Juice Craze May Be Next to Tank, Analyst Says

July 22, 2014

As the demise of Crumbs Bake Shop, and its cupcake kingdom, roils the food industry, one analyst is already predicting the next hot trend that is likely to cool off: Juices.

That’s the word from Darren Tristano, executive vice president of restaurant research company Technomic.

In a blog this week, food guru Tristano wrote that juice concepts, while “all the rage today,” are at risk of over-saturation and too much competition. The Westfield Garden State Plaza in Paramus is now home to Jamba Juice and Freshu Grill and Juice Bar.

“With health and wellness getting more play from affluent and millennial consumers, it’s clear the cold-pressed juice concepts will be pushing hard to expand,” Tristano wrote.

“Even though these concepts have price points over $10 in major markets like Los Angeles and New York, it’s clear that Hollywood-starlet impact on our country with juice cleanses is evident. Juice specialists will likely expand quickly as the fad continues but the trend will settle into concepts that represent reasonable prices for the mainstream consumer.”

He predicted that big brands such as Starbucks’ Evolution Juice and Juice It Up will have an edge in this competition.

“But ultimately, the ‘craze’ will settle down and many restaurants will likely see declines in sales that make it difficult to continue their operations,” Tristano wrote.


Crumbs Bakery Chain Closes Up Shop

July 21, 2014

When Crumbs, the New York City-based chain that built its business around cupcakes, shuttered several dozen of its remaining locations on Monday, it seemed like an abrupt ending for a company that opened a decade ago to ride the wave of popularity of the sugary treat sparked by the TV series Sex and The City.

But Crumbs’ rise and fall isn’t surprising when considering the company’s dependence on a fad. In fact, it’s the latest cautionary tale for one-item restaurants and other chains that devote their entire menus to variations of a single product.

- Krispy Kreme, for instance, expanded rapidly in large part on the cult-like following of its doughnuts. But sales started declining and the company ended up closing locations. Last year, restaurant industry researcher Technomic said Krispy Kreme had 249 locations, down from 338 a decade ago. The chain has broadened its menu more recently.

- A similar fate befell Mrs. Fields, which is known for its cookies. The chain has suffered in part because of the ubiquity of places that sell cookies, and it was down to 230 stores last year, from 438 a decade ago.

- TCBY had 355 stores last year, down from 1,413 a decade ago. Part of the chain’s problem is the competition, given the proliferation of frozen yogurt places.

Companies that only offer one item can fall victim to a number of risks. For one, trendy products tend to attract competition from big and small players that want to jump on the bandwagon. For instance, Starbucks and Cold Stone Creamery have been trying to capitalize on the cupcake trend with cake pops and ice cream cupcakes, respectively.

Being beholden to a single item also makes companies more susceptible to customers’ whims and changing tastes. There’s always a new fad. Frozen yogurt. Chopped salads. Freshly squeezed juices. Entrepreneurs may be eager to open stores selling these products, but there’s always the danger that fickle customers will move on to the next thing.

“A cupcake shop today can’t survive on just cupcakes,” said Darren Tristano, a Technomic analyst.

To combat the risks, many chains diversify their menus. And several have prospered by moving beyond their flagship products.

Dunkin’ Donuts, for instance, has been pushing aggressively into specialty drinks and sandwiches, with a focus on boosting sales after its morning rush hour. And Starbucks has introduced a range of new foods and drinks in its cafes, including premium bottled juices and salad boxes. The coffee chain even plans to expand wine and beer offering in evenings to as many as 1,000 locations over the next several years.

Magnolia, another popular New York City cupcake shop, is credited for sparking the cupcake craze after it was featured in Sex and the City.

The chain, which opened in 1996, has endured while many of the cupcake shops that opened up in its wake – including Crumbs – focused on just cupcakes. That’s in part because Magnolia, which now has 7 locations, offers a variety of desserts, including cakes, pies, cookies, brownies and banana pudding.

Sara Gramling, Magnolia’s spokeswoman, said the company is learning about the dangers of focusing too heavily on one product, as well as expanding too quickly.

“We’ll be mindful of those lessons,” she said.

Still, some chains manage to persevere by carving out a niche where there aren’t many competitors; Auntie Anne’s and Cinnabon have expanded locations over the years.

As for Crumbs, the company noted in a statement late Monday that it was evaluating its “limited remaining options.” That will include a Chapter 7 bankruptcy filing.


7-Eleven Launches New Doritos Loaded

July 18, 2014

By 10 a.m. Wednesday, the day of its launch, 7-Eleven’s brand new Doritos Loaded product had at least one Crystal Lake fan.

Karen Black-Vetter went into 7-Eleven, 1024 McHenry Ave., Crystal Lake, intending to leave with the usual snacks. But then, she saw the bold red signs advertising Doritos Loaded.

