‘Better Burger’ Segment Trending in Baton Rouge

May 22, 2015

Timothy Boone  picture

Copyright 2015, Capital City Press, All Rights Reserved. Distributed by NewsBank Inc.

http://theadvocate.com/news/business/12363703-123/better-burger-segment-trending-in

Smashburger, which was named as the top fast-casual restaurant chain in the country, opened its first Baton Rouge location Wednesday, the latest so-called “better burger” eatery to enter the market.

Better burger restaurants offer a premium product, with patties made from fresh, never-frozen beef and a wide range of toppings. Generally, the burgers sell for a few dollars more than the offerings at McDonald’s, Burger King or Wendy’s.

“The better burger market has grown up in the past five or six years,” said John A. Gordon, principal of Pacific Management Consulting Group, a San Diego-based group that works with restaurants. “Honestly, some of the traditional quick-service burger players got really bad.”

In recent months, Baton Rouge has seen growth in the better burger segment. There’s the Smashburger on Corporate Boulevard. Red Robin, one of the originators of the trend, re-entered the market after a decadelong absence with a restaurant that opened at the Mall of Louisiana just before Christmas. Lafayette-based Burgersmith will open its second local restaurant on Siegen Lane in early summer and a Juban Crossing location will be open by the end of the year.

Chuck Kerr, who has the local franchise rights for Mooyah Burgers Fries & Shakes with his wife, Denise, said he’s looking at opening a second Baton Rouge-area restaurant and is eyeing a Millerville Road location. Officials with Dallas-based Mooyah said the Kerr’s Siegen Lane location has been one of the chain’s top-performing restaurants in terms of sales.

Kerr credits his restaurant’s success to offering a high-quality product and consistently good customer service. “We have a simple menu, yet it’s complex,” he said. While he just sells beef, turkey or veggie patties, there are a wide range of toppings and sauces — so many that the chain boasts there are 1.2 million different ways to make a Mooyah burger.

“The neatest part about the whole thing is that the customer is benefiting from capitalism,” he said. “They’re getting more choices and better choices.” Kerr said he expects the major fast-food chains, such as McDonald’s, will take their resources and revamp their menus so they can compete with the better burger restaurants.

The better burger segment accounted for $3.5 billion in sales in 2014, said Darren Tristano, executive vice president of Technomic, a food industry research and consulting firm based in Chicago.

Tristano said he’s forecasting about 10 percent growth for the better burger chains over the next five years, thanks to the performance of such popular chains as Five Guys Burgers and Fries and Smashburger.

Robert Barbour, part of the franchise group that owns the Baton Rouge Smashburger, said customers are willing to pay an extra dollar or two for a quality hamburger. “People are demanding a better burger and better choices in their fast-casual dining,” Barbour said.

Smashburger was named the top chain by Fast Casual magazine in 2014. In seven years, the Denver-based company has grown to 325 locations. Smashburger gets its name from the preparation technique, which uses a custom-made, five-sided tool to smash balls of raw meat into the grill. This sears the bottom of the patty and allows the burgers to cook in their own juices.

Barbour said his franchise group plans to open 10 to 15 restaurants in their territory, which stretches from Lafayette through Mississippi to Memphis, Tennessee.

“Hamburgers are incredibly popular and a canvas for innovation and creativity,” Tristano said. “They’re a great familiar product that’s affordable and consumers continue to eat them.”


What McDonald’s Learned From Burger King’s Turnaround

May 13, 2015

Devin Leonard
http://www.bloomberg.com/news/articles/2015-05-06/what-mcdonald-s-learned-from-burger-king-s-turnaround picture

McDonald’s chief executive officer, Steve Easterbrook, unveiled his turnaround plan for America’s biggest burger chain, making a big deal out of an initiative to carve up his company into four geographic segments and put them under new management. “It will spread insight faster, it will enable quicker decision making, it will eliminate mistakes, reduce costs, and unlock growth,” he said in a videotaped presentation this week. He also touted the promise of McDonald’s sleeker operations in Australia.

What Easterbrook neglected to mention was even more intriguing: McDonald is following the lead of Burger King, its second-largest competitor. Burger King seemed to have lost its way until 3G, the Brazilian private equity group, took it private in 2010 as part of a $4 billion billion leverage buyout. The new owner rejuvenated the troubled chain with young leadership and a restructuring plan that was highly controversial at the time.

Some in the fast-food business believe that burger chains need to own a significant number of their stores to truly understand the market. That has been McDonald’s philosophy. The Brazilian private equity crew had different ideas. Arguing that franchisees would run them better, 3G sold off all but 52 of the 12,174 restaurants owned by Burger King around the world. Instead of falling on its face, Burger King’s overall sales in the U.S. rose 1.6 percent last year, outstripping both McDonald’s (-1.1 percent) and Wendy’s (-0.4 percent), according to Technomic, a Chicago-based restaurant consultancy.

