U.S. Seafood Chains’ Sales on Rebound

March 21, 2012

U.S. seafood chains’ sales on rebound

U.S. seafood chains’ sales on rebound

By Christine Blank, SeafoodSource contributing editor 20 March, 2012 – U.S. seafood restaurant chains bounced back in 2011, as the economy improved and more consumers returned to dining out.

According to Technomic’s new “Top 500” restaurant chain report, the 19 casual-dining seafood chains in the top 500 grossed USD 5 billion in sales in 2011, with an average sales growth rate of 2.5 percent.

Overall, the nation’s 500 largest chains registered a 3.4 percent sales increase in 2011, a sharp improvement over a 1.8 percent increase in 2010.

The seafood chains with the highest sales growth from 2010 to 2011 were Joe’s Crab Shack (12.1 percent), Chart House (9.6 percent), Bonefish Grill (9.6 percent), Roy’s Restaurants (7.7 percent) and Red Lobster (6.2 percent). Other top gainers were Legal Sea Foods (3.9 percent), Bubba Gump Shrimp Co. (3.6 percent), Pappadeaux Seafood Kitchen (3.1 percent) and Landry’s Seafood House (2.9 percent).

Red Lobster realized near-record sales growth in 2011, demonstrating a rebound from its “struggles” over the last five years, said Darren Tristano, executive VP of foodservice research and consulting firm Technomic, which is based in Chicago.

“Red Lobster has contemporized a number of restaurants, making them more appealing — not just on the outside, but also on the inside. And, for those in the lower to middle class who would like to dine at Red Lobster, they have made it more affordable and within reach,” Tristano said.

Joe’s Crab Shack added units and improved its advertising and marketing in 2011, according to Tristano. “They have done a really nice job of creating ads around their products and creating a very festive, high-energy shack concept,” he said.

Bonefish Grill’s sales have improved due to the chain marketing its contemporary concept that is “a step above casual but a step below fine dining.”

“It’s a nice niche. They don’t seem to have a lot of competition in that area,” said Tristano.

As for upscale seafood chains, sales at Ocean Prime jumped 23.1 percent in 2011, while sales at Mitchell’s Fish Market edged up 2.6 percent; sales at Oceanaire Seafood Room were flat in 2011.

Some seafood chains have also benefitted from the overall growth in the full-service restaurant segment, which experienced a 2.8 percent sales increase in 2011. Sales at full-service seafood chains grew 5.2 percent, edging out sales at full-service steak concepts at 5.1 percent, according to Technomic.

View the full article on seafoodsource.com

Pushing Up Prices – M&C Report

March 19, 2012

Pushing Up

Pushing Up Prices

U.S. consumers are willing to accept menu price increases, but restaurant operators must tread carefully.

Pricing pressures become more acute during period of economic uncertainty, for both consumers and restaurant operators. Rising food costs and consumer sensitivity to price increases create tensions and require a delicate balancing act. Technomic’s research has shown that restaurant operators may have a small amount of flexibility when it comes to managing price increases, but this flexibility has its limits.

While seven out of 10 U.S. consumers rank the price of the meal as one of the two most important forms of value (except when it comes to fine-dining), more than two thirds rate the quality of food an important part of the value equation.

Customers indeed are trying to save money where they can, but are willing to spend on things they deem worth it. Apparently restaurant visits often qualify. Only about 29% of U.S. consumers say they have recently changed where they purchase food in order to save money. Six out of 10 consumers are willing to spend more on a dish that has high-quality ingredients. And many of them are willing to spend more for healthy items, all-natural ingredients, new or unique international flavors and locally sourced ingredients.

Menu Price Expectations

Consumers have different price expectations for different service styles and dayparts as well. For example, at breakfast, nearly three-quarters of fast-food consumers are only willing to spend up to $5 a person. There is a much broader range among fast-casual restaurants, with two-thirds of consumers expecting to pay somewhere between $3 and $9.99.

Likewise, at lunch, 89% of fast-food consumers are willing to spend up to $6.99 per person, and three-quarters of fast-casual customers will spend between $5 and $9.99. The majority of consumers are willing to spend $11.99 or less on lunch at family style restaurants.

Lunch and dinner consumers have varied price expectations at upscale-casual and fine-dining restaurants, suggesting that a tiered pricing approach on menus might be most appropriate.

At limited-service restaurants, pricing expectations for dinner are similar to those for lunch, likely because these restaurants have not historically changed their menu pricing between lunch and dinner.

