KFC Growth Seen Slowing as Indonesia Limits Franchisees

May 13, 2013

i59E2rCg2bVEYum! Brands Inc. (YUM), owner of the KFC and Pizza Hut dining chains, and other fast-food companies may be forced to slow store growth in Indonesia, the world’s fourth- most populous nation, because of government rules to protect small businesses.

As US revenue drops, Yum is focusing on growing overseas, particularly in China and Southeast Asia. A plan taking effect in the next five years to limit restaurant franchise holders to operating 250 outlets in Indonesia, where fast-food sales rose 15 percent in 2011, may crimp openings for Yum and other US food chains as well as encourage similar restrictions in other nations.

“It’s going to probably slow things down a bit,” said Darren Tristano, executive vice president at Chicago-based restaurant researcher Technomic Inc. “This is going to be a bump in the road” for Yum, which already has 700 locations in Indonesia, he said.

Indonesian Trade minister Gita Wirjawan earlier this month announced the rule, which has certain exceptions, in a bid to protect small- and medium-size businesses. KFC, which sells wraps, spaghetti and chicken porridge in Indonesia, is the top US fast-food chain in the Asian nation with about 32 percent of the market, according to Bloomberg Rankings data from July.

Customers eat fried chicken with rice at fast-food restaurant Kentucky Fried Chicken in Jakarta. KFC, which sells wraps, spaghetti and chicken porridge in Indonesia, is the top US fast-food chain in the Asian nation with about 32 percent of the market, according to Bloomberg Rankings data from July. (Getty)

The rule “doesn’t impact Yum’s growth plans,” Virginia Ferguson, a company spokeswoman, said in an e-mail. “Our local franchisee will continue to work with authorities on the guidelines.”

Yum Expansion

Yum’s saturation of two or three stores per million people in Indonesia can expand to that of the US, where it has 50 to 60 eateries per million people, Muktesh Pant, chief executive officer of Yum International, said at an investor conference in December.

There is “no fundamental reason why Indonesia will not get there,” he said. In Indonesia, where gross domestic product growth is outpacing that of Brazil, Russia and India, Yum has said it can grow 43 percent to 1,000 stores by 2015.

“Indonesia is a very attractive market because of the extremely fast-growing middle class with discretionary income,” Bill Edwards, CEO of Irvine, California-based Edwards Global Services Inc., which advises retailers and restaurants, including Denny’s Corp. (DENN), in opening stores overseas.

While Yum says its growth won’t be affected by the rule, it’s harder to keep the brand and food quality consistent with different and smaller store owners, Edwards said.

“What if one operator does a bad job?” he said. More franchisees will require more supervision from the parent company, he said.

Yum, based in Louisville, Kentucky, has dropped 1.4 percent this year, while the Standard & Poor’s 500 Restaurants Index has gained 4.5 percent.

‘Still Evaluating’

The regulation affects companies such as PT Fastfood Indonesia, which operates more than 400 KFC restaurants in Indonesia. The rule applies to all food-mart franchisers and franchisees, including public companies, Wirjawan said.

“We are still evaluating and calculating the potential impact of the new rule,” Justinus D. Juwono, director of PT Fastfood, said in a telephone interview. “We haven’t changed or revised our investment plan or target yet. But, we’ll closely look into it, when we get our evaluation and calculation done in two or three weeks.”

Companies in Indonesia are allowed to operate 250 outlets either by selling partnership stakes or agreeing to open them in certain remote locations to be determined later, Wirjawan said at a press briefing in Jakarta on February 15. They will have five years to comply, he said.

Indonesia Population

Indonesia is the fourth-most populous country in the world with about 248.6 million people, according to a July estimate from the US Central Intelligence Agency World Factbook. China is the biggest country by population, followed by India and then the US, with 313.8 million people, the data show. Indonesia’s economic growth was about 6 percent in 2012. The nation had the world’s largest Muslim population as of 2010, according to the Pew Forum on Religion & Public Life.

Fast-food sales in Indonesia climbed 15 percent to $1.54 billion in 2011, compared with an increase of 9.6 percent globally and 3.6 percent in the US, according to data from Euromonitor International.

Dunkin’ Brands Group Inc. (DNKN), owner of the Dunkin’ Donuts and Baskin-Robbins dining chains, has about 600 stores in Indonesia, all of which are franchised. The company has been remodelling its Baskin-Robbins ice cream stores there.

“We are currently reviewing the regulation, and it is too early to determine possible impact,” Michelle King, a spokeswoman for Canton, Massachusetts-based Dunkin’ said in an e-mail. “We remain committed to the market.”

Me Too

McDonald’s Corp. (MCD), the world’s largest restaurant chain by sales, has about 130 stores in Indonesia, all of which are franchised. Becca Hary, a spokeswoman for the Oak Brook, Illinois-based company, declined to comment on the rule.

