Fogo Sizzles in IPO

July 1, 2015

NB_13HALLCOSER_5_19746449Karen Robinson-Jacobs
Copyright 2015 The Dallas Morning News. All Rights Reserved.
http://www.dallasnews.com/business/restaurants-hotels/20150619-dallas-fogo-de-chao-restaurant-sizzles-in-wall-street-debut.ece

Wall Street’s hunger for new restaurant stocks pushed another North Texas brand beyond its initial public offering price.

Dallas-based Fogo de Chão Inc., a Brazilian-themed full-service restaurant chain, debuted Friday on the Nasdaq after pricing late Thursday at $20 a share. The initial price was above the earlier stated range of $16 to $18 a share.

The stock closed at $25.75, up nearly 30 percent.

Fogo de Chão is the second North Texas restaurant chain to go public in a week. Last Friday, stock in Dallas-based Wingstop soared in that company’s first trading day, gaining 61 percent from the initial offering price of $19 a share. Before that pricing, the high end of that company’s range was $14.

Fogo chief executive Larry Johnson thinks consumers are drawn to his chain because of the value proposition, the ability to have an affordable “white tablecloth experience.” That in turn “resonates with investors,” he said as the stock price continued its day-one climb.

Johnson said he thinks investors will take note of the brand’s growing popularity and acceptance by different age groups.

The company’s 26 U.S. locations, which range in size from about 7,500 square feet to 10,000 square feet, bring in about $8 million each annually on average.

‘Concept travels well’

The company expects the store count to grow by at least 10 percent each year, with Fogo eventually launching at least 100 U.S. locations. Johnson offered no timetable for the full buildout.

“We are comfortable that the concept travels well,” he said of the chain’s popularity in different markets across the country. “When you put all that together, I’m confident investors are going to get the story and are going to reward us for our performance.”

No new locations are planned for North Texas this year, but next year Fogo plans to appeal to carnivores in Uptown, which already is home to several popular steakhouses including Morton’s and Perry’s Steakhouse & Grille.

The company, which is owned by affiliates of Thomas H. Lee Partners, sold 4.41 million shares in the IPO. Lee Partners retains control of the company.

Fogo de Chão, which came to the U.S. in 1996, is the latest restaurant chain to whet Wall Street’s appetite.

PrivCo, which provides financial data on privately held companies, listed four restaurant IPOs this year, each of which posted a significant first-day pop. Each one – Shake Shack, Bojangles, Wingstop and Fogo – was priced at about $20 a share.

Burger joint Shake Shack closed at about $46 during its market bow, and jumped to more than $92 in May.

Fast casual

Many investors are trying to find the next Chipotle. The Mexican-themed fast-casual chain went public in 2006 at $22 a share and closed the first day at $44 a share. The stock closed Friday at $614.22.

Unlike most of those chains, Fogo de Chão is a full-service restaurant, rather than fast food or the current industry darling, fast casual.

Johnson noted that his chain’s average sales per location are much higher than those for a fast-casual concept.

The flip side, noted Sam Hamadeh, founder and chief executive of PrivCo, is that expenses are higher at a large full-service restaurant.

“That’s something [for investors] to keep in mind,” he said. “That’s a very expensive operation. That could be a problem at the first sign of a slowdown.”

Darren Tristano, executive vice president of Chicago-based Technomic Inc., a restaurant research firm, thinks the success of fast-casual IPOs is helping fuel growth of other restaurant stocks.

“Fast-casual restaurant chains continue to dominate growth,” said Tristano. “Technomic’s forecast five-year compound growth for fast casual is greater than 10 percent. As analysts and consumer investors look toward continued patronage and success of fast-casual restaurant brands, IPOs have been and are likely to continue to be strong going forward. This success will likely positively impact other major restaurant brands with IPOs.”


App May Offer Doughnuts on Demand ; Dunkin’ is Exploring a Delivery Service

June 17, 2015

8849e1f883b10fbaf86357823c2ecf69Taryn Luna
© 2015 The Boston Globe. Provided by ProQuest Information and Learning. All Rights Reserved.
http://www.betaboston.com/news/2015/06/09/dunkin-donuts-app-may-offer-doughnuts-on-demand/

At a time when a consumer can use an app on a smartphone to have a bottle of whiskey or an iPad Air delivered to the door in an hour, an instant order of munchkins and a Box O’ Joe might not be far behind.

