Electrolux Professional, Middleby are said to bid for Welbilt’s Manitowoc Ice unit

Electrolux Professional and Middleby Corp. (NASDAQ: MIDD) are said to be bidding about $1.2B for Welbillt’s (NYSE: WBT) Manitowoc ice business as part of Ali Group’s attempt to gain regulatory approval for its planned purchase of Welbilt.
Electrolux and Middleby are on the shortlist of bidders for the ice-making unit, according to traders, who cited a Bloomberg report. A winner may be announced this quarter.
Welbilt announced in late September that shareholders approved its sale to Ali Group and that the companies will proceed with divesting Welbilt’s Manitowoc Ice brand to allay concerns of the U.S. Department of Justice. The companies at the time said they expected the sale of Manitowoc Ice in early 2022 and then close the acquisition shortly thereafter.
Recall July, Ali Group acquired Welbilt in a $4.8B enterprise value deal. Source: Seeking Alpha

Systemwide sales grew to more than $112 billion last year . . . .

McDonald’s Rewrites the Record Book in 2021

In Q4, U.S. same-store sales rose 7.5 percent year-over-year, and 13.4 percent on a two-year basis, with growth across all dayparts. A little more than a year ago, CEO Chris Kempczinski proclaimed McDonald’s was entering its “next great chapter.” And he wasn’t wrong. The burger giant’s systemwide sales grew 21 percent to more than $112 billion last year, a new record. Also, U.S. same-store sales lifted 13.8 percent in 2021, year-over-year, lapping the 0.4 percent bump in 2020. This is the highest-recorded comps performance since the chain began reporting the metric in 1993, and it marks the seventh straight year of positive domestic same-store sales. Franchisees, which make up 95 percent of the U.S system, experienced record-breaking cash flow, with an average growth of $125,000 per restaurant. That puts operators over $500,000—a 50 percent increase in the past three years. The company also posted an unprecedented operating income of more than $10 billion. “It’s clear there has never been a better time to be a part of brand McDonald’s than right now,” Kempczinski said during the chain’s full-year and Q4 earnings call. Domestic same-store sales largely benefited from average check growth, driven by the pricing of just over 6 percent in 2021. Traffic remained on pace with 2019 for the most part, with monthly dining visits rising 2.1 percent, 3,8 percent, and 1.1 percent in August, October, and December, according to Placer.ai data. Same-store sales at International Operated Markets increased 21.6 percent in 2021, or 3.4 percent on a two-year basis, while comps at International Developmental Licensed Markets grew 16.6 percent or 4.4 percent on a two-year stack. McDonald’s ended the year with 13,443 domestic units, a net decline of 239 locations. That comprises 12,780 franchises and 663 company-operated stores. Globally, there were just north of 40,000 restaurants or a net growth of 838 outlets. China, which finished 2021 with 4,395 stores, saw the net new unit expansion of 608 units, the most of any country. The chain projects between $2.2 billion and $2.4 billion in capital expenditures for 2022, with about 40 percent allocated to the U.S. business. Globally, the brand aims to open more than 1,800 restaurants, and achieve net new unit expansion of about 3.5 percent—the best growth rate in more than 20 years, according to financial analysis firm BTIG. “While we find it a little peculiar that McDonald’s and other large chains are accelerating development in the face of sky-high labor costs and shortages, we believe these brands could see an opportunity to take more share from smaller chains and independents,” BTIG analyst Peter Saleh said in a note. Of those 1,800 (gross) restaurants, more than 500 will come in the U.S. and International Operated Markets, while the remaining 1,300 will open in International Developmental Licensed Markets, including 800 in China. BTIG estimates the U.S. will see 150–200 net new locations, which would be the first year of positive growth in eight years. CFO Kevin Ozan said capital expenditures were lower than originally anticipated in 2021 for a variety of reasons, such as delays in obtaining permitting and construction materials. He believes the environment is improving, but it’s still not back to where it was prior to COVID.

“But the [2022] guidance we’ve provided related to both CapEx and openings, we feel pretty good about both of those, but we’ll keep an eye on those as the year progresses to make sure that it’s advancing the way we expect right now from a supply chain perspective,” he said. In Q4, U.S. same-store sales rose 7.5 percent year-over-year, and 13.4 percent on a two-year basis, with growth across all dayparts. Menu and marketing promotions like the McRib, Crispy Chicken Sandwich, and Mariah Carey’s 12 Days of Deals, contributed to increases, as well as a major expansion in digital channels. Comps at International Operated Markets lifted 16.8 percent in Q4, or 8.2 percent on a two-year basis, thanks to strong performances in France, the U.K., Italy, and Germany. At International Developmental Licensed Markets, same-store sales increased 12.3 percent in Q4 or 10.1 percent on a two-year stack. The growth was partly offset by negative comps in China due to COVID surges. Digital sales surpassed a record $18 billion in 2021 and mixed more than 25 percent in the chain’s top six markets. In some countries, digital accounts for north of 50 percent, like China and France. MyMcDonald’s Rewards, the single-biggest driver of digital adoption, exceeded expectations in enrollment and participation, Kempczinski said. After launching in the U.S. six months ago, there are more than 30 million loyalty members and 21 million active users earning rewards. The program boosts frequency by more than 10 percent.

