The remarkable rise of the sushi burrito

March 7, 2016

By Becky Krystal
The Washington Post
March 4th, 2016
https://www.washingtonpost.com/news/going-out-guide/wp/2016/03/04/the-remarkable-rise-of-the-sushi-burrito/

Korrito

Has your sushi been a bit different lately? Maybe longer, pudgier and rolled up with rice, protein and vegetables? You know, kind of like a burrito?

Actually, let’s call a spade a spade. Your sushi isn’t just like a burrito. At an increasing number of eateries, it is, in fact, a burrito. The sushi burrito has officially joined the ranks of such culinary chimeras as the Cronut and the ramen burger, seducing both eager customers and the restaurateurs who want to feed them.

Even as diners eat fewer Chipotle burritos, sushi burritos are gaining traction around the country and in the Washington area. The latest purveyor joined the D.C. scene last week: Seoulspice in NoMa, which sells what it calls the Korrito, a Korean-style burrito wrapped in seaweed and filled with sushi-grade rice, plus a variety of meats, vegetables and sauces.

Eric Shin, a percussionist for the National Symphony Orchestra, said he hit upon the burrito concept almost by accident about two years ago. He’d originally planned to offer kimbap, Korean rolls sliced into bite-sized pieces. Unfortunately — or perhaps fortunately — the machine he bought to cut them destroyed the food. “It was a huge mess,” he said. Amid the disappointment, Shin’s wife was so hungry she just picked up an uncut roll and started eating it like a burrito.

“It just sort of stuck,” Shin said.

Darren Tristano would tell you that the popularity of the sushi burrito is no accident. The president of Technomic, a Chicago-based firm that specializes in food industry analysis, said a number of factors are at play. Primary among them is the form itself. Four years ago, a Technomic concept study predicted “burrito-inspired” would be a common industry trend. Good call.

Sushi burritos have also been propelled by the growth in fast-casual dining and its build-your-own mentality, Tristano said. And with sushi available at almost every grocery store these days, it’s become an accessible and familiar food.

Like so many food innovations, sushi burritos gained traction on the West Coast and are continuing their march across the country. Sushirrito, a five-location California chain that bills itself as “the original sushi burrito concept” debuted in San Francisco in 2011, the same year the Jogasaki food truck hit the streets of Los Angeles; the Kome truck peddles sushi burritos in San Francisco.

“The concept for Sushirrito came to be since we love sushi and wanted it to be more accessible and portable. Burrito-sizing sushi makes a lot of sense given the handheld aspect of it,” said Sushirrito founder Peter Yen. “We weren’t trying to start a trend. We simply wanted to create a new type of food that we like to eat. Hybrid foods only make sense when the foods belong together — just because you can do a mash-up, doesn’t mean you should.”

Even given the wave of sushi burritos in California, lifelong friends and first-time restaurateurs Mike Haddad and Travis Elton weren’t quite sure what to expect when they debuted Buredo in downtown D.C. last summer.

[There’s no way we couldn’t try Buredo’s burrito-size sushi rolls]

“We didn’t know how it would be perceived,” Haddad said. When the doors opened and curious diners snaked down the block, “I said, ‘I think we have something here.'” Something big enough that the duo is close to opening a second location, near Dupont Circle.

Haddad and Elton think they’ve hit on customers’ interest in food that is fresh and healthful.

Darren Norris knows he’s tapped into that market at his almost year-old Maki Shop on 14th Street NW, where evenings will see diners trickling in from CrossFit and other nearby gyms. The owner of the late Kushi in Mount Vernon Triangle — whose six-ounce maki fall somewhere between the size of smaller sushi and sushi burritos — said his “sushi hand rolls” are “a lifestlye product” for on-the-go diners. “I want to be that thing that you could eat three days a week and not feel guilty about it,” Norris said.

Kaz Okochi, the proprietor of Kaz Sushi Bistro near Foggy Bottom, said he thinks size is what attracts people to sushi burritos — “too much rice,” he opined — and worries that diners who eat them will come to his restaurant and wonder why his food isn’t bigger. “They might get disappointed,” the Japanese native said. (Okochi’s own fast-casual, design-your-own sushi endeavor, Oh Fish!, lasted about two years downtown.)

Their size and torpedo shape notwithstanding, sushi burritos have forced us to reconsider what we think of as sushi, especially when it comes to fillings. At Buredo, nori is wrapped around everything from yellowfin tuna or salmon sashimi to tofu and pulled pork shoulder. Seoulspice’s Korean-accented items include bulgogi beef, pickled radish and, of course, kimchi. At Burrito San in Miami, you can have your sushi burrito by way of the Philippines (braised pork, banana ketchup) or India (spiced chicken, potatoes, curry). Denver’s Komotodo not only sells rolls such as the Bee’s Knees (fried chicken, asparagus, bacon, Monterey Jack cheese) and Fish n’ Chips (white fish, slaw, potato chips), but also gives you the $2 option to have your burrito deep-fried. Really, the question these days is not what can you put in a sushi burrito, but what can’t you?

Okochi, though, doesn’t take umbrage with the burrito entrepreneurs’ use of the word “sushi.”

“I’m not saying burrito sushi isn’t true sushi. Sushi is vinegared rice,” he said. Sticklers could even contest whether Okochi’s food is “true” sushi, since the chef said he’s developed his own style at his restaurant.

