Joseph W. Rogers, a Founder of Waffle House, Dies at 97

March 8, 2017

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Joseph W. Rogers, a founder of Waffle House, the restaurant chain that achieved a kind of cultural renown with its no-frills menu, attentive service and round-the-clock hours, died on Friday in Atlanta. He was 97.

The company announced his death on Monday. Joe Rogers Jr., who succeeded his father as chief executive in the late 1970s and remains chairman and controlling owner, said the elder Mr. Rogers died after having dinner with his wife of 74 years, Ruth, earlier in the evening.

Mr. Rogers and an Atlanta neighbor, Tom Forkner, founded the restaurant in 1955. At the time, Mr. Rogers was a senior official at a restaurant chain called Toddle House. Mr. Forkner was a real estate investor. The two were eager to own a restaurant in their neighborhood.

Even after starting the restaurant, Mr. Rogers kept his day job at Toddle House and moved to Memphis when he was promoted to vice president. But in 1961, frustrated that the company did not allow employees to acquire an ownership stake, he returned to Atlanta and devoted himself to Waffle House full time.

“If Toddle House had offered ownership to the management team, there never would have been a Waffle House,” Joe Rogers Jr. said in a phone interview.

Mr. Rogers and Mr. Forkner expanded the chain to about 400 restaurants by the late 1970s. Today, there are nearly 1,900 Waffle Houses in the United States, primarily in the Southeast, often along interstate highways. Of these, about 80 percent are company-owned. The rest are franchises.

Borrowing much from his previous employer — down to the waffle recipe, his son said — Mr. Rogers made Waffle House into a success in part by paying meticulous attention to customers, a management philosophy he imparted throughout the chain.

“I’ve walked into restaurants where workers are on the telephone calling, looking for an elderly customer who hadn’t been in in a while,” Joe Jr. said. “So it was all about the whole personal experience, relationships.”

Famously open 24 hours a day, seven days a week, the restaurants have been used by at least one Federal Emergency Management Agency official to help gauge the severity of natural disasters.

W. Craig Fugate, the FEMA administrator in the Obama administration, applied what he called “the Waffle House test.” If the local restaurant remained open after a hurricane, for example, it meant that power and water were very likely available.

Waffle House, a privately held company, had sales of a little more than $1 billion in 2015, making it the country’s 47th largest restaurant chain, according to estimates by Technomic, a restaurant industry consulting firm in Chicago.

Darren Tristano, Technomic’s president, attributed the chain’s success to its relatively small selection of highly “craveable” offerings and its unpretentious diner-style layout.

Rivals like International House of Pancakes have significantly altered their menus over the years, he said, but Waffle House has remained relatively faithful to its original model, allowing generations of adults to dine in roughly the same setting they did as children.

“This is something that’s very nostalgic,” Mr. Tristano said. “They’re true to their brand.”

Waffle House did not escape the ferment of the civil rights era, and it was the target of discrimination lawsuits in later years.

In an interview with The Atlanta Journal-Constitution in 2004, Mr. Rogers acknowledged that African-Americans had not patronized the restaurants early on.

But when civil rights protesters arrived outside a Waffle House in 1961, he said, he responded by asking them inside to dine.

“We actually accommodated everybody,” said the younger Mr. Rogers, who worked for his father at a nearby Waffle House at the time. “A lot of people have a stereotypical view of the South, that it was total segregation. That wasn’t the case.”

He added that African-American civic leaders expressed gratitude to his father for keeping restaurants open amid the rioting in many cities after the assassination of the Rev. Dr. Martin Luther King Jr. in 1968.

Still, in subsequent decades, workers and customers filed numerous lawsuits alleging sexual harassment and racial discrimination.

“I unearthed a policy of staffing restaurants on the basis of demographics,” said Keenan R. S. Nix, a lawyer who in the 1990s and early 2000s litigated several discrimination cases brought by employees and customers. One client alleged that the company had sought to cut back on the number of black workers in restaurants serving predominantly white customers.

Mr. Nix credited the company with changing its policies after these cases, some of which produced confidential settlements that he said “served the ends of justice.”

Joe Rogers Jr. said any policy changes at the company were not a response to litigation but part of a longer-term evolution. “Our law firm told us when they looked at all these things, ‘You’ve got to design better execution systems,’” he said. “It’s the growing pains of a big business.”

He blamed episodes of bias on “rogue employees” whom the company was not able to sift out when hiring.