Loyalty programs are now in more than 40 markets globally.

The McDonald’s app was downloaded 24 million times in 2021, by far the most in the quick-service industry, according to Apptopia, a real-time competitive intelligence company. The next closest was Starbucks at 12 million. Although Kempczinski didn’t have exact numbers on how much loyalty mixes, he did note that app usage in the U.S. runs in the mid-single digits. Loyalty programs are now in more than 40 markets globally, with the U.K. and Australia to come online in the first half of 2022. “We’re well on our way to building the world’s largest loyalty program,” Kempczinski said. Delivery has expanded to more than 33,000 restaurants in 100 countries, and in Q4, the channel witnessed double-digit comps growth year-over-year. McDonald’s signed long-term strategic partnerships with Uber Eats and DoorDash that will “unlock tremendous value for our customers and franchisees, helping to ensure the long-term profitable growth of delivery,” the CEO said. Drive-thru sales continue to be higher than pre-COVID, but average service times slowed year-over-year due to staffing shortages. Kempczinski said one key will be opening more service channels to reduce pressure on the drive-thru. About 80 percent of dining rooms are open, and the expectation is that number will keep rising. “Every market is laser-focused on opportunities that we can have to get back to continuing to make progress on reducing service times,” Kempczinski said. “The reason that that is so important is that when we reduce service times, we see customer satisfaction go up.” For the full year, the adjusted operating margin was 43.4 percent. In 2022, McDonald’s expects operating margin percent to be in the low-to-mid 40 percent range, as “strong topline momentum and minimal other operating income will be hampered by significant commodity and labor inflation,” Ozan said.

Food and paper costs increased 4 percent in the U.S. and 3.5 percent internationally last year, and the belief is that inflation will double. Most of the pressure will come in the first half of 2022 and ease as the year goes on.

As for labor pressures, only 1 percent of restaurants are operating with limited hours, an improvement from 10 percent in mid-December when Omicron began ravaging the country. Kempczinski said McDonald’s exited 2021 with a greater roster than what it started with. Last spring, McDonald’s announced it was raising the pay of hourly workers at company-run stores to an average of $13, but the chain doesn’t expect a one-time event of that magnitude again in 2022. In light of these pressures, the company maintains that it’s well-positioned with pricing compared to its competitive set. “What helps us from a research standpoint is the way consumers view value and the perspective of value,” Ozan said. “And I think in 2022, that will continue to be really important as inflation is hitting customers potentially harder than it’s hit people in a long time. And so we’re very cognizant of making sure that our value proposition continues to be strong. And so we do look at kind of absolute pricing compared to just increases also.” – Source: QSR.

Growing portfolio company affiliated with Triton Pacific Capital Partners sees more opportunity for add-on acquisitions . . . .

Tasty Chick’n LLC Acquires 90 KFC Franchised Units Across Eight States

Los Angeles-based franchise operator Tasty Chick’n LLC has completed the acquisition of 90 KFC units across eight states, the company said.

Tasty Chick’n is part of the restaurant management company Tasty Restaurant Group, which is affiliated with private-equity firm Triton Pacific Capital Partners. The restaurant group manages close to 370 quick-service restaurants on behalf of Triton Pacific-sponsored funds, including Pizza Hut, Burger King, Dunkin’, Baskin-Robbins, KFC, and Taco Bell across 16 states.

The 90 KFC units include 15 KFC/Taco Bell combination restaurants, which the company said will provide an entry point into the Taco Bell brand. Terms of the deal were not disclosed and Tasty officials did not identify the seller.

“We are thrilled to expand our relationship with Yum! Brands and are enthusiastic about the future growth opportunity this transaction affords,” said Craig Faggen, Triton Pacific’s CEO. “KFC is a long-standing leader within the chicken category for quick-service restaurants. The industry, however, remains highly fragmented, and the opportunity to purchase a sizable, well-established business such as this is limited. As a platform investment, we view tremendous growth potential through add-on acquisitions and new unit development.”

In 2021, Tasty Chick’n acquired 21 Dunkin’ locations, and in 2020 Tasty Restaurant Group picked up 37 Pizza Hut locations in Virginia and West Virginia, as well as five Burger King units in Iowa. — Source: NRN.

The sale of 13 KFC units in Oklahoma marks the latest in an ongoing series of multi-brand acquisitions . . . .

M&A Activity Heats up for Franchise Operators

With franchise operators seeing opportunities for consolidation, a growing number of restaurant locations are changing hands.

Tulsa, Okla.-based Schoenhofer Enterprises, for example, recently announced the sale of 13 KFC franchise locations in Oklahoma to SC Food Group LLC. The buyer is owned by multi-concept operator MBN Brands, which also owns and operates Jimmy John’s, Burger King, IHOP, and Little Caesars restaurants.

