Riding the Wave

October 23, 2014

Rubios_Exterior_NEW_2014-08-06_08.50.55_web_r100x80Lou Hirsh
© 2014 San Diego Business Journal. Provided by ProQuest Information and Learning. All Rights Reserved.

Leaders of Rubio’s Restaurants Inc. are taking steps to ensure that the look and feel of its eateries carry elements of the Carlsbad-based company’s DNA.

That includes its 31-year history as a California coastal company that became best known for the Mexican-style fish tacos served at its first restaurant in Pacific Beach back in 1983.

The company recently announced plans for a redesign of 60 of its California restaurants – about a third of the nearly 200 it now operates in five states – with a rebranding of the remodeled locations under the name Rubio’s Coastal Grill.

The first wave of remodelings is underway and set for completion by the end of 2015, with more updates planned for 2016. The first remodel was recently completed at the Rubio’s in Carmel Mountain Ranch, with ocean-themed artwork on the walls and seating areas decorated in beach-oriented colors like cobalt, green and brown, designed to evoke the ocean, sand and coral.

Officials said the first redesign has boosted customer traffic, and those results will inform the upcoming remodelings. In a recent interview, CEO Marc Simon said Rubio’s will likely invest more than $20 million in the first 60 renovations, and depending on the feedback in California, the “Coastal Grill” label may also be applied to the company’s restaurants outside of Calfornia – in places like Nevada, Colorado and Arizona.

The remodelings align with Rubio’s recent ocean-themed marketing campaigns, as the company looks to set itself apart from numerous fresh-Mexican competitors that have arisen in recent years, including local, regional and national chains.

Simon said the company is looking to capitalize on the “health halo” of the seafood, salads and other lighter items that it has been adding to its menu over the past few years. For instance, it will be adding more selections with salmon to its existing offerings like the original fish taco, developed by company founder and Chairman Ralph Rubio.

The CEO said the company is also conscious of serving the large number of consumers who are still budget-conscious and strapped for time, seeking something better than fast food but priced lower than the offerings of fine-dining establishments.

“People don’t want to deal with making reservations, then standing in a line and then paying a 20 percent tip on top of all that,” said Simon, who joined Rubio’s in 2008 and became CEO in 2011.

Rubio’s also plans to open seven new locations by the end of 2015, which will push its total from its current 197 to 204 restaurants, employing more than 4,000. Simon said the growth strategy for the foreseeable future will remain slow and steady.

Right now, 99 percent of Rubio’s locations are company-owned, and while it is exploring future partnerships with already-successful franchisees in places like the Las Vegas market, Simon said the company is in no rush to turn itself into a national player.

“I don’t feel at this point that we need to become a national company in order to be successful,” said Simon, a restaurant industry veteran whose earlier work included executive stints at McDonald’s Corp. and Chipotle Mexican Grill Inc.

The privately held Rubio’s, owned since 2010 by Connecticut-based Mill Road Capital LP, does not disclose revenue or other financial performance figures.

Rubio’s ranked at No. 32, with an estimated $200.9 million in 2013 sales – up 4.1 percent from 2012 – on a recent list of the nation’s top 150 fast-casual chains, published by restaurant industry consulting firm Technomic Inc.

Technomic Executive Vice President Darren Tristano said Rubio’s has generally been careful and prudent about the pace of its location growth, adjusting when necessary to shifts in the economy. By keeping the majority of its restaurants company-owned rather than franchised, it has also been able to focus more attention on improving product and service quality at individual locations.

“They’ve done a pretty good job of differentiating themselves from some of the other fresh-Mexican restaurant chains,” Tristano said.

Technomic’s list shows that 22 of the largest fast-casual chains are in the Mexican-style category. Most are smaller than Rubio’s, though its competitors include several larger chains, including No. 2 Chipotle Mexican Grill, No. 8 Qdoba Mexican Grill, owned by San Diego-based Jack in the Box Inc., No. 9 El Polio Loco and No. 12 Moe’s Southwest Grill.

Fast-casual chains generally do not have drive-through or full table service, with meal tabs averaging around $10 per person. The nation’s top fast-casual chain in 2013 was St. Louis-based Panera Bread, with more than $4.1 billion in sales at 1,700 locations.

The U.S. restaurant industry registered $448.8 billion in sales during 2013, up 3.2 percent from the prior year, with the fast-casual segment accounting for $34.5 billion – an increase of 11.3 percent, Technomic reported.

Researchers at consulting firm NPD Group noted that sales at fast-food restaurants, with an average check size of $5, were flat for the year ending in June 2014, while visits to fine-dining establishments, with an average check size of $40, were up 3 percent from the prior year. Total industry traffic was generally flat over the past year.

