The Joy of Innovation

May 28, 2012

By Danielle Douglas and Jeffrey MacMillan, April 29

If you stop in at 944 Florida Ave. NW around 8 a.m., you can get an herb frittata with a hazelnut latte from Blind Dog Cafe. Come back again at 8 p.m. and you can down a Heineken at Darnell’s Bar. Same place. Different owners. One lease.

Friends Noah Karesh, Jonas Singer and Cullen Gilchrist approached Darnell Perkins back in November about running a temporary coffeehouse in his saloon during the off-hours. The trio, who were customers, wanted to gauge the neighborhood’s interest before committing to leasing, refitting and operating a stand-alone space.

“We figured why put all of that capital into a cafe, when we haven’t proven that it could work,” Karesh said.

Blind Dog Cafe is part of an entrepreneurial movement in the local food scene that is ushering in new restaurant concepts, from food trucks to underground supper clubs, that stray from the traditional model. These entrepreneurs are readily using social media and mobile technology to market their businesses as they go head to head with established restaurants.

That such a spurt of innovation is transforming the restaurant industry should come as no surprise. Pushing a food cart or opening a carryout have always been one of the gateways to entrepreneurship because of the universal demand for food.

But the simplicity of the business model means the competition can be fierce and failure commonplace. Which is why this generation of restaurateurs is seeking out low-cost entry into the marketplace, said Darren Tristano, executive vice president at Technomic, a research and consulting firm.

“When you think about food trucks, the overhead is very low and it allows a certain freedom and flexibility,” he said. “People want to work on their own terms, be more creative.”

Pop-up eateries

In the case of Blind Dog Cafe, Karesh said “necessity was the mother of invention” as the paucity of coffee shops in Shaw inspired him to open his own. He roped in Singer, whom he grew up with in Chevy Chase, and Gilchrist, a line cook at Ardeo + Bardeo in Cleveland Park.

Sharing an already leased and licensed space has saved them hundreds of thousands of dollars in start-up costs. The three pay Perkins about $800 a month to rent the space. Karesh and his partners spent $20,000 to get the cafe up and running in January, most of the money went to purchasing equipment for brewing coffee and baking.

The laid-back atmosphere of the bar, complete with a well-worn comfy couch, already captured the homey vibe they were going for, so they only added a few shelves and tables.

The cafe, named for Singer’s blind Jack Russell terrier Baxter, attracts a mix of telecommuters looking for free Wi-Fi and endless caffeine. Karesh envisions Blind Dog as communal space for entrepreneurs, so he has begun inviting area start-ups, including artisan ice cream makers and vintage stylists, to host events in the cafe for free — pop-ups within a pop-up.

Culinary societies

One of the recent events held at Blind Dog involved a 45-person dinner party hosted by Feastly, a company that signs people up for “feasts” prepared by amateur chefs.

Feastly, co-founded by Karesh and Danny Harris, is the outgrowth of a pitch the pair made during November’s D.C. Startup Weekend. Karesh came up with the idea after having a hard time finding authentic cuisine while on vacation in Guatemala.

“The concept of using the dinner table as that original social network was something that really appealed to both of us,” Harris said.

Chefs can set the price of the meals and other house rules and choose how many people they want to serve under the model. On average, a feast costs around $30 per person. Karesh and Harris take up to 25 percent of the total proceeds from the dinner.

People can sign up to receive e-mail alerts on upcoming feasts. “We are leveraging technology to create vibrant communities,” Karesh said.

Kauffman Foundation vice president Lesa Mitchell said trusted online platforms, be they social network groups or referral sites such as Yelp, have become a driving force in the food industry. “Reputations can develop or be destroyed overnight because of technology,” she said. “There is greater immediacy in the response to these concepts.”

In the same vein as Feastly, The Coterie is an online marketplace that connects foodies with exclusive dining opportunities. For $42 a month, members gain access to cocktail parties and salon-style dinners. They also get access to a reservation system through which they can arrange for five-course tastings at one of five partner restaurants, including Fiola and Bibiana, for $135 a person.

“Our value proposition is connecting curious dinners with innovative chefs,” said Jill Richmond, who co-founded The Coterie with Nick and David Wiseman. “What underpins what we do, especially with the fireside dinners, is providing connections that are more meaningful than just having a great experience at a restaurant.”

Richmond, a consultant at the World Bank, started the culinary salon under the name No. 68 Project in London in March 2010. When her job led her back to the states a year later, she revived the project as a nine-week pop-up restaurant in the District.

The underground scene

Area foodies are dispelling the notion that Washington is too conservative to embrace experimental concepts. Underground dinner parties, where guests are not allowed to disclose the location or the host’s identity, have been gaining popularity in the past two years.

Dinner requests are growing at the Web site for underground restaurant Chez La Commis. Tom, the chef who requested anonymity to maintain privacy, started sending out e-mails to friends of friends in January to try out his creations.

A public relations executive by day, budding chef by night, Tom serves six-courses, with three wine pairings, for $40 out of his home in Clarendon. Word got out in the blogosphere about his dishes, such as crab salad with cucumber granite, and foodies started e-mailing requests to attend his clandestine supper club.

“Because there is no barrier aside from the cost of ingredients, you can get as creative as you want,” Tom said. “When you free people from the formal setting of a restaurant, the atmosphere becomes more lively. That matches the type of food I put out.”