Consumers Understand Price Increases

Technomic research reveals that U.S. consumers notice price increases. A large majority of consumers reports that they have noticed that grocery prices have been increasing either sharply (28%) or moderately (54%). Restaurant price increases have been less noticeable, but are still registering: 10% of consumers report that restaurant prices are rising sharply and 51% report they are increasing moderately.

The majority of consumers understand the cost pressures faced by restaurants. Most consumers attribute the rise in restaurant prices to increased costs of gasoline (69%) and ingredients (62%). Very few consumers attribute price increases to operator greed (9%) or labor costs (7%).

Perhaps because they see price increases in grocery stores and understand the reasons for the, most consumers will not stop visiting restaurants because of higher prices. Just over a third of consumers say they would go to limited-service restaurants less often—though some would lower their costs by ordering less expensive items (21% to 25%) or fewer items (15 to 19%), and others will switch to a cheaper limited service restaurant (8% to 12%).

A greater percentage of full-service customers would reduce visits, though consumer responses differ by type of restaurant. Locally owned restaurants appear to run the biggest risks as a result of price increases. Consumers are more likely to stop visiting independents (20%) than they are most other full-service restaurants. Two-fifths (42%) of consumers report that they would reduce their visits to family-style and traditional casual-dining restaurants as the result of price increases.

How Restaurant Operators Are Responding

U.S. restaurant operators use a number of methods to raise prices with out raising the ire of their customers.

P.F. Chang’s China Bistro, for example, has fount that small increases between 2% and 3% are accepted by customers, and that the easiest way to raise prices is to restructure or reformat the menu. In general, customers assume that there will be a price increase associated with a menu restructuring, whether or not there actually is one. At P.F. Chang‘s, customers respond more negatively when their favorite dishes are removed from the menu than when prices are increased. President Lane Cardwell asserts that companies should research what their competitors are charging, but must consider their own customers and concepts first.

Firehouse Subs CEO Don Fox concurs. The growing fast-casual sandwich chain conducts surveys and panels in various markets to discuss pricing. He adds that improving the quality of menu items or dining experience provides operators a rationale for raising prices, as consumers will see increased value in the offerings. Firehouse Subs recently started rolling out Coca-Cola‘s Freestyle machines, offering consumers many more beverage flavors and combinations. Customers could see the value of this new beverage service and were willing to pay more for customizable options.

Restaurants need to be prepared for consumers questioning the reasoning behind price increases, says Keith Sirois, CEO of Big Boy Restaurants. He advises operators to arm their managers and servers with an explanation as to why there was an increase, and, when necessary, why the increase was so significant. In conjunction with a recent increase, Big Boy prepared a printed response card for servers to hand out to their customers. The cards showed how commodity prices have been rising and offered an explanation of why prices were raised in the restaurant.

Key Takeaways

Operators must take menu price increases if they expect to run a successful business while maintaining the quality of food offered. With the increasing costs of commodities and the higher price of labor, there is no way for operators to achieve profitability without re-evaluating pricing strategies.

The important thing to remember is that guests are smart. They notice price increases, and they see compromises such as decreases in portion sizes. To avoid upsetting their customers, operators should be prepared to explain why there have been changes on the menu.

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

Restaurant’s Strategy is to Add More Flair with New Fare

March 19, 2012

Restaurant Strategy

Restaurant’s Strategy is to Add More Flair with New Fare

Catalina Restaurant Group Inc. recently decided that if it wants to grow the popularity of its struggling Carrows Restaurants brand, it needs to move beyond its meatand-potatoes comfort food zone.
The Carlsbad-based company recently took steps to differentiate the chain from Coco’s Bakery Restaurants, the more successful eatery the company also owns, by testing out Asian and Italian-style items, such as pastas and new salads, at a few Carrows locations. It will be gathering feedback over the next few months on what to keep permanently on the menu.

The aim is to move Carrows beyond its current loyal following, among older patrons, and attract a wider clientele including young consumers, families and large groups, who are often seeking lighter and healthier fare.

“We’re testing out an Italian menu at our San Clemente restaurant, and we have different Asian menus we are trying out in Imperial Beach and Cerritos,” said company President Masaaki “Mark” Terada. “We will see what we hear from the customers; so far the new items seem to be doing well.”

