Restaurant Doesn’t Deliver? New Uber-Like Services Will

August 17, 2015

2015-08-17_1057Kyle Arnold, Staff Writer
Copyright 2015, Orlando Sentinel Communications. All Rights Reserved.

http://www.orlandosentinel.com/business/os-restaurant-delivery-20150812-story.html 

The race is on to be Uber for restaurants.

Following the success of ride-sharing businesses, a handful of companies are pushing into Central Florida as on-call food-delivery services for restaurants that don’t have their own drivers.

Groupon-owned OrderUp launched Tuesday in Orlando with a fleet of about 60 drivers bringing food from restaurants to homes and businesses. Two local companies, Doorstep Delivery and Munchem, are also trying to find their place amid growing national competition from app-based services.

The services use an independent-contractor model, dispatching drivers to pick up orders at restaurants and then drive the food to its destination.

“You’ve always had the takeout-taxi model, but what we are seeing now is the younger generation who is very mobile-device-enabled,” said Darren Tristano, executive vice president of restaurant-research group Technomic.

The industry is more crowded nationally, with companies such as Postmates, GrubHub and Uber’s own restaurant delivery service, none of which has launched in Orlando.

Restaurants have been eager to get in on the trend, hoping to expand into delivery without hiring drivers. Chipotle, Olive Garden and Publix’s deli-sandwich counters are experimenting with the services at select locations locally.

Customers use the delivery services’ apps to place food orders, which are relayed to restaurants. The delivery service then picks up the completed orders and delivers them.

Third-party delivery services usually cost $4 to $6 per order, and customers are expected to tip the drivers. The delivery service often takes a cut of the total bill from restaurants, too.

Doorstep has about 300 partners in Central Florida, while OrderUp started with 31 partner restaurants. Munchem takes orders for any restaurant in which it can find a menu.

“These days everybody expects on-demand service,” said Andrew Brown, co-founder of Orlando-headquartered Doorstep Delivery. “People expect what they want, and they want it brought to them.”

Doorstep Delivery is the oldest of such local third-party restaurant delivery companies. It started in the Orlando area seven years ago without smartphones or an app, using dispatchers taking orders on a notepad and calling them into restaurants.

Brown said the rapid pace of technology has pushed the company to redevelop its model, leaning heavier on Web and mobile ordering. Doorstep is revamping its app to allow real-time tracking of delivery drivers, a feature popular with other services.

It is in 19 markets, mostly in Florida but also places such as Charlotte, N.C.; Dallas; and Denver. Nationwide, it has about 600 drivers and about 60 locally.

Gator’s Dockside has been working with Doorstep Delivery for about five years. It had considered its own delivery drivers but decided to go with a third-party company.

“When you figure 150 orders a month per location is probably average, I would say it’s definitely worth it as a business to try to reach those people,” said Gator’s Dockside director of operations Joe Foranoce.

OrderUp says its drivers can make up to $25 an hour during peak periods. The company, as well as others, does background checks on drivers and issues them a car magnet and “hot and cool” bags to keep food at temperature.

Delivery times aren’t guaranteed, since restaurants prepare food at their own pace. But the services are designed to have drivers arrive at the restaurant as soon as food is ready and hit the road.

Moises Almaraz, 20, took OrderUp’s first delivery Tuesday from Church Street Tavern in downtown Orlando to a nearby office building.

“I hope to make about $20 an hour,” said Almaraz, who recently moved from Naples after earning his associate degree and hopes to enroll at the University of Central Florida. “I’m just looking to earn some extra money before I go back to school.”

The independent-contractor model has been used by ride-hailing companies Uber and Lyft, requiring drivers to pay for their own gas, maintenance and taxes.

Another Orlando-based service, Munchem, launched to customers earlier this year with an app.

The service started in the Dr. Phillips neighborhood and has expanded to downtown and the UCF area. Munchem has seven drivers and is hiring more.

“We’ll deliver from pretty much any restaurant that we can get a menu for,” said Andy Kordalski, a spokesman for Munchem. “The ones that want to work with us are great, but we don’t necessarily need to partner with them because we’ll make the order and pick up the food ourselves.”


