Chipotle Falls as Food Costs Bite into Q4 Earnings

March 6, 2012

Chipotle Falls

Chipotle Falls as Food Costs Bite into Q4 Earnings

Update: Chipotle Mexican Grill said late Wednesday that fourth-quarter profit rose 23% to $1.81 a share. But Wall Street expected $1.83. It was the second straight quarter that the burrito chain has missed views amid higher food costs. Food costs were 32.2% of sales, up from 31.1%, due to higher commodity costs. Total sales climbed nearly 24% to $596.7 million, slightly above forecasts for $591.2 million.

The company’s shares fell 2% in early after-hours trading after rising 1% to a record high 370.98 ahead of results.

The restaurant chain sees food costs and same-store sales rising in the mid-single digits in 2012. The company expects to add 155-165 stores.


Posted Jan. 29 8:05 a.m. ET

Burrito joint Chipotle Mexican Grill (CMG) has served up double-digit sales and earnings growth, in the face of rising food costs and consumer belt-tightening. On Wednesday afternoon, investors will see if that continued through the fourth quarter.

Analysts expect the chain to post $1.82 per share, up 24% from $1.47 a year ago. They see revenue climbing 22.3% to $590.2 million.

Keys to watch for include sales at stores open more than a year. That grew 11.1% over the first nine months of the year. The company guided for low-single-digit growth for the full year, implying a slowdown in the fourth quarter.

Analysts will also be watching for rising food costs. Ingredients have gone up, but by how much? And was the eatery able to offset that with price hikes? The company raised menu prices earlier in the year and said customers didn’t balk.

Then there’s the restaurant growth. The company implied 52 to 62 new restaurants in the fourth quarter.

It opened 32 in the third, bringing its total to 1,163. That includes its first Asian-theme eatery, ShopHouse Southeast Asian Kitchen, in Washington, D.C.

That ShopHouse concept could provide some future growth, though the company hasn’t announced expansion there yet. Darren Tristano, executive vice president of the restaurant consulting firm Technomic thinks the concept might appeal to existing Chipotle customers though, and possible cannibalize some of that business.

Overall, Tristano says consumers seem to be dining out again, though they don’t welcome menu price increases, they’re expecting and tolerating them.

“Consumer sentiment is starting to shift very slowly toward ‘things are going to get better,'” he said.

But industry growth this year is likely to be modest. Technomic forecasts 3% sales growth industrywide — or about half a percentage after inflation.

Last week, the world’s largest burger Chain, and one-time Chipotle owner McDonald’s (MCD) beat earnings, but guided cautiously on 2012, in part on a weaker euro against the dollar. Europe is McDonald’s top sales region.

Chipotle won’t doesn’t have that problem — yet. It opened its first European restaurant in London in 2010. It’s since opened a second and has plans for several more there and is about to launch it’s first in Paris.

Chipotle shares sit near an all-time high, closing at $366.76 on Friday. That could lead to some profit-taking, if results aren’t stellar.

The company also faced rising fast-food competition from Yum Brands (YUM), parent of Taco Bell, which in December said it would roll out more a more Chipotle-like menu. It’s due to report on Feb. 6.

Chipotle is one of several trendy eateries with top-notch earnings. Buffalo Wild Wings(BWLD), Panera Bread(PNRA) and BJ’s Restaurants(BJRI) report later this month.

View the full article on Investor’s Business Daily

DiBella’s Creates a Larger Footprint

March 6, 2012


DiBella’s Creates a Larger Footprint

At a time when signs of economic recovery still haven’t hit many of our wallets, it may come as a surprise that DiBella’s Old Fashioned Submarines is experiencing a boom.

The company isn’t sharing dollar figures, but is reporting a 50 percent increase in revenue in 2011.

Much of that financial bump for the Rochester-based chain of sandwich stores came from opening six new locations last year, enlarging the brand to 23 stores in four states.

But DiBella’s chief operating officer, James Paladenic, said previously existing restaurants, including the seven in DiBella’s hometown, saw a 10 percent increase in revenue, too.

The new year would seem to hold more of the same: DiBella’s opened restaurant No. 24 in the Pittsburgh area on Jan. 4 and No. 25 in the Dayton, Ohio, area last week.

The company also intends to open stores in Connecticut and Indiana, and in metro areas in between where it already has a foothold.

By the end of 2012, DiBella’s expects to have at least 10 more locations, spread in a crescent shape from southern New England through the Great Lakes to Indianapolis.

“At the end of the year we’ll evaluate,” Paladenic said of more long-term growth plans.

A national restaurant analyst described DiBella’s as an emerging regional brand and predicted it could easily grow to 100 locations.

“What we’re … seeing here is a very well-established older brand that has engaged growth,” said Darren Tristano, a restaurant analyst for Chicago-based Technomic Inc. He said DiBella’s is in an excellent position to use its expertise to take advantage of current consumer preferences.

“Because of the sandwich, it fits within some of the trends today for customization and portability,” Tristano said.