Not surprisingly, Easterbrook’s turnaround blueprint for McDonald’s includes a plan to sell 3,500 of his company’s stores to franchisees. When the disposal process is over in 2018, McDonald’s will own only 10 percent of its stores, compared with 19 percent today. No, Easterbrook’s plan isn’t as radical as the one 3G put into place at Burger King, but it’s a validation of the private equity firm’s strategy.

Dave Henkes, a Technomic vice president, believes McDonald’s proposed selloff makes sense. “Franchisees tend to perform better,” he says. “They are driven, motivated owners who are more innovative and think outside of the box.” McDonald’s specific numbers in the U.S. last year bear this out. Henkes says sales at McDonald’s company-owned stores in the U.S. fell 3.6 percent last year. By contrast, its franchisee-owned ones suffered a decline of only 0.8 percent.

Even so, McDonald’s shares fell after Easterbrook made his announcement. Perhaps he hasn’t been bold enough. When 3G bought Burger King in 2010, the chain still owned 11 percent of its stores worldwide. The new owner got rid of nearly all of them as fast as it could. Based on McDonald’s recent numbers, Easterbrook needs to do the same. Why wait until after 2018?


McDonald’s Putting Itself on a Diet

May 11, 2015

http://business.inquirer.net/191312/mcdonalds-putting-itself-on-a-diet 

McDonald’s putting itself on a diet. It’s out with a desperately needed new strategy that includes cutting $300 million in costs.

Says McDonald’s CEO Steve Easterbrook: “The message is clear. We are not on our game.”

McDonald’s will sell 3,500 restaurants to franchisees by 2018, boosting global franchisee ownership from 81 percent to 90 percent.

The company will also re-organize into 4 units. The U.S., its largest segment with 40 percent of the company’s operating income.

International Lead Markets – established markets like Australia, Canada, and parts of Europe. High Growth Markets – ones with more room to grow, like China and Russia. and Foundational Markets, which will cover the remaining markets along with corporate activities.

McDonald’s also plans to return between $8 and $9 billion to shareholders this year. But investors didn’t like the taste of it all, the stock falling on Monday.

The strategy was criticized for its lack of details.

Dave Henkes of restaurant consulting firm Technomic says: “There wasn’t any talk about, you know, these announcements about breakfast, for example, or about, you know, menu innovation. There is a lot of franchisee disgruntlement, I think is a good word for it, about what they are going through. And I didn’t really hear about how they are going to reach out, and sort of fix those relationships.”

Separately, McDonald’s also announced the launch of a delivery service in New York City, a move, Henkes says, is one in the right direction.


Shake Shack, Born in a Park, Goes Public With Big Dreams

February 6, 2015

SHAKE-tmagArticleBy Michael J. de la Merced and Kim Severson

The New York Times

Copyright 2015 The New York Times Company. All Rights Reserved.

http://dealbook.nytimes.com/2015/01/29/shake-shack-born-in-a-park-goes-public-with-big-dreams/?_r=0

Nearly 14 years ago, on something of a lark, the restaurateur Danny Meyer opened a Chicago-style hot dog cart in Manhattan’s Madison Square Park, hoping to draw crowds to the park and give summer jobs to the staff at one of his nearby high-end restaurants.

That stand has morphed into Shake Shack, a burger-and-crinkle-fries empire with outposts in London, Dubai, Istanbul and Las Vegas. On Friday, it will begin trading on the New York Stock Exchange with a valuation of about $745 million, and will increase Mr. Meyer’s net worth by about $155 million.

Conceived as a homage to the friendly Midwestern fast-food joints of Mr. Meyer’s childhood, Shake Shack has become one of the most prominent purveyors of fast-casual food. That sector, dominated by the likes of Chipotle, has fundamentally reshaped the fast-food industry with its emphasis on using fresh ingredients. In short, Americans seem willing to pay more for fast food made better, so long as they are still served quickly.

The success of Mr. Meyer’s chain stands in stark contrast to McDonald’s, the global behemoth suffering from its worst slump in more than a decade. The golden-arched restaurant chain announced a change in leadership this week facing sagging sales and a flat stock price, as it struggles to adjust its well-worn menu for modern tastes.

Mr. Meyer, 56, and his team have had no such trouble. Shake Shack has resonated with consumers who grew up on fast food but are both wary and weary of it. Burgers have been enjoying a makeover that began in the late 1990s, as younger eaters have flocked to a new generation of burger chains like Shake Shack, Five Guys and Smashburger.

