QSR Value Promotions go Beyond Price in 2014

January 27, 2014

picRestaurant chains such as Burger King, Pizza Hut and Taco Bell add to their value strategies in the new year.

 Burger King’s January offer

Value is often top of mind in early January among restaurant customers who have resolved to save or better manage their money in the new year, but restaurant brands looking to capitalize on this show that enticing value strategies are about more than just low prices.

While some chains have moved up their well-known value promotions opportunistically into January — notably Subway, which is running its $5 foot-long campaign as “Janu-ANY” — others have introduced new value plays that de-emphasize prices in favor of new-product news or brand highlights like anniversaries.

“Today’s consumer mind-set around value really has shifted, or drifted, further away from price point,” said Darren Tristano, executive vice president of Technomic Inc., a Chicago-based market research firm. “Prices have been set [in consumers’ minds] by Subway’s $5 foot-long or some very meaningful milestones like $5 and $8 at Little Caesars for the Hot-N-Ready.”

As such, operators ought to consider looking beyond price points to signify value, Tristano said, whether it is the service experience, customization, culinary credibility, ingredient variety, or special preparations like slow-cooked barbecue or rotisserie chicken.

“There are so many ways you can maximize value, but it always comes down to differentiation,” he said. “What can you do differently from competitors or from consumers trying to cook this stuff at home?”

In the quick-service segment, where much of the marketing emphasis consistently has been on value for the past several years, the largest chains are approaching their messaging through the lens of new-product news.

Miami-based Burger King rebranded its value menu as King Deals, a tiered value menu starting with items for $1, including current limited-time offers the Rodeo Burger and the Rodeo Crispy Chicken Sandwich. The menu has 20 items at those lower price points at Burger King’s domestic locations, which comprise about 7,400 restaurants in the United States and Canada.

Wendy’s has added two sandwiches to their Right Price Right Size value menu

Also, from Jan. 6-29, Burger King will offer a free small coffee to any customer who purchases a breakfast sandwich.

Wendy’s, the Dublin, Ohio-based chain of about 6,500 units, also added spicy sandwiches to its Right Price Right Size value menu, which it debuted last year just after New Year’s Day. The Spicy Chipotle Crispy Chicken and Spicy Chipotle Jr. Cheeseburger sandwiches are priced at a suggested 99 cents.

Irvine, Calif.-based Taco Bell, also a Yum! Brands Inc. subsidiary, rolled out two value promotions before the new year, including the Grilled Stuft Nacho and the BCS Taco 12-Pack, both of which debuted Dec. 19.

The nearly 6,000-unit brand called out the $1.29 price point for the Grilled Stuft Nacho in the commercial that began running in December, but convenience and portability have been the main emphasis in the ad and its complementary social-media campaign. Taco Bell is managing a social campaign under the “#DoingStuff” hash tag, where people take photos or videos of themselves doing anything while eating a Grilled Stuft Nacho.

The BCS Taco 12-Pack carries a $12.99 price point and lets consumers choose 12 tacos from among the brand’s crunchy-taco flavors.

The price war continues for major pizza chains, but both Pizza Hut and Papa John’s Pizza have added a different angle to their start-of-year marketing campaigns. Both are tying a limited-time, low-price offer to a brand anniversary, allowing them to easily end the promotion without setting an expectation for a repeat performance every year.

“Cheaper isn’t always better,” Tristano said, “and for restaurant operators, it’s not a viable long-term and sustainable strategy.”

Plano, Texas-based Pizza Hut, a division of Louisville, Ky.-based Yum! Brands Inc., is offering 50 percent off medium and large pizzas ordered online at menu price for its Hut Lovers loyalty club members. New members of Hut Lovers may sign up and immediately redeem the offer, which will run through Jan. 10.

The impetus for the promotion is the anniversary of the first Pizza Hut order taken over the Internet, in Santa Cruz, Calif., in 1994. The chain of 14,000 restaurants worldwide has resurrected its original online-ordering hub from that year, PizzaNet, which the brand said produced the first thing ever purchased from the Internet.

“We want to celebrate the fact that before consumers could buy books, clothes, music or vacation packages via the Internet, they could place an online order for a Pizza Hut pizza,” Carrie Walsh, chief marketing officer for Pizza Hut’s U.S. division, said in a statement.

Pizza Hut’s commercial promotes the deal by harkening back to 1994 with one of the most popular songs of that year, “The Sign” by Ace of Base.

Louisville-based Papa John’s is taking customers back a decade further with its deal to celebrate its 30th anniversary. Through Jan. 26, consumers can add a large one-topping pizza for 30 cents, with the purchase of a large pizza at regular menu price. Papa John’s has 4,300 restaurants worldwide.

Fast-casual chains and value

Technomic’s Tristano noted that fast-casual concepts by and large do not run aggressive promotions in January or throughout the rest of the year, but those chains nonetheless could bolster their value perceptions through product news like other limited-service brands have done.

“You could conclude that brands like Jimmy John’s or Firehouse Subs don’t compete with Subway — their quality is a step above and their prices are $3 above — but the reality is consumers use both,” he said. “Consumers go higher in price one day, then look for low prices the next day to balance it out.”

Reconsidering ways to provide more value could be the way fast-casual brands make better inroads at the dinner daypart or with certain demographic groups, like women or Hispanics, Tristano added.