With 27,205 Stores, Subway Gets Indigestion

August 17, 2015

Julie Jargon
Copyright © 2015, Dow Jones & Company, Inc.

Aggressive expansion in U.S. leaves chain with crowded footprint and slumping sales

Subway, suffering through its biggest slump in years, is testing just how sprawling a fast-food chain can get before it becomes too big.

In its 50-year history, the sandwich chain has penetrated seemingly every commercial nook in the U.S., from strip malls to laundromats to car dealerships. With more than 27,000 domestic restaurants, it boasts far more U.S. outlets than any other retailer. McDonald’s Corp. has about 14,300, and Wal-Mart Stores Inc., about 5,200. The only thing comparable is the U.S. Post Office, which manages 31,662 retail offices.

But Subway’s expansion has hit hurdles. Sales at its U.S. restaurants dropped last year for the first time in more than a decade, falling 3.3% to $11.9 billion. That made it the only major sandwich chain besides Quiznos, owned by QCE Finance LLC, to suffer a sales decline in 2014, according to restaurant research firm Technomic Inc.

Franchisees are frustrated, with some selling their restaurants at reduced prices, and perceptions of Subway’s food quality slipping, according to franchise owners, attorneys and restaurant consultants.

Priyal Patel sold his Subway in Prospect Heights, Ill., in May for $77,000. He bought it in 2006 for $195,000 and spent $85,000 to remodel it. “No one wants to buy a Subway now,” he said. “People are selling for whatever price they can get.”

Don Fertman, Subway’s chief development officer, said the transfer rate of stores from one owner to another has been steady for a number of years.

Subway, which is incorporated as Doctor’s Associates Inc., has slowed its expansion, but is far from halting it. It has been opening about 400 stores a year in North America since 2013, down from 800 to 1,200 before that and as many as 2,000 annually in the late 1990s. “I don’t see us going back to that level, but 800 is possible,” Mr. Fertman said in an interview.

Darren Tristano, executive vice president at Technomic, said Subway is already nearing the limits of growth. “The problem is that new restaurants have to steal share in order to be successful,” he said. “A lot of the weaker brands that Subway has fed off, like Quiznos and Blimpie, are not around as much. They’re going to struggle to steal enough share to be able to keep opening more stores.”

Mr. Fertman says Subways aren’t cannibalizing each other and that restaurants in the most Subway-dense markets actually have higher average sales. Subway’s international growth remains strong, with system sales up 12% last year to $7.7 billion.

Subway owes its growth in part to an aggressive franchising system. Other big fast-food chains, including McDonald’s, Restaurant Brands International Inc.’s Burger King and Wendy’s Co., long owned and operated a portion of their restaurants — in part, to test new products and study their customers. Recently, those companies have been selling those outlets to cut costs and focus on rent and royalty fees — a strategy that can mean more stable revenue and higher profit margins but that also risks undermining chains’ ability to maintain consistent quality in restaurants.

Subway, co-founded in 1965 by aspiring doctor Fred DeLuca, started franchising nine years later, and today its restaurants are 100% franchise-owned. To boost growth, it has used an unusual system of “development agents,” often former or existing franchisees who buy the rights to develop a region.

For adding stores, agents receive a portion of the 8% royalty fee Subway collects as well as half the initial $15,000 franchise fee. The agents can earn bonuses for opening restaurants ahead of schedule — or be penalized for falling behind, according to Subway’s franchise documents.

Opening a Subway typically requires an initial investment of just $116,600 to $263,150, compared with $1 million to $2.3 million to open a McDonald’s. Subways also need less real estate: their assembly-line system means kitchens can be as small as 300 square feet — less than a third that of the smallest McDonald’s.

Most restaurant companies employ their own people to scout for locations in the U.S. — in part to ensure new outlets don’t compete with old ones. And other chains have cut store counts when growth has overreached. Starbucks closed hundreds in 2009. McDonald’s closed restaurants in the early 2000s and has been trimming its U.S. store count this year.