Experts said the midpriced fast-casual restaurants may hold appeal to diners looking to trade up from fast food, but still unable to eat at the upscale fine-dining restaurants on a regular basis.

“Consumer attitudes and behaviors have changed since the Great Recession began and may well have changed for the good,” said Bonnie Riggs, NPD Group’s restaurant industry analyst, in a recent report. “However, offering a good product at a fair price is no longer good enough. To attract them will take a deeper understanding of what they want when dining out.”

RUBIO’S RESTAURANTS INC.

CEO: Marc Simon

Sales: $200.9 million in 2013, according to Technomic Inc.

No. of local employees: Approximately 1,300

Investor: Mill Road Capital LP

Headquarters: Carlsbad

Year Founded: 1983

Company description: Operates 197 Mexican-style restaurants in five states, with seven openings planned for 2015


Domino’s is Hot; Pizza Hut Needs Reheating

October 22, 2014

By Sarah Halzack

(c) Copyright 2014, The News Journal. All Rights Reserved.

Domino’s Pizza and Pizza Hut are the titans of the $38 billion U.S. pizza market, and at this moment, one chain is piping hot and the other is in need of reheating.

Domino’s dazzled investors this week with third-quarter results that showed sales at stores open at least a year grew 7.7 percent in the United States and profits jumped 8 percent. The chain, which has 5,000 restaurants in the U.S., also said it attracted more customers and saw the average size of their tabs increase.

But things at Pizza Hut are looking decidedly less upbeat. Its parent company, Yum Brands, said last week that Pizza Hut’s same-store U.S. sales fell 2 percent in the most recent quarter and that its operating profit for the full year is likely to fall short of initial forecasts.

So why are these companies in such dramatically different postures?

The delivery food business has always been about convenience, and now the battle for the biggest slice of the pie is increasingly being waged online. So far, Domino’s has outmaneuvered its competitors with a popular app that is helping drive sales.

“I think it has really boiled down to convenience and the ability for Domino’s to really capitalize on the move toward online and mobile,” said Stephen Anderson, a restaurant industry analyst with Miller Tabak.

Domino’s says that 45 percent of its U.S. sales now come from customers ordering online and that they are running up a higher tab than people who call in their orders.

In a conference call with investors Tuesday, chief executive J. Patrick Doyle said that digital ordering capabilities are also leading to a higher volume of orders from repeat customers.

“It’s ultimately about the better retention of customers, better frequency of orders from customers, and as they have a better experience with Domino’s, we get more orders from them,” Doyle said.

Domino’s added a voice-ordering capability to its mobile app in June. Before the company started advertising the feature a few weeks ago, 200,000 orders had already been placed this way.

On social media, some consumers seem befuddled by the feature, wondering how it’s any improvement over ordering a pizza the old-fashioned way – by picking up the phone.

But Mark Kalinowski, lead restaurant analyst for Janney Capital Markets, said the voice app could be valuable to customers because it brings consistency to the process and it eliminates long hold times.

Meanwhile, Pizza Hut says that while its digital business is growing quickly, it has also acknowledged it is lagging its rivals.

“Our goal is to not only catch the competition on the digital front, but to surpass it in 2015,” said Yum chief executive David Novak in a conference call with investers earlier this year.

Yum says it is working hard to turn around the poor performance at Pizza Hut, not only by strengthening its digital offerings but by overhauling its marketing efforts and debuting new menu items that will connect with millennial diners.

The company said it recently “had good success” with the debut of its Hershey cookie dessert offering and its bacon and cheese stuffed crust pizza.

While the shift to digital pizza ordering is putting pressure on the major national brands to innovate, it could be creating problems for mom-and-pop shops and regional chains. These smaller operations likely don’t have the dollars to invest in such technology, meaning they might face fresh challenges in attracting convenience-focused customers.

Domino’s digital strategy has been crucial to its recent success, but analysts say the company has also gotten a boost from an effective marketing strategy that focuses on the improved quality of its ingredients. The company has also introduced a concept called “Pizza Theater” to some of its stores which allows the customer to see their pizza made fresh before their eyes. The hope is that this model can help boost its dine-in business and emphasize freshness.

“They’re really starting to reinvest in their brand by trying to shift the model from quick service to fast-casual,” said Darren Tristano, executive vice president of Technomic, a food and restaurant industry research firm.

Pizza Hut, meanwhile, has been more focused on emphasizing low prices with deals such as a large two-topping pizza for $7.99. Promotion-oriented strategies have been common in the quick-service restaurant industry lately as retailers try to get price-conscious consumers off the sidelines.

Both companies say they expect to remain focused on building their digital platforms to win market share in the future.