At $1.99 and 360 calories for a pack of four, Doritos Loaded are warm triangular pan-fried snacks, filled with melted cheese and encrusted with the signature nacho cheese flavor.

“We read that sign, and I said, ‘We have to try that,’” Black-Vetter said, sitting in the car with out-of-town friend Leslie Phiscator.

7-Eleven Inc. on Tuesday announced the launch of the new product, which can be found exclusively at 5,500 7-Eleven stores nationwide as of Wednesday, corporate spokeswoman Margaret Chabris said.

The snack food comes hand-in-hand with a new tropical Mountain Dew flavor called Solar Flare.

While its appeal is meant to hit all “on-the-go folks,” Chabris said Doritos Loaded is expected to be especially popular among younger Americans who prefer snacking to full meals – specifically, millennials.

“We have found that more and more people are not sitting down for three square meals a day, but they want something filling and affordable,” she said, adding the information stems from corporate studies. “It seems like, particularly, millennials snack throughout the day, so this is a perfect snack item for them.”

According to a 2012 report from the NDP Group, a market research company that tracks consumer trends, more than half of all Americans – 53 percent – snack two to three times a day.

Darren Tristano, executive vice president of food industry consulting company Technomics Inc., said annual studies done by Technomics also have found today’s America to be more snack-inclined than years prior.

“The snacking trend we’ve seen … is consumers are grazing more now, which means they’re having less to eat with greater frequency,” Tristano said. “Instead of three square meals, we’ve started to see more late-night snacking … and snacking late-morning and mid-afternoon.”

As far as snacks go, however, a dietitian at Centegra Hospital – Woodstock and McHenry said 7-Eleven’s newest product probably isn’t the best choice as it’s heavy in sodium, containing 1,070 mg.

“Anything that is providing half a day’s worth of sodium and it’s just a snack,” Susannah Baldock said, “that would be the first sign to look at something healthier.”

Those who indulge in Doritos Loaded could be swayed simply because of brand familiarity, though.

Tristano said food trends are pointing toward the use of big-name brands to increase revenue opportunities.

“One of the trends we’ve seen has been the opportunity for branded food services to take very leverageable brands like Doritos and other snacks, and build them into food service products in restaurants, and now we’re seeing it more out of the convenience stores.”

Based on previous new-product rollouts, however, Tristano said the buzz will likely quiet down in time.

“Most products that 7-Eleven introduces tend to be on a short-term basis,” he explained. “They’ll probably see how it registers with customers.”

At the Crystal Lake store, owner and franchisee Katen Patel was optimistic about the future of Doritos Loaded.

“I think it targets our target customer; I think kids are going to love it,” Patel said, sporting an official Doritos Loaded T-shirt. “If it does what Doritos does for our chips brand, I think it’ll do really, really well.”

It only took one bite each before Black-Vetter and her friend, Phiscator, were nodding in approval to one another in the car.

“Oh yeah,” Black-Vetter said. “I’ll get this again.”


How Does the Cupcake CRUMB-le

July 9, 2014

pictureWas anyone surprised by the recent demise of the Crumbs Bake Shop? For those who read the Wall Street Journal article about the gourmet-cupcake crash in April 2013, or those that had invested in the publicly traded company, it should not have been unexpected.

Last April, it was clear that the “cupcake fad” was crumbling right at the time Crumbs Bake Shop was expanding locations and working hard to be the category leader in the high-growth cupcake snack segment.

So what went wrong?

With Crumbs following in the footsteps of high-flying brands like Mrs. Fields, TCBY, Cold Stone Creamery and Krispy Kreme, consumers have proven that they are very fickle about where they shop for indulgence. As more independent and regional chains of cupcakeries grew nationally, the strong demand and growth provided short-term evidence that the trend was hot and would continue. But supermarkets jumped in with significantly lower price points, and consumers began baking cupcakes at home for even less. Kids’ lemonade stands across America began offering cupcakes for 50 cents, and the obsession with this traditional classic fell flat.

Brands that rely on a narrowly focused product will have greater risk. Although In-N-Out Burger has fewer than 10 items including burgers, fries, soda and shakes, it continues to do well by expanding slowly and cautiously and staying in tune with its customer. Overall, a bakery positioning with a broader offering and strong beverage platform could have strengthened the Crumbs business model with a bigger play at lunch to complement their breakfast and snacking occasions.

How have other brands fared with more narrowly focused offerings?

Mrs. Fields brought fresh baked cookies to America and by 1993 had nearly 600 stores open in malls around the country. At a time when malls were very popular, many consumers couldn’t get enough of those chocolate chip cookies. Today, there are less than 230 locations open and some have paired up with frozen yogurt brand TCBY to provide more variety in the co-branded location.

