More restaurants have jumped onto better-burger bandwagon

September 19, 2012

Emily Bryson York Chicago Tribune, 28 June 2012, St. Paul Pioneer Press

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 10 minutes or more for a better burger. They also can expect to pay more — as much as $10 for a meal.

But the idea appears to have broad appeal.

On a recent Friday afternoon, the Smashburger in Elmhurst, Ill., was bustling, with groups of co-workers, families, friends and couples out for celebration lunches, quick bites and family meals.

Heather Hoy and her husband, Blair, were enjoying a lunch with their three children and nephew in celebration of the last day of school.

She was tackling a Spicy Baja chicken sandwich with pepper jack cheese, guacamole, chipotle mayo and jalapenos. Sweet potato fries and haystack onions were also hits with her family, she said.

“It’s obviously higher quality than some of the fast-food places,” she said.

IMPROVEMENT PLAN

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. 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.”

Denver-based Smashburger also has wooed some McDonald’s franchisees away from the Golden Arches. Irwin Kruger, a 42-year McDonald’s operator, sold his business in 2010 to work with Ryan.

“I knew that Tom had never shot from the hip,” Kruger said, adding that anything Ryan ever proposed “was based in fact and science and a very keen eye on where consumers were going.”

Kruger said he was drawn in by the chain’s business model: smaller restaurants with high volume, and the ability to own an entire territory. With one restaurant in the Long Island area and two opening next month, Kruger is contracted to open 20 by the end of 2018.

ROOM FOR COMPETITION

Ed Rensi, former CEO of McDonald’s USA, said the idea that McDonald’s has lost its way with burgers is “nonsense.”

“You don’t grow to an $89 billion company by neglecting your core product,” he said. The success of better-burger chains, he said, is more a matter of the burger’s ability to sell for a wide range of prices.

“There’s a niche in any industry that you can fill and have a very nice business,” Rensi said, adding that baby boomers, who grew up eating burgers and have disposable income, are some of the best customers.

“They still want hamburgers, but they want them to be different than they had them back in the day.”

These 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 has 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 has 1,035 locations, founder Jerry Murrell said.

While new burger concepts are “popping up all over the place,” 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 has seen competitors “start having a little trouble with quality.”

“We can’t even make coffee right,” Murrell said.

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.”


Hooters-style restaurants experiencing a mini-boom

September 18, 2012

By Candice Choi, Associated Press, Sun, Jun 24, 2012

NEW YORK (AP) — The waitresses at Twin Peaks wear skimpy plaid tops that accentuate their chests. In case you didn’t catch the joke, the chain’s logo is an image of two pointy, snow-capped mountains. And the sports bar doesn’t stop there: It promises “scenic views.”

Twin Peaks owner Randy DeWitt downplays all of that and insists that the appeal of the restaurant goes beyond the obvious. Hearty meals and a focus on making customers feel special, he says, are what really keeps them coming back.

“We believe in feeding the ego before feeding the stomach,” he says. Or as the website of the mountain lodge-themed restaurant states, “Twin Peaks is about you, ’cause you’re the man!”

Twin Peaks is part of a booming niche in the beleaguered restaurant industry known as “breastaurants,” or sports bars that feature scantily clad waitresses. These small chains operate in the tradition of Hooters, which pioneered the concept in the 1980s but has struggled in recent years to stay fresh.

Instead of relying on lust alone, the new crop of restaurants is growing by offering new themes (think: rustic lodges and Celtic pubs) and varied menus (think: pot roast and shepherd’s pie instead of just burgers and wings). In other words, they’re hoping maybe people really are coming in for the food.

The nation’s top three “breastaurant” chains behind Hooters each had sales growth of 30 percent or more last year, according to Technomic, a food industry research firm. They still represent less than 1 percent of the nation’s top restaurants, but the upstart chains are benefitting as other mid-priced options like Applebee’s and Bennigan’s have experienced declines during the economic downturn.

“The younger crowds want to go to a newer place, not where mom and dad took them,” says Darren Tristano, an analyst at Technomic.