Indonesia may be the first of nations to impose restrictions on retail operators as other markets take on a “me-too” approach, Edwards said.

“This is one of the things we’re worried about in the franchise community,” he said. “This may set a precedent for other countries – the ‘me too’ does happen.”

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B.Good Ready to Grow

April 30, 2013

getimage.aspxAll-natural burger chain’s first franchise location is set to open in Shrewsbury, and dozens more are slated for New England over the next five years

First conquer New England. Then the East Coast. And finally, the country.

The founders of b.good, a Boston chain of nine farm-to-table burger and fry joints, are launching an ambitious campaign to spread their feel-good fast food in two weeks with the opening of the company’s first franchise store in Shrewsbury.

“We set out wanting this business to be huge,” said cofounder Anthony Ackil. “We never wanted to open five restaurants. We never wanted 50. We want hundreds.”

Ackil and Jon Olinto, the company’s other founder, developed plans and found partners last year for 23 new franchise stores. The restaurants, along with 12 more corporate locations, are slated to pop up in Maine, New Hampshire, Rhode Island, Connecticut, and Massachusetts over the next five years.

The duo met long ago, in sixth grade at Dexter School in Brookline, and bonded over homemade meals cooked by Ackil’s late uncle. As adults, they shared a love of fast food — but not the post-consumption guilt it inspires.

Ackil and Olinto opened the first b.good nine years ago, serving all-natural burgers, fries, and salads. Now the chain’s restaurants feature wallboards identifying the farmers who raise the beef and cultivate the produce served at each location.

As the business grew in Greater Boston, Ackil and Olinto spent time dissecting every aspect of their menu, finances, and operations — down to the amount of potatoes an employee can cut in 15 minutes. The founders share these details with their franchisees and take a hands-on approach with the each store, believing the brand’s success relies on how these restaurants perform.

“We want to give our franchisees a road map to make money,” Ackil said. “It’s taken us a long time to get things right.”

John Freeley and his brother, David, owners of the Shrewsbury location, were drawn to b.good above other brands because of the owners’ attitude and the farm-to-table approach.

“One of the key factors was their involvement in the franchise,” Freeley said. “In most cases, you sign the deal and you’re on your own. That’s not the case with Jon and Anthony.”

B.good sold the New England franchise restaurants to four different investor groups in deals for four or five stores each. The Freeleys are on pace to open a store a year, like the other investors, for five years in Rhode Island and southern Massachusetts.

But one analyst questioned how b.good, which serves a niche market of health-conscious consumers, will perform on a national scale.

The company follows two different trends in the “fast casuals” restaurant category — farm-to-fork fare and better burgers, said Darren Tristano, an executive vice president at Technomic, a food industry research firm. That could be a problem.

A bleak national market for farm-to-fork fast casuals means b.good’s founders are either on the brink of something new, different, and ready to burst with growth or people just won’t buy it, he said.

“Only a minority of consumers want farm-to-table,” Tristano said. “Out of that minority there are those who aren’t willing to pay for it because the price is higher. Now you’re getting down to a small minority that want it and are willing to pay for it, and then there’s a small percentage that actually do it.”

And in the booming burger market, well-established brands are offering lower investment costs and yielding similar annual sales.

B.good’s owners said a franchise store requires an investment between $400,000 and $600,000 and is expected to generate annual sales of about $1.15 million.

Another strong, growing brand in the better burger business, Five Guys, has an entry cost of about $350,000 to $550,000 per store and produces annual sales of about $1.2 million.

“Franchisees, knowing the market for those other burger chains, will look at b.good and ask why the investment costs are higher,” Tristano said.

Olinto said the b.good restaurants require slightly more money upfront because of upgraded fixtures, furniture, and equipment that help drive home the farm-to-table theme.

“If you just come in and get a burger and fries and don’t learn about our concept or where your food comes from, we’ve failed in a sense,” he said.

B.good is also likely to see competition from other fast casuals such as Subway, Chipotle, and even Panera Bread, which also serve more affluent consumers who care about the food they put into their body.

Although franchise business growth is predicted to increase at a slightly slower rate this year — by 1.4 percent compared with 1.5 percent in 2012 — it is still ahead of other business sectors, according to an IHS Global Insight report released in December.

Burger restaurants continue to pop up in the franchise industry, according to Alisa Harrison, a spokeswoman for the International Franchise Association. Overall, about 3,000 new restaurant franchises are forecast to open this year.

“We continually see new burger concepts because burgers and fries never go out of fashion,” she said. “It’s a concept that people like and if it can be replicated from one region to another, franchising is a great way to grow your business.”

Ackil and Olinto are confident they can stick to their restaurant concept of serving real food, which they define as knowing its source and the farmers who produce it.

The all-natural beef served in the nine corporate-owned b.good restaurants comes from Pineland Farms, a co-op of 270 sustainable farms located east of the Mississippi River and as far south as the Carolinas.

