B.Good Ready to Grow

April 30, 2013

getimage.aspxAll-natural burger chain’s first franchise location is set to open in Shrewsbury, and dozens more are slated for New England over the next five years

First conquer New England. Then the East Coast. And finally, the country.

The founders of b.good, a Boston chain of nine farm-to-table burger and fry joints, are launching an ambitious campaign to spread their feel-good fast food in two weeks with the opening of the company’s first franchise store in Shrewsbury.

“We set out wanting this business to be huge,” said cofounder Anthony Ackil. “We never wanted to open five restaurants. We never wanted 50. We want hundreds.”

Ackil and Jon Olinto, the company’s other founder, developed plans and found partners last year for 23 new franchise stores. The restaurants, along with 12 more corporate locations, are slated to pop up in Maine, New Hampshire, Rhode Island, Connecticut, and Massachusetts over the next five years.

The duo met long ago, in sixth grade at Dexter School in Brookline, and bonded over homemade meals cooked by Ackil’s late uncle. As adults, they shared a love of fast food — but not the post-consumption guilt it inspires.

Ackil and Olinto opened the first b.good nine years ago, serving all-natural burgers, fries, and salads. Now the chain’s restaurants feature wallboards identifying the farmers who raise the beef and cultivate the produce served at each location.

As the business grew in Greater Boston, Ackil and Olinto spent time dissecting every aspect of their menu, finances, and operations — down to the amount of potatoes an employee can cut in 15 minutes. The founders share these details with their franchisees and take a hands-on approach with the each store, believing the brand’s success relies on how these restaurants perform.

“We want to give our franchisees a road map to make money,” Ackil said. “It’s taken us a long time to get things right.”

John Freeley and his brother, David, owners of the Shrewsbury location, were drawn to b.good above other brands because of the owners’ attitude and the farm-to-table approach.

“One of the key factors was their involvement in the franchise,” Freeley said. “In most cases, you sign the deal and you’re on your own. That’s not the case with Jon and Anthony.”

B.good sold the New England franchise restaurants to four different investor groups in deals for four or five stores each. The Freeleys are on pace to open a store a year, like the other investors, for five years in Rhode Island and southern Massachusetts.

But one analyst questioned how b.good, which serves a niche market of health-conscious consumers, will perform on a national scale.

The company follows two different trends in the “fast casuals” restaurant category — farm-to-fork fare and better burgers, said Darren Tristano, an executive vice president at Technomic, a food industry research firm. That could be a problem.

A bleak national market for farm-to-fork fast casuals means b.good’s founders are either on the brink of something new, different, and ready to burst with growth or people just won’t buy it, he said.

“Only a minority of consumers want farm-to-table,” Tristano said. “Out of that minority there are those who aren’t willing to pay for it because the price is higher. Now you’re getting down to a small minority that want it and are willing to pay for it, and then there’s a small percentage that actually do it.”

And in the booming burger market, well-established brands are offering lower investment costs and yielding similar annual sales.

B.good’s owners said a franchise store requires an investment between $400,000 and $600,000 and is expected to generate annual sales of about $1.15 million.

Another strong, growing brand in the better burger business, Five Guys, has an entry cost of about $350,000 to $550,000 per store and produces annual sales of about $1.2 million.

“Franchisees, knowing the market for those other burger chains, will look at b.good and ask why the investment costs are higher,” Tristano said.

Olinto said the b.good restaurants require slightly more money upfront because of upgraded fixtures, furniture, and equipment that help drive home the farm-to-table theme.

“If you just come in and get a burger and fries and don’t learn about our concept or where your food comes from, we’ve failed in a sense,” he said.

B.good is also likely to see competition from other fast casuals such as Subway, Chipotle, and even Panera Bread, which also serve more affluent consumers who care about the food they put into their body.

Although franchise business growth is predicted to increase at a slightly slower rate this year — by 1.4 percent compared with 1.5 percent in 2012 — it is still ahead of other business sectors, according to an IHS Global Insight report released in December.

Burger restaurants continue to pop up in the franchise industry, according to Alisa Harrison, a spokeswoman for the International Franchise Association. Overall, about 3,000 new restaurant franchises are forecast to open this year.

