Bartolotta cooks up kitchen for Kohl’s

October 25, 2016


Rick Romell
Milwaukee Journal Sentinel

Menomonee Falls — For Bartolotta Restaurant Group, it’s an opportunity to branch further into a promising business area.

For Kohl’s Corp., it’s a shiny amenity to help in the quest to attract and retain good people.

And for Jason Wessels, the new dining area and kitchen his employer unveiled this week — a huge space that combines industrial-chic design with around-the-world food prep stations — is more than acceptable.

“This is amazing,” Wessels, who directs the big retailer’s shopper loyalty program, said as he got his first glimpse of the 32,000-square-foot area at corporate headquarters that Kohl’s has dubbed “The Kitch.”

“Like, amazing….It’s unbelievable.”

Following the lead of companies such as Silicon Valley tech firms that compete ferociously for talent, Kohl’s is wagering on the notion that one way to an employee’s heart is through his — or her — stomach.

“Corporations, particularly financial and high tech, where attracting and retaining high-skilled employees is very important, have seriously upgraded the quality of the meal services that they provide,” said Thomas MacDermott, owner of New Hampshire-based Clarion Group, a food service consultant.

Kohl’s isn’t Google. But for a department store retailer beset by stalled growth, changing consumer preferences and the ever-looming, Godzilla-like threat of Amazon, anything that helps bring in and hold smart employees may well be a smart bet.

“We knew we needed to elevate the quality,” chief administrative officer Richard Schepp said.

So, out with an in-house dining setup Schepp described with faint praise, saying it had been “OK” and “a decent cafeteria experience.”

In with a sleek, contemporary dining hall and such fare as Neapolitan pizzas, freshly prepared sushi, and specialty salads (beet and goat cheese; spelt and roasted squash with maple dressing) from a kitchen run by Bartolotta, which owns several highly regarded and popular restaurants in the area.

Just a little over five years ago, Kohl’s was cooking its own food at its 5,000-employee headquarters and, according to Schepp, not very well.

Now it has signed up with one of Milwaukee’s premier restaurant operators, outfitted a completely new kitchen and built a dining area that offers a wide range of collaborative gathering spaces and private nooks.

It’s a spot away from cubicles and offices that’s meant to be used all day, full of power outlets and USB ports but free of Kohl’s branding and even any references to the company’s “Greatness Agenda.”

“You feel like you left the building,” Schepp said.

Kohl’s won’t say what it spent, but turning a warren of cubicles into a dining area that can seat 750, a kitchen the size of a mini-mansion and a barista bar to boot isn’t cheap.

“This is all brand new,” Bartolotta group co-owner Joe Bartolotta said as he showed off the space. “…We gutted everything. We tore out the ceilings. We tore out everything. It was a very sizable investment.”

Whatever Kohl’s spent, it appears the company can recoup a small part of the expense through an agreement with the state that gives the firm tax credits in exchange for capital investments.

The deal was struck in July 2012, when the company planned to build a new, $250 million corporate campus a few miles from its present location. Kohl’s abandoned the plans 17 months later in favor of a less-expensive expansion at its current site. The $137 million in capital investment the company made there through last year, however, have helped it earn $18.3 million in state tax credits under the agreement.

The corporate impulse to amp up in-house dining isn’t broad, but rather is concentrated in sectors such as tech, said Mike Buzalka, executive features editor of trade journal Food Management.

But he said upgrades make sense for companies that, like Kohl’s, are situated where there are few nearby dining options.

It’s unusual for a firm to hire a restaurant operator, rather than a food-service contractor, to run its kitchen, Buzalka said.

Joe Bartolotta, however, sees the venture as a way to diversify. His 1,000-employee company has 11 restaurants, including highly regarded spots such as Lake Park Bistro and Bacchus.

But opening stand-alone restaurants is costly, and Bartolotta has been looking increasingly at opportunities to run places without the big capital investment. The firm operates four restaurants at Wauwatosa’s Mayfair Collection, for example, that are owned by the shopping center’s developer.

Two years ago, Bartolotta took over the food court at the U.S. Bank Center and opened what it calls the Downtown Kitchen. That operation impressed Kohl’s executives and paved the way for creation of The Kitch.

Profit margins on such businesses are lower than at a typical Bartolotta restaurant, but with a minimal upfront investment and an all-but-captive market of 5,000 potential diners, it’s an attractive proposition, Joe Bartolotta said.

That thinking makes sense, suggested Darren Tristano, president of Chicago-based food industry research firm Technomic Inc.

“When we look at the full-service space where Bartolotta operates, the high end is doing OK, but there aren’t a lot of growth opportunities for new restaurants,” Tristano said.

John Wise, operations director and managing partner at Bartolotta, said Downtown Kitchen serves about 500 people for breakfast and 1,500 to 2,000 at lunch. He expects the numbers at Kohl’s to be bigger.

Wessels, meanwhile, expects the new space to be about more than food. He believes it will bring colleagues together and spur beneficial collaboration.

Many people, Wessels said, regard the kitchen as the heart of their home.

“This is really going to become the heart of our office,” he said.

How 10 Food Trends for 2016 Will Transform Restaurants

November 2, 2015

2015 LLC™ All Rights Reserved

At this point a couple years ago, if you asked a restaurant executive how she might user Uber to build sales, she might have guessed as a prefix for the name of her brand’s Oktoberfest-theme burger. But now, Uber and Postmates are just two of the sharing-economy apps rapidly transforming foodservice and shaking up consumers’ expectations everywhere.
Going into 2016, there are dozens of similar forces shifting the ground beneath restaurants, and most of them are far beyond what brands have the power to control. While they are hard to predict, even for a data-rich firm like Technomic, they are easy to identify and understand, because they all spring from evolving consumer demand. Major moves from the biggest restaurant companies—McDonald’s moving its food supply toward more cage-free eggs, for example—aren’t dictated solely by the bottom line. They’re dictated by what consumers need from foodservice brands.