Women tend to look for smaller portions, which fast-casual brands could offer, even at a slightly higher price point, he said, while Hispanic customers tend to focus on family occasions when dining out. Both look for bolder, spicier flavors, he said.

“You have opportunities for more social occasions by offering a family-oriented package … or options for sampling and sharing,” Tristano said. “You don’t see as many parties of three or more in fast casual, and that might be the way for [those restaurants] to continue their momentum.”


New Pizza Hut Units Feature Pizza by the Slice

January 24, 2014

picChain aims to boost its lunch daypart and compete against fast-casual upstarts with the new prototype.

An updated dining room emphasizes a sit-down experience.

Pizza Hut opened two units this week built around a pizza-by-the-slice experience aimed at potentially evolving the brand to make inroads during the lunch daypart and to fend off competition from upstart fast-casual pizza brands.

A company-owned unit in Pawtucket, R.I., and a franchised restaurant in York, Neb., feature modern design elements that have spread from fast-casual restaurants into other industry segments, such as digital menu boards and open seating plans, as well as a pizza-by-the-slice “bar.”

The larger unit in York has 80 seats and will also emphasize the dine-in experience with sautéed pastas and a made-to-order salad bar. The Pawtucket location seats 30 people and will function more as a delivery-carryout restaurant with the additional by-the-slice feature.

Carrie Walsh, the new chief marketing officer for Pizza Hut’s U.S. system, said in a statement that the new restaurants would meet and exceed the needs of consumers, as well as “enter a competitive environment” like pizza by the slice in the Northeast “with a very competitive product.”

It also would give Plano, Texas-based Pizza Hut new footing in the lunch daypart, where several young fast-casual pizza brands are looking to build their market share. Much of the fast-casual sector’s activity revolved around pizza last year, with chains like Pie Five and Your Pie ramping up growth plans and other brands like Pizzeria Locale and PizzaRev attracting the investment of larger restaurant companies like Chipotle Mexican Grill and Buffalo Wild Wings, respectively.

However, Pizza Hut developed its new-concept stores to meet customer demand, not the challenge of the new fast-casual segment, spokesman Doug Terfehr said in an interview.

Pizza Hut says offering individual slices aims to satisfy customer demand.

“We pay attention to our consumer trends, one of which is them seeking a quick on-the-go option, and one of our solutions for that is pizza by the slice,” he said. “We’re not reacting or responding to what the others are doing with speed. It’s about understanding our broader pizza fan. They’re looking for a convenient option, and this is an inviting environment to bring that to them.”

Regardless, “fast-casual pizza competition is coming, and it’s coming hard,” said Darren Tristano, executive vice president of Chicago-based market research firm Technomic Inc.

Pizza Hut is acting prudently to recognize how that segment is changing pizza fans’ expectations, especially at lunch, which has always been a daypart in which the legacy chains like Pizza Hut and Domino’s Pizza could build sales, he said.

“The convenience of being able to get a single-serve, value-oriented item is the play Pizza Hut is looking to get into and what fast-casual chains will continue to dominate,” Tristano said. “It’s a way to build more traffic at lunch with something that’s price-appropriate. It’s a smart decision.”

Fellow industry expert Dennis Lombardi, executive vice president of Columbus, Ohio-based WD Partners, also praised Pizza Hut’s decision to experiment with pizza by the slice.

“It’s one of the major methods of delivering pizza that they haven’t done before,” Lombardi said. “This is absolutely appropriate and important. Couple that with walk-in traffic — think how well the Hot-N-Ready has performed for Little Caesars.”

Properly forecasting the production needs for pizza by the slice, so that the products look fresh and appealing but do not go to waste, would be a major challenge for adding that experience, he added.

Where Pizza Hut also needs to be cautious, Technomic’s Tristano said, is staying true to its positioning as a delivery and carryout leader.

“When you’re No. 1, you have more to lose than to gain,” he said, “so when trying to reinvent yourself to remain competitive and relevant to new customers, it’s important as long as you don’t turn off people who appreciate you for what you are.”

Pizza Hut spokesman Terfehr agreed, saying, “Delivery and carryout are still our core business, what we do well and what people come to us for.”

He added that delivery and carryout orders have followed typical patterns, with by-the-slice orders creating incremental traffic during lunch and somewhat in the evening, in the first few days of operation for the York and Pawtucket stores.

But don’t expect the by-the-slice format to appear in all new Pizza Hut units soon, Terfehr said. He conceded that a few more locations would open over the near term — and Pizza Hut’s chief development officer, Al Litchenburg, noted in a statement that the brand was “bullish on our plans to quickly expand them” — but most of the chain’s new domestic units would continue to carry the “Del-Co Light” design, which has helped Pizza Hut regain its momentum for net unit growth.

Pizza Hut opened 115 net locations in the United States in 2013 and has more than 7,750 domestic locations.

The brand is a subsidiary of Louisville, Ky.-based Yum! Brands Inc., which also operates or franchises KFC and Taco Bell in more than 130 countries.


Two Become One

December 3, 2013

two-become-onelaSeveral quick-service concepts have cobranded with other companies in hopes of leveraging the other brand’s assets, like marketing and menu. But Fatburger is doing something a little different in cobranded locations with its full-service sister brand Buffalo’s Café: It’s adapting much of the latter’s concept, including, in one case, its table-service format.

The 150-unit Fatburger opened three cobranded units with Buffalo’s Café, including one with table service, a full bar, and a patio, and two with a quick-service Buffalo’s Express format.