“We continually see new burger concepts because burgers and fries never go out of fashion,” she said. “It’s a concept that people like and if it can be replicated from one region to another, franchising is a great way to grow your business.”

Ackil and Olinto are confident they can stick to their restaurant concept of serving real food, which they define as knowing its source and the farmers who produce it.

The all-natural beef served in the nine corporate-owned b.good restaurants comes from Pineland Farms, a co-op of 270 sustainable farms located east of the Mississippi River and as far south as the Carolinas.

Pineland also supplies Whole Foods Market Inc., and Olinto said b.good is likely to pursue new markets that the supermarket company has entered because they share a similar customer base and need for local suppliers.

Tristano said it’s no surprise b.good found diners and investors in New England, but the brand will be tested in markets that don’t place as much importance on their food’s source.

“They’ll likely grow in the short term, but the long term is going to be a bigger question mark,” he said.

McDonald’s Cites Drop in Popularity for End of Walnut Salad

April 29, 2013

With new products in the wings, McDonald’s is trimming less popular items from its menu.

The Oak Brook-based burger giant said Thursday that it plans to discontinue its fruit and walnut salad and Chicken Selects. It’s also mulling the fate of the Angus Third Pounder.

The decision comes at a time when McDonald’s has been grilled by investors about a dearth of new products as well as softening sales.

With a number of items set to debut nationally — among them a spicy McChicken sandwich and the Egg White Delight breakfast sandwich — the cuts likely reflect the company making room for them, and others slated for this year.

“We are always talking to our customers and make decisions regarding our menu — what to add and what to remove — on a case-by-case basis,” McDonald’s spokeswoman Danya Proud said in a statement.

Darren Tristano, executive vice president of Technomic, said that while the current cuts are more than McDonald’s usually makes to its menu, it’s also introducing new products faster.

“The need to streamline their menu has become increasingly important,” he said.

McDonald’s posted its first monthly same-store sales decline in more than nine years in October, which led to a slew of questions about how the golden arches would fare against resurgent competition from Wendy’s, Burger King, and Taco Bell as well as fast-casual players like Chipotle and Panera.

During the company’s fourth-quarter earnings call in January, McDonald’s CEO Don Thompson acknowledged “some softening and some slowing” in the business.

“A couple of things needed to be stronger,” he said. “We needed to have and execute — we had it, but execute a more robust menu pipeline for our consumers, and that’s across the board in beverages and beef offerings and chicken offerings.” This year, Thompson said, McDonald’s will have new products in each of those areas.

Speculation involving the removal of the fruit and walnut salad, launched in 2005, and Chicken Selects, introduced in 2004, has circulated for years. But removing the Angus burger, which is sold with a variety of toppings, and as the primary component of three snack wraps, would be a more significant departure for McDonald’s.

Launched in 2009 with great fanfare, the Angus burger had been through years of testing and was the company’s first premium burger since the Big N’ Tasty debuted in 2001. It was pulled in 2010.

Angus currently represents the high end of McDonald’s menu, selling for $4 or more, depending on the toppings. The Big Mac, for example, was selling for $3.69 at an Evanston McDonald’s on Thursday.

The Angus faces stiff competition not only from other burgers on the McDonald’s menu, including the Big Mac, Quarter Pounder, and the McDouble, which sells for $1 at most restaurants, but from the entire so-called better burger category, a subgenre of the fast-casual category specializing in never-frozen burgers made to order with a variety of toppings.

Tristano said that while the Angus could be “too premium for McDonald’s,” it also might not be the right burger to compete with these high-end rivals. “Angus may be too lean, not enough fat, not enough flavor to compete with the more indulgent burgers out there,” he said.

Burger King Tries Again in France

April 25, 2013

BKFRANKFURT – Once a week, Vincent Bonnaire drives 15 miles from his office in Aix-en-Provence to Marseille airport in the south of France. He’s not catching a flight. He just wants his weekly Whopper fix.

Bonnaire, 28, an electrical equipment salesman, can once again enjoy his favorite burger in France. After a 15-year absence, during which rival McDonald’s captured almost half of the $12 billion French fast-food market, Burger King Worldwide returned to France in December. In the coming months, it plans to open its second outlet, off a motorway in Reims.