Technomic just released its 10 major food trends for 2016 with this dynamic in mind. Because consumers are the impetus behind all the upheaval, take a look at each trend and see how many of them you’re driving with your own dining out preferences.

The Sriracha Effect: This hot sauce from Thailand will continue to grow in popularity, but the “effect” Technomic predicts is that chefs and chain restaurant executives will search for the next hot ethnic flavor to find lightning in a bottle again. Early indications are that this will drive more use of and consumer interest in ghost pepper from India, sambal from Southeast Asia, gochujang from Korea, and harissa, sumac and dukka from North Africa.

The Delivery Revolution: Popular apps that simplify online and mobile ordering making “dining in” even easier and, in some cases, “dining out” irrelevant. Delivery services like GrubHub are starting to proliferate far beyond urban centers, bringing the convenience of a restaurant meal home, where plenty of people are likely camping out in front of the TV to binge-watch a season or two on Netflix. Other services are muscling in, including the aforementioned Uber and Amazon, which is expanding its Prime Fresh memberships for grocery delivery.

One particular threat to restaurants could be app-only services like Munchery, which delivers restaurant-quality food from a commissary, cutting out brick-and-mortar restaurants completely.

Negative on GMOs: In some cases, consumers have made up their minds before scientists have reached consensus, but many restaurant customers are declaring genetically modified organisms to be nonstarters. Many diners will agree with calls for labels of GMOs on menus and food packaging; some will go further and gravitate toward restaurants that advertise a GMO-free menu. That will be a major issue for the nation’s food supply, since many crops—particularly soy fed to livestock and other animal feeds—have been modified to boost their yields and productivity.

Modernizing the Supply Chain: Speaking of the supply chain, it already has enough challenges to deal with, including climate destabilization, rising costs for transportation and shipping, and pests. These will cause frequent repeats of shortages similar to those witnessed in 2015, like the unseasonable freeze that decimated Florida’s orange crop or the egg shortage that resulted from avian flu. Those hurdles will proliferate while more and more consumers demand food that is “fresh,” “local,” or just free of additives and artificial ingredients. Every brand, from restaurants to grocery stores and convenience stores, will make big investments in supply chain management in 2016.

Year of the Worker: Restaurants will also contend with rising labor costs, because of new mandates to cover full-time staff with health insurance and because the minimum wage could increase sharply depending on the state or city where they’re located. Pressure groups will ratchet up their call for a $15-per-hour wage, and they could possibly succeed in more cities like they have in New York and Seattle. Don’t expect any changes to the federal wage floor of $7.25 per hour, because no cooperation between a Democratic White House and a Republican Congress is possible, especially in an election year.
How will restaurants respond? Most will raise their wages to either comply with a new law or to compete for the best staff—but that means menu prices are going up as well, everywhere from fast food to fine dining. Also, more brands will experiment with technology and automation in the kitchens and the dining rooms to do more with fewer employees.

Fast Food Refresh: Consumers gravitate to “better” quick-service restaurants, which has transformed the industry. That has created a subset of “QSR-Plus” concepts with fresher menus and more contemporary designs, which exploits a price threshold between fast food and fast casual. Culver’s, Chick-fil-A and In-N-Out Burger are examples of this. “Build-your-own” menus are springing up across the industry, and many quick-service brands are adding amenities like alcohol.
QSR-Plus also helps other restaurants clarify their positioning by giving up their attempt to go upscale in a piecemeal approach, and those chains instead are returning to their roots with simplified menus and lower prices.

Elevating Peasant Fare: The popularity of street foods and consumers’ demand for portability and affordability have put things like meatballs, sausages and even breads back in the spotlight. But this time, those meatballs might have a nouveau twist, such as a blend of fancier meats like duck or lamb. Multiethnic dumplings will also continue to grow in popularity, from Eastern European pierogi to Asian bao.

Trash to Treasure: Rising prices for proteins will raise the profile of underused cuts of meat, organ meats or “trash fish.” The “use it all” mindset has also moved beyond the center of the plate. Some restaurants will use carrot pulp from the juicer to make a veggie burger patty, and perhaps other chains will follow the lead of Sweetgreen, which last year partnered with celebrity chef Dan Barber to make the wastED Salad, an entrée that saves vegetable scraps like broccoli stalks and cabbage cores and combines them with upscale ingredients like shaved Parmesan and pesto vinaigrette.

Let them eat kale stems!

Burned: Smoke and fire are showing up everywhere on the menu—smoky is the new spicy. Look for more charred- or roasted-vegetable sides, desserts with charred fruits or burnt-sugar toppings, or cocktails featuring smoked salt, smoked ice or smoky syrups.

Bubbly: Effervescence makes light work of the trendiest beverages. Technomic expects rapid sales growth of Champagnes and Proseccos, Campari-and-soda aperitifs, and adults-only “hard” soft drinks like ginger ales and root beers. In the nonalcoholic space, sales will also increase for fruit-based artisanal soda and sparkling teas.

Recipe for Success; Bill in State Senate Aims to Encourage Restaurants’ Promotion of Local Ingredients

May 16, 2013

For Conor McCann to get fresh ingredients for his Piggy Pat’s B-BQ menu items, he doesn’t have to look far.

A lot of the ingredients used in Piggy Pat’s recipes are a stone’s throw away: pork from Rodman in Jefferson County, cheeses from Newport, beef from Little Falls.

McCann, the New Hartford restaurant’s manager, estimates about 50 percent of the product sold comes from somewhere in the state.