Pineland also supplies Whole Foods Market Inc., and Olinto said b.good is likely to pursue new markets that the supermarket company has entered because they share a similar customer base and need for local suppliers.

Tristano said it’s no surprise b.good found diners and investors in New England, but the brand will be tested in markets that don’t place as much importance on their food’s source.

“They’ll likely grow in the short term, but the long term is going to be a bigger question mark,” he said.

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McDonald’s Cites Drop in Popularity for End of Walnut Salad

April 29, 2013

With new products in the wings, McDonald’s is trimming less popular items from its menu.

The Oak Brook-based burger giant said Thursday that it plans to discontinue its fruit and walnut salad and Chicken Selects. It’s also mulling the fate of the Angus Third Pounder.

The decision comes at a time when McDonald’s has been grilled by investors about a dearth of new products as well as softening sales.

With a number of items set to debut nationally — among them a spicy McChicken sandwich and the Egg White Delight breakfast sandwich — the cuts likely reflect the company making room for them, and others slated for this year.

“We are always talking to our customers and make decisions regarding our menu — what to add and what to remove — on a case-by-case basis,” McDonald’s spokeswoman Danya Proud said in a statement.

Darren Tristano, executive vice president of Technomic, said that while the current cuts are more than McDonald’s usually makes to its menu, it’s also introducing new products faster.

“The need to streamline their menu has become increasingly important,” he said.

McDonald’s posted its first monthly same-store sales decline in more than nine years in October, which led to a slew of questions about how the golden arches would fare against resurgent competition from Wendy’s, Burger King, and Taco Bell as well as fast-casual players like Chipotle and Panera.

During the company’s fourth-quarter earnings call in January, McDonald’s CEO Don Thompson acknowledged “some softening and some slowing” in the business.

“A couple of things needed to be stronger,” he said. “We needed to have and execute — we had it, but execute a more robust menu pipeline for our consumers, and that’s across the board in beverages and beef offerings and chicken offerings.” This year, Thompson said, McDonald’s will have new products in each of those areas.

Speculation involving the removal of the fruit and walnut salad, launched in 2005, and Chicken Selects, introduced in 2004, has circulated for years. But removing the Angus burger, which is sold with a variety of toppings, and as the primary component of three snack wraps, would be a more significant departure for McDonald’s.

Launched in 2009 with great fanfare, the Angus burger had been through years of testing and was the company’s first premium burger since the Big N’ Tasty debuted in 2001. It was pulled in 2010.

Angus currently represents the high end of McDonald’s menu, selling for $4 or more, depending on the toppings. The Big Mac, for example, was selling for $3.69 at an Evanston McDonald’s on Thursday.

The Angus faces stiff competition not only from other burgers on the McDonald’s menu, including the Big Mac, Quarter Pounder, and the McDouble, which sells for $1 at most restaurants, but from the entire so-called better burger category, a subgenre of the fast-casual category specializing in never-frozen burgers made to order with a variety of toppings.

Tristano said that while the Angus could be “too premium for McDonald’s,” it also might not be the right burger to compete with these high-end rivals. “Angus may be too lean, not enough fat, not enough flavor to compete with the more indulgent burgers out there,” he said.

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Burger King Tries Again in France

April 25, 2013

BKFRANKFURT – Once a week, Vincent Bonnaire drives 15 miles from his office in Aix-en-Provence to Marseille airport in the south of France. He’s not catching a flight. He just wants his weekly Whopper fix.

Bonnaire, 28, an electrical equipment salesman, can once again enjoy his favorite burger in France. After a 15-year absence, during which rival McDonald’s captured almost half of the $12 billion French fast-food market, Burger King Worldwide returned to France in December. In the coming months, it plans to open its second outlet, off a motorway in Reims.

Burger King’s first French foray was haphazard, ending with a quiet retreat after shuttering 39 restaurants. This time, Burger King has hedged its bets, sharing costs with Italian restaurant operator Autogrill. At stake is one of McDonald’s biggest markets based on sales and profits.

To beat McDonald’s and European rival Quick, which have gobbled up the best locations and tailored their menus to French tastes, the Miami chain must emphasize the flame-grilled burgers that have won passionate fans, according to Michael Schaefer, an analyst at researcher Euromonitor International.

“They have the name recognition, that weird cult following in France,” Schaefer said. “That’s kind of half the battle. The best thing for Burger King right now is to keep it simple and focus on things people know.”

Another failure in France could sour investors on Burger King’s shares, which have advanced about 20 percent from the company’s opening share price on its June 20 return to the New York Stock Exchange, after owner 3G Capital completed a merger with a company co-founded by activist investor William Ackman. The stock has outpaced both McDonald’s and the Standard & Poor’s 500 index since then, bolstered by an international push that has taken the chain into places as far-flung as Siberia and Peru.