What started out as a once a month event now occurs three to four times a month. “This is an investment in finding out whether I can eventually do my own restaurant,” Tom said.

Meals on wheels

No recent restaurant trend has garnered quite the attention as food trucks have. The new era of curbside cuisine, rife with gourmet concepts, has spawned well over 100 mobile vendors in the region since 2009.

“The evolution of mobile food service now has been fueled by the sustained period of economic weakness,” said Hudson Riehle, senior vice president of research at the National Restaurant Association. “Consumers find it more cost efficient to purchase food from these vendors than paying for a meal at traditional restaurant.”

Fojol Bros. of Merlindia, which debuted its Indian fare during the inauguration of President Obama, was one of the first rolling restaurants to hit D.C. streets.

Since then, the team behind the “culinary carnival” has launched three other food trucks, including Ethiopian-inspired Benethiopia. Their newest truck, Volathai, is outfitted with two propane-powered woks for cooking the Thai cuisine.

The company, which became profitable two months ago, has no designs on fixed sites to grow the business.

“People enjoy the informality of eating outside; it’s like a live social network for them,” said Justin Viterello, who, along with his mother Virginia Viterello and friend Peter Korbel, owns Fojol Bros. “There is now a culture behind eating outside … that’s exciting.”

Pickup artists

Jenna Huntsberger, the D.C.-based baker behind Whisked!, is not ruling out launching a food truck. But given the number already on the road, she is happy selling her sweet and savory pies, cookies and cakes online, at farmers markets and pickup sites.

“There are other ways to sell to the public without having to take on the overhead of having a brick-and-mortar space,” she said.

Huntsberger and her former partner, Stephanie Willis, started selling desserts at the 14th and U Farmers Market last May, then expanded online. All told, they invested $3,000 to purchase equipment and ingredients.

By the end of 2011, the women set up pickup sites for their online orders, a system modeled after Soupergirl, where Huntsberger used to work part time.

Customers who place orders by Tuesday at midnight can pick them up on Fridays at Weygandt Wines, Mr. Yogato, Miss Pixie’s or The Cupboard. Pies sell for $9 to $19 depending on the size, and can also be purchased through bi-weekly pie subscriptions starting at $72.

Willis left the company in December to focus on her job at the Department of Homeland Security, but Huntsberger continues baking treats out of rented kitchen space at 42 Degrees Catering in Rockville.

© The Washington Post Company


Drinks With Fresh Ingredients Popular at Restaurants

May 25, 2012

By JENNA TELESCA

Fresh food isn’t enough. Now restaurants are taking beverages to a new level with house-made drinks that incorporate fresh fruits and vegetables.

Culinary cocktails — savory, herb-infused or made with fresh ingredients — were mentioned as one of the top 20 overall restaurant trends in the 2012 National Restaurant Association’s “What’s Hot in 2012” chef survey.

And it’s not just cocktails that are being created with innovative ingredients.

“Beyond cool cocktail bars, we’re seeing so many restaurants in various regions offering house-made sodas with fresh and seasonal ingredients,” said Melissa Abbott, director of culinary insights at the Hartman Group, Bellevue, Wash.

In fact, chefs surveyed by NRA voted house-made soft drinks and lemonade as two of the top nonalcoholic beverage trends for 2012.

The house-made soda at We, the Pizza is an example of this growing trend, Abbott noted.

To create the sodas, the Washington-based restaurant makes its own fresh fruit purees, syrups and juices in-house and mixes them with seltzer water, according to Jordyn Lazar, the restaurant’s marketing manager.

We, the Pizza has a dozen different soda flavors such as grape, coconut, sour cherry and egg cream, each playfully named.

“Most popular is probably our orange soda which we call ‘I’ve Gotta Orange Crush on You,’” Lazar said, adding that the second best seller is “Don’t Forget Your Ginger Roots” made with fresh ginger.

The restaurant — which opened a year and a half ago — has an actual soda drip where customers can watch the “fizzician” put together the different concoctions.

“It’s a fun thing that people do while they’re waiting for their pizza to be ready at the restaurant,” Lazar said.

The handcrafted $3 sodas complement We, the Pizza’s menu — which includes unexpected pizza toppings like Brussels sprouts and highlights fresh, quality ingredients such as wild forest mushrooms, applewood bacon and free-range chicken.

Higher-end restaurants are using herbs, produce and fresh-squeezed ingredients in beverages to differentiate themselves, said Darren Tristano, executive vice president at Technomic, who said these drinks give customers a better-for-you perception.

“And it may be better for you, but I think there’s a perception,” said Tristano. “The word ‘fresh’ has taken on a new meaning, which has kind of a health halo around it — that it’s healthier, it’s better.”

Restaurants like McCormick & Schmick’s Seafood & Steaks now have fresh-squeezed juices in its alcoholic drinks, and Starbucks Coffee Co. recently opened a retail store for its Evolution Fresh juice brand, in addition to selling juice and smoothies at regular Starbuck’s locations, Tristano pointed out.

“So the next part of this trend is the premium positioning … Not every consumer is willing pay for or pay more for fresh, but there is an affluent consumer and a more contemporary Millennial that’s willing to pay more because they perceive the value as being much higher for this type of product,” Tristano said.