Catalina now owns and operates more than 180 restaurants, primarily in California with a limited presence in Arizona and Nevada. About two-thirds are Coco’s, which Terada said have contributed most to boosting the private company’s annual sales to more than $200 million, while Carrows has been lagging.

Reviving the brand could prove daunting. Darren Tristano, executive vice president with restaurant industry consulting firm Technomic Inc., noted that Coco’s and Carrows both operate in a declining “family dining” segment where older established chains have been challenged by operators appealing to younger generations, such as Panera Bread, Applebee’s and Chili’s.

The youth movement has spurred several established family-oriented eateries to make changes. “We see this with Denny’s offering a late night “Rock Star” menu, and IHOP now offering a new fast-casual concept that relies on counter ordering, food delivered at the table and increased convenience,” said Tristano.

Glendale-based IHOP recently opened its first-ever IHOP Express location in San Diego’s Gaslamp Quarter.

Tristano says that Coco’s and Carrows are both primarily regional players, leaving them challenged to match the marketing and operational clout of larger national rivals. Family-oriented restaurants of all sizes will likely need to remodel existing restaurants, tweak their brand positioning and adjust menus to attract younger demographics.

Both Carrows and Coco’s are longtime California brands. Carrows was founded in 1970 as Carrows Hickory Chip Restaurant in Santa Clara, and Coco’s started in the late 1940s in Orange County.
The two chains were purchased in 1996 by Advantica Restaurant Group of South Carolina, which sold them to Catalina in 2002. Catalina itself was acquired in 2006 by Tokyo-based Zensho Co. Ltd., Japan’s largest restaurant operator.

Terada said Catalina continues to own the majority of its locations, although it does have 15 franchised Coco’s and four franchised Carrows.

Catalina for the most part has resisted the trend of rivals in recent years to add bar service and alcoholic beverages to its offerings, even though those items could add considerably to customers’ tabs.

“We want to keep a family atmosphere in our restaurants,” Terada said.

View the full article on San Diego Business Journal

New and Unique Flavours Help Restaurants Respond to Consumer Demands without Breaking the Bank, Finds Technomic

March 18, 2012

New and Unique

New and Unique Flavours Help Restaurants Respond to Consumer Demands without Breaking the Bank, Finds Technomic

U.K. consumers are still greatly affected by lingering global economic recession, causing restaurant-goers to be more demanding than ever as they closely watch their foodservice dollars and actively seek the best overall value. These current market forces are making craveability and culinary expertise increasingly relevant to consumers. More than a quarter of all surveyed consumers (28 percent) are more interested in trying new flavours now than they were a year ago; this trend is strongly driven by younger consumers aged 18-34 (43 percent). Technomic’s findings signal the need for restaurants and their suppliers to stay on top of flavour trends in order to reinvigorate classic offerings with innovative twists.

“Operators are always looking at new ways to differentiate their brand,” says Technomic EVP Darren Tristano. “Incorporating unique flavours into existing menus can be a low-cost and effective way to grow sales and attract new customers. Focusing on food taste and flavour is a powerful long-term strategy.”

To help those aligned with the foodservice industry identify key flavour trends-whether infused during food preparation or added through sauces, dips and condiments-Technomic has developed the U.K. Flavour Consumer Trend Report.

Interesting findings include:

Of consumers surveyed, 39 percent said they would be more likely to visit a restaurant that offers new or innovative flavours, up from 35 percent of those surveyed in a 2010 study.

31 percent of consumers are willing to pay more for restaurant meals that showcase new and exciting flavour profiles. This is an increase from 28 percent two years ago.

Consumers aged 25-34 are the most likely to indicate a greater interest in ethnic flavours and cuisines (40 percent) up from 33 percent in just one year.

Mayonnaise is the leading condiment and sauce flavour at full-service restaurants and continues to show growth, increasing from 6.9 percent to 10 percent in the past two years.

Technomic’s 2012 U.K. Flavour Consumer Trend Report examines flavour preferences, attitudes and purchasing behaviour based on survey results from more than 1,000 consumers. The Menu Insights section utilises Technomic’s exclusive MenuMonitor trend-tracking tool to provide an in-depth look at how leading chain operators are incorporating top flavour profiles into menu items. Along with main course categories, the report contains in-depth explorations of beverage, dessert, snack and starter dip flavour preferences.

View the full article on PR Newswire Europe

Small Business: Sizzler Steers Comeback Through Local Area

March 17, 2012

Pennsylvania Gas

Small Business: Sizzler Steers Comeback Through Local Area

Sizzler USA Restaurants Inc. is staking part of its latest recovery plan on the Bay Area.

