Only a ping pong match would normally have heads snapping to and fro as they did this week in the restaurant business. Milliseconds after a development turned noggins one way, an often-related occurrence would spin them back. Speculation about a Darden-BJ’s marriage was followed by suggestions that Del Frisco’s could change hands. After proving its greatly expanded menu has been a success, Dunkin' revealed it's snipping the food lineup.
Here, at the risk of promoting neck strain, is more of what we mean.
1. Is Olive Garden getting a kid sister?
First came the wishful thinking that Darden Restaurants, the parent of Olive Garden and Capital Grille, would buy BJ’s Restaurants, a what-if that took on a life of its own. Then came the suggestion that Del Frisco’s Restaurant Group might soon be in play.
Both reports were the results of Wall Street watchers alternating between matchmaker and crystal ball gazer. Chris O’Cull, a restaurant analyst for KeyBank, sparked the Darden rumors by making a case for the casual giant’s merger with BJ’s. The former abounds in capital, real estate and big-company infrastructure, all of which would help the younger, more agile BJ’s resume its expansion after suspending development because of limited resources and eroding returns.
“We are not recommending these stocks because we expect a transaction in 2017, but we believe a combination could create [long-term] value for both companies, so we see some optionality value," O’Cull wrote.
That drew speculation that Bravo Brio Restaurant Group, operator of the Bravo and Brio polished-casual chains, might have caught Darden’s eye.
At no time did any of the mentioned companies weigh in on the matter, but the reports continued to wend through the investment community, prompting head nods of agreement here, and cries of “No way!” elsewhere.
2. Is Del Frisco’s for sale?
Meanwhile, an unidentified representative of the Maudes Capital investment firm aired a theory that Del Frisco’s could be a hotly shopped property among private-equity firms.
A post on the financial site SeekingAlpha.com connected several dots in concluding the multiconcept steakhouse operation could change hands. It’s under pressure from activist investors, it has already drawn a sizable investment from large finance companies such as Fidelity National Financial, and recently brought aboard casual-dining veteran Norm Abdallah as CEO. The author portrayed Abdallah as a finance veteran who formerly was affiliated with a P.E. company, though longtime observers know him as a chain builder.
“Many indicators suggest that this company will look for a buyer or find another way to pay back to the shareholders,” the post concluded.
It failed to cite the evidence that Reuters reported on a search for a buyer last year, the result of a minority investor demanding a sale.
3. Dunkin’ takes aim at menu drift
After working diligently to expand its menu, Dunkin’ Donuts says it’s time for the pendulum to swing the other way. The quick-service chain is about to start a 300-unit test of a scaled-back menu, with far fewer of the food items that helped the doughnut specialist expand its appeal.
Executives of parent company Dunkin’ Brands said the rollback is the result of complexities creeping into kitchens as the menu expanded. Paring back the listing will boost throughput, order accuracy and quality, leading to a net gain in sales, asserted CEO Nigel Travis.
He also suggested that carrying less of an inventory would lower food costs.
Ironically, the disclosure came as Dunkin’ revealed its best quarter in some time, with a 1.6% increase in same-store sales. One of the factors, Travis said, was the chain’s ability to sell customers food when they came into a unit for a beverage.
Travis said the test will start before the end of the month.
He also noted the chain is testing curbside delivery as a way of bolstering off-premise business at restaurants that lack a drive-thru.
4. Courtroom breaks
It’s been a good week for courtroom sanity.
Ask the proprietor of Salt 88, a restaurant in Omaha, Neb. John Horvatinovich stood trial this week for alerting fellow operators that two 17-year-old boys were looking for a restaurant willing to sell them beers. After the youngsters were turned away by bartenders at Salt 88, Horvatinovich lifted an image of the pair from the place’s security cameras and tweeted the pictures and a heads-up to colleagues—only to be charged with obstructing a police investigation.
It turns out the boys were part of a sting to see if establishments were selling alcoholic beverages to minors. Horvatinovich said he wasn’t aware the boys were part of a police operation, but did use the word “sting” in his tweet.
This week, after deliberating for hours, a jury agreed that Horvatinovich used “sting” to suggest the youngsters were systematically trying to find a place that would ignore the law, not that they were undercover agents. He was found not guilty.
The decision follows a jury’s refusal to agree with the Equal Employment Opportunities Commission that Texas Roadhouse must have discriminated against over-40 job applicants because so few people of that vintage were on its payroll. The EEOC had filed a lawsuit even though no employee had alleged discrimination.
The trial resulted this week in a hung jury. Texas Roadhouse will face a retrial in May, and has vowed to contest the suit rather than settle.
5. Starbucks offers legal aid as another counter to Trump
Just a reminder: Starbucks is in the business of selling coffee. Sometimes that’s tough to remember because the brand snags so many headlines for its social and political endeavors.
This week, for example, the chain turned heads by extending free legal advice to employees who are affected by President Trump’s controversial executive order on immigration changes. Employees with questions about their status can turn to the immigration division of Ernst & Young for answers or advice, with Starbucks picking up the tab.
“After the recent Executive Order placing restrictions on immigration and the subsequent legal challenges to its enforcement, we understand many partners still have questions about what this means for them,” read a note sent to all employees on Monday.
The company and its CEO, Howard Schultz, have been openly critical of Donald Trump’s claim that immigration restrictions are needed to better safeguard the nation. The brand has vowed to hire 10,000 political refugees, starting with foreign nationals who assisted U.S. armed forces as interpreters or guides.