Denis Schoenhofer, a third-generation franchisee whose family has operated KFC restaurants since Col. Sanders’ early days, said the company is focused on growth in new and existing markets. The Schoenhofers will continue to operate 23 KFCs in Kansas, Colorado, New Mexico, Texas, and two cities in Oklahoma: Bixby and Durant.

This sale is among several announced in recent months, though none disclosed terms. Here are a few examples of franchised restaurants changing partners. – Source: NRN.

The burger giant said that it plans to expand the test to 600 stores, increasing the chances of a nationwide introduction . . . .

McPlant is Coming to More McDonald’s Locations

The burger giant on Thursday said it plans to expand its McPlant test to some 600 locations in the San Francisco and Dallas-Fort Worth areas starting Feb. 14. The move is designed to give the company a better sense of consumer demand for the product.

“After planting the seed with a small-scale McPlant test in eight restaurants late last year, McDonald’s USA is expanding the test to select restaurants in your area to help us understand customer demand,” the company said in an update of its announcement of the original eight-store test.

But the expansion also continues the product’s path toward a potential national introduction, which could happen as early as next year. The company, however, has not shared any plans for any broader introduction.

The announcement confirms an earlier report from BTIG analyst Peter Saleh indicating that the company would bring the plant-based burger to more markets this year. The burger is made in partnership with Beyond Meat using ingredients such as peas, rice, and potatoes.

Saleh suggested at the time of his report that the burger could make its introduction on nationwide menus as early as 2023.

McDonald’s has been conducting its limited operations test of the McPlant at eight locations. Saleh suggested that the McPlant was selling well in the limited test, with about 70 of the burgers sold per restaurant, per day.

McDonald’s has been toying with plant-based burgers for years as rivals such as Burger King jumped head-first into the trend. The company tested a plant-based burger in Canada starting in 2019 and then in 2020 announced the creation of the McPlant, giving global markets the option for putting the plant-based burger on their menus.

Various countries have since tested or added the product to its menu, including the U.K., Sweden, Denmark, the Netherlands, and Austria. But the U.S., where McDonald’s has 13,800 locations, is the company’s biggest market.

The addition of the product to McDonald’s menu would take the plant-based meat trend even further into the mainstream. The company is by far the biggest restaurant chain in the U.S. Its addition would suggest the chain feels confident that demand for the product is broad enough to support a large-scale introduction.

At the same time, the move presents some risks for McDonald’s. For one thing, it adds a new burger patty at a time when smaller menus have helped its operators serve customers more quickly. That’s important given that up to 90% of the chain’s sales remain in the drive-thru.

It also presents more operations challenges at a time when labor remains scarce and ease of operations is considered an important point for keeping workers on hand.

The product is also not vegan—it is prepared on the same grill in which the chain makes eggs and burgers. – Source: Restaurant Business.

The chain is eyeing 8 percent unit growth in 2022 . . . .

Noodles & Company’s Growth Prospects Remain Strong

Noodles & Company is quite bullish on its prospects in California.

The fast-casual recently named Warner Foods, an operator of more than 150 Jack in the Box, Black Bear Diner, and Panera locations, its exclusive franchisee partner for the entire Golden State. As part of the agreement, not only will the franchisee develop 40 new restaurants in the next 12 years, but Noodles will also refranchise all 15 company-run stores in the state.

Speaking about the deal at the ICR Conference, CEO Dave Boennighausen said Warner Foods is “a great partner” that understands what consumers want and where economic opportunities are throughout California. The CEO believes the state will provide many opportunities, including the rollout of a slimmer prototype.

The franchisee will aim for one opening this year, and three to four debuts per year starting in 2023.

“We’re proud as heck to have Warner Foods join the fold,” he said.

The CEO of the Broomfield, Colorado-based chain doesn’t expect many other opportunities for franchising, but he does think the brand is well-positioned to attract franchisees of the same caliber as Warner Foods.

Part of the reason Boennighausen feels so confident is because of AUV. In Q3 2021 the brand saw AUVs reach $1.38 million, which is nearing the company’s stated goal of $1.45 million by 2024. New locations have realized a 30 percent cash-on-cash return on investment, he said.

Noodles plans to open seven to nine units in Q1, despite supply chain issues and delays in construction plaguing the industry. The goal for the entire year is to expand by 8 percent, meaning about 35 new restaurants. In the years beyond, the benchmark is 10 percent annual growth.

The company’s success can be partially attributed to the strength of its digital presence and loyalty program, Boennighausen said. Before COVID arrived, digital already mixed 30 percent, while off-premises accounted for 60 percent of sales. In Q3, digital represented 52 percent of sales, even as in-restaurant ordering returned to 70 percent of- pre-pandemic levels.