Burger King’s first French foray was haphazard, ending with a quiet retreat after shuttering 39 restaurants. This time, Burger King has hedged its bets, sharing costs with Italian restaurant operator Autogrill. At stake is one of McDonald’s biggest markets based on sales and profits.

To beat McDonald’s and European rival Quick, which have gobbled up the best locations and tailored their menus to French tastes, the Miami chain must emphasize the flame-grilled burgers that have won passionate fans, according to Michael Schaefer, an analyst at researcher Euromonitor International.

“They have the name recognition, that weird cult following in France,” Schaefer said. “That’s kind of half the battle. The best thing for Burger King right now is to keep it simple and focus on things people know.”

Another failure in France could sour investors on Burger King’s shares, which have advanced about 20 percent from the company’s opening share price on its June 20 return to the New York Stock Exchange, after owner 3G Capital completed a merger with a company co-founded by activist investor William Ackman. The stock has outpaced both McDonald’s and the Standard & Poor’s 500 index since then, bolstered by an international push that has taken the chain into places as far-flung as Siberia and Peru.

A setback in France “would be a very big blow for the organization and for the brand,” said Darren Tristano, executive vice president at researcher Technomic Inc. in Chicago.

Burger King is saying little about its plans in France, where the fast-food market will grow 17 percent by 2016, Euromonitor predicts. Autogrill provides expertise “in the travel sector,” according to emails from Leo Leon, Burger King’s general manager for Europe, the Middle East and Africa. Autogrill, based in Novara, Italy, runs restaurants – including more than 140 Burger Kings – in airports, railway stations and roadsides on four continents.

The Autogrill pact allows Burger King to test the waters without big upfront investments, said Jerome Hamrit, head of the consumer and retail practice at A.T. Kearney in France.

Burger King may benefit from its beef-heavy menu, a contrast to that of McDonald’s, often called “McDo” in France, which has increased its offerings of fare such as salads, fruit and pastries. Burger King should focus on the basics such as its Double Whopper, said Suzanne Stahlie, managing director at consultants FutureBrand in Paris.

“We can go to McDonald’s to eat ice cream or have a coffee,” she said. “People go to Burger King for the American burger.”

Waits can stretch to 45 minutes or more during lunch at the Marseille airport location.

Casual Dining Now on Resort Menus

April 24, 2013

665371The Four Seasons Resort Scottsdale recently opened a whimsical, comfort-food restaurant with a soda fountain, shuffleboard table and regional American specialties such as chicken-fried buffalo with buttermilk mash.

The venue, Proof, is a radical departure in dining at the AAA Five Diamond property and a first for the luxury hotel chain. It’s also an example of a casual dining trend taking hold at luxury resorts Valley-wide.

“We realized that our guests wanted a restaurant where they could eat in their T-shirt and shorts. It’s not that formal dining is gone completely but rather that the demand is increasing for approachable foods at approachable prices in a family-friendly setting,” Executive Chef Jesse Hansen said of the new restaurant.

After a five-year struggle to fill seats and make fancy dining rooms profitable, many resorts are moving their high-end restaurants down-market or adding informal dining options alongside them.

Economics and lifestyle are driving the move away from starched white tablecloths and china to wood tables and pottery, from four-course dinners to shared plates, according to industry experts.

Diners no longer have an appetite or pocketbook for $100 Kobe beef patties topped with foie gras.

Instead, today’s business and leisure diner wants the price to be as good as the food.

“The consumer mind-set is toward value, and resorts are getting the message,” said Darren Tristano, executive vice president of Technomic Inc., a Chicago-based market-research firm for the food-service industry. “They know that diners perceive the traditional resort restaurants as expensive and formal, so they are opening ones that are cheaper and more casual.”

Experts estimate that diners can cut a dinner tab almost in half by eating at a casual resort eatery. The lower prices especially appeal to guests who stay several nights and have little desire or money to dine nightly at the first-class restaurant.

The resort trend dovetails with an industrywide boom in casual dining. According to market researcher NPD Group, casual dining will continue to outpace all other sectors through 2019.