“More consumers are looking for affordable product that comes the way you want it,” he said.

Rochester sub fans know the DiBella’s sub is full of choices. They get to select their sandwich’s meats, cheeses, vegetables, sauces, type of roll and even temperature.

The company began as a delicatessen at the corner of Portland Avenue and Casper Street nearly a century ago when that neighborhood was dominated by Italian immigrants and first-generation Italian-Americans.

Over the years the business evolved several times, Paladenic said, focusing more on imported ingredients and then sandwiches made with rolls baked on the premises.

In 1998, DiBella’s was operating as a single sub shop in Henrietta when it added a second store in Greece.

Paladenic said Joey DiBella, the great-great-grandson of the founder, is a partner with Richard Fox in the Fox Family Management group, which has been involved since the second store was added.

The Fox team also owns 110 Wendy’s restaurants.

Tristano said restaurant chains can build revenue in several ways: expanding the number of stores, increasing sales year over year at each store, and selling franchises.

DiBella’s is doing the first two but continues to own all of its own stores.

“A lot of sandwich chains are really pushing catering because you really leverage your overhead,” Tristano said.

Indeed, Paladenic said DiBella’s has done that. Other recent or coming initiatives include:

Internal audits to ensure quality remains consistent.

Adding a line of chicken sandwiches.

Adding limited-time-only sandwiches (the beef on weck sub being offered now, for instance).

Adding a kids’ menu (look for a pint-sized peanut-butter-and-jelly sub soon).

“We realize customers have a lot of choices,” Paladenic said, but DiBella’s is striving to distinguish itself with quality.

“Other concepts out there created an awareness for subs,” Paladenic said, reluctant to name names.

But Tristano wasn’t shy about naming Subway as the dominant player in the national market.

He also noted that several regional brands, such as Firehouse Subs, Larry’s Giant Subs and Jersey Mike’s, are making their way from the East Coast to the Midwest, too.

These regional brands typically carry a higher price point (can you sing the $5 footlong jingle?), offer different flavors and have a more interesting restaurant interior than the national leader, Tristano said.

The Midwest may offer greater opportunity for DiBella’s than larger urban areas could.

“The competitors in that area may not have that Italian angle now,” Tristano said.

Paladenic said DiBella’s has chosen its new locations based on what has worked here in Rochester, including plenty of blue-collar folks nearby needing a quick lunch.

But tastes haven’t proven to be the same despite similarities in demographics.

Rochester and Buffalo DiBella’s customers prefer cold subs (70 percent of sales) to hot ones (30 percent), Paladenic said. Pittsburgh and Cleveland patrons prefer the opposite ratio.

DiBella’s is only too happy to accommodate them.

New McDonald’s Look, but Same Prices

March 6, 2012

New Look

New McDonald’s Look, but Same Prices

CHICAGO — With half-moon shaped booths, low stools, wooden blinds and flat-screen TVs, most patrons might expect to pay $8 for a burger, or $4 for a smoothie. But the decor isn’t a harbinger of price. This is the new look of a remodeled McDonald’s, purveyor of Happy Meals and value deals as well as upscale coffee drinks.

The Oak Brook, Ill.-based burger chain is reaching critical mass on a nearly decade-long, multi-billion-dollar global renovation and rebuilding project it’s betting will boost sales, traffic and brand perception. Restaurants undergoing simultaneous interior and exterior remodels are expected to see a 6 percent to 7 percent increase in same-store sales upon reopening, no matter where they are located.

“We are playing a little bit of catch-up,” said Denis Weil, McDonald’s vice president of concept and design, adding that retail remodels now need to happen more frequently. “Styles change faster, and customers have a higher need for novelty, and their tastes change faster as well.” Once an area has reached 40 percent to 60 percent completion in the remodeling process, Weil said, consumers begin to view the brand differently, stop in more often and buy higher-end items. Analysts say at that point they also can see the lift in sales.

McDonald’s plans to open 1,300 restaurants and remodel 2,400 in 2012, spending about $2.9 billion, the company said last week. The chain pays 40 percent to 45 percent of a franchisee’s remodeling costs for each restaurant, which averages about $600,000 in the U.S. By year’s end, the chain will have completed interior renovations on about half of its 33,000 restaurants worldwide.

“We believe now is an opportune time to strategically increase new store openings while continuing a significant focus on reimaging,” McDonalds CFO Pete Bensen said in a call with investors. “We have the financial capacity and talent to invest when many others cannot.” Although McDonald’s is on a nearly-nine-year streak of global same-store sales gains — most recently reporting a surge of 7.5 percent during the fourth quarter of 2011 — some fast-casual restaurants such as Chipotle and Panera are posting similar or greater same store sales gains. By adopting a higher-end look, McDonald’s is seeking to gain broader acceptance for top-tier items already on the menu, such as smoothies and Angus burgers, and better compete with the fast-casual industry.

“The evolution of the McDonald’s brand is, I think, necessary because so many other fast-casual brands are growing up,” said Darren Tristano, executive vice president of Technomic, a Chicago-based food industry consulting firm. He added that McDonald’s has done well to offer more premium products, particularly with drinks such as smoothies and specialty coffees.