COVID variants have disrupted ordinary operating procedures, (several units were forced to temporarily close as the Delta variant ravaged an already thin workforce) but Boennighausen said the brand is poised for success due to its established digital channels and the portability of its food.

“Our brand resonates so well with trends that we think COVID ultimately accelerated,” he said. “We continue to see that digital occasion as one that is very sticky, one that you continue to see good momentum around. We think there’s still a lot of opportunities for us to do a better job and harvest more from those areas.”

The fast-casual continues to build off a loyalty program that attracts new guests and increases the frequency with more personalized and relevant communication. Rewards membership has grown to about 4 million customers.

The brand is also continuing to leverage third-party delivery partnerships to increase awareness. When new stores enter a market, it takes some time for customers to discover the restaurants because they don’t fall under common dining categories.

“We’re not sandwiches, we’re not Mexican, we’re not burgers,” he said.

Third-party delivery platforms, along with digital efforts, have helped Noodles reach a larger customer base because of its varied menu options.

“From an Uber Eats or DoorDash perspective, if you were to search for health … family, vegetarian, Asian, Italian, Noodles & Company would pop up,” Boennighausen said. “The way our food travels, which is extremely strong … really did bring the brand to life and bring in much larger awareness to the brand.”

The CEO said items like the stuffed tortellini and zucchini noodles have appealed to a wider audience, and more innovation is on the way.  The brand is in the testing phase of a new “LEANguini” that has the “same taste, mouthfeel, and texture” customers expect from a traditional wheat pasta while having fewer carbs and more protein.

Noodles is also working on a “salad refresh.”

“This we feel really rounds out our healthier options,” Boennighausen said. “Together with the salad refresh we’re doing in the next several weeks, you can look to LEANguini to really show off that our menu more so than almost anyone in fast-casual can fit the needs of any dietary preference.”

Testing on an “Asian-based broth” will also begin later this year. The CEO described the new item as being similar to pho or ramen and “a natural fit for our menu.”

Like almost every other restaurant in the industry, Noodles has dealt with inflationary food and labor costs. To combat some of this pressure, the company raised prices twice in 2021—3 percent in August and another 2 percent in December.

The chain expects volatility as 2022 progresses, but Noodles will hold off on additional price increases until the market becomes clearer. If the fast-casual does decide to take more pricing, CFO Carl Lukach said the brand has the dry powder to do so.  – Source: QSR.

The onetime cult favorite has shrunk to five full-fledged restaurants and 128 stations in c-stores and supermarkets. The buyer, the distribution company Harbor Wholesale, intends to grow the brand . . . .

Skippers Has a New Owner and Growth Plan

The remnants of the Skippers Seafood & Chowder fast-food chain, a one-time favorite of the Pacific Northwest, have been acquired by the regional foodservice and c-store distributor Harbor Wholesale from Starway Restaurants LLC.

The price and other terms of the deal were not revealed.

Harbor President Richard Jensen said his company intends to “further develop the concept in the Northwest and beyond. We see a lot of opportunities to build on the signature fish & chips and clam chowder that Skippers is known for.”

Skippers has changed considerably since filing for bankruptcy in December 2006. At the time, the chain consisted of nearly 60 restaurants. Only five full-fledged units remain in operation, all franchised.

But the brand found new life as a food station inside c-stores and supermarkets. About 128 of those scaled-down operations are currently in operation.

Skippers-brand products, including its chowder, are also sold on supermarket shelves.

The transaction marks the latest twist for Skippers, which was founded in 1969 by Herb Rosen. It quickly became known for its chowder, competing head-to-head with the likes of Ivar’s. Other specialties included a variety of fried seafood.

The brand was sold to NPC International, a major Pizza Hut franchisee, in 1986. It would later become a major franchisee of Wendy’s as well. NPC was liquidated last year, with most of the company acquired by the restaurant industry’s biggest franchisee across all brands, Greg Flynn.

Because much of its menu consisted of fried foods, Skippers lost momentum as Americans became more health-conscious. It passed through a variety of owners, each looking to revive the concept until it filed for bankruptcy. The company was liquidated in 2007. – Source: Restaurant Business.

The celebrity chef envisions many Roots Chicken Shak locations run by local operators. . . .

Tiffany Derry is Creating a Franchise Model for Underserved Communities

Tiffany Derry is known for her duck-fat-fried chicken, but her real mission is to make restaurant ownership possible in underserved communities.

Derry’s own background is in fine dining: She earned a culinary degree at the Art Institute of Houston and then cooked abroad in Europe, Latin America, and Asia before working in a number of top restaurants across Texas. She also served her fried chicken at the Obama White House not once but twice and has appeared on TV shows including Top Chef and Bar Rescue.

She and her business partner Tom Foley own T2D Concepts, which operates Roots Southern Table, a casual restaurant in the Dallas suburb of Farmers Branch, Texas, that reflects Derry’s heritage as a native Texan with Louisiana roots. They also operate two Roots Chicken Shak restaurants — one in Austin and one in Plano, Texas — which have a fast-casual business model intended to be replicated in communities where franchised restaurants often decline to go.

