Taste for Quality: New Chains Respond to Demand for Better Burgers

July 19, 2012

New chains respond to demand for better burgers

By Emily Bryson York / Chicago Tribune, Wednesday, June 20, 2012

CHICAGO — The humble burger still reigns as an iconic American food, but a growing number of foodies are searching for something a little more special: Sandwiches made with fresh Angus beef, a better-quality roll and such toppings as aged cheddar or homemade pickles.

The “better-burger” segment has become one of the restaurant industry’s best performers in recent years, due in part to unprecedented growth by Five Guys Burgers and Fries, known for its hand-formed burgers, fresh-cut fries and unlimited free toppings.

More recently, a number of upstarts have elbowed in at the table, adding turkey or veggie patties and myriad toppings such as tzatziki (a yogurt-cucumber sauce), dill pickle chips, goat cheese or brie. Some also offer salads and beer.

The better-burger segment remains a tiny portion of the restaurant industry, with estimated sales of $2.2 billion in 2011, but it grew 21 percent from the prior year, according to a recent report by Technomic, a Chicago-based research firm. That compares with sales growth in 2011 of 3.2 percent for all fast-food and fast-casual restaurants that focus on burgers.

Technomic defines better-burger restaurants as establishments that use fresh meat and make sandwiches to order. That means consumers will have to wait up to 10 minutes or more for a better burger. They also can expect to pay more — as much as $10 for a meal.

McDonald’s continues to dominate the fast-food burger business, posting nine straight years of worldwide same-store sales gains. In recent years, the chain has expanded its menu and kept sales growing.

Salads, smoothies and coffee drinks have helped win back women, but Darren Tristano, executive vice president of Technomic, said serious burger lovers got bored along the way.

“That’s when the opportunity opened, and that’s when the chains jumped in,” he said.

McDonald’s declined to comment for this report. But the chain has chased the better-burger trend, adding Angus burgers with a better-quality bun and upgraded toppings like mushrooms and Swiss cheese.

Tristano said the economy also has been a factor in better-burger growth. “Consumers were looking for familiar products that could be a little better but didn’t break the bank,” he said.

Today, a number of “second-generation” chains can be found, with offerings beyond the ostensibly higher-quality burger and fries.

Newcomers include Smashburger, Freddy’s Frozen Custard and Steakburgers, The Counter and The Habit Burger Grill, all of which grew their restaurant bases by more than 20 percent during 2011. Denver-based Smashburger grew sales 71.5 percent to $118.7 million as locations expanded to 143 last year.

Smashburger founder Tom Ryan said he began thinking about better burgers a decade ago while conducting research for McDonald’s as the company’s worldwide chief concept officer.

“Although there was an increasing number of burger purveyors, no one was really hitting the ball out of the park around great burgers,” he said. “Even the best iconic ones, the Big Mac, Quarter-Pounder, Whopper, weren’t knocking burger lovers over anymore.”

The new burger chains appear to be building on a winning concept that Lorton, Va.-based Five Guys Burgers and Fries ushered in on a nationwide level when it began franchising in 2002. It’s been the fastest-growing restaurant chain in the U.S. by sales since 2008, up 32.8 percent in 2011, to $951 million, according to Technomic.

Five Guys already has more than 1,000 locations nationwide, including 1315 Ridgeway and 6600 Stage Road in the Memphis area. The chain also plans to open a third location at 2100 Union Ave.

While new burger concepts are “popping up all over the place,” Five Guys founder Jerry Murrell said, “there’s plenty of room for competition.” But he had words of caution for competitors that are building out the menu beyond burgers and fries.

“When you open a place up you have a tendency to start adding things and get away from the burger (and fries),” he said, adding that he’s seen competitors “start having a little trouble with quality.”

He’s determined to keep things simple and not try to please everyone. That includes being more concerned with getting the burger right than having it arrive fast.

“We have a sign in some of our restaurants that says, ‘If you’re in a hurry, there are a lot of really good hamburger places close to here,’ ” Murrell said. “Some of our franchisees are afraid to use it.”


Boston Market Corp. Lines up Limited-Time Deals in Bid to Get More People in the Door

July 18, 2012

By CATHERINE TSAI, 20 June 2012, (c) 2012. The Associated Press. All Rights Reserved.

DENVER (AP) – Boston Market Corp. plans a string of summer deals and giveaways to lure customers, especially younger ones, in a competitive market.

The campaign was built to show how the chain can fit into people’s lifestyles.

“It’s not just food that goes in your belly. It can be part of something you can experience,” said new chief brand officer Sara Bittorf.

Already the chain has introduced a summer menu with barbecue chicken, highlighting a sauce that launched last year. Now through July 29, kids under 12 who come in wearing a team uniform get free dessert when they buy a kids meal. During part of the Tour de France, people who ride their bicycles to Boston Market can be eligible for discounts.

It also is holding a sweepstakes with a trip to Maui as the grand prize. Finally, in August, an extreme sports athlete who is a fan of Boston Market will host a giveaway. Bittorf wouldn’t divulge details, but skateboarder Ryan Scheckler was recently quoted saying his ideal last meal would be from Boston Market.

The goal is to build on a reputation as a trusted partner for providing wholesome meals while also drawing younger customers, Bittorf said.

“I believe very strongly that the Boston Market brand has the ability to reclaim the position it owned 15 years ago, when it reinvented the home meal replacement category,” Bittorf said. “It wasn’t just the people who sold you food, it was a solution to your everyday dinner dilemma. It made your life a little easier. We’ve lost a little bit of that over the years.”

The company started as Boston Chicken in Newton, Mass., in 1985. Since then it has been through a name change, a trip through bankruptcy court and ownership for a time by McDonald’s Corp.

An affiliate of Sun Capital Partners acquired the company, now based in Golden, Colo., in 2007. It doesn’t release annual revenues.

The company faces competition on multiple fronts, said Darren Tristano, executive vice president of the food industry research firm Technomic Inc.

“Competition from Mexican, Asian and burgers, in particular, have really impacted their ability to grow,” Tristano said. “Then you talk about competition in chicken, not just from KFC and Chick-fil-A but also Costco, Sam’s Club, Safeway, because everybody has rotisserie chicken. It’s made it harder to be innovative and competitive.”