TCBY was the original leader in fro-yo until gourmet ice cream stole the show, forcing many stores to close. TCBY peaked in 1997 with more than 2,800 locations in the U.S. Americans’ willingness to pay more for what they considered “better ice cream” was evident as many brands emerged in the premium ice cream category including Ben & Jerry’s, Cold Stone Creamery, Marble Slab and Maggie Moo’s.

Krispy Kreme’s exceptionally craveable glazed donuts became President Clinton’s favorite and soon worked their way into regular consumption across the country. Peaking in 2004 with nearly 400 units, the donut company had sales in the U.S. of over $1 billion. Then came Atkins and low-carb diet trend. Krispy Kreme’s narrow focus on donuts paired with aggressive expansion put it at risk and caused it to shutter nearly half its restaurants by 2010. Today, Krispy Kreme has continued to expand globally and has started to open new stores in the U.S., posting a year-end 2013 total unit count of 249.

Cold Stone Creamery captured the hearts and wallets of many American consumers by introducing gourmet ice cream, customized on a cold slab with mix-ins. Although the chain continues to provide frozen desserts to many Americans, it does so with far fewer locations since its peak in 2007 at around 1,400 locations. Cold Stone Creamery ended 2013 with 990 stores in the U.S.

So what are the early warning signs for when a brand or category may be at risk?

Early warning signs appear as the category becomes more competitive. Category leaders begin to slow unit expansion, and same-store sales level out. As many brand leaders push expansion nationally, they begin to see greater competition from regional chains and independents that are in tune with the local consumer base. As more regional chains expand nationally and begin to battle for share in larger markets, new locations result in cannibalization and often consumers trying new brands just to see if they are different.

Strong blocking and tackling efforts are necessary to maintain differentiation and loyalty. Customers can be easily lost if franchise and company stores don’t deliver high levels of service and quality standards.

When does a segment become mature?

Many up-and-coming categories show high growth in unit expansion that drives sales volume growth. When longer-term sales growth shifts from high growth (above 5 percent) to lower growth (below 5 percent) you can usually see that the consumer interest is plateauing or that supply has caught up with demand.

In some cases, older legacy brands may be on the decline, offsetting growth from more contemporary concepts. Or menu-category products have been introduced into other segments, such as flatbread pizza in casual dining competing with limited-service pizza or more seafood options in the steakhouse segment competing with seafood-focused restaurants. In any event, declining growth rates generally show the state of the category and where it is headed.

Which segment is hot today but at risk in the short-term?

Juice concepts appear to be all the rage today. With health and wellness getting more play from affluent and Millennial consumers, it’s clear the cold-pressed juice concepts will be pushing hard to expand. Even though these concepts have price points over $10 in major markets like Los Angeles and New York, it’s clear that Hollywood starlet impact on our country with juice cleanses is evident. Juice specialists will likely expand quickly as the fad continues but the trend will settle into concepts that represent reasonable prices for the mainstream consumer.

Expect major brands like Starbucks’ Evolution Juice and Juice It Up to have a leg up on the competition, but ultimately, the “craze” will settle down and many restaurants will likely see declines in sales that make it difficult to continue their operations.

For cutting edge trend research and results, always keep Technomic in mind!


Consumer Reports: McDonald’s burger ranked worst in the U.S.

July 8, 2014

McDonalds Sales.JPEG-054a3By Jiaxi Lu  

Copyright 2014, The Washington Post Co.  All Rights Reserved.  

Some major fast-food chains—McDonald’s, KFC, Taco Bell—may find the latest Consumer Reports fast-food survey hard to swallow.

According to the survey, released on Wednesday, more than 30,000 Consumer Reports subscribers say these restaurants’ signature items are the worst in their categories: McDonald’s has the worst burger; KFC has the worst chicken; and Taco Bell has the worst burrito.

Consumer Reports surveyed 32,405 subscribers about their experiences at 65 fast-food and fast-casual chains. This is what they were asked: “On a scale of  1 to 10, from least delicious to most delicious you’ve ever eaten, how would you rate the taste” of their signature dishes?

Habit Burger Grill, In-n-Out and Five Guys Burgers received the highest rating for their burgers, 8.1, 8.0 and 7.9 respectively.  Meanwhile, McDonald’s scored a paltry 5.8 rating.

McDonald’s: Changing menu adds pressure to prep kitchen

McDonald’s has been busy changing its menu in an effort to attract more customers. But despite the novelty items the company promoted in 2013 — Fish McBites in February, McWraps in March, Mighty Wings in September, etc. — the company’s U.S. sales dropped 0.2 percent last year.

