Some trends seize the business with the force of Homer Simpson’s donut craving. Others aren’t noticed until the damage warrants a loud palm smack to the forehead. Both versions were evident this week to observers blessed with a supple neck and a keen ear. Here are some of the developments that elicited oh’s and ow’s.
We’re not over simplifying
To the contrary, streamlining menus and kitchen operations blossomed into a veritable trend this week, with converts crowing loudly about the financial benefits of lightening units’ prep burden.
Burger King CEO Daniel Schwartz cited “operationally simple innovation” as the main factor for his charge’s much-lauded performance in the second quarter. Headquarters dropped just five menu changes on the back of the house, a drastic reduction from past years, he explained. In BK’s assessment, sales were aided by the improvement in execution and the tight focus on just a few traffic lures.
“Even more important is that the five new products collectively required only one new SKU to be introduced into our restaurants,” Schwartz told investors. “We believe that these types of operationally simple products are the key to increasing franchisee margins.”
Burger King wasn’t the only operator to cite menu and kitchen simplification as a financial boon. Pollo Tropical, the Latin quick-service chain, dropped fajitas and sangria from its menu expressly to streamline operations. The result was an increase in throughput and a reduction in food waste, said CEO Tim Taft.
Heads have been spun before by contrarians who’ve bet the menu stretching of recent years has given consumers fewer reasons to visit, not more. Last week’s success stories will likely prompt more battlers for market share to focus on better execution of fewer items, using a smaller (read: cash-freeing) inventory of ingredients and possibly speeding service.
Fresh Latin sells. And not just at Chipotle.
With restaurant traffic fundamentally flat, a comp sales increase of more than 3 percent will spin heads today. Five percent begs the ministrations of a chiropractor. Six percent merits consideration for the restaurant equivalent of Cooperstown. For the second quarter, there were only four public chains that surpassed that mark: Chipotle (13.4 percent), Starbucks (7 percent) and—wait for it—Pollo Tropical (6.7 percent) and Qdoba (7.5 percent.)
That’s right, Pollo Tropical and Qdoba—two brands that don’t readily come to mind when you think of over-achievers—pulled ahead of virtually all other national quick-service concepts except Chipotle and Starbucks. What do they and the other major-leaguers have in common? An emphasis on quality, authenticity and big flavors.
It’s not a coincidence that three of the four in the 6 Percent Plus Club specialize in Latin food. Nor is it unrelated that Taco Bell, a brand with a 2 percent comp increase, is about to move into fast-casual with a new upscale concept called U.S. Taco. You can get a preview here.
Attention helps sales
The restaurant industry is taking a cue from pro football and developing special teams to handle functions that were once blended into general management duties.
Burger King, for instance, is dispatching squads of “coaches” to “work with restaurant teams and managers to share best practices,” Alexandre Macedo, the president of BK’s North American operations, explained to investors.
The mentors-on-the-move program is part of a larger initiative called the Restaurant Excellence Visit program, or REV. At units that have been REV’d, guest satisfaction scores have risen 11 percent, and service speed has jumped 9 percent, Macedo said.
Pollo Tropical focuses its special team on potential customers. A few weeks before a store opens, a squad of “brand ambassadors” is dispatched to the area to visit local businesses and provide food samples. “By the time the restaurant opens, there is already demand for the product,” CEO Taft explained.
You can’t sell what you give away
Not all of the trends in plain view during the past week were positive. Indeed, necks craned at indications they’re to be avoided. Take discounting and the pain it’s still creating for Famous Dave’s.
Until the current regime took power, the barbecue chain was running discounts of about 30 percent, and not on soft drinks, appetizers or desserts. The price of a $30 entrée was being cut by a full $10, CEO Ed Rensi told investors. “We educated our best customers to wait for this discount,” he acknowledged.
The chain has stopped using those Grand Canyon-scale discounts, but it’s paying a steep price for past sins, according to management. Dinner comps for the second quarter fell 10 percent, and lunch was off 9.2 percent.
New menu lures don’t always work
Just ask Liz Smith, CEO of Outback and Carrabba’s parent Bloomin’ Brands.
As she explained to financial analysts, Carrabba’s switched during the second quarter to a menu sporting prices that were lower than the chain’s norm and dishes that broadened the Italian chain’s scope. The goal was to broaden the chain’s appeal, but “we have not seen a meaningful increase in incremental traffic,” Smith noted. “It is clear that we did not go far enough in the menu relaunch to address consumers' desire for lightness and variety on weekday dining occasions.”
That wasn’t the only food misfire. The Potbelly fast-casual sandwich chain posted negative comps for the second quarter. The decline was due primarily due to the chain’s new Flats flatbread line, reported Andrew Charles, an analyst with Bank of America Merrill Lynch. Instead of boosting traffic, as Potbelly had expected, the sandwich line merely prompted trial by current customers, Charles said in a report to customers.
Sometimes, menu news just doesn’t cut through the clutter.
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