Hardy Grewal, Subway’s largest U.S. development agent, said that while the system incentivizes expansion, “development agents aren’t stupid. We don’t open stores to close them.” Mr. Grewal owns five Subways in Los Angeles, and his agent territory includes 910 stores in Southern California and 1,000 in the mid-Atlantic. He said he’s focusing on moving restaurants to better locations and only expanding in properties with captive audiences, like airports.

“Any time you open more and more units, there’s always some impact,” he said. “People are still making some money — it’s just not what they used to make.”

Average sales per Subway restaurant in the U.S. declined last year by 3.1% to $475,000, according to Technomic. John Gordon, founder of restaurant consulting firm Pacific Management Consulting Group, found in a 2012 survey of sandwich-chain profitability that Subways average annual profits of $70,000 a store.

With sales down, he estimates that amount has fallen to $30,000 to $40,000. Mr. Fertman said Subway doesn’t have a full picture of franchisees’ profitability because they aren’t required to share that with the company.

Subway is facing other challenges. It suspended ties with its longtime pitchman Jared Fogle in July after federal authorities raided his home as part of an investigation that officials have yet to disclose. Mr. Fogle, through his attorney, has said he is cooperating with authorities. And Mr. DeLuca, the 67-year-old chief executive of Doctor’s Associates, who has been battling leukemia, has turned over management of daily operations to his sister.

Subway also scored five percentage points or more below the average of the limited-service sandwich category on food and beverage attributes in a recent consumer survey, according to Technomic.

Les White, who owns 47 Subways in Arizona and is chairman of an association that represents 6,500 Subway franchisees in North America, said Subway is working on initiatives to improve food quality, including the removal of preservatives and artificial ingredients. “What’s difficult about trying to change a company this large is it’s difficult to change things immediately,” he said.


Wendy’s to Look Into Dropping Antibiotics

July 31, 2015

wendys-chickenJD Malone
(c) 2015 Columbus Dispatch. All Rights Reserved.
http://www.dispatch.com/content/stories/business/2015/07/30/wendys-to-look-into-dropping-antibiotics.html

Instead of a spicy rub or a slice of artisanal cheese, Wendy’s latest chicken sandwich is getting attention for what it won’t have.

The Dublin-based chain is poised to begin testing antibiotic-free chicken in several cities as it tests both consumer response and its supply chain.

Wendy’s plans to test a new chicken sandwich in mid-August in seven markets, and antibiotic-free chicken in four of those seven — Orlando, Fla., Gainesville, Fla., Kansas City, Mo., and Austin, Texas.

Central Ohio won’t see the new chicken unless it goes nationwide. That move is pretty likely as long as there is enough antibiotic-free chicken available, analysts say.

Further details on Wendy’s plans were not forthcoming.

Still, analysts think it’s the right move to swim with other chains doing similar things. McDonalds, Chipotle and Chick-fil-A have all pledged to remove antibiotics from their chicken. Big producers including Tyson and Perdue also have announced a pivot away from using antibiotics unless medically necessary.

“On the list of bad words, antibiotic had definitely moved up,” said Darren Tristano, vice president at Technomic, a Chicago-based food-service analysis and consulting firm. “The overall trend is taking things (thought to be) harmful out of the supply chain. Consumers want this.”

“The time is ripe,” said Tim Powell, principal of Think Marketing, a Dublin-based food-service consultant. “Today’s consumer is far better-educated on where their food is coming from, and they have shown they will pay more for it.”

The new chicken will also be used in salads and other menu items featuring grilled chicken.

Wendy’s has been looking to tweak its menu lately.

Earlier this year, the chain tested a black bean veggie burger in Columbus and received a lot of attention for trying a nonmeat sandwich. There’s no word on whether that sandwich will join the chain’s menu permanently, but it’s part of a bigger strategy among quick-service chains to keep up with fast-casual restaurants such as Chipotle.

They have to speak the same language to lure similar customers.

“You have to do things like this,” Tristano said. “You don’t want to be one of the last. You want to be one of the first.”