Joseph Wilson Rogers was born in Jackson, Tenn., on Nov. 30, 1919, to Frank Hamilton and Ruth Elizabeth DuPoyster Rogers. His father was a railroad worker who lost his job during the Depression.

After high school, Mr. Rogers learned to pilot B-24 aircraft in the Army and trained other pilots.

Besides his wife, the former Ruth Jolley Rogers, and his son Joe, he is survived by another son, Frank; his daughters, Dianne Tuggle and Deborah Rogers; nine grandchildren; 15 great-grandchildren, and one great-great-grandchild.

Mr. Rogers remained involved with Waffle House into at least his late 80s. Most days he would spend several hours at the company’s headquarters in Norcross, Ga.; other times, he would show up at restaurants and mix with the customers.


McDonald’s Moves Toward Antibiotic-Free Chicken: Too Little, Too Late?

March 10, 2015

Nancy Gagliardi
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Taking a cue from rival Chick-fil-A, McDonald’s announced Wednesday morning that it intends to stop buying chickens that have been treated with antibiotics that are also taken by humans, seeking to address consumers’ concerns about resistant “super-bugs” resulting from overuse of the drugs. According to the Centers for Disease Control and Prevention, every year super-bugs cause some 2 million illnesses and 23,000 deaths in the U.S., resulting in an estimated $20 billion in direct health care costs. McDonald’s also announced that its U.S. locations would sell milk products only from cows that are free of artificial growth hormones (specifically rbST), but added that it would continue to allow suppliers to “responsibly use” certain antibiotics (called ionophores) which are not used in humans.

The world’s largest fast food chain will spend the next two years working to phase in its news standards with its suppliers, including Tyson Foods which, according to reports, said it would comply with the company’s requests, adding that its chicken production had reduced it use of antibiotics by 84% since 2011. A company spokesperson also commented that it would phase out using antibiotics as early as in the hatchery phase of production (when chicks are injected while still in their shells).

While he may only (officially) be four days into his new role, CEO Steve Easterbrook (who recently said he viewed himself as the company’s “internal activist,” perhaps hoping to ward off the latest wave of activist investors targeting companies that haven’t performed as well as expected) gets to mark this antibiotic-free move under his watch.

But is this really a signal that it won’t be business as usual for the beleaguered fast food giant or is it too little too late?

“I don’t think it is. It’s what needs to happen to McDonald’s right now,” says Darren Tristano, a restaurant industry analyst at Technomic. “In our industry you can catch up very quickly, but if you don’t, doing nothing isn’t an answer or a solution. This clearly is a sign that McDonald’s is willing to improve.”

While the antibiotic ban is making big news here, McDonald’s is already sourcing drug-free chicken overseas. “There are a number of countries where it doesn’t have antibiotics or hormones in its chicken,” says Tristano, including the U.K., where Easterbrook comes from. “But this is a step for them to come back to the leadership position they used to have in this industry.”

While this most likely is the first of many steps by McDonald’s to reverse its recent slide (in interviews, Easterbrook has said it needs to become nimble to accommodate market needs), a comeback will take time. Says Tristano:

First, you have to qualify coming back. I think for McDonald’s that’s getting back to a level of growth that’s nominally keeping up with inflation. I’d expect to see it back to 2.5% to 3%, which puts it into a position where it isn’t losing share, and anything above that would put it in a position where it’s taking share. Look, it was the leader during the recession, driving a lot of the industry growth. While I wouldn’t expect that to reoccur, I think getting back to zero and building, and no longer losing share is important, and we may be looking at 2016 for that to happen. But if it can get back to even, that certainly helps the company grow again.


Tim Hortons’ Must-Win Battle

January 12, 2015

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By Sherri Daye Scott

COPYRIGHT © 2015 JOURNALISTIC INC. ALL RIGHTS RESERVED.

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Now that it’s merged with Burger King, the question is more important than ever: Can the Canadian favorite finally find true success south of the border?

Tim Hortons has devoted fans in the U.S. One need only to read the Twitter and Facebook feed on the brand’s U.S. website to see the passion. “Can you please open a Tim Hortons in Cincinnati???” writes Kevin Ryne Laile. “I just had the best/fastest/nicest @TimHortonsUS service!! The new one at 5 mile & Newburgh is awesome,” tweets @lemonyellowsun.