During a conference call with investors, McDonald’s chief financial officer Peter Bensen said the company “probably did things a little bit too quickly” in terms of introducing those new menu items. The constant changes and bold experiments with the menu put pressure to the restaurants’ kitchens, which sometimes took too long to fill orders. But new items introduced this year will be welcomed by the chain’s new kitchen equipment. Prep tables will be replaced with larger surfaces that are able to hold more sauces and ingredients.

In 2014, Bensen said, the company will “refocus the core,”  including tried-and-true favorites such as the Big Mac, Chicken McNuggets and the Quarter Pounder, as well as breakfast.

Consumer searches for healthier choices

Research shows Americans are spending $683.4 billion a year dining out, and they are also demanding better food quality and greater variety from restaurants to make sure their money is well spent.

When deciding where to dine, consumers are giving more consideration to food quality, according to the Consumer Reports survey. The restaurant’s location is less important than it was in 2011, when the group last conducted the survey. Diners today are more willing to go out of their way and find tasty meals that can be customized.

“Fast-casual dining in places like Chipotle and Panda Express lets the consumer guide the staff to prepare their meal just the way they like it,” Darren Tristano, executive vice president of Technomic, a food-service consulting firm, said in the report.

While many of the traditional chains have lagged in offering higher-quality ingredients, he said, some food chains — including Chipotle, Noodles & Company and Panera — have been offering meat raised without using antibiotics in animal feed, a feature that attracts consumers searching for healthier options.

Fast-food alternatives: fast-casual restaurants

Chipotle was rated by readers as their top fast-casual restaurant. (Fast-casual restaurants usually serve higher-quality, higher-priced fast food.) According to the survey, McAlister’s Deli gets the award for most improved as the chain’s score increased significantly since the 2011 report.

Top fast-casual restaurants: 

Chipotle Mexican Grill Firehouse Subs Five Guys Burgers and Fries Jason’s Deli Jersey Mike’s Subs Jimmy John’s Gourmet Sandwiches McAlister’s Deli Panera Bread Schlotzsky’s 


10 INTERNATIONAL CONCEPTS FINDING SUCCESS IN THE U.S.

June 2, 2014

Darren Tristano and Lauren Hallow

Some of the United States’ largest restaurant chains, including McDonald’s, Starbucks and Applebee’s, conduct a significant amount of business overseas. So what are some of the larger international chains that are enjoying success in the U.S.?

Several global chains are capitalizing on U.S. consumers’ appreciation for authenticity by bringing international fare, such as TOUS les JOURS Korean pastries and 100 Montaditos Spanish sandwiches, to the States. However, these concepts aren’t just offering a taste of their native countries—chains like Maoz Vegetarian and Coffee Culture Café & Eatery offer a different spin on concepts (health-focused eateries and coffee cafés, respectively) already popular in the U.S. Below are ten international chains that have successfully entered the U.S. and are looking to expand stateside:

Pie Face

Pie Face interior

Who: Founded in Sydney in 2003, Pie Face is an Australian limited-service chain known for its savory pies marked with cartoonish faces. The fun concept also offers a range of sandwiches, wraps, pastries and coffee. In 2012, Pie Face opened its first location outside of Australia in New York City.

U.S. Development: Shortly after Pie Face opened its first site, Wynn Resorts Ltd. CEO Steve Wynn invested $15 million into expanding the concept in the U.S., leading Pie Face to launch seven additional units in New York City over the next two years. From 2012 to 2013, Pie Face’s U.S. sales jumped 150% to $5.5 million.

Why it’s worth watching: Pie Face has flourished in New York City thanks to its sweet and savory handhelds and 24-hour service. The concept is an ideal spot for on-the-go urban consumers looking for everything from a sweet breakfast to a convenient lunch to a late-night snack.

Nando’sNando's exterior-1

 

Nando’s is a fast-casual chicken chain specializing in Portuguese-style peri peri chicken. Since launching in 1987 in South Africa, Nando’s has expanded to more than 1,000 locations in about two-dozen countries, but it’s especially popular in the U.K. The concept first expanded to the U.S. in 2008 with a unit in Washington, DC.

U.S. Development: Nando’s continued expanding in the Washington, DC, market and now operates 15 units in DC, Virginia and Maryland. From 2012 to 2013, Nando’s opened five locations in the U.S., propelling a nearly 40% increase in U.S. sales to $21.4 million. The chain plans to launch its 16th U.S. location soon in the District’s Tenleytown area.

Why it’s worth watching: Nando’s offers patrons a worldly experience, with Portuguese-style chicken and a mix of Portugal and South African wines served in units decorated with African artwork. The chain also showcases the best qualities of a fast-casual concept—lavish decorations make for an inviting place to dine, while speedy service attracts on-the-go patrons.