“You’re only going to be as good as your next platform or your next innovation,” said Chris Brandon, a Domino’s spokesman. “So we’re already starting to look at what are customers are telling us they want more of.”


European Fast Casuals Testing American Waters

October 8, 2014

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By Darren Tristano, Foodable Industry Expert

In the third in a three-part series on the fast-casual market in Europe, Darren Tristano covers some of the European chains that are making their way to the United States.

Some of America’s most successful fast-casual chains, including Chipotle, Five Guys and Smashburger, conduct a significant amount of business overseas. At the same time, several European concepts see the United States as fertile ground for their own growth.

Recent fast casual immigrants to the States

As its name suggests, Maoz Vegetarian specializes in vegetarian fare with a menu that centers on sandwiches, salads and gluten-free falafel. The Amsterdam-based limited-service concept gained popularity for its simple service style—patrons choose a salad or sandwich for a fixed price, then visit the salad bar to add as many toppings as they choose for no additional cost. In 2004, Maoz opened its first U.S. location in Philadelphia. It now operates about a dozen units in the U.S. in Texas, Illinois, New York, New Jersey, Pennsylvania and Florida.

Maoz has a relaxed service approach that allows customers to add their own toppings to their sandwiches and salads instead of charging by weight, as at other salad bar concepts. Another differentiating factor: Maoz gives out doggy bags to patrons who don’t finish their meal, an amenity typically not offered at salad bars.

Nando’s

Nando’s is a fast casual chicken chain specializing in Portuguese-style peri peri chicken. Since launching in 1987 in South Africa, Nando’s has expanded to more than 1,000 locations in about two-dozen countries, but it’s especially popular in the U.K. The concept first expanded to the U.S. in 2008 with a unit in Washington, DC. Nando’s now operates 15 units in DC, Virginia and Maryland. From 2012 to 2013, Nando’s opened five locations in the U.S., propelling a nearly 40% increase in U.S. sales to $21.4 million.

Nando’s offers a worldly experience, with Portuguese-style chicken and a mix of Portugal and South African wines served in units decorated with African artwork. The chain also showcases the best qualities of a fast casual concept—lavish decorations make for an inviting place to dine, while speedy service attracts on-the-go patrons.

Vapiano

Vapiano operated in the U.S. much the same as its fast casual Germany counterpart. The concept offers made-to-order pizzas, pastas, salads and more from a variety of food stations. Everything on the menu is a la carte, allowing for customized meals. The distinctive feature of each location is the various food stations where chefs and bartenders custom-prepare food and drinks. Diners can order directly from chefs at different cooking stages, allowing for customizable and interactive meals. Meals are recorded on a personal electronic “chip card” given to each guest; diners pay for whatever was recorded on the card at the end of the meal.

The first Vapiano in the U.S. opened in Arlington, VA, in April 2007. A month later, the chain opened a second U.S. unit in nearby Washington, DC, and the third unit opened in D.C.’s Chinatown neighborhood soon after that. The chain now has 11 restaurants in the States.

100 Montaditos

Inspired by traditional Spanish tapas taverns, 100 Montaditos was founded in Spain in 2000. The chain, whose name translates to “100 Sandwiches,” offers at least 100 varieties of crunchy snack-sized rolls made to order and topped with traditional Spanish ingredients like Serrano ham, chorizo and Manchego cheese. In 2011, the chain launched its first U.S. location in Miami. Since then , 100 Montaditos has opened about a dozen more Florida sites as well as locations in Iowa, New York and the Washington, DC, market. The chain recently announced plans to open 28 units in New York City over the next three years, five of them before the end of 2014.

With its variety of sandwich options and an adult beverage menu that includes sangria and Spanish wines, 100 Montaditos offers patrons a chance to have a traditional Spanish experience in a fun, casual setting.


What Will We Be Eating in 2050?

October 7, 2014

what-will-we-be-eating

Leading food watchers share their visions of what consumers will be munching on and swigging in the decades ahead.

Some food trends have staying power while others are fleeting fads … do you remember gelatin salads? Food fashions come and go but may reappear wearing a new set of clothes in 10, 20 or 30 years. Today, gluten-free, protein, local sourcing, sodium reduction, and whole foods resonate with many consumers and influence food choices and eating habits.

Since FutureFood 2050 is focused on finding solutions to sustainably feed 9-plus billion people by 2050, we thought it would be both fitting and fun to ask leading food watchers, market researchers and “trendmeisters” what they think consumers will be eating in 2050.

Three trends with staying power
Consumers increasingly demand food supply chains with greater transparency, local food sourcing and healthier cuisine on the menu.
“Although health and wellness comes with a price, the future will likely hold greater opportunities to make healthier fare more affordable for lower- and middle-income groups.”