As long as sushi burritos don’t take over the entire sushi market, he’s fine living side-by-side with them, he said.

In fact, self-professed sushi lovers Haddad and Elton view themselves as “introducing sushi to a new audience,” Elton said.

“It is definitely opening up people’s minds,” Haddad said.

Seoulspice’s Shin said he’d like his Korritos to similarly encourage diners to seek out the kind of traditional Korean food he grew up eating.

Even with more people like Haddad, Elton and Shin getting in on the sushi burrito game, Technomic’s Tristano said there’s still room to grow in the genre. He said reasons why sushi burrito establishments are still less common than their popularity might indicate include food safety issues with sourcing and serving raw fish (although many burritos rely on cooked, fried or even vegetarian fillings) and the fact that the concept is hard to replicate.

“A good sushi burrito can be tricky and sometimes challenging to get the flavors to blend together well in a larger roll,” said Mauricio Fraga-Rosenfeld of Rolls by U in Arlington, which opened in the fall with sushi “ritos” such as the Frida (with roast beef and kimchi) and the Van Gogh (a more traditional pairing of tuna and avocado). “Also, price point may play a part in why others don’t want to risk it. It’s cheaper to do tacos or Mexican burritos. It takes creativity and great quality in product and recipe to get it right, as well as extremely fresh ingredients.”

“I think it’s really difficult to pull off,” Shin said. “Most of the restaurants that open up are afraid to do something different.” Shin said he had to battle through questions and skepticism from his own family (his parents ran a Korean restaurant in Atlanta), some of whose recipes he’s using at Seoulspice. “I caught a lot of s— from my grandma,” he laughed.

When other sushi burrito spots do inevitably open, Shin won’t be too worried. “The more, the merrier,” he said. “I’m so proud of D.C. for embracing ethnic foods and creative ethnic foods in general.”

The Buredo duo was slightly more measured.

“Time,” Haddad said, “will tell on who will last.”

Correction: A previous version of this story misidentified the geographical origins of Jogasaki and the Kome truck. This version has been updated.


Fazoli’s closes only Las Vegas restaurant

February 24, 2016
Jennifer Robison
Las Vegas Review-Journal
February 17, 2016
http://www.reviewjournal.com/business/fazolis-closes-only-las-vegas-restaurant

1004922526_fazolis_021716_3.jpgThere’ll be no more free breadsticks on North Town Center Drive.

Italian fast-food franchise Fazoli’s has quietly closed its lone Las Vegas eatery. The restaurant, behind the 7-Eleven at Town Center and Covington Cross in Summerlin, shut Feb. 8, 15 years to the day after its 2001 debut.

The closure defies broader market trends, as big, national chains including Chick-fil-A and Cracker Barrel prepare market launches for late 2016 and early 2017.

“Las Vegas is definitely a growth market,” said Darren Tristano, president of Chicago-based restaurant consultant Technomic.

So why did operators shutter Fazoli’s?

Company spokeswoman Janet Ritter deferred to the franchisee, Las Vegas-based Glencoe Management, and Glencoe Management didn’t return phone calls. The company’s website said it owns 21 local Burger Kings, including one at 1280 Town Center Drive, next to the former Fazoli’s.

But Ritter said Fazoli’s, a Kentucky chain with 217 U.S. locations mostly in the Midwest and South, “would like to have a presence in Las Vegas, and we are seeking franchisees to open units in the Las Vegas area.”

The Fazoli’s closure capped a market foray that never really picked up steam.

Ritter said she had no information on number or dates of operation of prior local stores, but at least two other Fazoli’s franchises — one on Ft. Apache Road near Rhodes Ranch and another on Eastern Avenue in Silverado Ranch — opened after 2001 and closed years ago.

The 28-year-old company had as many as 300 U.S. restaurants before it began pruning locations in the recession. Each restaurant typically employs 30 to 40 people, Ritter said.

Competition has hurt Fazoli’s, Tristano said.

The U.S. market is saturated with chains, including Panera Bread and Noodles & Co., that serve pasta and pizza. Plus, Fazoli’s straddles a blurry line between fast food and the more upscale fast-casual segment, which includes operators such as Chipotle and Au Bon Pain.

“That’s not a terrible place to be. The problem is, you’re lumped in to some extent with fast food because of the drive-thru and the price points, but the quality is not at the level of a fast-casual restaurant,” Tristano said. “That’s not to say it’s not good quality, but there are so many concepts with customized, prepared-to-order food.”

It didn’t help that Fazoli’s had just a handful of local stores. A franchise needs 20 to 25 locations in a big market to build loyalty and brand awareness, Tristano said.

Still, Fazoli’s seems to have righted its ship: The company said in December that same-store sales were up in 65 of the prior 68 months, including a 3.1 percent jump year over year in November. It opened 10 new franchises in 2014 and 2015.

And restaurant operators continue to salivate over the Southern Nevada market, Tristano said.

“Las Vegas has the demographics and growth that many chain brands are looking for,” he said. “Not all of the markets in the United States are growing, but you’re seeing housing development and population growth there, and that’s a big deal. Chains tend to be prioritizing growth markets.”