Tovan Adams says he frequents Tilted Kilt Pub & Eatery in Tempe, Ariz., where waitresses wear matching tartan mini-skirts and bras that fit in with the restaurant’s Celtic theme. He even brings his daughters, ages 6 and 9, with him for lunch.

“If you come in the evening, you’ll see a lot of kids here,” says Adams, an electric engineer who likes the menu’s variety. “Everyone’s still got their clothes on. If you go to the beach, it’s a lot worse than being here.”

Lynette Marmolejo, a college admissions worker, dropped in at the Tilted Kilt for the first time recently. She likes that the restaurant is dominated by the “corporate crowd” rather than the “college crowd.” And she says the half-dressed waitresses don’t bother her.

“Prices and the food — if those are good, I don’t care what anybody’s wearing,” Marmolejo says.

Tilted Kilt, which serves dishes such as shepherd’s pie and “Irish nachos” (potato chips instead of corn tortillas), had annual sales of $124 million last year, reflecting growth of 33 percent, according to Technomic. And by the end of this year, the company expects to have 95 locations, up from 57 at the end of last year.

That growth is one reason Tilted Kilt CEO Rod Lynch, bristles at the “breastaurant” moniker. He says the word implies that the company’s success is based purely on sex appeal. To the contrary, he says his customers — about three-quarters of whom are men and of the average age of 36 — consistently say the experience is about far more.

Tilted Kilt doesn’t go so far to call itself a family restaurant. But Lynch understands the risks of crossing a certain line.

“We want to be very PG-13,” he says. Its “class in all things” motto also means servers can’t have tattoos, piercings or dyed hair.

Rose Dimov, a 22-year-old waitress at Tilted Kilt, says her job is no different from any other waitressing gig; make guests feel special and ensure they have a good time. As an aspiring ballroom dancer, she also says she’s not fazed by the revealing outfit that comes with the job.

“Going to a restaurant should be an experience,” Dimov says. “We’re entertainers.”

Although the name might suggest otherwise, the owner of Mugs N Jugs in Clearwater, Fla., says his place also is like any ordinary restaurant with entertainment. Sam Ahmad says his game room, pool table and karaoke are why 40 percent of his customers are families.

Sales at the restaurant grew to $3 million in 2008, from $700,000 in 1998, Ahmad says, but have since declined because of the recession. After selling a second location to a franchisee last year, Ahmad is looking to find others who want to open franchise locations under the Mugs N Jugs banner.

As for the tank tops and shorts the waitresses wear, Ahmad says they don’t reveal too much. And those photos on the Mugs N Jugs website showing waitresses leaning over a pool table? Ahmad explains they are purely for marketing purposes.

“They’re at an angle because they’re at a pool table,” he says. “When you’re in the restaurant, you won’t see that. She’ll be standing.”

Taking a cue from its much smaller rivals, Hooters is also making changes.

The company opened its first location in 1983 in Clearwater, Fla., with waitresses sporting the now famous tiny orange shorts and tight white tank tops. The chain grew rapidly at first but has struggled in recent years. Sales have fallen steadily since peaking in 2007 at $960 million, as the menu and decor grew stale.

Last year, a group of private investors bought the chain of 365 restaurants and decided to try to revive the business. In February, Hooters opened a renovated location in Atlanta to showcase its new look with upgraded TVs, an outdoor bar and a covered patio. Remodeling is slated for another six to eight restaurants this year.

In April, Hooters also beefed up its menu with items that include a Baja burger, buffalo chicken sliders and a spinach and shrimp salad. The idea is to offer dishes that draw new customers, says David Henninger, Hooters’ chief marketing officer. Currently, more than three quarters of Hooters customers are male, with an average age of 45.

As part of the effort to improve its image, Henninger says Hooters is looking to showcase the life stories of its servers, many of whom are studying to go on to professional careers.

“The public can be misinformed about what we do,” says Henninger, who was hired this year. “They jump to their own conclusions.”