In the U.S., bright red, double mansard roofs are being swapped for a single yellow arch outside, and inside two- and four-top tables are being swapped for long, wide, community tables, tall bar tables and more modern booths. About 33 percent of the chain’s 14,098 U.S. units have undergone an interior facelift, and only 16 percent have completed an exterior overhaul.

Weil said that cultural tastes have necessitated different exterior designs by area of the world. But needs inside the restaurants are more common. On the inside, he said, major metropolitan areas such as London, New York and Shanghai share a similar look, distinct from suburban or rural areas.

The company is moving to seating “zones,” slow zones for coffee sippers enjoying the Wi-Fi, fast zones at high bar tables for single diners wolfing down a sandwich, and family zones with booths for parents to “lock” their children on the inside to prevent them from wandering.

“We have clear standards around the world,” Weil said. “The design might be different, but we have standards — sleek tables and chairs, contemporary graphics, variable lighting, timeless base materials, seating zones, flexible seating, open floor plans and clean upgraded restrooms — so these are all things you will see in all of the decors.”

McDonald’s has traditionally pushed its franchisees to complete renovations every 20 years. But the new looks are designed with a handful of graphical themes and color palettes that can be swapped out every few years to freshen up the look by updating some lights, wall art and chair coverings, without undergoing another full-scale remodel.

Although franchisees are required to make updates at determined intervals, some are electing to remodel ahead of schedule. Lisa Essig, a McDonald’s owner operator with six restaurants in the Kansas City area, saw an opportunity to increase capacity at one restaurant and get customers’ attention another.

Her first location saw a double-digit same store sales lift after the remodel, which expanded the dining area, and increases of more than 7 percent in the second location, where she felt the restaurant had become an expected part of the scenery.

She’s been particularly pleased with the second drive-through lane, which makes lines look shorter; extra outlets for Wi-Fi seekers, so they’re staying longer (and sometimes ordering more) without jockeying for space; and of course the overall, modernized look.

“Some customers have said even the food looks better,” Essig said, adding that some of the best reactions to the new look have been from seniors, whom she’d feared alienating with a more contemporary design.

Essig said she views her remodels, ranging from $350,000 to $700,000, as long-term investments, and hasn’t calculated how long it will take to break even at each location.

Although France and Australia began redesigning restaurants in the late 1990s, McDonald’s made remodeling part of its global turnaround plan in 2003. The European market increased emphasis on completing them in 2005.The chain once struggled in Europe in part because of poor brand perception, lack of culturally relevant menu items, and other issues. But average restaurant sales have increased in recent years, which the company attributes to remodeling, among other initiatives.

Today, France, Australia and Canada are among some of the most complete areas.

Morningstar analyst R.J. Hottovy said that McDonald’s sales case for the investment has been evident in the chain’s numbers for areas of the world with a significant number of remodels. He added that the remodels are making restaurants “more inviting to customers,” not just because of the upgraded look, but also added features like Wi-Fi and flat screen TVs.

Weil said the updates also help the chain sell more of its higher-end items.

“It’s about permission,” Weil said. “As (President) Don Thompson says, ‘You eat with your eyes first.’ ”

View the full article on Medford Mail Tribune

Panda Express Take Sweet and Sour Beyond the Food Court

March 6, 2012

Panda Express

Panda Express Take Sweet and Sour Beyond the Food Court

Not all that long ago, many Americans thought of Chinese food as fried rice, chow mein and orange chicken. And one reliable place to find it was at the mall, at places like Panda Express.

But food court mainstay Panda Express is now in the midst of a major transformation. That means moving from mall basements to stand-alone restaurants and keeping pace with an increasingly sophisticated American palate.

“It was my entryway into Chinese food,” says Devin Niebrugge a bit wistfully. The 23-year-old California transplant is enjoying a late lunch at a Panda Express in Washington, D.C. “I feel like you start with Panda Express and when you start to like that, then you go to the more local Chinese restaurants and experiment a little more.”

Panda Express is now one of the fastest-growing chains in the U.S. For the past 28 years, head chef Andy Kao has worked to stay ahead of food trends.

“Before, I just gave customers a big chunk of meat,” Kao said at a suburban Los Angeles Panda that was turned into a temporary test kitchen last fall. “Now I need to make sure [the] nutrition’s good.”

One of Panda’s challenges is countering the perception of Chinese food as oily and fried. Since 2007, Panda has publicly made a point of serving 20 different kinds of vegetables all chopped in-house every day.

Freshness is a strategy it shares with other “fast casual” restaurants such as Panera Bread and Chipotle. The niche thrived during the recession by highlighting quality ingredients in meals costing less than $10. To compete in a “Food Networked” world, Kao has had to somehow showcase Panda as generally appealing yet authentically ethnic.

One secret? That fiendishly tasty orange chicken. Panda Express product manager Patricia Lui says Panda sold over 60 million pounds of it last year. Every ounce seems calibrated to clobber your pleasure centers.