The closely held company plans to open five new restaurants in the region, with the first new location to open in the next two years, and the last opening within six.

Sizzler is targeting high population areas that also have daytime workers nearby, such as Fremont, San Jose, Union City, Milpitas, Pleasanton and Livermore, though it hasn’t made final decisions on where the restaurants will be. The chain is also remodeling existing restaurants in Santa Clara, Hayward, Pinole, Auburn and Sacramento.

Once popular for its low-price meals and bottomless salad bar, the Culver City-based restaurant chain has been squeezed by higher-end and lower-end competitors, while a trend toward healthier food has driven some patrons elsewhere.

In 1996, Sizzler filed for Chapter 11 bankruptcy, closing more than a hundred stores in the process. The company has since mounted several turnaround efforts. Last year, a management-led group that included a former Sizzler owner bought the franchise for an undisclosed sum from an equity firm that had owned the franchise since 2005.

The local expansion is the latest phase of Sizzler’s broader comeback plan, which started roughly a year ago. Nationally, Sizzler is aiming to attract customers by remodeling restaurant interiors, including fresh paint, new finishes and automated ordering kiosks. It is also playing up freshly cut and ground meat, and even a food truck, called the “ZZ-Truck,” that serves fare such as sandwiches, salads and ice cream around Los Angeles and Orange counties.

“If I would have invited you to Sizzler four years ago, I would have said, ‘It’s great food but don’t pay attention to the building,’ ” says Kerry Kramp, Sizzler’s chief executive, who announced the new Bay Area restaurant openings in February.

While Sizzler is also targeting other urban areas such as Minneapolis and Denver for its revival, the Bay Area is a particular focus because it has historically been a strong market for the company. Overall, Sizzler will have 17 Bay Area locations after the openings and refurbishments, making it the region with the second-most Sizzlers, just behind the 18 planned for Chicago.

Focusing its potential new restaurants on Bay Area cities such as Fremont and Milpitas will likely offer opportunities for the chain, says Darren Tristano, an analyst at research firm Technomic, which has no financial ties to the restaurant. Those areas don’t have much in the way of competition for Sizzler, he says.

“Sizzler is factoring in ways that make them more relevant,” Mr. Tristano says, adding that the restaurant’s expansion is coming as the rest of the industry retrenches. “This is the right time to try to grow against other restaurants’ poor performance,” he says.

Sizzler plans to open new restaurants and refurbish others in the Bay Area, part of a national strategy. Some locals have already been won over. Janice Visaya, a 21-year-old student in San Francisco, first went to an older Sizzler restaurant about two years ago with her boyfriend’s family, primarily because it was the closest American buffet in the area. “I always seem to keep going back for their steak and baked potato,” she says.

Sizzler’s wider efforts to attract customers by emphasizing its fresh food and new look helped boost sales in restaurants open at least a year to $298 million in 2011, up 1.5% from 2010.

Still, the once-iconic 53-year-old company, which is down to 170 stores from more than 600 in the ’80s, faces steep challenges in its attempted comeback.

Analysts say the restaurant industry has changed since Sizzler was the go-to place for a good, inexpensive steak—a 12 ouncer at a Sizzler outside San Francisco costs $12.99. Fast-food outlets have eaten into Sizzler’s typical market, while higher-end restaurants have lowered their prices to stay competitive. In addition, the latest data from market researcher NPD Group show that Americans are eating at home more often.

Despite this, Rob Black, executive director of the Golden Gate Restaurant Association trade group, notes that the Bay Area doesn’t have many restaurants catering to families. That could be an opportunity for Sizzler.

“Sizzler is family-focused and there’s an important role for those restaurants in the Bay Area,” he says.

View the full article on The Wall Street Jounral Online

Pennsylvania Gas Station Wawa is Just One Cult Classic Heading to D.C.

March 16, 2012

Pennsylvania Gas

Pennsylvania Gas Station Wawa is Just One Cult Classic Heading to D.C.


“Breathe in. Breathe out.”

“Omg, yes please.”

Those were just some of the reactions on Twitter to news that Pennsylvania-based convenience store and deli chain Wawa is interested in opening locations closer to metro Washington. Some may call such enthusiasm for a gas station with food overblown. But others know that Wawa has a huge cult following. It even has a rival in fellow Pennsylvania-based convenience chain Sheetz (each has its passionate defenders).