Now it needs to find a way to hook more young, single people with grab-and-go food, not just harried parents, Tristano said.

While it has long offered more than chicken, Boston Market is looking to add more menu items, perhaps around the first of the year.

It has a catering business, but it also is testing delivery in New York City. “It’s on our radar. We’re trying to figure out how to make it work in less dense areas,” Bittorf said.

The chain is even looking at whether to offer food trucks. “Certainly the trend has not escaped us,” Bittorf said. “We would come at this from different approach. Imagine you are a commuter and you get off the train at the end of a long day, and there’s a Boston Market food truck with food you pre-ordered, and you can pick up a meal and go home.”


Fast Food Finesse

July 17, 2012

EMILY BRYSON YORK, Chicago Tribune, 22 June 2012

Copyright 2012, NewsBank. All Rights Reserved.

CHICAGO — The humble burger still reigns as an iconic American food, but a growing number of foodies are searching for something a little more special: sandwiches made with fresh Angus beef, a better-quality roll and such toppings as aged cheddar or homemade pickles.

The “better-burger” segment has become one of the restaurant industry’s best performers in recent years, due in part to unprecedented growth by Five Guys Burgers and Fries, known for its hand-formed burgers, fresh-cut fries and unlimited free toppings, which has a store in Dickson City, Lackawanna County.

More recently, a number of upstarts have elbowed in at the table, adding turkey or veggie patties and myriad toppings such as tzatziki (a yogurt-cucumber sauce), dill pickle chips, goat cheese or brie. Some also offer salads and beer.

The better-burger segment remains a tiny portion of the restaurant industry, with estimated sales of $2.2 billion in 2011, but it grew 21 percent from the prior year, according to a recent report by Technomic, a Chicago-based research firm. That compares with sales growth in 2011 of 3.2 percent for all fast-food and fast-casual restaurants that focus on burgers.

Technomic defines better-burger restaurants as establishments that use fresh meat and make sandwiches to order. That means consumers will have to wait up to 10 minutes or more for a better burger. They also can expect to pay more — as much as $10 for a meal.

McDonald’s continues to dominate the fast-food burger business, posting nine straight years of worldwide same-store sales gains. In recent years, the chain has expanded its menu and kept sales growing.

Salads, smoothies and coffee drinks have helped win back women, but Darren Tristano, executive vice president of Technomic, said serious burger lovers got bored along the way.

Smashburger founder Tom Ryan said he began thinking about better burgers a decade ago while conducting research for McDonald’s as the company’s worldwide chief concept officer.

Community Newspaper Holdings, Inc.


Panera Seeking Bigger Slice of Market with Several New Cafes

July 16, 2012

Dan Eaton, 22 June 2012, © 2012 American City Business Journals, Inc. All rights reserved.

Columbus is one of Panera Bread Co.’s oldest markets, but observers might not guess that based on the frenetic pace of its new franchisee for the region.

Warren-based Covelli Enterprises Inc. has wasted little time launching plans for more Panera cafes after acquiring the 20-restaurant Central Ohio franchise from Columbus-based Breads of the World LLC late last year. It has opened four cafes this year, including the largest Panera in the nation near Ohio State University, and has at least seven more on tap before the calendar flips to 2013.

“We’re being aggressive in Columbus right now,” said owner Sam Covelli.

Planned openings this year include sites in the Brewery District, the revamped Shops at Worthington Place and at a new retail plaza at West Third Avenue and Olentangy River Road near Lennox Town Center.

“Columbus has been a high-volume market for us,” Covelli said. “I really feel there is a heck of a lot of opportunity to still grow.”

High volumes

Covelli is Panera’s largest franchisee with nearly 200 restaurants in Ohio, Kentucky, West Virginia, Pennsylvania and Florida. It is expanding into Toronto, Canada, this year and recently acquired five cafes in Lima, Wooster, Marion and Mansfield. The company, which also franchises five O’Charley’s restaurants, has been in the Panera business since 1998.

St. Louis-based Panera has grown to 1,562 cafes, including 816 that are franchised, since its debut in 1987 as the Saint Louis Bread Co. It reported same-store sales for franchised restaurants last year rose 3.4 percent, and were up 5.2 percent in the first quarter of 2012. Sales across the chain totaled $1.82 billion last year, up 18 percent from $1.54 billion in 2010.

Covelli won’t disclose his operation’s sales but said cafes in the Columbus market have seen consistent double-digit increases.

“High volumes make it a lot easier to grow,” he said.

Bakery-cafes have been one of the fastest-growing segments of the restaurant world in recent years, with sales growth outpacing the overall industry, according to a 2011 study by Chicago-based Technomic Inc. Darren Tristano, executive vice president, said in the report that one in three consumers surveyed still hasn’t visited a Panera-style cafe, which spells a lot of upside for operators.

“The most common reasons have to do with location and unfamiliarity,” Tristano said. “As more units open and as marketing efforts continue to boost awareness, there is little reason to think the segment will not continue to perform well.”

Rising up

Covelli is working on making Panera ubiquitous in Central Ohio. The next openings include two in the Delaware area – one in the city and one at the Route 36 exit off Interstate 71 – another in Heath, and a Gahanna restaurant on North Hamilton Road. More highway exit sites could be coming. Covelli runs six Paneras along the Ohio Turnpike.

“We don’t want to depend solely on interstates, but we’d like to start doing more in Central Ohio,” he said.

Covelli made a splash in the Ohio State campus area with a Lane Avenue restaurant at nearly 8,000 square feet in size. He expects a planned cafe in the Brewery District to be high profile as well. The cafe would fill the former Hoster’s brew pub at 550 S. High St., putting Panera close to the heavily traveled Franklin County government complex to the north and German Village to the south. It also has 80 parking spots.

“We just think that’s going to be a tremendous site,” Covelli said.

Other possibilities include a third campus restaurant and a second in the Polaris area, perhaps along Gemini Parkway to complement its cafe at Polaris Towne Center.

The key is to identify and jump on opportunities, Covelli said, even if they are close to existing Paneras.

“There are sites out there that we don’t know about yet,” he said. “We’re getting sites now that we didn’t know about several months ago.”