Andy Wiederhorn, CEO of Beverly Hills, California–based Fog Cutter Capital Group, which owns Fatburger and Buffalo’s Café, says the two brands are a natural fit, especially because they are under the same parent company.

“We have one back-of-the-house kitchen and one cash register system, with two different menuboards and two signs,” Wiederhorn says.

While the full-service unit with Buffalo’s Café offers a casual-dining menu including burgers, steaks, and seafood, the Fatburger with Buffalo’s Express has a limited menu of chicken wings, chicken tenders, and 13 different sauces to go along with the burger brand’s offerings.

Merging the two brands helped spike sales, Wiederhorn says, noting that business at the Buffalo’s Café and Fatburger cobranded units is up 30 percent. “Fatburger had chicken wings on the menu but didn’t have branded wings,” he says. “We’re chicken experts on the Buffalo’s side, so it’s added credibility. Look at how successful KFC and Pizza Hut have been.”

Like with those two Yum! Brands, Wiederhorn says, Buffalo’s Café’s and Fatburger’s menu options go well together.

“You can’t add sushi to a hamburger place. It becomes a great way to differentiate yourself from a competitor,” he says, adding that the quick-service burger landscape is so competitive that Fatburger needed something to set itself apart.

Keeping everything simple and clear in the cobranded units also boosts credibility, he says. The Buffalo’s Express menu, for example, doesn’t deviate from chicken wings, chicken tenders, and boneless wings.

While cobranding skeptics say that merging two concepts can dilute each individual brand’s credibility, Wiederhorn says, adapting two brands like Buffalo’s Café and Fatburger to each other helps draw new customers and can help spike revenue at each brand.

Al Ries, co-author of The 22 Immutable Laws of Branding, says cobranding can be an effective strategy to launch a sister brand.

“To the consumer who likes and admires the Fatburger chain, cobranding will help Buffalo’s Café,” he says. Since many consumers are reluctant to dine at the new eatery on the block, Ries says, “a cobranding arrangement is probably more helpful for a new chain just getting started than it is for established chains.”

Darren Tristano, executive vice president at Chicago-based market research firm Technomic, says pairing Fatburger with a chicken wings concept is a recipe for success.

“Since the wings are complementary and not competitive from a meal perspective, this represents a strong opportunity to increase check average and provide consumers craving wings an opportunity to find them while others are looking for a good burger,” he says.

Moreover, Tristano says, Buffalo’s Express could capitalize on the success of other wing quick serves, like Wingstop and Wing Zone. “The model to open smaller units, either company-owned or franchised, provides a greater opportunity to keep costs low while focusing on a high demand product,” he says.

He adds that some consumers might want to design a meal using the menus of both chains. “They’ll add wings to a burger order,” Tristano says.

Ries says the menu at both cobranding participants must overlap and not clash to make the arrangement successful. When McDonald’s owned Chipotle, he says, a potential cobranding deal would have flopped since McDonald’s reputation for indulgent burgers might hurt Chipotle’s emphasis on locally sourced, healthy dining.

Cobranding has additional traps, Ries says. For example, if a consumer rejects the food at one brand, it might tarnish the perception of the other. Tristano adds that cobranded units can be tricky to operate smoothly.

“Adding new logistics to the ordering and service models can create slowdowns in process and get in the way of customer satisfaction for those who only want a burger,” he says.

Fatburger has bounced back from declaring bankruptcy in 2009. It’s nearly quadrupled its number of outlets since bankruptcy and has done well overseas, particularly in China, Taiwan, and Singapore. Wiederhorn say more growth is on the horizon. He expects 50 new Fatburger, Buffalo’s Café, and Buffalo’s Express units to open in 2014. About a dozen will be located in Europe, and the rest in the U.S.


How a Fast-Food Chain Plans to Bulk up on Quinoa, Smoothies

November 19, 2013

AR-310199982.jpg&maxw=368&q=100&cb=20131119093150If Matt Matros has his way, Protein Bar’s quinoa bar-ritos and protein smoothies might just become the next burger and milkshake.

Spurred by a $22 million investment by private-equity firm Catterton Partners, Mr. Matros’ four-year-old healthy fast-casual restaurant chain is poised to go national and aims to hit 40 locations by the end of 2015. At least one analyst says Protein Bar eventually could have between 300 and 1,000 stores across the country.

Since opening his first restaurant across the street from Willis Tower in 2009, Mr. Matros, 34, has grown the chain to 12 locations throughout the Chicago area and Washington. The 400-person company projects nearly $20 million in sales this year.

By the first quarter of next year, Protein Bar will open two more Loop outlets, another in Streeterville and one in Lincoln Park. Protein Bars will also debut in Evanston and Schaumburg, as well as in Denver and Boulder, Colo.

The chain will hire about 15 corporate operations staff and about 25 to 40 employees per new store, according to Mr. Matros, founder and CEO.

“We were the starting pitcher (in the healthy fast-casual game), but it’s still only the second or third inning,” he says. “It’s a long game, and we’re not the only player who’s going to be successful, but we like to think we’re well-positioned.”

The need to expand quickly is paramount, agrees Darren Tristano, an executive vice president at food consultant Technomic Inc. in Chicago. “You cannot hide a successful concept like Protein Bar very long,” he says. “You’re going to see other burrito-inspired brands start to pull in its aspects.”