Wawa is part of a growing group of restaurant and food chains that share two qualities: They have a built-in set of fans, and they hope to bring their operations closer to Washington soon.
“We have several sites in the works,” said Peter Gilligan of Wawa Inc., at the International Council of Shopping Center’s Mid-Atlantic conference in late February. The company is in talks for locations in Virginia and Maryland but would ultimately like to be in the District as well, provided it can find a site big enough to house a gas station.

It’s all part of the conventional wisdom that the region’s demographics make it a no brainer.

“Many folks in the restaurant arena look at the D.C. market as a place where you almost can’t go wrong,” said Chicago restaurant consultant Darren Tristano of Technomic Inc., citing residents’ tendency to eat out frequently and the mix of international consumers.

Another cult favorite targeting Washington is Sonic, a drive-thru style fast-food operation beloved for unusual drinks like cherry rickeys and greasy fare like tater tots. Senior Real Estate Director Gary George said the company expects to sign a Washington-area franchisee within 60 days. Its closest location right now is in Fredericksburg, Va.

The Washington area has seen several other cult favorites recently open or expand in the market.

Coffee Bean & Tea Leaf is popular on the West Coast, particularly among Hollywood celebrities; it opened its first location at the Washington Hilton in February. Bojangles, heralded by North Carolinians for its spicy chicken, opened its first D.C. location last year in Union Station, and the owners hope to get as many as 30 open locally in the next five to seven years. Jersey Shore favorite Jersey Mike’s Subs, known for its hoagies, has opened 11 spots around this region in two years and has plans for about 15 more. Jimmy Johns, particularly embraced by college students, has opened in areas such as Leesburg and Crystal City. And now, not just New Yorkers stand in line for Shake Shack’s hamburgers. The restaurant opened in Dupont Circle last year.

Tristano thinks the Washington area is seeing an influx of new entrants partially because of the growing popularity of the franchise model for restaurant expansions.

To succeed, cult favorite restaurants ideally should have consumers in a market with some knowledge of their products. Tristano said that’s why Washington is seeing interest in particular from chains with locations on the East Coast, such as Bojangles and Wawa. Atlanta-based Chick-fil-A, which has expanded its presence in this area dramatically, is a proven success story that others can look to, he said.

Marketing can also build awareness, but those efforts can be tricky, Tristano added. Sonic has run national commercials for its products in Tristano’s home city of Chicago and in the Washington area, leading impatient customers in both cities to wonder why the restaurants are not there yet.

Some cult favorites will always have Washington-area residents originally from elsewhere pleading for their arrival, even if the likelihood is slim. One example is California-based In-N-Out Burger, which has devotees of its “animal style” sandwiches nationwide. Is it coming?

“We don’t have any immediate plans for the D.C. area,” said In-N-Out spokesman Carl Van Fleet. “We continue to grow pretty slowly and, while we hope to get there someday, our current growth plans are only focused on the five states in which we currently operate.”
Wait, did he say “someday”? There may still be hope.

View the full article on Washington Business Journal

Sonic Drive-In Revives ‘Out of Work’ Spokesmen

March 16, 2012

Sonic Drive-In

Sonic Drive-In Revives ‘Out of Work’ Spokesmen

WITH the unemployment rate above 8 percent, Americans are taking extreme measures to get hired — even, apparently, brand spokesmen.

T. J. Jagodowski and Peter Grosz, who starred in humorous and largely improvised ads for Sonic Drive-In from 2002 to 2010, appear in about a dozen videos uploaded to YouTube over the last few weeks.

Proclaiming to be commercials produced by the two, the videos include such mishaps as the spokesmen promoting popcorn chicken in a car overrun by live chickens.

“We want our old jobs back,” explains a Facebook page featuring the two. “Now we make our own commercial-things without permission from the man.”

A Web site features a petition for consumers to sign that demands their return. The effort culminated with a commercial that was posted to YouTube on Tuesday and which will go on the air this Monday. “Hey there, America,” Mr. Grosz begins in the ad. “You may remember us as the two guys who used to be in all those Sonic commercials.”

Mr. Jagodowski says, “But then they phased us out.”

“So we decided to go rogue and make our own commercials,” Mr. Grosz continues.

After a montage from the online videos, they triumphantly reveal they have been rehired, and the commercial closes with the screen text, “The two guys are back.”

