McDonald’s previously introduced the McPlant in various markets abroad, including Sweden, Denmark, the Netherlands, Austria and most recently the United Kingdom. The company noted that the McPlant in the United States contains non-plant-based ingredients such as American cheese and mayonnaise and is cooked on the same grill as meat-based products and eggs. Guests can customize and request to hold the cheese and mayonnaise, or any other ingredients, McDonald’s said. Source: McDonald’s Corp.

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