Arahova Lands National Deal

June 23, 2014

9951741MONTREAL — Arahova Souvlaki, the Greek restaurant chain that opened in 1971 with a three-item menu, two tables and nine chairs on St. Viateur St., is now expanding nationally.

But unlike other Quebec restaurant chains that have grown by opening a slew of franchised restaurants in other provinces, Arahova’s tzatziki, spinach dip and gyros will first hit Canadian grocery shelves this summer.

Arahova Production, the chain’s retailing arm, reached an agreement on June 11 with Loblaw Cos. Ltd. to launch six of its product lines at 140 Loblaw stores across the country, said division vice-president George Kalogrias, 38.

Kalogrias expects the agreement will boost the company’s retail sales by a third and lead to the opening of an Arahova franchise in Calgary and two more in Vancouver in 2015. He declined to disclose Arahova’s total revenues.

“It’s going to help us grow our brand,” he said. “Then we can start our restaurant expansion. It’s hard otherwise to negotiate a new lease. You have no clout.”

Arahova’s strategy reflects a broader industry trend as chains turn to retail licensing to build their brands in new markets and diversify their revenue streams in the competitive restaurant sector. On the flip side, supermarkets have also opened in-store eateries dubbed “grocerants.”

In 2013, fast-growing MTY Food Group Inc. reached a deal with 295 Quebec-based grocers to carry its Thai Express meals in frozen food aisles. And Imvestcor Restaurant Group Inc., which operates Pizza Delight, Mikes, Scores and Bâton Rouge, grew revenues 13 per cent year-to-date, on an annual basis, due mostly to higher manufacturing sales and retail royalties from its ribs and sauces, the company said this month.

“These brands provide credibility in terms of quality, and consumers are willing to pay more for brands they trust,” explained Darren Tristano, executive vice-president of Technomic Inc., a Chicago-based research and consulting firm servicing the food and food service industry.

“Customers who enjoy the products will look to dine out at the restaurants if they are located near them.”

Arahova Production already sells its dips and Greek yogurt cheesecake at most Quebec supermarkets and at Costco Wholesale Corp. stores in four U.S. states. Retail sales now generate more than half of the family-owned chain’s total revenues.

But in the restaurant industry, the strategy of growing sales through retail licensing also carries risks, notes Tristano.

Retail purchases, especially of frozen, prepared meals could cannibalize occasions for customers to eat out at restaurants. And there’s the chance that the taste of a product doesn’t translate well from the restaurant table to the grocery shelf, he said.

“Products that aren’t considered as good from retail may give customers a negative reaction … and thus avoid dining at the restaurant,” he said.

Kalogrias said Arahova has kept the same family recipe used over the last 43 years for the 10 tonnes of tzatziki a week sold to customers in restaurants and in retail stores.

The Arahova Souvlaki brand is owned by two related families of Greek heritage, which each operate separate companies. Together, they run two corporate and eight franchised Arahova restaurants in the Greater Montreal Area. Kalogrias’s family started Arahova Production and it is the only one to sell retail products.

The first Arahova restaurant, a 400-square-foot eatery in Mile End, was owned by George Kalogrias’s father, Christos, and his uncle Nick Koutroumanis. It was named after Arahova, a village in Greece.

Kalogrias first experimented with retail in 1995, when local grocers approached the family with requests to stock Arahova’s tzatziki on their store shelves. One of those customers was the St. Viateur bagel factory, Kalogrias said.

“At 4 a.m., all those people were coming in for tzatziki and bagels,” he recalled.

The family started small, with Kalogrias driving orders to clients in his car.

“I started delivering it myself in those green picnic coolers,” he said. “Then one cooler became two coolers.”

Arahova Production now manufacturers and distributes most of its retail items from two separate centres in Laval. The division’s Greek yogurt cheesecakes are made at a separate facility in Toronto. With the agreement with Loblaw’s and the new franchises, Arahova may soon outgrow those locations.

“This is going to mean a lot for our name,” Kalogrias said. “We want to become a household brand across Canada.”