It turns out, however, that this was not really a job-seeking effort by the spokesmen but a publicity stunt by the brand.

After Sonic decided to bring back the spokesmen, “we sort of imagined that they could pester the company to get their jobs back,” said Jeff Goodby, co-chairman and creative director of Goodby, Silverstein & Partners in San Francisco, part of the Omnicom Group, which produced the commercials and the online videos.

The spokesmen were originally cast by Barkley in Kansas City, Mo., when it was the agency of record for Sonic. They “were put away a little too early because if they stayed around they really would have come into their own in the social media context,” Mr. Goodby said.

Character-driven viral campaigns often owe much of their success to YouTube. For example, Old Spice commercials and online-only videos featuring Isaiah Mustafa have attracted nearly 200 million views.

The fictional effort of the spokesmen to get their jobs back served as a premise to set up Facebook and Twitter accounts and a YouTube channel on their behalf, and all will now be repurposed to promote the characters and Sonic.

While the job-seeking premise might strike a chord with the ranks of the unemployed, Mr. Goodby said that was not the impetus.

“It wasn’t intended to resonate in that way,” Mr. Goodby said.

But Darren Tristano, an executive vice president of Technomic, a food industry consulting and market research firm, said consumers still are apt to identify with the idea of seeking employment.

“So many Americans are underemployed or unemployed that I think that’s how we are going to relate to these guys,” Mr. Tristano said. “It may be more subliminal but it’s going to be effective.”

Originally named Top Hat Drive-In, Sonic began in Shawnee, Okla., in 1953 and now has more than 3,500 locations in 43 states.

Customers order over microphones in individual parking spaces, and carhops — typically on roller skates — deliver the food. Naturally the highest concentration of restaurants is in warmer states including Texas, and, according to the company, the busiest month tends to be May, the slowest January.

Revenues of both company- and franchised-owned restaurants totaled about $3.6 billion in 2011, which made Sonic the fourth-largest fast-food chain, behind McDonald’s, Burger King and Wendy’s.

The company spent $122.5 million on advertising in 2010 and $104.9 million in the first nine months of 2011, according to the most recent data available from the Kantar Media unit of WPP.

In late January, Sonic got an unexpected jolt of publicity when Giorgio Fareira, a folk singer, was in a car with friends when they pulled into a Sonic in Connecticut. Mr. Fareira, who was in the passenger seat and happened to have his guitar, decided on the spot to sing the order into the microphone to a good-humored Sonic employee, while a friend in the backseat with an iPhone shot a video, which she posted on YouTube.

Versions of that video drew more than two million views. (“If this music video doesn’t make you happy and hungry,” advises a post about it on the Web site Gizmodo, “you are dead inside.”) While brands occasionally disapprove of unauthorized content on YouTube, Sonic embraced Mr. Fareira, and through its public relations agency helped the singer get booked on the “The Ellen DeGeneres Show” on Feb. 14.

“We all got a big kick out of it right off the bat,” said J. Clifford Hudson, chief executive of Sonic. “Now we’re really kind of helping evolve his career a little bit further.”

As for the spokesmen, neither had expected to be returning to Sonic. Mr. Grosz previously worked as a writer for “The Colbert Report” and currently appears on NPR’s “Wait Wait … Don’t Tell Me!” as a panelist. Mr. Jagodowski performs improvisational comedy frequently in Chicago.

“We both thought that it had been a really nice and enjoyable run but that it was done,” Mr. Jagodowski said.

Mr. Grosz, who said income from the commercials is primarily what paid for his home in Los Angeles, had been pleased when the previous campaign kept getting renewed year after year.

“At first it was gravy, and then it was a cherry on the top of the gravy,” said Mr. Grosz. “A lot of times, if you get paid it’s for really soul-sucking things, but I’m proud of what we’re doing with Sonic.”

View the full article on The New York Times

Outlook for Restaurants Rosier than Overall Economy

March 15, 2012

Outlook For

Outlook for Restaurants Rosier than Overall Economy

Assuming that spiraling gas prices don’t pull the rug out from under any fragile recovery, restaurant operators might finally feel like celebrating a little this year.

In its 2012 forecast released earlier this month, the National Restaurant Association projected that restaurant sales will grow 3.5 this year, to $632 billion. Another recent report from Packaged Facts, “The Foodservice Landscape in the U.S.,” was even more optimistic, predicting a 4.2 percent jump.