Without explaining how, he says the “curious” name of the restaurant could easily be misinterpreted. He says that the name is “part of the fun” and is about being “in on the joke.”

No matter how hard they try to open their doors to a broader audience, Hooters and its rivals remain the subject of criticism. “If it’s an adult entertainment business, that’s fine,” says Mona Lisa Wallace, president of the San Francisco chapter of the National Organization for Women. “Where they’re crossing the line is when they expose young children to the objectification of women.”

Not every chain is defensive about the reputation of breastaurants.

At Twin Peaks, based in Addison, Texas, sales last year grew 35 percent to $44 million from the previous year, according to Technomic. Owner DeWitt touts the 22-restaurant chain’s amenities but is under no illusions about the main attraction.

Waitresses, for instance, vary their costumes for special occasions. Around the holidays, servers dress up like Santa’s little helpers. Around Easter, they dress up like bunnies.

The owner of Tilted Kilt is just as frank. “We hire only spectacular talent,” Lynch said. “They have to fit into that costume.”


Burger King, the Cash Cow

September 17, 2012

By: JOE NOCERA, Published: June 22, 2012

Earlier this week, a well-known company went public in a complicated transaction that involved a handful of Wall Street sharpies and a mysterious investment vehicle called a SPAC. The company was Burger King.

If you are surprised to learn that the home of the Whopper — not to mention the bacon sundae — would find itself the subject of complex financial machinations, you shouldn’t be. Burger King has long been an enrichment scheme for clever financiers, who have sucked hundreds of millions of dollars out of it over the years. Maybe it will be different this time. Or maybe not.

Financial engineering has been part of the Burger King story for so long that it’s hard to believe there is still anything worth plucking from its carcass. “It’s been run as a cash cow for Wall Street,” said Bob Goldin, an executive vice president of Technomic, a food service consulting firm. Along the way it’s had 13 chief executives in 25 years, numerous strategy shifts and marketing campaigns — and has been constantly starved for cash. But, hey, the private equity guys got theirs. And isn’t that what really matters?

Burger King first became financial fodder in 1967 when it was bought by Pillsbury, which didn’t have a clue about how to run a restaurant chain. Then in 1988, a British company, Grand Metropolitan, initiated a hostile takeover and won Pillsbury. The new owners vowed to turn Burger King around.

It didn’t happen. Nine years later, Grand Met merged with Guinness to form Diageo, by which time Burger King’s role was well established. It shipped cash to headquarters, even as it lagged ever further behind McDonald’s.

Enter — ta-da! — private equity. In 2002, Goldman Sachs, along with two private equity firms, TGP and … hmmm … Bain Capital, teamed up to buy Burger King. This is exactly the kind of situation private equity firms like to trumpet: taking over a downtrodden company and nursing it back to health. And to get them their due, Burger King’s new owners did some good, stabilizing both the company and the franchisees, many of whom were in worse shape than Burger King itself.

But the private equity investors also cut themselves an incredibly sweet deal. Their $1.5 billion purchase price included only $210 million of their own money; the rest was borrowed. They immediately began taking out tens of millions of dollars in fees. Four years later, they took Burger King public. But, first, they rewarded themselves with a $448 million dividend. In all, according to The Wall Street Journal, “the firms received $511 million in dividend, fees, expense reimbursements and interest” — while still retaining a 76 percent stake.

Does it need to be said that Burger King was soon back to its old struggling self? Or that the solution, once again, was to sell to another private equity firm? Of course not! In 2010, Bain, Goldman and TPG cashed out, selling Burger King to 3G Capital, for $3.3 billion. In sum, the original private equity troika reaped a fortune by selling a company that was in nearly as much trouble as it had been when they first bought it. Surely this represents the apotheosis of financial engineering.

What has 3G done? According to Howard Penney, the managing director at Hedgeye, it has prettied up the pig by laying off a large percentage of the staff in Burger King’s Miami headquarters. Burger King’s owners grew earnings, he said, “by cutting expenses. They have not improved the business one iota.” And, of course, 3G pulled out fees and dividends, too. In all, Penney wrote recently, private equity firms have taken for themselves “$1 billion or more in capital that could have been used to improve the company’s relative standing versus its competitors, many of whom Burger King struggles to keep up with.”