Shrinking sales pushing Bonefish Grill chain to close 14 restaurants, restructure

February 22, 2016
Justine Griffin, Times Staff Writer
Tampa Bay Times
Wednesday, February 17, 2016 11:12am
http://www.tampabay.com/news/business/retail/bonefish-grill-to-close-14-restaurants-and-restructure/2265710

Times files
Bonefish Grille on North Dale Mabry Highway.Bonefish Grill will close 14 restaurants this year as the seafood chain restructures following several quarters of disappointing sales results.

Tampa-based Bloomin’ Brands, the parent company of Bonefish Grill, Outback Steakhouse, Carrabba’s Italian Grill and Fleming’s Prime Steakhouse & Wine Bar, announced Wednesday that it expects the 14 Bonefish Grill locations to close within the year. Bloomin’ took a pre-tax charge of $24.2 million during the fourth quarter of 2015 in connection with the closures. No specific stores were named.

“We needed to strip out the complexity that had impacted the core service at Bonefish and focus on what wasn’t broken,” said Bloomin’ Brands CEO, Liz Smith, during an earnings call Wednesday. “We’ve done that. It’s important to look beyond quarter to quarter. We expect 2016 to be a strengthening and momentum story for Bonefish Grill as we move through the year.”

Sales were down at Bonefish Grill by 5.4 percent for the months of October through December as compared to same period in 2014. Sales for the quarter were down a combined 2.8 percent at all Bloomin’ restaurant brands in the U.S.

Bonefish Grill, which was intended to be the leading brand for new growth in Bloomin’ Brands’ restaurant portfolio last year, saw the steepest declines. This is the third quarter of decline for the chain, which is in a competitive class of “polished casual” chain restaurants, and tends to be more pricey than dining experiences like a TGI Fridays or Olive Garden. The menu quality is similar to restaurants like Seasons 52 or Carmel Cafe.

But Bonefish’s biggest competitors are independent restaurants, said Malcolm Knapp, a restaurant economist in New York City and the founder of Knapp-Track, an industry tool used to track restaurant sales.

“Bonefish is in a good spot where they can appeal to a higher demographic because the food quality is good,” Knapp said. “But independent restaurants are getting bigger and there are a lot of really great chef-driven places out there. With the shrinking size of the middle class, restaurants are seeing less frequency from consumers, who have a lot more choices.”

An “anti-chain” movement from a younger demographic has changed the way consumers are spending their money and hurt chain restaurants like Bonefish. Millennials and generation X-ers are looking for value but often opt to try a locally owned restaurant rather than a chain.

“This is a symptom of a bigger issue,” said Darren Tristano, president of Technomic, a Chicago-based food research firm. “Fast food and fast casual concepts continue to do well but casual dining is staying stagnant. It doesn’t help that Bonefish is a seafood restaurant, which has its ups and downs and isn’t as broadly appealing as steaks or Italian.”

Nevertheless, Knapp believes Bloomin’ is taking the right steps to get Bonefish Grill back on track this year. The company named Gregg Scarlett as Bonefish’s CEO in March 2015. Founding Seasons 52 chef, Clifford Pleau was hired away to Bonefish in Sept. 2014. Since then, the restaurant chain has simplified its menu and instituted an updated look inside newer restaurants.

“They are clearly in the middle of a turnaround,” Knapp said. “Bonefish is not young. The market has moved on from them. But it’s not unusual for large chains to do some pruning like this periodically.”

Bonefish Grill opened two new restaurants in the U.S. from September to December 2015, bringing the total count to 210. The company opened more than a dozen Bonefish locations from 2014 to 2015. However, Smith said in August that development for Bonefish would stall until sales improved.

Carrabba’s Italian Grill also had a shake up in leadership. Bloomin’ Brands announced that Mike Kappitt was named president the day before Bloomin’ released its fourth quarter results. Kappitt will be responsible for leading operations and development of the Carrabba’s brand in the U.S. He most recently served as the senior vice president and chief marketing officer of Bloomin’ Brands. The former president, David Pace, left the company to become CEO at Jamba Juice last month.

Bloomin’ Brands fourth-quarter revenue was $1.04 billion, down 5.3 percent from the fourth quarter of 2014. The company’s net income for the fourth quarter was $17.7 million, down from $22.4 million the year before. Earnings per share were 14 cents for the quarter, down from 17 cents in 2014. Sales were down for the quarter at brands across the U.S. Sales in international markets were up — Outback Steakhouse sales in Brazil saw a 7.3 percent increase. The company operates 75 Outback Steakhouse restaurants in Brazil and 75 in South Korea.

Shares in Bloomin’ Brands fell nearly 11 percent Wednesday to $15.10 despite strong daily gains by all the major U.S. stock markets. The company’s stock price has not been this low since 2012.


Bagger Dave’s slide: After multiple closings, missteps, burger chain goes into holding pattern

February 18, 2016
GARY ANGLEBRANDT
February 13, 2016 8:00 a.m.
Crain’s Detroit Business
http://www.crainsdetroit.com/article/20160213/NEWS/302149989/bagger-daves-aims-to-beef-up-outlook-after-closings-missteps

If the past year is any indication, the future of Bagger Dave’s Burger Tavern is anything but in the bag.