The cafe coming to West Third and Olentangy is a little more than a mile from its Grandview Avenue unit, but it can cash in on redevelopment of Gowdy Field, he said. The Lane Avenue and South Campus Gateway Paneras are a mile apart but pull from different areas of the OSU campus.

“We’re just right down the road from the other one,” he said. “They hardly affect each other.”

Covelli may be looking for a move soon on the office front as well. The company took Breads of the World’s offices in the Olentangy Plaza on Bethel Road, next to one of its restaurants.

The growing fleet is going to lead to more office needs. Covelli said the company could try to expand at Bethel or look for new offices.


The Donut’s on Us Today, Say National Chains

July 13, 2012

Published: Friday, 1 Jun 2012, By: Katie Little, News Associate

There may be no such thing as a free lunch — but if you’re eyeing a free donut today, you’re in luck.

In honor of National Donut Day, Dunkin’ Donuts and Krispy Kreme Doughnuts are running in-store promotions on Friday and taking part in the opening and closing ceremonies at their respective stock exchanges, the NASDAQ and the New York Stock Exchange.

At participating Dunkin’ Donuts locations, customers can score a free donut of their choice with the purchase of any beverage. On Twitter, the company will also post donut trivia questions, and users who answer correctly will be entered for a chance to win one of six $50 gift cards.

Meanwhile, Krispy Kremes in the U.S. and Canada will give away a free donut of any variety with no purchase necessary.

The Nasdaq, whose opening bell Dunkin’ rang this morning, has unofficially changed its name to “NASDDAQ” and incorporated the company’s pink and orange ‘D’ letters along with a sprinkled donut into its logo. Krispy Kreme will stop by the NYSE to ring the closing bell.

In New York City, Entenmann’s Bakery will hand out free donuts at Madison Square Park and present a $25,000 check to The Salvation Army, which will be providing free coffee to celebrants.

National Donut Day was first established by the charity in 1938 in Chicago as a way of honoring the “Donut Lassies” who served soldiers the treats during World War I and helped raise money during the Great Depression.

The events’ organizers will also share a proclamation letter from Mayor Bloomberg in honor of the holiday. The event comes just one day after Bloomberg announced a proposed ban of the sale of sweetened drinks larger than 16 fluid ounces at restaurants, movie theaters and delis. If approved, the controversial plan could be implemented as soon as next March.

Despite their confectionery names, these companies rely on more than merely donuts to fuel their businesses.

“I think what we have seen is chains like Krispy Kreme, Tim Hortons and Dunkin’ Donuts that have shifted from being traditional donut chains to serve broader occasions and day parts,” said Darren Tristano, executive vice president at Technomic.

Despite the strength of the cupcake trend, Tristano said that sales in the donut industry have been relatively stable. He added that this continued donut popularity speaks to the rise of snacking and eating during off-peak occasions.

Dunkin’ has responded to this demand by expanding its line of bakery sandwiches. Michelle King, Dunkin’ Brands’ director of global public relations, said breakfast sandwiches are already popular with customers, who have been purchasing them throughout the day.

“All are familiar with a twist and cater to our busy guests who are snacking more frequently throughout a ‘clockless day,’ ” she said about the new sandwiches.

Although Dunkin and Krispy Kreme carry many similar products, Dunkin has enjoyed stronger sales and location growth compared to Krispy Kreme, according to Technomic estimates. At Dunkin’, U.S. sales grew 23 percent from 2007 to last year while Krispy Kreme sales fell 13 percent during the same period.

Part of Dunkin’s success is due to the popularity of its coffee product.

“In fact, we don’t even classify them as donuts anymore,” Tristano said about Dunkin’. “We have them in the coffee café category.”

Companies place added emphasis on coffee since it typically carries a higher margin than items, such as donuts. Customers who incorporate a restaurant serving coffee into their daily routine often go to that chosen store every day and may purchase additional items while there. “By providing coffee and other products in addition to donuts, industry operators hope to attract consumers to their stores more frequently,” said Agata Kaczanowska, lead industry analyst at the research firm IBISWorld.

In September, Krispy Kreme announced the launch of three signature coffee blends. The company has also stepped up its expansion efforts internationally; it recently announced new development agreements in India and Russia.

This international push follows declines in U.S. store locations in both 2008 and 2009, according to Technomic data. The company added one net domestic location last year.

“The issue with Krispy Kreme was that they broadened so much, you could get them at the grocery stores, the convenience store, so why would you get them at the restaurant?” Tristano said.

In addition to promoting coffee to drive sales, donut shops are reacting to another trend to boost revenue, Kaczanowska said.

“Another tactic that donut stores are using to boost consumer interest is offering smaller donuts, which have fewer calories and less fat,” she said. “These appeal to health-conscious consumers that may indulge more often when smaller portions are offered.”


Popeyes Bachelder Lifts Franchisee Profits

July 13, 2012

ATLANTA — Cheryl Bachelder, chief executive officer of AFC Enterprises Inc (NYSE: AFCE), holding company for Popeyes Louisiana Kitchen, speaks to Blue MauMau about the art of leading.

 A big believer in measuring, Bachelder actually monitors the bottom line of Popeyes franchises — 2,044 restaurants altogether, 40 of which are company-owned. That’s because she believes the key to a franchisor’s success is focusing on individually lifting the profits of franchised establishments.

Under her leadership, Popeyes says customer ratings have improved by over 20 percentage points in just the past year. In last month’s earnings report, Bachelder declared, “According to independent data, our 2011 domestic same-store sales outpaced the chicken QSR category by 430 basis points.” Actually, the chain has outpaced the QSR sector in same-store sales growth for three of the last five quarters. In a time of squeezed profits because of creeping commodity costs, Popeyes restaurant margins have become better by over 200 basis points in three years.

 “2011 was the third year in a row that we have delivered increased, absolute profit dollars to our franchisees,” declares Bachelder. How many franchisors can say that?

