On the Horizon: Five Trends for U.K. Restaurants

January 24, 2014

The trends driving restaurant growth and innovation are driven by consumer demands for transparency, quality, flavour, and flexibility.

The U.K. foodservice scene continues evolving in unique and interesting ways. Looking forward to next year, Technomic’s analysts and consultants have identified five key trends that expected to play major roles at British restaurants.

Catering to the Millennial customer

As the influence and collective spending power of the U.K.’s Millennial generation grows, expect to see restaurant operators amplify efforts to target these consumers via foods and brands that appeal more directly to a Millennial demographic.

For instance, consumers aged 18–34 display the strongest interest in ethnic flavours. And a greater proportion of younger than older consumers indicate that it is important to them that cafés offer a variety of side options and seasonal menu items, according to Technomic’s U.K. Café Consumer Trend Report. Further, 31% of consumers aged 18–34 strongly agree that they would order limited-time offerings (LTOs) at cafés, compared to just 22% of all consumers polled.

Also watch for new mobile apps and digital tools that integrate seamlessly into Millennials’ lifestyle. Offering free WiFi in-store and letting customers place orders online are great starting points for connecting with these on-the-go, always-connected guests. Leading operators are also going beyond these steps.

Last spring, Wagamama partnered with Blippar, an image-recognition mobile application, to introduce augmented-reality place mats. Guests who downloaded the free Blippar app could hold their mobile device over (aka “blip”) the special place mats to access promotional information about the Wagamama Lounge, a pop-up concept featured at London-area summer music festivals.

Domino’s last September rolled out the free Pizza Hero app in the U.K., giving customers the chance to play professional pizza maker, rolling out pizza dough virtually, adding tomato sauce and then sprinkling on cheese and assorted toppings. A direct link takes users to the ordering page on Domino’s website.

And Apple’s Passbook lets iPhone users group their coupons, loyalty/rewards cards and more in one quasi mobile wallet—giving them quick access to their most-used or most-important passes. Last fall, casual-dining chain Harvester Salad & Grill became one of the first U.K. restaurant concepts to offer Passbook integration, and gave diners who used the app at Harvester £5 off when they spent £30.

The evolution of pubs

Classic British pubs will push even harder in 2014 to transform and grab market share from conventional restaurants by focusing more attention on creating upscale, premium food and drink (particularly speciality coffee and American craft beer); launching repositioned outlets in nontraditional sites; introducing web-enabled ordering systems that emphasise convenience and speed of service for guests; and promoting low-price-oriented menus and new loyalty programmes designed to spur customer traffic and strengthen the value perception.

Die-hard traditionalists might scoff at the idea of having a coffee and working on a mobile device at the pub, but a customer-centric evolution can help pubs maintain their relevance with a new generation of consumers.

Throughout 2013, we’ve seen examples of how pubs and pubcos are tackling the task of serving consumers who have higher expectations for food/drink, amenities and service at pubs. We expect the focus on this imperative to be that much keener in the year ahead.

For example, Orchid Group—whose approximately 250 pubs are now up for sale—realised that those establishments best positioned for success in Ireland and some U.S. cities after smoking bans took effect there were those that emphasised attractive food offerings. Orchid re-evaluated its menus and added pizza and Thai food, among other items, driving increases in food’s share of the sales mix. The company also took efforts to appeal to women.

Similarly, Marston’s PLC announced at the beginning of the year that it would install free Wi-Fi at about 550 pubs under its managed pub estate, Marston’s Inns & Taverns. The Prince George pub in Brighton, East Sussex, offers an all-vegetarian menu and a vegetarian-friendly wine list. And in August, Wetherspoon announced a new initiative pairing craft brewers from the U.S. with U.K. brewers, as part of an effort to seize upon U.K. consumers’ heightened interest in craft beer. The U.S. brewers produce their beers in the U.K. for sale at Wetherspoon pubs.

Honest chicken

Thanks in part to the recent crop of “better chicken” concepts opening in London, emerging chicken-focused concepts will flourish in 2014, a trend closely tied to growing consumer interest in sourcing, preparation and menu transparency. Pret a Manger, for instance, touts that its chicken is starch-free, phosphate-free and sourced from a higher-welfare supplier in Suffolk. Expect to see chicken increasingly described as “free-range,” “locally sourced” and “hand-battered.” We’ll also see more American influences in the form of barbecue chicken and buttermilk fried chicken, as well as simpler cooking techniques that let the quality of the chicken speak for itself.

KFC in the U.K. touts that its chicken on the bone comes from only British and Irish chickens, and that chicken goes from the refrigerator to a breading of flour and the chain’s 11 signature herbs and spices and then to the fryer within two minutes. Little Chef touts that its Crispy Chicken Platter features 100% chicken breast fillet.

Other takes on fried chicken include Scream’s Southern-Fried-Style Chicken fillets served with barbecue seasoned chips, Jubo’s Chicken Roll with Korean fried chicken fillet, kimchi slaw and gojuchang mayo, and Clutch’s Love Me Tenders, fried chicken tenders in a peanut and chilli crust.