The Southfield-based restaurant chain suffered the indignity of two rounds of restaurant closings in 2015. The first came in August, when parent company Diversified Restaurant Holdings Inc. shuttered three locations, all in Indiana, gnawing $1.8 million in writedowns off the corporate books.

Then in December, eight more locations closed, at a loss of about $10.7 million for writedowns and other costs. One of them was its downtown Detroit location. The others were in Indiana.

The Detroit restaurant had been open for two years. One of the Indiana restaurants didn’t last 10 months; two more barely made it to the one-year mark. The oldest of the Indiana restaurants, the one in Indianapolis, was just 3 years old.

Anyone looking for more upbeat signs than these should avoid cracking open Diversified’s quarterly reports of the past year.

The reports start rosily enough. The first, released in March, predicted between 47 and 51 stores by the end of 2017. (There were 24 at the end of 2014.) These numbers steadily fell in subsequent reports. By the time November’s third-quarter report came around, the company had stopped making any predictions at all.

“We will not commit to any further development of Bagger Dave’s,” the company said in the report, released seven weeks before the December closings.

That doesn’t mean the company had given up on Bagger Dave’s. It opened five last year, including one in Centerville, Ohio, as recently as November, its first in that state. Another is set to open near Cincinnati in late March. But that and the 18 Bagger Dave’s (16 in Michigan, one in Ohio and one in Indiana) that survived the closings — and employ 670 people — will be the last for the foreseeable future.

This is a marked about-face for a company normally hell-bent on growth. It opened six Bagger Dave’s in 2014 and seven in 2013. And that pales to its Buffalo Wild Wings franchise operations, the largest in the country. Last year alone, Diversified added 20 more restaurants, 18 of which came from the $54 million purchase of Buffalo Wild Wings restaurants in the St. Louis area. That brought the number of Buffalo Wild Wings locations under its umbrella to 62.

From the end of 2011 to the end of last year, Diversified increased the total number of its restaurants across the two brands from 28 to 80. This year, though, it plans to add just three — the Bagger Dave’s near Cincinnati and two more Buffalo Wild Wings locations.

Familiar taste

Bagger Dave’s has struggled before. Sales took a hit after Diversified embarked on an aggressive growth plan in 2012, opening or buying 16 stores across its two brands. It listed on Nasdaq the following year.

The pace distracted management from everyday operations, and it was the Bagger Dave’s side of the business that took the hit in sales.

To mend things, Diversified beefed up Bagger Dave’s marketing, launched a corporate training program, brought in an employee-assessment firm and began hiring professionals from national chains such as Red Robin. It brought in consultants from the Disney Institute to go over employee retention and recruitment and rolled out new menus — the first one in early 2014 and another last year. The final rollout wrapped up last September.

It included adding more burgers and removing sandwiches that weren’t selling well, switching from a two-patty burger to an 8-ounce one and adding a grilled chicken breast sandwich. Fries are included in the price of a burger instead of added on. The menu’s marketing pitch changed to tell customers about certain points of company pride, such as how it uses prime rib and sirloin in its burgers and carefully sources its food.

“I’m much, much more connected to Bagger Dave’s now,” CEO Michael Ansley said last April in a Crain’s interview.

Things appeared to pay off. In a conference call for last year’s second-quarter results, Ansley said sales at Bagger Dave’s stores open at least two years had increased 2.5 percent compared with the same quarter a year earlier and 4 percent year to date.

Ansley talked about encouraging positive signs showing in things like Facebook “likes” and “net promoter scores,” which measure customer satisfaction. Investments in technology — tabletop ordering tablets, a mobile app, a gift card program, a “RockBot” jukebox app — promised to further brighten the picture.

Nevertheless, Ansley had to acknowledge struggles. “Despite the positives, we fully appreciate the missteps we have made in the past with respect to the brand,” he said.

One initiative has proved costly. Management was determined to maintain a base staffing level at Bagger Dave’s restaurants, even if sales were low. This policy was done to bolster service and coax repeat visits out of customers.

But this, along with minimum wage increases, pushed up the company’s year-on-year compensation costs by more than 25 percent in the second quarter of last year. This came on the heels of a $2 million spike in compensation costs that brought its tally for 2014 to $9.2 million.

Minimum staffing practices like this are rarely used in the restaurant industry, said Darren Tristano, president of Technomic Inc., a Chicago-based restaurant industry research company.

“There’s nothing financially efficient about it,” he said. “You end up with staff standing around.”

In a conference call on Nov. 5, Ansley and CFO David Burke expressed frustration with the slow pace of results. Burke described Bagger Dave’s as a “Dr. Jekyll/Mr. Hyde concept” because of the changes it had undergone.

There were signs of improvement coming out of investments in the menu and training, but “you don’t see an immediate impact in sales from that,” he said.

The financial picture

Diversified’s breakneck growth comes with a heavy capital burden.

Estimated capital expenditures last year were about $30 million. It spent $36 million the year before.

The buildout of a Bagger Dave’s costs $1.1 million to $1.4 million, according to company financial statements. A new Buffalo Wild Wings costs $1.7 million to $2.1 million. Updates to older restaurants cost between $50,000 and $1.3 million.

A listing on Nasdaq in 2013 raised $31.9 million. But much of the company’s expansion has been financed by debt. Total debt rose from $61.8 million at the close of 2014 to $123.9 million at the end of September, pushed up because of the acquisition of the St. Louis stores.