 Darren Tristano, executive vice president of researcher Technomic Inc. observes that there has been a shuffle in the fried chicken marketplace. Chick-fil-A, Popeyes and Bojangle’s have gained market share while Church’s and KFC have declined. “As KFC keeps its growth aimed at international markets and specifically China, other fried chicken brands have an opportunity to grow and grab share in this mature U.S. QSR chicken segment,” says Tristano. “Popeyes has improved its image through rebranding, broadening its menu and differentiating through flavor profiles and brand positioning. Their success in growing sales and units during our difficult economic climate over the past five years is a testament to their management team’s efforts and their strategy.”

Bachelder knows these companies well. She cut her management and leadership teeth with consumer goods giant Procter & Gamble and later Gillette. She joined Domino’s Pizza in 1995 as vice president of marketing and product development. From 2000 to 2003, she served as president and chief concept officer of KFC, a restaurant division of Yum! Brands, Inc.

Her peers think highly of the CEO of Popeyes. Domino’s Pizza CEO Patrick Doyle says of Bachelder: “Cheryl hired me into Domino’s and taught me a great deal about the business.” Doyle, who was recently honored as CEO of the year for 2011 by CNBC’s Herb Greenberg and Brian Sullivan, adds of his mentor: “What has made her highly successful is her focus on building great consensus with her franchisees whenever possible, and building that through a fact-based approach to the business. It’s not at all surprising to see the level of success she is having with the Popeyes brand.” 

 


The Breast of Advertising

July 12, 2012

From Hooters to the cover of ‘Time,’ does the strategy sell or repel?

By David Wallis on June 4, 2012

Sales were “crazy, crazy,” at Sal Ali’s grocery and news shop in Manhattan, where issues of Time magazine featuring a controversial cover on attachment parenting were selling off the rack. It was the rack, of course, that generated so much interest for the May 21 cover story, illustrated with an attractive mom exposing her nearly naked breast to nurse her huge, 3-year-old son standing on a chair. Leafing through the newsweekly’s buzziest cover in recent memory, Ali couldn’t deny he enjoyed the brisk business, though the cover made him wonder: “What will be the difference between Time and Playboy if they exploit like this?”

Though Time executives trumpet the serious news value of their cover photo, the newsweekly was also hopping on a well-worn but reliable bandwagon. Far beyond selling bras, marketers flash young women’s breasts to hawk everything from chicken wings and cars to fishing line and, of course, magazine issues.

Sexual content is everywhere in advertising. A recent study in Advertising & Society Review found that 20 percent of all magazine and Web ads involve sexual images, which falls to just 10 percent for TV spots. The debate over breasts in ads and whether they attract, distract or repel rages on, with numerous studies warning that sexual imagery can be a too-risky strategy that alienates consumers, particularly women. Even some creatives argue that the tactic appeals to the lowest common denominator. Still, a long list of brands continue to use the anatomically blessed to sell their wares.

Unquestionably, Time’s cheesecake recipe succeeded. A spokeswoman for the magazine says the May 21 issue was this year’s best-seller so far. Newsstand sales for the issue were 50 percent higher than average over the last 26 weeks, according to Gil Brechtel, president and CEO of the Magazine Information Network, a research company whose clients include major magazine retailers such as Hudson News. That impressive jump compares to a 20 percent decline in Time’s single-copy sales in the last five years, according to Audit Bureau of Circulations figures.

Sexing up a sober story on parenting is a brilliant market-shocking move, says Sallie Mars, chief diversity officer at McCann Worldgroup and the former director of creative services at McCann New York who coined the term “breast for success” marketing to critique sexist ads. Breastvertising must be “disruptive” to work, she says, likening Time’s cover designers to Renaissance painters showing the nursing mother and child. “They knew the power of the breast.”

A 2007 print campaign for Tom Ford for Men cologne, Mars says, took the strategy to a disruptive yet effective extreme. The ad shows a phallic bottle of cologne lodged between a nude female model’s cupped breasts. Her gaping, lipsticked mouth appears in mid-moan. “Because [Ford] is such an out gay man,” says Mars, he “had to go against the gay stereotype” to prove the scent wasn’t just for homosexuals. Shortly after the ad ran, the company reported overall stronger sales for the brand compared to the year before. (Estée Lauder, which owns Tom Ford Fragrances, declined to comment.)

Many restaurateurs build their businesses firmly on the breasts of bikini-clad waitresses. “Breastaurants” are so numerous, in fact, that there’s an entire uniform company devoted to selling tiny halter tops and hot pants. Breastaurants now gross $2 billion to $2.5 billion per year, up from approximately $1.5 billion five years ago. That startling growth dwarfs the 2.6 percent sales increase of the top 500 restaurant chains during the same period, says Darren Tristano, evp of Technomic, a food industry research firm. The marketing secret, he suggests, is selling the message that “you are going to receive attentive service from attractive servers, and that’s something most men don’t have at home.”

Dominating the category is Hooters, which opened its first restaurant in Clearwater, Fla., in 1983 and now boasts 430 locations in 27 countries, ringing up some $1 billion per year selling chicken wings, booze and merchandise. Though 68 percent of its patrons are male, Hooters offers a kids’ menu and woos women with promotions like free wings on Mother’s Day.

Meanwhile, Twin Peaks Restaurants opened its first sports bar and grill near Dallas in 2005 with a clear, dudes-rule pitch. “Obviously, Twin Peaks is a play on breasts,” says Meggie Miller, the company’s marketing director and self-described “expert in boobs.”

Billed as the “ultimate man cave,” the chain attracts a 90 percent male clientele and will soon open its 24th outpost, buoyed by 55 percent growth in sales in 2011 year over year. The company’s typical server, says Miller, is a “hot girl, but a hot girl next door.” To distinguish itself from Hooters, Twin Peaks’ strategy is to cater even more to men­—if that’s possible. (Hooters sued Twin Peaks over trade secrets in a case settled out of court.)

Scientific studies have documented how breasts­­—and their size—can affect male behavior, according to Florence Williams, author of Breasts: A Natural and Unnatural History. In a study recently reported in the French journal Perceptual and Motor Skills, sociologists arranged for a woman to hitchhike wearing augmented bras that inflated her natural A cups into B, and then C cups. Male drivers were about 60 percent more likely to give a lift to the woman with a C cup than an A cup. Meanwhile, breast size hardly affected women drivers’ decision to stop. Williams refers to another recent study from the Archives of Sexual Behavior suggesting that breasts attract eyeballs, literally. “The male pupil in the eye looks at a woman’s breast within 200 milliseconds,” she says. “It’s the first place they look, and the eyes linger longer on the breast region” than other body parts.