Along with saving money, business and leisure diners at resorts have less interest than their grandparents in suiting up for multiple courses in formal dining rooms.

At Montelucia Resort and Spa in Paradise Valley, Executive Chef Michael Cairns recently opened Centro Lounge, a Southwestern-inspired bistro that meets an ambitious guest wish list: fresh, locally inspired food; small plates to share; entrees under $20; Wi-Fi access; and a light, bright, unpretentious space in which to enjoy a meal.

“People want technology in the dining room so they can check e-mail, watch TV or chat on the phone while eating,” Cairns said. “We blew up the old model of resort dining and brought in the new.”

The changes work for Francis Miller and her husband. The Lancaster, Pa., couple spend weeks every winter at the resort at the base of Camelback Mountain.

“We like that we have a casual, bright and light restaurant to grab something to eat,” Miller said. “Guests watch sports, the food channel. It’s a nice addition to have on the property.”

Resorts also are banking that the hipper, casual eateries will prevent guests from spending their dining dollars elsewhere while enticing locals to the resort for a meal. The new casual model is midway between the rank-and-file coffee shop and formal dining room, replicas of innovative, one-of-a-kind, chef-owned eateries.

“Food is a critical part of a resort’s overall profits, so it’s important they keep guests on site for as many meals as possible,” said Kristen Jarnagin, vice president of communications for the Arizona Lodging and Tourism Association.

The long run of good times for Arizona resort restaurants began stalling in 2008. That April, Mary Elaine’s, for 20 years a showcase of luxury fine dining with decadent touches like purse stools, closed. The Phoenician replaced the restaurant with a partnership with superstar chef and international entrepreneur Jean-Georges Vongerichten for J&G Steakhouse.

Shortly after, two other high-end Valley resorts shuttered their decades-old, fine-dining rooms in favor of celebrity-chef spinoffs. The Marquesa at the Fairmont Scottsdale Princess turned into Bourbon Steak, a Michael Mina steak house; while the Chaparral at the Marriott Camelback Inn turned into BLT Steak, a Laurent Tourondel concept.

Diners view steak houses as a more casual alternative to the old-school, stuffier resort restaurants and a popular draw to business travelers dining on company expense accounts, hospitality-industry experts said.

But is casual resort here to stay? Predictions range from yes to passing fad.

Chefs such as Cairns are certain the days of dark leather, starched tablecloths and French continental fare are over forever. Yet Jarnagin believes formal dining, like most cyclical trends, eventually will return.

“Everything comes full circle, and when the good times roll, people will want that truly special meal that only a high-end hotel at a resort can offer,” Jarnagin said.

Despite the growing popularity of casual dining, properties such as the Sheraton Wild Horse Pass and Resort have no plans to shutter or offer lower-tier alternatives to their upscale, showcase restaurants.

“Kai is part of our resort’s identity and a way we share the Native American culture, history and legacy,” said Stephanie Sanstead, spokeswoman for the Gila River Reservation resort. “Kai is here to stay no matter what happens at other resorts.”

McLent? Fish Hits Fast Food Menus for Holidays

April 23, 2013

fishIf you suspect there’s something fishy going on at your favorite fast-food joint, you’re probably right. The countdown to Easter is on, and that means everyone from McDonald’s to Quiznos is cashing in on the Catholic tradition of skipping red meat in favor of fish during Lent. This year, several chains have created new menu options for customers during this, the holiest of seafood seasons.

Darren Tristano, executive vice president of food service research and consulting firm, Technomic, told Nation’s Restaurant News that most restaurant chains should consider having some kind of fish or non-meat option for people observing Lent in order to prevent a loss of traffic during the season. Many chains are taking that advice and running with it this year.

McDonald’s, the largest of the fast-food chains, introduced a new item this year in addition to its popular Filet-O-Fish sandwich. Its snack-size Fish McBites are a guilt-free option for believers as well as those concerned with the environment, as they have been certified 100 percent sustainably sourced from the Marine Stewardship Council. The packaging for the Fish McBites, as well as the Filet-O-Fish sandwich, carries the council’s blue “eco-label.”