Organic and higher-end supermarkets, Tristano noted, have been focusing on offering juice and smoothie bars in-house.

At Woodland, Calif.-based Nugget Markets, customers can build custom-made juices and smoothies at the retailer’s coffee and juice bars.

“We encourage our guests to mix and match splashes of apple, carrot, beet, orange, cucumber and celery juices, or any other of our fresh squeezed selections,” Nugget Markets’ Tammy Campbell said in a post on the retailer’s website last month.

The nine-unit chain also made sure to promote the vitamins and nutrients and convenience of juice and smoothies, noting that juices’ retail price starts at $2.75 and smoothies’ at $3.50.

The ability to customize the flavors in their smoothies and juices can be a significant attraction to consumers, Tristano said.

The lack of preservatives in these fresh drinks can also be appealing to specific consumer groups, Tristano added.


Burger King scrambles for cage-free eggs

May 24, 2012

‘Humane’ is new trend

By Tim Devaney, The Washington Times, Sunday, April 29, 2012

 The nation’s fast-food giants are aggressively touting more humane ways of producing their menu offerings, but whether the kinder, gentler methods of serving up chicken nuggets and cheeseburgers can pay off at the cash register remains an open question.

Looking to trump moves by rivals McDonald’s Corp. and Wendy’s International Inc., industry No. 3 Burger King Corp. last week announced that it would take a more eco-friendly approach. By 2017, the company said, all the eggs and pork served to its customers will come from suppliers that don’t confine animals to cages or crates. It’s the first major fast-food burger chain to make a 100 percent “cage-free” commitment.

Jonathan Fitzpatrick, chief brand and operations officer at Burger King, called the move “the responsible thing to do” and one that “will allow us to leverage our purchasing power to ensure the appropriate and proper treatment of animals by our vendors and suppliers.”

Some say these moves, while well-intentioned, could backfire, leading to more animal deaths and environmental harm while taking bigger bites out of customers’ wallets.

“There are trade-offs with any decision,” said Charlie Arnot, CEO of the Center for Food Integrity. “So we’re encouraging them to consider these trade-offs before they simply respond to pressure from animal-interest groups.”

Although the more humane methods can generate positive headlines and enhance a brand’s reputation, the impact on the bottom line is less certain.

“I don’t think this will pay off from a financial standpoint,” Technomic restaurant analyst Darren Tristano said. “What typically happens is, you end up paying more. But you don’t do it because you expect to profit from it. You do it because it is good business sense. It shows good corporate social responsibility.”

Burger King announced its move just weeks after revealing that it would soon return to the New York Stock Exchange to trade its shares publicly. The last time the company’s shares were available for public sale was in 2010, when investment firm 3G Capital took it private for $3.3 billion. The company has announced an extensive revamping of its menu and a remodeling of its more than 12,000 outlets worldwide amid news that it had fallen to third place behind Wendy’s in the fast-food hierarchy.

Mr. Arnot said Burger King’s move could lead to higher prices on the menu, increase the restaurants’ environmental footprints and even harm the animals that the brand is trying to protect.

“If cage-free is the right direction for you, that’s fine, but think about the implications to the environment, to hen health and well-being, to worker health and safety, and to food affordability before you make that decision,” he said.

When the hens roam free, he said, they tend to cluster. This can lead to suffocation.

“You’re also likely to see an increase in hen mortality,” he said. “One of the reasons that the cage systems have been developed is to protect hens from pecking each other.”

Some critics say the government definitions of “free-range” and “cage-free” practices have been so diluted that the changes in animal welfare are minimal.

Listening to the customer

Fast-food restaurant officials said they are acting on feedback from patrons.

“We’re all listening to what our customers are telling us,” Wendy’s spokesman Denny Lynch said. “Consumers are more interested in their ingredients. They’re more interested in the sourcing and where the food is coming from, and they’re more interested in the humane treatment of the animals.”

But don’t expect these chains to go vegetarian anytime soon.

Wendy’s customers “do understand that these animals are raised for food,” Mr. Lynch said. “They’re not pets. We’re not going to be buying pillows for every animal.”

Burger King’s plan for cage-free eggs means the chickens that produce its breakfast-sandwich eggs will not be enclosed in tiny cages. Instead, they will be free to roam around the supplier’s barn.

Burger King was the first major restaurant chain to begin buying cage-free products in 2007. About 9 percent of its eggs and 20 percent of its pork are raised cage-free. The company said last week that it will shift completely to cage-free production over the next five years.

McDonald’s and Wendy’s have asked pork suppliers to develop plans to eliminate gestation crates, the small cages in which pregnant pigs are kept, but they have not set a timetable.

Dispatching chickens

Wendy’s has turned its focus to less-traumatic ways of killing chickens, Mr. Lynch said. The restaurant doesn’t compete as much in the breakfast market, so it uses fewer eggs than either McDonald’s or Burger King.

In an effort to improve animal welfare for the chickens it uses for sandwich meat, Wendy’s has been moving away from electric stunning of chickens before they are brought to the chopping block.

“We are active in identifying more humane methods of doing that,” Mr. Lynch said.

He said electric stunning has been an industry standard “for a long, long time” and that there is nothing unethical about it, but he added that his restaurant chain is simply trying to find better methods.