Franchise Chatter Names Emerging New Food Segment The Hottest Franchise Concept of 2014

May 22, 2014

By Brian Bixler
Franchise Chatter

During the last few years, a band of start-ups has been racing to become what some have called “the Chipotle of pizza,” seizing upon the fast-casual custom concept and mimicking the company’s model in hopes that they can do for pizza what Chipotle did for the burrito. With major names in franchising recognizing the potential in the fast-casual custom pizza segment and backing some of the brands financially, potential franchisees are seeing dollar signs in what has evolved into the hottest franchise concept of 2014—one that looks to have staying power, rather than being a passing fad.

That’s the conclusion drawn in a report from Franchise Chatter, an online information resource for franchisees. Published on franchisechatter.com, the new report looks at the latest developments and growth within the fast-casual custom pizza segment, which has been drawing increasing interest among investors as new brands look toward explosive expansion, spreading the concept across the country.

“There are now dozens of brands in this segment, which could become as popular as frozen yogurt franchises were a few years ago,” said Ambrosio Cantada, founder of Franchise Chatter. “As these companies gain market share, we know potential franchisees will want to read about the future of this segment of the pizza category, and which brands may end up on top. “

Since 2008, a growing number of companies has moved into the custom pizza segment by establishing fast-casual restaurants in which customers choose their ingredients—including the dough, sauce and toppings—along a service line. With pizzas being cooked in high-temperature ovens, the concept combines speed and customization that customers are looking for today, with a variety of healthy ingredients.

So many new brands are entering the market with none of them dominating yet that potential franchisees face the dilemma of striking while the iron’s hot (or, in this case, the oven) or sitting on the sidelines to see which brand will best capture market share.

Some brands are posting impressive annual sales volumes as high as $1.8 million at individual units, according to Technomic Executive Vice President Darren Tristano, who recently completed the Fast-Casual Pizza Cluster Report for the market research firm.

Even though Technomic’s year-end 2013 figures show Pie Five Pizza Co., Uncle Maddio’s and Your Pie leading some competitors in the number of units, each with 18, the landscape is about to change.

“I think right now the two brands that are at the forefront would be PizzaRev because of the investment of Buffalo Wild Wings and Blaze Pizza, which is expanding rapidly,” Tristano says. “They both have strong management and overall knowledge of the consumer market.”

The speed with which the dueling companies bring their concepts to additional markets will be key to determining their success, he added. Tristano expects the custom pizza segment to be especially popular with the noon crowd.

“Fast-casual pizza has emerged out of a white space that’s typically lunch time,” he said, adding that brands that offer comfortable environments and alcoholic beverages will also be able to pick up dinner and nighttime customers as well.

“We expect to see a lot of opportunity for growth in the next five to eight years,” Tristano said. “It will likely attract more franchisees and other investors to come into the market as it’s still in the very early stage.”

The Franchise Chatter report includes updates on specific brands it has identified for having the greatest growth potential over the next five years.

For more information, click on the Hottest Franchise Concept of 2014 banner at franchisechatter.com.

Brian Bixler is a freelance journalist and blogger who writes for several business-oriented websites, including Franchise Chatter, a membership site devoted to reviewing franchise earnings claims. By talking to executives of leading brands as well as some of the most successful franchisees across the country, Franchise Chatter reports on growing brands as well as those that might be struggling. The website also examines the profit potential of all the major brands with its FDD Talk feature.


Subway Owners Take Stake in BurgerFuel

May 14, 2014

subwaylogopromoThe “better burger” niche is already crowded with domestic startups, but a new player from New Zealand, BurgerFuel, soon might break into the competition and onto the fast track to growth, helped by a partnership with Subway founders Fred DeLuca and Peter Buck.

According the The New York Times, DeLuca and Buck acquired a 10-percent stake in BurgerFuel in January through their investment company, Franchise Brands, which supports small and midsize concepts. BurgerFuel reportedly hopes to leverage this strategic alliance into expansion throughout the United States by selling franchises to operators of Subway, which is 100-percent franchised and has more than 25,500 restaurants in the United States.