These dishes also illustrate U.K. consumers’ growing appetite for spicy heat, also evidenced incurries that pack a little more punch than chicken tikka masala; the rising popularity of Mexican cuisine; and the cult-like following of London-based Nando’s, the fast-casual concept specialising in flame-grilled piri-piri chicken. Neutral-flavoured, food-cost-friendly chicken offers an ideal protein platform for showcasing the vibrant flavours and colours of chillis from around the globe.

Migration of street food

Fueled by younger consumers’ demand for authentic and unique offerings, chefs are looking to global street foods for menu inspiration for their brick-and-mortar restaurants. Trendy street-inspired dishes starring on menus include Venezuelan arepas, Chinese jian bing and bao, Taiwanese hirata buns and Italian arancini.

KFC U.K. got in the game last year, introducing a limited-time Streetwise Sweet Chili Wrap featuring a chicken mini-fillet, sweet chili sauce, lettuce and cheese wrapped in a tortilla. And London-based fast-casual chain Leon introduced a Thai Green Chicken Curry box, featuring slow-cooked shredded chicken thigh, roasted aubergine and bamboo shoots served on brown rice.

Looking ahead, ethnic beverages like Mexican aguas frescas and horchata will carve out a wider niche on the menu. Also watch for dynamic flavour mashups from different cuisines and the continued growth of food trucks serving ethnic and fusion street foods.

Telling the sourcing story

Transparency is now top-of-mind for operators who want to keep customers confident in their brand. Use of eco-friendly food packaging, such as recycled or reusable cups or stemware, is increasing along with a growing commitment to ethical food sourcing. Next year will bring a surge in brand campaigns communicating quality and traceability. Watch for package logos denoting animal welfare standards, in-restaurant signs documenting supplier sourcing, and marketing initiatives focusing on the use of British and Irish products.

A good example is the Olive Branch Pub in Clipsham. Its website highlights a story about head chef Sean Hope’s recent lobster fishing trip, to source the freshest lobster for dishes such as grilled lobster Thermidor and a fresh lobster claw and tail meat with lobster tortellini. The site also provides a list of the pub’s suppliers and producers—not just the names of the farms but also the actual farmers with whom the Olive Branch works.

For its part, McDonald’s U.K. invited three young British farmers to get a behind-the-scenes look at operations inside McDonald’s stores as the part of its Progressive Young Farmer Training Programme. The mentoring-focused programme, according to McDonald’s, “aims to help young people looking to work within agriculture kick-start careers in the industry by providing them with the blend of farming and business acumen needed to succeed in today’s modern farming sector.”

The programme has the added benefit of providing a fresh, interesting supply-chain story that McDonald’s—which also announced in April that it was switching to serving 100% Freedom Food pork raised on farms that meet strict animal-welfare standards—can share with consumers.

Similarly, fast-casual burrito specialist Chipotle, whose Food With Integrity philosophy/sourcing model has won acclaim in the U.S., notes on its U.K. website that it uses Freedom Food chicken, Farm Assured beef and free-range pork.

Key Takeaway

The trends driving restaurant growth and innovation are all driven by consumer demands for transparency, high-quality and -flavour, and flexibility. Restaurant operators should examine and pay attention to these trends but follow the lead of their own customers and those they are trying to attract.


Premium Toppings, Pairings Boost Pizza Sales

January 13, 2014

picCustomizable options and combo opportunities are creating exciting new options across the foodservice category.

Pizza remains among one of the most demanded foodservice options anywhere in the country. But it’s also one of the most competitive menu options. Customers are demanding high quality toppings and more exciting varieties in their pizza pies, as well as value-driven add-ons, such as beverages and side dishes that can complete a meal. Moving into 2014, convenience stores can expect increased competition from fast casual restaurants selling customizable pizzas and pizzerias attracting customers with craft beer options.

Chicago-based research firm Mintel International found in a recent study that the pizza restaurant market in the U.S. grew throughout the recession and is continuing to gain momentum. Pizza restaurant sales grew 10% from 2007 to 2011, and a growth of 16.7% is predicted from 2012 to 2017, reaching a projected $44 billion in 2017.

C-stores have ample opportunity to cash in on pizza’s popularity and take advantage of pizza trends coming out of other channels, from bundling beer and pizza to featuring more gourmet toppings and themed pizza options.

Italian Meats Pizza
Wade Mannino, president of Patoka Fast Stops in Patoka, Ill., and Stop and Go Marts in Marine, Ill., has been partnering with Hunt Brothers Pizza since 1996. He is seeing the latest trends in pizza first hand. “Customers are looking for specialty pizzas and add-ons—like bread sticks, chicken wings or calzones—anything they can add on to the pizza order,” he said.

Mannino’s stores witnessed customer excitement from the introduction of Hunt Brothers’ new Italian Meats Pizza (pictured above), which brought a bump in pizza sales with its debut during a test market launch earlier this year. “Anything new here sells,” Mannino said, noting that his stores offer all of the limited time only (LTO) pizzas, such as the Buffalo Chicken pizza, that Hunt Brothers offers to keep customer interest high year round.

The Italian Meats pizza uses Hunt Brothers’ original rising fresh crust, topped with a signature sauce, layered with slices of Italian-style ham, salami, pepperoni and 100% mozzarella cheese.