“Sweet and sharp and salty,” she smiles. “You don’t want any one flavor to stand out. You want it to be balanced.”

To create another Panda platonic ideal, Lui and Kao are in the process of testing a brand new recipe for shrimp. Such premium products (along with Angus steak and portobello mushrooms) are part of Panda’s plan to go more upscale. But the bottom line is steam table sustainability.

“So we’ll taste it fresh and we’ll taste it held,” Lui explains. “And we’ll see if the flavors and textures are holding up, and if not, we’ll go back to do more development work.”

Of the 150 recipes Kao dreams up every year for Panda Express, only one or two will make it to consumers, usually after years of trial and error. I watched Lui and product development coordinator Adrian Lok narrow down sauces.

“We had to put out 60, 70 sauces and taste each one,” Lok says. The day I visited, they’d screened it down to six. Panda did not want me to reveal the flavors, but they would be familiar to anyone who enjoys a range of Asian cuisines. Smart, says food industry consultant Darren Tristano, who points to the success of Sriracha rooster sauce. He says Americans are craving a flavor profile Panda’s well-positioned to provide.

“The spiciness, that teriyaki flavor,” he enthuses. “Those different types of sour and tart and tangy. They’re really starting to become more appealing. In fact, if you just look at the kids’ aisle for candy [in the grocery store], that’s most of the types of food we see. Very tart and sour flavors are what kids are looking for.”

So are older kids, like the college students who routinely devour Korean food and seek out Korean-influenced frozen yogurt, like Pinkberry. It’s reflective of a changing American palate. Tristano says there are about 40,000 Asian restaurants in the U.S. that represent about 13 percent of all full service sales.

“Compared to Italian at about 11 percent,” he observes. “Now Italian used to be larger than Asia, but the two have flipped over the past two years.”

Tristano admits that “Asian” seems like ridiculously broad category compared to Italian, but it’s in Panda’s interest to play up a pan-Asian approach; one stop for Chinese, Korean and Thai.

In fact, the final version of that test kitchen shrimp that landed on Panda’s steam tables last week uses spicy Thai green peppercorns. Sales are up 5 percent since the launch of peppercorn shrimp. Customer Niebrugge says Panda can innovate all it wants. Nothing would persuade her to order anything but her beloved orange chicken.

“You know it’s always the biggest tray on the little buffet line,” she points out. “Everybody eats it.”

A few new Panda Expresses open every month, most recently in Mexico City, joining about 1,500 Pandas so far. That’s 30 percent more than 10 years ago. Over the long term, Panda plans to express itself to the tune of 10,000 restaurants all over the world.

View the full article on NPR

Love is in the Air

March 6, 2012

Love Is In The Air

Love is in the Air

While most people may associate Valentine’s Day with upscale restaurants and fine wines, dozens of quick-serve promotions, ranging from heart-shaped doughnuts to couples’ specials, are giving operators hope that they won’t be stood up this February 14.

By targeting families and social gatherings, operators say they’re able to attract customers for the holiday. And for some stores, Valentine’s Day is one of the busiest days on the calendar.

Promotions across the industry are varied. White Castle, for example, will once again host its candlelit dinner, complete with table service, at stores across the country. Great American Cookies will roll out special Valentine’s cookie cakes. And Pollo Tropical will offer a $9.99 meal for two at its 90 company-owned stores in Florida, New Jersey, and Georgia. Even Baskin-Robbins is debuting two new flavors—Love Potion #31 and Chocolate Dipped Strawberry—for its new Cake Bites line through the end of the month in honor of the holiday.

In addition, Krispy Kreme will offer its popular heart-shaped doughnuts in grocery stores, convenience stores, and mass merchants this February, as well as in its 678 domestic and international retail stores. The specialty doughnuts feature red and white sprinkles and icing.

Doughnuts may not seem like a romantic treat, but Krispy Kreme’s chief marketing officer Dwayne Chambers says romance isn’t what the company is aiming for. Rather the concept is taking advantage of a widely recognized holiday to pull in larger groups of people, such as families, offices, or school parties.

“Not that many people are eating doughnuts by themselves,” Chambers says. “Usually you get a dozen and you share it with other people. I think over the years it’s continued to really grow in its importance. It goes back to the fact that doughnuts are kind of a shared experience.”

The chain is also advertising a set of 12 free Valentine cards with the purchase of a dozen doughnuts. Each card can be redeemed for a free doughnut. Selling hundreds of thousands of the novelty heart-shaped doughnuts each year helps make Valentine’s Day one of the busiest days of the year for Krispy Kreme stores, Chambers says.

“We will sell as many doughnuts as we can make and box,” he says.

Many customers view Valentine’s Day as an excuse to splurge, says Darren Tristano, an executive vice president of the foodservice research and consulting firm Technomic.

“Consumers are viewing Valentine’s Day as an opportunity to treat themselves and their loved ones. Even when they’re alone, they’ll take the opportunity to treat themselves because they feel they deserve it,” he says.