Dunkin’ Donuts is the latest quick-service restaurant chain to wade into the so-called on-demand economy, acknowledging Monday that it is evaluating delivery services in conjunction with new mobile ordering technology the coffee-and-doughnuts chain is developing.

Dunkin’ is following in the footsteps of two rivals, Starbucks Corp. and McDonald’s Corp., both of which are testing deliveries to homes and offices this year.

Nigel Travis, chief executive of Dunkin’ Brands Group, the parent company, called delivery a “big opportunity” in an interview with CNBC.

The company said delivery might be built into an application currently in development. The app, which Dunkin’ began testing last year, would allow customers to order and purchase coffee and food on a smartphone and pick it up at a store.

Dunkin’ declined to provide details about how a delivery service would work and said it has not begun to test the system.

Dunkin’ Donuts and other fast-food chains face a particular challenge in delivering products: keeping their hot food and drinks at the right temperatures, said Darren Tristano, an executive vice president at Technomic Inc., a Chicago food industry research firm. While things like pizza and Chinese food retain heat during transport, Tristano said, some fast-food products don’t survive as well.

“It might reflect negatively on the brand,” Tristano said. “There’s great risk along with the opportunities.”

Food chains are quickly trying to catch up with the explosive popularity of on-demand delivery services such as Postmates and GrubHub, which can provide nearly anything consumers want, whenever they want it. The chains also hope deliveries will increase sales in a relatively stagnant quick-service industry.

Dunkin’ Donuts’ same-store sales in the United States increased 1.6 percent in fiscal 2014, compared with 3.4 percent the year before. Meanwhile, McDonald’s comparable sales declined 2.1 percent in 2014. Starbucks, the leading coffee and bakery chain in the country, reported a 6 percent jump during the same period.

Earlier this year, Starbucks and McDonald’s said they both planned to work with Postmates, the San Francisco-based 24-hour service, to deliver in select markets. Customers place orders on the Postmates app or website and local couriers pick up the goods from restaurants and stores. An order of a Big Mac and medium fries from McDonald’s, which includes a $5 delivery fee, costs about $11.

Although many consumers already can order a Big Mac or a Frappuccino through the Postmates system, the partnerships allow companies to integrate the ordering process into the food chains’ own mobile applications, control the transaction, and track consumer interests, Tristano said.

Starbucks said it will launch a “Green Apron” program with actual baristas delivering coffee in New York later this year.

Dunkin’s delivery and mobile ordering initiatives are being led by Scott Hudler, global vice president of consumer engagement.

The company said he was not available for an interview.

Tristano said Dunkin’s delivery service would probably increase sales modestly as existing customers shift to delivery. He said the service would appeal to consumers who are physically unable to visit a store, don’t have a car, don’t want to deal with parking, or “are just lazy and don’t want to get up and go.”


Just Top it With a Hot Dog? One Surprising New Trend

June 15, 2015

102751830-hot-dog-bites-pizza.530x298Katie Little
http://www.cnbc.com/id/102752349

Ketchup, mustard or both?

The most difficult part of preparing a hot dog used to be picking the toppings. But in today’s mashup-loving food world, the hot dog is the topping.

On Thursday, Pizza Hut plans to debut a new spin on the summer staple—a pizza with 28 bite-sized hot dogs baked into the crust and served with a side of mustard.

“I think people love hot dogs. In our case, people love pizza, and they’re willing to mash up foods more than ever,” public relations director Doug Terfehr said in a phone interview.

Pizza Hut is hardly alone at finding new ways to incorporate hot dogs into their menu. In the burger world, Carl’s Jr. and Hardee’s are selling what they call the “most American burger ever.” It’s a Black Angus beef patty topped with a split hot dog and potato chips.

In October, Wayback Burgers debuted the limited time Frank-N-Burger, which included two beef patties, a hot dog, American cheese and barbecue chips on top.