This latest deal is just as complicated as the ones that have come before. Three financiers, including William Ackman, the well-known shareholder activist, put together a special purpose acquisition company, or SPAC — a vehicle that allows them to raise money, buy a company and take it public without the hassle of an I.P.O. The SPAC then bought a stake in Burger King, though 3G is still in charge. On its first day of trading, Burger King had a market value of $3.3 billion. When you include its fees and dividends, 3G has already made a tidy sum on its original investment.

Ackman told me that the 3G guys are “the best operators around, bar none.” He sent me a presentation for investors that suggests that the owners are prepared to modernize the stores, expand abroad and make other moves that are necessary for Burger King to remain competitive.

For the sake of all the people whose livelihoods depend on Burger King, let’s hope that happens. And if it doesn’t? The financiers will still make money. They always do.


Starbucks Believes M&A Bolsters Company’s Core

September 14, 2012

A pedestrian passes by a La Boulange outlet in San Francisco. Starbucks is paying $100 million for the chain.

Most people flock to Starbucks to buy coffee, Frappuccinos and lattes. But Starbucks is sending out a siren call for customers to add sandwiches and pastries to their java orders. In fact, it spent $100 million to acquire La Boulange, a San Francisco-based bakery with 19 outlets, in June. Integration is slated to begin by early 2013.

How does the hefty acquisition fit into Starbucks’ long-term strategy? The skinny is that to grow revenue, companies must go beyond their core products. Known for coffee, Starbucks has to expand its repertoire in order to boost income. As a result of the merger, La Boulange’s products will be sold at Starbucks outlets and supermarkets nationally.

Starbucks’ springing for La Boulange achieves two primary goals, says Darren Tristano, a Chicago-based executive vice president at Technomic, a food industry research and consulting firm. The first is boosting sales of its baked goods, which only account for about 20% of total sales. The second focuses on the fact that selling La Boulange’s products in supermarkets adds to its line of consumer packaged goods like coffee.

‘We Are Bakers Too’

At the time of the acquisition, Starbucks CEO Howard Schultz said, “This is an investment in our core business. After more than 40 years, we will be able to say that we are bakers too.”

David Tarantino, a Milwaukee-based senior research analyst with Robert W. Baird, says Starbucks views this purchase as a “strategic asset to grow their food sales dramatically.” Currently, about one-third of its customers buy food, and if La Boulange can boost that number to 40% or more, Starbucks will see a return on its investment.

Tarantino says the fact that Pascal Rigo, the founder and CEO of La Boulange, is staying on and joining Starbucks as a senior executive is critical to the acquisition.

“His involvement will help make sure that Starbucks maintains the quality, recipes and execution of its food items as it rolls out nationally,” he said.

Moreover, it allows Starbucks to become more of a fast-casual cafe rather than a quick-service coffee shop. That will let it compete vs. Panera Bread, one of the most rapidly expanding chains in the restaurant industry.

Since Starbucks lures hordes of coffee drinkers, its target clientele will have an opportunity to increase spending. Consumers will be able to buy freshly made croissants, muffins and sandwiches to accompany their beverages at breakfast and lunch, Tristano says. Starbucks will have to develop kitchens in several regional locales to transport the pastries to its outlets and ensure freshness.

In the past, Starbucks has offered panini sandwiches that needed microwave heating. This led to mixed results in sales.“It slowed down service and took baristas away from their specialty,” Tristano said.

But why spend $100 million to acquire 19 bakeries, a premium price, instead of developing their own? “Buying the bakeries accelerates growth,” Tristano said. Panera is expanding quickly and Dunkin’ Donuts offers specialty coffees, so the La Boulange purchase primes Starbucks to vie in a more upscale way against two rivals.