Giraffas

Giraffas exterior

Since launching in 1981, Giraffas has become one of the most popular limited-service chains in Brazil with its traditional Brazilian plates along with build-your-own burgers. There, the concept is quick-service, but when it expanded to the U.S. in 2011 with a location in Miami, Giraffas adopted a fast-casual service style and added more American-friendly menu items like pastas and salads.

U.S. Development: Giraffas now operates 10 units in the U.S., all in Florida. From 2012 to 2013, the chain launched five Florida units, helping its U.S. sales to triple to $11.1 million. Giraffas recently sold its U.S. company-owned locations to franchisees to raise funds for additional U.S. expansion. The chain aims to operate 200 U.S. locations by 2020.

Why it’s worth watching: Giraffas successfully mixes authentic Brazilian fare with American-style options. Units offer a different take on the American create-your-own-burger concept with Brazilian picanha steak burgers instead of traditional beef patties.

100 Montaditos

100 Montaditos interior

Inspired by traditional Spanish tapas taverns, 100 Montaditos was founded in Spain in 2000. The chain, whose name translates to “100 Sandwiches,” menus at least 100 varieties of crunchy snack-sized rolls made to order and topped with traditional Spanish ingredients like Serrano ham, chorizo and Manchego cheese. Over the years, 100 Montaditos expanded throughout Spain as well as internationally. In 2011, the chain launched its first U.S. location in Miami.

U.S. Development: Since 2011, 100 Montaditos opened about a dozen more Florida sites as well as launched locations in Iowa, New York and the Washington, DC, market. From 2012 to 2013, the chain more than doubled both its U.S. unit count and sales. 100 Montaditos plans to continue expanding in the U.S., recently announcing plans to launch 28 units in New York City over the next three years, five of them before the end of 2014. 100 Montaditos also has additional Florida and Washington, DC-area locations in the pipeline and is seeking sites in new markets such as Texas.

Why it’s worth watching: With its variety of options, along with an adult beverage menu that includes sangria and Spanish wines, 100 Montaditos offers patrons a chance to experience a traditional Spanish experience in a fun, casual setting. The menu includes something for everyone with sandwiches ranging from traditional Spanish options, like Serrano ham, to American-style choices, like Philly steak, to dessert montaditos, such as hazelnut spread on chocolate bread.

WagamamaWagamama-1

 

Although it hails from the U.K., Wagamama takes its inspiration from traditional Japanese ramen bars. The casual-dining Asian/noodle chain offers made-to-order ramen and modern Asian fare in a hip, casual setting. In 2007, Wagamama crossed the pond and launched its first U.S. unit in Boston’s Faneuil Hall.

U.S. Development: Thanks to the popularity of its first U.S. location, Wagamama opened its second U.S. site later that year in Harvard Square in Cambridge, MA. A third location opened in 2009 in Boston’s Prudential Tower. In fall 2013, Wagamama opened its fourth U.S. site—and most suburban location—in Lynnfield, MA. From 2012 to 2013, sales at Wagamama’s U.S. units increased 17.8% to $7.6 million. The chain plans to continue growing in the U.S., with more locations expected to open in the coming years.

Why it’s worth watching: With its large portions of piping-hot ramen along with open kitchens that allow patrons to view their meals being prepared, Wagamama offers customers a taste of the authentic Japanese ramen experience. The contemporary concept is also popular for Millennial-friendly features like fresh juices and complimentary Wi-Fi service at all units.

Hakkasan

Hakkasan Las Vegas

Another U.K.-based concept, Hakkasan actually comes from the same people who founded Wagamama. The fine-dining chain serves upscale modern Cantonese fare in large, opulently decorated units. Since launching in London in 2001, the concept has expanded to several major international cities; it opened its first U.S. location in Miami in 2009.

U.S. Development: Hakkasan now operates five units in the U.S., including a location in New York City that holds one Michelin star. In 2013, the concept launched two U.S. units—one in Beverly Hills, CA, and a 60,000-square-foot restaurant and nightclub in Las Vegas’ MGM Grand Hotel & Casino. In January of this year, parent Hakkasan Ltd. acquired in a majority stake in San Diego-based Enlightened Hospitality Group, whose portfolio includes acclaimed concepts Searsucker, which offers new American fare, and Herringbone, which specializes in seafood. The company plans to continue expanding Hakkasan and Enlightened’s brands in the U.S.

Why it’s worth watching: Although the other Asian chains featured in this blog are more casual, Hakkasan proves that Americans are also seeking upscale Asian fare. While all U.S. sites feature a full-service bar and lounge, Hakkasan’s latest U.S. location in Las Vegas was the first to incorporate a nightclub, suggesting the chain could delve more into the nightclub business in the future.