Using local products is something the restaurant takes pride in, having started the practice about a year and a half ago. Getting the word out about that fact to their customers, however, is a little harder, he said.

“Marketing costs a lot, and you have to get that and buying the product into the budget,” he said.

“It adds up.” A bill making the rounds in the state Senate might alleviate that extra cost, while promoting local agriculture and foods at the same time.

The “Dine: Pride of New York” bill, encouraging restaurants to promote and use local products in their dishes, passed a vote by the Senate’s Agriculture Committee in mid-February and will go next to the Finance Committee.

If the bill is approved and made into state law within the year, it would take effect Jan. 1.

Membership in the program would be qualified by the number of ingredients grown and/or processed within the state. Restaurants that utilize at least 15 percent of local products would qualify for state designed logos and promotional materials touting the fact that they’ve gone local.

The bill is an extension of “Pride of New York,” which already promotes statewide agriculture and is more specific to the restaurants using those farmers’ products.

“Our thought behind this bill is to really help market those efforts and promote those efforts,” said state Sen.

David Valesky D-Oneida, the bill’s sponsor.

He said the materials range from stickers to go in restaurant front windows to a spot on a “Dine: Pride of New York” designated website. Restaurants also would specify from which farms its edible components come.

Valesky, McCann and others in the industry believe eateries and the sources of their ingredients – the farms – would benefit from the bill, but not without some difficulties.

Agriculture is the biggest industry in Upstate New York, and is the No. 1 economic generator for this part of the state, said Steve Ammerman, manager of public affairs for the New York Farm Bureau.

A bill like this would do nothing but good, he said.

“It seems like one of those no-brainer bills,” he said.

But finding the proper amount of the local products at the right price is a bit of a fishing expedition.

McCann said his restaurant would like to use more free-range local chickens – it used about 100,000 birds last year – but he said not a lot of local suppliers carry product on that scale.

Szarek Greenhouses in Westmoreland sells its hydroponic lettuce to Utica restaurant The Tailor and The Cook, which touts using local products on its website.

The farm’s co-owner Bernie Szarek said he would like to expand and sell to more restaurants, but the cost to farm the vegetables would break his bank.

“We’d be happy to do it, but it’s a matter of economics,” he said.

“It’s hard to feed a family today, but we have to sell a good product to stay in business, so it might cost a smidgen more.”

Logistics and cost of restaurants going local and using at least 15 percent of state-made products could make qualifying for the bill’s advantages a little tougher, said Darren Tristano, executive vice president of Technomic, a food-industry consulting and research firm.

An uptick in fiscal traffic caused by local hungry customers would help spur the bill’s efforts. Eating locally makes customers feel good because they feel like they are supporting their neighborhood businesses, as well as reducing their carbon footprint, he said.

“They have an emotional connection to brands,” Tristano said.

“It’s meaningful to them.”

Experts Warn of Impending Food Price Increases

May 10, 2013

PICTUREThe lingering effects of last summer’s drought — the largest in the U.S. since the 1950s — don’t appear to be dissipating any time soon. Quite the contrary, in fact, as many experts now warn of food price increases throughout this year.

Analysts with Great American Group Inc. report that overall retail food prices are likely to increase between 3 and 4 percent in 2013, which is above the historical average.

According to the National Climatic Data Center, about 55 percent of the country experienced at least moderate short-term drought in June 2012, for the first time since December 1956. It was compounded by a heat wave-laden July, which left farmers scrambling to save harvests.

The corn harvest in particular was dramatically reduced by the drought, affecting the cost of animal feed, which has spiked the cost of meat and dairy products. After reaching a high of $8.43 per bushel in August, corn prices softened in the remaining part of the year and into January 2013. Despite the recent decline, corn prices remain well above those of prior years.

To raise or not to raise prices?

In its latest Food Monitor (Inventory and Equipment), Great American Group notes that retail food prices have already been impacted by increases in commodity costs, with some operators wondering whether or not to pass those costs along to consumers.

“Commodity prices have been high for several months, and food retailers have been feeling pressure to pass along price increases to customers,” said Ken Bloore, chief operating officer for Great American Group’s Advisory and Valuation Services division. “Prices are expected to increase more significantly in the coming weeks and months.”

Some consultants, however, advise against increasing prices too much. Michael Shepherd, who owns three pizzerias in Ohio and Michael Shepherd Consulting LLC, said operators will risk losing customers if they increase prices too much while the economy is still slow.

Five or 10 years ago, this would have been a better option. Now, however, “it’s a whole new world,” he said.

“When people’s incomes are going down, your prices can’t keep going up,” he said. “Increasing sales volume to outrun your rising costs is a race you can never win. You’ll reach a point where you can’t squeeze any more from your customers, and when the economy goes south again, it’ll catch up to you.”

However, Darren Tristano, executive vice president at market research firm Technomic, said grocery prices are rising faster than restaurant prices, so “for consumers, restaurants are now actually a better value.” But while consumers may be more optimistic than they were last year at this time (by 4 percent), operators are feeling the commodities pressure and will have little choice but to pass along some costs.

“This year we expect a big spike in beef, so we’ll see more veggies and chicken, as well as operators who plan to take price increases. Fifty-four percent say 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.

Other factors at play in rising costs

The drought of 2012 isn’t the only driver of rising costs. Food prices were also impacted by the consumption of corn in the production of biofuels, as well as population growth and increased energy costs, according to Great American Group.

Also, gridlock in Washington, D.C. may exacerbate the issue, particularly with a possible sequester looming. The sequester (or the “second mini fiscal cliff,” according to CNN) dates back to 2011, when President Obama and Congress agreed upon certain budgeting cuts totaling $1.2 trillion to gain control of the nation’s debt. This agreement was made with a the idea that the government’s bills would be paid in the interim, but a compromise has yet to be made, which will force spending cuts to go into effect on March 1.