According to a recent Mintel report (see sidebar), pepperoni and sausage are the two most popular toppings. The Hunt Brothers’ varieties were tested in the Dallas and St. Louis markets (which includes Illinois) from Aug. 18 to Oct. 14, and rolls out nationwide this month. When introducing meat topping pizzas, c-stores often struggle with a low quality perception, but by elevating the quality of the meat and product, c-stores can not only increase price, but can break through that perception and increase sales, said Darren Tristano, executive vice president, for the Chicago-based research firm Technomic Inc.

“Customers like the Italian Meats pizza because it’s new and it’s more of a premium product,” Mannino said.

Just as important, the pizzas are delivered with all the toppings already in place, making it easy for employees to prepare. “All you have to do is add the seasonings and spices they use, and if the customer wants double cheese then you’d add the double cheese to that,” Mannino said.

LTO Excitement
Gier Oil Co., with 37 Eagle Stop Convenience Stores in Missouri, also partners with Hunt Brothers Pizza at a number of its locations.

Bethany Poe, operations supervisor for eight Eagle Stop stores, six of which offer the Hunt Brothers program, said her customers are also looking for variation, and are attracted by limited time offers. “Customers miss the LTOS when they are taken off the menu, but then they’re excited when they bring them back a few months later,” she said.

Poe’s stores also tested the Italian Meats pizza during the pilot period. “Some of our stores are in rural areas, and it’s especially beneficial to try to do something different in these locations to change up the offering for the customers,” she said. “With the Hunt Brothers offering, we have the option of selecting the pizzas we want to offer, but we normally go with what Hunt Brothers recommends to stay competitive with the other stores,” she noted.

Technomic found that when it comes to flavors, themed pizzas continue to trend, especially at the c-store level. “The Buffalo chicken pizza is popular because it has the protein—chicken—but also the Buffalo sauce that’s going to give it some spiciness, which customers love,” Tristano noted.

Hawaiian pizza—with ham and pineapple— is another example of a popular themed pizza. Themed pizzas are gaining traction because customers don’t have to decide what topping to add.  “This is something that can be picked up by c-stores and leveraged as an opportunity to sell more pizza,” Tristano said.

When selecting a variety of themed pizzas it’s important to note that an increasing subset of the Millennial generation identifies as vegan, vegetarian or flexitarian (vegetarian most of the time but sometimes eats meat), making it wise to offer a non-meat pizza option alongside a meat-eaters option to capture customers in this demographic, Tristano noted.

Trending Now
Tristano pointed to two overarching trends set to impact pizza in 2014: the pizza pub concept of pairing pizza and alcohol together, and customizable pizza pies, made exactly how the customer desires.

Better fast casual pizza concepts are a key trend now emerging—not only on a regional basis—but soon to hit the national landscape as they gain momentum and capital for growth.

“In California, Blaze Pizza and Pieology are examples of concepts doing something similar to what Chipotle does. You pick a pizza they have or customize it as you interact with the person preparing the pizza,” Tristano said. “What these brands are doing is taking advantage of customization and speed, while leveraging quality and premium ingredients and flavors, which are all on target with what consumers are looking for from the pizza segment.”

Better With Beer
Craft beer is trending with both men and women—and especially with Millennial consumers. Pizzerias are tapping into this demand, showcasing an array of craft, domestic and premium beers alongside their pizza offerings.

“To some extent you have this already in a c-store, most of which sell beer,” Tristano said. “A lot of times a pizzeria isn’t going to have the same beer selection as you can find at a c-store, making this an opportunity for c-store retailers.” 

Technomic consumer research shows customers continue to demand premium high quality toppings and convenience, and proximity and convenient location weigh as key factors in customer intent to purchase.

“That’s something c-stores have an incredible advantage with, not just because of the number of locations, but the ease of going in and out, parking and the ability to pick up other items, such as pop, candy snacks and desserts,” Tristano said.

Convenience stores that currently serve pizza can boost sales by making it easy for customers to select the types of items usually purchased with pizza. That could be chicken wings, but more likely it’s desserts, snacks and beverages—including beer—that can be offered as a bundle deal or simply merchandised nearby.

Trendiest Toppings
Chicago-based research firm Mintel International, recently polled consumers to discover the hottest pizza toppings. Pepperoni took the lead (65%), followed by sausage (54%) and mushroom (51%). Other winners included extra cheese (45%), onion (39%), green pepper (37%), olive (34%), bacon (31%), ham (29%) and pineapple (21%).
Men are much more likely than women to order bacon-topped pies (38% of men versus 24% of women), sausage (60% to 48%), pepperoni (71% to 60%), and ham pizzas (34% to 25%).
Age also impacts topping preferences. Those 18-24 prefer bacon-topped pizza (40% versus 31% on average), extra cheese (54% to 45%), ham (36% to 29%), and pineapple (26% to 21%).


Custom-Made Burgers Reach McDonald’s

December 4, 2013

McDonald’s, a company that pioneered uniform, assembly-line hamburgers, is now experimenting with a somewhat antithetical concept: Custom-made burgers. The chain is currently testing them in Laguna Niguel, Calif., where diners make selections on an iPad; the burgers cost more than Big Macs, are grilled-to-order, and come with a choice of more than 20 toppings and sauces. The beef patty isn’t cooked until you order, so the sandwich requires extra time to prepare. It’s a head-scratching departure from the burger-factory model that has allowed the chain to serve food quickly, inexpensively, and profitably. “It goes against what they stand for: speed, convenience, price, and value,” says Darren Tristano, an executive vice president at food industry consultancy Technomic.