Yet the dedication of a few has not translated into the type of market domination the brand has seen in Canada, where Tim Hortons accounts for 42 percent of all quick-service transactions and 75 percent of quick-service caffeinated beverage sales.

Thirty years after opening its first store in the U.S., Tim Hortons’ share of fast-food bakery sales is less than 2 percent, according to Euromonitor. Size plays a role; competitors McDonald’s, Starbucks, and Dunkin’ Donuts operate 10 times the number of stores. But other factors are at play, such as low brand awareness and consumer loyalty to established American brands. Krispy Kreme, for example, operates fewer than 300 stores, compared with Tim Hortons’ 860-plus U.S. units, and enjoys more market share.

“Tim Hortons saw 3 percent sales growth in 2013, which is not bad,” says Elizabeth Friend, senior consumer foodservice analyst at Euromonitor. “But Dunkin’ saw 6 percent growth, while Krispy Kreme saw 7 percent.”

Still, Tim Hortons is determined to become a major player in the U.S. Its most recent annual report called the U.S. a “must-win” market and outlined a top-line, five-year growth strategy that focused on extending dayparts, increasing check averages, expanding the rollout of its bakery-café model, and seeding new markets. And that was before the brand was purchased by Burger King, which moved its headquarters to Canada, christened the new company Restaurant Brands International, and promised to invest in Tim Hortons to set it up for U.S.—and worldwide—success.

“When I look at the U.S. market, I see the world’s largest economic market,” Tim Hortons then-CEO Marc Caira told the Wall Street Journal in May 2014. “I see the world’s largest foodservice market. I see a food market that continues to grow. I see a population that continues to grow. I see a country [that’s similar]. … When you look at all these things and you have a brand like Tim Hortons, why would you not go into that market? To me, it’s not a question of not being there, but what are you going to do that’s different for you to succeed?”

Past performance
The U.S.’s first Tim Hortons opened near the Canadian border in Tonawanda, New York, in 1984. Wendy’s International Inc. purchased Tim Hortons parent company TDL Group Ltd. for $425 million in 1995. The goal was to leverage Tim Hortons’ coffee and baked goods to drive guests into cobranded Wendy’s/Tim Hortons units on both sides of the border during the breakfast daypart.

There were early signs that the partnership might falter. Tim Hortons cofounder Ron Joyce sold his stock in Wendy’s International in 2002 after losing confidence in senior management decisions, such as switching from locally baked goods to frozen par-baked product shipped from a central warehouse. And U.S. stores continually missed sales goals despite significant marketing investment.

“American consumers were confused. They didn’t understand how the two brands worked together, so the partnership just didn’t work,” says Darren Tristano, a restaurant industry consultant for Technomic.

Still, Canadian Tim Hortons stores performed well, accounting for one-quarter to one-third of parent company Wendy’s earnings in 2004. On the strength of those stores, investors began pressuring Wendy’s to spin off Tim Hortons to increase shareholder value. In 2005, Wendy’s announced plans to roll out its own breakfast menu by 2007. The next year, it listed Tim Hortons on the New York Stock Exchange and earned more than $670 million on the first day of trading. And in August 2006, Wendy’s told The Street is would sell its $4.17 billion worth of Tim Hortons stock.

Tim Hortons corporate ownership moved back to Canada in 2009, while U.S. operations remained in Dublin, Ohio. Cobranded units with Wendy’s remain in operation, though the two brands are no longer tied at the corporate level.

Since that time, the Tim Hortons standalone growth strategy in the U.S. has come under scrutiny from stockholders and industry-watchers alike. Thirty-six stores in the Northeast closed in 2010. U.S. same-store sales dipped 0.5 percent in the first quarter of 2013, inciting pressure from hedge fund investors Scout Capital Management LLC and Highfields Capital to curb U.S. expansion efforts in favor of buying back shares.

Now with the merger with Burger King, it remains to be seen how the “Must-Win” plan outlined by Caira, who is now vice chairman of Restaurant Brands International, will be adjusted, if at all.

The current state
With systemwide sales of $589.5 million in 2013 and more than 850 units operating, Tim Hortons ranks 41st among U.S. quick-service brands, according to the 2014 QSR 50. The chain operates in 10 U.S. states—Michigan, Maine, Connecticut, Ohio, West Virginia, Kentucky, Pennsylvania, Rhode Island, Massachusetts, and New York—with the largest concentration of stores in the Midwest and Northeast.