Officials from Milford, Conn.-based Subway did not respond to inquiries for comment as of press time.

Darren Tristano, executive vice president of Chicago-based research firm Technomic Inc., noted that Subway’s growth in extremely nontraditional spaces — such as a church, a Goodwill training center and auto showrooms, to name a few recent openings — show franchisees’ willingness and demand to open restaurants.

Fellow industry expert Dennis Lombardi, executive vice president of Columbus, Ohio-based WD Partners, added that those Subway franchisees might be looking to open more units but, depending on where they are located, might not have the chance to grow as fast with more Subway locations as they could with a new concept, like BurgerFuel.

“It may not be about the 25,000-plus Subways [in the United States], but more about a franchisee’s home trade area, where it’s hard to expand your own franchise business and almost have to wait for somebody in the area to sell,” Lombardi said. “This gives the franchisees the opportunity to have a growth vehicle, and typically these kinds of new brands have a higher revenue potential relative to Subway’s.”

With BurgerFuel as a possible growth vehicle, Subway might have a way to enable its franchisees’ growth in more traditional spaces or make inroads with a slightly different customer base, Tristano said. He added that Subway’s tack of looking for a concept outside its segment — similar to Chipotle’s interests in ShopHouse Southeast Asian Kitchen and Pizzeria Locale, or Buffalo Wild Wings’ investment in PizzaRev — is likely the better option than taking its current offering and trying a more upscale take on it, as Taco Bell plans to do with U.S. Taco Co. and Urban Taproom.

“Subway is looking for growth potential, and it probably has more opportunities outside of the sandwich segment than within sandwich,” Tristano said. “They should look at something that could work in a co-branded way, like maybe with desserts. They still have so many franchisees that they could really leverage that base.”

Lombardi added that BurgerFuel’s possible entry to the United States “is not exactly coming in at the early stage of the better-burger trend.” In addition to muscling into a crowded segment, BurgerFuel would present completely new operations models or real estate needs to Subway franchisees, but “that’s not an overwhelming issue” to the better-performing operators in the system, he said.

“Subway is doing something nice for its franchisees by making this concept available to them,” Lombardi said. “But you’re not going to give a marginal operator the ability to expand into a second concept. If they want to grow, they’ll have to show Subway they are good at what they do.”

Both experts agreed that a possible expansion of BurgerFuel in the United States could be an intelligent long-term plan for Subway, and neither saw it as an indication that Subway’s growth could be slowing down in the United States.

“If you think about Subway’s royalty stream coming into its two owners, it’s crazy; you probably wouldn’t need to do anything else,” Tristano said. “But progressive brands always need to think about where the future is. There may be a day when people don’t believe Subway is the healthiest restaurant in the world, so Subway would need some bench strength and a way to hedge a little.”

Lombardi said that day is not really close to arriving.

“There are no real negatives in this, and I’m not surprised it’s happening,” he said. “Subway is still the golden goose for them. I just interpret this as another growth angle, an ‘and,’ not an ‘or.’”

As of May 13, Subway had 41,800 restaurants in 106 countries.


Beef’s to Ride On Fast Casual Train

April 23, 2014

AR-140419726Perhaps it’s a sign of how much Tampa loves Beef ‘O’ Brady’s that everyone just calls it “Beef’s.”“Hey, let’s go to Beef’s to watch the game.” Personally, I’ve stumbled over the full name a few times, but that’s another matter. I stumbled over the Au Bon Pain restaurant name for years. There’s just no way to pronounce it without sounding like a rrreal ‘mmmerican or a Francophile snob.

Be that as it may, Beef’s will soon give people another reason to check it out. The company is joining the growing ranks of restaurants launching “fast casual” restaurants, following right in line behind Panera, Chipotle and Five Guys. This one will be called “Beef’s Express,” and Beef’s CEO Chris Elliott says he doesn’t mind if people think of this as a Beef ‘O’ Brady’s version of Chipotle. One could do worse in the restaurant world. Have you seen the lines at Chipotle recently? It’s like a money printing press.