Attracting eyeballs is one thing, but the presence of breasts doesn’t necessarily mean a consumer will have a positive view of a product, or buy it. In his famous 1983 book Ogilvy on Advertising, David Ogilvy advised marketers to handle breasts delicately: “Some copywriters… try to inveigle [consumers] into their ads with pictures of babies, beagles and bosoms. This is a mistake. A buyer of flexible pipe for offshore oil rigs is more interested in pipe than anything else in the world. So play it straight.”

The Ogilvy rule is still important today, says Ben Judd, associate business dean at the University of New Haven, who has conducted several studies pertaining to sexual imagery in ads. Judd calls naked come-ons in campaigns “a complete waste of time” since consumers tend to ogle the breasts, then forget the product. “The more nudity you show, the lower recall of the brand,” he says. For example, a 2001 study sponsored by American Demographics found that 61 percent of respondents who viewed sexualized ads were less likely to buy.

More recently, marketing professors at the University of Wisconsin found that sexy Super Bowl ads from 1989 to 2012 were 10 percent less likeable than other spots. Yet while none of Nielsen’s 10 best-liked 2012 Super Bowl ads were of a sexual nature, one bare-babed spot did rank among the 10 most-recalled ads: the much-buzzed-about spot for Go Daddy featuring Danica Patrick and Jillian Michaels brushing body paint on a near-naked model.

To Chuck Schroeder, partner at marketing firm Senior Creative People, relevance matters most. If brandishing breasts doesn’t flow organically, he says, the message goes wildly off course. A self-described “beer guy” who previously worked on the Strohs and Miller Lite accounts and briefly co-owned Saratoga Lager, Schroeder sees beer and breasts as a particularly stale combination. He recalls a famed spot from 1991, created by Hal Riney & Partners, that fell flat. “Remember the Swedish Olympic Bikini Team? Who did that?” asks Schroeder. “It was typical frat boy beer advertising with big-boobed models in bikinis. I think you remember the boobs.”

That controversial spot for Old Milwaukee, in fact, attempted to rejuvenate a flagging brand the consumer likely viewed as “my father’s beer,” recalls Patrick Scullin, now creative director of Ames Scullin O’Haire in Atlanta, who created the campaign at Hal Riney.  The spots featured buxom blondes parachuting in to surprise buddies fishing or camping. The slogan was “It Doesn’t Get Any Better Than This.” The campaign boosted sales but led to a sexual harassment lawsuit by female workers at Stroh Brewery Co., which at the time owned Old Milwaukee. The company settled out of court and retired the bikini team.

Of course, that didn’t stop brewers from churning out copycat ads ever since. A 2007 Miller Lite ad, for instance, featured a scantily clad Pamela Anderson in a pillow fight. And in a Bud Light Lime Web-only ad (labeled “pornohol” by watchdog group Alcohol Justice), topless UFC model Arianny Celeste cavorted on piles of loose limes as she squeezed the citrus and declared how thirsty she was.

When asked to comment, Paul Chibe, U.S. CMO of Anheuser-Busch InBev, gently chided his company over the ad, which was created before he came aboard last year. “I don’t think it’s ‘pornohol,’ but it’s certainly not in the direction I would have gone in,” he says.

Other companies, meanwhile, are sticking to the male-centric approach—among them, Go Daddy, with its explicit Super Bowl spots. When the Internet company’s founder and CEO Bob Parsons announced that he had purchased time during the 2005 Super Bowl, some bloggers argued that it was a waste of money. Ignoring the critics, Parsons bought a second spot in the same broadcast. The company’s first commercial, created by the Ad Store, lampooned Janet Jackson’s “wardrobe malfunction” the year before, featuring a former porn actress in a slinky tank top emblazoned with the Go Daddy logo. As she testifies before a faux congressional committee—whoops!—one of her spaghetti straps pops off and her breasts nearly spill out. Cut to an elderly committee codger, wheezing into his oxygen mask.

Illustration: Lincoln Agnew, Getty Images

Fox broadcast the spot during the first half of the big game, but a scandalized National Football League pressured the network to pull the second. Go Daddy cried censorship, pocketed a Fox refund and basked in more than $11 million in free media, according to broadcast monitoring service Cision, formerly known as Multivision. Within a week, Go Daddy’s market share jumped from 16 percent to 25 percent. Sticking to its sexy-plus-sophomoric strategy ever since, the once-obscure brand now controls 53 percent of the domain and Web hosting market.

Marshal Cohen, chief industry analyst at NPD Group, is certain that companies flaunting breasts know what they’re doing, pointing to strong sales of intimate apparel, padded bras and silicon breast implants as evidence that women are also buying into bust appeal. Consumers may be unaware of the selling power of the bosom, the analyst says, since they assume they have total control of their buying decisions. “We can deny it all we want,” he says, “but [breasts] are a very subliminal piece of powerful marketing.”

But some brands may unconsciously push away women with such a naked ploy. “How many times have we seen the pair of tits sell the sneaker, the car, bottle of water. I perk up much more with campaigns that use humor,” says Jennifer Pozner, founder and executive director of advocacy group Women In Media & News.

The award for the most tasteless use of breasts in recent memory may go to Fiat, as seen in an outbreak of intense blogger criticism. In a spot by Leo Burnett, Argentina, a woman in a parked Fiat Palio confides to her male partner her intention to get a boob job. Next, the ecstatic man imagines a miniature version of himself diving between his girl’s future stripper-sized breasts. “All right,” he then says, feigning sensitivity, “if that’s what you want.”

The ad went viral, getting global exposure. And perhaps in Argentina and other parts of the world, only brutes buy Fiats. But in the United States, 41.9 percent of Fiat owners are women, according to the auto-data site TrueCar.com. (Fiat did not respond to requests for comment.)

Gratuitous breasts in ads are short-sighted, argues Kat Gordon, owner of the agency Maternal Instinct, which specializes in marketing to women. “Brands assume that men are their target audience when in reality women are doing the buying,” says Gordon, founder of the upcoming 3% Conference in San Francisco, meant to draw attention to the relatively low number of female creative directors, seeing as women account for as much as 85 percent of all consumer spending.