Apparently, there is pent-up demand for meals away from home. NRA notes that two out of five consumers say they are not using restaurants as often as they would like, and “with the right incentives, that demand can translate into sales.”

Besides higher gasoline prices, restaurants face another threat to profitability this year: rising food commodity costs. NRA’s report notes that wholesale food prices grew last year faster than they had in more than three decades. This year, prices are expected to continue climbing for some commodities, but ease for others.

“Such price increases have the potential to erode the pricing gains restaurants have made relative to grocery prices, creating increased incentive for consumers to eat at home and throw into the disarray the delicate balancing act so many restaurant operators now walk in planning their menu strategies, which rely more now than ever on hitting the appropriate pricing and food margin mix,” Packaged Facts observes.

For many operators, that mix is increasingly looks like fast casual concepts, a segment where Technomic expects 8 percent annual sales growth over the next five years. “Full- and quick-service operators continue to adapt and reposition their concepts toward areas in which fast casual has been effective with consumers,” says Darren Tristano, executive v.p. at Technomic.

But full-service restaurants, which saw sales grow last year by 8.1 percent, are one of the biggest benefactors of the return to dining out, Packaged Facts notes.

Several other areas hold above-average upside potential:

Breakfast: Sales increases in this segment have outpaced population growth since 2008 by 5 percent. According to Technomic, 46 percent of consumers now occasionally purchase weekday breakfasts, compared to 33 percent three years ago. Health and convenience—both location and time—are the top considerations.

Mature audiences: Consumers 65 or over are spending significantly more (13 percent) on limited-service restaurants than they did five years ago, Packaged Facts reports.

The heavy half: It’s hardly surprising to hear that households with $100,000+ incomes, which represent only 17 percent of all households, make up more than one-third of the spending at restaurants.

View the full article on Restaurant Hospitality

New Barbecue Franchise Set to Enter Florida via Pembroke Pines

March 14, 2012

New Barbecue

New Barbecue Franchise Set to Enter Florida via Pembroke Pines

For Jack Flechner, business is all about timing. So it was only a matter of time before he found the second career he was hoping for as a restaurant entrepreneur.

Flechner set aside his career as a real estate attorney in 2005, just as the market collapsed, to launch his new effort. Hoping to ride the popular wave of gourmet burger concepts, he joined a few colleagues to invest in three Five Guys Burgers and Fries locations in Florida.

While he liked the concept, the territory he purchased was limited. In September, he sold out and bought into a small Louisiana-based barbecue franchise.

With a new team of partners he calls “experts at raising capital overseas,” Flechner signed an agreement with VooDoo BBQ & Grill to develop 26 restaurants throughout Florida. The first is expected to open in Pembroke Pines by summer.

The deal is the largest in the restaurant chain’s 10-year history and will nearly double its number of existing or planned locations, according to Chad Tramuta, senior director of franchise development.

VooDoo has 12 locations in Louisiana. The company also plans growth in the Carolinas and Texas.

Unlike the gourmet burger business, which has become one of the fastest-growing fast-casual segments, the barbecue segment offers vast opportunity, said Darren Tristano executive VP of Chicago-based Technomic, a food industry research company. He noted that most barbecue joints are typically mom-and-pop operations.

“There hasn’t been a lot of innovation or growth in this category, so this is a good opportunity for a chain like VooDoo to be able to grow,” he said. “[VooDoo] has a name that is memorable and an offering that’s broad enough to include burgers and salads and items that eliminate the veto vote.”

Flechner, whose territory includes all of Florida except the Panhandle, hopes to have four restaurants open by the end of the year.

His initial franchise fee investment was about $400,000. That does not include leases, buildout or equipment, Tramuta said.

While most barbecue concepts feature a down-home, country atmosphere, VooDoo has a New Orleans feel and flavor, he noted.

“Most people think of barbecue as sloppy, Southern smokehouse,” Tramuta said. “We are bringing a new look and feel to the barbecue arena.”

Most barbecue joints feature baked beans, coleslaw and french fries, but today’s consumer is looking for more Tristano noted.

“They want new flavors and profiles,” he said.

VooDoo BBQ & Grill took note of that, Tramuta said. Its ribs come competition-style, with sauces on the side, and the menu includes a wide range of choices, including salads, burgers, chicken wings and seafood. There’s also traditional New Orleans fare, such as po’boys and gumbo.