Wendy’s has considered “low atmospheric pressure systems,” or LAPS, to suffocate rather than stun chickens. Wendy’s has one top supplier that uses this “less invasive” method, Mr. Lynch said.

Explaining the process, he said, “When you get in an airplane and fly to high altitudes, you have to put on an air mask. So this process is what is used to treat the chickens, except they don’t get an air mask.”

Restaurants aren’t the only ones transitioning to cage-free food.

Retailers Wal-Mart Stores Inc. and Costco Wholesale Corp. have made the move with 100 percent of their private-label eggs. Unilever NV, which makes Hellmann’s mayonnaise using 350 million eggs a year, is in the process of doing so. Others in the food industry, such as Sonic Corp., Subway, Ruby Tuesday Inc. and Kraft Foods Inc., are taking similar steps.

McDonald’s has been a staunch user of cage-free food in Europe.

“I think they’re trying to get ahead of the curve and McDonald’s here,” said Mr. Tristano, the restaurant analyst. “If you’re Burger King, and you know McDonald’s is doing it in other countries, it’s a smart move.”

© Copyright 2012 The Washington Times, LLC. Click here for reprint permission.


Burger King Aims to Reclaim Throne

May 22, 2012

With Burger King’s announcement of a $750 million, one-year investment in everything from menu to marketing, the burger chain is making a significant push to leave its recent troubles behind.

Supporting the company’s new slogan, “Exciting things are happening at Burger King,” the investment will focus on four priorities: a menu expansion designed to broaden Burger King’s appeal beyond its core of young males, a marketing campaign featuring various celebrities, store renovations, and operations improvements.

“We are focused on creating long-term value and increasing consumer consideration for the Burger King brand,” says Michelle Miguelez, director of global communications at Burger King Corp. “In order for this investment and this plan to work, all four of these areas are priority. One cannot outweigh another.”

New menu items such as mango and strawberry-banana smoothies, Garden Fresh salads, chicken wraps, and crispy chicken strips suggest Burger King is taking cues from industry leader McDonald’s, which rolled out similar menu items over the last decade to broaden its appeal with health-conscious consumers. Burger King’s roll out of mocha and caramel frappes also takes a page out of McDonald’s playbook, not to mention that of Starbucks.

Burger King “recognizes that most of the menu items we have rolled out are not category innovations,” Miguelez says, but “they are new to [Burger King].”

The Miami-based chain’s goal with its menu expansion is to attract new customers while retaining the young males that frequent Burger King for its heartier offerings, like the Whopper.

“As a quick-service restaurant, Burger King wants to appeal to everyone,” Miguelez says, “but we are also expanding our menu to appeal to a broader demographic, offering items that provide options for the whole family.”

The chain’s new star-studded marketing campaign features Salma Hayek, Jay Leno, David Beckham, Steven Tyler, Mary J. Blige, and Sofia Vergara. (Hayek stars in both English- and Spanish-language ads; Vergara’s ad is only in Spanish.) All of the ads strike a humorous tone—Jay Leno, a collector of classic cars, drives up to the counter to place his order—and lead off with Burger King’s new “exciting things” tag line.

As part of the investment, Burger King is also promising an improved restaurant experience with enhancements at every location. These include digital menuboards to replace the traditional slat-and-slide boards, new employee uniforms, and new packaging.

As a whole, the investment represents a spirited attempt to kick-start a brand that has fallen behind other quick serves in the race for second place to McDonald’s, which, according to Advertising Age, was 101 percent ahead of Burger King in average domestic revenue per unit in 2010, more than double its lead from 10 years earlier.

McDonald’s was 101 percent ahead of Burger King in average domestic revenue per unit in 2010, more than double its lead from 10 years earlier.

The investment comes just in time, says Darren Tristano, executive vice president at Technomic, a Chicago-based consulting firm for the foodservice industry.

“It has less to do with following McDonald’s and trying to compete, and more to do with, ‘If we don’t do it, we’re not going to be around in five years,’” Tristano says.

Burger King’s downslide started in the early 2000s, when major franchisees publicly aired grievances with the company. Since then, the chain has passed into different ownership several times and jumped on and off the public markets every few years. (The company recently announced plans to list its shares on the New York Stock Exchange through a merger with a London-based investment company.)

Burger King has made “significant strides in repairing relations with [its] franchise community,” Miguelez says. “Burger King Corp.’s new senior management team has spent the past year evaluating the business and collaborating with franchisees on ways to create efficiencies and ultimately drive increasing sales and profits across the system.”

While repairing its franchisee relationships is crucial, Burger King’s menu expansion may be the most important aspect of its investment, especially since the majority of its business comes through the drive thru.

“The menu ultimately will be what gets more customers in the doors,” Tristano says. “[Burger King has] perhaps even a better tasting product than McDonald’s has. So you can make the argument that if your product is better, then why aren’t you doing better?”

Considering Burger King’s arguable leg-up on the field in food quality, some analysts question whether the chain should be doubling down on its flame-grilled offerings rather than expanding its menu to mirror McDonald’s or any other chain’s.

“They should be focusing on themselves,” says Jeff Davis, president of Sandelman & Associates, a foodservice consumer research firm. “People don’t need another McDonald’s.”

For its part, Burger King says it has no intention of losing sight of what made it one of the industry’s top chains in the first place.