Dunkin’ Donuts Slams New York Regulators Over Wage Increase

July 28, 2015

1200x-1

Juliana LabiancaFreeman Klopott
http://www.bloomberg.com/news/articles/2015-07-23/dunkin-donuts-lashes-out-at-new-york-regulators-over-wage-hike

Dunkin’ Brands Group Inc., the owner of Dunkin’ Donuts, upbraided New York regulators over a plan to boost fast-food wages to $15 an hour, a move the company said could lead to price increases.

A wage board formed by Governor Andrew Cuomo arrived at the decision without involvement from the restaurant industry, Dunkin’ Chief Executive Officer Nigel Travis said on a conference call Thursday.

“We’re deeply disappointed that the governor chose to skirt the legislative process by appointing a wage board, which did not even include a representative from our industry,” he said. “Our franchisees, and in fact other company’s franchisees, were denied the chance to fairly express their concerns.”

The board recommended on Wednesday that the minimum wage for fast-food workers be raised to $15 by 2018 in New York City and three years later in the rest of the state. Cuomo has indicated that his labor commissioner, who has final say, will follow the board’s advice, though adjustments may be possible. The increase, which will be phased in annually, applies to fast-food chains with 30 or more locations.

Dunkin’ is contemplating ways to adjust to the pay increase, Travis said. One option is boosting prices, he said.

Unfair Attention?

Travis complained that the fast-food industry was singled out by regulators, a concern echoed by McDonald’s Corp. Chief Financial Officer Kevin Ozan during a conference call Thursday. McDonald’s wants minimum-wage increases to “deal with all industries similarly,” he said. Ozan didn’t discuss New York City’s wage hike specifically.

Picking on fast food alone will put those businesses at a competitive disadvantage, said Randy Mastro, an attorney hired by a group of New York franchisees. The proposal, he said, targets business owners who are “already struggling to survive on low margins and cannot afford this 66 percent increase in labor costs for their entry-level workers.”

Restaurant companies have come under increasing pressure to boost pay over the past year. Large chains have a corporate social responsibility to pay a fair wage, said Darren Tristano, executive vice president at research firm Technomic Inc.

“If you’re a chain, it may feel like you’re being targeted, that it’s making it harder to be successful,” he said. “But it’s the right thing to do.”

In response to Dunkin’ complaints, Cuomo spokeswoman Dani Lever referred to comments the governor made at a rally in New York City. At the event, he said higher wages are needed for workers to live a decent life.

“You cannot live and support a family on $18,000 a year in the state of New York,” Cuomo said. “That’s why we have to raise the minimum wage.”


Gone Fishing

July 27, 2015

July15-Food-Trends---Sharky's-Tacos

Copyright © 2015 Journalistic Inc.

http://www.qsrmagazine.com/menu-innovations/gone-fishin?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20QSRmagazine%20%28QSR%20magazine%29

Seafood gives operators a versatile protein that has a sustainable, healthful halo.

There’s nothing fishy about the seafood at limited-service restaurants today. Operators are focused on meeting consumers’ demands for seafood that is creative, healthful, and sustainable, from grilled fish fillets to upscale lobster rolls.

“There’s a little oversaturation in chicken, burgers, and pizza,” says Andrew Gruel, founder of Slapfish, a seven-unit southern California seafood chain. “People are eating more seafood now that they realize how healthy and accessible it is.”

According to Chicago-based market research firm Technomic Inc., 64 percent of the nation’s quick-service and fast-casual restaurants offer a seafood item, whether it’s fish tacos, shrimp fried rice, or anchovies on pizza. The number of seafood items on regular limited-service menus is virtually unchanged from a year ago, with 54 percent featured at quick serves and 46 percent at fast casuals.

The most offered seafood, according to Technomic’s MenuMonitor database, is shrimp. It’s in a variety of dishes, part of many ethnic menus, and a popular add-on protein at restaurants as diverse as Noodles & Co. and Pei Wei Asian Diner.
Even Atlanta-based wings chain Wing Zone serves a shrimp dish. “Almost all of our food items are fried, so having fried shrimp is easy on the operation,” says Dan Corrigan, director of marketing. “We actually changed our shrimp recently to more of a jumbo breaded shrimp, and that’s doing well.” The shrimp is served with a dipping sauce. It’s only 3 percent of the sales, Corrigan adds, but when Wing Zone tested removing the item from one restaurant, guests wanted it back.
One reason fast casuals make up a big percentage of limited-service eateries serving seafood is its premium price, says Technomic executive vice president Darren Tristano.