“We were looking at that from the very beginning,” Derry said, noting that the restaurant was designed to keep the menu simple and the prices low. It uses thigh meat instead of more expensive breast, and its vegetables are a straightforward mix of lettuce, tomatoes, and onions. It has small footprints to allow for lower rent and ordering kiosks to save on labor.

But Derry and Foley, who is a lawyer by training, are also working on structuring deals to help people in underserved communities — usually people of color and often women — own their own businesses.

They seek loan guarantee funds that will back community members who aren’t creditworthy enough to get loans on their own, and banks interested in improving their ratings under the Community Reinvestment Act, which encourages lenders to assist low- and moderate-income neighborhoods. Those ratings can be taken into account when regulators consider approval for future bank mergers, charters, new branch openings, and the like.

Derry and Foley also want to work with municipalities who have a vested interested not only in improving the lot of their residents but also in expanding their tax base by supporting businesses in communities that don’t have enough of them.

Corporate sponsors could be crucial, too, Derry said, and the communities themselves have to be involved.

“At the end of the day, all of these things have to work,” she said.

And that’s possible. Derry said that at the onset of the pandemic, they started serving free food to underserved communities, and it turned out that those communities had resources of their own, such as connections with vegetables and meat suppliers.

“So we’ve seen the power of the community, and it is strong,” Derry said. “We’ve learned that we have to literally put roots in the community. That’s what changes things.” – Source:  NRN.

Red Lobster announced the hiring of industry veteran Patty Trevino as chief marketing officer, a newly created position intended to refine the brand’s message and elevate customer engagement . . . .

Red Lobster Hires Patty Trevino as Chief Marketing Officer

Red Lobster announced the hiring of industry veteran Patty Trevino as chief marketing officer, a newly created position intended to refine the brand’s message and elevate customer engagement.

As part of her role, she will be responsible for unifying and leading marketing, communications, customer experience and loyalty, and culinary operations. In recent months, the seafood brand has leaned toward marketing value and made an effort to expand its rewards program. Earlier in January, the chain unveiled a new “3 from the Sea” menu offering a soup or salad, appetizer, and entree for $15.99. And this past fall, Red Lobster gave away 1 million My Red Lobster Rewards bonus points in conjunction with National Lobster Day.

Red Lobster will look for more of the same and better from Trevino, who thrives on defining and building brands and strategic communication platforms, the company said. The casual-dining icon chose the marketing expert for her strength in “identifying untapped opportunities, successfully managing and inspiring teams, and delivering best-in-class work to meet business objectives.”

“Red Lobster is an iconic brand. Everyone knows Red Lobster – and of course, the Cheddar Bay Biscuits,” Trevino said in a statement. “I grew up in a small Texas border town, and I remember how excited I was when I finally got to go to Red Lobster. Now, years later, I still think the Red Lobster brand is pretty special, which is why I couldn’t pass up the opportunity to join this incredible team. I think there’s a great opportunity to tap into the essence of the brand and bring that to life for the next generation.”

Trevino previously worked as senior vice president of marketing for Carl’s Jr. and Hardee’s. Before that, she was chief marketing officer for Bonefish Grill, vice president of product marketing for Outback Steakhouse, and director of global brand marketing for Burger King. “Since I joined Red Lobster a few months ago, my goal has been to build an unstoppable, aligned team of expert leaders, that come together to create amazing support for our guests and our employees. I am absolutely thrilled to have Patty join our already incredibly talented team and take on the critical role of aligning and integrating our guest analysis with our menu and message strategies,” Valade said in a statement. – Source: FSR.

The new Spicy Lovers Pizza, launching as an LTO, boasts layers of fiery toppings . . . .

Pizza Hut Turns Up the Heat on Its Latest Pie

Pizza Hut’s new Spicy Lovers Pizza launches Thursday nationwide, tempting heat seekers with layers of fiery toppings.

The limited-time offer includes three bold pizza variations: Spicy Double Pepperoni, Spicy Hawaiian Chicken, and Spicy Veggie.

The heat starts with the sauce. A spicy marinara, kicked up a notch with the addition of hot seasonings, covers the crust.

Then more hot ingredients are layered on. The pepperoni pizza is topped with both classic and crispy cupped pepperoni, red jalapeno peppers, and Fiery Flakes—a custom blend of crushed chili peppers and herbs.

The Hawaiian Chicken subs chicken and pineapple for pepperoni, but also includes spicy marinara, sliced red jalapenos, and Fiery Flakes. Ditto with the Spicy Veggie, a vegetarian option with a  topping of mushrooms, red onion, and green bell peppers.

Each variation wouldn’t be complete without Pizza Hut’s traditional layer of gooey melted cheese.

Pizza Hut intentionally jumped on “one of the hottest trends out there” to craft these pies. The chain cites data from Technomic, Restaurant Business’ sister company, showing that 78% of consumers now enjoy spicy foods and over half of those respondents indulge at least once a week.