According to CNN, if these cuts aren’t averted by March 1, there will be a $51 million cut to food safety programs. This means food inspectors will be furloughed and meat and poultry plants could be closed for up to 15 days. Consequently there would be shortages of chicken, eggs, pork and beef, leading to price increases. U.S. Department of Agriculture Secretary Tom Vilsack told CNN: “Food safety could be compromised. There will have less food available — by as much as 2 billion pounds of meat, 3 billion pounds of chicken, 200 million pounds of eggs.”

Many New Yorkers Were Opposed to the Sugary Beverage Ban

December 27, 2012

12-12_0Our athletes went to the Olympics, our science went to Mars, and our people went to the polls. But what of the restaurant industry in 2012? These dozen items from the year had the biggest impact on the foodservice landscape and shaped the industry for a potentially game-changing 2013.

An Economy in Flux

The economic recovery isn’t lighting a fire under anyone’s feet, but the economy did at least improve, albeit slightly.

As of August, the National Restaurant Association’s (NRA) Restaurant Performance Index had been positive for nine consecutive months. It has since been weakening, however, indicating operators are less optimistic about economic conditions going into 2013.

“In the winter quarter [of 2012], we started to see things looking good,” says Bonnie Riggs, restaurant analyst with NPD Group, a Chicago market research company. “We thought we turned the corner. But then gasoline prices increased and people pulled back.”

The Congressional Budget Office’s outlook is for the economy to grow less than 2 percent in 2013. The Conference Board, a business group, is slightly more optimistic, estimating growth at 2.2 percent.

However, if Congress fails to avert a series of tax hikes and budget cuts due in January—the so-called “fiscal cliff”—analysts warn another recession could ensue, which could undo any kind of progress quick-service operators have made.

Health Headaches and Solutions

Health issues continue to impact restaurants, both in menu development and how operators deal with the Patient Protection and Affordable Care Act (PPACA), also known as “Obamacare.”

The U.S. Supreme Court this year upheld the constitutionality of most of PPACA.

Many restaurants may need to undergo some significant cost analyses next year to prepare for a wide range of regulations scheduled to begin in 2014.

“We’re going to see a lot of financial modeling going forward, and deciding how to manage the costs,” says Dennis Lombardi, executive vice president of foodservice strategies at WD Partners, a Columbus, Ohio, design and consulting firm. “It seems the way it may be playing out is to find ways to keep employee hours down and make more of them part-timers.”

One portion of the act that may go into effect in 2013 requires chain restaurants with 20 or more locations to display calories on menuboards.

Many companies have decided not to wait for the law’s implementation, though, including McDonald’s. In September, all of McDonald’s 14,000-plus U.S. restaurants began listing calorie counts on menuboards.

The proactive move by McDonald’s “is a real positive,” says Darren Tristano, executive vice president of Technomic Inc., a Chicago consulting and market research firm.

The calorie numbers “may be more of a shock at first, but when [consumers] return, they will still want to indulge,” Tristano says. “That’s what you do when you go out.”

Meanwhile, all types of limited-service operators began offering better-for-you alternatives, from oatmeal to sweet potato fries.

The Big Soda Ban

Any consumer who plans to visit a restaurant in New York City in March or after shouldn’t expect to buy sugar-sweetened beverages larger than 16 ounces. They’re outlawed.

In a stated bid to combat obesity, the city’s Board of Health instituted the ban at eateries, movie theaters, and other venues.

Restaurants call the action unfair, in part because it still allows larger drinks to be purchased at retail outlets and convenience stores. Whether the ban sweeps across the country, like the city’s earlier action against trans fats, is still up in the air.

“We’ll have to take a wait-and-see approach,” Technomic’s Darren Tristano says. “I suspect if history serves us, it will likely become a political issue … and likely will spread to other cities.”

Commodity Costs Rise

The most severe drought in a quarter century has had a serious impact on U.S. agriculture and food prices. The damage done to corn and other crops was extensive and resulted in higher direct and indirect costs.

Many ranchers are running out of grass. Unable to grow enough feed crops—or unwilling to pay for higher priced feed—they are thinning their herds by selling cattle early. That will likely result in fewer cattle going to market next year, making beef and other proteins more expensive, according to the U.S. Department of Agriculture (USDA).

Wholesale beef prices were already up 10.5 percent by 2012’s third quarter, while poultry prices increased 11.5 percent. Heat stress and higher feed costs are expected to reduce pork production as well, the department says.

“If you look at the USDA forecast for a year ago, there was no contingency for a drought of this severity and duration,” says Hudson Riehle, senior vice president of the NRA’s Research and Knowledge Group.

Interactive Imitation

Consumers increasingly want to know more about what’s in their food, and also desire the ability to customize their dishes more than ever before. For years, quick-service concepts such as Chipotle and Subway have capitalized on this desire by giving guests the ability to craft their own dishes, choosing from an array of fresh ingredients.

In 2012, this build-your-own strategy continued to become more rule than exception, expanding into categories like pizza and even ethnic concepts. Newer brands, such as Pie Five, Atlanta’s Uncle Maddio’s, and Washington, D.C.’s Amsterdam Falafelshop, are now thriving on the model.

“We expect to see this basic model growing,” Tristano says. “Customers want to be part of the process, and the visual impact is important. Interactivity engages the customer. This is an emotional connection that makes loyal fans of these restaurants.”

A New Kind of Trade Down

Most of the restaurant industry suffered during the recession, but fast-casual restaurants still performed well. Folks may not have been eating out as often, but when they did, they were looking for quality and value. Many found those attributes at Chipotle, Panera Bread, and their fast-casual peers.

Numerous full-service restaurant companies took notice.