The company’s share price opened at $2.57 the day the closure of the eight stores was announced. The stock was trading just above $1.50 last week.

A pair of lawsuits last year further strained finances. The two cases, brought by the same attorney, alleged employees who work for tips were made to do the work of non-tipped employees who earn a higher hourly rate. The settlement and related expenses cost the company $1.9 million.

For the first three quarters of last year, Diversified booked a net loss of $6.6 million, compared with an $85,000 profit for the same period in 2014. The company lost $1.3 million overall in 2014. The company does not believe it made a full-year profit in 2015. (Annual results are expected to be released in March.)

Preliminary financial estimates for 2015 show revenue growing 34 percent to $172.5 million from $128.4 million in 2014, in line with the company’s guidance.

Same-store sales increased 2.8 percent at Buffalo Wild Wings and 1.3 percent at Bagger Dave’s from 2014 to 2015, but they decreased 7.8 percent year-over-year in the fourth quarter at Bagger Dave’s and increased just 0.8 percent at Buffalo Wild Wings.

The Buffalo squeeze

Bagger Dave’s menu refresh included adding more burgers and removing sandwiches that weren’t selling well.

The 18 Bagger Dave’s stores that remain don’t appear to be on much better ground.

The eight stores shuttered in December generated $5.5 million in revenue, or $687,500 per restaurant, through the first three quarters of last year and had a pre-tax (EBITDA) loss of $600,000. But the other 18 locations brought in $14.1 million, or $783,333 per restaurant, and had a pretax profit of $700,000. That comes to less than $52,000 per restaurant on an annualized basis, a growth rate of 5 percent.

The revenue per restaurant on an annualized basis comes to $1 million, well below the target revenue per store of $1.7 million, the goal stated in a presentation to investors in January.

A profit margin of 5 percent is low, especially for company-owned stores, Tristano said. Franchisee-owned stores typically hit at least 10 percent because of the fees to the franchisor they must pay.

“They’ve got to be doing better than 5 percent to pay down their debt,” Tristano said.

The obvious question that arises is, were the closures enough?

All Bagger Dave’s restaurants are company-owned. (Plans to franchise the brand several years ago were scrapped.) With a massive Buffalo Wild Wings operation cranking away, the Bagger Dave’s “baby brand,” as Ansley has called it, has had a hard time getting the attention it needs.

Diversified has a contractual obligation with Buffalo Wild Wings Inc. to open 42 restaurants by 2021 and has 15 more to go. The company says it’s ahead of schedule.

Ansley also points out that failing to make that obligation bears only a weak cost: Diversified only has to pay Buffalo Wild Wings $50,000 for each store it does not open — far less than the millions it costs to open one. “With our relationship with Buffalo Wild Wings, I doubt they’d charge us the $50,000,” Ansley said.

In any case, the moves Bagger Dave’s has made demonstrate the pressure on Diversified to stay focused on the much stronger Buffalo Wild Wings side of the business.

“In the year ahead, we plan to focus our resources primarily on growing our BWW portfolio, which represents the overwhelming majority of both our revenue and adjusted EBITDA,” the company said in its third-quarter report.

The move toward Buffalo Wild Wings is smart because it’s a more proven brand than Bagger Dave’s, which is “a good brand but not that broadly differentiated,” Tristano said.

“The reality in our industry is that there’s no shortage of optimism. We hear about these ambitious goals, but very rarely do we see brands meet those goals.”

The response

Last year’s closings, which included one Buffalo Wild Wings restaurant in Florida besides the Bagger Dave’s spots, were the first for the company. But they were a long time coming.

“Bagger Dave’s has given us some fits,” Ansley said in an interview. “We knew we had issues with it two years ago. We made a lot of changes — I can’t even count the changes.”

These changes came too quickly and were confusing for guests and employees. “We were too aggressive. That was the problem, and we learned it the hard way,” Ansley said.

Casual dining chains face intense competition throughout the country, not just from each other but also from fast-casual restaurants like Chipotle Mexican Grill and Five Guys Burgers and Fries. The parent of the Max & Erma’s chain closed eight metro Detroit locations in January.

To counter this trend, Diversified needs to do a better job of marketing Bagger Dave’s by doing things such as telling people of premium ingredients that are mostly sourced in Michigan, Ansley said.

He also is heartened to see interest in properties of the shuttered locations. This includes the one in downtown Detroit, which has garnered “a lot of offers,” he said.

The company is holding the line on the minimum staffing levels that have driven up compensation costs. “There will be a little deleveraging from” the minimum staffing levels that drove up compensation costs but “nothing substantial,” Ansley said.

No more Bagger Dave’s locations will be closed, Ansley said. If the prototype stores do well for the rest of the year, “then we will start expanding again,” he said.

The 18 remaining Bagger Dave’s restaurants are profitable, said Ansley, who is especially encouraged by the performance of “prototype” stores. These stores have the new menus and have been redesigned to be smaller and “hipper.” They are in Grand Blanc, Birch Run, Grand Rapids, Chesterfield Township and Centerville, Ohio.

The three analysts who cover Diversified’s stock are encouraged. They express concern at the company’s debt but agree that the Bagger Dave’s changes are on the right track.