On the other hand, McDonald’s isn’t exactly killing it lately. Same-store sales have slowed in the U.S. (They were up only 0.7 percent last quarter and slowed to 0.2 percent in October.) That’s not all: The chain has been plagued by complaints of slow service and inaccurate order responses. In response, McDonald’s has tried to pare its sprawling menu and will redesign its drive-thrus next year to shorten waiting times.

A widespread introduction of custom-made burgers wouldn’t help these issues. What it might do, though, is help the chain stay relevant as consumers—twentysomethings in particular—express interest in customization, Tristano says.

McDonald’s spokeswoman Lisa McComb said in an e-mail that it’s too early to comment on the custom-made burgers, although the test will offer valuable consumer insights. “With these tests, we will have an opportunity to hear directly from our customers in real-time on what they expect from McDonald’s in terms of the overall restaurant experience and their ability to further customize their menu choices,” she said. Even if McDonald’s doesn’t go down the Chipotle road, letting customers say what they want on their burgers—”Hey, everyone really likes burgers with guacamole!”—could shape menus in the future.

While the option to customize could help McDonald’s look less like a mechanized food factory, Tristano says most customers would probably continue ordering from the regular menu. “It’s more of a promotion, and marketing, and trying to change its brand image,” he says. Even as McDonald’s expands its premium offerings, its bigger promise to customers is still speed and price.


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.


Burger King Debuts Low-Calorie French Fries

October 11, 2013

n-BURGER-largeLooking for an edge against its quick-serve rivals, Burger King is introducing healthier french fries, dubbed “Satisfries,” today at all of its 7,200 U.S. outlets.

Satisfries contain 40 percent less fat and 30 percent fewer calories than traditional fries, and 25 percent less fat and 20 percent fewer calories than standard Burger King fries, which remain on the menu. Satisfries will sell for $1.79–$1.99 a serving, compared with the $1.59 price of basic fries.

Eric Hirschhorn, chief marketing officer, North America, at Miami-based Burger King, says fries are the one quick-serve category that hasn’t seen “breakthrough innovation.”

“We’re not replacing our current french fries. We’re just giving [customers] a new option,” Hirschhorn says. “We’re giving people an option to make small changes.”

Hirschhorn says consumers’ evolving tastes and dietary choices encouraged Burger King to develop Satisfries. He adds that french fry consumption is declining, even though about half of the 100 million consumers who stop at a Burger King each month order fries.

“People want to make small changes that make a big impact, and don’t want to sacrifice the foods they love,” Hirschhorn says.

Keri Gans, Burger King spokeswoman, registered dietician, and author of The Small Change Diet, said during a September 19 product launch in New York City that one in eight men and one in 10 women in the U.S. dine on french fries daily, and that fries constitute 1.5 percent of the caloric intake of the average American meal. Satisfries contain the same ingredients as the classic fries, just in smaller quantities, she added.

The healthier fries will initially be a limited-time offering. Hirschhorn says the public’s reaction will determine how long the item stays on the menu. Its debut will be supported by a full marketing campaign.

Burger King could use a winner. Competition from McDonald’s and Wendy’s value menus, as well as from a growing crop of fast-casual concepts, has slowed the company’s growth. In fact, same-stores sales at Burger King dipped 3 percent in the U.S. and Canada during the first quarter of 2013 compared with the previous year.

“Economic factors are influencing low-income groups’ ability to dine out with greater frequency, making it more difficult for fast-food chains to increase traffic and sales,” says Darren Tristano, EVP at Technomic, a Chicago-based market research firm.

To keep pace with McDonald’s and Wendy’s, Tristano says, Burger King must introduce new products to keep the cash registers ringing. In the last year, it has added a barbecue sandwich, sweet potato fries, smoothies, and lemonades, helping it compete against industry leaders, he adds.


Olive Garden Woos Millennials with Smaller Portions

October 10, 2013

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

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

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

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

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

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

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

Olive Garden has been struggling in the aftermath of the downturn as Americans eat out less. Efforts to lure cash- strapped diners with such deals as three-course dinners and $6.95 lunches haven’t helped much because Brinker International Inc.’s Chili’s and Applebee’s, owned by DineEquity Inc., are also advertising cheap eats.

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

Same-store sales at Olive Garden, which has about 820 locations, have declined in five of the last eight quarters. Darden, which also owns Red Lobster and LongHorn Steakhouse, recently announced it is “significantly” cutting Olive Garden store openings to focus on attracting new customers.

“It’s wise to slow down that growth a little bit,” said Stephen Anderson, an analyst at Miller Tabak & Co. in New York. “They’re getting very close to that saturation point in the U.S.,” which would be between 900 and 1,000 stores, he said.

The company is reworking the recipe for its crispy chickpeas after the seasoning and breading didn’t resonate with diners in testing. It also increased the size of its grilled chicken tapas from one to two skewers of meat after customers said the portion was too small to share.

“If you only have one, people are fighting,” said Jay Spenchian, executive vice president of marketing.

The small plates, priced at $4, are “expanding the way people think about Olive Garden,” he said. “The reaction has been excellent.”