“As consumers continue being more and more adventurous with their palates, the launch of Spicy Lover’s Pizza allows Pizza Hut to reach those bold flavor seekers, who are often younger and more diverse, bringing them and their pizza-loving friends and family into the world of Pizza Hut,” a spokesperson said in a statement.

All three limited-time pizzas are available starting Thursday at Pizza Hut locations nationwide. Customers can order them through contactless delivery, carryout, and both curbside and Hut Lane pickup. – Source: Restaurant Business.

The CEO of Chili’s and Maggiano’s leaned on a lifetime of restaurant experience to weather a challenge no one was prepared for, creating a new blueprint for growth in the process  . . . .

Wyman Roberts Led Brinker Over the Bridge and Onto a New Path

Nothing in Wyman Roberts’ 30 years in the hospitality industry had prepared him for March 2020.

Sure, the CEO of Chili’s and Maggiano’s parent Brinker International had dealt with hurricanes and other isolated incidents with difficult aftermaths. But those chapters had a clear beginning and end. Two years ago, there was no precedent or playbook for a dangerous virus shutting down restaurants nationwide and triggering a cascade of related problems that continue to this day.

To get through it, Roberts, a finalist for this year’s Restaurant Leader of the Year award, has depended on skills and instincts honed through a lifetime in restaurants. He has exuded calm without ignoring the trouble the company was in. He has leaned on existing strategies and developed new ones in real-time. He has launched an entirely new restaurant brand—a calculated gamble that paid off in more ways than one.

His dynamic response to a turbulent two years helped Brinker rebound from the depths of the pandemic to its place as one of the most successful brands in the business. But it was more than just a return to form—it was a reimagining of what those restaurants can be.

‘Don’t get paralyzed’

When the pandemic struck, Roberts’ first job was to understand how it would impact the two chains and their more than 1,650 restaurants. Brinker’s finance guys crunched the numbers.

“They came back with a forecast that was kind of similar to what we typically do in a tough time,” Roberts said—losses of 3% or 4%. The CEO dismissed the projections out of hand.

“No guys,” he told the team. “This is a different thing. This is gonna be big.” Weeks later, same-store sales at Brinker’s company-owned restaurants had plummeted more than 64% year over year.

Outwardly, Roberts worked to relay a sense of calm across the company. He wanted to express comfort and optimism. “Don’t get paralyzed,” he said.

That started with maintaining a presence, both physically and virtually. While many offices across the country shifted to remote work, Brinker leadership remained in the company’s Dallas headquarters.

“Right or wrong, we stayed in the building,” Roberts said—a signal of commitment and stability.

Leadership also stepped up their communications with staff. They hosted live quarterly town halls and made sure they saw restaurant leaders regularly, even if it was over video. Roberts’ mantra to his teams during that time: “We’re crossing a bridge, and we just gotta get over the bridge, and we’re gonna take everybody we can with us over the bridge.”

At the restaurant level, some smart pre-pandemic investments allowed Brinker to pivot quickly when dining rooms had to close. It had offered delivery since 2019. Other technology, like tabletop ordering tablets, was moved into the parking lot to support takeout, allowing restaurants to essentially turn inside-out.

“We just got after it and had a lot of the technology and partnerships in place to be able to do it successfully and not miss too much of a beat,” Roberts said. He called the process “invigorating.”

‘Be bold and let’s go’

Technology was also the enabler for the company’s biggest pandemic-era move: the launch of It’s Just Wings, a delivery-only virtual brand that could be run out of existing kitchens and help generate sales.

Brinker had tested two other such brands, and It’s Just Wings was on deck to go through the usual pilot process. It would start in a handful of restaurants, incorporate tweaks and gradually scale up. But the pandemic made that difficult because the leadership team couldn’t travel, and it had become clear that the virus wasn’t going away anytime soon. So in the summer of 2020, Roberts did something bold: He pulled the trigger on It’s Just Wings, launching it in more than 1,000 Chili’s overnight.

His thinking: Brinker had the infrastructure to make it happen through its partnership with DoorDash. It had familiarity with virtual brands from previous tests. And it had all those kitchens with a capacity to spare.

“Now’s the time to just be bold and let’s go,” he said.

It’s Just Wings was an instant success, generating $170 million in its first year. More importantly, Roberts said, it sent the message that the chain was not going to simply hunker down, cut costs and wait for this thing out—it was going to use its scale and expertise to grow.

“[t’s Just Wings] worked from a financial perspective … but just as much as a cultural statement to our people,” Roberts said.

It also proved a point in the casual-dining segment, which had long been criticized as being overbuilt.

“What we said is it’s not overbuilt, maybe it’s just underutilized,” Roberts said. “We just have to figure out how to get more out of [the restaurants] versus trying to build more and more of them.”

It’s a philosophy that has now become almost conventional wisdom in casual dining, where many big chains have launched virtual brands and other sophisticated off-premise strategies.