Rather than spend millions in R&D, La Boulange offers immediate help. “They now have a supply chain that can provide its 10,875 U.S.-based stores and create retail products for supermarkets,” Tristano said.

Tarantino says that customers currently spend $1.5 billion on food at Starbucks annually. He says this justified the $100 million price of the acquisition because Starbucks “sees the potential return they might get from having La Boulange products in its cafe.”

Expanding La Boulange beyond the U.S. is a strong possibility. Tarantino said that “Starbucks is a global brand. It’s clearly possible you could see La Boulange outlets outside the U.S. in Asia and Latin America.”

Of course, any major M&A has risks. Tarantino says this purchase could “start to stretch the management bandwidth too far and could lead to management losing focus on its core.”

Global Expansion

Starbucks has said that it wants to retain La Boulange’s identity and not rebrand it as Starbucks. That strategy enables it to franchise the bakery and expand it nationwide, Tristano says. Growth won’t happen overnight and could take several years to achieve, but Starbucks could ramp up revenue by opening many new La Boulange bakeries.

Starbucks faces challenges maintaining its brand. Tristano says it acquired Evolution Juice for $30 million in November 2011 to expand its juice offerings and tackle industry leader Jamba Juice, and despite adding the bakeries, it’s still “a coffeehouse at heart.” It must continue to focus and specialize on the coffee while adding to its repertoire of products.

But Tarantino sees La Boulange spiking Starbucks’ revenue when combined with Starbucks’ ubiquity.

“Starbucks has significant growth potential of its retail brand,” he said. “Coffee is a convenience, and if you have to walk six blocks to find it, it can be too far.”


Seattle-based concept brings Chipotle assembly model to pizza segment

September 13, 2012

June 11, 2012 | By M. Sharon Baker


Ally and Scott Svenson may be relatively new to the pizza business, but they are hardly neophytes when it comes to growing restaurant concepts into multimillion-dollar enterprises — they’ve done it twice before.


The duo founded Seattle Coffee Co. as expats living in the United Kingdom in 1995 and grew the chain to 75 stores in less than three years. In 1998 Starbucks Coffee bought the Svensons out for more than $85 million.


In 1999 the Svensons helped London-based chef Antonio Carluccio create and fund Carluccio’s Caffès, a U.K.-based Italian cafe and deli concept. They took it public on the London Stock Exchange in 2005, built it to 50 units, then sold it in 2010 to the Dubai, United Arab Emirates-based Landmark Group in a deal valued at $141 million.


Now the Svensons are back in the United States with a fast-casual venture called MOD — short for “made on demand” — Pizza. The Seattle-based five-unit chain sells customized thin-crust pizzas served in two to three minutes for $6.88. Two more restaurants are slated to open in Seattle this year, and a third is planned for an undisclosed city in the Pacific Northwest.


MOD borrows Chipotle Mexican Grill’s assembly-line model and use of fresh ingredients, offering any number of toppings on an 11-inch pie for a single price. Sauce and dough are made fresh daily, and the pizzas bake in an 800-degree gas-powered oven. Beer, wine, milk shakes and salads also are available. 


The name MOD reflects the concept’s made-on-demand promise and the youthful, irreverent sensibility of a British subculture known as mod. 


HEADQUARTERS: Seattle
MARKET SEGMENT: fast casual
NO. OF UNITS: 5
SYSTEMWIDE SALES: $5 million projected for 2012
AVERAGE CHECK: $10
LEADERSHIP: founders Ally and Scott Svenson, director of operations Chris Schultz
YEAR FOUNDED: 2008
METHOD OF GROWTH: private investors, future partnerships
NOTABLE COMPETITORS: Pie Five Pizza Co., Pieology Pizzeria, Serious Pie, Top That! Pizza, Uncle Maddio’s Pizza Joint
TARGET MARKETS: Pacific Northwest
WEBSITE: www.modpizza.com

The idea for the concept grew out of the need to feed their family quickly and affordably.