Abroad, KFC released the Double Down Dog, a hot dog wrapped with a fried chicken bun, in the Philippines earlier this year.

Even at the baseball field, where the hot dog is practically an institution, the humble frank is getting revamped. A minor league team in Delaware came up with its own spin on the meat—a hot dog sandwiched between two Krispy Kreme doughnuts and topped with bacon and drizzled with raspberry jam.

While these wacky creations are still few in number, they come amid signs the hot dog market is warming up.

Between 2013 and 2015, the appearance of hot dog entrees on menus rose 5 percent, according to Technomic’s MenuMonitor, while the number of hot dogs served at restaurants rose nearly 3 percent in the two years ended in March, according to market research firm NPD Group.

So what’s driving restaurants to release these wacky hot dog mashups?

“These products do not have to be profitable for them to be successful,” said Darren Tristano, executive vice president at Technomic.

Instead, they are meant to capitalize on buzz marketing and spur people to think about the restaurant and then visit, he added. They also play off two broader themes in the food space: an overarching mashup trend and more interest in the hot dog.

At Carl’s Jr. and Hardee’s, the idea of a burger topped with a dog has been in the works for about a decade.

“It’s kind of a Fourth of July picnic on a bun,” said Brad Haley, Carl’s Jr. and Hardee’s chief marketing officer.

“We’re not into doing burgers just for kind of the buzz factor. They have to taste good and sell well—otherwise we wouldn’t do them.”

If that is the case, expect more hot dog mashups on to pop up on menus.

“I think this is an industry where if something is successful, it becomes a trial for other brands,” Tristano said.


Wahlburgers Goes for Burger Gold

June 12, 2015

pictureBy Joel Stein
http://www.bloomberg.com/news/articles/2015-05-28/wahlburgers-donnie-mark-paul-wahlberg-plot-fast-food-empire

Paul Wahlberg wanted to open a small restaurant in his hometown. Then his two famous brothers got involved

Paul Wahlberg can’t concentrate. He keeps looking around, fixating on a sticker stuck on a light and then a tiny carpet stain. Finally he can’t take it anymore and bolts up to correct the way an employee is changing a bulb. This isn’t a guy who should be starting a nationwide fast-food franchise. This is a man who should be placed gently back in his very small kitchen, with a limited number of things to stress about, as he has for decades as a cook at Boston restaurants including Alma Nove, an Italian restaurant he named after his sweet mother, Alma. After he comes back to the table, his eyes keep darting back and forth. “I got to touch up some paint,” he says. “I’m not telling you where.”

Paul’s two younger brothers are Mark (The Fighter, Marky Mark and the Funky Bunch) and Donnie (CBS’s Blue Bloods, New Kids on the Block), both charismatic, fast-moving celebrities with agents, managers, and—as seen on HBO—entourages. They’re also Paul’s business partners in Wahlburgers, which until earlier this year was one little mall burger joint in Hingham, a suburb 30 minutes from Boston. In 2015, Wahlburgers plans to open dozens of locations in Florida, Las Vegas, New York, the Middle East, and several airports. They marketed it through a cartoonish reality show on A&E called Wahlburgers that’s even less suited for serious, shy Paul, 50, with his gray sweater zipped up to the very top. It’s a show about a neurotic chef who is mocked and terrorized by his cooler, easygoing famous brothers.

“In a perfect world, Paul would have the one restaurant and in eight years possibly open a second restaurant,” says Mark, 43, calling from a golf course in Los Angeles. But once Paul invoked the family name, Mark decided to plan a full chain and pitch the reality show. “I said, ‘Paul, if you want to build a one-off, call it Paul’s Burger.’ I wanted to grow a real business that was passed on to future generations.” (Among them, the three brothers have eight kids.)