Coffee Culture Café & Eatery

Coffee Culture

Coffee Culture Café & Eatery is a Canadian quick-service coffee chain. Although grab-and-go options are available, the concept leans toward a more relaxing coffee experience—units are designed to be cozy and inviting, with plush furniture, exposed brick walls, plasma TVs and free Wi-Fi. In 2009, the chain began expanding into the U.S., establishing a U.S. headquarters in Buffalo, NY, for affiliate Coffee Culture New York Inc. and opening units in Williamsville and Ellicottville, NY.

U.S. Development: Over the years, Coffee Culture has continued expanding in New York and has also opened units in new U.S. markets. The chain now operates 13 U.S. locations in New York, Pennsylvania and Florida. Several sites opened in Erie, PA, thanks to a 2010 franchise agreement with Lake Erie College of Osteopathic Medicine. From 2012 to 2013, sales at Coffee Culture’s U.S. locations increased 28.3% to $5.9 million. At least two more U.S. units are in the pipeline for Amherst, NY, and Miami.

Why it’s worth watching: Coffee Culture differentiates itself from other coffee-café chains by offering patrons a welcoming, unpretentious place to relax, study or work while enjoying an all-day menu of specialty coffee drinks, sandwiches and pastries. Unlike other coffee chains, Coffee Culture serves breakfast fare like bagels and egg sandwiches all day, and also menus a variety of sandwiches, wraps and salads for lunch and dinner.

Maoz Vegetarian

Maoz salad bar

As its name suggests, Maoz Vegetarian specializes in vegetarian fare with a menu that centers on sandwiches, salads and gluten-free falafel. The Amsterdam-based quick-service concept gained popularity for its simple service style—patrons choose a salad or sandwich for a fixed price, then visit the salad bar to add as many toppings as they choose for no additional cost. In 2004, Maoz launched its first U.S. location in Philadelphia.

U.S. Development: Maoz now operates about a dozen units in the U.S. in Texas, Illinois, New York, New Jersey, Pennsylvania and Florida, and the chain is seeking additional U.S. franchise opportunities. In addition to growing its unit count, sales have also been up—from 2012 to 2013, sales at its U.S. units increased nearly 10% to $11.1 million.

Why it’s worth watching: Patrons flock to Maoz for its relaxed service approach that allows customers to add their own toppings to their sandwiches and salads instead of charging by weight, like at other salad bar concepts. Another differentiating factor: Maoz gives out doggy bags to patrons who don’t finish their meal, an amenity typically not offered at salad bars.

TOUS les JOURSTOUS les JOURS-1

 

TOUS les JOURS is a French-Asian bakery café chain. Originating in South Korea, the concept uses high-quality Korean ingredients to make its pastries and breads. The concept’s French and Asian influences are well-represented in its menu, with items that range from French croissants to Korean milk bread to sesame doughnuts. Several years after launching in the late 1990s, TOUS les JOURS began expanding internationally, including to the U.S., where it opened its first stateside location in 2004 in Los Angeles.

U.S. Development: Over the last 10 years, TOUS les JOURS has launched more than two-dozen additional U.S. locations, and now operates nearly 30 sites in California, Texas, Massachusetts, New York, New Jersey, Virginia and Georgia. From 2012 to 2013, the chain opened four units in the U.S. and experienced a 17.9% increase in U.S. sales. TOUS les JOURS plans to open more U.S. locations.

Why it’s worth watching: TOUS les JOURS’ commitment to authenticity and freshness makes it a popular spot for a variety of patrons, from Asian Americans looking for a taste of home to adventure-seeking consumers seeking a different kind of bakery fare.

Max Brenner

Max Brenner

Max Brenner is a concept specializing in all-things chocolate, from hearty desserts to specialty beverages to fondue. The concept’s roots date back to 1996, when it was a small chocolate shop in Israel. In 2001, it was bought by Israel-based Strauss Group, which developed the concept into a full-service chocolate-focused restaurant and bar. The concept expanded internationally, primarily in Australia. In 2006, Max Brenner’s first U.S. location opened in New York City.

U.S. Development: In addition to the original New York unit, Max Brenner now operates four other sites in the U.S. in Boston; Bethesda, MD; Paramus, NJ; and Philadelphia. The chain announced in April that it was moving toward a fast-casual prototype for its U.S. locations in place of the existing full-service format, saying that the fast-casual model better suits U.S. consumers. The Bethesda and Paramus sites— which opened July 2013 and April 2014, respectively—both feature the new fast-casual model. Max Brenner aims to launch about 200 more units in North America.