“Burger King is and will always be the home of the Whopper,” Miguelez says.


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Copyright © 2012 Journalistic Inc. All Rights Reserved. QSR is a registered trademark of Journalistic, Inc.


Subway debuts new café concept at FAU

May 21, 2012

By Justine Griffin, Sun Sentinel, 6:30 PM EDT, April 23, 2012

Subway stores are getting a makeover in South Florida.

The Florida Atlantic University campus in Boca Raton will get the first Subway Café in Florida, and one of many to come to South Florida soon, according to Subway Development Corp. chief executive, Larry Feldman.

Subway Café will offer an expanded menu, which includes gourmet coffee, salads, paninis and pastries. The new stores will offer leather seating, with hardwood and marble floors, stone inlays in the walls and flat screen televisions in the dining area. Feldman says that the new design will open mainly in metropolitan areas, such as high-rise office buildings, university campuses, fitness centers and hospitals.

“This is not your typical Subway,” said Feldman, whose regional headquarters is based in Boynton Beach.

The first Subway Café opened in theWashington, D.C., area in 2008, but Feldman thinks the upscale concept will excel in South Florida.

“Customers can still get the traditional sandwiches they know at these stores,” he said. “But we’ve created a nice environment where people can come to relax.”

Feldman runs 1,200 stores in South Florida, Washington D.C., Maryland, Virginia and Delaware, with more than 270 of those stores in Palm Beach, Broward and Miami-Dade counties. Twenty eight Subway locations opened in 2011 in South Florida, and there are 20 under construction. Feldman hopes to have about 17 more in the works soon.

“Subway is known as the sandwich shop which is a strong position for them as they go into this transition,” said Darren Tristano, the executive vice president of Technomic, a food consulting firm. “However, it will be difficult to reach into the beverage platform. McDonald’s has a strong hold over coffee, and without a drive-through, they should expect challenges.”

In 2011, Subway passed McDonald’s to have the most fast food stores open in the world. There are now Subway stores in 100 different countries.

The 3,400-square-foot store inside FAU is attached to the university’s football stadium, and will remain open until 4 a.m. to reach the student community said franchisee owner, Louis Giorgi. The expanded dining room will seat 70 people.

“It is unlike any other Subway I’ve ever seen,” Giorgi said.

Giorgi and his family own 20 Subway franchises in the Boca Raton and Delray Beach area. Aside from the FAU café store, another store will soon be opening in three weeks at Palmetto Park Road and A1A near Boca Raton beach.

“You could open a Subway in a broom closet,” Giorgi said. “Unlike other fast food concepts, the investment is relatively low, and it’s so much easier to set up.”

The initial investment fee for a new Subway franchisee is $15,000, Feldman said. For multiple location owners, that fee drops to $7,500.

Giorgi owns the 400-square-foot store inside the Town Center at Boca Raton, but he’s even seen smaller locations in hospitals and even kiosks.

Feldman hopes to expand the company into nontraditional spaces outside of strip centers and shopping malls. A new Subway location just opened inside the YMCA wellness center in Hollywood. Another will open at the YMCA location in Pembroke Pines soon, he said. There’s also a Subway store inside Jackson Memorial Hospital in Miami.

jusgriffin@sunsentinel.com, 954-356-4528 or Twitter: @SunBizGriffin

Copyright © 2012, South Florida Sun-Sentinel


Buffalo Wild, Panera Beat On Earnings But Sales Shy

May 18, 2012

Buffalo Wild Wings (BWLD) and Panera Bread (PNRA) reported better-than-expected earnings late Tuesday as consumers dined out more during an unseasonably warm January and February. But revenue for the casual eateries came in just shy of analyst forecasts.

Buffalo Wild, which unexpectedly reported before the close, said earnings rose 21% to 98 cents a share. Analysts had seen 95 cents. The wings joint’s revenue climbed 38% to $251.1 million, just a hair under estimates for $251.2 million. Sales at company-owned stores open more than a year climbed 9.2%.

Traffic that tapered off slightly in March might have caused the revenue miss, analysts said.

Elevated food costs remain a concern. Buffalo paid $1.92 per pound for its signature wings, 57% higher than a year ago. Prices remain elevated in the current Q2, the company said in a conference call, rather than tapering off as they traditionally do. It guided the rest of its commodity costs up about 4% for the year.

So Buffalo is raising some prices in Q2, such as its Tuesday night special, to 50 cents per wing.

It reaffirmed its full-year guidance of 20% profit growth.

“We have a disciplined approach to managing the costs we can control,” CEO Sally Smith said on a post-earnings conference call.

Shares fell 6% to 78.17 — its lowest close since Buffalo’s prior blowout report.

After the market close, Panera said earnings per share climbed 28% to $1.40 per share, 5 cents above forecasts. Sales rose 18% to $499 million, just missing forecasts for $500.8 million. Same-store sales at its company-owned restaurants grew 7.5%.

Nick Setyan, a restaurant analyst with Wedbush Securities, said it appeared the company managed its food, beverage and other rising costs.

“They’ve been able to pass that on more than I would have expected,” he said.

The sandwich maker sees Q2 EPS of $1.40-$1.43. Wall Street had expected $1.40.