A setback in France “would be a very big blow for the organization and for the brand,” said Darren Tristano, executive vice president at researcher Technomic Inc. in Chicago.

Burger King is saying little about its plans in France, where the fast-food market will grow 17 percent by 2016, Euromonitor predicts. Autogrill provides expertise “in the travel sector,” according to emails from Leo Leon, Burger King’s general manager for Europe, the Middle East and Africa. Autogrill, based in Novara, Italy, runs restaurants – including more than 140 Burger Kings – in airports, railway stations and roadsides on four continents.

The Autogrill pact allows Burger King to test the waters without big upfront investments, said Jerome Hamrit, head of the consumer and retail practice at A.T. Kearney in France.

Burger King may benefit from its beef-heavy menu, a contrast to that of McDonald’s, often called “McDo” in France, which has increased its offerings of fare such as salads, fruit and pastries. Burger King should focus on the basics such as its Double Whopper, said Suzanne Stahlie, managing director at consultants FutureBrand in Paris.

“We can go to McDonald’s to eat ice cream or have a coffee,” she said. “People go to Burger King for the American burger.”

Waits can stretch to 45 minutes or more during lunch at the Marseille airport location.

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Hot & Healthy; On the Menu: Chipotle Teaming Up with Oakland Tofu Company for a New Veggie Dish in Selected Markets

March 6, 2013

It’s an unlikely union: tofu and Mexican fast food. But a restaurant chain known for burritos the size of footballs and nighttime crowds of college students has teamed up with a small Oakland tofu company to use the vegetarian-friendly Bay Area as a testing ground for a new menu and image.

Starting Tuesday, Chipotle will add a new vegan burrito filler made with tofu from Oakland’s Hodo Soy to the menu at seven Bay Area restaurants. If diners approve, Chipotle says it will add the tofu dish, called Sofritas, to restaurants across the country, part of the company’s efforts to hone its reputation as healthier and more earth-friendly than its fast-food competitors. That move could also catapult Hodo Soy from a locally grown, 30-or-so-employee company into a major supplier for one of the country’s most popular quick-serve food chains.

But for Hodo Soy founder and chief executive officer Minh Tsai, the thrill of the new partnership is more about the opportunity to change tofu’s bad rap than the potential sales boost. He’s on a mission to demonstrate that tofu can taste better than the mushy, tasteless white cubes that gather dust on supermarket shelves.

“The win here is people will be exposed to tofu like they’ve never been,” said Tsai, 42, who models his recipe on the tofu he grew up eating in Vietnam.

But before Hodo Soy can change the minds of tofu skeptics everywhere, Bay Area vegetarians first have to approve of Chipotle’s new dish, which will compete with the likes of San Francisco’s Gracias Madre and Berkeley’s Flacos, popular vegan Mexican eateries, and dozens of veg-friendly taquerias in San Francisco’s Mission District — the very place Chipotle co-CEO Steve Ells began his culinary career. Chipotle will track sales for several weeks, but expectations are high.

The San Francisco Vegetarian Society has given Chipotle’s idea a thumbs ups, and the Maryland-based Vegetarian Resource Group, predicts the new dish will be a hit. John Cunningham, consumer research manager for the resource group, said Chipotle already has a loyal following of vegetarian customers who order meat-free versions of its tacos and burritos. The restaurant was hailed as the No. 1 choice among vegetarians for quick-serve food in a survey by Vegetarian Resource Group, which educates the public about vegetarianism.

It may not be the totem of health food — its chicken burrito has been named among the 20 worst foods in America for its high calorie and fat content — but Chipotle is a popular hangout and lunch spot for college students and millennials, among whom vegetarianism is most popular.

“This provides the type of alternatives” that vegans and vegetarians want, said Darren Tristano, executive vice president for Technomic, which studies food industry trends.

Chipotle joins a growing number of restaurants adding vegetarian and vegan items to their menu. Burger King has added a veggie burger, Subway tested vegan sandwiches and Smashburger won praise for its black bean burger. With more people going meat free, Cunningham said, restaurants without a veggie option are bound to lose business.

This isn’t Chipotle’s first try at pleasing the meatless crowd — it tested a vegan burrito a few years ago that was pulled from menus after even the company agreed it didn’t taste so good. The Bay Area is the obvious place for Denver-based Chipotle to try again.

“They’re definitely looking at a market with high concentration of vegan and vegetarian eaters,” said Angelica Pappas with the California Restaurant Association. “That’s smart. They’re going to see right away if there’s a demand for what they’re serving up.”

And the Bay Area sits conveniently between other prime vegetarian and vegan markets — Southern California, Portland and Seattle. If Chipotle passes muster in San Francisco, it likely will appeal too broader West Coast demographic, Tristano said

But don’t expect Chipotle to be the next vegan mecca. The company has made strides to debunk its image as just another fast-food restaurant — McDonald’s was its largest investor until 2006 — but it hasn’t been a smooth transition. Chipotle outraged vegetarians a couple years ago after customers discovered pork was added to a bean dish that had been passed off as vegetarian, and its 1,000-plus calorie burritos are shunned by some as worse for the waistline than a Big Mac.