The broader menu should prove to be a recipe for success, Tristano said. “It opens the door to give [customers] more reasons to return.”


VooDoo BBQ & Grill

* Franchise fee: $35,000

* Total investment: $340,500 to $625,000

* Royalty fee: 5 percent of gross sales

* Location size: 2,400 to 3,000 square feet

View the full article on South Florida Business Journal


March 14, 2012

Steak 'n Shake

Varied Menu Brings Sizzling Growth for Denver-Based Smashburger

Smashed ground beef is proving to be a winning concept for Denver-based Smashburger.

With 143 locations opened nationwide since its inception in 2007, Smashburger is one of the fastest-growing restaurant chains in the U.S.

Commitments from newly signed franchisees will bring the store total to 450 by 2014.

But that number is small fries to Smashburger chief executive Dave Prokupek, who said the business “easily” could reach 2,000 to 3,000 outlets in the next 20 years.

“No one has ever really grown this fast in the first five years,” he said during a recent lunchtime interview at the Tabor Center Smashburger, gripping a napkin in one hand and in the other a grilled chicken sandwich with goat cheese and spinach.

Gourmet grilled chicken in a joint named after a burger?

That’s part of the Smashburger appeal, analysts say. In what the industry defines as the “better burger” niche within the hamburger hierarchy, Smashburger is wooing customers with a diverse menu ranging from customizable burgers to chicken sandwiches and salads to innovative sides such as flash-fried mixed vegetables.

Its largest competitor in the “fast casual” subset of the better-burger category is Five Guys Burger and Fries, a national chain with six times as many U.S. restaurants.

“But Smashburger is different because they have a broader menu. They don’t just have burgers and fries and hot dogs,” said Darren Tristano, executive vice president of Chicago-based restaurant consulting firm Technomic.

Recently, Forbes magazine listed Smashburger as No. 1 among its top 100 “Most Promising Companies.”

The Smashburger name derives from the cooking process, in which raw Angus beef meatballs are placed on a grill and smashed into patties by a cook wielding a hand-held steel paddle.

The cook keeps pressure on the patty for 10 seconds, causing it to sear and lock in juices while it continues cooking for another three minutes.

According to Prokupek, starting with a loosely packed meatball instead of a pre-formed patty makes the burger less dense and allows it to better express flavor.

“I eat a lot of burgers, and I would describe this as a very good burger,” said customer David Jasper at the downtown Denver outlet. “They’re juicy and they’re tasty. And you can get in and out of here pretty quick.”

Customers order at the counter, then are served tableside within about five minutes.

The average check is $8. A typical restaurant grosses $959,000 a year.

Although Smashburger is privately owned and not required to report financial information, it recently disclosed to analysts that 2011 sales were $118.7 million, a 72 percent increase from $69 million in 2010. Most of the growth was from opening new outlets. Same-store sales increased 3 percent in 2011.

Smashburger was founded by Denver-based private equity firm Consumer Capital Partners — that same company that until last month was a principal owner of the struggling Quiznos chain. Consumer Capital ceded its Quiznos ownership in a financial restructuring that gave control to New York hedge fund Avenue Capital Group.

Analysts and Smashburger insiders say the hamburger chain is entirely unaffected by the Quiznos financial problems and restructuring.

“Smashburger is growing much smarter than (Consumer Capital) did with Quiznos,” said restaurant analyst John Gordon of San Diego-based Pacific Management Consulting Group.

While many of Quiznos’ franchisees are one-store mom-and-pop operators, Smashburger is focused on high-volume, multi-store franchise investors, Gordon said.

Initial franchise fees are $40,000 per store, plus royalty payments of 5 percent to 6 percent of gross sales and a marketing fee of 2 percent.

The current mix of Smashburger restaurants is 58 percent owned by franchisees and 42 percent corporate-owned.
Prokupek said that going forward, growth will come primarily from new franchises. Smashburger projects that by 2014, 72 percent of its 464 units will be owned by franchisees.

The chain recently announced an international expansion plan with proposed franchise locations in Calgary and Edmonton, Alberta; Costa Rica and undisclosed countries in South America and the Caribbean; and Middle East locations, including Bahrain, Kuwait and Saudi Arabia.

Franchisee David Whisenhunt opened his first San Diego restaurant in 2010. He now has eight in operation and has the rights for an additional 18 in the area.

“It’s a brand-new brand that’s still catching on,” he said, “but I think the potential is huge.”

View the full article on The Denver Post