Donnie, 45, had to find a way to get Paul and Mark to compromise, slowing Mark down to assure quality and speeding Paul up to begin expansion. In 2014, Donnie took a train to Hingham every time he had a break from taping Blue Bloods in New York. Sometimes he’d write menu descriptions, but more often he’d try to convince Paul that Wahlburgers had to grow more quickly. “Paul’s so intense that everything gets heated. If one tomato is sliced wrong, he’d be on the verge of a nervous breakdown,” he says. There are nine siblings, and while Donnie and Mark share the fame thing, Donnie’s always been closest to Paul, so it fell on him to determine how to scale his older brother’s burgers. They cost $7.15 to $9.50 and are high-enough quality to satisfy fans who traveled for a special experience but not so expensive that they’re untrue to lower-class, Southie roots, the essence of the Wahlberg brand.

“What people generally think about Mark and Donnie Wahlberg is that they are hardworking people who are hustling and humble,” says Cory Isaacson, a partner at the marketing agency Walton Isaacson, which promoted Bethenny Frankel’s Skinnygirl brand when she was on The Real Housewives of New York. “If Katy Perry opened a burger joint, no one would think she’s actually affiliated with it.”

Mark said, “‘Paul, if you want to build a one-off, call it Paul’s Burger.’ I wanted to grow a real business.”

Based on that logic, the Wahlbergs believe they can win the ongoing burger war in the U.S. The battle kicked off a few years ago, when McDonald’s started teetering; earlier this year it fired its chief executive officer after its worst sales slump since 2001. In the meantime, the so-called better-burger category has stolen market share, with Five Guys growing from five stores in 2001 to 1,270, and Shake Shack doubling its market valuation during its first day of stock trading in January. It’s now worth more than $2.8 billion, with just 69 stores, or more than $41 million per stand. The category is saturated with its own fat: Smashburger (320 locations), Elevation Burger (52), the Counter (40), and Umami Burger (24) are growing at a fast clip nationally.

Wahlburgers is trying to differentiate itself by being both a restaurant like Umami and the Counter and a fast-food joint like Shake Shack and Smashburger. A third of each franchise is devoted to counter service, but there are also servers and a full bar. Paul was insistent about this concept, even as his brothers, outside investors, and their CEO—Rick Vanzura, former chief operating officer of Panera Bread, who first reached out on Facebook—pushed for the lower labor costs of self-service. “That’s not what I wanted to bring into the world,” Paul says. He wanted a place where older people are comfortable and bartenders sometimes dance to pop music, some of which is sung by his brothers.

One thing Vanzura brought with him from Panera was the belief that he could control quality by—unlike McDonald’s—having a large number of stores owned by a small number of franchisees, all of whom must have at least $5 million in net worth to be considered as partners. “People will say what we’re doing is unprecedented as far as growth from a single unit,” Vanzura brags as he eats a sweet potato tater tot. To get his job, he went to meet Donnie on the set of Blue Bloods, where NKOTB fans often lurk. (“I’m used to having a job interview in a job setting. A handler was walking me to his trailer, and I saw a sea of middle-aged women waiting there,” he says.) He met Mark at a Nobu, in New York, where they kept being interrupted by the waiter with special dishes the chef sent out. Mark in particular has been a good co-owner, Vanzura says: “When he calls franchisees and says, ‘I’m behind this and will make sure it gets a lot of exposure,’ that carries a lot of weight.”

None of this would’ve taken off without Mark’s TV idea. The original Wahlburgers had some pretty weak nights until the show began airing in 2014. Afterward, Paul had to start opening an hour earlier, at 11, once he saw people lined up outside. They did more than 400,000 checks in the tiny restaurant last year. The company is private, so Paul won’t reveal its annual revenue.

Despite seeming like more of a pun than a TV show, Wahlburgers is airing its third season. It averages 2 million viewers, according to Nielsen, and was nominated for an Emmy. Its success gives the chain a chance in a burger field that’s already pretty mature. “They’re expanding in Vegas, Miami,” says Sam Oches, the editor of QSR (quick-service restaurant) magazine. “This is what celebrity chefs do: move to very tourist-friendly places.”

But Darren Tristano, who covers food service for the market research company Technomic, thinks a split-service restaurant limits growth. “If you’re in a neighborhood looking for a place to sit down to eat, it’s going to work,” he says. “But when you look at the U.S. in terms of gross opportunities, there aren’t as many of those markets around.”