“We think much of the ‘noise’ of the past few quarters is behind the company and management can focus on restaurant operations,” wrote Mark Smith, analyst at Minneapolis-based Felt & Co.


Luxury Dining at the Mall

April 22, 2014

bildeWhen the new Saks Fifth Avenue department store opens at the Mall at University Town Center, shoppers can expect more than just expanded departments and two floors of merchandise. The 80,000- square-foot Saks space — one of the key anchors for the $315 million mall in Sarasota County — also will boast its own restaurant, and be one of the first in the chain to do so.

When Saks opens, so will “Sophie’s,” a new restaurant concept by Fifth Dining LLC, a new restaurant effort within the Saks brand. The elegant, gourmet restaurant will complement the department store’s look and feel but will offer a completely separate lunch and dinner dining experience for Saks shoppers.

“We wanted to tie together the legacy of Saks with a concept that had a lot of appeal for the people who happen to shop here,” said Michael Kaufman, president of Fifth Dining. “The restaurant is designed to be a high-end experience through a unique look and feel and our freshly prepared food. It’s not stuffy, but resonates appropriately with the traditional Saks Fifth Avenue shopper.”

The 2,600-square-foot restaurant’s design is simple, with sleek tables and chairs and black-and-white finishes.

Its name pays homage to one of Saks Fifth Avenue’s legendary fashion designers, Sophie Gimbel, who designed women’s apparel for Saks for 40 years and married a Saks executive. Among her many simple and elegant designs was a red coat and dress she created for Lady Bird Johnson.

“We’re not creating a museum to honor Sophie, but a restaurant brand, if you will, keeping in mind what she stood for — like the simplicity in the way she designed — as we go along,” Kaufman said.

IT STARTED IN CHICAGO

Saks opened its first Sophie’s concept in Chicago earlier this year. Sarasota will be the second. More restaurants are planned in larger markets.

“These kind of restaurants primarily target women. It’s very much a place for ladies to lunch and meet their friends, then continue shopping,” said Jeff Green, a retail analyst with Phoenix-based Jeff Green Partners. “The demographic in Nordstrom cafes is traditionally older. I imagine the restaurant in Saks will do very well in Sarasota.”

Saks Fifth Avenue will close its existing 40,000-square-foot store at the Westfield Southgate Mall in October, when the mall being jointly developed by Taubman Centers and Benderson Development debuts.

Saks Fifth Avenue has further invested in the importance of the Southwest Florida market by closing its Tampa store at Westshore Mall.

When the 880,000-square-foot Mall at University Town Center opens in October, Sarasota will have the only Saks department store on the Gulf Coast north of Fort Myers.

Saks joins Macy’s and Dillard’s as anchors for the new mall, the only enclosed mall scheduled to open this year in the United States.

A slew of other national, high-end retailers have committed to opening stores there, including Apple, Anthropologie, lululemon, Tiffany’s & Co. and Brooks Brothers, to name a few.

Sophie’s will compete with other national restaurant chains — Brio Tuscan Grille, Capital Grill, Seasons 52, Cheesecake Factory and Zinburger — as dining options at the new mall.

“There are so many great restaurants in Sarasota. We hope Sophie’s will fit right in,” Kaufman said.

The restaurant will not stay open later than the department store does. Each Sophie’s will have a menu unique to its market. For example, Sarasota’s menu will have more fresh seafood than others, Kaufman said.

While the Sarasota Sophie’s menu has yet to be created, and the Chicago restaurant is open only for breakfast and lunch, its menu gives a taste of what Sarasota can expect. It includes a $12 cocktail menu with a rhubarb basil gimlet of distillery gin, basil, bitters and lime juice. Entrees include a North Atlantic salmon for $25 and an “Amish chicken breast” for $21.

A RETAILING TREND

Saks Fifth Avenue is the latest upscale retailer to venture into the dining sector in recent years.

Nordstrom’s department stores, including the one in Tampa’s International Plaza, have their own line of in-store cafes, which serve lighter fare, coffee and cocktails.

The concept has helped make Nordstrom more of a destination for shoppers, said Darren Tristano, executive vice president with Chicago-based Technomic, a food consulting firm.

“Combining a high-end restaurant with the Saks or Nordstrom clientele is a service to the customer that goes beyond just the typical shopping experience,” he said. “The idea of restaurants in department stores is coming back, and we’re seeing a lot of it internationally. It has great strength and is moving forward.”

Macy’s, too, has dabbled with restaurant concepts in larger markets — such as its Stella 34 Trattoria, an Italian restaurant tucked onto the sixth floor of the Macy’s in New York.

Brooks Brothers announced that it plans to open its first restaurant, “Makers and Merchants,” a steakhouse, around the corner from its flagship store in New York this year. The restaurant is taking over vacant space once used for a Brooks Brothers women’s line.

“Price is not the issue here, considering the type of store shoppers are in,” said Green, the Phoenix-based consultant. “We really only see these kind of restaurants inside upscale department stores, even though they used to be in more traditional stores.

“Full-service restaurants won’t ever be in traditional stores anymore.”


Making Sense of Value and Pricing Expectations

March 25, 2014

The prevalence of value-based promotions spiked in recent years as U.S. restaurant operators aimed to drive incremental traffic and sales among consumers affected by the recession. The use of these deals is becoming ingrained in consumer behaviour, even as the economy slowly improves. During the economic recession, consumers were more likely to cut back spending altogether, deals or no deals. Now that the economy is on the mend, consumers are accustomed to these deals being available and likely expect that they will be in the future.