“Casual-dining chains continue to look at whether they have a limited-service opportunity,” Lombardi says. “It allows them to extend the reach of their brand, and in some cases move into areas where full service may not work as well.”

Abuelo’s Mexican Restaurant is one of the latest casual chains to open a fast-casual offshoot, which it did this year with its Abuelo’s Taqueria in Lubbock, Texas. The menu items and pricing are focused on promoting frequent dining.

The opening comes on the heels of several new ventures launched by casual chains in late 2011, including Red Robin’s Burger Works and Pizza Inn’s Pie Five.

Pie Five, which makes handcrafted pizzas in five minutes, has more than a half-dozen corporate-owned locations in the Dallas area.

“We will be looking at other markets [in 2013] from a corporate standpoint, as well as domestic and international franchising,” says Madison Jobe, senior vice president and chief development officer for Pie Five and Pizza Inn.

Other chains launching fast-casual units included Steak ‘n Shake, with its Signature unit in New York; Shoney’s, with Shoney’s On the Go; FATZ, with Tablefields Market Kitchen; and global beef bowl giant Yoshinoya, with Asiana Grill Yoshinoya.

Ethnic Flavors Gain More Exposure

Americans have made Italian, Mexican, and Chinese cuisines their own, so why not something like Vietnamese or Indian?

Pho, a noodle soup, and banh mi, a sandwich typically made with French bread, are some of the latest cultural dishes to hit the mainstream, often with a U.S. twist.

“People were drawn first by the pho, but now banh mi is very popular, especially as a reimagined American sandwich,” says Melissa Abbott, senior director of culinary insights for The Hartman Group, a research and consulting firm in Bellevue, Washington.

“You have a sandwich on really good French bread filled with really fresh ingredients,” she notes. “It has a flavor that is heightened by various fresh herbs and vegetables.”

Tin Drum AsiaCafé, which has 11 units in the Atlanta area, serves cuisines from around Asia, including pho. Owner Steven Chan says the chain had banh mi on the menu a decade ago and may bring it back “because it’s getting popular again.”

Giving an American twist to Indian food is what Qaiser Kazmi is doing in Washington, D.C. His restaurant, Merzi, features Indian-inspired cuisine with U.S. touches. For example, Merzi serves tandisserie chicken, which is tandoori chicken cooked rotisserie style.

“Our cuisine is not directly from India,” Kazmi says. “We would never leave skin on chicken back there. But I fell in love with rotisserie chicken and wanted to combine that with something that has Indian flavors.”

The Reverse Food-Truck Trend

For Kim Ima, opening the Treats Truck Stop in Brooklyn last year was the logical next step for the owner of a popular food truck.

“I like that I had established my business before opening the storefront,” she says of her truck, the Treats Truck, which has served treats and drinks since 2007. The restaurant offers homey comfort food for breakfast, lunch, and dinner.

Food-truck operators across the country, from Boston to Los Angeles and Houston, are similarly turning to brick and mortar.

In the five years since the gourmet food-truck phenomenon began on the coasts, thousands of these vehicles have hit the nation’s streets, giving budding restaurateurs a relatively inexpensive entry into the business. But it’s not easy.

“You’ve got this small space, gas costs, repairs, weather, licensing—all kinds of issues,” says David Weber, president of the NYC Food Truck Association. “So a lot of food-truck entrepreneurs, once they develop a brand, are looking for more stability. It’s logical to take their concept and give it a home.”

The Future of Social Media is Here

Now that many restaurants have found ways to take advantage of Facebook, Twitter, and YouTube, they’ve moved on to other, newer social media platforms, such as Pinterest.

Pinterest is akin to a visual bulletin board, where images can be “pinned” to virtual boards. They can be downloaded to the board or can be taken from (and linked to) other websites.

Dunkin’ Donuts, for example, uses photos on Pinterest to link to various events, as well as products, including limited-time offers.

“Pinterest seems a way for the social media strategy to involve more of the customer and the community,” Tristano says. “Instead of pushing out from the company, this is trying to draw customers in to be part of it, to have a shared experience.”

Don’t Forget Boomers

While focusing on Millennials is all the rage, many restaurant operators also understand that Baby Boomers still make up a lot of the nation’s buying power. Members of the generation are looking to dine at places that feature unique flavors and provide plenty of value.

“It’s really the Boomers and those over 65 that are keeping the [restaurant] industry from experiencing a decline,” NPD’s Riggs says. “Boomers are increasing their visits to all restaurant types, but particularly quick service … and fast casual.”

Of course, younger diners typically will be the first to hear about new and exciting limited-service restaurants.

“The Millennial kid knows where the cool stuff is and will tell mom and dad to try it,” Abbott explains. “They are more tapped into the social network. But the parents are increasingly curious to try new places. In the past, that may not have been so.”

Exploring the IPO

One major quick-service restaurant company went to market this year with a big stock deal, while another chain’s plans to go public didn’t get off the ground.

Burger King took its crown back to Wall Street. The Miami-based company’s shares began trading publicly through an unusual deal in which investment firm Justice Holdings paid $1.4 billion to acquire a 29 percent stake from owner 3G Capital.

CKE Restaurants, the Carpinteria, California, parent of Carl’s Jr. and Hardee’s, had planned a $200 million public offering but delayed it. Concerns were raised about the impact of required health-care costs and rising commodity prices.

“The market was willing to give restaurant companies a premium valuation early in the year,” says R.J. Hottovy, restaurant industry analyst with Morningstar in Chicago. “A lot of them were operating at peak margins. Since then, there have been some concerns about the industry’s fundamentals.”

Brand Evolution Continues

Quick serves are always tweaking their images, but there were some major changes in store for menus at some larger chains in 2012.