Mr. Meyer’s chain is part of a new crop of fast-casual restaurants that promote the authenticity of ingredients. Many have since gone public, stirring up investors’ appetites: Shares in Zoës Kitchen have doubled from the chain’s public debut, while those in El Pollo Loco are up 76 percent. The shares of another chain, Habit Restaurants, have risen more than 80 percent since their November debut.

Yet the fast-casual dining sector has become crowded, with a host of new entrants in an already competitive restaurant business. Shake Shack has tripled its store count in just two years, with 63 branches, and now Mr. Meyer and his team must prove they can manage their chain’s explosive growth and weather the public’s fickle tastes.

Shake Shack is rooted in Mr. Meyer’s own culinary experiences. Its origins lie in St. Louis, where he grew up on straightforward food served with Midwestern friendliness at restaurants like the German restaurant Schneithorst’s and Steak ‘n Shake, itself now a 500-restaurant chain.

He also came to love the frozen custard at Ted Drewes, which began selling Christmas trees and frozen custard in the 1930s. That restaurant introduced the concrete, a shake as thick as ice cream with a raft of mix-ins, in 1959; it is now a signature item at Shake Shack.

So integral is the frozen treat to the company’s identity that Mr. Meyer nearly named the hot dog cart ”Custard’s First Stand.” He acknowledges in the stock sale’s prospectus that the name was ”pretty bad.”

But Shake Shack also draws on the lessons Mr. Meyer has learned in his three decades as one of New York’s most successful restaurateurs. His career began in 1985 when, at age 27, he opened the Union Square Cafe as a kind of antithesis to New York restaurants of the time that cultivated exclusivity and excess. The restaurant’s mix of warm service, dishes made with produce bought at the nearby Greenmarket and top-notch food served more casually was groundbreaking.

Since then, hospitality has been the calling card for his empire, which has expanded to what are now fixtures of the New York dining scene: Gramercy Tavern, Blue Smoke and Maialino among them. (Those restaurants are part of a separate company, the Union Square Hospitality Group, that will remain privately held.) The restaurateur has even written a best-selling book, ”Setting the Table,” a primer on customer service.

Even in its prospectus, Shake Shack refers to its customers as ”guests.”

”The thing I learned growing up in St. Louis,” he told St. Louis magazine in 2007, ”was the power of hospitality. The enormously warm feelings of loyalty that come from feeling welcome and being recognized and having the sense that the restaurant is happy to see you.”

That combination of quality ingredients and warm service has proved profitable, though the company is still a relative minnow. Shake Shack reported $5.4 million in net income in 2013 on $82.5 million in sales. Chipotle, by contrast, reported about $327 million in net income on $3.2 billion in sales in the same year.

Still, its success has helped bolster the fortunes of Shake Shack’s owners and close partners. Beyond Mr. Meyer, the top shareholder is Leonard Green & Partners, a Los Angeles private equity firm that invested in the company in 2012. The firm’s partner now on Shake Shack’s board, Jonathan D. Sokoloff, was introduced to Mr. Meyer through top executives at Whole Foods, in which Leonard Green once held a stake. They initially met over dinner at Gramercy Tavern.

Responsible for helping propel the growth of Shake Shack, Leonard Green’s holding in the company is now valued at roughly $193 million.

Shake Shack has even helped transform Pat LaFrieda, which manufactures the company’s secret burger blend, from a local artisanal butcher into a nationally lauded purveyor of quality beef.

But Shake Shack’s ambitious expansion plans — the chain plans to open at least 10 company-owned restaurants in the United States each fiscal year — may threaten the high level of hospitality the company is known for.

Mr. Meyer’s original network of restaurants was opened within a tight radius within New York City, so that the restaurateur could walk between them and ensure that each was up to par. That hasn’t been possible with Shake Shack for some time, and its increasingly far-flung locations risk eroding that quality of service.

Already, its Manhattan-based locations are more profitable than its other branches, reporting 31 percent operating profit margins compared with 21 percent for non-Manhattan restaurants.

Another potential problem is that the so-called ”better burger” slice of the fast-casual market is getting crowded, according to Darren Tristano, an analyst at the research firm Technomic. While the market may grow from $3 billion to $5 billion, he argued, it won’t grow much more — and consumers may slowly lose their hunger for burgers.

”I wouldn’t necessarily call them unique or the best, but they are a very well-positioned burger concept with good service,” Mr. Tristano said. ”They’re not that much different from regional players.”

But Shake Shack is wagering that hungry customers will beg to differ.

”When Shake Shack opened up a block from my house,” the chef Anthony Bourdain said in 2011, ”I dropped to my knees and wept with gratitude.”