Last year saw the chain extend its breakfast menu until 5 p.m., expand its cold specialty beverage line to include Frozen Green Tea and Frozen Hot Chocolate, and test on-the-go offerings such as Spinach and Egg and Chorizo hand-held pies and a Meatball Panini, all in an attempt to reach a broader American audience and drive up average unit volumes in existing stores.

“Tim Hortons has a much bigger presence in the U.S. than people know,” Friend says. “They are definitely a player.”

A player in a field of tough competitors all vying for a share of U.S. breakfast, lunch, and beverage dollars. Along with Tim Hortons, Euromonitor places 24 other brands in the U.S. bakery fast-food category, including fast-casual concepts such as Panera Bread, Au Bon Pain, and Corner Bakery. Factor in convenience-store chains like 7-Eleven, Wawa, and Sheetz, and you have a market saturated with choice.

However, working in Tim Hortons’ favor as it seeks to stand out is a menu that straddles the line between fast food and fast casual. “They’re a notch above McDonald’s and just below Panera when it comes to food,” Tristano says. “The average check is less than $9, but the offering is closer to bakery-café than coffee [quick serves].”

“They are unique,” Friend says, “in that what they offer is closer to full-meal options than others in their category. Food—especially dinner, snack, and specialty beverage—has been a focus in the U.S., and it shows.”

Still, there is the issue of getting the uninitiated to step into a Tim Hortons stateside.

Tim Hortons is Canada’s No. 5 consumer brand, according to Interbrand, and sells eight out of every 10 cups of coffee poured there. According to YouGov’s August 2014 Brand Index, only 30 percent of Americans are aware of Tim Hortons, while 90 percent or more know Dunkin’ Donuts and Starbucks.

A variety of factors drive those numbers. Both Starbucks and Dunkin’ are established national brands with significant brand-building media spends each year. Plus there is the retail component. Starbucks, for example, sold more than $1 billion in packaged coffee and tea at grocery stores in 2013, bringing its brand to millions of consumers who might not otherwise interact with it.

But at the heart of the matter is the simple fact that Americans do not connect with the brand’s story and links to Canadian nostalgia the way their neighbors to the north do. They view Tim Hortons as simply another bakery-café option—and an unfamiliar one, at that.

“Tim Hortons is essentially starting from scratch in the U.S.,” Friend says. “There is not enough awareness for there to be public perception about the brand, good or bad.”

The positive news for Tim Hortons, though, is that once a guest is introduced to the brand, they rank it comparatively to Dunkin’ and Starbucks on quality and significantly higher than Starbucks on value, according to YouGov’s research.

To reach its goal of 300 new stores by 2018, Tim Hortons is aggressively courting would-be franchisees. Area development and master franchisee deals have already been signed in new markets such as St. Louis; Youngstown, Ohio; Fort Wayne, Indiana; and Fargo, North Dakota. Franchise start-up costs are similar to Dunkin’ Donuts: net worth of $500,000 plus liquid assets in the $250,000–$300,000 range.

“I understand the attraction to the U.S. market,” says Peter Saleh, New York–based analyst at Telsey Advisory Group. “There’s a lot of money to be made if you do it right. But there’s also the risk of losing money for many years as Tim Hortons builds brand recognition. I don’t know that they are going to find a lot of franchisees outside core markets willing to do that.”

At the center of U.S. expansion efforts is the Tim Hortons Café & Bake Shop concept that launched in 2010. The chain describes the prototype on its website as featuring “contemporary exteriors, warm, inviting interiors, advanced equipment and new digital menu technologies.” In an August 2014 report, Morningstar analyst R.J. Hottovy noted the format’s positive impact on same-stores sales and building and equipment costs in the U.S. market.

Looking forward
The question on everyone’s mind, of course, is how the Burger King buyout will impact Tim Hortons’ U.S. plans.

Opinions vary. Some say the merger should help Tim Hortons align itself with savvy master franchisees here in the States and move into battleground states like Texas and Illinois. There is also the potential to expose millions of Burger King customers to the Tim Hortons brand by switching from Seattle’s Best coffee in favor of Tim Hortons products.

Others believe the deal will have little effect on U.S. growth efforts, but might be a positive for overseas expansion. Burger King operates 18,000 stores in 100-plus countries. Pre-sale deals are already in place to open 120 Tim Hortons stores across Qatar, Kuwait, the UAE, Oman, and Bahrain by next year, plus an additional 100 Tim Hortons stores in Saudi Arabia by 2018.