Why it’s worth watching: In a time when chains are increasingly becoming more health-minded, Max Brenner stands out for encouraging patrons to enjoy one of America’s favorite indulgences: chocolate. With a hip, modern décor and eye-appealing presentations, the novelty concept comes across as more sophisticated than gimmicky, helping patrons feel a little less guilty about enjoying that chocolate pizza or hot chocolate.

CONCLUSION

It would be beneficial for U.S. restaurant operators to pay close attention to these global chains and others that are successfully growing their U.S. businesses. With chains making moves to further cement their U.S. business—from Hakkasan acquiring a stake in a San Diego multiconcept operator to Coffee Culture establishing a U.S. headquarters—it’s likely these chains will be competing with U.S. operators for years to come.


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.


With a Mouthful, A&W Hopes to Draw Baby Boomers’ Offspring

May 5, 2014

pictureA&W plans to submit to Guinness a 304-character hashtag promoting its Hand-Breaded Chicken Tender Texas Toast Sandwich.

By ANDREW ADAM NEWMAN

THE popularity of the A&W Restaurants chain in the United States peaked in the 1960s and 1970s, when the number of locations — many with carhop service — swelled to 2,400, so it is no wonder that the brand stirs nostalgia in the baby boomer generation. But now A&W, which has about 700 restaurants, wants to make an impression on those boomers’ children, and the brand is increasingly turning to social media to do so.

To promote a new menu item with an unwieldy name, the Hand-Breaded Chicken Tender Texas Toast Sandwich, the brand is introducing a hashtag that is itself unwieldy: #supertastylargeandinchargetexastoasttwohandwichmadewithdeliciousonehundredpercentwhitemeathandbreadedchickentendersandyourchoiceofclassicorspicypapasauceeitherwayyoucan’tgowrongwowthatsoundsgoodyouneedtotryoneitsonlyavailableforalimitedtimeImgoingtohavetogogetonemyselfareyoustillreadingthisseeyouatAandW.

Along with deliberately defying the basic hashtag tenet of being simple to remember, at 304 characters it far exceeds the 140-character limit of Twitter, although other social media platforms like Facebook, Instagram and Pinterest allow longer hashtags.

A television commercial introduced on Monday opens with a voice-over asking: “How would you describe the Hand-Breaded Chicken Tender Texas Toast Sandwich?” To the sound of rapid clicking of keyboard keys, the speaker breathlessly rattles off about half of the hashtag, before slowing down and saying, “In other words, it’s a mouthful.” An end card directs viewers to the A&W website to see the full hashtag.

The brand is calling it the world’s longest hashtag, an assertion that may be difficult to prove, but it says it will seek recognition from Guinness World Records. (A search of the Guinness website yields five records related to Twitter and six related to Facebook, but none related to hashtags.)

The social media and advertising campaign is by Cornett Integrated Marketing Solutions, the agency of record for the chain. Both are based in Lexington, Ky. A&W, which declined to reveal expenditures for the campaign, spent only $876,000 on advertising in 2013, according to the Kantar Media unit of WPP. (Advertising expenditures for A&W root beer sold in stores, which is licensed in the United States by the Dr Pepper Snapple Group, is not reflected in the figure.)

A&W ranks 168th among all American restaurant chains, based on estimated yearly revenues of $184.4 million, according to Technomic, a restaurant consulting and market research firm.

“They’re a brand that’s trying to find their way,” said Darren Tristano, an executive vice president at Technomic. “It’s a nostalgia and legacy brand that is familiar to a number of Americans, but the problem with A&W is that it was a drive-in and it isn’t really a drive-in today.”

Among A&W’s 700 units in the United States, 50 are drive-ins, 200 are stand-alone dine-in restaurants, and the remainder are co-branded locations where it shares a roof with other fast-food establishments, primarily KFC and Long John Silver’s.

What A&W needs to do, Mr. Tristano said, is “rebuild their brand perception with millennials.”

Tim Jones, a creative director at Cornett, said that to reach younger consumers, the 95-year-old brand aims to strike a tone of “hip nostalgia” that characterizes older brands like Levi’s and Ray-Ban.

Rooty the Great Root Bear, an orange-sweater-wearing A&W mascot introduced in 1974, was returned to prominence in 2012 after having been, in the words of the brand, hibernating for about a decade. Today, A&W’s Twitter account, which has 7,200 followers, is written from the bear’s perspective.

“On Twitter, if you’re the voice of a seven-and-a-half-foot-tall bear with no pants, you can be a little bit more silly and more playful,” said Liz Bazner, associate manager of digital communications at A&W Restaurants. “The idea is also that Rooty doesn’t quite understand technology or Twitter, so he’d use a hashtag that would be too long for Twitter.”

In 2013, A&W created a profile for the mascot on LinkedIn, and when other users would add Rooty to their professional network, the bear would write far-fetched recommendations on their behalf.