This is a more complete version of the story than the one that appeared in print.


Shake Shack IPO Filing Comes Amid a Hunger for Premium Burgers

January 14, 2015

Passersby walk in front of the Shake Shack restaurant in the Manhattan borough of New YorkCopyright 2015 Thomson Reuters. All Rights Reserved.
By Anjali Athavaley

NEW YORK, Jan 2 (Reuters) – Shake Shack Inc’s filing this week for an initial public offering underscores a question for investors and foodies alike: How hungry are U.S. consumers for another burger chain?

A key part of Shake Shack’s growth strategy involves expanding its locations beyond its New York base, and investors and analysts are bullish on its prospects.

They say there is room for more “fast casual” restaurants that offer higher quality burgers, a variety of toppings and in some cases, beer and wine. Shake Shack’s burgers are described in its preliminary prospectus as all-natural and hormone- and antibiotic-free.

To be sure, there are skeptics who say the excitement over Shake Shack is overblown.

“Consumers love it and it will be well greeted in the market – and then probably fizzle out,” said Doug Kass, president of Seabreeze Partners Management in Palm Beach, Florida, and a noted short-seller.

“That a company of such a small size can get a valuation is symptomatic of the silliness … that develops in a period of zero interest rates,” he said.

A Shake Shack spokeswoman declined to comment.

Still, several factors appear to be working in Shake Shack’s favor. First, 2014 was a solid year for restaurant IPOs, particularly of the fast casual variety.

Burger chain Habit Restaurants Inc’s shares have risen 3 percent since its $30 Nasdaq debut on Nov. 20, based on Friday’s prices, and Zoe’s Kitchen was up 12 percent from its April market debut at $28.72 on Friday. Shares of El Pollo Loco, another fast casual company, were up 5.5 percent Friday from their $19 market debut in July.

Second, premium burger chains are outperforming the burger category as a whole, thanks to demand from younger, more affluent consumers. Sales at such chains including Five Guys and Smashburger rose 9 percent in 2013, according to restaurant consultancy Technomic Inc, while overall sales at all burger chains including fast food restaurants such as McDonald’s Corp were down 1 percent.

“The better burger space has been a pretty disruptive force for McDonald’s and other players,” said Darren Tristano, executive vice president at Technomic.

NEW YORK AND BEYOND

Shake Shack has developed a fervent following since it was founded by restaurateur Danny Meyer in 2001, but the challenge will be to replicate the success it has found in New York in the rest of the United States and overseas. The company has 31 company-operated and five licensed locations in 10 states and Washington, D.C., and 27 locations abroad.

The chain believes it has the potential to increase the number of domestic company-operated Shacks to at least 450 and analysts say that finding new locations with affluent consumers is critical.

Consumers such as Leticia Garza, 33, a middle school teacher in Austin, Texas, help illustrate the brand’s potential in other parts of the country, but also the challenges. Garza says she is excited to hear that Shake Shack planned to expand to Austin.

Still, she notes that she has many similar options. “There’s definitely going to be some competition because we have recently gotten an In-N-Out, and a couple of local versions that are similar to In-N-Out: P. Terry’s and Mighty Fine.” She adds: “We have Smashburger, too.”

Indeed, the market may be just a few years away from being saturated with too many fancy burger places, some analysts say. Furthermore, premium burger chains are not the only ones offering more personalized options: McDonald’s is rolling out a new “Create Your Taste” program this year that will give customers a choice of sandwich toppings.

In December, the world’s biggest fast food chain, which has not had a monthly gain in sales at its established U.S. restaurants since October 2013, said it also planned to cut the number of items on its U.S. menus. It also plans to use fewer ingredients in food, in an effort to reach consumers who want simpler, more natural choices.

McDonald’s is cheaper than Shack Shack and competes for a less affluent consumer. Still, industry watchers say such efforts could put pressure on premium burgers.

“We’re always looking for the latest version,” said Harry Balzer, an analyst at NPD Group, a market research company. But, he said, “there’s a limit to the burgers we’re going to eat.” (Additional reporting by Sinead Carew; Editing by Eric Effron and Tomasz Janowski)


Carl’s Jr. Revolutionizes Fast Food with New All-Natural Burger

December 15, 2014

(c) 2014 Business Wire. All Rights Reserved.temp_image_445085_3

New All-Natural Burger features the first all-natural, no added hormones, no antibiotics, no steroids, grass-fed, free-range beef patty from a major fast food company

Today, Carl’s Jr.(R) announced the All-Natural Burger, featuring an all-natural, grass-fed, free-range beef patty that has no added hormones, antibiotics or steroids. With the introduction of the All-Natural Burger, Carl’s Jr. is the first major fast-food chain to offer an all-natural beef patty on the menu. The All-Natural Burger will be available in participating Carl’s Jr. locations beginning Wednesday, Dec. 17 and features the charbroiled, all-natural beef patty topped with a slice of natural cheddar cheese, vine-ripened tomatoes, red onion, lettuce, bread-and-butter pickles, ketchup, mustard and mayonnaise, all served on the brand’s signature Fresh Baked Buns.