While some customers grab a quick glass of wine and a small plate, others eat them as appetizers to a larger meal or to sample something they’ve never tasted before, he said.

Olive Garden has plenty of competition in the race to win over millennials. Applebee’s has introduced late-night specials such as half-price appetizers and girls’ night out to attract younger customers. Its Club Bee’s locations stay open until 2 a.m. and sell sangria and bahama mamas to the party crowd.

Outback Steakhouse, owned by Bloomin’ Brands Inc., recently sold a $10.99 steak-tasting option with two or three pieces of beef with different sauces including brandy peppercorn and Bearnaise. Cheesecake Factory Inc. has small plates including chicken samosas and fried zucchini.

More millennials are dropping by the Olive Garden in Irving, Texas, to sample the small plates, Alex Aragon, the restaurant’s general manager, said in an interview.

The tapas are “closing the gap between lunch and dinner,” said Aragon, who noted that it’s easier for the younger crowd to text and check their phones while munching hand-held bites.


Family Restaurants a Casualty to Casual

October 8, 2013

Gene_Kasapis_Sr_and_Gene_Jr.jpg&MaxW=620&v=201310071326When Gene Kasapis Sr. opened the first Ram’s Horn restaurant in 1967 in Greektown, family dining was one of the largest segments of the restaurant industry.

Since reaching an apex six years ago, sales at Southfield-based Kasapis Bros. Inc. have been declining, falling from $44.8 million in 2007 to $35.6 million in 2011.

But Kasapis Sr. and his son Gene Kasapis Jr. are hoping a modern restaurant design and an updated menu will become prototypes for change as the once-thriving restaurant chain looks to regain its popularity.

Like many family restaurants, Ram’s Horn has battled increased competition from fast-casual chains, burger joints and sandwich shops — even family-friendly taverns.

The elder Kasapis said sales are slowly getting better, but he also attributed local economic conditions as an added challenge.

“Are we picking up? Yeah. But are we anywhere near we were in 2007? No,” Kasapis said. “Every recession, we come back stronger than before. In our 50-year history, this is the longest recession.”

Kasapis said he has a simple solution for the declining sales: “More people need to get back to work.”

There are 19 Ram’s Horn restaurants, seven of which are corporately owned.

While Kasapis Sr. said he has no plans to begin selling alcohol at any of his Ram’s Horn locations, the chain is fighting back with new menu items and a new décor for its locations in Livonia and Dearborn.

The new layout features open ceilings, new carpet, new lighting and flat-screen TVs.

Kasapis said the new design costs between $300,000 and $550,000 per location, adding that the company will retrofit existing restaurants with the new décor as needed but is in no hurry to do so.

“We are trying to make our restaurants more appealing to younger people,” Kasapis Jr. said. “We have to change with the times.”

Conversely, Joe Vicari, president and CEO of Warren-based Joe Vicari Restaurant Group, which includes four Country Inn restaurants, said he saw a 10 percent spike in sales during the height of the recession at his Country Inn restaurants, but it was short-lived.

“That has since settled,” Vicari said. “Sales from this year over last year have been flat.”

Vicari said average weekly sales at the family restaurants range from $30,000 to $35,000, about the same as when he opened his first Country Inn in 1987.

“When you take into consideration increased operating costs, we should be doing $40,000 or more in sales per week,” he said.

Vicari was once a Ram’s Horn franchisee and owned two restaurants, but said he ended his relationship with the brand in 1997.

“It was good to get involved with Ram’s Horn when they were at their peak,” he said. “I learned a lot about the restaurant business from them, but as I got older and wiser, I wanted to go out on my own.”

Darren Tristano, executive vice president of Chicago-based food industry research firm Technomic Inc., says there is more to deflated family restaurant sales than a stubborn economy.

In fact, Tristano said, sales are declining across the board in the family-style restaurant segment of the industry.

The main culprit, he said, is the emergence of fast-casual restaurants and changing consumer tastes.

“Family dining has been flat for a decade,” Tristano said. “Casual dining, and fast casual dining, hit a growth spurt in 2005 and that momentum has continued.”

Tristano said the fast-casual segment will generate about $35 billion this year while family-style dining will generate about $40 billion.

But Tristano said those numbers can be deceiving.

“Fast casual has been a small segment that is quickly growing, while family-style dining has, on a nominal basis, been flat,” Tristano said. “In fact, when adjusted for inflation, family dining has been down.”

Tristano said family dining peaked in the 1990s, before fast-casual restaurants like St. Louis-based Panera Bread Co. and Denver-based Chipotle Mexican Grill Inc. entered the marketplace, which proved more attractive to younger diners.

“What family dining is facing is, you have older generations continuing to age and younger ones that feel too young to go to them,” Tristano said. “There has to be a shift in the category to get relevant to younger consumers. So far, that has not happened.”

Jason Nies, owner of The Hills City Grille, grew up around the Ram’s Horn brand; his father was a franchisee.

Nies said he saw the decline in family dining and decided to stay away from the segment when he began planning the first Hills City Grille, in Rochester Hills.

“I saw that trend going down 10 years ago,” Nies said. “The clientele was getting older and moving on, so I felt like it was a segment that was on the decline versus one on the rise.”

Nies opened the first Hills City Grille in 2007 as more of a tavern than a family restaurant.