“That’s harder to translate to quick service,” he says. “Seafood’s price points are more full service or fast casual.” Nonetheless, many big limited-service restaurant operators offer at least one seafood menu item, such as the Filet-O-Fish at McDonald’s or Tuna Sandwich at Subway.

Keeping seafood sustainable is more important to Americans today than ever before.

“Customers are increasingly asking where their food comes from, how is it produced, is it safe, and are there any environmental issues when it’s produced,” says James Baros, aquaculture and sustainability coordinator at provider National Fish and Seafood of Glouchester, Massachusetts. He points to Atlantic cod and some tuna species as examples of how industrial fishing nearly obliterated stocks. “It was an important lesson to learn,” he says.

Half of U.S. seafood is caught wild, while the other half is farmed. That’s up from 15 percent farmed three decades ago. “We’re seeing a big transition to aquaculture,” Baros says. “Fish is the last major food we go out and catch. You don’t hear of catching cows in the wild.”

Salmon, shrimp, and tilapia are the most popular farm-raised seafood varieties for Americans. But wild caught still has a certain cachet for diners, and many restaurants point out that their fish is wild caught. That includes the largest quick-service seafood operator, Long John Silver’s, where the classic battered and fried Fish and Chips remains the biggest seller.

“Our two main types of fish are Alaskan pollock and cod. Both are wild caught and sustainable,” says chief executive James O’Reilly. “It takes a lot of commitment to maintain a sustainable supply.”

The fried fish is usually pollock, while cod is available either fried or baked. Shrimp, mostly farm-raised in South America, can be baked or fried, and Long John Silver’s also sells fried crab cakes and clams, with langoustine bites offered as a seasonal item.

“Our seafood menu has evolved,” O’Reilly says, adding that the brand has increased its healthier options while also adding more portable items, including fish tacos, seafood-salad sandwiches, and fish strips. These steps are helping the Louisville, Kentucky–based company maintain its seafood leadership, O’Reilly says. “I believe that growth will be fueled by the addition of Millennials concerned with quality and sustainability,” he says.

Battered fried fish is also the No. 1 item at Captain D’s, which has positioned itself as a fast-casual seafood dining experience. While about two-thirds of the menu is fried, the biggest growth is in grilled items, says Jason Henderson, vice president of product innovation for the Nashville, Tennessee–based chain. Double-digit growth pushed grilled food to about 10 percent of sales in 2014.

The grilled menu includes Alaska salmon and pollock, tilapia, and shrimp, while the fried fish is pollock. The chain also features breaded flounder and catfish, a nod to its Southern roots, as well as fried shrimp and stuffed crab shells.
Most diners don’t ask about the food’s source, Henderson says, but the menu often makes it quite clear, particularly with Alaskan fish.

“We’ve worked with a long list of accounts to increase the visibility of Alaska seafood,” says Claudia Hogue, foodservice director at the Alaska Seafood Marketing Institute. The state produces 53 percent of America’s seafood harvest.

In addition to white fish—cod, halibut, and pollock—Alaska is known for its wild salmon. Some salmon varieties are available year-round, but for most, the season kicked off in May and runs through the summer. There are also Alaska Dungeness and other crab varieties, along with scallops and prawns.

“We encourage people to use the Alaska name because we know customers more and more want to know the origin of their fish,” Hogue says. Studies commissioned by the institute indicate consumers feel better about buying Alaska-brand seafood.

Southern California–based Sharky’s Woodfired Mexican Grill makes a point that fish served in its tacos, burritos, bowls, and other items are wild caught, and varieties like salmon and cod are from Alaska.

“We’re a lifestyle brand, and many who visit us recognize the benefits of wild-caught seafood,” says David Goldstein, chief operating officer of the two-dozen-unit chain.