Two older competitors also have built their presences in Chicago and elsewhere. Freshii, a New York-based chain launched in 2005, boasts 13 area locations, while Palm Springs, Calif.-born Native Foods Cafe, a vegan fast-casual concept that has been around for two decades, has opened three Chicago outlets in recent years.

The urgency is heightened by the fact that growth in the overall market for fast-casual dining—which offers a higher-end selection and atmosphere than typical fast food—while still robust, is slowing down.

Chipotle Mexican Grill Inc., which helped create the category, opened its doors in 1993. Two decades later, fast-casual restaurants will generate about $35 billion in sales this year, according to Technomic estimates, up from $31 billion in 2012.

‘THE NEW STARBUCKS’

Protein Bar, Mr. Tristano says, differentiates itself by creating healthy food that tastes good. The chain charges premium prices—about $10 for a salad, for example—with ingredients such as antibiotic-free chicken and a salad mix that includes kale and spinach.

“They pull in an affluent corporate customer, as well as the millennials who feel that they’re entitled to it,” he says. “Protein Bar is the new Starbucks—it’s all about status.”

Those loyal customers, who often line up out the door of Protein Bar’s Loop locations between noon and 1 p.m., is one reason that Greenwich, Conn.-based Catterton invested. The firm previously has taken stakes in restaurants including Noodles & Co., which went public in June, and P.F. Chang’s, as well as health-focused brands such as Core Power Yoga and O.N.E. coconut water.

“Many folks have tried to do ‘better for you,’ but no one has combined that with the taste and crave-ability that Matt and his team have achieved,” Catterton partner Jon Owsley writes in an email. “We think that is a winning combination that will be tough to beat.”

As the company expands into Chicago’s neighborhoods, Protein Bar will have to move beyond its primary lunch business and prove that it can lure customers for dinner—long the Achilles’ heel of fast-casual chains.

Mr. Matros says Protein Bar’s stream of new menu items is up to the challenge.

“Our job is to stay in front of the consumer by continuing to introduce them to nutritionally relevant items,” he says. “We want to exist in the sweet spot between . . . foods you’ve never heard of” and ingredients that are ubiquitous.


For American Restaurant Chains, the Future is Mexican

November 15, 2013

1025_fast_food_mexican_630x420Yum! Brands’ (YUM) most profitable fast-food chain in the U.S. isn’t Pizza Hut or KFC–for years, it’s been Taco Bell. With the success of Doritos Locos Tacos, the upscale Cantina Bell menu, and breakfast (available nationwide next year), Taco Bell’s comparable sales have been up for seven consecutive quarters, including a 2 percent increase in the most recent period.

The chain’s financial results are just one sign of the growing popularity of Mexican food in the U.S. Data from food researcher Technomic show that sales at Mexican-style restaurants grew 9.3 percent in 2012, outpacing the 5.8 percent increase among all limited-service restaurants. In fact in the U.S., tortillas outsell burger and hot dog buns, tortilla chips eclipse potato chips, and salsa tops ketchup, according to an Associated Press report.

“We know that for the U.S. to have a successful year, it’s important for our most profitable U.S. brand to do well, and we certainly have a lot going in our favor at Taco Bell,” said Yum chief executive officer David Novak during a recent earnings call. The late-night gordita joint now accounts for 60 percent of Yum’s operating profits in the U.S. There are 5,704 Taco Bells in the U.S., about 32 percent of Yum’s total in the country.

The burger-and-fries business, meanwhile, has seen better days. McDonald’s (MCD) same-store sales grew only 0.7 percent last quarter, Wendy’s (WEN) was up 0.4 percent, and Burger King (BKW) fell 0.5 percent.

Mexican quick-service restaurants offer “high value and appeal with millennial consumers and affluent groups,” says Darren Tristano, an executive vice president at Technomic. Popular burrito purveyor Chipotle (CMG) has led the way, and the 1,525-store chain just reported a same-store sales increase of 6.2 percent in the last quarter.

Even casual-dining giant Chili’s Grill & Bar (EAT), where comparable sales fell 1.9 percent last quarter, is looking for a rebound via its Mexican menu. “When you look at tacos, quesadillas, fajitas, that category represents really the biggest category that we have at Chili’s. Bigger than burgers,” said Wyman Roberts, CEO of Brinker International, Chili’s parent company, during an earnings call on Wednesday. Chili’s Mexican food, he said, will give the chain an edge over casual-dining rivals.

The plan for Chili’s is to focus on that part of its menu. A spokesperson for the restaurant chain wrote in an e-mail: “Mexican is a menu category our guests have given us all the permission in the world to expand, and with Southwestern ingredients already a part of our flavor profile, it is the natural next step in Chili’s menu innovation.”

So while burger and pizza chains remain the most popular in the U.S., diners and those trying to capture their attention are increasingly moving in a south-of-the-border direction.


Olive Garden Shrinks Meals for Millennials

November 14, 2013

CHICAGO – Olive Garden, purveyor of the Never Ending Pasta Bowl, has discovered portion control.

In an effort to attract millennials and boost flagging sales, Darden Restaurants Inc.’s Italian restaurant chain is introducing small plates, including Parmesan asparagus and grilled-chicken tapas. This amounts to a 180-degree turn for a chain that has long sold big portions to eaters who like a deal.

The challenge for Olive Garden will be encouraging diners in their 20s and 30s, many of whom shun chain restaurants, to drop by for nibbles without alienating loyal customers who convene for family feasts.