But when he opened a second location, in a former Ram’s Horn in Troy, he did so with family diners in mind.

Troy’s Hills City Grille is a hybrid; it serves breakfast, lunch and dinner but each part of the day is geared toward a different segment of the population.

Nies said breakfast attracts older guests, while lunch fills up with stay-at-home moms and business professionals.

Nies said the strongest part of the day is dinner, when young parents with children make up more than 60 percent of his customer base.

After 10 p.m., Hills City Grille turns into a bar complete with live music and craft drink specials.

“Where are families going? They are going to the taverns and places with similar atmospheres. Places that serve beer and wine with dinner,” Nies said.

Nies said he expects sales at the restaurant to reach $1.5 million this year.

“It’s pretty unique to be able to hit all of the dayparts effectively and have a venue that permits that,” he said.


Industry Evolution

October 1, 2013

U.S. restaurant chains of all stripes are taking on fast-casual attributes to evolve their concepts and remain relevant to consumers.

Change is one of the few constants in the restaurant industry. Whether restaurants are adding another daypart, updating the décor or introducing new prototypes, the best foodservice operators understand that, to succeed in the business, they should be aware of the unpredictability of the industry and be open to evolving.

In the past few years, we’ve seen many U.S. concepts make some key changes to keep up with the restaurant industry’s best performer: the fast-casual segment. Thanks to customisable and craveable options, premium ingredients and quick service, growth of the fast-casual segment is outpacing that of the quick-service and full-service sectors. As reported in Technomic’s Top 500 Chain Restaurant Report, turnover for the restaurant industry as a whole from 2011 to 2012 increased 5.2%, including a 5.8% rise in limited-service turnover and a 4.5% increase in full-service turnover. In comparison, turnover for the fast-casual segment increased 13.0% from 2011 to 2012, and that growth is expected to continue.

To compete with fast-casual restaurants, quick-service and casual-dining operators are branching out of their comfort zones to find different ways to reach new consumers as well as retain their customer base. Full-service chains such as Applebee’s and Red Lobster have introduced fast-casual elements to attract on-the-go consumers, and Burger King, which receives most of its business from drive-thru and carryout orders, added delivery service to increase its convenience factor. Other chains like Auntie Anne’s and Chick-fil-A are using food trucks to generate brand awareness by bringing their food to festivals, sporting events and community gatherings.

It’s not just existing chains that understand the need to evolve. The latest crop of limited-service pizza concepts, which includes Pie Five Pizza Co. and MOD Pizza, functions more like a Chipotle than a Pizza Hut. Patrons create their pizzas by making their way through an assembly line-style queue, choosing a crust, sauce, cheese and toppings as they go. They then receive their pizzas in minutes, sometimes by the time they reach the cash register. This style of ordering allows diners to be much more involved in the pizza-making process than at a traditional limited-service pizza concept, where patrons usually don’t watch the preparation of their pizzas. The customisability and quick service are some of the reasons why Technomic predicts made-to-order fast-casual pizza concepts are the next “better burger.”

Below are some examples of operators thinking outside of the box in order to keep their concept relevant in the ever-changing restaurant industry.

Full Service to Limited Service

In the U.S., the limited-service sector is growing at a faster rate than the full-service segment, leading some of the country’s top full-service chains to experiment with limited-service prototypes. In August, midscale chain Bob Evans launched Bob Evans Express, a new counter-service prototype for nontraditional venues such as corporate offices, universities and shopping malls. The new format, which offers a limited menu of hot foods along with packaged items, was designed to expose patrons who otherwise wouldn’t have the time to visit a sit-down Bob Evans restaurant to the chain’s signature homestyle breakfast and lunch offerings.

Earlier this year, U.S. casual-dining seafood chain Red Lobster began testing a new limited-service offering, Seaside Express, at two of its Florida locations. Patrons visiting the restaurants can choose either the standard full-service Red Lobster dining experience or order from the Seaside Express counter, which offers a menu of mains such as burgers, sandwiches and flatbreads, priced between $6.99 and $8.99 (approximately £4.50 and £5.79). After ordering, customers seat themselves and a server brings out their food. Because patrons pay for their meals at the counter, the concept is meant to appeal to diners who are pressed for time and may not like waiting for a cheque to be brought to the table. It also appeals to those looking for a discounted Red Lobster experience—the Seaside Express menu features lower-priced mains compared to Red Lobster’s standard menu.

Also earlier this year, Applebee’s expanded its limited-service model, Applebee’s Express Lunch, to 23 company-owned locations in the U.S. The format, first launched in Kansas City in July 2012, is similar to Seaside Express, in that patrons choose to either sit down and be waited on or order their meal from the Express counter, then seat themselves. The menu features pick-two combos starting at $6.99.

Applebee’s launched a fast-casual offering, Applebee’s Lunch Express. Patrons order at a counter then seat themselves, and a server brings their food to their table.

Applebee’s launched a fast-casual offering, Applebee’s Lunch Express. Patrons order at a counter then seat themselves, and a server brings their food to their table.