Other chains are also picking up on the trend of disclosing the sources of fish items on their menus. This season, Wendy’s is promoting its Premium Fish Fillet by advertising its 100 percent North Pacific cod origins. And Culver’s, a Midwestern fast-food chain, is selling a seasonal Northwoods Walleye sandwich.

“That’s part of the overall trend to improve perceptions of food and ingredients through marketing,” Tristano said, “so certain regions get called out. Marketers have enhanced perceptions with the way they’ve described menu items for years. Is it more appealing during Lent? Probably.”

Other chains that are getting creative with their Lenten offerings this year include Quiznos, which is promoting its Lobster and Seafood Salad sub, and Carl’s Jr. and Hardee’s, whose brand-new Charbroiled Atlantic Cod Fish sandwich has arrived right on time for the seafood season.

NAPICS ’13: Is ‘Better Pizza’ the Next Fast Casual Category?

April 22, 2013

pizzaPizza is rapidly moving toward a fast casual format, said Darren Tristano, executive vice president of market research firm Technomic, during his keynote address Sunday at the North American Pizza and Ice Cream Show in Columbus, Ohio, where he also discussed frozen dessert trends.

“We’re starting to see a ‘better pizza’ category (similar to the ‘better-burger’ category created by Five Guys, Smashburger, etc.). These pizzas are made in 3 minutes and they’re made to order and this is really an area pizza hasn’t seen before, but it’s what consumers want,” he said. “This will be very strong especially at lunchtime.”

Consumers are driving the emergence of “better pizza,” artisan and gourmet concepts as they demand more bang for their buck.

“Value-conscious consumers are making judgments about pizza based on what they’re actually getting,” Tristano said. “Quality is more important than ever.”

Tristano outlined other emerging menu trends in the pizza segment, including a bigger focus on chicken as a topping, particularly as barbecue chicken and buffalo chicken offerings. Not only is chicken more cost effective as the price of beef rises, it is also adaptable.

He also said more pizzerias are experimenting with seafood toppings such as shrimp.

“Fresh toppings” requests have risen 6 percent since 2010. Diners also want a large quantity of toppings and cheese, a variety of toppings from which to choose, and new and innovative toppings.

Consumers are also seeking out more premium ingredients than they were in recent years.

“They want more health-halo descriptors such as all-natural, locally-sourced, healthier components like whole wheat crusts, organic, artisan, gluten-free,” Tristano said. “This is good news because it means they’re willing to spend more.”

Other pizza menu trends include:

  • Ethnic toppings moving into the mainstream, such as Papa Murphy’s Thai Chicken deLite.
  • Artisan and upscale; pushed into the mainstream by Domino’s artisan line. “This allows you to sell pizza at a higher price point,” Tristano said.
  • Pizza providing a platform for other comfort foods, such as meatloaf pizza and mac and cheese pizza.
  • Breafast. Some pizza chains, such as Chicago-based Rosati’s, are offering morning options to add sales. “This also gives them an opportunity to innovate and will add value to the bottom line,” Tristano said.
  • Gluten-free is still growing fast. Chuck E. Cheese mainstreamed gluten-free last year, allowing groups to easier choose where to eat if one person is on a gluten-free diet.
  • Combo meals have emerged, particularly from Pizza Hut with its Big Dinner Box. “They generate value and put that value in front of the consumer,” Tristano said.
  • Restaurant to retail. Donato’s and Noble Roman’s are two examples of brands that have added a take-and-bake line for grocery stores.
  • Adult beverage. Tristano said there is a shift toward brewpubs and craft beer. Adding these options to the menu provides a “big opportunity to attract younger consumers with a high-margin item.”

Off the menu, consumers want pizza available from a convenient location, good-tasting pizza and pizza at a value.

“Convenience is the primary traffic driver, but it won’t provide a strong edge if you don’t have a better-tasting pizza,” Tristano said.

What about dessert?

The frozen dessert space has gotten increasingly crowded within the past 10 years and competition has flattened sales since 2010, Tristano said.

Although the Recession has ended, consumers remain cautious with their spending. However, according to Tristano, they feel better about their own situations and fewer consumers admit they’re struggling.

