This week’s 5 head-spinning moments: Matters of scale
By Peter Romeo on Feb. 02, 2018If you’re the sort of Rain Man spawn who knows enough chicken wings will be sold on Super Bowl Sunday to circle the Earth three times, have a paper bag ready for hyperventilation relief. The revelations that turned heads this week in the restaurant business were similarly astounding matters of scale—measures too huge or infinitesimal to slide past without a "Wow."
Giants like Starbucks and McDonald’s routinely spit out jaw-dropping numbers, but seldom are the stats as arresting as the sales and cost figures that came to light in recent days. A court agreed that KFC could forgo a splinter of the chicken market that a franchisee insisted was worth chasing, while the industry learned about a potential savings of millions for operators in Iowa.
Read on and geek out, calculator and paper bag in hand.
Starbucks’ new mother lode
The coffee chain describes its new Roastery outlets as cathedrals for coffee aficionados. Turns out their sales would make anyone shout, “My gawd!” The newest one, which opened two months ago in Shanghai, is generating sales of more than $64,000 per day, an annualized bounty of more than $23 million. Chairman Howard Schultz pointed out to investors that the volume is more than twice the $32,000 a conventional Starbucks collects in a week. Tickets at the Shanghai store average $29.
That wasn’t the only head-turning number Starbucks served up this week. CEO Kevin Johnson revealed that the onetime mall stalwart has reduced the number of stores located in a shopping complex to less than 6% of the system.
Starbucks is slated to soon open Roastery locations in New York City and Chicagoland.
Think your tax bill is high?
The topic of the moment for restaurants has to be the effect of the new federal tax law. Now that numbers crunchers are putting pencil to paper, operations are able to compute how much of an impact the overhaul will have on their bottom line.
One of the more staggering measures was the amount McDonald’s says it will pay to repatriate profits from divisions outside the United States. The new law encourages U.S.-based multinationals to pull that money back, hopefully for domestic re-investment, by reducing the tax penalties for a limited time. McDonald’s is taking advantage of the break, but the one-time charge will still amount to $1.2 billion dollars. Yes, that’s a “b.”
Gold from those golden fries
McDonald’s also revealed this week that it has found the key to a $100 billion new market. Global Chief Strategy Officer Lucy Brady told Bloomberg that the chain has re-engineered operations to get McDonald’s famous fries into delivery customers while they’re still as good as what an on-premise customer gets. She did not divulge details, but suggested that considerable pains are taken to ensure the fries are the last-in items for a delivery order.
CFO Kevin Ozan revealed several seeks ago that McDonald’s orders are usually delivered by third-party partner Uber Eats within 25 minutes. Brady indicated there’s about a 30-minute window for getting fries to customers in top shape.
McDonald’s has assessed the potential of the delivery market at $100 billion. There’s that “b” again.
French fries are McDonald’s most-ordered delivery item, followed by a Big Mac meal and McNuggets.
Walking away from ‘halal’
What a KFC franchisee saw as a lucrative opportunity was adjudged not worth the risk by the franchisor. The licensee, Afzal Lokhandwala, had sued the brand owner after it forbade franchisees from advertising their chicken as halal, or compliant with Muslim dietary laws. KFC said the term was subjective. Lokhandwala said it was a ticket to head-turning sales, and that he was transparent about what was halal and what didn’t qualify for the designation. The suit alleged that KFC was devastating Lokhandwala’s business by not letting him tag his chicken as halal and cash in on the eating preferences of an estimated 1.1 million Muslims in America. A judge settled the matter by siding with KFC.
Iowa is fed up
Paying the fifth-highest rates in the nation for casualty insurance isn’t sitting well with restaurants in Iowa. The Iowa Restaurant Association is pushing lawmakers to bring the cost down by spreading the pain of liability coverage to all places that sell alcoholic beverages, instead of singling out restaurants.
“There is no similar requirement for those who ‘sell’ unopened alcohol such as box stores, pharmacies, grocery and convenience stores,” the IRA said in announcing its crusade for lower rates.
"We are the only segment of the industry which is held responsible for the behavior of others," CEO Jessica Dunker commented in the statement.
The group wants lawmakers to impose the same insurance requirements on all alcohol sellers that it currently puts on restaurants and bars.