“I’m not totally sold that the U.S. should be a focus for Tim Hortons,” Friend says. “There are plenty of other international markets where there’s opportunity for organic growth versus fighting for market share.”

If the chain is to remain focused on U.S. growth, targeting Millennials with a message of quality is a smart move, Tristano says.

“The Millennial consumer is always looking for something new,” he says. “Tim Hortons could be that for them. Kids see Dunkin’ Donuts as older, their parents’ place. And they don’t have enough money to eat at Panera, but are very focused on quality. If they try Tim Hortons and experience the quality, they’ll pay more.”

Tristano’s advice is telling: the food, not the brand, is the key to find success in the U.S.


Second Cup Tries Upmarket Vibe

December 8, 2014

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Underdog coffee shop chain is trying to remain relevant as competition heats up

When Alix Box joined Starbucks Canada almost 20 years ago, it was the underdog taking on titan Second Cup in the fledgling coffee wars.

Today, as the new boss of Second Cup Coffee Co., Ms. Box is again the underdog, this time battling giant Starbucks – and an array of other fast-growing rivals.

Just over nine months into the job as chief executive officer, Ms. Box is rolling out a three-year transformation effort starting with a sleek redesigned Second Cup in downtown Toronto. On Wednesday, Ms. Box held court at the new “store of the future,” which opens on Friday. Located in the city’s hipster King Street West entertainment district, the café is an airy, white-hued space with marble counters, a “slow bar” and a high-tech Steampunk coffee brewing machine.

But as a reminder of the increasingly brutal café landscape, the new store faces a Tim Hortons restaurant across the street and a Starbucks about a block away. There’s also an outlet of the nascent, but increasingly popular, Aroma coffee shop several steps away and other independent cafés nearby.

Given the intense competition, Ms. Box travelled the country to get feedback from Second Cup franchise owners at their almost 350 cafés – a far cry from Starbucks’ 1,445. She got an earful.

“They felt Second Cup had fallen behind and was outdated,” she said as she sipped a Finca La Cumbre light roast Costa Rican brew at the slow bar, priced at $4.75. “This is not tweaking,” Ms. Box added, referring to Project Crema, the internal name for Second Cup’s reimagination. “We’re not doing a little bit here and a little bit there. This is a revolution … It’s never too late.”

It may not be too late but time isn’t on Second Cup’s side. Having essentially created the affordable luxury café culture in Canada, Second Cup has lost steam as Starbucks, market leader Tim Hortons and global titan McDonald’s Corp. have raced to perk up their coffee business here.

Now, under new leadership, the chain is betting it can get the jolt it needs with a chic café design, fresh offerings and breaks for its franchisors.

“Is it too late? Probably,” said Joe Jackman, CEO of consultancy Jackman Reinvents, which specializes in turnarounds such as the ones at U.S. fashion retailer Old Navy and drugstore chain Duane Reade. “They’re yesterday’s brand … But I don’t count them or anybody out. It’s doable. It’s just a long-odds situation.”

Added Darren Tristano, executive vice-president at researcher Technomic in Chicago: “Given the size of Starbucks compared to Second Cup, it’s a more uphill challenge.”

The challenge is daunting. In its latest quarter, Second Cup posted a $26.2-million loss, including provisions for café closings and a hefty $25.7-million writedown of impaired assets – the value of its trademarks – while its adjusted profit tumbled 64 per cent. Meanwhile, its same-store sales dropped 2.9 per cent, its 10th quarterly decline in that important measure of sales at outlets open a year or more.

Starbucks doesn’t break out its Canadian results, but in the third quarter, same-store sales at its Americas division rose 5 per cent and “Canada is a contributor to that growth,” Rossann Williams, Starbucks Canada president, said in an e-mail. It has also been adding more food and digital payment alternatives.

At McDonald’s Canada’s 1,430 restaurants, including McCafe, coffee sales have nearly tripled since 2008, more than doubling its coffee market share here, said president John Betts. Tim Hortons for its part will soon be acquired by Burger King, counting on the heft of the fast-food chain to help it expand even further.

Even as its rivals stake out their territory, Second Cup has an opportunity to move more upscale to make gains, Mr. Jackman said.

Other retailers, such as Hudson’s Bay Co., have found that reinventing themselves by shifting more upmarket can be more rewarding rather staying in the sinking middle ground, he said.