I sat down with Elliott this week to hear a rundown, and he very much cautioned that this is an experiment, and that they’re starting with a single prototype in Lakeland — a test bed to try out everything from the menu and portion sizes to the furniture and traffic flow. He also explained what happened to the St. Petersburg YWCA location of The Brass Tap, since he runs that brand too, but more on that below.

“It took a little while to get our heads around the idea, but once we got into it, we became very excited,” Elliott said. “In the beginning we weren’t sure we could convert the Beef ‘O’ Brady menu to a fast casual menu.”

All this brings up the question: Why the heck are all the restaurant companies trying to be Chipotle all of a sudden.

My time as a business reporter has taught me that one of the biggest dangers in explaining a corporate project is to reduce everything down to one factor. Life is far too chaotic and contradictory, and I won’t fall into that intellectual pothole today.

So, let me count the ways the fast casual concept is taking off like a frenzy in the market — or rather, let’s let Darren Tristano count the ways. He’s a frequent source of mine, and he travels the country checking out restaurants and giving advice to owners for the consulting firm Technomic Inc.

♦   Compared to a full-service restaurant like Olive Garden or Red Lobster or Ruby Tuesday, fast casual restaurants like Chipotle or Five Guys average a 50/50 ratio of dine-in versus take-out traffic,
so they require a smaller footprint;
hence, lower real estate costs. Plus, Elliott says full-service Beef’s restaurants do 40 percent lunch, 60 percent dinner, while a fast casual joint has the opposite
ratio. So, launching Beef’s Express helps even out the revenue per hour.

   ♦   A smaller footprint means a restaurant doesn’t require an expensive stand-alone building, which opens it up to new sites such as malls, airports, strip centers and even travel centers.

   ♦   The catering opportunities are very strong for “off-premises sales” at a fast casual place. The kitchen can still produce the food, but there’s no need for dining room space. PDQ, for instance, does a
thriving business catering events
around town, something I’ve seen pretty much zero fast-food chains do well. Typical fast-food items don’t handle the transportation well. French fries have about a
three-minute shelf life before they turn pasty and cold.

   ♦   Fast casual joints can charge higher prices, which means better annual sales, which means higher return on investment for a franchisee who can open a store “with less cost/capital than brands
like McDonalds or Applebee’s but with
greater upside vs. Subway,” Tristano said. The labor cost per employee may be higher at fast casual places, but there’s no need for a host, waiters, bussers or
other floor staff. Just cooks, a cashier and a cleanup person. I’m not saying
that’s good for America’s job prospects; just observing the thinking of restaurant execs.

   ♦   Typically, fast casual food is a peg or two above typical fast food, and even KFC is getting in on the fast casual action. It built a test site in Louisville, Ky., called “KFC Eleven” with more upscale items.

Put that all together and Tristano says the average fast casual “unit volume” can top $1.1 million per store, versus “fast food that is much lower.”

But let’s focus a bit closer on Beef’s.

Elliott says the Express sites will only take some design cues from a regular Beef’s, but there will be no TVs (sacre bleu!). This is not the place to park all afternoon to watch a football game; that’s for the regular Beef’s.

The Lakeland mock-up is a 2,000-square-foot prototype with 64 seats, the size of a small Chipotle. People walk up to a counter, order their food and pay at a cashier. A server brings out the food. But here, Beef’s is pushing the envelope. Unlike Chipotle or Five Guys, which basically have one food item (burritos or burgers), Beef’s will have more than a half dozen: Chicken wings, burgers, chicken tenders, fish and chips, Cuban sandwiches, Philly cheese steaks, sandwich wraps and flatbreads.

Beef’s wants the average check to hover around $10, drink included. “The trick will be to have a more diverse menu and still deliver on what people want from fast casual,” Elliott said. “Quality, speed and value.”

Elliott is targeting an opening within 12 months, maybe by the end of this year. The Beef’s fleet of restaurants are virtually all franchisee operated, so Elliott can’t just build a slew of sites like McDonald’s or others can. “It depends,” Elliott said. “If the test goes well, we might get a lot of interest.”