Tristano says many customers are looking for an upgrade on their usual dining choices, meaning fast food customers might treat themselves to a fast-casual meal, while frequent casual diners might upgrade to fine dining for the night. That means big opportunities for all restaurant owners, he says.

“What that means to the operator is you’re going to have a customer who’s not generally a regular. It’s a strong opportunity to build new customers,” Tristano says.

While customers are mostly trading up, quick serves can also take advantage of families and value-oriented customers who wouldn’t otherwise choose to eat out.

“There are opportunities to steal those full-service occasions and bring people out for a meal,” Tristano says. “You start to think about, how do I treat my family without spending too much money? Anything the quick-service restaurant can do to build that traffic on this holiday not only helps a less-frequent weeknight this year, but also supports bringing people from other businesses to something that isn’t going to break their wallet.”

Papa Murphy’s takes that mindset to heart. The company will again target value-minded customers with its $7 heart-shaped pizza, dubbed the “Heartbaker.”

Valentine’s Day is a busy holiday for Papa Murphy’s 1,300 stores. But because the chain’s take ‘n’ bake pizzas are finished at home, stores will see customers throughout the day, not just at peak times, says chief marketing officer Jenifer Anhorn.

“Valentine’s Day is a big, high-traffic day for us, in part because of our Heartbaker pizza, and in part because it’s an evening where people are out and about and looking for meal solutions,” she says.

The pizza is a great draw for families, especially those with young children, Anhorn says.

“It’s more of a family thing. Parents are buying it and doing something special for the kids,” she says. “If mom and dad are going out for dinner, they bring it home for the babysitter to enjoy with the kids.”

View the full article on QSR Magazine

Independent Insights: M&C Report

March 6, 2012


Independent Insights

Menu analysis of leading U.S. independent restaurants finds innovation begins with the familiar.

Consumers in the United States continue to spend carefully and avoid risk. But at the same time, they are eager to try new flavors and preparations. Many of the leading independent restaurants—those who drive menu innovation and whose ideas are watched carefully by the rest of the foodservice industry—are balancing comfortable with new by offering unique twists on familiar dishes.
Here are a half-dozen themes that emerge from a menu analysis of leading U.S. independent restaurants.

New and Improved Pot Pie
Pie is projected to be on-trend this year. But instead of the burgeoning of sweet fruit or cream pies, it is savory pies that are gradually growing in popularity. These meat-, cheese- and vegetable-filled pies can be served across all dayparts and several meal parts, including appetizers and entrées.
For example, Uptown Pie Company in Chicago serves a Chicken & Artichoke Pot Pie; Caramelized Onion Tart with Goat Cheese and Niçoise Olives; Mac and Cheese Pie; Lobster Shepherd’s Pie; Sweet Corn & Shrimp Cobbler; and Philly Cheesesteak Pie. And New York’s Fig & Olive offers a Fig Gorgonzola Tartlet—warm Gorgonzola, prosciutto, fig, walnut, arugula and tomato on a puff pastry.
Savory pies are adaptable to many kinds of proteins, seasonings and vegetables. Beef, pork, turkey, fish and shellfish can all appear in savory pies, and these proteins pair well with a variety of cheeses and vegetables such as carrots, peas and corn. Because savory pies are so versatile, operators can often use leftover ingredients from other dishes and compile them into a warm pastry shell.

Lamb and Duck Get Downscaled
Dishes such as rack of lamb, lamb shank, duck confit and foie gras have dazzled consumers’ taste buds at higher-end restaurants. However, a recent menu movement has seen lamb and duck featured in approachable dishes such as tacos and burgers. Through the use of lamb and duck, operators are reinventing popular dishes with new flavors and textures.
Less formal lamb and duck dishes on menus include the Lamb Shank Tacos at Second Empire in Raleigh, NC; The Spoon Burger—Minnesota farmed lamb, Moroccan spices, house herb ketchup, lettuce, tomato, pickle and a wheat bun, at Spoonriver in Minneapolis; Grilled Duck Burger with wild rice and mushroom duxelle, bacon bits, herb goat cheese and cherry aїoli at The Happy Gnome in St. Paul, MN; and Warm Frisee & Baby Spinach Salad topped with smoked duck confit, bacon, blue cheese, poached egg and Dijon vinaigrette at Victoria Gastro Pub in Columbia, MD.
Many patrons shy away from lamb and duck because they are associated with high price points. By incorporating lamb and duck into more familiar dishes, chefs can showcase the flavors of these meats to patrons who might otherwise never try them.

