Chains cry, ‘Market tiers!’
If you heard a loud creak from the restaurant business this week, it was merely the sound of menus being crowbarred open a little wider to accommodate the mid-market’s new bait of choice for price shoppers. Panera Bread, Red Robin and Denny’s all followed Ruby Tuesday, Bob Evans and virtually the whole quick-service segment in committing to menus packed with new pricing tiers.
But the strategy of the full and limited-service converts is subtly different from the intentions of the grab-and-go guys. Their hooks are a wider choice of a la carte products and the option of mixing and matching elements to customize the price. A $15 platter might sound a little pricey to some shoppers. But the option of ordering a $9 entree with one $2 side and a $4 beverage? The chains are hoping that’ll say “bargain.”
That’s why they’re deconstructing meals to sell the key elements in a variety of sizes and quality levels, enabling customers to combine the components however their preferences and wallets dictate.
At Red Robin, that translates into a tiering of burger choices, as the casual chain explained to investors last Friday. At the high end is the Finest selection, with choices like the new Smoke & Pepper Burger, priced at $13.95 and already accounting for 5 percent of sales, according to CMO Denny Post.
At the low end of the burger spectrum is the Tavern line, with products like a Double, priced at $6.99. Sandwiched between the Tavern and Finest choices is a Gourmet line. “We’ll look for opportunities to build all three out,” said Post.
Similarly, appetizers are organized into $3, $5, $7 and $9 sections.
The new approach, and the Smoke & Pepper Burger in particular, were lauded by the chain’s executives for boosting the average guest check by 5.1 percent during the fourth quarter of 2013, offsetting an ebb in traffic.
Panera intends to use portion size rather than quality variations to set different pricing tiers for a new sandwich line set to roll this spring. Executives haven’t revealed all the details, but CEO Ron Shaich divulged this week that the sandwiches will be made with fresh-baked, naan-like flatbrads.
“Our flatbreads provide customers the option to choose their portion size, which supports the broader perception of value on our new menus,” Shaich explained to investors during a conference call. “We believe this could also serve to open up a more robust snacking platform for Panera and add some muscle to our gathering place business,” or what he’s characterized in the past as the hanging-out day part. Apparently the sandwiches lend themselves to sharing.
Panera: New aids for takeout & delivery
Giving customers the option of picking a sandwich size is part of a larger strategic shift by Panera to diversify the choices it extends to patrons. “Historically, we at Panera have operated a one-size-fits-all model,” Shaich commentd.
A part of that shift, he said, will be providing more ways to place orders for takeout and delivery, which Panera provides for big orders as part of its catering program.
Shaich declined to divulge details, explaining that the new options would be revealed at a meeting with investors next month. But he teased the analysts on the conference call with assurances they’ll likely be wowed. “You might want to conclude that this is yet again another mobile app in the food industry,” he said. “What we’re talking about is far more.”
Time is on Jack’s side
The clock is proving a valuable business tool for Jack in the Box, as investors learned when their heads were spun this week by the comments of new CEO Leonard Comma. He revealed that the burger chain has enjoyed a sales boost from the reduction of service times by a full minute during the last two years. “We believe we have about another minute of opportunity to lower our speed of service,” he added.
Half of that reduction will come from better execution in some stores, and the rest will be realized through “processing re-engineering,” he said.
Meanwhile, Jack’s orb-like head has apparently been spun by the sales impact of the chain’s late-night Munchie Meals menu. The roster is “resonating with the segment of our customers we call the other 9-5ers,” said Comma. “This daypart has a lot of upside potential for us.”
He did not reveal if the munchie line-up fared any differently in Colorado, where marijuana was legalized on Jan. 1.
Time to rip out seats?
Famous Dave’s, the full-service barbecue chain, revealed that 35.6 percent of its sales are now generated by orders for off-premise consumption. Less than 10 percent is generated by catering, with the other 25.8 percent coming from takeout.
Bob Evans Farms recently noted that 11 percent of its sales now come from carryout or catering, leaving little doubt that the limited-service sector is facing some takeout competition.
Red Robin tweaks its fast-casual spin-off
Meanwhile, Red Robin is forging ahead with its fast-casual defense, a strategy that pivots on the notion, If you can’t beat ‘em, join ‘em. The casual chain spun off a fast-casual concept last year called Burger Works, and it’s committing resources to development of the concept, albeit in a slightly different form, or what management calls Burger Works 2.0.
CEO Steve Carley was stingy with details, but he told investors this week that the upstart concept will be more closely aligned with the Red Robin brand going forward. He also noted that the A-grade sites for development will be urban areas with strong lunch potential and an ample pool of nearby residences. Deals have already been inked for Chicago and Washington, D.C.