Shares rose about 1% in late trading after falling 93 cents to 148.25 during the regular session.

Panera now sees “full-year fiscal 2012 earnings slightly above the high end of our long-term range of 15% to 20%,” co-CEO Bill Moreton said in a statement.

Panera hosts a Wednesday morning conference call.

The overall industry began 2012 strong, says Darren Tristano, executive vice president of the restaurant consulting firm Technomic. Unusually sunny skies in January and February in much of the country lured consumers out of their homes. An extra day this leap year helped too. Consumers appear to have tightened their wallets somewhat in March, analysts say.

“Casual diners had a pretty bad March,” Setyan said.

Tristano’s firm maintains its 2012 sales forecast of just 3% to 3.5% for the sector.

Buffalo Wild pushed its gift cards at Target (TGT), Wal-Mart Stores (WMT) and other retailers in Q4, and doubled sales of them in the holiday period. The eatery said card redemptions accounted for 2 percentage points of its same-store gains.

Rising commodity costs are a common theme, says Maryanne Rose, CEO of SpenDifference, which helps restaurants with supply chain issues.

“Everyone’s taking price increases,” she said. “I’m not getting the feeling that people are getting a lot of push-back from the consumer.”

With prices rising at the pump and the grocery line, customers expect it from restaurants, she said: “There’s just a new normal .”


Fast-Casual Nation

May 16, 2012

By Josh Sanburn, Monday, Apr. 23, 2012

There’s a Wendy’s in Wichita, Kans., where you can choose between a bacon portabella Black Label burger (with mushroom sauce and Muenster cheese), an apple pecan chicken salad, a Monterey ranch crispy-chicken sandwich and an Asiago ranch chicken club. The lineup bears little resemblance to Wendy’s burgers-and-fries menu of even a few years ago–and it’s a big reason Wendy’s was able to edge out Burger King for the first time last year to become the country’s No. 2 hamburger chain, according to numbers released last month by food-industry research firm Technomic.

Fast-food joints are redefining themselves. They’re placing a sharper focus on ingredients and transforming their dining rooms into Starbucks-style hangouts to compete with so-called fast-casual restaurants like Five Guys, Chipotle and Panera Bread. “Fast casual has raised the bar,” says Darren Tristano, executive vice president of Technomic. “When your competitors are doing this, you don’t want to lose relevance.”

Burger King is belatedly launching its own makeover. It finally fired its bizarre king mascot last year and unveiled a line of BK Chef’s Choice burgers. Taco Bell recently announced a Chipotle-esque Cantina Bell menu, while White Castle is testing three specialized menus at existing franchises: one offers beer and Southern-style barbecue, another Asian noodles; the third serves panini-style sandwiches.

But the trend dates back nearly a decade, starting with the one fast-food chain that’s still beating everybody else. In 2002, McDonald’s suffered its first quarterly loss in almost half a century. Many factors were at play: overly rapid expansion, complaints about cleanliness and customer service, and negative publicity following the publication of Eric Schlosser’s muckraking Fast Food Nation. The following year, McDonald’s began slowing the number of new stores it opened so it could focus on revitalizing its menu and responding to the attitudinal shift toward premium, nutritional foods.

That’s why when you walk into a McDonald’s today, you see an Angus Mushroom & Swiss Burger, a Fruit ‘N Yogurt Parfait and a McCaf Iced Caramel Mocha alongside the Dollar Menu and Big Macs. Since the shift, McDonald’s sales have only gone skyward: total revenue increased from $50.8 billion in 2004 to $77.4 billion in 2010.

“To be able to sell Angus burgers at that price”–about $4–”and not lose anything in terms of speed and consistency is pretty shocking,” says Gloria Cox, a principal at the Cambridge Group, a growth-strategy consulting firm. “McDonald’s has shown it can be done, and that may cause others to say, ‘If they can do it, maybe we should give it a try too.’”

McDonald’s was also guarding against the rise of fast-casual restaurants, whose customer pitch is to offer much higher quality for a slightly higher price. Sales at Five Guys, which began in 1986 with one location in Arlington, Va., and now has close to 1,000, grew by 38% from 2009 to 2010 alone. Sales at Chipotle increased 20.7% during the same period. (McDonald’s bought a majority stake in the chain in 1999 but divested seven years later.) Panera Bread boosted revenue 24% from 2007 to 2010, at the height of the recession.

Wendy’s senior vice president Denny Lynch says his company feared getting squeezed between the Five Guys of the world and convenience stores like 7-Eleven. “You don’t want to get stuck in the middle,” he says. So around 2009, Wendy’s started upgrading its menu: first salads, then french fries, then chicken sandwiches and burgers. Now Wendy’s salads have fresh strawberries. Its french fries are topped with sea salt. Its burger patties are thicker. It uses red onions instead of white and crinkle-cut pickles instead of ordinary dill.


Olive Garden stocks Sam’s Club shelves with dressing, cheese

May 11, 2012

By Sandra Pedicini, Orlando Sentinel, April 25, 2012

 Olive Garden’s Italian salad dressing and shredded cheese are now for sale in Sam’s Club stores across the country.

The Italian chain, owned by Orlando-based Darden Restaurants, said Wednesday the products will be sold at Sam’s Club stores exclusively for a year. Darden, which also owns Red Lobster and LongHorn Steakhouse, will study sales results before determining whether to expand its new grocery business.