“We had a giant car full of hungry boys, needing to feed them before a game and constantly trying to figure out how to do it,” said Ally Svenson, who has four sons between the ages of 8 and 15. “If I fed them quickly, that meant I would have to eat later, or if I took them to a place where I wanted to eat, it was going to cost me $120. The [solution] was always something like Chipotle, but you can’t eat that every night.”


Soon after, they joined forces with Jim Markham, a Californian who was trying to grow his pizza-by-the-slice business. The Svensons brought in their friend Michael Klebeck, co-founder of Seattle’s Top Pot Hand-Forged Doughnuts, to help refine and execute the concept. Markham eventually returned to California, starting a similar concept called Pieology Pizzeria in 2011.


The first MOD opened in Seattle in November 2008. The second opened in Bellevue, Wash., in January 2010, followed by three other Seattle-area units between June 2010 and October 2011.


While each unit is a bit different, Scott Svenson said the 2,200-square-foot location that opened in October 2011 in the Seattle suburb of Alderwood, featuring 85 seats inside and 30 patio seats, is the closest to a prototype.


MOD raised $4 million from investors to fund its expansion. Chris Schultz, a 10-year veteran of Starbucks, runs MOD’s day-to-day operations, while Ally Svenson oversees branding, communications and the in-store experience.


Scott Svenson is in charge of MOD’s funding and growth strategy, but works as chief executive of wealth management firm Freestone Capital Management. He also heads up The Sienna Group, his family’s investment company.

In addition to Top Pot’s Klebeck, MOD backers include Lindsey Schwartz, CEO of Schwartz Brothers Restaurants; Adam Brotman, vice president, digital ventures at Starbucks; Jim Alling, chief operating officer of T-Mobile; and Paul Twohig, COO of Dunkin’ Donuts.


MOD now employs just over 100 people and is projected to make $5 million with its first six shops in 2012, Scott Svenson said.


Like other entrants to the still-
undeveloped fast-casual pizza market, MOD faces several challenges, said Darren Tristano, executive vice president of Chicago research firm Technomic.


“It’s a very saturated Italian and pizza marketplace, with full- and limited-service restaurants as well as independents,” he said. “At [MOD’s] price point, they still have a lot of Chipotles to compete with and sandwich, Asian and other choices within a consumer’s consideration. It’s going to be a difficult battle within fast casual for a share of the stomach.”


From hot dogs and sausages to ethnic foods like taquitos and egg rolls, roller grills continue to prosper at conveniece stores.

September 12, 2012

Jun 13, 2012, By Howard Riell, Associate Editor

Roller grills—if handled correctly—offer a great opportunity to grow sales. But as simple and relatively labor-free as they are, they still require management oversight, employee training and some marketing savvy.It’s not that complicated, but it is that essential.“Let me give you an analogy,” said H. G. Parsa, chairman of the Department of Foodservice and Lodging Management at the Rosen College of Hospitality Management at the University of Central Florida in Orlando, Fla. “Every dining room table has salt and pepper. They’re not exciting, but everybody has them. Roller grills are the workhorses of convenience stores, and they make money.” As far as return on investment, roller grills are practically unparalleled. “The equipment has one of the highest payoffs. It’s attractive, and the best part is it doesn’t take space,” Parsa said. “Plus roller grills are easy to clean and require no labor. The products sell themselves. It’s a small size but can hold a lot of hot dogs, bratwurst, taquitos, sausages, whatever. It looks pretty and attractive, and it smells good. That’s the key.”While roller grills may have been stigmatized in the past, the high quality items now available are attracting a wide audience. “It’s blue collar food with crossover appeal,” Parsa said. “Construction workers, children, students, everyone it seems, is a potential roller grill customer. When you factor in the economy and product promotions, the roller grill offers tremendous value. It’s not a thriller, but it sells.”C-stores can also all but skip trumpeting the grill. “People know it’s where it is,” Parsa pointed out, “and they’ll go get it. The only thing is to make sure the food is fresh, and that the grill is maintained properly. You can get one big one, but two small ones work much better.”

Building Sales

How to make the most of a store’s roller grill station?