The Carl’s Jr. All-Natural Burger features an all-natural, grass-fed, free-range beef patty that has no added hormones, antibiotics or steroids. With the introduction of the All-Natural Burger, Carl’s Jr. is the first major fast-food chain to offer an all-natural beef patty on the menu.

“We’ve seen a growing demand for ‘cleaner,’ more natural food, particularly among Millennials, and we’re proud to be the first major fast food chain to offer an all-natural beef patty burger on our menu,” said Brad Haley, chief marketing officer of Carl’s Jr. “Millennials include our target of ‘Young Hungry Guys’ and they are much more concerned about what goes into their bodies than previous generations. The new All-Natural Burger was developed specifically with them in mind. It features grass-fed, free-range beef that’s raised with no antibiotics, no steroids and no added hormones. The charbroiled All-Natural Burger also has a slice of natural cheddar cheese, vine-ripened tomatoes, lettuce, red onion, bread-and-butter pickles, the classic trio of condiments – ketchup, mustard and mayo – and it’s all served on one of our Fresh Baked Buns that we bake fresh inside our restaurants every day. Whether you’re into more natural foods or not, it’s simply a damn good burger.”

“Greater awareness for health and wellness is driving the growth in healthful menu items, yet our research indicates that the majority of consumers still opt for more indulgent food,” said Darren Tristano, EVP of Technomic Inc. “The push and pull between healthfulness and indulgence makes an All-Natural Burger on-trend. All-natural products also have a ‘health halo’ impact and often help consumers feel confident that they are getting a product better for them and from a source they can feel good about.”

The new All-Natural Burger is available as a single all-natural beef burger for $4.69, as a double burger for $6.99, and may be ordered in a combo meal with fries and a drink. Guests may also substitute the all-natural patty on any burger on the menu for an additional charge. Prices may vary by location. For a limited time, visit carlsjr.com/coupons to download a coupon for $1 off any All-Natural Burger combo meal, valid at participating locations.

The new burger will be supported by an advertising campaign created by Los Angeles- and Amsterdam-based creative agency, 72andSunny. The first of two TV spots will begin airing on Dec. 29 with an additional commercial to debut Feb. 2015 during the super big football game many will be watching.


Habit Looks to Trade on ‘Better-Burger’ Standing in IPO

December 11, 2014

© 2014 Orange County Business Journal. Provided by ProQuest Information and Learning. All Rights Reserved.

RESTAURANTS: Recent growth, timing of offering look favorable

The Habit Restaurants Inc. in Irvine appears to have a number of factors working in its favor for an initial public offering that’s expected sometime this week, including some that reflect its strong run of recent years and others that indicate the chain is well-positioned for the future.

Among them:

* Habit has staked out a spot in the meaty middle of the “better burger” category with an effective mix of competitive standing on price and quality.

* The burger chain has quadrupled in size in seven years and now has 99 locations in four states.

* Habit plans more growth in 2015, notably on the East Coast and other new regional markets.

* It’s the first better-burger chain to go to market, and the move comes just a few months after the IPO by Costa Mesa-based fast-food chicken chain El Polio Loco Holdings Inc., whose shares have more than doubled since their July debut.

Habit’s offering of 5 million shares at $ 14 to $16 a share would put about 20% of the company on the market and raise about $66 million for the parent of the Habit Burger Grill chain after costs, according to its Securities and Exchange Commission filings.

Habit Restaurants Inc. would trade on Nasdaq under the ticker symbol “HABT.” Its market capitalization at $15 a share would be about $380 million.

When El Polio Loco’s similarly priced offering-$15 a share-hit July 25, its stock quickly traded above $20, and it now trades at about $35 for a market cap of some $1.3 billion.

Habit has been busy with expansion plans in the run-up to its public offering. It signed master franchise deals for 15 units in Las Vegas and 25 in Seattle in May. The first restaurant in a planned East Coast expansion came in August in Fair Lawn, N.J.

Growth

Habit was founded in 1969 in Santa Barbara.

Greenwich, Conn.-based private equity firm KarpReilly LLC led a group in 2007 that bought a majority stake. It will own 37% of the company after the offering, with voting control of 55%, the SEC filings said.