New Interpretations of BLTs
The BLT, or bacon, lettuce and tomato sandwich, is a staple in the U.S. Because of its use of bread, fried bacon and mayonnaise, BLTs have unhealthy levels of fat and sodium. Restaurant chefs have taken interest in the BLT and are creating their own equally indulgent interpretations. These new offerings entice customers to experiment with interesting takes on a classic American dish, similar to the gourmet grilled cheese trend from last year.
New interpretations include the Pimento Cheese BLT Sandwich with fried green tomatoes, baby greens and crispy Newman bacon on toasted brioche at Felicia Suzanne’s in Memphis, TN; the Dagwood B.L.T. with arugula, oil-cured tomatoes and horseradish aїoli at Portland, OR’s Urban Farmer Restaurant; and the BBLT—with pork belly, bacon, pickled tomato, cilantro and hot sauce—at Michael Symon’s Roast in Detroit.
The growth of BLTs trails the mega bacon trend that swept the nation last year. Although no longer the big buzzword on every menu, consumers still have a deep love for bacon.

Pretzels Twist Their Way onto Upscale Menus
Pretzels are no longer just found at sports stadiums, concert arenas and carnivals. These contorted baked breads are being featured on full-service restaurant menus as appetizers, snacks or desserts. Many are housemade and served with quality meats or specialty mustards. Patrons find pretzels appealing because they are fun to eat, are filling, and have a comforting, nostalgic quality.
For example, The Contortionist snack at San Francisco’s Straw features pretzel bites with herb honey mustard and chopped parsley. At New York’s David Burke Kitchen, pretzels appear as a snack with pastrami and mustard. And at Michael Symon’s Roast, the Beer & Pretzels dessert includes chocolate pretzels with Guinness ice cream and caramel foam.
Sometimes a successful dish such as gourmet pretzels only requires looking beyond traditional restaurant menus to spur creativity. Because pretzels can take on many shapes and are highly adaptable with the use of various salts and dipping sauces, the baked treats allow operators to easily add a distinctive and craveable menu option.

Gourmet Corn Dogs
Corn dogs—hot dogs coated in cornmeal batter and deep-fried or baked—are commonly associated with street food, fairs and quick-service restaurants. The most distinguishing feature of any corn dog is the wooden stick it is served on, making it extremely portable and easy for dipping. Traditional condiment pairings for corn dogs are ketchup and mustard. Recently, casual-dining chefs are using different proteins and offering housemade, premium condiments to modernize the corn dog. Despite changes in preparation technique and ingredients, many of these fancy interpretations maintain the informal stick plating for nostalgia.
Gourmet corn dogs include the Lobster Corn Dogs with whole-grain mustard and crème fraîche served at celebrity chef Michael Mina’s Bourbon Steak; Straw’s Great Expectations snack of Niman Ranch mini corn dogs with curried aїoli, Heinz 57 and honey mustard; and the Chorizo Corn Dog with Manchego and ancho-chili ketchup at The Original Dinerant in Portland, OR.
One of the easiest ways to make a dish contemporary is to use a different protein. For instance, by replacing a traditional pork hot dog with an ethnic meat such as chorizo, the corn dog becomes more appealing to diners craving bolder, nontraditional flavors.

Designer Donuts
Cupcakes were the dessert craze in 2010, and many industry insiders predicted 2011 to be a huge year for pie. Pastry chefs now seem to be focusing their attention on the versatility of donuts. No longer just a breakfast food, donuts are appearing in all dayparts and meal parts, particularly the dessert category.
In Brooklyn, NY, Dough specializes in yeast donuts with unusual flavors such as Hibiscus, Cheesecake with Graham Crackers, Blood Orange, Nutella Cream, Chocolate with Chipotle and Dulce de Leche. In Portland, OR, Voodoo Doughnut uses toppings such as M&M’s, chocolate chips, peanut butter, marshmallows, blue-raspberry powder, bacon, bubble-gum dust and Fruit Loops cereal.
In addition to creating nontraditional donut flavors, donuts can also be paired with sweet or fruity dipping sauces or topped with ice cream or whipped cream. And because donuts have a highly portable size and shape, the treats are appealing as a morning, dessert or snack option.

Key Takeaway
Independent operators are introducing more affordable versions of high end dishes to please cash-strapped customers, but also taking familiar items and adding “exotic” twists. Not only do these new preparations excite customers, they also make it possible for consumers to dine out without compromise in our post-recession economy.

Darren Tristano is Executive Vice President of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit

This article came from a print version of M&C Report

In 2011, Hamburger Chains Make Big Push Locally

March 6, 2012

Technomic Report

RESTAURANTS: In 2011, hamburger chains make big push locally

The year began with Roberto Vigilucci, who built a tiny chain of popular Italian cuisine restaurants in San Diego’s County’s coastal cities, tightening his expansion plans by pulling out of an Oceanside restaurant and postponing plans to open a delicatessen market in Carlsbad.

Vigilucci remains in a holding pattern on expansion plans, though the restaurant industry seems poised for a rebound in 2012 despite closings of multiple Carlsbad-owned Carrows restaurants throughout the region this year, a bankruptcy filing of San Diego’s Pat & Oscar’s, and the closing of the prominent Acapulco Mexican Restaurant in Escondido.

Tracy Pedrazzani, a Vigilucci’s spokeswoman, said the chain saw a 40 percent increase in parties booked in the last three months of the year. The biggest increase came from corporations and “business parties,” she said.