“They’re moving in the right direction, but I don’t think most consumers think of them as healthy,” Tristano said. “Their target audience is still going to be a young male looking to a one and a quarter pound burrito packed with chicken and steak.”

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Growing Taste for Mediterranean

March 5, 2013

Inside a refurbished two-story warehouse in Paterson’s down-at-the-heels Bunker Hill area, a homegrown company is riding the nation’s wave of enthusiasm for Mediterranean cuisine.

Workers dressed in white overalls operated a mechanized production line Wednesday morning, mixing, cutting and shaping fillo — a paper-thin dough made by Kontos Foods that is used to make Greek or Middle Eastern pastries.

The production line, which was opened about a month ago, is the latest move in a steady expansion by family-owned Kontos, which in recent years has included buying its leased manufacturing and distribution facility, expanding the building and buying another one to house the fillo dough operation.

The projects were backed by the New Jersey Economic Development Authority, which issued bonds that were acquired by TD Bank. The two property acquisitions, the purchase of machinery and equipment, and related expenses cost $11.5 million, according to EDA records.

And despite the fact that the company added a second floor to double the size of the latest acquisition to 45,000 square feet, the expansion is still not enough, said Warren Stoll, the company’s marketing director.

“This was pretty much maxed out the day we started,” said Stoll, as he showed off the refurbished building with Steve Kontos, company vice president and a co-founder.

“We are working 24 hours a day to fill orders for Singapore, Taiwan, Korea and China,” Kontos said. He said the company added a second floor to the building, rather than develop the parking lot, so that it would still have space to expand there in the future.

The company was started in 1987 by Kontos and his father, Evris, at the time making pita bread. It now has 200 employees, 10 of whom were added when the new facility was opened. And the product line has since expanded to include 50 bread products, as well as yogurts, crepes, wraps and other items sold nationwide through retail outlets and to restaurants and hotels.

While the expansion is driven in part by growing name recognition for Kontos products, another key factor is the rising interest among American consumers in Mediterranean foods, Stoll said.

Darren Tristano, executive vice president for Technomic, a Chicago-based food industry research company, said the increased interest in Mediterranean foods can be seen in the rise of Greek-concept franchises, such as Little Greek and Hungry Greek in Florida, and the Garbanzo Mediterranean Grill chain, which is soon to open a restaurant in Florham Park. In New Jersey, the It’s Greek to Me chain now has 10 restaurants, six of them in Bergen or Passaic counties.

“The second important indicator is the health and wellness trend,” in which Mediterranean food is perceived by consumers to be healthy, Tristano said. “These Mediterranean-style foods are designed for healthfulness, for lower calorie counts and are generally fresh in nature.”

Leave a Comment » | Beyond Foodservice, Distributors, Economy, Expansion Strategy, Experience, Financial Activity, Flavor, Food, Franchise Activity, Future Plans/Announcements, Growth, Health & Wellness, Ingredient, Mediterranean, Menu Development/Innovation, Menu Trends | Permalink
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Biggby’s Big Gulp: Metro Detroit Plan is Litmus Test for U.S.

March 4, 2013

AR-302179975.jpg&MaxW=290The executive team behind Biggby Coffee wants to turn the Lansing-based chain into a national brand. But first, they say, the company has to dominate Southeast Michigan.

The company looks to open 136 Biggby Coffee shops in metro Detroit by the end of 2015, bringing its total store count in the area to 150.

President Mike McFall and CEO Bob Fish of Global Orange Development LLC, which operates as Biggby Coffee, said mastering metro Detroit is a litmus test to see whether the company can dominate a larger market.

“Metro Detroit is going to get every ounce of effort we have,” McFall said. “We are not spreading resources over seven states. Rather, four or five counties.”

Biggby has a strong presence in Kalamazoo, Lansing and Grand Rapids — about one store for every 24,000 people. In metro Detroit, it looks to open one store for every 30,000 people, following a food chain market penetration model.

“I know what we can do per a given population in other areas of Michigan, and we think metro Detroit is a similar market,” McFall said.

Biggby set aside $1.1 million to spend on advertising in the metro area, McFall said, mostly through cable TV and billboards, to generate buzz about the company and attract potential new franchisees.

“We are using broad-based marketing,” he said. “We believe that by building the brand and developing and building successful units, that will, in the end, get us more franchisees.”

Biggby’s real estate strategy is different than other franchise systems. Instead of selecting sites “at the corner of Main and Main,” McFall said, the company looks for sites that are slightly off the main drag or perhaps are existing independent stores that can be converted.