Habit had $162 million in sales for the 12 months ended Sept. 30, according to the documents. It ranked No. 16 this year on the Business Journal’s list of OC-based restaurant chains.

Net income has grown from $2.4 million in 2011 to $5.7 million in 2013.

It has had 43 consecutive quarters of samestore sales growth, and average unit volumes have grown from $ 1.2 million in 2009 to $ 1.7 million for the trailing 52 weeks as of Sept. 30, the filing said.

“They have strong leadership and strong growth,” said Darren Tristano, executive vice president at Chicago-based restaurant consultant Technomic Inc.

Tristano said Habit benefits from being the first prominent hamburger chain to go public this year. New York-based Shake Shack, which has about 50 units, is also considering an IPO, according to reports.

“If you believe in this segment, this is the first available investment,” Tristano said.

He attributed several restaurant IPOs this year to private equity investments that led to “operators trimming the fat” and then tapping the public markets to slash debt.

El Pollo Loco raised $113 million to pay down part of $289 million in debt when it went public.

That and a prior refinancing cut its debt service from $36 million a year to $10 million. It said resulting cash flow would fund growth.

Habit said it would use $41 million of its offering proceeds to close out debt, with $25 million for working capital, according to the filing.

Company representatives declined to comment for this article.

‘Better Burger’

Tristano placed Habit firmly in the “better burger” category: chains with a higher-quality hamburger than a $2 McDonald’s or Burger King selection, but at a lower price-$3 to $5 compared with $8 to $10-than restaurants such as The Counter.

Habit’s roots are in fast food, and “they’ve evolved toward fast casual, so they’re in-between,” he said.

He said El Pollo Loco has staked out similar territory-somewhere between Chipotle and Taco Bell.

“Quality and price means a better deal for lower- and middle-income customers,” Tristano said.

He said Habit-again, like El Pollo Loco- is strong in California, but sounded a note of caution.

“They’ll have strong regional competition in other markets,” he said.

One example: Prairie du Sac, Wise.-based Culver’s, which is similar in style to Habit and has 450 company-owned and franchise locations in 20 mainly Midwest states.

Tristano said Habit has shown it can do well against established competitors, including Irvine-based In-N-Out Burgers, a standardbearer in the better-burger category.

“They have to introduce themselves to a new audience, but they can be competitive,” Tristano said. “And they did well in the Consumer Reports [national] test early this year.”

Habit Burger Grill: 99 units and counting, initial public offering slated for this week

The Habit Restaurants Inc. in Irvine appears to have a number of factors working in its favor for an initial public offering that’s expected sometime this week, including some that reflect its strong run of recent years and others that indicate the chain is well-positioned for the future. Among them:

* Habit has staked out a spot in the meaty middle of the “better burger” category with an effective mix of competitive standing on price and quality.

* The burger chain has quadrupled in size in seven years and now has 99 locations in four states.

* Habit plans more growth in 2015, notably on the East Coast and other new regional markets.

* It’s the first better-burger chain to go to market, and the move comes just a few months after the IPO by Costa Mesa-based fast-food chicken chain El Polio Loco Holdings Inc., whose shares have more than doubled since their July debut.


Building a Bigger Burger Biz

December 9, 2014

Paul Wahlberg starts expansion across US

© 2014 New York Times Company. Provided by ProQuest Information and Learning. All Rights Reserved.

Paul Wahlberg has dreamed of owning a restaurant almost since he started out washing dishes on Canal Street in the early 1980s, but the chef couldn’t have imagined something this big. Wahlburgers, the restaurant company he owns with his celebrity brothers Mark and Donnie, will on Thursday unveil plans to open 27 more locations.

The major expansion comes just three years after the first Wahlburgers restaurant opened in Hingham and follows deals for three in Las Vegas and five in the Philadelphia area. A Toronto restaurant — the second Wahlburgers — drew huge crowds to a grand opening last month.

The new franchise agreements include 20 locations in Florida and seven in New York City. But Massachusetts isn’t being left out of the growth spurt — the Wahlbergs are getting ready to open their second and third Boston-area Wahlburgers restaurants, in Lynnfield and the Fenway. Eventually, the brothers say, there could be up to 300 across the country.

Unlike other restaurant chains, this one’s growing pains are playing out in front of a TV camera. A&E’s reality show, “Wahlburgers,” has featured the business in 18 episodes so far. The show brings people to the burger joints. But it also elevates the stage on which Paul Wahlberg works, putting more pressure on him to send customers away satisfied.

“We’re just fortunate that people are interested in it,” Paul, 50, says of the franchising efforts. “The family name has some celebrity status to it. But we still have to live up to that.”