Giving an example of a missed marketing opportunity, Gordon singles out online florist Teleflora’s Super Bowl spot this year by in-house agency Fire Station. In the Valentine’s Day-themed commercial, supermodel Adriana Lima leans toward the camera in a low-cut dress and purrs, “Guys, Valentine’s Day is not that complicated. Give—and you shall receive.”

The stereotype that the gals gossip in the kitchen during the Super Bowl while the boys high-five in the den is, of course, flat wrong, as women comprise roughly 46 percent of the audience for that event. (The NFL licenses team logos to a women’s purse manufacturer for a reason.) Teleflora’s flowers-for-sex premise was among the most-cited on Twitter under the hashtag #notbuyingit, according to Imran Siddiquee, social media and communications manager for MissRepresentation.org, a not-for-profit group that keeps track of demeaning media messages.

As Cindy Gallop, ex-chairman of the agency BBH New York, puts it: “Teleflora presupposed—this is a very Old World Order mind-set—that they are not targeting me, and I say that as a woman who sends flowers to her girlfriends.”

Years after David Ogilvy’s warning and the Old Milwaukee lawsuit, there’s evidence some beer brands may be rethinking their tactics. Miller Lite’s Pamela Anderson pillow fight has morphed into its “Man Up” spots. As for Bud Light Lime, Chibe of Anheuser-Busch promises no more citrus-squeezing topless models. “We’re not going to rely on stereotypes and things that may have played well with a male-centric audience years ago,” he responds. “That old imagery is too limited in its appeal and is not reflective of today’s society and today’s consumer.”

Benj Steinman, editor of the trade Beer Marketer’s Insights, says such softcore campaigns have bitten the dust, by and large. “Traditionally, top-tier brewers focus—too much, I would say—on the male 21-27 demographic,” he says. Today, brewers are more interested in cultivating women beer drinkers, he points out. “It’s called evolution.”


Starbucks’ La Boulange Deal Creates Some Indigestion

July 11, 2012

By KEVIN HARLIN, INVESTOR’S BUSINESS DAILY, Posted 06/05/2012

Starbucks’ moves to cook up a better dining experience has made for a bit of indigestion among its investors and some of its competitors.

Shares of the world’s largest coffeehouse chain were down 4% midday Tuesday to 51.68, a day after it announced it was paying $100 million for the San Francisco bakery chain La Boulange.

The idea, Starbucks’ CEO Howard Schultz said in an after-hours conference call Monday, was to build La Boulange into a national brand, while also incorporating some of its gourmet cafe offerings into his own coffee shops.

Coffee chain Caribou Coffee (CBOU) was off 1.3% midday Tuesday to 12.05. Green Mountain Coffee Roasters (GMCR), a sometime Starbucks partner and sometime competitor in the home single-serve coffee market, was down 3.3% to 22.70.

Both had shot up late Monday when Starbucks said it would have an after-hours announcement — possibly on takeover speculation.

Smaller competitor Peet’s Coffee & Tea (PEET) also slipped slightly Tuesday to 58.02.

Darren Tristano, executive vice president of Technomic, a restaurant industry consulting and research firm, said the bakery acquisition will put Starbucks more squarely in competition with bakery-cafes such as Panera Bread (PNRA) and the privately held Corner Bakery chain. Panera shares were down about 1% to 138.67.

Starbucks has experimented before. It’s rolled out beer and wine sales at some of its cafes and has rejiggered its menu multiple times. The acquisition of the La Boulange brand could bring in more customers in the early morning hours for the bakery’s pastries and croissants, and later in the day for loaves and sweets. The chain’s 19 cafes also serve artisan sandwiches.

Tristano thinks Starbucks loyalists will appreciate La Boulange’s pledge for high-quality, locally sourced foods.

“Better quality food will provide a better tasting product for Americans who are willing to pay a little more to get a little better,” he said.


Growth Concepts: Targeting Tomorrow’s Leaders

July 11, 2012

A look at today’s growing chains points to the trends that savvy restaurant operators will make the most of in coming years.

Technomic has identified hundreds of concepts over the years, identifying where we think there will be growth and then tracking these chains to see which will succeed or fail. There is not a set definition for growth concept—sometimes it’s a case of “we know it when we see it.” There are, however, elements that most of these chains have in common.

We tend to track concepts with three or more locations and a couple of years of growth. Unit economics have also proven important, as it is key to continue to grow and profit at the unit level in order for a chain to succeed. In terms of the actual brand, most of the “hot concepts” have broad consumer appeal, a well-defined menu and a differentiated approach, offering something unique to drive the customer experience.

A Snapshot of Today’s Growth

Unit growth in 2011 was a mixed bag in the United States in terms of success and failure. While we haven’t seen a lot of growth in the industry as a whole, more than 500 of the 1,500 chains we are tracking expanded. Nearly a third of the chains saw no growth, though, and a third of the chains’ unit counts declined. As one brand’s restaurants close, others simply take their space.

Looking at the fastest-growers, those whose total units increased by 20% or more, finds that 77 are fast-casual concepts, despite that segment’s being the smallest segment in the industry. There were 53 casual-dining chains with store-count increases of 20% or better, and 52 quick-service chains. As expected, there was not much growth in the family-style segment, with only eight concepts experiencing at least 20% growth.

As it’s expanding the quickest, the fast-casual segment worth looking into more deeply. The segment is very broad in terms of menu, as everything from burger to salad saw growth. Out of the 77 growth concepts, better burger performed the best with 21 restaurant chains reporting 20+% growth. In this category, we’ve seen a lot of movement from regional concepts expanding. Healthy concepts, namely salad and Mediterranean chains, are emerging, as they offer a more nutritional experience; there were 13 healthy concepts with 20% increases or better. The sandwich, bakery-café and Mexican menu segments each had several fast-growers as well.

Limited-Service Growth Concepts

What follows is a handful of up-and-coming restaurant chains that we see as examples of overall trends that are driving business.