Meanwhile, here’s other retail, restaurant and trend news around town:

So, about that YWCA Brass Tap location in St. Petersburg that closed last week. Elliott said it was a valiant effort, particularly because it was part of an adaptive re-use of a notable location, but the site just wasn’t seeing enough traffic. But it’s not going away forever. Likely, Elliott said, the Brass Tap brand will be relocated to a spot around the restaurant hub — Central Avenue, maybe close to the stadium.

Last week, we wrote a huge story about the launch of the Lyft ride-sharing service in the Tampa region. There’s a fight afoot, obviously, because taxi and limo companies don’t necessarily welcome the competition from plucky and less-expensive upstarts. Now Lyft just gave the taxi guys another reason to grumble. After raising $250 million in new venture capital, Lyft is cutting prices by 20 percent. Rival/compatriot ride-sharing service Uber made a similar move recently. As the TechCrunch blog phrased it, the move “won’t affect the amount of money that drivers take home. Instead, the company is temporarily suspending its 20 percent commission while testing out the new rates.”

The Channel District will soon have a couple of more bar/restaurants to boast of. Maloney’s Local Irish Pub will open soon along Meridian Avenue in the Grand Central complex, taking the place of the former Rajin Sports Bar & Grill, with a likely opening of late May. There’s already a Maloney’s in Westchase if you want to see the look and feel. Soon after, a partner restaurant will open directly next door called The Hideaway, more of an upscale lounge. There’s one in Clearwater if you want to check that out. Both are owned by Todd Wingard and Brian Pfeiffer, who say it’s a “leap of faith” to go into that area, but with hundreds of new apartment units going up, the Riverwalk complete soon and Jeff Vinik’s projects nearby, they figure this is the sweet spot for young professionals.

Fear not, Apple devotees, your International Plaza store is only temporarily closed. The site is undergoing another renovation and should re-open May 23. Unfortunately, if you don’t like crowds, there may be some frustrating news. Despite cries from the populace to triple or quadruple the size of the store, the site will retain its current footprint.

Good news for Oxford Exchange fans. The oh-so-classic styled bookstore/tea shop/retail store/business club/restaurant now has a full liquor license, which means beer, wine and cocktails. Another change: The restaurant is normally only open for breakfast and lunch, (private events at night) but the owners have decided to experiment with dinner open to the public at large on Thursday and Sunday nights. Call early for reservations, because the menu looks hot: Macadamia Mahi Mahi ($24), Steak Frites ($32), Shrimp N’ Grits ($24) and Vegetable Lasagna ($18).

After a devastating fire, A Modern Line furniture has found a new home in Seminole Heights at 4632 N. Florida Ave., adjacent to several other funky art galleries and creative projects. “Granted, we will be a bit lighter on merchandise to start, but the place is looking great and we still have a pretty swell collection to choose from,” co-owner David Call said in an email to fans. “Many thanks to our awesome neighbors, family, friends, customers and our local businesses for helping make this happen as fast as it has. You all rock! Love you all!”


Luxury Dining at the Mall

April 22, 2014

bildeWhen the new Saks Fifth Avenue department store opens at the Mall at University Town Center, shoppers can expect more than just expanded departments and two floors of merchandise. The 80,000- square-foot Saks space — one of the key anchors for the $315 million mall in Sarasota County — also will boast its own restaurant, and be one of the first in the chain to do so.

When Saks opens, so will “Sophie’s,” a new restaurant concept by Fifth Dining LLC, a new restaurant effort within the Saks brand. The elegant, gourmet restaurant will complement the department store’s look and feel but will offer a completely separate lunch and dinner dining experience for Saks shoppers.

“We wanted to tie together the legacy of Saks with a concept that had a lot of appeal for the people who happen to shop here,” said Michael Kaufman, president of Fifth Dining. “The restaurant is designed to be a high-end experience through a unique look and feel and our freshly prepared food. It’s not stuffy, but resonates appropriately with the traditional Saks Fifth Avenue shopper.”