The most popular seafood item is Charbroiled Fish Tacos featuring salmon or wahoo. Fish tacos are $4.29, versus $2.99 for chicken and $3.99 for steak. Other favorites are the Salmon Power Plate, Salmon Burrito, and Tempura Cod Tacos.
Sharky’s also features mahi mahi, pollock, and shrimp, and all these offerings provide “a real point of differentiation for us,” Goldstein says. Seafood has grown to 11 percent of sales, twice what it was a few years ago.

At Ivar’s Seafood Bars in and around Seattle, fish (Alaska cod) and chips is the big draw. “We ride the up-and-down tides on price points,” says Carl Taylor, director of operations at the regional favorite. “It’s a premium product we serve.”

The majority of the menu is fried. In addition to cod, there’s fried halibut, salmon, clams, scallops, big and small prawns, and oysters. The menu also has several chowders, grilled halibut and salmon, Dungeness crab, and salads with different seafood varieties.

“Within the past three years, we expanded the grilled items and added fresh fish,” Taylor says. “We sell it as long as the run is going.” The two-piece Fresh Halibut Platter, with cole slaw, wild rice, and cornbread, sells for $15.99.

Ivar’s oysters are from the Washington and Oregon coasts. The Alaska Dungeness ($9.29) is higher in terms of price, he says, but worth every penny. “I could go out and get rock crab and mix it with the Dungeness to lower the price, but we don’t.”

Just as consumers equate wild salmon with Alaska, they link lobsters with Maine. That’s the draw at New York–based Luke’s Lobster, which has 17 fast-casual “shacks” in Mid-Atlantic coast cities and recently expanded to Chicago.

“We are exporting the experience of the Maine lobster shack,” says founder and president Luke Holden, whose father has been in the seafood industry for years and built up well-established relationships with fishermen across the Northeast coast.
The $15 fresh lobster rolls are made to order in the traditional Maine style, with a quarter pound of chilled lobster meat in a top-split bun—the sides are shaved to toast better—plus a slick of mayonnaise, Holden’s secret seasoning, and lemon butter.

“All the meat is from the claws and the knuckles; the knuckle tends to be the most delicious part,” Holden says, adding that the tail is considered premium, but not for lobster rolls. “You would have a tug of war with a warm bun and a chewy tail.”

The shacks also offer crab and shrimp rolls, Jonah crab claws, and New England clam chowder. Crab is purchased from fishermen from Maine to Rhode Island, while the shrimp is wild from Canada.

Lobsters were sustainably caught long before it became a trend, says Matt Jacobson, executive director of the Maine Lobster Marketing Collaborative. Some rules governing trapping date from the 1870s. Today, lobsters must be males between 3.5 and 5 inches in body length. Others are tossed back—smaller ones to grow, and females and bigger males to breed.

While many consumers consider lobsters a center-of-plate item served whole, there are many other uses for the meat, Jacobson says, including in salads, pasta, and Asian dishes. Lobster rolls are also growing in popularity nationwide.

Lobster rolls and fish tacos are the two top sellers at Slapfish. “Lobster is incredibly indulgent, and the growth in our lobster rolls has been 100 percent due to Instagram and social media,” Gruel says. “People see them online and want them.”

The fish tacos are available with grilled or fried fish, largely wild-caught species ranging from Pacific cod to Maine’s Acadian redfish, depending on the season. The tacos include cabbage, avocado purée, and pickled onions.

“The key is the balance,” he says. “You want a good amount of cabbage to provide that great crunch, and the acidity to cut through the richness of the fish.”

Slapfish’s limited entrée menu also includes the Crabster Grilled Cheese sandwich with lobster and crab, and a Surf ‘n Turf Lobster Burger smothered in lobster and caramelized onions. There’s also fish and chips, chowder, chowder on fries, and shrimp.

A taste of the Hawaiian Islands is part of the draw at Coconut’s Fish Café. The four-unit chain began in Maui, Hawaii, and has since moved to the mainland. It features mahi mahi, ono—the Hawaiian name for wahoo—and ahi.

“They are all wild, and they are line caught,” says Dan Oney, chief operating officer. “The people we buy from are able to track the fish to the boat. It’s the concept of taking care of the earth and taking care of our customers.”