 It’s a chance “to extend the brand beyond the four walls of the restaurant,” Darden spokesman Rich Jeffers said.

But don’t expect to buy breadsticks or chicken parmesan anytime soon. Darden says it would have difficulty re-creating the quality of its restaurant meals in frozen entrees, so it would stick with basic items such as the dressing and cheeses made by outside companies but marketed under the Olive Garden brand under a licensing deal.

T. Marzetti, which sells its own products in grocery stores, also makes the Olive Garden dressing. Lotito Foods produces the cheese blend.

Locally, a two-pack of 20-ounce Italian dressing bottles sells for $6.98. The 14-ounce, refrigerated blend of asiago, parmesan, romano and provolone cheeses carries a price tag of $7.98.

Olive Garden, which has already sold dressing in its restaurants for a decade, also will sell mozzarella and parmigiano-reggiano cheese in select Sam’s Club stores. Those will include some in Central Florida.

Seeing Olive Garden venture into the grocery aisles isn’t a surprise, said Steve West, a restaurant-industry analyst for ITG Investment Research. “We’ve seen this kind of trend for years.”

P.F. Chang’s, Romano’s Macaroni Grill and California Pizza Kitchen all sell frozen meals. Tony Roma’s, which has its restaurant operations based in Orlando, also sells frozen entrees and recently began hawking ribs on a cable home-shopping network.

Analysts said Olive Garden’s food manufacturers would likely pay the restaurant chain between 5 and 10 percent of sales in royalties. It would be small change for Darden, a company that rings up $7.5 billion in sales each year.

“It builds brand awareness, which I’m not sure they really need to do, but it does give them another revenue stream which doesn’t take a lot of cost,” said Darren Tristano, executive vice president of Chicago-based foodservice research firm Technomic. “I think even if it is successful, its not going to be that meaningful to a brand that’s so large.”

Tristano recently bought a bottle of Olive Garden dressing from Sam’s.

“I’m not sure it’s as good as it is at the restaurant,” he said. “That could be quality or psychology. I’m not sure. It’s close enough that I feel like it’s a nice opportunity.”


The hottest new trend in casual dining? The ‘breastaurant’

May 10, 2012

From Twin Peaks to the Tilted Kilt, sexed-up dining chains are popping up everywhere

by Anne Kingston on Wednesday, April 25, 2012

If you’ve not yet heard of “breastaurants,” gird yourself: they’re about to roll out across Canada. And this new generation of mammary-centric casual dining chains—with their slick thematic formats, man-cave mentality and hyper-friendly female servers schooled in “touchology”—makes Hooters seem downright quaint.

First out of the gate is Tilted Kilt, a Tempe, Ariz.-based “Celtic”-themed sports pub chain whose servers wear tiny tartan tops and micro-mini kilts. Originating in Las Vegas in 2003, the Hooters-Brigadoon hybrid has 60 locations in the U.S. with 15 franchises in development. Its first Canadian location opened in Edmonton last December; a Toronto franchise will open in June, with a Calgary outpost slated for July. “We’re racing to have it finished before Stampede,” says Mark Hanby, Tilted Kilt’s vice-president of development. Hanby admits the company “had serious butterflies” about opening in Edmonton, but now expects the chain’s average annual per-location sales of US$2.7 million to be higher north of the border, in part because of higher prices. The Calgary location is 8,000 sq. feet, bigger than the chain’s average 6,000- to-6,500 sq.-foot floorplan in the U.S. Hanby, who has scouted the country, says Ottawa, Halifax and Saint John, N.B., are ripe for the concept. He hopes to see six locations in the Toronto area by the end of 2013.

Over the past decade, the “breastaurant” has emerged as the second-fastest growing sector in the casual dining industry behind upscale burgers, says Darren Tristano, an industry consultant with Chicago-based Technomic, Inc., who coined the “breastaurant” neologism in 2007. Puns and plaid go with the territory. Addison, Tex.-based Twin Peaks, founded in 2005, has 20 U.S. locations with plans for another 30 by year-end. It exploits an Alpine lodge theme with “scenic views” provided by “Lumber Jill” servers in skimpy plaid shirts and hiking shorts. Canada is on Twin Peaks’s radar, says marketing director Meggie Miller: “We’ve received lots of interest and we’re open to seriously considering qualified [franchisee] candidates.” Meanwhile, regional players are thriving in the U.S., among them Brick House Tavern & Tap, Honey Shack, and Bone Daddy’s House of Smoke, which boasts “BBQ, beer, and Daddy’s girls” in midriff-baring sweaters.

“Breastaurant” customers are 80 per cent male, range in age from 21 to 35, and are not necessarily single, says Tristano. Tilted Kilt’s clientele skews slightly older at 38, says Hanby, who notes they’ve had success near Florida retirement communities and military bases.

As retrogade as it may appear, the “breastaurant” trend is propelled by current cultural and economic trends. The spectre of scantily clad women that made Clearwater, Fla.-based Hooters a target of outrage when it opened in 1983 is now engrained culturally, down to near-naked barristas manning “sexpresso” stands in the Seattle area. Vancouver-based Earls Kitchen and Bar, for example, has morphed from casual preppy servers in the 1990s to female servers in form-fitting black cocktail gear. “We’ve grown up,” says Cate Simpson, spokeswoman for the 63-location chain. She admits some servers’ skirts are so short they’re thinking of imposing a dress code: “They look great but we have to keep a standard.”