For millennials, “social occasions generally don’t tend to be large meals in a traditional sense,” said Darren Tristano, executive vice president at Technomic Inc., a research firm based in Chicago. “They’re looking for items they can share, sample, that allow them to graze.”

Small plates may not be “a clean fit” for Olive Garden, given its focus on families and boomers, he said.

Olive Garden created the tapas recipes about six months ago and began testing the food earlier this year in Atlanta, Los Angeles and Grand Rapids, Mich.

After offering the dishes for a limited time last month, the chain plans to add them to the permanent menu in December. It’s also trying out more small plate varieties such as garlic hummus, chicken meatballs and tortelloni stuffed with cheese, to gauge customer response before introducing them nationwide.

Olive Garden has been struggling in the aftermath of the downturn as Americans eat out less. Efforts to lure cash-strapped diners with such deals as three-course dinners and $6.95 lunches haven’t helped much.

As a category, sit-down restaurants are lagging behind fast food and fast casual joints. Sales at full-service restaurants will rise 2.9 percent this year to $208.1 billion, compared with a 4.9 percent gain for fast-food eateries, according to National Restaurant Association estimates.


MANGIA! Eataly is almost here, with its cornucopia of gourmet foods. Big deal? Yes, very much.

November 13, 2013

Eataly—New York’s celebrity-sponsored food emporium that is the definition of excess—is almost ready to devour River North. But will the neighborhood’s frequent-diner residents and tourists slaver over it?

Part restaurant, part gourmet grocer and all show, Eataly is set to open off North Michigan Avenue at the end of November. It will sprawl over 63,000 square feet—roughly the footprint of five Trader Joe’s markets and bigger than its Manhattan predecessor—on two floors and boast eight Italian-themed restaurants plus fresh produce, seafood, meats and cheeses; prepared foods and sandwiches; an in-house brewery; wine and cocktail bars; and specialty items like cured boar’s meat and $227.80 bottles of balsamic vinegar.

Unlike in New York, this Eataly will offer fried foods and a “Nutella station,” too. A customer might spend $2 for a slice of fresh focaccia or $200 for a truffle-based dinner.

“We think we can add to the landscape of food,” says Adam Saper, an Eataly partner. “We have very high hopes, and we think this is going to be an unbelievable site.”

Eataly’s partners chose River North on purpose. The neighborhood is home to 52,000 residents, nearly a third of them between 25 and 34 years old. The median income is $62,803. During weekdays, the area also is crowded with office workers. Eataly expects 70 percent of business to come from people who live or work nearby. And, of course, there are all those tourists, whom Eataly is counting on to pack its markets on weekends.

CELEBRITY CACHET

Eataly’s domestic owners, who include celebrity chef Mario Batali and restaurateur (and “Master Chef” judge) Joe Bastianich, scored with that same customer mix when they opened their first U.S. location in New York’s Flatiron district in mid-2010. It pulled in $70 million its first year.

Chicago has one other thing going for it: The city is close enough to New York that Eataly can use the same suppliers for both imported and domestic products. “If we went to the West Coast, we would have to redo our logistics,” Mr. Saper says.

But while no one place has what Eataly will have, River North and nearby neighborhoods hardly lack for high-end restaurants or upscale supermarkets. Within just a few blocks of Eataly’s East Ohio Street location are a Trader Joe’s, a Whole Foods Market, a Jewel and a Dominick’s. Go a little farther and there’s Whole Foods Market Inc.’s Lincoln Park flagship, which is even bigger than Eataly—and comes with free indoor parking. (Mr. Saper plans to announce customers’ parking options soon.)

“The big challenge is to get patrons in River North to change their habits from where they are going now,” says Darren Tristano, an executive vice president at restaurant consulting firm Technomic Inc. in Chicago. “Unless Eataly has a better experience and better value, patrons are going to go back to what they are accustomed to.”

Brendan Sodikoff, the restaurateur behind River North’s Gilt Bar and Bavette’s Bar & Boeuf, welcomes the new eatery. “Nothing good ever hurts,” he says. “It does make competition stiffer. (Other restaurants) will have to be on their game.”

Eataly was founded in 2007 when Oscar Farinetti opened one in Turin, Italy. There are now 18 stores in Italy and Japan, which are owned by a separate partnership, with plans for more U.S. locations. Chicago was a no-brainer given that it is a big tourism destination, a transportation hub and a rising restaurant capital, Eataly partners say. The Michelin guide made Chicago its third U.S. city for ratings in 2010, behind New York and San Francisco.

Mall developer Macerich Co., which owns Eataly’s new site, has gone out of its way for the new tenant. It sued to evict Texas de Brazil after the steakhouse’s next-door neighbor, Walt Disney Co.’s ESPN Zone restaurant and bar, closed in 2010.

Eataly’s New York location has been a boon to its neighborhood, helping to boost rents as much as 15 percent in the past two years. River North rents span $50 to $150 a square foot based on proximity to Michigan Avenue. If Chicago’s Eataly takes off, landlords will hope to hike rents in River North, too.

“Eataly will definitely draw some attention,” says Jason Gustaveson, vice president of Stone Real Estate Corp. in Chicago. “Rents in that area are not going down, that’s for sure.”


Gandy Restaurant Project Mixes Food Trucks, Waterfront Ambiance

October 28, 2013

tbo.comA year ago, Scott Tashkin had sold his stake in a staffing firm and was having a drink with his wife at the I.C. Sharks bar in St. Petersburg when she pointed to the derelict property next door that used to be the Banana Boat bar.