Most of the fish is grilled, and the ahi tuna is seared rare and served with wasabi. “We have big, beautiful, 6-ounce fillets of fish that if you go to a sit-down restaurant, you would pay $30 or $40,” Oney says. Coconut’s platters start at $10.99.
Mahi mahi and ono are in the seafood pasta, as well as the fish tacos that include family-recipe coleslaw and tomato and mango salsas. There’s also a fish sandwich and other fried items—fish and chips, shrimp, calamari, and coconut shrimp—on the menu.


Subway is Making a Huge Mistake That Could Undermine its Business

July 21, 2015

jared-fogle-subway-5Ashley Lutz
http://www.businessinsider.com/subways-rapid-expansion-could-hurt-business-2015-7

Subway’s biggest problem has nothing to do with shamed former spokesman Jared Fogle.

The company dismissed its weight-loss pitchman last week after his house was searched in an FBI investigation and one woman accused him of making inappropriate comments about middle-school girls.

While the scandal with Fogle will pass, the company’s rapid expansion plan is a bigger issue that could hurt business, according to Jonathan Maze at Nation’s Restaurant News.

“It’s really been a victim of its own success,” David Henkes, from the consulting firm Technomic, told Bloomberg. “It’s really saturated the market. It’s got over 27,000 (US) locations now. The unit economics are very tough. Competitors have really come in and provided some alternatives to consumers that have caused Subway to suffer some sales losses.”‘

Subway has 44,000 restaurants worldwide, more than McDonald’s. Executives say the company eventually plans to reach 100,000 locations.

Subway’s US sales last year fell by 3%, the biggest fall for any of the top 25 fast-food chains, Drew Harwell reports at The Washington Post.

Subway also fell two spots to become the third-most-popular fast-food restaurant for the first time in seven years.

The expansion plan is backfiring, according to The Post.

“More people have money to spend, and they’re choosing to spend a little bit more on better concepts where they get a better product,” Darren Tristano at Technomic told The Post. “Subway’s strategy has only been to open more stores, and ultimately those stores just cannibalize each other.”

In other words, Subway is so ubiquitous that customers leave one restaurant to go to a closer one.

Tristano also told Bloomberg that “if your goal is to have the most versus the best, you’ll eventually run into trouble.”

Subway should focus on innovating its menu instead, Maze said.

With its vegetables and lower calorie counts, Subway arguably invented the idea of “fresh” fast food two decades ago.

But while Subway stayed the same, better competitors got into the space.

Chipotle offers food that is raised without fillers or antibiotics and is prepared fresh in stores. Firehouse Subs and Potbelly offer elevated ingredients and side dishes such as gourmet kettle chips and potato salad.

Americans who once praised Subway’s low-fat offerings are now concerned the chain’s lunch meats and sauces are overly processed with fillers and additives.

“What Americans see as healthy has evolved,” Harwell writes. “Subway hasn’t.”


Romano’s Macaroni Grill Has a New Twist to Dining Options

July 10, 2015

pictureMike D. Smith
Copyright 2015. Hearst Communications, Inc. All Rights Reserved. Distributed by NewsBank Inc.
http://www.pressreader.com/usa/houston-chronicle/20150709/281973196325188/TextView

As chain with 147 locations adjusts to desires of millennials, it adds a walk-up express line to its traditional sit-down table service

Fans of Romano’s Macaroni Grill can still walk in, take a seat and wait to order from a familiar-looking Italian-American menu. But diners seeking quicker, cheaper meals now can turn toward a walk-up express line and order from “Romano’s Kitchen Counter.”

The addition of this “fast-casual” option, with lower-priced and easier-to-prepare items, represents the latest shake-up for a chain that has seen its value plummet since 2008. Macaroni Grill’s newest owners are hoping to attract more of the typically younger customers drawn to places like Chipotle, Panera Bread and Zoës Kitchen, while not abandoning the full-table service it has provided for 27 years.

“We decided to play in both spaces,” CEO John Gilbert said recently at the Macaroni Grill at 5802 Westheimer Road.

The makeover comes amid an industrywide shift as restaurants struggle to keep pace with demographic changes, diners’ ever-evolving moods and a post-recession dining landscape that favors new, fresh, quality and quick.