“Using only a large-ish glass of water, he once single-handedly defended a small village in the Amazon Basin from a horde of ferocious army ants,” Rooty wrote on behalf of one LinkedIn user. About another, he offered, “He can hurl tennis rackets at small moving objects with almost zero accuracy.”

LinkedIn removed Rooty’s profile a couple of weeks after it went up, citing a policy of permitting only actual people on the site. In response, the brand posted a video in mock indignation to YouTube.

An A&W smartphone app encourages users to draw a mug of root beer for the bear, who, when tapped on his stomach, emits a hearty belch. The app, Burping Rooty, also allows users to direct the bear to recite the alphabet in belch form.

“If you’d like to grab some attention for your business on social media,” Forbes.com reported in 2013, “A&W Restaurants is currently providing a training manual on a fun-filled way to do it.”


Does Taco Bell’s Fast-Casual Entry Have a Chance?

April 24, 2014

Taco Bell is following the lead of its YUM! sister brand KFC, which entered the fast-casual market last year. KFC Eleven features hand-crafted food—flatbreads, rice bowls and KFC Boneless Original Recipe Chicken—in a more contemporary environment.

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Taco Bell’s new fast-casual concept, U.S. Taco Co. and Urban Taproom, provides the chain an opportunity to move into fast casual while maintaining its identity and value positioning with existing customers in the quick-service segment. Many brands today are trying to shift toward a more upscale menu, food and atmosphere positioning, but this strategy can confuse loyal customers and make it difficult to stay true to the brand identity. Taco Bell’s strategy makes sense and supports its goal to increase sales from $7 to $14 billion in the U.S. market.

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So what are the challenges this new brand faces?

Competition: In addition to a strong independent Mexican restaurant market, today’s Mexican grill segment features strong category leaders like Chipotle Mexican Grill, Qdoba Mexican Grill and Moe’s Southwest Grill. And there are more than 50 other fast-casual chains competing for share of stomach, many of which are growing aggressively.

Also within the landscape are successful taco shops that are growing from regional roots in California and Texas like Fuzzy’s Taco Shop, Torchy’s Tacos and Chronic Tacos. The 2013 limited-service Mexican category totaled $18 billion in sales with more than 18,000 restaurants. With so many competitors in the space, finding room for U.S. Taco Co. will be a challenge for Taco Bell’s young “intrepreneurial” team.

Price: With price points per-person pegged at $11.50‒$12, many economically challenged consumers may not be able to afford to eat at U.S. Taco Co. on a frequent basis. Average fast-casual price points are still south of $10. And with average prices of fast-casual burritos in the $6‒$7 range, consumers will continue to see pound-for-pound value at Mexican grill concepts. Recent Technomic research with consumers indicated that the optimal price at fast casual for lunch was $7.60, with a high price threshold of about $10. At dinner, consumers indicated that $9 was the optimal price, with $12.50 providing the upper threshold limit. As a result, consumers will likely see this U.S. Taco Co. as a place to go for dinner, as its lunch prices are too high for many consumers on weekday occasions.

Menu: Many American consumers have come to expect high levels of “authenticity” around both Mexican and Southwest dishes, sides and beverages. The menu at U.S. Taco Co. will feature the following tacos:

  • The One Percenter, featuring fresh lobster in garlic butter with red cabbage slaw and pico de gallo on crispy fry bread.
  • The “Brotherly Love,” a nod to the Philly Cheesesteak, with carne asada steak, grilled peppers and onions, roasted poblano queso and cotija cheese (rather than Cheez Whiz), and fresh cilantro in a flour tortilla.
  • The “Winner Winner,” which features Southern-style fried chicken breast with “SOB,” or “South of the Border” gravy, roasted corn pico de gallo with fresh jalapenos, and fresh cilantro in a flour tortilla.

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And on the side, guests can get “papas fritas,” which resemble steak fries, coated with habanero dust and served with housemade dipping sauces such as ghost chile ketchup or roasted poblano crema. Guests can also order their fries loaded with taco ingredients sans tortilla as a “secret menu” option.

Taking a page out of Red Robin’s play book, the menu will include shakes spiked with beer, and the brand will eventually offer tap, can and bottled craft beer.

So how will consumers react?

Patience and education will be important to getting consumers to consider an even more Americanized version of a traditional, authentic Mexican taco. Replacing the American burger with a taco served with fries and a shake will be a new behavior for many Americans. Although this new offering will likely have great appeal for Millennial consumers age 21‒36, Gen X and Boomers will likely continue to lean toward more familiar and traditional meals. As innovation and thinking outside the box (or bun in this case) is essential for filling white space, this new format may be a bit ahead of its time.


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