One of the most notable chains to do this was Burger King, where an array of new menu items, including smoothies, salads, chicken wraps, and specialty coffee drinks, were added to broaden the brand’s customer base. That was the first part of a four-pillar, $750 million strategy Burger King announced in the spring.

Taco Bell also welcomed major menu innovations. The Irvine, California–based brand launched the highly successful Doritos Locos Tacos, featuring shells made with the taste and flavor of Doritos snack chips. Then the chain rolled out a Cantina Bell line of upscale burritos, bowls, and sides created by noted chef Lorena Garcia.

Taco Bell also introduced breakfast at about 800 West Coast locations.

“What Taco Bell has done is a testament to product innovation,” says restaurant analyst Hottovy. The chain “remains in its core competency, broadens its appeal, and takes the pricing point upward.”

How Record Corn Prices are Impacting Food-Related ETFs

November 20, 2012

PowerShares Dynamic Food and Beverage Portfolio (PBJ) gives investors low-risk exposure to restaurant stocks and even has a small dividend yield. As the retail restaurant group has picked up momentum, investors can play on this demand.

“High unemployment and relatively high gas prices have had a negative impact on disposable income,” Darren Tristano, executive VP at Technomic said. Fast-casual “has been successful in taking share from the other segments.”

The so-called fast casual category of eateries has seen an 8% rise in retail sales in 2012. Eateries such as Chipotle, and Panera Bread have led the industry’s rebound over the past few years. Lower and middle income consumers are attracted to an affordable, higher quality eating experience, compared with that of fast food, reports Anna Louis Jackson for Bloomberg BusinessWeek.

The retail restaurant group is up 13% so far in 2012, compared to the S&P 500, which has gained 7.5%, reports Marilyn Much for Investor’s Business Daily. However, menu prices have risen around 2%-3% in response to rising commodity prices. More big price moves in grains will likely have an effect upon food prices, with drought conditions looming.

PBJ ETF is up 6.4% year-to-date and boasts a 1% dividend yield. If the food and beverage industry can keep pace, PBJ will remain appealing due to the defensive nature of the fund.

Meanwhile, corn and wheat prices are up 31% since June 1, while coffee has risen 17%. In turn, pork and beef prices will rise as grain supply is tight. Chicken prices are expected to rise next.

Nevertheless, Q2 earnings have been decent from fast-causal eateries. Chipotle has an estimated 40% jump in 2Q profit, and has been on the rise for 13 quarters, with double-digit sales. Dunkin Donuts is another winner, with a 5% jump in second quarter profit.

The slow-to-recover U.S. economy and commodity price hikes are two obstacles that the restaurant sector are up against.

Commodity ETFs such as PowerShares DB Agriculture Fund (DBA) will likely gain as mother nature runs its course. DBA has gained about 8% over the past three months.

Other commodity funds on a run:

  • Teucrium Corn Fund (CORN) up 32% this quarter
  • iPath Dow Jones UBS Grains Sub-Index Totoal Return SM ETN (JJG) up 32% for the past three months

Carmel Cafe & Wine Bar Eyes Orlando for Expansion

November 2, 2012

Anjali Fluker, Orlando Business Journal, © 2012 American City Business Journals, Inc. All rights reserved.

A Tampa restaurant group wants to bring its tapas-style concept to Orlando-area neighborhoods.

Carmel Cafe & Wine Bar LLC — which has three restaurants in Clearwater, Tampa and Sarasota, as well as one opening in south Tampa — is narrowing the site list for its first metro Orlando location.

Carmel Cafe & Wine Bar eventually plans to put eight of its restaurants in the area in the next two years. Co-owner Alex Sullivan declined to share potential construction costs since the concept is looking at both existing spaces and ground-up development. However, the chain’s newest 4,000-square-foot, 150-seat store in south Tampa was a $2 million effort.

The focus on tapas is somewhat rare in Orlando, where a handful of such concepts exist, including Ceviche and the planned Loft 55 in Orlando, as well as Cafe Tu Tu Tango on International Drive and El Bogedon in Winter Park. However, none of these concepts have multiple locations locally.

Carmel Cafe & Wine Bar may be a viable competitor to the successful Seasons 52 restaurant chain owned by Orlando-based Darden Restaurants Inc. (NYSE: DRI), which focuses on small plates and healthy meals, said restaurant industry analyst Darren Tristano.

Though the group has yet to sign any leases, Sullivan said he likes Winter Park, the Sand Lake Road area in southwest Orlando, Waterford Lakes in east Orlando, Lake Mary and Altamonte Springs, to name a few submarkets.

“We were trying to determine what makes sense for us, and Orlando is close to home,” said Sullivan, who added that the restaurant’s main demographic appears to be women, but Carmel Cafe & Wine Bar also offers steaks and burgers to draw in men. “A lot of people think Orlando and think of Disney, but there are lot of residents who appreciate good food, a great atmosphere and great restaurant. That’s our customer.”

The new restaurants could create up to 160 temporary construction jobs based on ground-up construction, as well as nearly 400 permanent jobs at buildout. First-year sales in each existing restaurant are forecast for $2.5 million, reported the Tampa Bay Times.

Carmel Cafe & Wine Bar is looking for about 4,200 square feet of space in the Orlando area, said Jorge Rodriguez, director of retail for commercial real estate brokerage firm Colliers International, who represents the chain in its Orlando growth.

Though the concept is less than 2 years old, the owners are longtime successful restaurant executives. Sullivan’s father, Chris Sullivan, was a founder of Outback Restaurants, and other partners in the restaurants are former executives with Oceanaire Seafood Room and Fleming’s Prime Steakhouse.