The route to becoming a national chain can be traced to a meeting Mark Wahlberg had with Rick Vanzura, a former cochief operating officer at Panera Bread, soon after the Hingham shop opened. Vanzura was brought on board in 2012, first as a consultant and then as the company’s chief executive, with the charge to chart an expansion plan. Vanzura works at an office across the street from the redeveloped Hingham Shipyard — the home of the first Wahlburgers and Alma Nove, a restaurant the brothers opened in 2010. Aside from Vanzura and Paul Wahlberg, the corporate staff now consists of just one other person. Vanzura anticipates a few more hires in 2015 and a more meaningful increase in 2016 as restaurants open.

The A&E show generated interest among potential franchisees. But most of the inquiries don’t make it far: Vanzura says he only considers operators with considerable restaurant experience and a net worth of at least $5 million.

The Toronto operators — including hotelier Henry Wu and investor Michael Wekerle — had a relationship with the Wahlbergs as investors in Hingham. Wu says he’s also investing in the Fenway and Lynnfield locations. He says he was attracted to the concept’s unusual mix of sit-down service on one side of the room, with alcohol, and fast-casual service on the other. His team plans to open several more in Canada, likely starting in Ontario. Wu says the 120-seat restaurant in downtown Toronto already has exceeded expectations: The tables turn at least three times every dinner period and up to six times on busy nights.

In Florida, franchisee Manny Garcia was introduced to the Wahlbergs through Orlando venture capital firm Blackwood Holdings. Garcia, a former Burger King franchisee who sold his 67 BK shops in the 1990s, established Davgar Holdings to oversee his family’s three restaurants in the Orlando area.

Davgar’s restaurants will include the Wahlburgers locations in Florida.

Garcia says that by the time he got involved, he had already seen the TV series. He saw a kindred spirit in Paul — someone with a passion for the restaurant business. The first Florida Wahlburgers will likely be on his home turf in the Orlando area, and he says he will scout for locations in Miami and Tampa, with Blackwood providing a major equity investment.

Wahlburgers faces plenty of competition as the chain grows. The “better burger” segment of the casual dining market is already crowded, with the likes of Five Guys, Smashburger, and Shake Shack, says Darren Tristano, of the restaurant consultancy Technomic in Chicago. Many rivals offer burgers for less than the $7 or more that Wahlburgers charges, although most don’t have sit-down service or alcohol. “So many players have gotten into the space,” Tristano says. “It’s hitting a saturation point.”

Like many restaurants, the Wahlburgers shops don’t always open on their original timetables. The brothers hoped they could open the location on Brookline Avenue in the Fenway — which, like the Hingham spot, will be in a Samuels & Associates development — in time for opening day at Fenway Park next year. Now, they’re aiming for the summer.

Paul admits to some nervousness as he works under the unyielding heat of a national spotlight. But he’s hardly planning on getting out of the kitchen. “There are going to be hiccups,” he says. “There are going to be bumps in the road. But we have to keep plugging along and doing the best that we can.”


Asian Concepts Poised for High Unit rowth this Year

November 25, 2014

New data from Technomic forecasts a 2.3-percent unit growth rate over 2013 among the 500 largest US restaurant chains.

According to a news release, this will be slightly higher than the 2.1-percent growth rate from 2012-13 and much higher than the 0.5 percent rate in 2009.

The unit growth is rising in both the full and limited-service segments. Technomic EVP Darren Tristano said fast casual concepts will continue to show high levels of unit growth, as well limited and full-service Asian concepts. Among full-service restaurant menu segments, Asian will increase units by 5.1 percent, followed by seafood (3.9 percent) and steak (3.4 percent).

Asian/noodle also leads the limited-service menu segments, increasing unit counts by 8 percent, while bakery cafes and coffee cafes will grow units by 5.2 and 4.2 percent, respectively.

Many full-service brands have positioned themselves to expand this past year. The largest growth has been at Buffalo Wild Wings, which will have added 65 units, Mellow Mushroom (32 units) and LongHorn Steakhouse (24 units), according to Technomic.

In limited service, Subway will add 908 units by year-end, followed by Starbucks (443), Jimmy Johns (350) and Dunkin Donuts (291).

Fast casual to continue double-digit sales bump
Additionally, limited-service restaurants are expected to gain a sales bump of 3.5 percent. Fast casual chains should experience a 10.8-percent increase in sales, while quick-service chains increase 2.3 percent.

Full-service restaurants will experience a 2.5 percent sales increase in 2014, similar to the 2.4 percent increase in 2013.

Fine dining is expected to continue its post-Recession rebound, with a 5.8-percent sales increase. Casual and midscale restaurant growth will be nominal, at 2.8 and 0.5 percent, respectively.