The Un-Delivered Pizza

Today’s trendiest limited-service pizza concepts don’t focus on delivery—in fact, most don’t even offer it. Fast-casual pizza concepts such as Uncle Maddio’s Pizza Joint and Blaze Fast Fire’d Pizza are revolutionizing the limited-service pizza industry by specializing in create-your-own personal pizzas. Thanks to high-tech pizza ovens that cook pies at incredibly high temperatures, patrons no longer have to call ahead to place a takeaway order or sit at their house waiting for a pizza to be delivered. Now, customers can simply line up at a counter, choose their crust, sauce and premium toppings, and either have their pizzas ready for them by the time they reach the cash register or brought to their table by a server in minutes.

One of the largest points of differentiation is that these fast-casual pizza concepts focus on dine-in service. Instead of operating out of small, minimally decorated counter units, these restaurants feature a hip, chic décor and plenty of seating to attract dine-in consumers. Most also menu adult beverages, a characteristic that attracts value-seeking consumers on a dinner date or group outing who may not have the funds to visit a full-service restaurant and provide a tip.

Décor at Uncle Maddio’s Pizza Joint units (top) includes abstract wall dividers and a word wall, dominated by the phrase “Served with love.” Pie Five Pizza Co. units feature science-themed murals, such as a periodic table that replaces the elements with Pie Five pizza ingredients.

Décor at Uncle Maddio’s Pizza Joint units (top) includes abstract wall dividers and a word wall, dominated by the phrase “Served with love.” Pie Five Pizza Co. units feature science-themed murals, such as a periodic table that replaces the elements with Pie Five pizza ingredients.

These new concepts haven’t gone unnoticed by the quick-service pizza sector. Pizza Inn, a U.S. pizza chain that consists mostly of buffet and counter-service restaurants, launched its own fast-casual made-to-order pizza concept, Pie Five Pizza Co., in 2011, which has since grown to 14 locations. Sbarro, another U.S. quick-service pizza chain, is set to debut a fast-casual pizza concept, Pizza Cucinova, later this year.

Not all pizza chains are launching fast-casual concepts; some are instead choosing to incorporate fast-casual elements into their existing concept. Within the past few years, Domino’s Pizza has converted dozens of restaurants into its Pizza Theater prototype. The model still functions like a typical Domino’s Pizza unit but features a comfortable dining room and an open kitchen for patrons to watch the preparation of their pizzas. Other new elements to the Pizza Theater prototype include ordering kiosks, electronic order tracking, and chalkboards where customers can doodle and leave feedback while waiting for their order.

Quick-Service Delivery

In contrast, some quick-service concepts are updating their concepts by adding delivery services. In 2012, Burger King launched delivery in the U.S. at select locations in Washington, DC, and has since expanded the service to select markets in 14 states, from California to Illinois to New York. The chain boasts that hot food is delivered hot and cold food is delivered cold, thanks to new innovative packaging. The service is designed for large orders (a minimum order amount of $10 is required), so in addition to Burger King’s standard offerings, the delivery menu also features several large combo meals, like a four-sandwich bundle with fries and an option with 10 cheeseburgers and 20 chicken nuggets.

A loyalty program specifically for customers using the delivery service has been implemented to bring in more users. Those who use the service and are enrolled in the loyalty program receive a free sandwich with every fourth order.

Burger King launched delivery service in select markets in the U.S. The delivery menu features Burger King’s traditional offerings along with large combo meals.

Burger King launched delivery service in select markets in the U.S. The delivery menu features Burger King’s traditional offerings along with large combo meals.

It will be interesting to see if the service succeeds and if other concepts will be inspired to launch delivery. Burger King says customers in the U.S. have embraced the new option, and it continues to expand delivery to other U.S. markets, most recently to Washington State and Minnesota. But so far, it appears only one other major U.S. quick-service chain, White Castle, has followed suit. The popular burger chain has been testing delivery at a restaurant in Columbus, OH, since earlier this year and recently added delivery to a second site in Columbus, but it hasn’t discussed any plans to expand the service nationwide.

Key Takeaways

While the fast-casual segment is booming in the U.S., it is relatively new in the U.K.—only seven of Technomic’s Leading 100 U.K. Chain Restaurants are classified as fast casual. However, all of those chains posted turnover increases in 2012, and three of them–Patisserie Valerie, PAUL and Le Pain Quotidien–reported double-digit turnover growth. As a group, they increased sales by 8.5% and grew their unit count by 6.6%.

With these numbers, along with the recent entry of U.S. fast-casual concepts like Shake Shack and Five Guys Burgers and Fries in the U.K., we can expect the U.K. fast-casual sector to continue growing. Thus, it’s likely we’ll see top quick-service and casual-dining chains in the U.K. evolve their concepts to compete with the growing fast-casual segment.


Why More Extreme Foods Are Creeping Onto Menus

September 26, 2013

comp_badfood17__01__630x420For Americans who haven’t been to a state fair recently or who are unacquainted with Paula Deen’s style of Southern comfort food, this may come as a surprise: Some people make sandwiches with doughnuts. Now a doughnut sandwich is available for a lucky (or brave) few at none other than Dunkin’ Donuts (DNKN). The chain is testing a Glazed Donut Breakfast Sandwich—there’s a pepper fried egg and cherrywood-smoked bacon inside—in about a dozen stores in the Boston area.