And that almost guarantees success in the local restaurant industry. “They’ve got instant credibility on the street when you’re talking about those people,” said David Gabbai, a restaurant/retail broker with The Shopping Center Group LLC in Longwood, who’s not involved in the Carmel Cafe & Wine Bar expansion. “If I’m making a call to a landlord that has available property and [Sullivan is] part of the group that started Outback, that will get them noticed.”

The concept also sets it self apart by having all customers order from an iPad, while also providing them with full waiter service. The iPad also stays at the table through the meal, so it can provide entertainment for kids or allow someone to order something else without having to wait for a server.

Meanwhile, this is a good time for a group that can get financing to expand as the rest of the market still recovers.

“If a concept is able to expand financially without leveraging itself too far or franchising, that’s an ideal situation — before the other chains start to bounce back,” said Tristano, executive vice president of Chicago-based restaurant industry analyst firm Technomic Inc.

What this means to you

• Real estate, construction and vendor opportunities

• New restaurant can be venue for business meetings, events.

Popeyes Bachelder Lifts Franchisee Profits

July 13, 2012

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

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

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

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

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

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

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


The Joy of Innovation

May 28, 2012

By Danielle Douglas and Jeffrey MacMillan, April 29

If you stop in at 944 Florida Ave. NW around 8 a.m., you can get an herb frittata with a hazelnut latte from Blind Dog Cafe. Come back again at 8 p.m. and you can down a Heineken at Darnell’s Bar. Same place. Different owners. One lease.

Friends Noah Karesh, Jonas Singer and Cullen Gilchrist approached Darnell Perkins back in November about running a temporary coffeehouse in his saloon during the off-hours. The trio, who were customers, wanted to gauge the neighborhood’s interest before committing to leasing, refitting and operating a stand-alone space.

“We figured why put all of that capital into a cafe, when we haven’t proven that it could work,” Karesh said.

Blind Dog Cafe is part of an entrepreneurial movement in the local food scene that is ushering in new restaurant concepts, from food trucks to underground supper clubs, that stray from the traditional model. These entrepreneurs are readily using social media and mobile technology to market their businesses as they go head to head with established restaurants.

That such a spurt of innovation is transforming the restaurant industry should come as no surprise. Pushing a food cart or opening a carryout have always been one of the gateways to entrepreneurship because of the universal demand for food.

But the simplicity of the business model means the competition can be fierce and failure commonplace. Which is why this generation of restaurateurs is seeking out low-cost entry into the marketplace, said Darren Tristano, executive vice president at Technomic, a research and consulting firm.

“When you think about food trucks, the overhead is very low and it allows a certain freedom and flexibility,” he said. “People want to work on their own terms, be more creative.”

Pop-up eateries

In the case of Blind Dog Cafe, Karesh said “necessity was the mother of invention” as the paucity of coffee shops in Shaw inspired him to open his own. He roped in Singer, whom he grew up with in Chevy Chase, and Gilchrist, a line cook at Ardeo + Bardeo in Cleveland Park.

Sharing an already leased and licensed space has saved them hundreds of thousands of dollars in start-up costs. The three pay Perkins about $800 a month to rent the space. Karesh and his partners spent $20,000 to get the cafe up and running in January, most of the money went to purchasing equipment for brewing coffee and baking.

The laid-back atmosphere of the bar, complete with a well-worn comfy couch, already captured the homey vibe they were going for, so they only added a few shelves and tables.

The cafe, named for Singer’s blind Jack Russell terrier Baxter, attracts a mix of telecommuters looking for free Wi-Fi and endless caffeine. Karesh envisions Blind Dog as communal space for entrepreneurs, so he has begun inviting area start-ups, including artisan ice cream makers and vintage stylists, to host events in the cafe for free — pop-ups within a pop-up.

Culinary societies

One of the recent events held at Blind Dog involved a 45-person dinner party hosted by Feastly, a company that signs people up for “feasts” prepared by amateur chefs.

Feastly, co-founded by Karesh and Danny Harris, is the outgrowth of a pitch the pair made during November’s D.C. Startup Weekend. Karesh came up with the idea after having a hard time finding authentic cuisine while on vacation in Guatemala.

“The concept of using the dinner table as that original social network was something that really appealed to both of us,” Harris said.

Chefs can set the price of the meals and other house rules and choose how many people they want to serve under the model. On average, a feast costs around $30 per person. Karesh and Harris take up to 25 percent of the total proceeds from the dinner.

People can sign up to receive e-mail alerts on upcoming feasts. “We are leveraging technology to create vibrant communities,” Karesh said.

Kauffman Foundation vice president Lesa Mitchell said trusted online platforms, be they social network groups or referral sites such as Yelp, have become a driving force in the food industry. “Reputations can develop or be destroyed overnight because of technology,” she said. “There is greater immediacy in the response to these concepts.”

In the same vein as Feastly, The Coterie is an online marketplace that connects foodies with exclusive dining opportunities. For $42 a month, members gain access to cocktail parties and salon-style dinners. They also get access to a reservation system through which they can arrange for five-course tastings at one of five partner restaurants, including Fiola and Bibiana, for $135 a person.

“Our value proposition is connecting curious dinners with innovative chefs,” said Jill Richmond, who co-founded The Coterie with Nick and David Wiseman. “What underpins what we do, especially with the fireside dinners, is providing connections that are more meaningful than just having a great experience at a restaurant.”

Richmond, a consultant at the World Bank, started the culinary salon under the name No. 68 Project in London in March 2010. When her job led her back to the states a year later, she revived the project as a nine-week pop-up restaurant in the District.

The underground scene

Area foodies are dispelling the notion that Washington is too conservative to embrace experimental concepts. Underground dinner parties, where guests are not allowed to disclose the location or the host’s identity, have been gaining popularity in the past two years.

Dinner requests are growing at the Web site for underground restaurant Chez La Commis. Tom, the chef who requested anonymity to maintain privacy, started sending out e-mails to friends of friends in January to try out his creations.