Q3 traffic gains at Mexican concepts
Additionally, research from The NPD Group analyzed Q3 consumer traffic at US restaurants, and shows an increase in the fast casual segment, as well as at coffee/donut/bagel concepts and Mexican concepts.

Fast casual restaurants posted an 8 percent gain in traffic across all dayparts compared to same quarter year ago. Visits to Mexican quick service and coffee/donut/bagel concepts grew by 5 percent, according to NPD’s foodservice market research.

Conversely, hamburger quick-service traffic, which represents the largest share of quick service visits at 23 percent, declined by 3 percent compared to same quarter year ago. Visits to both sandwich concepts and Asian quick-serve restaurants were down 1 percent.

Although total industry traffic was flat in the quarter, consumer spending rose 3 percent in the July/August/September quarter due to average eater check gains. Check and dollar gains are in line with food away-from-home inflation. Dealing/discounts are still supporting traffic with visits on a deal up 4 percent compared to a decline in non-deal visits.

“Although total traffic is flat, the visit growth in the fast casual, coffee/donut/bagel, and Mexican QSR shows that consumers still have an interest in going out to restaurants,” NPD analyst Bonnie Riggs said in a news release. “Those restaurant concepts that are meeting the needs of today’s foodservice consumers will win their visits.”


Consumer Reports: McDonald’s burger ranked worst in the U.S.

July 8, 2014

McDonalds Sales.JPEG-054a3By Jiaxi Lu  

Copyright 2014, The Washington Post Co.  All Rights Reserved.  

Some major fast-food chains—McDonald’s, KFC, Taco Bell—may find the latest Consumer Reports fast-food survey hard to swallow.

According to the survey, released on Wednesday, more than 30,000 Consumer Reports subscribers say these restaurants’ signature items are the worst in their categories: McDonald’s has the worst burger; KFC has the worst chicken; and Taco Bell has the worst burrito.

Consumer Reports surveyed 32,405 subscribers about their experiences at 65 fast-food and fast-casual chains. This is what they were asked: “On a scale of  1 to 10, from least delicious to most delicious you’ve ever eaten, how would you rate the taste” of their signature dishes?

Habit Burger Grill, In-n-Out and Five Guys Burgers received the highest rating for their burgers, 8.1, 8.0 and 7.9 respectively.  Meanwhile, McDonald’s scored a paltry 5.8 rating.

McDonald’s: Changing menu adds pressure to prep kitchen

McDonald’s has been busy changing its menu in an effort to attract more customers. But despite the novelty items the company promoted in 2013 — Fish McBites in February, McWraps in March, Mighty Wings in September, etc. — the company’s U.S. sales dropped 0.2 percent last year.

During a conference call with investors, McDonald’s chief financial officer Peter Bensen said the company “probably did things a little bit too quickly” in terms of introducing those new menu items. The constant changes and bold experiments with the menu put pressure to the restaurants’ kitchens, which sometimes took too long to fill orders. But new items introduced this year will be welcomed by the chain’s new kitchen equipment. Prep tables will be replaced with larger surfaces that are able to hold more sauces and ingredients.

In 2014, Bensen said, the company will “refocus the core,”  including tried-and-true favorites such as the Big Mac, Chicken McNuggets and the Quarter Pounder, as well as breakfast.

Consumer searches for healthier choices

Research shows Americans are spending $683.4 billion a year dining out, and they are also demanding better food quality and greater variety from restaurants to make sure their money is well spent.

When deciding where to dine, consumers are giving more consideration to food quality, according to the Consumer Reports survey. The restaurant’s location is less important than it was in 2011, when the group last conducted the survey. Diners today are more willing to go out of their way and find tasty meals that can be customized.

“Fast-casual dining in places like Chipotle and Panda Express lets the consumer guide the staff to prepare their meal just the way they like it,” Darren Tristano, executive vice president of Technomic, a food-service consulting firm, said in the report.

While many of the traditional chains have lagged in offering higher-quality ingredients, he said, some food chains — including Chipotle, Noodles & Company and Panera — have been offering meat raised without using antibiotics in animal feed, a feature that attracts consumers searching for healthier options.

Fast-food alternatives: fast-casual restaurants

Chipotle was rated by readers as their top fast-casual restaurant. (Fast-casual restaurants usually serve higher-quality, higher-priced fast food.) According to the survey, McAlister’s Deli gets the award for most improved as the chain’s score increased significantly since the 2011 report.

Top fast-casual restaurants: 

Chipotle Mexican Grill Firehouse Subs Five Guys Burgers and Fries Jason’s Deli Jersey Mike’s Subs Jimmy John’s Gourmet Sandwiches McAlister’s Deli Panera Bread Schlotzsky’s