“The better news is consumers are more optimistic about 2013, by about 4 percent more than they were last year at this time,” he said.

Consumers’ primary concerns are gas prices (27 percent), grocery costs (26 percent), and their own financial health (26 percent).

“Grocery prices are rising faster than restaurant prices, so for consumers, restaurants are now actually a better value,” Tristano said.

While consumers are more optimistic for the New Year, operators have the opposite mentality. The big concern is commodity prices.

“Fifty-four percent (of operators) said they will raise their prices this year. They don’t want to, but most will have to,” Tristano said. He added that all eyes will be on McDonald’s. As the chain bumps its value offerings from $1 to $1.29, it makes other brands more comfortable to inch up prices as well.

Tristano also pointed out that while sales are rebounding from the economic fallout, they’re still well below pre-Recession levels. For example, the restaurant industry as a whole experienced 13.5 percent growth in 2007 versus 3.6 percent expected for 2013.

“It will likely take until 2020 to achieve 2007 levels,” Tristano said. “But we’re headed in a positive direction and that is better than a decline.”

Concepts and Consumer Trends

For the dessert segment as a whole, nothing is more popular than frozen yogurt. Pinkberry kicked off a high-end influx of these concepts in 2005, and was eventually joined by self-service and lower price-point brands such as Orange Leaf.

Also on trend and poised to grow are old-fashioned ice cream parlor concepts (such as Oberweis) and Pino Gelato, as well as international concepts finding their way stateside, like Costa Rica’s POPS.

“Many of these provide authenticity, which is what people want,” Tristano said. Other trends include:

  • Broadening menus to add winter weather business; for example Cold Stone Creamery’s cupcakes and novelties lineup. Also, adding complementary offerings such as crepes to go with a gelato, provides more chances to sell during any season.
  • The acceleration of breakfast offerings, such as Greek yogurt with fruit.
  • Smoothies and other specialty beverages. “They offer portability, and they can benefit from the lifestyle-oriented marketing people want now,” Tristano said.
  • Catering. Ben & Jerry’s is now offering catering, as is Cold Stone. “They said, ‘if you’re not going to come to us, we will come to you,’ and it’s a great option for business events, charity events, etc.,” Tristano said.
  • Super premium. “Raising the indulgence factor and playing with flavor innovation adds an element of sophistication,” Tristano said, pointing to Columbus-based Jeni’s Splendid Ice Cream as an example.
  • Healthy promoted as a lifestyle.
  • Letting consumers control expenditures; for example, frozen yogurt concepts, like Menchie’s, that allow guests to mix, weigh and pay.
  • Community outreach. Yogurtland is a good example of providing philanthropic opportunities for its guests. “It won’t necessarily build sales, but it builds an emotional connection for guests and that makes them feel good. It also builds brand awareness,” Tristano said.

“Ultimately what operators need to keep in mind is consumers indulge when they go out to eat — they can eat healthy at home. But they want to have healthful options when they are out because it gives them more control over their decisions,” Tristano concluded. “Frozen dessert concepts need to be broadening their options to serve more occasions and differentiate.”

Focusing on Fresh Foods

April 18, 2013

sandwichThe grab-and-go business is constantly evolving. Today’s customers not only want their foodservice fast, but they expect quality, consistency and healthy daypart options.

Convenience store operators are driving sales of healthy, portable foodservice offerings like packaged sandwiches, wraps, salads and some roller grill items. But, historically, the industry has seldom gotten the attention it deserves for its healthy food options. Changing that perception, and making consumers aware of the healthy items c-stores carry will take some effort.

T. W. MacDermott, president and principal of the Clarion Group in Kingston, N.H., pointed out that most c-stores have a high level of repeat business from their immediate surrounding area and commuters who stop for gas or coffee en route to work. Thus, it should be relatively easy to communicate any new initiative to them with minimal effort and expense.

“The trick is to make sure that the healthy foods being offered are really healthy, and especially fresh,” MacDermott said. “There can be no shortcutting on quality, or the store will sell its product only once.”