Zoës Kitchen excels at healthfulness. The Birmingham, AL-based fast-casual concept offers healthy Mediterranean-inspired comfort food that appeals to consumers who want something that tastes good, is made fresh daily and is better for them. The chain’s 57 restaurants feature a bright, colorful environment to create a sense of friendliness. Zoës also specializes in home meal replacements, offering consumers the chance to bring home better-for-you meals for a family.

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Orange Leaf Frozen Yogurt excels at value. The frozen-yogurt market has evolved over the years. Chains such as Pinkberry and Red Mango rolled out in 2005, offering a more upscale approach to the frozen dessert. Following the recession, self-service concepts such as Orange Leaf Frozen Yogurt and others grew as franchisees jumped in to expand these cheaper-to-operate chains. In terms of value, its self-service model allows guests to create their own portion size and pay accordingly, and is very kid-friendly. The craveable dessert is also known for its health halo attributes, as most diners view frozen yogurt as healthy. Oklahoma City-based Orange Leaf had 114 units at year-end.

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Jake’s Wayback Burger excels as a modern classic. The Cheschire, CT-based 44-unit chain is an older concept that rebranded itself in 2010 around the idea of a juicy burger and a “real” milk shake in a ‘20s-inspired setting. With the popularity of better-burger concepts, Jake’s positioned itself for quick growth via franchising. As larger fast-casual better-burger chains such as Five Guys sold out of its U.S. franchise opportunities, Jake’s jumped in, presenting potential franchisees a way to profit on both the single- and multi-unit level.

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Freebirds World Burrito excels at energy and personality. This is a concept with attitude. Its colorful design and rebellious positioning appeal to diners looking for something unique. The fast-casual chain, which had 62 units and is based in Austin, Texas, offers its tin-foil-wrapped burritos in a number of different sizes, up to the Super Monster for extremely hungry guests. It then uses that tin foil in its restaurant décor, creating a fun environment.

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Newk’s Express Café excels at grab-and-go. The fast-casual sandwich concept appeals to time-pressed consumers with its grab-and-go fare. Meals are made to order, scoring high with consumers on how they relate to the brand. To further the quick yet quality positioning, restaurants are well designed to appeal to the on-the-go crowd. Newk’s has 45 units and is based in Jackson, MS.

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Freshii excels at customization. Freshii has taken off across the nation, opening 26 units from coast to coast. The very customizable chain takes a healthy positioning, promoting its wraps, salads and rice bowls as better-for-you options made with fresh, healthy ingredients. One drawback for some consumers of these quality meals is the higher price point. This, however, is a pro for the chain, and Chicago-based Freshii targets more affluent clientele accordingly.

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Full-Service Growth Concepts

Business is a bit more difficult for full-service concepts today. One main reason is tipping. Gratuity is a cost that consumers have to factor in when dining out at full-service restaurants that is not applicable in limited-service restaurants. Full-service restaurants can also be an inconvenience for some diners at lunchtime, especially those looking for a quick meal. On the whole, the full-service sector is not growing as much as the limited-service segment, partially because these restaurants are bigger investments and there is not as much franchise interest. There are plenty of concepts, however, that are succeeding.

Cooper’s Hawk excels at hand-crafted wine. The varied-menu chain is known for making its own wine. While its nine restaurants offer several different elements in one (winery, restaurant, bar and tasting room), it isn’t your typical wine bar. Restaurants are masculine enough to appeal to men but still offer the comfort level and sophistication that many female consumers are drawn to. The Orland Park, IL-based chain has also done well with its wine club, offering a monthly bottle of a special blend only available to club members.

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Genghis Grill excels at customization and value. The Asian create-your-own-stir-fry chain appeals to diners for a number of reasons. The do-it-yourself format provides a number of options for guests. The 70+ ingredient bar has a variety of healthy options for diet-conscious consumers, and it is also a nice outlet for kids to be creative in building their own meals. Food quantity is also customizable; customers can eat as much as they want. The 82-unit Dallas-based chain is growing rapidly, which can be attributed to its small platform and low costs.

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Mellow Mushroom excels at uniqueness. Each Mellow Mushroom restaurant is different; there is no typical prototype of the casual-dining pizza chain based in Atlanta. Each of the 135 units has regional elements built into the décor to provide a sense of local comfort. The chain as a whole, though, is known for its hippie theme. The psychedelic ambiance allows guests to leave their world and immerse themselves in a far-out experience.

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Chuy’s excels at quirkiness. The casual-dining Mexican chain is known for kitsch. Restaurants feature design elements such as a hubcap-covered ceiling, Elvis-themed rooms and a toppings bar in the back of a vintage car. The chain pairs its differentiated experience with quality food. This nostalgic feel and good fare especially appeal to the Baby Boomer generation.

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Brio Tuscan Grille excels at sophistication. The environment is both sophisticated and comfortable at this Columbus, OH-based casual-dining Italian chain’s 46 restaurants. One might consider it a more upscale version of the Olive Garden, providing a higher level experience that also costs slightly more. Because of the higher price point, the diverse affluent guests can expect to see a larger wine selection and polished menu.

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Marlin & Ray’s excels at atmosphere. This concept is a prime example of reconcepting. After many Ruby Tuesday units failed, the company was left with some prime real estate. Instead of continuing to sell the buildings to other casual-dining chains, Ruby Tuesday rolled out Marlin & Ray’s, a seafood concept that is more upscale than its previous brand. The Maryville, TN-based company is attempting to move to the polished-casual level by continuing to offer a laid-back environment but rebranding to a more sophisticated, vibrant concept.

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Key Takeaways

Operators will continue to adjust their concepts to adapt to competitive markets. As concepts broaden their menus and go after different service formats, it grows increasingly difficult to identify the competitors. This is especially true among fast-casual brands. This small segment continues to evolve and grow, leading the pack for development in the foodservice industry.

With the Millennial generation increasing its spending power, operators are developing and adjusting concepts to fit this demographic. Contemporary concepts will continue to flourish, as the younger generation seeks out the next best thing.

Finally, food quality and value will drive consumer appeal. Food quality is what creates craveability, but value always remains top of mind. Operators need to be able to provide balance in order to draw in consumers and remain profitable.

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 http://www.technomic.com.