Ms. Box’s store of the future reflects her focus on a premium experience and offerings. Coffee at the slow bar, which she compares to the feel of a wine bar, costs up to $4.95, which can be more than twice the price of its regular brew. At the bar, the coffees include an Ehiopia YirgZ, with a “peach-like sweetness and grapefruit acidity” and Finca La Soledad, a light roast from Guatemala.

She’s chosen a new, local bakery to source a more edited offerings of muffins, scones and croissants, with a breakfast menu that includes egg white and kale sandwiches and granola and oatmeal. Franchise owners had told her that the food needed to be better and fresher.

The store’s remodelling cost close to $1-million, although rolling it out will probably cost half that much as the company learns from the process, she said.

An $8-million share offering will help fund the renovations in the 10 corporate stores, while Ms. Box is giving breaks to franchisors that could encourage them to invest in re-doing their stores.

Second Cup’s recent $2.3-million of annual savings from cuts to head office – dubbed coffee capital – went toward shaving franchisors’ royalties to 7.5 per cent of sales from 9 per cent, and their marketing spending to 2 per cent from 3 per cent if they achieve high operational scores, she said. That amounts to about $15,000 worth of annual savings for a café owner, and almost all of them so far have qualified for the breaks, she said.

At the new store. she changed the logo to a more modern-looking font and added art work by local artists to the cups. Her team has put hooks underneath the eat-in counters to hang purses and coats. And she introduced a new staff dress code of a charcoal grey apron over a white shirt and dark denim pants to replace the all-black with red piping uniform.

Its “image was very fast-foodlike,” Ms. Box said. “It looked like everybody else. We think we can be a bit different.”


Buffalo Wild Wings Soars Under Sally Smith

November 24, 2014

By Nancy Gondo, Investor’s Business DailyUntitled-1

When Sally Smith worked as a waitress during college, she had no idea that she would one day run a big, national restaurant chain.

“It was really hard work — balancing, having four or five tables, so time management, remembering things — that hospitality component,” she told IBD. “It was not for a long period of my life, but having that, I have a lot of empathy for what happens at every restaurant.”

That experience has been one of the factors helping her lead Buffalo Wild Wings from a 35-restaurant chain 20 years ago to a 1,050-location behemoth in America, Canada and Mexico, with annual revenue of nearly $1.5 billion.

The stock has rocketed alongside that growth — by a stratospheric 1,300% since its IPO in 2003.

“Sally has maintained a consistent performance and track record in an industry where executive leadership turnover has been very high,” said Darren Tristano, an executive vice president at food-industry tracker Technomic. “Retaining key leadership team members and with consistent strategic planning and execution, she has built a solid foundation for success and continued expansion and sales growth opportunities.”

How has she kept the Minneapolis-based chain on a growth track?

Smith, 56, looks way down the road. She figures out what the sports-bar company needs to do in order to keep expanding over the next three to five years vs., say, three to six months.

 

Hello Columbus

Buffalo Wild Wings opened 32 years ago in Columbus, Ohio, and has been public for 11 years.

The restaurants are part sports bar, part casual eatery, with TV screens showing sporting events from around the globe.

And it still considers itself a growth play.

“We’re not a dividend payer, we’re not doing stock buybacks right now, but rather, we’re investing in our growth,” Smith said. “When we were smaller, it certainly was a lot easier because it’s a lot easier to double when you have $10 million in sales vs. a billion in sales.”

Amid that challenge, Buffalo Wild Wings is a force in the restaurant industry. After Smith joined in 1994 as chief financial officer, she closed underperforming units, changed the chain’s name from BW3 and updated the logo.

She took over as CEO in 1996. Under her reign, Buffalo Wild Wings has expanded to all 50 states and across both borders, broadened its menu and added technology for ordering and entertainment.

She also brought structure to what had been a rather rudderless company.

“We were so small that it really had no infrastructure. In a way, it was like starting a business,” Smith said. “We didn’t have a marketing department, we didn’t have a talent management department.”

Smith also helped set up an advisory council for franchisees. Her prior experience at Dahlberg, maker and franchiser of Miracle-Ear hearing aids, helped her define what kinds of franchisees Buffalo Wild Wings wanted to attract.

Growing up in Grand Forks, N.D., she didn’t know what career path to take. But she always heard her father, who worked in banking, talking shop at home. So business became quite familiar to her.

In her first job as a 16-year-old, Smith filed checks for a bank and performed bookkeeping duties, rising to become a teller.