The company said it has borrowed many of its expansion ideas from Subway, the sandwich giant operated by Milford, Conn.-based Doctor’s Associates Inc., that ranks as one of the world’s largest and fastest-growing franchises, according to Forbes.com.

In fact, McFall said, Subway has been trying to acquire both Global Orange Development and Global Orange LLC, a separate entity created to own the intellectual property, but neither party could agree to terms for a sale.

He said a 2006 conversation between himself, Fish and Fred DeLuca, co-founder of Subway, changed Biggby’s business plan.

“Fred is an advocate on focusing on one thing or the other, either being a franchise-based company or owning the units,” McFall said. “He told us, ‘You guys are doing both marginally.’ His position was to make sure we chose to be one or other.”

Fish and McFall listened. In 2006, they sold nine company-owned Biggby stores to focus on franchising. Delivery and roasting also are outsourced; Biggby uses Lansing-based Paramount Coffee Co. to roast its beans.

“The idea behind selling stores was we wanted to focus on being the best franchise company we could,” McFall said. “We will get back into owning stores, but we will be franchisees of our own concept and hire an operator.”

There are 142 Biggby locations throughout the Midwest, all of which are owned and operated by franchisees. The company does not sell territories.

Systemwide sales for Biggby reached $59 million in 2012, and McFall said revenue is expected to reach $68 million in 2013.

But make no mistake: The goal for Biggby is turn it into a national brand. “This is step one of developing a much bigger company,” McFall said.

Alan Liddle, managing editor of special projects for industry publication Nation’s Restaurant News, said Biggby has a shot at reaching its goal of opening 136 stores in two years if it finds the right franchisees and sites.

“It’s ambitious, but if the stores are small and don’t require a great amount of capital, it could happen,” he said.

Potential franchisees are required to have $70,000 in liquid assets and a total available credit line of $250,000, which covers the entire cost of opening a franchise, from equipment, furniture and outdoor signs to inventory. A common target for potential franchisees are empty-nester couples where one spouse can focus on the coffee business while the other earns money from an existing job.

The average Biggby coffee shop is 1,400-1,500 square feet. Franchisees pay 5 percent of total sales in royalties to Global Orange Development and an additional 2.5 percent is used for advertising.

“And if you have a system which relies on franchisees to do the leg work, then you are cutting down on resources you need to open 136 stores.” said Liddle, adding that Subway has been successful using that model.

But there is a downside, too.

“As a franchisee, you wonder if the company is as invested in each store,” he said.

Biggby isn’t the only coffee company to see metro Detroit as a growing market.

In 2012, Oakville, Ontario-based Tim Hortons Inc. made a big push in metro Detroit. Tim Hortons opened its 130th store in metro Detroit in December 2012. The company declined to comment due to a quiet period before their fourth-quarter earnings are released Thursday.

Minneapolis-based Caribou Coffee Co. has 22 locations throughout metro Detroit.

“We are always looking to expand our footprint in our key markets,” Alfredo Martel, senior vice president of marketing and product management for Caribou Coffee, said in an email.

Darren Tristano, executive vice president of Chicago-based food industry research firm Technomic Inc., warns that coffee is becoming over-saturated and established brands like Seattle-based Starbucks Corp. are contracting.

“Coffee is very saturated today and it’s full of a lot of major brands who have strong brand recognition,” Tristano said. “And growth in individual units that are specifically serving coffee has begun to slow.”

But Tristano says there is room for growth if Biggby can keep operating costs down.

“I would say, there is room for opportunity if they can keep unit economics down,” Tristano said. “They would need to be profitable with about $400,000 in annual sales and look for nontraditional sites (like a food court, airport, hospital, university or convenience store).”

Beyond bricks and mortar, Biggby is working on a prepackaged line of coffee drinks, and has its beans in 300 grocery stores, including Costco and Sam’s Club. But McFall and Fish refuse to lose sight of their goal of becoming a national coffee chain.

In fact, McFall said Biggby has been approached by myriad businesses looking to help it expand its product offerings and retail presence in stores.

“We don’t mess around with every single idea that other people think we should do with our company,” McFall said. “There are a million ideas out there, from gift baskets to online clubs, but we are solely focused on being an extraordinarily good coffee retailer.”

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Pop-up Restaurants: One-Night-Only Dining in Orlando

February 25, 2013

Pop-up RestuarantEric Hanke didn’t know what he’d be eating when he walked into the ClandesDine restaurant Saturday night.

“That kind of mystery and mystique adds to the whole event,” said Hanke, 38, who went for a date night with his wife, Frieda Lamberg.

The couple were pleased with what they got for $75 each at the one-night restaurant in the back of an ad agency: a five-course gourmet meal with wine but with a kiddie twist. The appetizer featured peanut butter that looked like sand, grape jelly with port and brioche. Royal red shrimp were fashioned into fish sticks. The main course of wild boar meatballs with spinach linguine came on school-lunch trays.