The fact that Hooters allowed its brand to wither provided an opportunity, says Tristano, as did the availability of locations with good lease rates due to the economic downturn. Hooters, a US$1-billion juggernaut with 455 locations (11 in Canada), has become as dated as its servers’ suntan-coloured pantyhose and orange nylon shorts. Sales declined more than 7.5 per cent last year. Over a dozen locations have closed and its CEO recently jumped ship to Twin Peaks.

The “breastaurant” concept resonates amid economic and gender-role uncertainty. They’re proletariat men’s clubs, soothing public man caves where guys go to bond, drink cold beer and watch the game without being told to put the toilet seat down. Sales are 50 per cent alcohol; menus are defiantly masculine: pulled pork, burgers and wings. Twin Peaks taps into to the mindset with its slogan: “Twin Peaks is about you, because YOU’RE THE MAN!” Brick House Tavern & Tap offers built-in “man caves”—seats of four nestled in front of big-screen TVs. Bone Daddy’s even has a free “VIP” club.

It’s an ethos that fits with what the American cultural critic Susan Douglas calls “enlightened sexism”—the notion that formerly “sexist” depictions of women are harmless, even fun, when presented with an ironic wink. “We’re a place that makes fun of men; women are this, sports are that,” Twin Peaks CEO Randy Dewitt has said.

The big draw, says Tristano, is attentive, friendly service. “It’s all about the ambiance and the servers,” he says. “You don’t go for the food.” Tilted Kilt’s Hanby agrees: “A lot of people are selling beer and food. So to win we’ve got to be spectacular and different.” He boasts of Tilted Kilt’s “upbeat atmosphere” and “entertainment in the form of interaction.” Guests don’t just ogle the servers, they’re given permission to engage, he says. “They can open their mouths, they can have a dialogue.”

Tilted Kilt servers, or “cast members,” as they’re known, are “sassy,” “sexy fun,” and “sexy smart,” Hanby says. Training focuses on how to make a connection with the guests and provide entertainment value. “Most of the girls have a shtick, and we work with them to develop it.” Tilted Kilt’s CEO Ron Lynch has spoken of servers employing “touchology”—touching the table often, and making guests feel at home. “Sometimes waitresses are providing the best part of a guest’s day,” he says.

Twin Peaks’s servers even connect with regulars on social media, sharing what shifts they’ll be working and daily specials. Such friendly details provide ample opportunity to “upsell,” industry-speak for increasing the bill. At Twin Peaks, for instance, servers taking a beer order will ask, “Do you want the ‘man size’ or the ‘girl size’?”

Hanby, who talks of “keeping it PG13,” insists the line between banter and flirting is not crossed: “It should not be sexual in any way, shape or form.” He doesn’t shy from the “breastaurant” label but says they don’t use it internally: “We never refer to our servers using a part of their anatomy,” he says. “We’d never put the ladies in a position that would objectify them,” a comment at odds with the publication of the annual women of Tilted Kilt calendar. Hanby doesn’t deny the concept is based on the “sex sells” truism. “There’s sex appeal involved,” he says. “We don’t back away from that. It’s part of life every day, everywhere.”

Expect more of it. Tristano sees room for another 500 “breastaurants” in the U.S. and 200 to 300 in Canada. Small chains are starting to jump on the trend, he says. As for the female-equivalent “chestaurant,” Tristano sees little likelihood of that: “Women are more focused on the food experience,” he says. “There’s a big difference in what men want.”

Meanwhile, the Tilted Kilt has registered its cutesy-naughty name internationally. Asia and former Eastern Bloc countries are ripe for expansion, Hanby says. As for taking the concept to Scotland, home of the first tilted kilt? “That’s not on our agenda,” he says. “Yet.”


Burgers and Blueberries?

May 8, 2012

They don’t like to admit it, but today’s consumers are still influenced by advertising perceptions. Key marketing terms can drive those perceptions toward better-for-you emotional drivers, craveability and real attitude and usage trends.

Recently, Burger King launched their “Fresh Menu,” which adds several new items including salads, premium chicken tenders and smoothies. McDonald’s recent earnings report indicates that the focused and increased effort by Burger King toward this new and fresh promotion has allowed them to gain some share from McDonald’s and has given Burger King some renewed momentum. 

McDonald’s, on the other hand, has been promoting a more “wholesome” menu and recently added “sweet, plump, fresh blueberries by the bushel” to their menu promotions. They are combined with crunchy walnuts, real banana and two full servings of whole grains in Blueberry Banana Nut Oatmeal, and with yogurt and granola—“a half cup of dairy and a full serving of whole grains”—in the Blueberry Yogurt Crunch. The effort shows an emphasis on more healthful offerings combining seasonal berries with “low-fat” yogurt and the “wholesome crunch of granola.”

Although these efforts may only have a small impact on consumer menu choices, these brands are providing the important alternatives that give consumers better options when dining away-from-home. 

This may be a small step, but nonetheless, a step in the right direction.

McDonald's Blueberry Ad (English)

 

McDonald's Blueberry advertisement (Español)


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