She enjoyed economics classes in high school and the University of North Dakota. Seeing her prowess with numbers, a professor suggested a career in accounting.

Smith went for it, joining the accounting-consulting firm KPMG.

That move turned into an 11-year post with Dahlberg, where she served as chief financial officer. After the firm was acquired, she stayed on for a year, then heard from Buffalo Wild Wings, which was still called BW3. She was all in.

It turned out to be the right decision — for Smith and the wings-and-beer chain.

After setting up infrastructure and steering the company onto a growth path, Smith took B-Dubs (a moniker it sports on its website) public in 2003, raising more than $50 million in the initial public offering. As shares continue to advance — up 10% this year — the company has scored compounded annual revenue growth of 27% and net income growth of more than 34% the past decade.

With a 98 Composite Rating, Buffalo Wild Wings is a leader in IBD’s Retail-Restaurants group. Its five-year earnings growth rate and sales growth rate are 23% and 25%, respectively.

 

Cheers

“Her leadership has shaped the brand by remaining true to who they are and where they came from,” Tristano said. “By expanding the menu to be more relevant (burgers), and by keeping pace with technology and entertainment platforms, BW3 has continued to shine in an industry that has been struggling with low growth and weak performance since the recession.”

Aside from her nine-month stint as a waitress 15 years prior to joining the company, Smith didn’t have direct restaurant industry experience. But she has excelled by drawing on her financial background, speaking with other industry executives and studying what has worked for them.

Smith has what she calls a collaborative management style. When she meets with team members, she tells them that there’s enough work for everybody. Teamwork, not territorial behavior, helps advance the company.

“I think the more people that can be exposed to other areas, not just their own, they each would have a much better understanding of what everybody is trying to achieve,” she said. “So I’m big on collaboration and working together to solve a problem, whether it’s in your specific area (or not).”

 

One For All

When Smith goes on the road, she visits restaurants and interacts with management and employees to find out everything from what’s working to details about hiring and distribution to what would make the job easier or more fulfilling.

“I’ve always been a curious person,” she said. “I do a lot of reading, and I have since I was very young. So being able to ask questions helps me learn, and I think sometimes you ask questions to help the other person learn.”

Clearly, exploring fresh possibilities matters to Smith. While advising college students interested in a career at the executive level, Smith encouraged them: “Don’t be afraid to take a lateral move to learn another aspect of the business, or a lateral job. It isn’t all about up, up, up. And don’t be afraid to take a job that’s undefined. Most of mine have been.”

Take her start at Dahlberg. Her position was new, and it was a small company. Then there’s Buffalo Wild Wings, which was a fledgling, local firm when she joined.

On the personal front, Smith dives into newspapers’ business and technology sections, belongs to a book club, bikes, golfs and enjoys cooking with her two kids.

What’s next for Buffalo Wild Wings? Smith still sees big opportunities in America in terms of unit growth and individual restaurant growth. She also sees international expansion, with plans to reach the Middle East and the Philippines.

Technomic’s Tristano would agree. “BWW likely has greater opportunity to expand outside the U.S., in North America and other major international food-service markets across the globe,” he said. “There continues to be strong opportunities for expansion in the U.S. in smaller suburban and rural markets where wings and sports are in high demand.”

Meanwhile, said Smith, “I love going into the restaurants and hearing that someone’s been with us for five years or seven years, or they’ve been on 10 new-store-opening teams, or that they love working at Buffalo Wild Wings.”


After missteps, Dunkin’ Donuts Set for California Expansion

September 4, 2014

pictureChastened by early mistakes, company takes a 2d shot in the state Starbucks rules

By Taryn Luna

Globe Correspondent

Al Golub/AP for the Globe

Dunkin’ Donuts launches its campaign in Modesto, Calif.

Dunkin’ Donuts, the coffee chain so familiar in the Northeast, is nearing the end of an expansion march across the country to become a true national brand.

The retailer kicked off its California expansion on Tuesday, the first step in a strategy to challenge Starbucks’ stronghold on the West Coast.

The company once operated more than a dozen restaurants in the state but shuttered them by the early 2000s, citing logistical problems and poor relationships with franchisee partners.

Dunkin’ temporarily abandoned its California dreams as the international business grew to more than 3,000 restaurants. Today the chain serves its signature Munchkins and Coolattas at nearly 900 stores in South Korea, but has only three nontraditional stores in obscure California locations: on a Marine base, inside a hotel, and at a highway rest stop.