Overall, sales picked up modestly in 2011 at locally based restaurant chains, including Rancho Bernardo-based Garden Fresh Restaurant Corp., Carlsbad-based Daphne’s California Greek and others.

“It was a challenging year,” said Michael Mack, the chief executive of Garden Fresh Restaurant Corp. who founded the company in 1978. The chain is made up of 112 salad-buffet style restaurants in 15 states that operate under the Souplantation and Sweet Tomatoes brands. It rolled out smaller Souplantation Express eateries this year to cater to hungry crowds near food courts, airports and college campuses.

“We continued to see a lot choppiness and uncertainty on the part of our customers,” Mack said. “A lot are wrestling with purchase decisions over how much they want to dine out versus making food at home.”

The sluggish economy continues to dampen growth somewhat. “Here’s the good news. I don’t think the economy will get a lot worse. Housing can’t be much worse. That’s the good news. The economy will continue to grow 2 to 3 percent (annually),” he said.

Bill Trefethen, the CEO of Daphne’s California Greek, also said sales were picking up —- estimated at 3.5 percent over the past year. “We rebranded and remodeled,” said Trefethen, who turned the old Daphne’s Greek Cafe into “Daphne’s California Greek” and began making over the 60-store chain into a hipper concept with piped-in music from the Dave Matthews Band and other pop artists, new colors and even dumping Coke machines for Pepsi dispensers.

“The economy is kind of sideways,” said Trefethen, who hopes to overhaul the look of the chain’s remaining restaurants by the spring.

The big story in 2011, however, was the arrival of hamburger chains throughout San Diego County and Southwest Riverside. The pace of burger joints opening up has been unrelenting.

In August, Virginia-based Elevation Burger, a tiny chain of 20 restaurants trying to muscle into the $65 billion, national hamburger market, opened its first franchise in the western United States in the suburban Bressi Ranch area of Carlsbad. Lorton, Va.-based Five Guys Burgers and Fries, with more than 750 locations, stormed the region with new restaurants opening this year in Encinitas, San Marcos and Vista.

Denver-based Smashburger, with more than 100 locations, opened stores in Del Mar, La Jolla, Oceanside and San Diego. It has commitments from its franchise partners to build 463 units, and is on target to have 500-plus stores in the next few years.

There also is Culver City-based The Counter; San Diego-based Burger Lounge; and the privately held Islands Restaurants L.P., a 50-plus store chain of tropical-themed eateries with headquarters in Carlsbad that has felt competitive pressure from a surge of gourmet burger rivals coming to compete on its turf. Executives with Islands declined to comment on their plans.

Irvine-based Habit Burger Grill Inc., which opened its first San Diego County fast-food store in Mission Valley three months ago, and another in Carmel Valley last month, plans another by midyear in Solana Beach and its first for Riverside County sometime in 2012 for Murrieta, according to Russ Bendel, president and chief executive of Habit Burger, a fast-casual chain famous for its charbroiled hamburgers, specialty sandwiches, salads and handmade shakes and malts.

A quirky treat that Habit Burger serves up: The chain jets in sushi-grade tuna from Fiji in the South Pacific Ocean to Los Angeles International Airport three times a week.

Habit Burger opened its first restaurant in Santa Barbara nearly 42 years ago, and took 22 years before it opened a second. At the end of 2007, private equity firm Greenwich, Conn-based KarpReilly LLC invested in Habit and began opening company-owned stores throughout Southern California, and adding three in the Phoenix area. Today, the Irvine-based chain has more than 50 locations.

“At the time they (KarpReilly) acquired the company, it had 16 restaurants. Over the last three to four years, we have steadily grown and accelerated growth,” Bendel said.

“To enter San Diego (County), we wanted to make sure that we entered with premium locations. It’s taken us a little bit of time. But we are patient,” Bendel said. “We are not franchise driven. We are under no pressure from franchise agreements to open ‘x’ number of stores in ‘x’ amount of time.”

KarpReilly also has investments in the Burger Lounge, Elephant Bar, Mimi’s Cafe and Marie Callender’s.

Darren Tristano, executive vice president of Technomic Inc., a Chicago-based restaurant industry consulting firm, is forecasting growth in the fast-casual and full-service restaurant sector in 2012, the first time since the Great Recession reared up.

He’s forecasting 2.5 percent growth next year. The reason: The employment picture has improved somewhat in the U.S.

He sees some older full-service chains continuing to struggle, including Catalina Restaurant Group, the Carlsbad-based parent of Coco’s Bakery Restaurant and Carrows Restaurants. Catalina runs the 67-store Carrows chain and the 121-store chain of Coco’s eateries. Islands also has been challenged, Tristano said.

“It’s a battle,” he said. Putting aside McDonald’s, Burger King and Wendy’s, the $1.6 billion “better-burger” market is dominated by Five Guys with $700 million in sales, followed by Smashburger with $69 million, The Counter with $49 million and all the others battling it out for the lower-rung spots, according to Tristano. The better-burger market is expected to see double-digit growth in 2012, reaching more than $2 billion in annual revenue as an industry in 2012, he said.