The 2,600-square-foot restaurant’s design is simple, with sleek tables and chairs and black-and-white finishes.

Its name pays homage to one of Saks Fifth Avenue’s legendary fashion designers, Sophie Gimbel, who designed women’s apparel for Saks for 40 years and married a Saks executive. Among her many simple and elegant designs was a red coat and dress she created for Lady Bird Johnson.

“We’re not creating a museum to honor Sophie, but a restaurant brand, if you will, keeping in mind what she stood for — like the simplicity in the way she designed — as we go along,” Kaufman said.

IT STARTED IN CHICAGO

Saks opened its first Sophie’s concept in Chicago earlier this year. Sarasota will be the second. More restaurants are planned in larger markets.

“These kind of restaurants primarily target women. It’s very much a place for ladies to lunch and meet their friends, then continue shopping,” said Jeff Green, a retail analyst with Phoenix-based Jeff Green Partners. “The demographic in Nordstrom cafes is traditionally older. I imagine the restaurant in Saks will do very well in Sarasota.”

Saks Fifth Avenue will close its existing 40,000-square-foot store at the Westfield Southgate Mall in October, when the mall being jointly developed by Taubman Centers and Benderson Development debuts.

Saks Fifth Avenue has further invested in the importance of the Southwest Florida market by closing its Tampa store at Westshore Mall.

When the 880,000-square-foot Mall at University Town Center opens in October, Sarasota will have the only Saks department store on the Gulf Coast north of Fort Myers.

Saks joins Macy’s and Dillard’s as anchors for the new mall, the only enclosed mall scheduled to open this year in the United States.

A slew of other national, high-end retailers have committed to opening stores there, including Apple, Anthropologie, lululemon, Tiffany’s & Co. and Brooks Brothers, to name a few.

Sophie’s will compete with other national restaurant chains — Brio Tuscan Grille, Capital Grill, Seasons 52, Cheesecake Factory and Zinburger — as dining options at the new mall.

“There are so many great restaurants in Sarasota. We hope Sophie’s will fit right in,” Kaufman said.

The restaurant will not stay open later than the department store does. Each Sophie’s will have a menu unique to its market. For example, Sarasota’s menu will have more fresh seafood than others, Kaufman said.

While the Sarasota Sophie’s menu has yet to be created, and the Chicago restaurant is open only for breakfast and lunch, its menu gives a taste of what Sarasota can expect. It includes a $12 cocktail menu with a rhubarb basil gimlet of distillery gin, basil, bitters and lime juice. Entrees include a North Atlantic salmon for $25 and an “Amish chicken breast” for $21.

A RETAILING TREND

Saks Fifth Avenue is the latest upscale retailer to venture into the dining sector in recent years.

Nordstrom’s department stores, including the one in Tampa’s International Plaza, have their own line of in-store cafes, which serve lighter fare, coffee and cocktails.

The concept has helped make Nordstrom more of a destination for shoppers, said Darren Tristano, executive vice president with Chicago-based Technomic, a food consulting firm.

“Combining a high-end restaurant with the Saks or Nordstrom clientele is a service to the customer that goes beyond just the typical shopping experience,” he said. “The idea of restaurants in department stores is coming back, and we’re seeing a lot of it internationally. It has great strength and is moving forward.”

Macy’s, too, has dabbled with restaurant concepts in larger markets — such as its Stella 34 Trattoria, an Italian restaurant tucked onto the sixth floor of the Macy’s in New York.

Brooks Brothers announced that it plans to open its first restaurant, “Makers and Merchants,” a steakhouse, around the corner from its flagship store in New York this year. The restaurant is taking over vacant space once used for a Brooks Brothers women’s line.

“Price is not the issue here, considering the type of store shoppers are in,” said Green, the Phoenix-based consultant. “We really only see these kind of restaurants inside upscale department stores, even though they used to be in more traditional stores.

“Full-service restaurants won’t ever be in traditional stores anymore.”


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.


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