Hingham, a tony Boston suburb where New England Patriots coach Bill Belichick lives, certainly qualifies. It’s 11:30 a.m., and Wahlburgers is full of people essentially eating ground meat for breakfast. Alma walks around chatting with customers. She’s on the show, too, and has become a bona fide reality star, coming in on Saturdays to flit between the tables. After raising famous kids, she’s loving her own fame: “My friends said, ‘Doesn’t it drive you crazy?’ Are you kidding? People want to talk to me!” Paul nods sideways in disagreement. Sitting down for lunch, he looks flummoxed when a waitress brings him a hat to autograph for some customers. “It had always been, ‘Yo yo yo. You’re Mark and Donnie’s brother,’ ” he says. Paul liked it much better that way.


Bun Sales: Burger King Tops Wendy’s

June 11, 2015

picture

Leslie Patton
http://www.iol.co.za/business/international/bun-sales-burger-king-tops-wendy-s-1.1863811#.VXhq5flVhBc

Chicago – Burger King is back in second place.

The chain regained its status as the No. 2 US fast-food hamburger seller last year, a spot it lost to Wendy’s in 2013, according to researcher Technomic.

Burger King’s domestic sales rose 1.6 percent to $8.64 billion in 2014, while Wendy’s fell 0.4 percent to $8.51 billion, the data show. McDonald’s had $35.4 billion in US sales last year.

To lure more customers, Burger King has been advertising limited-time offers and brought back cult favourite Chicken Fries at the end of March. Wendy’s, meanwhile, is pushing crispy chicken sandwiches and recently began selling Honest organic green tea to attract younger diners.

Burger King has become “increasingly competitive with McDonald’s by broadening their menu and focusing on value”, said Darren Tristano, executive vice-president at Technomic. Wendy’s has moved to higher prices and more premium foods, which may deter lower-income consumers, he said.

Burger King’s domestic same-store sales jumped 6.8 percent in the most recent quarter, fuelled by its Spicy BLT Whopper and two-for-$4 croissant breakfast sandwiches. Wendy’s North American same-store sales increased 3.2 percent in its latest quarter.

Before being unseated by Wendy’s in 2013, Burger King had been the No. 2 chain since at least 1972, according to Technomic. Sonic Corp., the drive-thru chain, is ranked No. 4, while Jack in the Box is No. 5.

Burger King is owned by Restaurant Brands International, which also owns the Tim Hortons chain.


Fast Casual Still Surging Segment Eats Away at Fast-Food Chains, Pulls in Millennials

June 11, 2015

Alejandra Cancino
Copyright (c) 2015 The Capital (Annapolis). Provided by ProQuest Information and Learning. All rights Reserved.

CHICAGO – Darren Tristano’s daughter had a definite preference when it came to where she wanted to celebrate her 16th birthday: She wanted to go to Panera Bread, a favorite among her peers.

“That’s when you know fast casual has arrived,” said Tristano, executive vice president of Chicago-based food-research firm Technomic, at a recent conference in Chicago on the growing popularity of restaurants that offer a casual environment mixed with fast service, such as Panera and Chipotle Mexican Grill.

U.S. sales in the fast-casual segment are expected to swell to $62 billion in 2019, up from $39 billion in 2014. Pushing that growth, Tristano said, are millennials hungry for higher quality foods at affordable price points, now at $9 to $13 per check. Behind them are teenagers, like his daughter, who prefer cheaper meals but are evolving into the next wave of fast-casual customers.

As the industry grows, Tristano said, restaurants are experimenting and expanding on their success. Chipotle, for example, partnered with two restaurateurs in Colorado to open Pizzeria Locale, a fast-casual restaurant with the assembly-line concept customers seem to love. Denny’s launched a fast-casual restaurant called The Den that targets college students. And Panera is experimenting with having customers place their orders on computers.

The new ideas seem to be working.

Fast casual is gobbling up sales of quick-service restaurants, such as McDonald’s and Subway. In 2014, the segment grew to own 16 percent of the limited-service restaurant market, up from 12 percent in 2009. By 2019, it’s expected to reach 21 percent.

Because of that growth, Tristano said he expects that sales at quick-service restaurants will not rebound, but rather will continue to decline as fast casual takes over.