“But it’s hard for me to say. Better burgers still seem to be in their infancy stage in terms of growth,” Tristano said.

View the full article on North County Times

Breakfast Trending Upward

March 6, 2012

Breakfast Trending

Breakfast trending upward

Driven by the need for fast, convenient options in the morning, consumers are trading at-home breakfast occasions for away-from-home purchases, according to Chicago-based foodservice research and marketing firm Technomic. Consumer data shows that the breakfast segment is not yet saturated and there are still plenty of opportunities for the daypart.

Technomic estimates that the breakfast segment accounts for 12 percent of the total restaurant industry, generating around $42 billion in annual sales.

“Breakfast is a very dynamic segment in which consumers are looking for healthier options and place a premium on convenience,” said Technomic executive vice president Darren Tristano in a press release. “Our busy lives and weekly routines drive the need for fast, convenient options in the morning. When consumers don’t have convenient options, they’re increasingly bringing breakfast from home to eat elsewhere.”

Coffee is playing an increasingly important role in consumers’ breakfast purchasing decision: 33 percent of consumers who drink coffee at breakfast indicate they are loyal to a coffee brand or foodservice outlet that serves their preferred coffee, up from just 25 percent of consumers who said the same in 2009.

Health also is a top trend to watch, with whole grains and multigrain items as ways to signal health.

Technomic’s Breakfast Consumer Trend Report examines preferences, attitudes and purchasing behavior based on survey results from more than 1,500 consumers.

View the full article on Modern Baking

Diners go for Fast-Casual

March 6, 2012

Report Consumers

Diners go for Fast-Casual

BY TIFFANY HSU – Los Angeles Times

LOS ANGELES — Fast-food eateries are in the throes of drive-thru Darwinism as more upscale upstarts, such as Chipotle Mexican Grill and Panera Bread Co., grab market share from the likes of Taco Bell, Subway and Wendy’s.

Chains that are fancier than fast-food options but cheaper than sit-down alternatives are part of a hybrid sector known as fast-casual that is maturing into one of the food industry’s strongest.

That category is tapping into growing demand for more healthful, specialty foods that are still speedily served and moderately priced. Fast-casual is steadily poaching fast-food customers looking for better quality and sit-down diners seeking cheaper prices, NPD analyst Bonnie Riggs said.

“There’s no end in sight to their growth,” Riggs said. “They’ve delivered on consumers’ value expectations far more than most fast-food places.”

The evolution is happening as the rest of the restaurant industry fights for a shrinking customer base amid a slow economic recovery and high food prices.

Fast-casual is still only a small segment of the industry. But it tripled its market share in roughly the past decade to about 6 percent of restaurants, analysts said, and it is the industry’s only segment to grow in the past five years. In 2010, major fast-casual chains pulled in $18.9 billion – a 6 percent increase, according to research group Technomic.

“This category has essentially blown through the recession without skipping a beat,” Technomic Executive Vice President Darren Tristano said in a statement.

Formerly known as adult fast food, fast-casual includes restaurants with limited table service and no drive-thrus. They are often perceived to have higher-end décor, food quality and prices.
‘More fuzziness’

But the boundaries are blurring. Eateries such as Carl’s Jr., with its Six Dollar Burger, and foodie favorite In-N-Out straddle the line between fast-casual and fast food. Drive-thrus are appearing at Panera locations, and some fast-casual chains are experimenting with delivery – usually an option sit-down restaurants provide.

“We’re going to continue to see more fuzziness in how to define these restaurants,” said Robert L. Sandelman, chief executive of food service research group Sandelman & Associates.

Panera, which has about 1,500 outlets nationwide, is turning in especially impressive numbers. In the third quarter, its profit was $28.8 million – up 27 percent compared with the same period in 2010. In late November, the company’s stock price hit a 52-week high of $143.38.
Bakery-cafe restaurants, such as Corner Bakery Cafe, are leading the fast-casual charge, analysts said, followed by so-called better-burger chains such as Five Guys, the Counter and the Shake Shack. Other fast growers include Asian restaurants, noodle shops and Mexican eateries.
Perceived food quality is key to fast-casual’s rise, according to a survey measuring meal quality by the MarketForce research firm. Customers ranked Panera, Chipotle and Five Guys high while pushing fast-food companies Burger King, McDonald’s and Taco Bell to the bottom.

In the same study, fast-casual restaurants also scored among the best for atmosphere, healthful options and eco-friendly business practices.

Fast-casual chains also tend to have distinctive décor, such as the international-cafe feel of the Cosi sandwich chain and Pei Wei Asian Diner’s glossy vibe.

“These restaurants offer a more pleasant experience – unlike a fast-food place that’s less clean than you’d like it to be, smelling like grease, and small, too,” said Jason Moser, a restaurant analyst for Motley Fool. “It’s just the evolution of eating out in general.”

View the full article on News Observer