While price continues to be a major component of the value proposition, it is by no means the only factor. Value is multidimensional, including the quality of food and beverage, and the quality of service and convenience. These different facets of value allow flexibility in formulating value propositions and pricing strategies.

This article explores U.S. consumers’ value equation; the appeal of restaurant deals and promotions; consumer price thresholds and how low prices drive traffic. U.K. operators will find many of these themes suitable for their own customers, whether they are deal-seekers or not.

The Value Equation

The restaurant value equation is comprised of a host of factors. It’s not straightforward—and it’s evolving. Primary drivers of value are price, quality, service and atmosphere. Secondary drivers vary but may include the meal or occasion as well as the diner’s mood and needstates. Consumers asked to describe what constitutes good value in a restaurant mention food quality, appropriate portion sizes, fair prices, service and cleanliness.

Food and beverage trump price in creating good value. Highlighting specific qualities of food and beverages—such as quality, convenience or healthfulness—can help marketers create a message of good value. Even at limited-service restaurants, the quality and taste of the food are most important: 86% of consumers say food and beverage are key to the LSR value equation, vs. 74% who name price. At full-service restaurants, of course, service and ambiance are also central: 87% name food and beverage as a component of value, 60% mention price, 28% ambiance, and 24% the service and amenities.

Customisation can enhance the value proposition. Half of diners—and a larger proportion of those under 35—say customisation is important in creating a good value proposition. They want to know that the meal will match their personal preferences and that they will get (and pay for) only the ingredients they like. Restaurants can incorporate customisation by offering menu items in multiple portion sizes (thus making them appropriate for both meals and snacks); allowing ingredient substitutions; and varying the heat level of foods from mild to super-spicy. Even a simple bottle of hot sauce left on the table allows patrons to customize their dish to their liking.

Deal-seeking in restaurants has become ingrained behaviour for consumers. Dealing was essential during the recession, but since then operators have been hoping to scale back on deals as the economy improves. However, consumers expect to continue employing deals; more than half say they’re using more deals now than two years ago. Interestingly, deal-seeking is not tied to income constraints; eight out of 10 diners at almost all income levels say they order from dollar menus at fast-food restaurants at least once a month, and among those with annual incomes over $150,000, seven out of 10 do the same. In addition, four out of 10 consumers use “daily deal” websites, and two out of 10 use them more than once a month. (These sites encourage restaurant patronage, but not loyalty; 55% of subscribers to daily-deal sites say they turn to these deals so they can try new restaurants more often.)

Traditional buy-one-get-one and half-off specials resonate strongly with consumers. More restaurant traffic is being driven by specials rather than the quality of the food, atmosphere or experience, with consumers asking: “What can I get for the price?” Deals that provide immediate half-off savings represent the most attractive value: eight out of 10 consumers say buy-one-get-one deals and half-off promotions add strong value, compared to seven out of 10 who name set-price specials, coupons or value menus. Buy-one-get-one specials, coupons and half-off deals are effective in driving traffic, with almost two-thirds of consumers saying they’d be likely or extremely likely to visit restaurants that offered these.

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated Sum of percentages may not equal cumulative percentage due to rounding Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: Approximately 800 consumers aged 18+; base varies as promotions were randomly rotated
Sum of percentages may not equal cumulative percentage due to rounding
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Pricing Expectations

Consumer price thresholds increase as the day progresses.Operators should make sure that their price thresholds are in line with what consumers are willing to pay (keeping in mind that consumers may report lower thresholds than they would actually accept). Research for Technomic’s Value and Pricing Consumer Trend Report found a “sweet spot” between what consumers consider optimal and what they’ll pay without complaint for each meal in each restaurant segment.

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Base: 1,800 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Snacks provide a unique pricing opportunity because women are willing to pay more for snacks than men are. For example, while the average consumer would pay $5 for a snack, women aged 25‒34 would pay $6.50. A number of chains, from coffee-café Starbucks to quick-service burger chain SONIC, have experimented with “happy hours,” during which they sell snacks at a special price. And while some fast-casual bakery cafés are seen by consumers as offering only unhealthy pastries for snack time, Au Bon Pain has built afternoon traffic with female-pleasing small plates like hummus with cucumber and Thai peanut chicken with snow peas.

“Fresh” and “premium” descriptors can increase consumer price thresholds.Nearly half of consumers say they would be likely to purchase—and to pay more for—food or beverage that is fresh; 37% say the same about premium options. Operators may be able to justify higher price points on food and beverage billed as fresh, homemade, premium, authentic, local, natural, organic, seasonal or sustainable. They should carefully consider both what such terms could mean when applied to their offerings and how to adjust their price threshold.

Value and Low Prices Help Justify Restaurant Visits

The good news for restaurant operators is that good value makes consumers feel better about eating out: 57% say they can eat out more often if meals are low in cost, and 52% say low prices help them justify the money they spend eating out.