Fast-food chains still command a hefty presence, however. McDonald’s has about 14,000 U.S. locations, compared with Chipotle, which has about 1,800 locations.

A young player in the segment, Protein Bar, has grown to 20 locations, mostly in Chicago, but also in Washington, D.C., and Colorado.

The joints, whose customers are between 25 and 40 years old, sell high-protein meals made with ingredients such as quinoa, organic tofu and black beans, Protein Bar founder Matt Matros, 36, said.

Matros cobbled together $600,000 inloans, savings and credit card debt to open his first store in 2009 in downtown Chicago.

He now has 65 investors, 550 employees and more than 10,000 daily customers.

Matros’ restaurants are considered part of the “healthy” segment of fast casual, which is expected to grow by 30 percent annually.

Other segments expected to have double-digit growth include Mediterranean concepts, pizza and salads.


Pinkberry Flirts With Self-Serve in Two Southern California Shops

May 27, 2015

By Nancy Luna/Staff Writer

For several months, Pinkberry has been quietly testing self-serve machines in at least two Southern California locations.
http://www.ocregister.com/articles/self-662718-serve-pinkberry.html?page=1

Pinkberry, credited for launching the modern-day frozen yogurt craze, is testing self-serve machines in two Southern California locations.

The do-it-yourself experiment has been ongoing for months at shops in Brea and Burbank. A Pinkberry official played down the test, which comes a few years after Chief Executive Ron Graves said he would never play the self-serve card.

“Leapfrogging the competition requires you to know and be true to your brand as well as deeply understand your competition,” Pinkberry spokeswoman Laura Jakobsen told the Register this week. “This is research – you can only learn so much by observing.”

At the Pinkberry on Imperial Highway in Brea, the store offers 10 flavors at 49 cents an ounce. The front counter has a bar, where customers can choose from an assortment of fruit and candy toppings.

By comparison, a nearby Yogurtland in Brea had a menu of 16 different flavors at 41 cents an ounce.

In Burbank, the self-serve option has been around a year, while Brea converted in December. Jakobsen said Pinkberry has no plans to convert more shops.

“We opened the self-serve stores to gain insights from both a consumer and operational perspective,” Jakobsen said. “We are not considering converting more locations.”

Darren Tristano, a restaurant consultant for market research firm Technomic, said five years ago that premium frozen yogurt chains like Pinkberry “would have great competition from self-serve fro-yo brands” in a post-recession economy.

“There is no surprise that Pinkberry would test and consider replacing or adding self serve to their concept,” Tristano said. “The affordable price points of weigh-and-pay as well as the labor savings is a strong driver for change within the market.”

Though brands such as Golden Spoon Frozen Yogurt have been around for more than 30 years, Pinkberry is considered a pioneer in the category.

When Pinkberry debuted 10 years ago, it elevated the frozen yogurt category with its slick presentation and tart-heavy fruit flavors. Pinkberry now has 250 shops in 21 countries.

Copycat brands have since saturated the market, including Yogurtland, Tutti Frutti and Cherry on Top. To differentiate themselves, many adopted the self-serve model. Their popularity soared among consumers who enjoy controlling how their food is prepared.

“The trend in consumer control demonstrated by build-your-own formats is the next generation of customization,” Tristano said.

Irvine-based Yogurtland launched its first self-serve store in Fullerton in 2006. It now has about 300 stores in the U.S., Australia, Guam, Thailand, Venezuela and Dubai.

When asked in 2012 about the popularity of self-serve froyo, Pinkberry’s Graves told Inc. magazine that he refused to “go self-serve.”

“Why? Because that would be letting the competition define us,” he said.

History shows it could also be brand suicide.

In 2012, Rancho Santa Margarita-based Golden Spoon tested self-serve in a handful of Southern California stores. At the time, the chain said it would eventually convert at least 40 locations to the trendier do-it-yourself shops.

But after its loyal customers balked at the messiness of self-serve, the chain halted those plans.

“Sanitation was a key issue,” Chief executive Roger Clawson told the Register in 2013. “Our core customer demands full service.”


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