“A number of key areas come to mind,” said Darren Tristano, executive vice president of Technomic Inc. in Chicago. “The first is enhanced flavor. Operators can differentiate the flavor of the product served on the roller grill. Add flavor inside the product as well as spicy sauces and dips to create craveability and give consumers a greater demand driver.”

The second part, Tristano explained, has to do with innovation. “By developing different ethnic products like Mexican taquitos, Italian and polish sausage and bagel dogs, operators can broaden the appeal,”he said. “Differentiation by quality is also important. Higher levels of quality products provide a better-for-you appeal that is conveyed through the branding.”

Two additional key factors are portability—emphasizing the portability of the product that requires only one hand to eat and can be eaten on the run—and price point, Tristano said. He recommended bundling meals with chips, cookies and a drink to promote greater demand among value-seekers.

Attention to Detail

Even with quality products and a value price, freshness reigns supreme. “I took over a store where they really weren’t doing a whole lot with the roller grill at all,” recounted Steve Vieira, a district manager for a group of franchised Circle K locations in Pittsburgh owned by Duxbury, Mass.-based Verc Enterprises. Verc also directly operates 23 convenience stores in Massachusetts and New Hampshire. “They would throw hot dogs down in the morning and the same ones would be on there 10 hours later.”

Vieira, whose background includes food industry experience, knows what he is talking about. Under his stewardship, the Circle K roller grill sales have skyrocketed by close to 400% in the last seven months.

Hot dogs, Vieira noted, are only good on the grill for a lifespan of four hours. “If they don’t sell within that four-hour span they’ve got to go. You’ve got to put fresh ones on and you need to get the area clean. You’ve got to have the condiments available. It’s all about eye appeal and keeping everything fresh.”

At Vieira’s flagship store, he has the grill running from 10 a.m. to 10 p.m. “As I saw sales starting to increase I kept expanding that. I now run the grill 24/7 with the exception of when they shut it down for about two hours at night to do all the cleaning,” he said.

The store was rebuilt about seven years ago under previous ownership. “I don’t know if they had grills prior to the rebuild, but we now have two three-foot grills going around the clock,” Vieira said.

The unit offers a wide variety of products prepared on its grills, including hot dogs; cheeseburger dogs; pepperjack hot dogs; chicken; beef and pepperoni-and-cheese tornados; Buffalo-chicken roller bites and pork egg rolls. The store recently introduced a combo deal—a hot dog, fountain soda and bag of chips—for $3. “I’m expecting that to really take off for the summer,” said Vieira.

Too few c-store operators understand just how integral roller grills can be to their success. Fortunately for Vieira, he isn’t one of them. “I really believed that there was a lot of opportunity here,” he said. “There was a lot of training that had to be done with the staff. We had to get everybody on board. They had to know that it was important to our bottom line, and that we wanted to grow the category.”

Each of the employees has received training on the proper procedures for setting up, cleaning and maintaining the grills and condiment section.

The chances for success were so great, Vieira recalled, and owner Leo Vercollone’s belief so strong that it became a challenge he could not refuse. “I mean, there was just so much opportunity to grow this category, and we ran with it. It was important to Leo and it was important to us as a company,” he said. “It’s something that we wanted to look at and make sure we were giving due justice. Even I’m shocked at the numbers.”

One of Vieira’s primary tasks was to make certain his people were thoroughly trained on all aspects of the grills’ operation and maintenance.

In terms of routine maintenance, store managers should check the cook temperatures daily. In most cases, health inspectors won’t ask how long food has been sitting atop a roller grill, but rather at what temperature the product is held.

“It’s got to be out of the danger zone, which means 140 degrees or over,” Vieira said.

In fact, keeping the temperature adjusted correctly is an excellent way to help overcome the automatic resistance many customers have to anything sitting on a roller grill.

“The tendency when you throw some new product on there is to turn the control way up in order to get the temperature up quickly. But then your product generally shrivels up, and after a little while doesn’t look as good,” Vieira said. “If you time yourself right and keep the heat a constant low, acceptable temperature, hot dogs will tend to look nice and juicy and more appetizing for a longer period of time.”