New Food Concepts Flood Market

July 10, 2012

John Vomhof Jr., 8 June 2012, Minneapolis/St. Paul Business Journal

John Mallon and Randy Carmody launched Freeziac three years ago, looking to get in on the frozen-yogurt fad that was taking the West Coast by storm. Now the frozen-yogurt chain has five locations and another that’s slated to open soon.

“I think there could be well over 100 yogurt shops in the Minneapolis-St. Paul area before it reaches its peak,” Mallon said. “I think this is taking the place of the neighborhood ice cream shop.”

Chaska-based Freeziac isn’t the only player eyeing the market, though. The frozen yogurt segment has exploded in the Twin Cities over the past few years, with national and local chains snatching up dozens of storefronts throughout the metro area.

The rapid growth of the frozen-yogurt category and another hot, national trend — the rise of fast-casual sandwich shops — are helping fuel activity in the local retail real estate market. However, skeptics doubt whether all of the new concepts can survive.

“I’m not an expert on yogurt, but this feels a lot like the bagel wars of the 1990s, when there were a bunch of players jumping into the market at the same time,” said Chris Simmons, senior vice president of retail for Colliers International’s Minneapolis office. “As far as I know, Brueggers and Einstein Bros. are the only ones left. Most of the other ones only had one or two stores before they left and went home.”

Frozen yogurt

Self-serve yogurt stores have expanded rapidly over the past few years, generally outperforming the broader restaurant industry amid the slow economic recovery. The trend, which started in California with chains such as Pinkberry Inc., has taken off thanks to increasingly health-conscious consumers and the appeal of customization. The chains offer a wide variety of yogurt flavors and toppings, including fruit, nuts and candy.

The frozen yogurt segment still accounts for just a fraction of the $6.05 billion per year frozen-desserts restaurant category, which is dominated by Edina-based International Dairy Queen Inc.’s $2.45 billion in annual U.S. sales. But analysts say yogurt is starting to steal some market share.

Locally, there are now dozens of yogurt shops in a category that was virtually nonexistent several years ago. The players include:

• Bloomington-based Leeann Chin Inc.’s Red Cherry, which has 35 locations inside Leeann Chin restaurants.

• Broken Arrow, Okla.-based CherryBerry, which has 10 Minnesota stores and 10 more coming soon.

• Freeziac, which has five shops and one more coming soon.

• Salt Lake City-based TCBY Enterprises Inc., which has three locations.

• Yogurt Labs, which has a shop near Lake Calhoun in Minneapolis and has plans for new locations at the IDS Center in downtown Minneapolis and at 50th & France in Edina.

Two of the biggest national chains, Yogurtland Franchising Inc. and Pinkberry, aren’t even in the Twin Cities yet. Two other top players, Menchie’s Frozen Yogurt and Red Mango Inc., only have one location each.

So while it may seem that Minnesota has suddenly become inundated with yogurt chains, the market actually is well behind the curve on this trend, said Darren Tristano, senior vice president for Chicago restaurant consulting firm Technomic Inc.

“In a state like California, we might be starting to see some saturation, but the vast majority of the U.S. hasn’t hit that point yet,” he said. “In fact, many cities are just starting to experience it for the first time.”

While there are many competitors jockeying for space at the same time, Tristano notes that the real estate and labor costs for self-service shops are relatively low. Therefore, a store can be profitable on only a few hundred thousand dollars in sales.

“Some chains will emerge as the clear winners, but the market can support quite a few,” he said.

Frozen-yogurt shops also appeal to franchisees because they’re typically considered “semi-absentee” businesses, said Mike Welch, president of FranNet Minnesota. That means the owner doesn’t have to be on site all of the time.

“They look at it as an investment tool,” he said. “It’s just in lieu of a 401(k) that’s just languishing in the market.”

The key is for franchisees to pick the chains with the strongest business fundamentals in place that point to long-term sustainability.

“There’s absolutely risk, but it’s all about doing the appropriate due diligence,” he said. “If the track is laid well and you’re a good runner, you’re going to make it.”

Sandwich shops

Another hot, national trend that’s starting to take hold in the Twin Cities is the expansion of fast-casual sandwich shops. Firehouse Subs, Which Wich and Jersey Mike’s all have entered the market last year, targeting a segment somewhere between Subway and Panera — and they’re all seeking to grow rapidly.

The sandwich trend is similar to what has happened in other categories in recent years with Chipotle in the Mexican category and chains such as Five Guys and Smashburger in the burger category.

Jacksonville, Fla.-based Firehouse Restaurant Group Inc. opened its first Twin Cities location in Maplewood last August, and has said it hopes to open 54 stores in the Twin Cities within 10 years. It’s the nation’s seventh-largest sandwich chain, with 477 units and more than $284.6 million in sales.

“This is a sandwich for foodies,” said Ron Harris, Firehouse’s area representative for the Minneapolis market. “You pay a little more, but you get more for your money. We give you more meat and our sandwiches taste great.”

Dallas-based Which Wich Inc. opened its first Minnesota store in Blaine last summer. It now has four locations in the market and plans for more.

“It will be competitive, but I think there’s room for more than just Subway out there,” said Garrett Ebling, an Interstate 35W bridge collapse survivor who owns the Blaine location and will open a store in Maple Grove next month.

Manasquan, N.J.-based Jersey Mike’s Franchise Systems Inc. has locations in Coon Rapids and St. Anthony Village. Area director John Griparis, who owns those stores, said the company hopes to eventually have five or six franchisees with a total of 50 restaurants in the Twin Cities.

Of course, those new players will face plenty of competition in the market from chains such as Subway, Jimmy John’s Gourmet Sandwich Shop, Davanni’s, Quiznos, Potbelly Sandwich Works, Erbert & Gerbert’s Sandwich Shop and Cousins Subs Sandwich Shops. The overall U.S. sandwich segment grew 4 percent to $24.09 billion in 2011. Subway’s $11.4 billion in annual sales account for 47 percent of the market.

“That segment actually does concern me a little bit,” Welch said, pointing to competition, relatively high startup costs and labor demands. “A sub shop can cost more than $500,000, and there’s no direct correlation between what the investment is and what the franchisee can expect in return.”

American City Business Journals