There was ample reason this week to think we’d fallen through the mirror into some sort of reverse reality. How else do you explain Starbucks aping Olive Garden or Chipotle citing old guard QSRs as an inspiration? Here’s how things appear on the other side of the looking glass.
1. ‘Here’s what you’ll make’
Old reality: Raises are something discussed in private with employees.
New reality: Pay increases are bull-horned to the world so everyone in and out of the company knows. Starbucks announced a bump in the take home of baristas and night supervisors via a companywide message that was leaked to the major media. The company also decided to pay longtime employees a bonus in January. The recipients found out when the rest of the world did.
Once again, Starbucks is riding the crest of a trend. Almost simultaneously, Walmart’s CEO announced the retailer would ratchet wages higher so everyone on the payroll would make more than the federal minimum.
2. Olive Garden sets the trends
Old reality: Starbucks sets the patterns and trends the rest of the restaurant industry blithely follows. Anyone in the business not offering sleeves for takeout coffee cups?
New reality: The coffee giant follows Olive Garden’s lead. This week the Grand Barista cranked up its buzz machine for a promotion that rewards 10 customers with passes to guzzle as much coffee as they’d like for no additional charge. Doesn’t that sound similar to Olive Garden’s Never Ending Pasta Pass, the arthritic chain’s best marketing idea in decades?
True, there are some differences. Starbucks’ all-you-want pass is good for 30 years (despite the explicit promise of Coffee for Life,) while the pasta pass expires in seven weeks. The coffee pass is a sweepstakes prize; patrons can win it merely by paying regular price for a coffee with their Starbucks card or app. Olive Garden sold its bonanza deal for $100.
But in both instance, the aim is sizzle, a payoff that’s not being overlooked by other chains. Mustering consumer attention with unlimited trips to the trough is clearly on the rise. Donatos, for instance, ran a Free Pizza for Life sweepstakes this summer (though the winner only gets the pizza for 20 years,) and Chick-fil-A and Zaxby’s both offer free food for a year to the first 100 customers of a new store.
3. Chipotle gives fast food some credit
Old reality: The executives of Chipotle Mexican Grill looked down on conventional fast-food chains. Just this week, for instance, founder and co-CEO Steve Ells was asked by a FastCompany writer about the quick-service sector’s attempts to copy Chipotle’s “food with a difference,” as the chain describes it. “It’s a joke,” Ells responded. “You know those guys, right? They can’t change.”
New reality: The team acknowledges its admiration for conventional fast feeders’ throughput during the lunch rush. “Our average restaurant is [doing] about one third of that speed at peak lunch hour,” co-CEO Monty Moran told investors this week, noting that some places with indifferent food can crank 350 orders through the line. “So our ability to achieve higher throughput is enormous.”
4. Re-assessing the ACA’s cost
Old reality: The Affordable Care Act will eat the industry alive.
New reality: It’ll be a significant bite, but hardly lethal.
Chipotle CFO Jack Hartung acknowledged there’s still considerable uncertainty about the health-insurance mandate’s financial impact, but “we estimate that total cost will not exceed 1 percent of sales.”
And that’s with 10,000 hourlies eligible to sign up for Chipotle’s coverage plan, he noted.
That assessment was such a surprise that an analyst participating in the call pressed for confirmation. Hartung explained that the forecast was actually on the high side.
“We just don't know how to estimate it and so we just put kind of an upper range on it,” he said.
The Cheesecake Factory expects its health insurance costs to hover at 2014 levels next year, when the ACA takes affect.
The cost spiked by $7.5 million in the third quarter, said CFO Doug Benn, but that was primarily due to an increase in costs not dissimilar to the upswing Cheesecake saw in 2009 and 2011.
5. The new battle of New Orleans
Old reality: New Orleans’ restaurant scene is renowned for its Cajun and Creole cathedrals as well as upstarts with a more contemporary bent.
New reality: New Orleans’ restaurant scene is known for the most contentious ownership struggles this side of a gangland turf war. This week lawyers took to the mattresses over control of Galatoire’s, one of the city’s legendary establishments. The landmark is principally owned by local businessman Jean Georges, who bought a controlling stake in the restaurant c. 2009 from a partner of the Galatoire family. A new lawsuit filed by a buyer who was spurned back then by the Galatoires challenges Georges’ rights to the establishment.
The challenger is Terry White, who wants the 2009 deal overturned so he can buy the place. Meanwhile, another of White’s holdings, Brennan’s, is reopening this week under the tutelage of partner Ralph Brennan, who bought the establishment from feuding relatives who couldn’t collaborate to make the place successful.
The moral: The Big Easy isn’t such an easy place to do business, even for the city’s landmark restaurants.
Gotta run. In this alternate universe, the doctor says I have to eat more pizza and drink more wine.
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