Now that Orlando has embraced food trucks, some promoters have turned their attention to another big-city trend: the pop-up restaurant.

Mark Baratelli, an Orlando events promoter who runs the Daily City website, hopes to make ClandesDine a regular happening. Restaurant critic Scott Joseph recently held his first pop-up and will soon sell tickets for his second. Barbecue restaurateur John Rivers and even the Citrus Club have also experimented with them.

Here-today-gone-tomorrow restaurants have become a way for chefs to get exposure and test new concepts. Adventurous foodies, meanwhile, get a new kind of mystery dining. They buy tickets — usually pricey ones — often not knowing where they’ll have dinner, who they’ll sit with or what they’ll eat.

Baratelli stressed on his website that diners should come with an open mind and a daring palette. “Do not expect white-glove service. Don’t ask for your sauce on the side. Just come and enjoy.”

The novelty is appealing to some Americans who are weary of casual dining and find fine dining too stuffy.

“Today’s consumer doesn’t think of dining away from home as traditionally” as in the past, said Darren Tristano, executive vice president of Chicago-based food-industry research firm Technomic.

Tristano said such concepts can work even in Orlando, which doesn’t have the same heavy concentration of urban dwellers as larger cities such as New York and San Francisco.

Baratelli agrees, although in Central Florida, organizers might have to think more creatively, he said.

“Some cities have hundreds of buildings and crazy spaces, things that are really old and interesting,” he said. “I think Orlando has those. We’re just going to have to dig and look for them.”

Baratelli held his debut dinner in the Mills 50 District, in the same place as his weekend Cardboard Art Festival. A few musicians from the Florida Symphony Youth Orchestra played Beatles tunes as the 36 diners got to know one another among displays of cardboard animals and robots.

Much of the food came from chef Bryce Balluff’s Fork in the Road food truck, parked outside.

Baratelli is getting the word out about his pop-ups through his website, as is Joseph.

For his first pop-up, Joseph chose a chilly seafood-processing room at Gary’s Seafood & Specialties, where the dinner included a fish-filleting demonstration.

“I like the location to be logical, that it has something to do with the food or with the dinner, to help educate [people] about what we eat, what we drink,” Joseph said.

Just a few days before Joseph’s pop-up last year, legendary New York City restaurant Le Cirque opened for one night at the Citrus Club in downtown Orlando. That was one of a series Le Cirque held around the country.

Also last year, 4 Rivers founder John Rivers tried out a new concept called Cowboy Kitchen at Alaqua. Ultimately, Rivers decided to let the idea for a restaurant featuring upscale Southern cuisine wait so he could focus more on his growing smokehouse empire. But he plans more pop-ups, just for fun.

For Balluff, who cooked at ClandesDine, the pop-up is also a chance to expand his horizons.

“I wanted to be able to still do fine dining. That’s my first love,” said Balluff, whose food truck serves up dishes such as braised short rib sandwiches and paella-covered hot dogs. A pop-up, he said, is “kind of my outlet.”

Leave a Comment » | Future Plans/Announcements, Menu Development/Innovation, Menu Trends, Pop-Up Restaurant | Permalink
Posted by bnoone

Food Industry Vet Betting on Pie

February 19, 2013

Sugar_Cream_Pie 304A hospitality veteran is launching a new pie restaurant — with the hope of baking up a popular franchise.

Ron Wolf, who founded the Georgia Restaurant Association, is opening up a new fast-casual restaurant called That Pie Place.

The first location is set to open this month at 6355 Peachtree-Dunwoody Road in Sandy Springs. The hope is to begin franchising in late 2013, with the goal of having 200 locations by 2020, Wolf said.

He’s banking on the rapid growth of the fast-casual segment, which had about $30 billion in sales last year in the United States. That’s almost 10 percent of the $375 billion restaurant industry, said Darren Tristano, executive vice president of Chicago food industry research and consulting firm Technomic Inc.

“It’s been growing at a double-digit rate since 2000,” Tristano said. Fast casual has a lot of traction because the food quality and service is good, and the price point is attractive, he said.

“It wasn’t a coincidence that I wanted to be in that segment,” said Wolf, who founded the Georgia Restaurant Association in 2003 and served as its CEO until 2010. Also, in the past, he worked for Holiday Inn Worldwide and AFC Enterprises Inc.

That Pie Place will be Wolf’s return to food service after almost 30 years.

“I had the desire to do one last project,” said the 63-year-old. “I believe this can work … We want this to be, perhaps, the next great opportunity for that mom-and-pop operator.”

He’s teamed with franchise veteran Daryl Dollinger, president and co-founder of Raving Brands, now called Big Game Brands. The Atlanta company founded such fast-causal concepts as Moe’s Southwest Grill, Mama Fu’s and Planet Smoothie.

That Pie Place is a side project for Dollinger.

“It’s almost ridiculous how good the product is,” Dollinger said. “We are doing something that nobody else is doing in Atlanta.”