“So we walked over and I guess that’s how it started,” Taskin said. Not long after, Tashkin purchased the property and after months working from a construction trailer, the site is shaping up to become Tampa area’s next luxury beach-side bar restaurant called The Getaway. “We’ve just always wondered why Tampa doesn’t have more waterfront places with all this water around us.”

So they’re building one, and this restaurant and bar will have the hippest of twists. Though the landscape will be lush and the drinks especially upscale, there will be no permanent restaurant kitchen. Instead, there will be a steady rotation of the hippest food trucks in Florida to provide food to an all open-air bar space along the water.

“At some point, maybe we build our own kitchen,” Tashkin said. “But when we floated this idea of bringing in food trucks, people got really excited.”

To pull off his project, Tashkin partnered with David Burton, an operator of local Pizza Fusion locations. When complete, the project could reach a $3 million budget for the land and construction. That includes floating docks with 30 boat slips. And there will be two tiki areas, one with a 1,600 square foot, open-air drinking and dining space, and another “dockside” bar near the boats.

The location sits just at the western landing of the Gandy Bridge in Pinellas County, and it faces south toward a set of mangroves and small islands. So a dockmaster at the Getaway will also rent out kayaks and paddleboards for anyone who wants to explore. Luckily, the site was already permitted for dock space, even though most had fallen into disrepair before construction started. Also luckily, the site sits midway between the decidedly gritty “Beercan Beach” on the south side of the Gandy causeway where people drive right up to the water for fishing and drinking, and the decidedly upscale office parks further inland and the affluent areas around Snell Isles and Coffee Pot Bayou.

During a recent tour of the space, a pair of boaters broke down just off the soon-to-be-built dock space — as their outboard motor battery died — and they drifted up to the waterfront space. “Hey, when do you guys open,” the boater asked. “Soon as we can,” Tashkin replied.

People should expect far more than just a thatched roof, Tashkin said. He’s hired architects who designed many of the most upscale Key West restaurants. There will be lush landscaping, a covered walkway from the parking lot, a fireplace pit by the water, a tiki-covered fish pond, thatched band stage, and all drinks made with fresh ingredients — not pre-made mixers.

Though there are not a lot of beach-side places, there are a few recent projects in the area, including the Hulk Hogan-themed “Hogan’s Beach” restaurant on the Courtney Campbell Causeway. The Gulf side has far more watery places, including the Salt Rock Grill, Frenchy’s Rockaway Grill, Crabby Bill’s and the Hurricane in Pass-A-Grille.

At one point, Tashkin and Burton had envisioned building out the derelict Banana Boat bar into a kitchen for the overall operation, but going with the food truck trend sparked huge interest, Tashkin said, and he’ll spend the next few weeks sorting out which ones will be in the first rotation.

Some elements of this plan match with especially hip trends in restaurants, said Darren Tristano, a restaurant consultant with the market research and consulting firm Technomic. Besides the numerous food truck festivals that seem to grow bigger each year, at least a few restaurants are embracing food trucks — which had been seen as their natural competition for customers.

“In Austin, there are a number of bars where you order food at a stand behind the bar,” Tristano said. “If there’s a trend here, it’s the bring-your-own food trend.” The Getaway, he said, will have to balance the desire of customers for a consistent menu, with the allure of “Who knows what will happen tonight” adventure of just going to a beach bar to find out which food truck came, too.

Kathy Hayden, Editor-in-Chief of Food+Service Magazine, said food truck “clusters” are popular in cities such as Portland, Ore., that has several permanent places to park in the city.

She also notes the Truck Yard burger bar/beer garden in Dallas that launched with food truck service in an outdoor beer garden, serving steak sandwiches.

“The idea of gathering food trucks makes sense,” she said, “especially where weather and local regulations are agreeable.” The question in her mind is whether any such restaurant can make money off a variety of trucks, unless they end up charging rent/parking fees.

Meanwhile, contractors at the Getaway this week started to put up the major poles that will hold up the tiki bars, and if all goes according to plan, the restaurant will have a soft opening in November and a full opening in December.


Sbarro’s New Kitchen

October 18, 2013

sbarro-s-new-kitchen_0As fast-casual pizza concepts make their mark across America, one of the nation’s top 10 pizza chains is joining the growing movement.

Sbarro will open its first Pizza Cucinova restaurant next week in a strip at Columbus, Ohio’s popular shopping center, Easton. The concept’s second and third units will open in early 2014 near downtown Columbus and in Cincinnati, respectively.

“This is a completely separate concept, designed to be developed primarily in strip centers,” says J. David Karam, chief executive of Sbarro, which has more than 1,000 units in some 40 countries. “It’s part of a fast-emerging category.”

Pizza Cucinova has been a key initiative for Karam since he joined Sbarro in early 2012 as chairman after serving as Wendy’s president from 2008 to 2011. The first stores are prototypes, not test units, he says.

“I thought it was important to develop or acquire an artisan pizza business,” says Karam, who took on the title of CEO in March.

Not that there’s anything wrong with the Sbarro pies, he adds, which feature fresh dough and whole-milk Mozzarella shredded in the stores.

“Sbarro is the premium-quality [quick-service pizza] chain,” he says, and Pizza Cucinova embraces the “stratification of the market.”