Now the coffee chain is preparing to take another shot in a market where its toughest competitor, Starbucks Corp., dominates with more than 2,500 stores.

Dunkin’ plans to open its first traditional restaurant in Modesto, Calif., on Tuesday and a second store in Santa Monica in the following weeks.

Three additional restaurants in Long Beach, Downey, and Whittier are expected before the end of the year. Franchisees have signed agreements to open nearly 200 stores by 2020 and the company intends to eventually grow to 1,000 stores in the state.

“We’ve learned a lot about operating out West,” said Nigel Travis, chief executive of Dunkin’ Brands. “We’ve been incredibly impressed with the quality of the franchisees.”

But Dunkin’ had to learn the hard way.

The chain was so eager to enter California in the 1990s that it “hopscotched a lot of the country,” said Grant Benson, vice president of global franchising and business development at Dunkin’ Brands.

The nearest distribution center was in Chicago, and truck drivers hauled products thousands of miles to the California stores. “It left a lot of gaps where we didn’t have a supply chain and any development,” Benson said.

Travis has also said that Dunkin’ was less selective with its franchisee partners and did not properly train them.

Dunkin’ vs. Starbucks in California

Locations of the first new traditional restaurants in California, compared to the current locations of Starbucks restaurants in the Golden State.

The company renewed its plans to move into California a few years ago and began building up its network of stores in the West, entering Denver and Salt Lake City in the past year.

The California stores will be supplied from a Phoenix distribution center, and the company intends to open a new warehouse in California as more restaurants get off the ground.

Benson said the chain has also upgraded its training program. It is working with a mix of existing franchisees that operate Dunkin’ restaurants in other states and new partners with experience in California.

Software programs that aggregate data on demographics, competition, and traffic will help the company select the best locations for restaurants, he said.

Darren Tristano, an executive vice president at the food industry research firm Technomic, said that California is a major growth opportunity for the Canton company.

Dunkin’ was the second-largest coffee chain in the United States last year, with $6.7 billion in annual sales and a 30.9 percent market share, according to Technomic. Starbucks posted $11.7 billion in sales and a 53.8 percent share last year. Technomic does not track sales by state.

And although Dunkin’ is entering a region dominated by Starbucks, it will appeal to a different customer, Tristano said.

Starbucks typically opens in middle- to upper-income neighborhoods and generally draws more affluent consumers, Tristano said. Dunkin’ prices are slightly lower, and the chain primarily draws middle- to lower-income consumers who represent a larger percentage of the workforce.

The stores tend to be smaller than at Starbucks, which means Dunkin’ pays less for real estate. They also can open more stores in nontraditional spaces, such as gas stations and convenience stores, he said.

Dunkin’ will serve its hot brews in paper cups in California — a move Tristano lauded and said environmentally conscious consumers will expect in the Golden State. The company will use the same polypropylene recyclable cup that was introduced in Somerville in May to comply with a citywide ban on disposable polystyrene, often referred to as styrofoam.

“When you look at how the brand has evolved over time, they should have a pretty good opportunity to grow there,” he said. “Today I think the California market is ready for Dunkin’.”


Juice Craze May Be Next to Tank, Analyst Says

July 22, 2014

As the demise of Crumbs Bake Shop, and its cupcake kingdom, roils the food industry, one analyst is already predicting the next hot trend that is likely to cool off: Juices.

That’s the word from Darren Tristano, executive vice president of restaurant research company Technomic.

In a blog this week, food guru Tristano wrote that juice concepts, while “all the rage today,” are at risk of over-saturation and too much competition. The Westfield Garden State Plaza in Paramus is now home to Jamba Juice and Freshu Grill and Juice Bar.

“With health and wellness getting more play from affluent and millennial consumers, it’s clear the cold-pressed juice concepts will be pushing hard to expand,” Tristano wrote.

“Even though these concepts have price points over $10 in major markets like Los Angeles and New York, it’s clear that Hollywood-starlet impact on our country with juice cleanses is evident. Juice specialists will likely expand quickly as the fad continues but the trend will settle into concepts that represent reasonable prices for the mainstream consumer.”

He predicted that big brands such as Starbucks’ Evolution Juice and Juice It Up will have an edge in this competition.

“But ultimately, the ‘craze’ will settle down and many restaurants will likely see declines in sales that make it difficult to continue their operations,” Tristano wrote.