‘The nature of the business’

These innovations, along with the arrival of vaccines and a sense that the worst had passed, really began to gel last spring. Chili’s sales turned positive again, surpassing pre-pandemic levels by 8.5% in the quarter ended in June 2021. The more upscale Maggiano’s was slower to recover, but comps had returned to their pre-pandemic baseline by the end of September. More than 30% of Brinker’s business was coming from pickup and delivery, up from the high teens before the pandemic.

“All of the things we had been doing to set ourselves up, both in the base business and the virtual brand business, started to become unlocked as the country thought they were coming out of COVID,” Roberts said.

Of course, the following months had a few more curveballs in store. Labor shortages, supply chain snarls and ballooning inflation have been enough to make any restaurateur question their career path. But Roberts said the ongoing barrage reflects what he loves most about his job.

“The thing I like about restaurants is it’s dynamic,” he said. “It’s real-time. And so I just think that it’s been more dynamic than ever before.

“We could afford to have it settle down a little bit, but that’s just the nature of the business.”

Roberts seems to relish facing these storms head-on. Last year, when a distributor didn’t have enough drivers to adequately deliver the product, headquarters staff rented U-Hauls, loaded them in the parking lot, and covered the last leg of the delivery themselves.

“We did that for several weeks,” he said. “That’s what we had to do to get through it.”

Indeed, Brinker has stayed on its toes amid the shifting currents. To better compete for workers, it started using technology to ease the application process, which can now be done in seconds via text message. It raised menu prices about 3% to combat inflation, though not as aggressively as competitors, prioritizing traffic as it rides out what Roberts views as short-term cost pressures.

It has more workers in its restaurants today than it did before the pandemic (though “there are still pockets,” Roberts said, and the latest wave of COVID-19 cases is causing daily callouts). It has beaten the category on traffic in every quarter for the past three years. “That’s going to pay off long-term when people are more comfortable going out.”

Asked whether, knowing what he knows now, he would have done anything differently in March 2020, Roberts thinks for a moment before joking: “I would have bought a lot of steaks.”

Supply chain issues aside, Roberts has led Brinker across that bridge and into an even better place. He has no reason to look back now. – Source: Restaurant Business.

A self-avowed perpetual entrepreneur, Restaurant Leader of the Year finalist David Overton relies heavily on personal preferences and his own tastes in running what’s now a multi-billion-dollar company sporting a multitude of brands . . . .

Meet Cheesecake Factory’s Customer Advocate, He Also Happens to Be the CEO

Amazon has a policy of including an empty chair in its headquarters meetings to represent the customer. The Cheesecake Factory prefers a flesh and blood representation in the person of its CEO, David Overton. Any item on the polished-casual chain’s voluminous menu is there because Overton liked it, a gauge that has proven eerily accurate in predicting acceptance. Chances are that a Cheesecake Factory is where it is because Overton personally OK’d the location. Many chain CEOs personally approve every new site, but few are as involved as Overton in striving to impress guests with the design and ambiance, factors that he regards as part of the value his brainchild delivers. His guidelines are his own tastes and preferences (look next visit for a sky scene, an Overton signature). He’s also held the line on Cheesecake’s enormous portion sizes because he knows a serving is typically enough for two meals, another key value cue to customers. It’s a decision he says is reinforced every time he and his wife opt for a Cheesecake dinner and realize they’ll have plenty left over for the next day. (His favorite item is the Glamburger, a classic burger inspired by the sliders he loved while growing up in Michigan.) That personal approach has served Cheesecake well in its rise from a single bakery-cafe in Beverly Hills, Calif., that Overton opened in 1978 as a marketing tool to help his parents sell cheesecakes wholesale to other businesses. Today, the Cheesecake restaurant chain extends to more than 230 Overton-approved locations worldwide. The 207 or so domestic branches each average $10.7 million annually in sales or more than $1,000 per square foot. Takeout and delivery sales alone account for about $3.1 million per store. Despite those high-altitude figures, business remains on the upswing. Same-store sales for the third quarter of 2021 outstripped the pre-pandemic level of 2019 by 8.3%. The namesake brand is the foundation of what is now a diversified restaurant company with a second casual concept, North Italia, already in growth mode. About 29 are open, and Cheesecake believes the market could support at least 200 units. The concept features what Overton calls contemporary versions of classic Italian fare, with roughly 30% of sales generated by wine, beer, and other adult beverages. Average unit sales are believed to be around $7 million annually. “We think that North could end up being up to 20% of the company,” Overton told Restaurant Business in a phone interview. Under development for possible rollouts are the casual concepts Culinary Dropout and Blanco Tacos + Tequila and a health-oriented fast-casual operation, Flower Child. Along with North Italia, the three were developed by Fox Restaurant Concepts (FRC), a wholly-owned subsidiary of the Cheesecake corporation that’s run largely independently by its founder, Sam Fox, as an incubator of concepts. In a setup unique in the business, Fox creates and runs concepts, refining the ones with apparent legs into potentially national concepts while each grows to a handful of locations. Then the concept shifts to Cheesecake’s fold for development and ongoing operation, tapping the parent company’s deep experience in building a national brand. Overton says his corporation has been careful about not “Cheesecake-ing” North Italia and intends to do likewise with other FRC concepts that graduate to a growth brand in Cheesecake’s portfolio. He attests that he’s seen ample instances of a promising business being diluted by a strategic buyer that insists on imposing its methods and approaches. Cheesecake’s focus, he says, will be on providing the parent company’s expansion know-how and benefits of scale, not on messing with an FRC brand’s DNA. True to Overton’s reliance on what resonates with him personally, the FRC deal came about because of the relationship that flowered with Sam Fox. “We were considering buying another concept. That went on for a few years, but there was nothing that we liked,” Overton recalls. “Through a real estate person, [FRC] called us and asked if there’d be any interest in North Italia. “We had a meeting with Sam,” he continues. “He’s a lot like me in many ways. We hit it off right away.” Both were strong in what Overton terms a CEO’s “soft skills”—disciplines like menu development, operations, and concept design. They also recognized a fellow entrepreneur who just happened to head a successful restaurant enterprise of size. “We got along great,” says Overton. “As we progressed with the North deal, the idea came up that we might want to buy his whole company. Finally, we said, ‘Let’s just buy his whole company.’ Sam agreed to stay on for a period of time, and we made the deal.”