Base: 1,500 consumers aged 18+ Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Base: 1,500 consumers aged 18+
Source: The 2013 Value and Pricing Consumer Trend Report, Technomic

Key Takeaways

The value equation involves multiple inputs, but price and quality both play strong roles in all segments. Deal-seeking in restaurants has become ingrained behaviour, and consumers don’t expect to change. Operators must find ways to adjust prices, deals and portions so they can still make money. Price and value promotions can effectively drive traffic. But be careful what you’re driving traffic to; you probably don’t need more business on Friday night. Freshness, quality and customisation can help justify higher prices.

There is pent-up demand for restaurant meals. Consumers who are looking for low prices are doing so to eat out more often. Older consumers seek value and “worth,” while younger diners have a more straightforward desire for deals; operators should consider strategies that don’t alienate any part of their customer base.

Darren Tristano is Senior Managing Director of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.


New Pizza Hut Units Feature Pizza by the Slice

January 24, 2014

picChain aims to boost its lunch daypart and compete against fast-casual upstarts with the new prototype.

An updated dining room emphasizes a sit-down experience.

Pizza Hut opened two units this week built around a pizza-by-the-slice experience aimed at potentially evolving the brand to make inroads during the lunch daypart and to fend off competition from upstart fast-casual pizza brands.

A company-owned unit in Pawtucket, R.I., and a franchised restaurant in York, Neb., feature modern design elements that have spread from fast-casual restaurants into other industry segments, such as digital menu boards and open seating plans, as well as a pizza-by-the-slice “bar.”

The larger unit in York has 80 seats and will also emphasize the dine-in experience with sautéed pastas and a made-to-order salad bar. The Pawtucket location seats 30 people and will function more as a delivery-carryout restaurant with the additional by-the-slice feature.

Carrie Walsh, the new chief marketing officer for Pizza Hut’s U.S. system, said in a statement that the new restaurants would meet and exceed the needs of consumers, as well as “enter a competitive environment” like pizza by the slice in the Northeast “with a very competitive product.”

It also would give Plano, Texas-based Pizza Hut new footing in the lunch daypart, where several young fast-casual pizza brands are looking to build their market share. Much of the fast-casual sector’s activity revolved around pizza last year, with chains like Pie Five and Your Pie ramping up growth plans and other brands like Pizzeria Locale and PizzaRev attracting the investment of larger restaurant companies like Chipotle Mexican Grill and Buffalo Wild Wings, respectively.

However, Pizza Hut developed its new-concept stores to meet customer demand, not the challenge of the new fast-casual segment, spokesman Doug Terfehr said in an interview.

Pizza Hut says offering individual slices aims to satisfy customer demand.

“We pay attention to our consumer trends, one of which is them seeking a quick on-the-go option, and one of our solutions for that is pizza by the slice,” he said. “We’re not reacting or responding to what the others are doing with speed. It’s about understanding our broader pizza fan. They’re looking for a convenient option, and this is an inviting environment to bring that to them.”

Regardless, “fast-casual pizza competition is coming, and it’s coming hard,” said Darren Tristano, executive vice president of Chicago-based market research firm Technomic Inc.

Pizza Hut is acting prudently to recognize how that segment is changing pizza fans’ expectations, especially at lunch, which has always been a daypart in which the legacy chains like Pizza Hut and Domino’s Pizza could build sales, he said.

“The convenience of being able to get a single-serve, value-oriented item is the play Pizza Hut is looking to get into and what fast-casual chains will continue to dominate,” Tristano said. “It’s a way to build more traffic at lunch with something that’s price-appropriate. It’s a smart decision.”

Fellow industry expert Dennis Lombardi, executive vice president of Columbus, Ohio-based WD Partners, also praised Pizza Hut’s decision to experiment with pizza by the slice.

“It’s one of the major methods of delivering pizza that they haven’t done before,” Lombardi said. “This is absolutely appropriate and important. Couple that with walk-in traffic — think how well the Hot-N-Ready has performed for Little Caesars.”

Properly forecasting the production needs for pizza by the slice, so that the products look fresh and appealing but do not go to waste, would be a major challenge for adding that experience, he added.

Where Pizza Hut also needs to be cautious, Technomic’s Tristano said, is staying true to its positioning as a delivery and carryout leader.

“When you’re No. 1, you have more to lose than to gain,” he said, “so when trying to reinvent yourself to remain competitive and relevant to new customers, it’s important as long as you don’t turn off people who appreciate you for what you are.”

Pizza Hut spokesman Terfehr agreed, saying, “Delivery and carryout are still our core business, what we do well and what people come to us for.”

He added that delivery and carryout orders have followed typical patterns, with by-the-slice orders creating incremental traffic during lunch and somewhat in the evening, in the first few days of operation for the York and Pawtucket stores.

But don’t expect the by-the-slice format to appear in all new Pizza Hut units soon, Terfehr said. He conceded that a few more locations would open over the near term — and Pizza Hut’s chief development officer, Al Litchenburg, noted in a statement that the brand was “bullish on our plans to quickly expand them” — but most of the chain’s new domestic units would continue to carry the “Del-Co Light” design, which has helped Pizza Hut regain its momentum for net unit growth.

Pizza Hut opened 115 net locations in the United States in 2013 and has more than 7,750 domestic locations.

The brand is a subsidiary of Louisville, Ky.-based Yum! Brands Inc., which also operates or franchises KFC and Taco Bell in more than 130 countries.