Columbus was chosen for the initial store because it is one of the nation’s top test markets, and so Karam can keep an eye on it. He splits time between Columbus—home to his family’s large Wendy’s franchise, Cedar Enterprises—and Sbarro’s offices in Melville, New York.

“We certainly believe in the underlying trend that is causing customers to look for higher-quality food, but they still want convenience.”

Much of the work to create Pizza Cucinova was led by Anthony Missano, president of business development.

“We’re very confident in this category,” says the 35-year Sbarro veteran. “It’s artisan, Neapolitan-style pizza, with very, very fine dough that requires special handling. We will be featuring top ingredients and will locally source many of them.”

Using dough made with double-zero flour from Italy, the thin-crust pies are baked quickly in a very hot, wood-smoked oven and topped with upscale ingredients such as arugula and prosciutto.

“We certainly believe in the underlying trend that is causing customers to look for higher-quality food, but they still want convenience,” Karam says.

The menu features nine specialty pies, five pizzas dubbed “Classics,” and a build-your-own option, all of which come in one 12-inch size. Specialty pizzas include the Steak and Gorgonzola pie, made with roast top sirloin, caramelized onions, roasted garlic, Gorgonzola, and chopped parsley; and the Caponata Vegetariana, made with grilled eggplant, garlic, goat cheese, and capers. Among the ingredients in the remaining specialty pizzas are roasted Portobello, truffled Asiago cheese, truffle oil, imported Bufala Mozzarella and Burrata, anchovies, clams, shrimp, sausage, meatballs, pepperoni, soppressata, arugula, fennel, broccolini, and peppadews.

Pizza Cucinova’s Classic pies are all made with extra virgin olive oil and Pecorino Romano. Four different variations, the White, Red, Green, and Margherita, allow customers to choose from sauces such as marinara and basil pesto, as well as different cheeses. Customers can add extra ingredients for $1–$4 each.

The fast-casual concept will also serve upscale salads like Roasted Red and Yellow Beets, with house greens, Feta, roasted walnuts, fresh basil, and lemon vinaigrette; and the Mediterranean, with a mix of greens, olives, Feta, pepperoncini, grape tomatoes, cucumbers, and red wine vinaigrette.

A unique salumeria-style menu item includes sliced prosciutto and crusty bread, soppressata, salami, olives, and pepperoncini. Pizza Cucinova will serve eight beers on tap, wine by the glass, soft drinks, and cheesecakes baked daily.

The new concept’s layout follows in the open, airy fast-casual tradition. Diners enter the restaurant and go down the ordering line, where the restaurant’s staff builds the pies on pizza peels. There’s a big menuboard behind the workers, and customers pay at the end. Reclaimed wood is used throughout the restaurant, including in the tables.

Sbarro, which operates primarily quick-service pizza restaurants in shopping malls, universities, airports, and other nontraditional locations, is the latest on a growing list of operators and restaurant veterans to launch fast-casual pizza operations. Texas-based chain Pizza Inn created Pie Five, while Atlanta-headquartered Uncle Maddio’s Pizza Joint was developed by Moe’s Southwest Grill cofounder Matt Andrew. Los Angeles brand PizzaRev has financial backing from Buffalo Wild Wings, and Pasadena, California–based Blaze Pizza is operated by the founders of Wetzel’s Pretzels.

The new pizza movement is part of a bigger trend in which restaurant companies, from quick-service veteran White Castle to casual player Red Robin Gourmet Burgers, test and roll out fast-casual concepts to capitalize on the only restaurant segment showing solid growth.

Recent research from restaurant market research firm Technomic Inc. determined the made-to-order pizza category could be the next hot niche concept.

“There are several players in the U.S. looking to grow by focusing on a customization process that uses different sauces, cheeses, and flour types, just like Subway or Chipotle do,” says Darren Tristano, executive vice president at Technomic.

The artisan pies “are in that sweet spot of $5–$7 and can be quickly turned out in a very fresh manner,” he adds.

In a very competitive market, where big chains sell larger traditional pizzas for less than $6 each, the profit margin for fast-casual pizza is also attractive, he says.

Although Domino’s Pizza has experimented with stores that focus increasingly on lunch—a hallmark of fast casual—and has moved kitchens to the front of the store, Sbarro is the largest pizza chain to incorporate a customizeable and quickly served artisan menu.


With a Wink and a Nudge, ‘breastaurants’ Consider Milwaukee

October 17, 2013

b99111943z.1_20131010160657_000_gj52ren1.2-0Milwaukee could soon get a taste of the new breed of “breastaurants” that have emerged to challenge Hooters in the beer-and-babes dining category.

A Texas-based group has signed an agreement to open two Twin Peaks (get it?) restaurants in the area, and has been actively scouting locations.

Eyeing Milwaukee as well is Tilted Kilt Pub & Eatery, which also dresses its waitresses in skimpy, cleavage-emphasizing outfits, but with a Celtic theme rather than Twin Peaks’ mountain-lodge look.

Both chains are relatively small. But they’ve been expanding by providing a fresh approach to a restaurant industry segment long dominated by Hooters.

“There are definitely opportunities for growth and, certainly, demand,” said Darren Tristano, executive vice president at food industry research firm Technomic Inc. “So I think we’re going to expect three to five years of continued growth, and that’s partially because there are a lot of markets like Milwaukee that don’t have these restaurants.”