“We’ve seen our customers buy doughnuts in the summertime to bring to the family cookout and put burgers on them,” says Dunkin’ executive chef Stan Frankenthaler, who runs the chain’s test kitchen. “We make sandwiches for ourselves on doughnuts.” Trying out the salty-sweet treat with customers seemed natural. Reactions to the doughnut sandwich, Frankenthaler says, have ranged from, “Oh my God, why?” to “Oh my God, why not?”

The Glazed Donut Breakfast Sandwich is one of many curious new items offered by restaurant chains, often for a limited time, to attract that adventure-seeking, fast-food-eating creature known as the young American male. Food-industry researcher Technomic reports that 34 percent of young men eat fast food several times a week; only 23 percent of young women do. So many restaurant menus are crafted with the Y chromosome in mind. Taco Bell’s Doritos Locos Tacos? Dude food. Crazy Cheesy Crust Pizza at Pizza Hut? Dude food. The Bacon Cheddar Stuffed Burger at Burger King (BKW)? Ditto. And who do you think is chugging Johnny Rockets’ Big Apple Shake? (That’s the one with an entire slice of apple pie blended into a milkshake.) “The younger generation is looking for fun things to try, interesting things to talk about,” says Technomic Executive Vice President Darren Tristano.Marketers have no shortage of ideas to test. It’s hard to rule anything out.”

Wait—aren’t Americans supposed to be eating healthier foods? Yes, and no. “At home, consumers are more careful about what they eat,” says Bonnie Riggs, a restaurant industry analyst at research firm NPD Group. “At restaurants, they are more indulgent.” In a recent survey, Riggs says, only 8 percent of consumers said they look for healthy options when they go out to eat. “And that’s not necessarily what they do,” she says. “That’s what they say they are looking for.”

Most fast-food chains have added a dish or two that could conceivably qualify as healthy and several that definitely wouldn’t. In March, Burger King began offering burgers stuffed with bacon and cheddar and topped with onion rings, as well as tater tots filled with bacon and onions. It also started selling turkey and veggie burgers. The bacon cheeseburger has 650 calories and 39 grams of fat; the veggie burger, served with mayonnaise, has 410 calories and 16 grams.

Among the most successful in the more-is-more category of food is the Doritos Locos Tacos, which Yum! Brands’ (YUM) Taco Bell introduced a year ago. It has sold 375 million servings of the tacos, which feature the familiar flavors of the popular tortilla chip brand. “If those were around when I was in college, I would have eaten them all the time,” says Sam Oches, the 26-year-old editor of the trade magazine QSR (which stands for quick service restaurants). “They are for a very specific demographic.” The tacos are made with regular Taco Bell fillings and a specially created Doritos shell. Taco Bell started with a Nacho Cheese Taco; in March it brought out a Cool Ranch version. Now PepsiCo (PEP), which owns Doritos, is selling a Doritos Locos Taco-flavored chip for a short time this spring. Dude!

Pizza Hut, another Yum! Brands unit, has found a way to deliver even more cheese to customers. The chain’s new pizza has 16 open-face pockets along the crust brimming with its Italian five-cheese blend. Before its introduction, the pizza was internally known as the Stuffed Italiano, which didn’t sound extreme, just strange. By early April, when it was launched for a limited time, it had become the Crazy Cheesy Crust Pizza. “You’ve got to somehow stimulate the imagination of the consumer if they are going to be at all interested in a product,” says Bruce Perkin, Pizza Hut’s chief research and development officer. Doug Terfehr, a spokesman for the chain, adds, “Young males like to try new things, and this product does a lot of what they like.” A slice has 340 calories; one-third of them come from fat.

For now, Pizza Hut is waiting to see how well the pies sell before deciding whether to make other fillings. One possibility: bacon, a staple of extreme eating that has even made it into desserts such as the Bacon Sundae offered by Burger King last summer. Beyond that, “never say never. We’re constantly looking at form, function, flavor, and ingredients,” Perkin says. “Nothing’s off the table when we’re experimenting and playing.”

It’s not only fast-food chains that are going to extremes. The Cheesecake Factory’s (CAKE) Bistro Shrimp Pasta has an astonishing 3,120 calories and 89 grams of saturated fat. IHOP’s Country Fried Steak & Eggs—served with deep-fried hash brown potatoes and two buttermilk pancakes—has 1,760 calories. The Center for Science in the Public Interest, which calculated these “nutritional” values, notes that this is like eating five McDonald’s (MCD) Egg McMuffins sprinkled with 10 packets of sugar.

Most of the dishes aimed at the Man v. Food-watching, Guy Fieri-following crowd are available for a limited time. That’s the best way to generate interest. “If the McRib was available year-round, no one would care,” says Oches at QSR. There is an added benefit to the limited-time offer: Restaurants are not required to disclose the calorie counts of those items, says NPD’s Riggs.

Although chef Frankenthaler says Dunkin’ Donuts is “very pleased with the way things are going” with its doughnut sandwich, there are no plans yet for a nationwide launch. “It’s fun, playful, but I would not think Dunkin’ Donuts is going to make a huge push toward more sandwiches with glazed doughnuts,” Oches says. As a newly health-conscious Deen joked on National Public Radio earlier this year, for some dishes, “it’s only one serving per lifetime.”

The bottom line: America’s $161 billion fast-food industry has embraced rich, fatty, gooey extreme foods to grab diners’ attention.


Follow

Get every new post delivered to your Inbox.

Join 119 other followers