Ready-to-eat sandwiches, fresh fruit, packaged salads, fruit cups, yogurt cups and other foods that a customer may pick up to take for lunch at work are extremely popular. “The operator will need to either find a supplier of the fresh foods or maybe partner with a nearby restaurant or caterer whose label on the fresh products will be an assurance of quality to customers and a helpful ad for the provider,” MacDermott said.

Fresh Returns
Another major difference between jumping from retail to foodservice that could cause problems for inexperienced operators is handling products with a short shelf life.

“A whole different mindset is required when it comes to working with perishable products. This is an area that convenience stores need to understand and perfect to boost fresh grab-and-go sales,” MacDermott said. “It’s better to throw expired food out, or donate items nearing their spoilage date to a food bank. The loss will be more than offset by growing repeat sales if customers know that whatever they buy is fresh—no more than 36 hours old.”

Letting consumers know about the guaranteed freshness and food donations can also engender confidence, good will and additional repeat business.

To ensure the high turnover that healthy, fresh products require in order to be profitable, the products should be rotated at frequent intervals and kept in a separate, distinctive refrigerated display case, Mac Dermott suggested. If possible, it should also adjoin a display of non-refrigerated healthy products, such as granola bars and the like.
If possible, said Arlene Spiegel, president of Arlene Spiegel & Associates in New York City, “list ingredients, sources and method of preparation next to each item. Customer can never have too much information about the quality of the food they are eating.”

While retailers are naturally sensitive to pricing, convenience stores don’t necessarily have to worry about competing with supermarkets when it comes to fresh grab-and-go foods.

“Customers stop at convenience stores because they are convenient, not because they’re bargain hunting. That is a strategy they can use to their advantage,” MacDermott said.

Going to Market
As foodservice becomes more of a convenience store industry staple, effectively marketing quality and freshness will only enhance the offering.

“The industry needs to decide how it wants people to think about it,” said Ryan Mathews, founder and CEO of Detroit-based Black Monk Consulting. “One can make the claim of convenience, or, one can make the claim of health. But making compound claims—like healthy and convenient—is always tricky.”

Mathews posed the question: Is the industry willing to invest in a long-term mass-marketing reimaging campaign? “I doubt it,” he said, “and I really doubt it would be worth it. A better tactic is to promote healthy options in store and to convert the market one customer at a time.”

There is, as Mathews pointed out, a danger inherent in foodservice marketing, as well. “Every time a retailer pats himself on the back for offering ‘healthy’ solutions somebody is always anxious to challenge those claims—such as Arby’s current anti-Subway campaign—or to look deeper into the product portfolio to see if the health claims holds up across the store,” Mathews said. “The best plan is to continue to offer better-for-you choices, save the mass marketing dollars and do the absolute best job you can serving your customers.”

Defining Healthy
Customers are correct that there is a barrier to offering healthy foods in c-stores, according to Tim Powell, director of research and consulting services for Chicago-based Technomic Inc.

“The majority of regular consumers just stare at you incredulously when you ask them the importance of health and wellness when selecting prepared foods in the segment—especially when they are holding a double-sausage mini pizza in one hand and a bear claw in the other,” Powell said.

Despite that, Powell noted that there is still a need to offer healthy fare in the form of fresh-cut fruit, salads, grilled and fewer fried products. “Industry leaders in foodservice like Wawa, Sheetz and Rutter’s have developed a tolerance for waste and accepted that if you offer fresh foods consistently, eventually—as new customers walk through the doors, especially females—you will eliminate the perception that only old hot dogs and burnt coffee are awaiting them.”

The bottom line, Powell said, is that the convenience store chains that will be successful with their foodservice programs must evolve into offering healthier items. “Others will simply perpetuate the perception of a gas station with food if they don’t expand and rotate menus,” he said.

Defining exactly what “healthy” means to consumers was the subject of some recent Technomic research. While Americans have obviously become much more health-conscious, their perceptions of what is considered healthy eating at restaurants are continually changing. Contemporary definitions of health are strongly associated with local, natural, organic and sustainable ingredients. Consumers are also taking more of a balanced and personal approach to healthy eating, seeking out better-for-you foods, while enjoying occasional indulgences.