Mooyah expects to stand out in crowded burger market with food, flair, service

September 12, 2012

John Stearns, 15 June 2012, Wichita Business Journal

© 2012 American City Business Journals, Inc. All rights reserved.

mooyah.com

A Texas-based burger franchise is hungry to sink its teeth into Wichita.

The local burger market is crowded, acknowledges Rusty Rathbun, a Wichita restaurant developer, but he says Mooyah Burgers, Fries & Shakes will stand out.

“There’s nothing like it in Wichita, guarantee it,” Rathbun says.

In the few markets where it’s established, Mooyah is known for its build-your-own burger combinations, myriad milkshake flavors and colorful dining rooms that feature flat-screen TVs and a giant chalkboard for the kids.

Rathbun works with Mooyah as a development agent, assisting Mooyah franchisees and taking a stake in each restaurant he helps. In Wichita, he’s working with franchise owner Anthony Powell, a former anchor on KSN-TV.

They expect to open in a west Wichita location — yet to be disclosed — in August. Powell says he’s waiting to finalize an SBA loan for build-out and equipment.

He says a timetable for future Wichita stores, which he has rights to, depends largely on how the first store does.

A growing niche

Frisco, Texas-based Mooyah fits in the “fast-casual” burger category with the likes of Five Guys Burgers and Fries.

“Fast-casual” means counter service, but food is made to order, so there’s more time between ordering and eating. And consumers pay a little higher price for what they expect to be higher quality.

Wichita’s Five Guys franchisees, brothers Jay and Jeff Miller, say they aren’t concerned about the new competition.

They entered the burger business 2½ years ago and now have three restaurants in Wichita and plan to open two more within five years.

“All we can worry about is ourselves,” Jeff Miller says. As long as Five Guys keeps offering high-quality food and service, the Millers say, they’ll be fine.

Five Guys is the nation’s fastest-growing large restaurant chain, according to food industry researcher Technomic Inc., with sales of $951 million in 2011, up 32.8 percent from the year before.

Mooyah — with just 36 stores, most in Texas — is much smaller.

Darren Tristano, Technomic vice president, estimates Mooyah’s sales at $21 million last year. But that gives it an average unit volume of about $1.1 million, close to Five Guys’ $1.15 million.

“They’re a good brand,” Tristano says. “It’s one that we expect to be a growth chain for years to come.”

Adam Mills, CEO of the Kansas Restaurant and Hospitality Association, says fast-casual restaurants are proving popular.

They cater, he says, to people in a hurry but who seek higher quality food and service and are willing to pay a little more.

However, not every fast-casual burger joint is guaranteed to succeed, as Smashburger demonstrated when it closed its two metro-area stores, the last a year ago. A Smashburger spokesperson could not be reached for this story.

Mills doesn’t know why Smashburger closed here, saying factors could include site, funding, branding or advertising.

Sold on food, experience, support

Powell says he was attracted to Mooyah after meeting Rathbun, whom he calls a “brilliant restaurant person.” Rathbun has developed about 125 Subway restaurants in Kansas and co-owns Wichita’s Twin Peaks restaurant.

After researching Mooyah, tasting the food and meeting franchisees, Powell bought in. He recently finished Mooyah training in Texas.

In Dallas, where burger competition also is fierce, “Mooyah stands above and beyond,” Powell says. “Not only the food, but the dining experience as well.”

Service is huge, he says, and will be his focus. For operations, he’s hired an experienced restaurateur, Bambi Storlie, as general manager.

High-quality food and service are key to competing in a crowded market, agree Five Guys’ Jay and Jeff Miller, and they welcome Mooyah to try its hand at it.

It won’t matter that much to Five Guys, Jay Miller insists. “I’m not going to sweat it either way.”

Franchise fee: $30,000 for first restaurant, $20,000 for each thereafter.

Number of stores: 36. Projected to be 50 by year-end, 100 by end of 2013.