Gilbert took over earlier this year after the sale of the company by Houston-based Ignite Restaurant Group for just $8 million. Ignite had paid $55 million for the properties two years ago, taking them off the hands of a California private equity firm that had given Dallas-based Brinker International $88 million in 2008.

The number of restaurants in the chain dropped as well, to 147 today from 200 at the time of the Brinker sale.

Those 147 locations churn out annual sales of about $350 million, serving about 20 million meals each year.

However, Gilbert saw much room for improvement.

The restaurants had undergone only one makeover once since 1992. That is a far longer interval than the seven years that Gilbert said is ideal.

As the restaurant chain’s brand aged, so did its core customer.

Part of the formula for Mac Grill’s turnaround is a remodel. The dimly lit interiors will undergo changes to make better use of each restaurant’s ample space. The exteriors are being studied for more eye-grabbing details that can capture passing traffic.

Those changes are to complement the most noticeable shift – the mix of express and casual service, cashing in on what Gilbert said is an undeniable industry change toward express service.

Dual-concept mode

The company first tested the dual-concept model in a Cleveland, Ohio, restaurant.

First came express lunch. Customers order at the counter from a different menu more suitable for quicker service, with more “handhelds,” like sandwiches, plus calzones, pastas and spaghetti. Express customers get a number and take a seat.

The chain took its express lunch national in October, then added a dinner express menu in February with a seven-minute guarantee for the $7 lunch and nine minutes for the $9 dinner.

“In the aggregate, it’s working,” Gilbert said, adding that he measures success through dining traffic. “Are we getting more people in our restaurants than we did before? I think, absolutely, that’s true.”

A growing segment

Of the 61 billion American restaurant visits in the year ending in May, fast casual accounted for 5 percent of the market, said Bonnie Riggs, a restaurant industry analyst with NPD Group.

Still, it’s the segment everyone’s talking about. In 2009 and 2010, during the recession, overall restaurant industry growth was negative two years in a row for the first time.

Overall growth has been flat since. The segment bucking that trend is fast casual, which has posted 7 to 8 percent quarterly growth.

All of this is happening as the restaurant industry now features more options for ready-to-eat, fresh food – think, supermarkets and enhanced convenience stores – and sees, increasingly among millennials, more cooking at home.

“It’s been a real battle for market share, and with this one segment growing, everyone is seeming to try and emulate it,” Riggs said of fast casual.

While mixing fast casual with casual is attractive, Darren Tristano, executive vice president of food service consulting firm Technomic, says it can have its pitfalls.

One challenge is the potential for customer confusion. Those who know a restaurant’s brand will expect full service, and there can be a learning curve for others.

There’s also the risk of alienating core customers.

“I think that the mistake many of these concepts are making trying to compete with fast casual is they are losing sight of consumers coming to them for a particular reason, what they’re known for,” Riggs said. “You really have to do your homework and understand what your customers’ needs are. They can go to a fast-casual restaurant if they want fast-casual.”

Some brands have created offshoots to tap the express service market. Examples include Pizza Inn’s Pie Five and Red Robin’s Burger Works. Other brands have tried and failed.

The best use of a hybrid model is to boost lunch sales with more value, convenience and service, Tristano said.

Gilbert said that is happening with Macaroni Grill’s changes to date. Lunch sales, which represent about 30 percent of the chain’s business, have increased by about 20 percent.

Lunch express, so far, is more lucrative than express dinner.

Interior remodeling

Customers will begin to see the other changes soon. A Houston location will undergo the first interior remodel within a few months.

The company continues to explore additional express-service menu items, a new pizza-menu lineup, steakhouse items, additional salads and seafood. The dozen new express-menu items are being evaluated for their popularity, with such items as parmesan truffle fries and brunch offerings being explored.

There also are plans to test a “wine-on-tap” system and an express-only version of the restaurant – all part of the effort to retain its loyal customers and appeal to younger diners.

“The bigger risk is not doing anything,” Gilbert said.

Gilbert said, too, that he admits the chain has to catch up to its competitors.

“There are customers who like us truly because we’re not busy,” he said. “That’s not healthy for us.”


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