The industry’s collective IQ might’ve jumped 20 points this week. Or was it 30? It’s difficult to say because the smarties were too busy enacting bright ideas to help the less gifted count that high. Their reactions to new realities left no doubt that success in the restaurant business requires considerably more today than serving hot food hot and cold food cold. Consider these head-turning responses to changing times:
Consumers are pushing restaurants to minimize the distance their food has to travel before ending up on a plate. That’s great if you’re a 20-seat café with space for a garden outside the kitchen, but how can a chain oblige the demand for hyperlocal products?
The Good Times burger chain revealed this week that it’s trying a clever way to do it. One of its 37 quick-service restaurants has started making its own pickles on the premises. The all-natural pickles are served in three ways: deep fried, as spicy spear-shaped garnishes, and sliced atop burgers.
“While house-made pickles may not sound like a big idea, we think it can be far more meaningful than the product itself and the statement that it makes around our brand,” COO Scott LeFever told investors.
He added that the fried pickles have been such a hit that Good Times is rolling out the side systemwide.
2. Retail and product licensing get their due
No fewer than two restaurant companies underscored the importance of licensing as a revenue source by naming new presidents charged specifically with expanding that alternate business.
Among the express duties of James Walker, promoted this week to president of development and operations for Johnny Rockets, is growing the company’s Johnny Rockets at Home business, which licenses the Rockets name for use on consumer products.
Among Kat Cole’s new responsibilities as one of three group presidents for Focus Brands is seeking new licensing opportunities for the company’s various quick-service brands, which include Moe’s Southwest Grill, Schlotzsky’s, McAlister’s Deli, and Auntie Anne’s. In Cole’s previous job, as president of Focus’ Cinnabon chain, sales of Cinnabon-branded products by third parties hit $750 million, she told Restaurant Business.
3. McD’s proxy jiu jitsu
As if the goading from labor advocates and regulators wasn't enough, McDonald’s recently felt pressure from another source to ratchet up wages and assume responsibilities for franchisees’ employment practices. Shareholder Alison Faith pushed for the inclusion of a recommendation in McDonald’s proxy statement that the company and its franchisees pay employees no less than $11 an hour systemwide.
The resolution went one step further: If the chain set its own minimum wage, shareholders would recommend that the financial impact to their holdings be offset by a cut in franchise fees or a hike in prices.
It was shareholder activism taken to a new height, via a new route.
Faith, who says she holds 2,875 McDonald’s shares, argued that the actions were only proper given the National Labor Relations Board’s re-designation of McDonald’s in mid-December as a “joint employer” of franchisees’ hires.
Although the recommendations were non-binding if approved, McDonald’s took no chances of allowing a precedent to be set, a backdoor policy-setting process to be established. Legal advisors to the chain showed they’d paid attention in law school by providing shareholders with seven pages of legalese as to why the resolution could and should be excluded from the proxy.
The general thrust was that matters like wage levels fell within the day-to-day responsibilities of management and were beyond the purview of shareholders.
4. BWW’s new bid for sales
After the nets are cut down by the winning team in the NCAA college basketball tournament known as March Madness, look for Buffalo Wild Wings to try a new way of tempering the drop-off in sales. The chain has become such a popular place to watch games that management regards the elimination of popular teams from its core markets as material events that need to be brought to the attention of shareholders.
This spring, shareholders will see the sports-bar chain try to muscle its way to more midday sales by beating fast casuals at their own game.
“In 2015, to increase lunch sales, we'll launch a nationwide lunch program in April that highlights what guests want from a lunch occasion: Variety, value and speed,” CEO Sally Smith told analysts. “We conducted several tests and believe our approach will help drive traffic during lunch, while optimizing the speed in the kitchen to ensure guest satisfaction.”
She was mum on the particulars.
BWW has experience in fast casual, having been formatted originally as a limited-service operation before recasting itself into a full-service sports bar. It also holds stakes in two fast-casual upstarts, