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.


First Watch Evolves to Attract Younger Customers

June 9, 2015

By Justine Griffinbilde

http://www.heraldtribune.com/article/20150527/article/150529734?p=2&tc=pg

Like nearly all other industries, the restaurant business has metamorphosed through the years.

Some national and regional chains are feeling the push to compete with small businesses, as millennials and Generation X consumers flock to support hole-in-the-wall eateries within their communities that reach a younger customer through robust social media presence and online apps.

First Watch Restaurants, the Manatee County-based chain of breakfast, brunch and lunch cafes, also has evolved through the years to meet the demands of these new customers.

This year, First Watch introduced a new urban layout in restaurants across the country, including two sites in Florida: Largo and Estero.

The “urban farm” design is bright, colorful and modern. The build-out looks like something you’d see on a busy street in a bigger metro area than Sarasota.

“The new concept is more in line with the customer First Watch is targeting,” said Darren Tristano, executive vice president of Technomic, a food research firm based in Chicago. “It’s not fancier, but it plays on freshness and the importance of being local.”

First Watch has expanded into more urban areas in recent months — such as Denver and the Washington D.C. metropolitan area — where reaching a younger demographic is key.

Inside the new restaurant, the dining room has funky light fixtures and exposed brick walls. An array of blackboards make up the host and check-in counter, where messages can change daily.

One wall is devoted to old wooden crates that once would have shipped fresh eggs and other goods that the restaurant might use inside.

“Breakfast and the farm naturally go together,” said Richard Renninger, First Watch’s chief development officer, who helped come up with the new design. “But it has an urban look that makes customers feel like they’re still in the hustle bustle of their community.”

It took some time, and a lot of tweaking, to come up with a design that fit the needs of the aging baby boomer demographic and the millennial and Generation Xers, Renninger said.

“It was important for us to create a new space that is comfortable for all our customers, but still somewhere where millennials would want to hang out,” he said.

This is the third redesign of the restaurant that First Watch has implemented since the chain began in the 1980s.

The restaurants in Sarasota County showcase both older looks. The company plans to renovate some properties in Florida next year.

“First Watch is making all the right moves. They’re following millennial and Generation X dining habits — which tend to be more health conscious for themselves and their young families,” said Brian Connors, a consultant with Miami’s Davis Connors Hospitality.

To attract more younger customers, First Watch also debuted a new smartphone app service at its restaurants this year through “NoWait.”

NoWait is a free app that allows users to compare restaurant wait times within a 30-mile radius of wherever they are.

Users can then add their name and the size of their party to a wait list. The app notifies users when they are close to being seated.

“It’s sort of like they’ve found the Holy Grail,” Connors said. “It’s the perfect concept that doesn’t discriminate against the baby boomers either — it’s the type of restaurant my parents would go to and feel like they’re a part of their local community.”


Americans Turning to Restaurants, Not Grocery Stores, for Mealtime

April 30, 2015

by Mark Fisher

http://www.daytondailynews.com/news/news/americans-turning-to-restaurants-not-grocery-store/nkxP2/picture

Restaurants cater to younger diners who are leading the trend
The Census Bureau reports that in March, for the first time since such records have been kept, Americans spent more money in restaurants than in grocery stores. Millennials led the charge. Local restaurant owners, including Dan Young owner of Young’s Jersey Dairy, say they’re not surprised about shift occurring in the dining scene in this region and across the country.

For the first time since the government started keeping track in 1992, Americans—led by those in the millennial generation—spent more money last month in restaurants and bars than they did in grocery stores.

This region’s restaurant owners say they’re not surprised at the shift in spending patterns, and they’re taking steps to attract younger diners.

Dan Young, CEO of Young’s Jersey Dairy and the Golden Jersey Inn in Clark County north of Yellow Springs, said today’s families work long and sometimes unpredictable hours and have limited time to spend together.

“Yes, they can get a nice meal from the grocery store, but if your ‘together’ time is limited, who wants to spend that time preparing the meal?” Young said. “Why not meet your family or friends at a local restaurant and enjoy each other’s company while choosing from a much wider selection of food than you typically would at home?”

The U.S. Department of Commerce reported last week that Americans spent $52.3 billion at restaurants and bars in March, and $49.7 billion in grocery stores—the first time grocery spending lagged restaurant/bar expenditures.

The National Restaurant Association reported earlier this month that despite extreme weather in many parts of the country, its “Restaurant Performance Index” (RPI)—a monthly barometer of the the health of and outlook for the U.S. restaurant industry—held steady in February, which also marked the 24th consecutive month in which the RPI signified improvement in key industry indicators.

Hudson Riehle, senior vice president for the restaurant association, said restaurant operators are increasingly optimistic about business conditions and potential sales growth in the months ahead. About 59 percent of restaurant operators expect to have higher sales in six months, compared to the same period in the previous year, up from 57 percent the previous month. In contrast, only 4 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, restaurant association officials said.

The association offers advice to restaurant managers on its web site on how to cater to the twenty-somethings and early-thirty-somethings who are increasingly likely to let others prepare their meals.

“Millennials view dining out as a social event (i.e. a chance to connect),” the association says on its web site. “They prefer to eat at restaurants with a lot of choices and lower price points. They tend to favor fast food, deli food and pizza restaurants over coffee shops, high-end dining and casual dining.

“Equally important for restaurateurs to remember is that millennials can be moving targets. While they develop brand attractions and support reward and loyalty programs, their allegiances can be very flexible according to their circumstances.”

Young, whose restaurant and ice cream shop are geared toward families, said diners in the 25-to-34 age group are “eager to try new tastes, probably because they have been exposed to more variety growing up.”

“Plus, with today’s amazing technology, it just takes a few tweets or texts and you can be visiting a nice restaurant with family and friends in a few minutes,” Young said. “Spontaneous is so much easier than when most of the 25-to-34-year-olds were born —when the family had one, maybe two phones at home, and families had to plan out the day ahead of time.”

Shanon Morgan, president of the Miami Valley Restaurant Association, agreed that technology — and in particular, social media — are stimulating restaurant and bar business, especially among younger diners.

“It’s much cooler to check in at the local tap room than the local grocery store,” Morgan said.

Jay’s Restaurant in Dayton’s Oregon Historic District has begun advertising more heavily on social-media sites and has launched “happy hour” specials on Tuesday and Wednesday in part to attract more younger diners, according to Amy Haverstick, Jay’s Restaurant’s owner, who is herself the mother of a 2-year-old.

“People my age, the couples are working full time, and they’re finding the easy way out — it’s all about convenience,” Haverstick said. “Life just seems to be a lot more fast-paced for our generation.”

Darren Tristano—executive vice president of Technomic, a Chicago-based food service research and consulting firm—said his company’s research “continues to show that the millennial consumer has integrated dining away from home deeper into its identity compared to older generations. They appreciate the socialization and the lifestyle element that restaurant visits bring to their overall quality of life.”

Tristano said members of the millennial generation “continue to use restaurants with great frequency, and as their spending power builds, so will their dining (expenditures). Favorable employment and disposable income growth trends along with lower gas prices are fueling the return by many younger consumers to restaurants.”

Millennials, Tristano said, “are the future, and along with them, the key to many restaurants’ future.”
________________________________________
Americans’ shifting spending patterns
March 2015
Restaurants and bars: $50.4 billion
Grocery stores: $50.1 billion
February 2015
Restaurants and bars: $50.0 billion
Grocery stores: $50.4 billion
March 2014
Restaurants and bars: $46.8 billion
Grocery stores: $49.1 billion
Source: U.S. Department of Commerce


Brisket Channel proves to be ultimate reality TV

August 27, 2014

Article by: David Phelps, Star Tribune

© 2014 Star Tribune

Remember the Brisket Channel on Duluth TV?

It was on for 13 hours and five minutes over the Memorial Day weekend.

It turned out to be quite a hit, once reruns made it to YouTube. Nearly 400,000 viewers tuned into the Internet version of the smoked brisket marathon developed for Arby’s by the Minneapolis ad agency Fallon.

So popular was the website that each unique visitor spent an average of 38 minutes on the site, watching a brisket slow cook in the same manner that Arby’s prepares brisket for its customers. It also helped that visitors had a chance to win one of $20,000 in prizes that included a 10-gallon hat, lasso and beef-scented candles.

“We were blown away by that,” said Matt Heath, Fallon creative director, of the viewership.

And the client was pleased. “Thirty-eight minutes is longer than a lot of TV shows,” said Jeff Baker, Arby’s senior brand experience director. “It was a great idea based on simplicity.”

Besides setting a Guinness record for the longest TV commercial, the brisket show and limited brisket sandwich offer set the stage for Arby’s new “we have the meats” advertising campaign that Fallon launched earlier this month.

Results for the fledging ad campaign so far are inconclusive. But Rocky Novak, Fallon’s managing director, said: “We’re seeing a lot of social media love.” Arby’s said it does not release sales figures. But when it first made the brisket sandwich limited-time-offer available in October of 2013, “we declared it the most successful [limited-time offer] in the brand’s 50-year history,’’ said a spokesman Wednesday.

Gone as Arby’s pitchman is Bo Dietl, the former New York City police detective who was the face and voice of Arby’s for nearly two years. To quote Dietl from a commercial for Arby’s fish sandwich, “Really?” Yeah, really.

In fact, the new Arby’s commercials are faceless. The only human element seen by viewers is of a person from the shoulders down wearing a chef’s jacket. A roast beef or turkey or corned beef sandwich is the star of the commercial.

“The LSR [limited service restaurant or fast food] industry is not hyper-focused on food. There are a lot of entertainment factors,” said Heath. “We wanted to see how close we could get to the food. We didn’t want to put a face in there. It’s about the finished product.”

Among the tag lines used for the new set of Arby’s commercials are “this is meatcraft,” “fear not the meats,” “meats crafted with a heavy hand” and “it will change you.”

“We feel like we have an incredible heritage of meats and that presenting them in a simple way was the best way,” Baker said in an interview earlier this week.

Brand overhaul

Arby’s new advertising campaign will be accompanied by a new branding campaign that the Atlanta-based company announced in June. The branding effort includes remodeled exteriors, revitalized interiors and staff training.

Based on some consumer testing, Arby’s message and image could use a little retooling.

According to the food industry consulting firm Technomic, sales and market share at Arby’s have declined in each of the last two years, placing the roast beef king a distant second behind Subway in the non-hamburger sandwich sector and ahead of a hard-charging Jimmy John’s.

“Arby’s is considered to be unique because its about roast beef, not hamburgers, not chicken. We’re talking about an older, nostalgic brand,” said Darren Tristano, executive vice president for Chicago-based Technomic. “Clearly there are some advertising opportunities and some innovative opportunities.”

Novak said the new Arby’s advertising campaign is all about what goes between a bun or two pieces of bread in the Arby’s kitchen.

“The main takeaway first and foremost is that this is about the meat that is put in the sandwich,” Novak said.

Tristano said Arby’s scores well with consumers on a number of metrics, including service, decor and “craveability.” But it doesn’t score so well on prices, healthy options and “advertising that makes me hungry.”

“By focusing on what differentiates you, that creates memorable and creative advertising,” Tristano said. “Freshness gives you a stronger feel of healthiness.”

And credit for a new Arby’s feel may come down to a Texas-smoked brisket that took 13 hours to cook and five minutes to carve.


With a Mouthful, A&W Hopes to Draw Baby Boomers’ Offspring

May 5, 2014

pictureA&W plans to submit to Guinness a 304-character hashtag promoting its Hand-Breaded Chicken Tender Texas Toast Sandwich.

By ANDREW ADAM NEWMAN

THE popularity of the A&W Restaurants chain in the United States peaked in the 1960s and 1970s, when the number of locations — many with carhop service — swelled to 2,400, so it is no wonder that the brand stirs nostalgia in the baby boomer generation. But now A&W, which has about 700 restaurants, wants to make an impression on those boomers’ children, and the brand is increasingly turning to social media to do so.

To promote a new menu item with an unwieldy name, the Hand-Breaded Chicken Tender Texas Toast Sandwich, the brand is introducing a hashtag that is itself unwieldy: #supertastylargeandinchargetexastoasttwohandwichmadewithdeliciousonehundredpercentwhitemeathandbreadedchickentendersandyourchoiceofclassicorspicypapasauceeitherwayyoucan’tgowrongwowthatsoundsgoodyouneedtotryoneitsonlyavailableforalimitedtimeImgoingtohavetogogetonemyselfareyoustillreadingthisseeyouatAandW.

Along with deliberately defying the basic hashtag tenet of being simple to remember, at 304 characters it far exceeds the 140-character limit of Twitter, although other social media platforms like Facebook, Instagram and Pinterest allow longer hashtags.

A television commercial introduced on Monday opens with a voice-over asking: “How would you describe the Hand-Breaded Chicken Tender Texas Toast Sandwich?” To the sound of rapid clicking of keyboard keys, the speaker breathlessly rattles off about half of the hashtag, before slowing down and saying, “In other words, it’s a mouthful.” An end card directs viewers to the A&W website to see the full hashtag.

The brand is calling it the world’s longest hashtag, an assertion that may be difficult to prove, but it says it will seek recognition from Guinness World Records. (A search of the Guinness website yields five records related to Twitter and six related to Facebook, but none related to hashtags.)

The social media and advertising campaign is by Cornett Integrated Marketing Solutions, the agency of record for the chain. Both are based in Lexington, Ky. A&W, which declined to reveal expenditures for the campaign, spent only $876,000 on advertising in 2013, according to the Kantar Media unit of WPP. (Advertising expenditures for A&W root beer sold in stores, which is licensed in the United States by the Dr Pepper Snapple Group, is not reflected in the figure.)

A&W ranks 168th among all American restaurant chains, based on estimated yearly revenues of $184.4 million, according to Technomic, a restaurant consulting and market research firm.

“They’re a brand that’s trying to find their way,” said Darren Tristano, an executive vice president at Technomic. “It’s a nostalgia and legacy brand that is familiar to a number of Americans, but the problem with A&W is that it was a drive-in and it isn’t really a drive-in today.”

Among A&W’s 700 units in the United States, 50 are drive-ins, 200 are stand-alone dine-in restaurants, and the remainder are co-branded locations where it shares a roof with other fast-food establishments, primarily KFC and Long John Silver’s.

What A&W needs to do, Mr. Tristano said, is “rebuild their brand perception with millennials.”

Tim Jones, a creative director at Cornett, said that to reach younger consumers, the 95-year-old brand aims to strike a tone of “hip nostalgia” that characterizes older brands like Levi’s and Ray-Ban.

Rooty the Great Root Bear, an orange-sweater-wearing A&W mascot introduced in 1974, was returned to prominence in 2012 after having been, in the words of the brand, hibernating for about a decade. Today, A&W’s Twitter account, which has 7,200 followers, is written from the bear’s perspective.

“On Twitter, if you’re the voice of a seven-and-a-half-foot-tall bear with no pants, you can be a little bit more silly and more playful,” said Liz Bazner, associate manager of digital communications at A&W Restaurants. “The idea is also that Rooty doesn’t quite understand technology or Twitter, so he’d use a hashtag that would be too long for Twitter.”

In 2013, A&W created a profile for the mascot on LinkedIn, and when other users would add Rooty to their professional network, the bear would write far-fetched recommendations on their behalf.

“Using only a large-ish glass of water, he once single-handedly defended a small village in the Amazon Basin from a horde of ferocious army ants,” Rooty wrote on behalf of one LinkedIn user. About another, he offered, “He can hurl tennis rackets at small moving objects with almost zero accuracy.”

LinkedIn removed Rooty’s profile a couple of weeks after it went up, citing a policy of permitting only actual people on the site. In response, the brand posted a video in mock indignation to YouTube.

An A&W smartphone app encourages users to draw a mug of root beer for the bear, who, when tapped on his stomach, emits a hearty belch. The app, Burping Rooty, also allows users to direct the bear to recite the alphabet in belch form.

“If you’d like to grab some attention for your business on social media,” Forbes.com reported in 2013, “A&W Restaurants is currently providing a training manual on a fun-filled way to do it.”


Taco Bell Runs Naughty TV Ad For ‘Happier Hour’

March 27, 2014

taco-bell-campaign-188_2To drive awareness of its “Happier Hour,” which runs from 2 to 5 pm each day, Taco Bell is running new TV creative that’s slightly naughty, in a playful way.

The spot (in 30- and 15-second versions), from Deutsch LA, shows three different scenarios in which male/female pairs — office colleagues, college students and seniors — exchange suggestive looks and then appear to be heading out together for a tryst, as the song “Afternoon Delight” plays in the background.

But it turns out that they’re all actually headed to a Taco Bell, where they can get any “Loaded Griller” for $1, and any medium beverage for the same price, during those three afternoon hours.

The “Afternoon Delight” version is a Little Hurricane cover of the 1976 Starland Vocal Band song.

The keen-eyed viewer may notice a cameo by “America’s Next Top Model” winner Laura Ellen James, playing a college student who clearly makes the day of her much-shorter classmate when she lures him out of an in-progress lecture.

The spot started airing this week on networks and cable, and will continue running through the end of June, with additional media support through the end of August. Happier Hour is being promoted on Taco Bell’s social assets, including Facebook (10 million “likes”) and Twitter (1.1 million followers), as well as featured on YouTube.

Happier Hour is described in consumer promotions as a “limited time offer,” but it’s been running at participating locations since last year (an “always on” promotion), according to Deutsch. The current marketing push is the second campaign for Happier Hour; Taco Bell also ran a campaign last year.

The reasons behind a special afternoon event/offer aren’t hard to grasp. QSRs obviously benefit from driving more traffic during the quieter hours between and following regular meals. And offering snackable items at attractive prices has become a key strategy for driving such business.

According to a new “Snacking Occasion Consumer Trend Report” from foodservice research firm Technomic, 51% of Americans now report that they eat snacks at least twice a day — up from 48% two years ago. Nearly half (49%) report that they eat snacks between meals, and 45% replace one meal a day with a snack.

Among those who buy snacks at restaurants, 45% order from the value or dollar menu.

“There’s plenty of room for restaurants to expand their snack programs and grab share,” even as packaged food makers and retailers also push harder to grab those snacking dollars, noted Technomic EVP Darren Tristano.

And while candy is still the dominant snack (purchased at least occasionally by 71% of surveyed consumers), half of consumers say that “healthfulness” is very important to them when choosing a snack. As a result, many restaurants, like their CPG counterparts, are including healthier options within their snack offerings.


On the Horizon: Five Trends for U.K. Restaurants

January 24, 2014

The trends driving restaurant growth and innovation are driven by consumer demands for transparency, quality, flavour, and flexibility.

The U.K. foodservice scene continues evolving in unique and interesting ways. Looking forward to next year, Technomic’s analysts and consultants have identified five key trends that expected to play major roles at British restaurants.

Catering to the Millennial customer

As the influence and collective spending power of the U.K.’s Millennial generation grows, expect to see restaurant operators amplify efforts to target these consumers via foods and brands that appeal more directly to a Millennial demographic.

For instance, consumers aged 18–34 display the strongest interest in ethnic flavours. And a greater proportion of younger than older consumers indicate that it is important to them that cafés offer a variety of side options and seasonal menu items, according to Technomic’s U.K. Café Consumer Trend Report. Further, 31% of consumers aged 18–34 strongly agree that they would order limited-time offerings (LTOs) at cafés, compared to just 22% of all consumers polled.

Also watch for new mobile apps and digital tools that integrate seamlessly into Millennials’ lifestyle. Offering free WiFi in-store and letting customers place orders online are great starting points for connecting with these on-the-go, always-connected guests. Leading operators are also going beyond these steps.

Last spring, Wagamama partnered with Blippar, an image-recognition mobile application, to introduce augmented-reality place mats. Guests who downloaded the free Blippar app could hold their mobile device over (aka “blip”) the special place mats to access promotional information about the Wagamama Lounge, a pop-up concept featured at London-area summer music festivals.

Domino’s last September rolled out the free Pizza Hero app in the U.K., giving customers the chance to play professional pizza maker, rolling out pizza dough virtually, adding tomato sauce and then sprinkling on cheese and assorted toppings. A direct link takes users to the ordering page on Domino’s website.

And Apple’s Passbook lets iPhone users group their coupons, loyalty/rewards cards and more in one quasi mobile wallet—giving them quick access to their most-used or most-important passes. Last fall, casual-dining chain Harvester Salad & Grill became one of the first U.K. restaurant concepts to offer Passbook integration, and gave diners who used the app at Harvester £5 off when they spent £30.

The evolution of pubs

Classic British pubs will push even harder in 2014 to transform and grab market share from conventional restaurants by focusing more attention on creating upscale, premium food and drink (particularly speciality coffee and American craft beer); launching repositioned outlets in nontraditional sites; introducing web-enabled ordering systems that emphasise convenience and speed of service for guests; and promoting low-price-oriented menus and new loyalty programmes designed to spur customer traffic and strengthen the value perception.

Die-hard traditionalists might scoff at the idea of having a coffee and working on a mobile device at the pub, but a customer-centric evolution can help pubs maintain their relevance with a new generation of consumers.

Throughout 2013, we’ve seen examples of how pubs and pubcos are tackling the task of serving consumers who have higher expectations for food/drink, amenities and service at pubs. We expect the focus on this imperative to be that much keener in the year ahead.

For example, Orchid Group—whose approximately 250 pubs are now up for sale—realised that those establishments best positioned for success in Ireland and some U.S. cities after smoking bans took effect there were those that emphasised attractive food offerings. Orchid re-evaluated its menus and added pizza and Thai food, among other items, driving increases in food’s share of the sales mix. The company also took efforts to appeal to women.

Similarly, Marston’s PLC announced at the beginning of the year that it would install free Wi-Fi at about 550 pubs under its managed pub estate, Marston’s Inns & Taverns. The Prince George pub in Brighton, East Sussex, offers an all-vegetarian menu and a vegetarian-friendly wine list. And in August, Wetherspoon announced a new initiative pairing craft brewers from the U.S. with U.K. brewers, as part of an effort to seize upon U.K. consumers’ heightened interest in craft beer. The U.S. brewers produce their beers in the U.K. for sale at Wetherspoon pubs.

Honest chicken

Thanks in part to the recent crop of “better chicken” concepts opening in London, emerging chicken-focused concepts will flourish in 2014, a trend closely tied to growing consumer interest in sourcing, preparation and menu transparency. Pret a Manger, for instance, touts that its chicken is starch-free, phosphate-free and sourced from a higher-welfare supplier in Suffolk. Expect to see chicken increasingly described as “free-range,” “locally sourced” and “hand-battered.” We’ll also see more American influences in the form of barbecue chicken and buttermilk fried chicken, as well as simpler cooking techniques that let the quality of the chicken speak for itself.

KFC in the U.K. touts that its chicken on the bone comes from only British and Irish chickens, and that chicken goes from the refrigerator to a breading of flour and the chain’s 11 signature herbs and spices and then to the fryer within two minutes. Little Chef touts that its Crispy Chicken Platter features 100% chicken breast fillet.

Other takes on fried chicken include Scream’s Southern-Fried-Style Chicken fillets served with barbecue seasoned chips, Jubo’s Chicken Roll with Korean fried chicken fillet, kimchi slaw and gojuchang mayo, and Clutch’s Love Me Tenders, fried chicken tenders in a peanut and chilli crust.

These dishes also illustrate U.K. consumers’ growing appetite for spicy heat, also evidenced incurries that pack a little more punch than chicken tikka masala; the rising popularity of Mexican cuisine; and the cult-like following of London-based Nando’s, the fast-casual concept specialising in flame-grilled piri-piri chicken. Neutral-flavoured, food-cost-friendly chicken offers an ideal protein platform for showcasing the vibrant flavours and colours of chillis from around the globe.

Migration of street food

Fueled by younger consumers’ demand for authentic and unique offerings, chefs are looking to global street foods for menu inspiration for their brick-and-mortar restaurants. Trendy street-inspired dishes starring on menus include Venezuelan arepas, Chinese jian bing and bao, Taiwanese hirata buns and Italian arancini.

KFC U.K. got in the game last year, introducing a limited-time Streetwise Sweet Chili Wrap featuring a chicken mini-fillet, sweet chili sauce, lettuce and cheese wrapped in a tortilla. And London-based fast-casual chain Leon introduced a Thai Green Chicken Curry box, featuring slow-cooked shredded chicken thigh, roasted aubergine and bamboo shoots served on brown rice.

Looking ahead, ethnic beverages like Mexican aguas frescas and horchata will carve out a wider niche on the menu. Also watch for dynamic flavour mashups from different cuisines and the continued growth of food trucks serving ethnic and fusion street foods.

Telling the sourcing story

Transparency is now top-of-mind for operators who want to keep customers confident in their brand. Use of eco-friendly food packaging, such as recycled or reusable cups or stemware, is increasing along with a growing commitment to ethical food sourcing. Next year will bring a surge in brand campaigns communicating quality and traceability. Watch for package logos denoting animal welfare standards, in-restaurant signs documenting supplier sourcing, and marketing initiatives focusing on the use of British and Irish products.

A good example is the Olive Branch Pub in Clipsham. Its website highlights a story about head chef Sean Hope’s recent lobster fishing trip, to source the freshest lobster for dishes such as grilled lobster Thermidor and a fresh lobster claw and tail meat with lobster tortellini. The site also provides a list of the pub’s suppliers and producers—not just the names of the farms but also the actual farmers with whom the Olive Branch works.

For its part, McDonald’s U.K. invited three young British farmers to get a behind-the-scenes look at operations inside McDonald’s stores as the part of its Progressive Young Farmer Training Programme. The mentoring-focused programme, according to McDonald’s, “aims to help young people looking to work within agriculture kick-start careers in the industry by providing them with the blend of farming and business acumen needed to succeed in today’s modern farming sector.”

The programme has the added benefit of providing a fresh, interesting supply-chain story that McDonald’s—which also announced in April that it was switching to serving 100% Freedom Food pork raised on farms that meet strict animal-welfare standards—can share with consumers.

Similarly, fast-casual burrito specialist Chipotle, whose Food With Integrity philosophy/sourcing model has won acclaim in the U.S., notes on its U.K. website that it uses Freedom Food chicken, Farm Assured beef and free-range pork.

Key Takeaway

The trends driving restaurant growth and innovation are all driven by consumer demands for transparency, high-quality and -flavour, and flexibility. Restaurant operators should examine and pay attention to these trends but follow the lead of their own customers and those they are trying to attract.


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