I do not want to “Cheesecake” any of his concepts because they’re strong on their own. We spent a lot of time on how we could integrate.

That person-to-person engagement was also a factor in a deal Cheesecake struck back in April 2020, when the pandemic’s shutdown of dining rooms had restaurant companies looking for cash reserves to carry them through the crisis. Cheesecake Factory was no exception. The search extended to private-equity companies, which Overton mentions in a tone someone might use in announcing an upcoming visit to a dentist. But one of those was Roark Capital, the PE firm founded by Neal Aronson to build and hold a wide collection of franchise businesses. Today, that portfolio includes Buffalo Wild Wings and Dunkin’ parent Inspire Brands, along with Jamba and McAlister’s Deli franchisor Focus Brands. Cheesecake doesn’t franchise, and Overton had never met Aronson. But, the Cheesecake CEO recalls, he liked the man and admired what he’d built. It wasn’t the typical low-ball-it-and-then-flip-it PE firm. Its stated goal was to build brands, not make a quick buck off them. Cheesecake ended up taking a $200 million equity investment from Roark. Overton’s team repurchased most of the stake in June for $475 million. Roark retained a 4.6% stake, which the securities filings indicated would be controlled by Aronson.

What’s next?

At age 75, Overton says he’s still deeply involved with the day-to-day operations of Cheesecake, though with a focus on the soft-skills aspects of the business. He recounts how he recently convened a meeting of the whole menu R&D team at a unit, where they ordered everything on the menu and dissected it to see what could be improved. “There were items there that I hadn’t touched in 20 years,” he recounts. He has a longstanding leadership team to handle functions like finance. David Gordon, now president, joined Cheesecake more than 28 years ago as a unit-level manager. SVP of Operations Spero Alex has been with the company for 32 years.

I’m not a gourmet. I’m not someone who likes weird food. What I like, a great number of people like.  I don’t know where I get it.

Part of Overton’s focus is on training, recruitment, and talent development. Cheesecake is routinely hailed in studies as one of the restaurant industry’s best places to work. Part of that is the sheer amount of money employees can make, even at the field level. Servers earn as much as the VPs in many white-collar businesses. Many MBA holders might envy the compensation of general managers, whose tenure averages 14 years. Regional VPs average 23 years. But culture also figures large in the company’s positive reputation as an employer, if not in the corporation’s overall success, according to its CEO. “We strive to treat people right, Overton says. “It started out with me back in 1978, the kind of person I am, how I treat people.” He’d quit college to make a living as a drummer in a band, a route he thought would be his career path until his parents asked for help in building their Michigan-based cheesecake business. Overton convinced his mother and father to move their business to Beverly Hills, where they’d have more of a showcase, and spark a groundswell of interest by showing how consumers loved the product. The place opened to a line, without any advertising. “My mother’s cheesecake recipe was really good,” Overton says.

We started Cheesecake to sell my parents’ cheesecake. Because I didn’t recognize what not to do, I had fresh ideas. We made everything fresh because I didn’t know what a steam table was.

Overton says his days as a musician taught him the importance of being surrounded by people who are talented and whom you can trust. It also whets his appreciation of kindness, collaboration, and the importance of everyone succeeding. “We work at all of that,” he says. “We have a women’s group that we’ve created. We want to be kind.” As for retirement, “I’m fine,” he says. “I see nothing out there that would thrill me as much as what I’m doing now does. “I’m proud of the business, and I would think that many people would think it was great,” he says. “We certainly didn’t do it the way everyone else did.”  — Source: Restaurant Business.

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