Furthest along in Milwaukee is Twin Peaks, which developer David Schmille touts as “kind of the Cadillac” of the segment. Schmille, a Dallas-area resident, operates Fish City Grill restaurants in Texas and Arkansas, and is a former top executive with the Romano’s Macaroni Grill chain.

“I’ve already been up there a few times,” he said of Milwaukee. “We’ve got one opportunity that we’re looking at right now. We like the Mayfair mall, Brookfield mall corridors.”

“We’re hoping to have something in the market by next year,” he said.

Focus on skin

Based in Dallas, Twin Peaks has grown from seven restaurants in 2008 to 44 now. The chain touts its “made from scratch” cooking, and longtime restaurant industry consultant Malcolm Knapp gives Twin Peaks high marks for its food.

Ample servings of skin, though, seasoned with suggestive wordplay — “well built sandwiches,” “smokin’ hot dishes,” “scenic views” — are essential ingredients in the marketing recipe.

But forget the double-entendres. The first sentence of the chain’s franchise disclosure document — required to be provided to potential franchise buyers — makes the business model clear:

“You will establish and operate a lodge-themed, full service restaurant with a full bar featuring the ‘TWIN PEAKS’ Girls, who are attractive women dressed in theme-related uniforms that enhance the sex appeal of the women,” the document begins.

Swap Twin Peaks’ deep-cleavage plaid tops and short shorts for Tilted Kilt’s deep-cleavage tartan bras and mini-kilts, and the waitresses at the two chains look pretty similar.

But Tempe, Ariz.-based Tilted Kilt doesn’t seem to favor Twin Peaks’ wink-wink marketing approach. Kilt president Ron Lynch doesn’t even want his places called “breastaurants” — and not simply because yet another chain, Bikinis Bar and Grill, trademarked the word last year.

Lynch’s view, according to a Tilted Kilt spokeswoman: “He thinks that term demeans and objectifies his employees.”

Among Tilted Kilt’s 85 locations — up from 14 in 2008 — are restaurants in Green Bay and Oshkosh, and a third that opened this year in Kenosha, in a former Old Country Buffet.

“We’ve been in pretty steady growth even with the down economy,” said Paul DiBenedetto, who heads a group that holds Tilted Kilt development rights for Wisconsin and seven other states.

DiBenedetto’s group doesn’t yet have a franchisee for the Milwaukee area, which puts Tilted Kilt a step behind Twin Peaks and Schmille, who already has connected with a local real estate broker and is searching for space.

Waitresses as performers

At the moment, the nearest Twin Peaks is in Wheeling, Ill., a northwest suburb of Chicago. The company-owned restaurant opened in March and is huge — 450 seats, 64 TV screens as large as 80 inches, and 110 employees.

Among them are 55 “Twin Peaks Girls,” who might address customers as “sweetie” and “honey” or sit down beside them to chat. It’s all part of their instruction in what one waitress described as the restaurant’s Three S’s: Sit, Schmooze, Sell.

“They’re considered performers,” general manager Ignazio Colella said. “We hire them on as performers.”

As Colella explained it, the girls are encouraged to “flirt without intent…have a couple playful innuendos.”

Said waitress Kelli Koch, a 19-year-old community college student who hopes to become a paramedic, “I can sit down with you. I can talk with you. I can mess around with you, play with you a little bit.”

But no touching.

“When guys touch us, it absolutely is not tolerated,” she said.

She acknowledges being “a little shy” at first about showing herself in the skimpy Twin Peaks costume. Now it’s merely the uniform she wears at work — at a place where she regularly earns $100 a shift in tips alone.

“We look at it as nothing but a job,” she said. “I am going to school, I’m making car payments, I’m making credit card payments…. We’re just normal teenage girls who are trying to make good money to get ourselves set up.”

Colella takes pride in Twin Peaks’ food, but said there’s no shortage of decent restaurants with lots of TVs showing sports.

“But when you throw in great-looking girls who have a great attitude, who are going to give you an experience…it sets you apart,” he said.

Limits to strategy

The breastaurant strategy, though, has limits.

Hooters of America is a case in point. The Atlanta-based chain finished last year with 417 restaurants, down from 455 at the end of 2010, according to the firm’s franchise disclosure document. Among locations that closed was one in Greenfield.

Overall sales fell by about 7% over the same period, Technomic estimates.

Hooters pioneered the segment but has “been on stasis for about 10 years,” said Knapp, creator of the Knapp-Track count of monthly restaurant sales and traffic. “They just weren’t growing and they had internal fights…and they weren’t responding to changes.”

Now, new management under an ownership group that took over in 2011 is “working on making it more relevant again,” Knapp said. “The T-shirts never went out of relevancy, but the food really wasn’t what it should have been.”

And while Tilted Kilt has expanded overall, several outlets also have closed over the last few years, including locations in Madison and Stevens Point.

An issue all of the chains face is the limited appeal of the testosterone-drenched atmosphere to one very large demographic group — women.

Schmille said about 90% of Twin Peaks’ customers are men. The lunch crowd at the Chicago-area restaurant last Thursday bore that out: five women among roughly 100 men.

Later that afternoon in Kenosha, a 30-ish woman hesitated at the door of the Tilted Kilt, with its stained-glass likenesses of the chain’s waitresses.

“Oh God,” she said, “please don’t tell me that’s how they’re dressed in there.”

“C’mon,” said her male companion. “We were here for football.”

In they went.


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