A public relations executive by day, budding chef by night, Tom serves six-courses, with three wine pairings, for $40 out of his home in Clarendon. Word got out in the blogosphere about his dishes, such as crab salad with cucumber granite, and foodies started e-mailing requests to attend his clandestine supper club.

“Because there is no barrier aside from the cost of ingredients, you can get as creative as you want,” Tom said. “When you free people from the formal setting of a restaurant, the atmosphere becomes more lively. That matches the type of food I put out.”

What started out as a once a month event now occurs three to four times a month. “This is an investment in finding out whether I can eventually do my own restaurant,” Tom said.

Meals on wheels

No recent restaurant trend has garnered quite the attention as food trucks have. The new era of curbside cuisine, rife with gourmet concepts, has spawned well over 100 mobile vendors in the region since 2009.

“The evolution of mobile food service now has been fueled by the sustained period of economic weakness,” said Hudson Riehle, senior vice president of research at the National Restaurant Association. “Consumers find it more cost efficient to purchase food from these vendors than paying for a meal at traditional restaurant.”

Fojol Bros. of Merlindia, which debuted its Indian fare during the inauguration of President Obama, was one of the first rolling restaurants to hit D.C. streets.

Since then, the team behind the “culinary carnival” has launched three other food trucks, including Ethiopian-inspired Benethiopia. Their newest truck, Volathai, is outfitted with two propane-powered woks for cooking the Thai cuisine.

The company, which became profitable two months ago, has no designs on fixed sites to grow the business.

“People enjoy the informality of eating outside; it’s like a live social network for them,” said Justin Viterello, who, along with his mother Virginia Viterello and friend Peter Korbel, owns Fojol Bros. “There is now a culture behind eating outside … that’s exciting.”

Pickup artists

Jenna Huntsberger, the D.C.-based baker behind Whisked!, is not ruling out launching a food truck. But given the number already on the road, she is happy selling her sweet and savory pies, cookies and cakes online, at farmers markets and pickup sites.

“There are other ways to sell to the public without having to take on the overhead of having a brick-and-mortar space,” she said.

Huntsberger and her former partner, Stephanie Willis, started selling desserts at the 14th and U Farmers Market last May, then expanded online. All told, they invested $3,000 to purchase equipment and ingredients.

By the end of 2011, the women set up pickup sites for their online orders, a system modeled after Soupergirl, where Huntsberger used to work part time.

Customers who place orders by Tuesday at midnight can pick them up on Fridays at Weygandt Wines, Mr. Yogato, Miss Pixie’s or The Cupboard. Pies sell for $9 to $19 depending on the size, and can also be purchased through bi-weekly pie subscriptions starting at $72.

Willis left the company in December to focus on her job at the Department of Homeland Security, but Huntsberger continues baking treats out of rented kitchen space at 42 Degrees Catering in Rockville.

© The Washington Post Company

Wendy’s to go easier on animals

April 17, 2012

Wendy’s Co. is changing the way it treats chickens and pigs used in its food in an effort to be more humane.

The Dublin-based fast-food company’s animal-welfare council said yesterday that one of its chicken suppliers, O.K. Foods Inc. of Fort Smith, Ark., has started using a low-atmospheric-pressure system that renders the chickens unconscious before the birds are handled by plant workers.

The process is criticized by some animal-welfare groups but replaces the industry standard practice of stunning chickens with electricity.

Wendy’s said it is the first quick-service restaurant chain to back the system, and urged other chicken producers to embrace the practice.

The company did not disclose what percentage of its chicken comes from O.K. Foods.

“We just think it’s a more humane way to go, a superior alternative to conventional electrical stunning,” Wendy’s spokesman Bob Bertini said.

The move is part of an ongoing trend, not just in animal welfare but in corporate responsibility,” said Darren Tristano, executive vice president of Technomic, a Chicago restaurant- and food-research group.Many major chains are re-evaluating the way animals are treated in the food-service supply chain.”

By treating animals better, restaurants give consumers a better feeling about their meals, Tristano said.We’re still putting them in our mouth, but we care how it gets there.”

The downside:It very likely will increase the price of products.”

Wendy’s also said that it is working with its U.S. and Canadian pork suppliers to eliminate the use of sow-gestation stalls over time. Animal-rights groups say the individual stalls are inhumane, but pork producers say the larger stalls increase labor and food costs.

However, several major pork producers have agreed to phase out gestation crates.

Major pork buyer McDonald’s Corp. announced in February that it would phase out crates that tightly confine pregnant sows in a move that was predicted to be a major shift for the industry.

“I don’t think it’s something that is trendy in the sense that it comes and (goes),” said restaurant broker Randy Sokol of Sokol & Associates. “It’s a way of life now, something that we Americans want.”

Wendy’s has been working toward eliminating the use of the gestation stalls since 2007, Bertini said. “Our suppliers have been making progress in that area, and we felt it important that all of our suppliers now move in that direction.”

The upgrades are part of continuing efforts by Wendy’s animal-welfare council, which has been in place since 2001, Bertini said. “A major part of the program has been the auditing process of our beef, poultry and pork suppliers throughout the U.S. and Canada, up to two times a year. If suppliers do not meet our standards, they are terminated.”

Although Bertini did not know how many suppliers have been dropped, “it has taken place over the last 11 years. They’re very stringent standards and cover all areas of treatment.”

Wendy’s, the second-largest burger chain in the U.S., operates more than 6,500 restaurants around the globe. The company is trying to rejuvenate its image as a higher-end fast-food chain by updating stores, revamping its menu and making other efforts to reinvent itself after a failed merger with the Arby’s chain.

Dispatch reporter Tim Feran contributed to this story.