Chef Todd Kazenske, an instructor at Le Cordon Bleu College of Culinary Arts Atlanta, developed the menu.

That Pie Place will serve breakfast, lunch, dinner and dessert. The pies are created before the customer’s eyes, in a format similar to Moe’s Southwest Grill or Chipotle. People can customize their fillings.

Some of the standard pies include egg and cheese, chicken cordon bleu, cheeseburger, salmon teriyaki or Philly cheese steak. Dessert options include pecan, fruit, cheesecake and s’mores.

Pies range in price from $1.99 to $5.99.

It takes three minutes or less to bake the pies. They are easily portable, making the restaurant ideal for college campuses or airports, Wolf said.

“Our whole model is ‘Come play with us,’ ” Wolf said. “What do you like? We have the ability to make an incredible variety of different flavor profiles.”

Leave a Comment » | Expansion Strategy, Fast Casual, Franchise Activity, Future Plans/Announcements, Growth, Menu Development/Innovation, Menu Trends, New Product Tests/Mentions | Permalink
Posted by bnoone

A Snack Trend With Pop: Gourmet Popcorn Takes Over

February 12, 2013

113263407Move over, CrackerJack: The hottest snack food of 2013 is gourmet popcorn. And we’re not talking that bright orange stuff that comes in the tins you get around the holidays, or the vats with the synthetic butter you get at the movies. Today’s popcorn has gone seriously decadent, flavored with everything from black truffles to the Italian spirit Campari to wasabi.

Americans eat around 16 billion quarts of popcorn a year, according to The Popcorn Board, and artisanal, handmade varieties are garnering an increasing chunk of what was nearly a $1 billion market at the beginning of the decade. The Doc Popcorn chain, which claims to be the biggest popcorn retailer in the world since it began franchising in 2009, has grown by leaps and bounds; co-founder Rob Israel told CNBC that his company has 85 locations open and 300 in development.

The Boston Globe and the Syracuse Post-Standard both report that gourmet popcorn shops are flourishing. Maybe the economy is doing better than the data would suggest, if enough of us have the discretionary income to fork over $4 or $5 for a small bag.

Oh, that’s the other thing about this trendy treat: It’s not cheap. But snackers seem willing to pay for the variety and the convenience, says Darren Tristano, executive vice president at consulting company Technomic. “The consumer can’t create it easily at home, and when they’re out, they’re willing to pay more for it,” he says. “The impulse nature… and the convenience factor of getting it fresh is certainly going to go a long way towards that price point.”

“People come to our mall stores. They will literally buy a bag, eat it, and buy another bag,” Israel told CNBC.

Gourmet popcorn is even edging out the cupcake tower at trendy gatherings, with photos of and chatter about gourmet popcorn bars popping up on wedding-planning forums, blogs, and social networking sites like Pinterest. “Elaborately spiced and flavored popcorn has been showing up at events in 2012, and caterers are predicting that they’ll see even more in 2013,” the event industry trade magazine Catersource predicts.

Food marketing company the Sterling-Rice Group and the National Association for the Specialty Food Trade say gourmet popcorn is one of the top 10 food trends for the year. Sterling-Rice predicted popcorn will “explode” this year thanks to its “addictive” quality and its use as a vehicle for sweet and savory flavors.

Doc Popcorn’s flavors include the classics — caramel, a couple varieties of cheddar, sweet and savory buttered — as well as more unusual ones like jalapeno and cinnamon. Other popcorn purveyors push the envelope even further with flavors like bacon, buffalo and blue cheese, s’mores, spicy or salted caramel, stout beer, and cheesecake.

Aside from its versatility, the other reason behind popcorn’s newfound popularity is that the popcorn business is a relatively easy one to break into, Tristano says. The start-up costs aren’t exorbitant; the corn is simple enough to make with equipment that can fit into a kiosk or small storefront; and, as anyone who’s made a batch themselves can attest, it doesn’t take a high level of technical know-how to make the stuff.

Even though popcorn — the world’s supply of which is almost all grown here in the U.S. — was affected by the drought that afflicted the nation’s agricultural belt last year, experts don’t see that affecting its popularity, or, for that matter, its profitability. Although both retail and wholesale prices rose this fall, Reuters said, Tristano says the cost of the corn is only a small portion of a seller’s costs.

But will popcorn have the staying power of other food trends like bacon or cupcakes, or will it be a flash in the, er, kettle? “It’s a question of whether popcorn is enough to hang a retail business on for the long term,” Louise Kramer of the National Association for the Specialty Food Trade tells the Globe. ”As a popcorn retailer you have to keep it interesting and different.”

Leave a Comment » | Economy, Expansion Strategy, Flavor, Future Plans/Announcements, Growth, Ingredient, Menu Development/Innovation, Menu Trends, Price, Snacking | Permalink
Posted by bnoone

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