“More consumers than ever before tell us that eating healthy and paying attention to nutrition is important,” said Darren Tristano, vice president of Technomic. “However, there’s a shift happening in terms of what actually defines healthy for them. We’re seeing more consumers gravitate toward health-halo claims, such as local, natural and organic, as well as whole wheat.”

Sandra Matheson, president of Food Systems Consulting Inc., said that convenience store operators also need to identify that they have choices available throughout the store. “Not just junk food, but something for everyone. And they need to have deals on their healthier items to get people to try them,” she said.

Convenience retailers also need for their offerings to match their message. “If they say their food is healthy, it needs to be truly fresh and healthy,” Matheson said. “In my experience, I have visited sites that advertised healthy foods, but found their foods loaded with salt. Some weren’t even fresh. The more fresh fruits and vegetables you can get on the menu the better. Perception goes a long way when customers see these items near the food counter.”

But most importantly for c-stores to remember is that this can be regarded as the c-store industry’s golden age of foodservice. The time to build your business is right now.
“If c-stores don’t seize the opportunity in front of them, they are foolish,” said Karen Malody, the principal of Culinary Options, a foodservice consultancy in Seattle. “It’s hard work and they will likely need to engage some foodservice experts to help them think differently, but the opportunity to grow sales is enormous.”

Is the Cupcake Trend Over? Battle for “Share-of-Stomach” Heats Up!

April 18, 2013

Over the past decade, we have seen a shift in the frozen treat and snack category with many short-term category trends gaining steam and eventually showing unsustainable growth in the longer term.

Lessons from the past

krispy-kreme-donuts_150Krispy Kreme’s singularly focused menu of sweet, craveable doughnuts led to rapid expansion for the chain in the later ’90s. Peaking in 2005 with sales in excess of $1 billion, the company has since declined and settled down with annual U.S. sales today of $570 million. Although the chain’s growth over the past two years has been slow and steady, Krispy Kreme has shifted unit development globally by bringing products to international marketplaces; today Krispy Kreme has more than 500 locations outside the U.S. compared to just 239 domestically.

Cold_Stone_150.Cold Stone Creamery was at the heart of a premium ice-cream movement. Its rapid growth in units helped the chain achieve peak annual sales in 2007 of nearly $500 million in a frozen-dessert category of $7 billion. Then premium ice-cream players suffered from the recession as increased unemployment and declining disposable personal income—among other economic factors—prevented consumers from indulging in ice-cream purchases. Today, Cold Stone Creamery has broadened its offering with ice-cream cupcakes and shakes and continues to manage sales of $355 million.

Crumbs_150“Sex in the City” and Magnolia Bakery sparked a cupcake revolution and national craze that led to upstart brands like Crumbs Bake Shop, Sprinkles and Gigi’s Cupcakes adding locations. Independent cupcake shops have also popped up in most major cities in recent years, while supermarkets have expanded their cupcake offerings for in-store bakeries. Although Technomic estimates the retail cupcake shop segment to be in the range of $200 to $250 million annually, this segment appears to be maturing and flattening in the restaurant lifecycle curve as other desserts build greater momentum.

Pinkberry_150It is worth noting that frozen-yogurt brands like Yogurtland, Pinkberry, Menchie’s and Red Mango are still in the high-growth stage of their lifecycle.  Frozen-yogurt chains within the 2013 Technomic Top 500 Leading Chain Restaurant Report as a whole increased their sales by 20%, with net unit growth of over 25%. The high appeal of frozen yogurt’s broad flavors, customization options and “health halo” consumer perception has given other sweet-treat operators (like cupcakes, traditional ice cream and doughnuts) a run for their money. This trend will likely continue to grow in the short term based on the low cost of opening a store and the franchise brand availability and appeal.

So what’s next? 

We could see growth of numerous dessert trends such as chocolate-covered bacon shops, cream puffs, churros or perhaps macaroons.  One thing that isn’t changing is consumers’ interest in craveable sweet and savory snacks.  Health and lifestyle considerations will also remain a consideration but a balance with indulgence will likely provide ample opportunities for both healthful and decadent treats.

In today’s restaurant space, growth has become a battle for share:  as one category grows, another will fall victim.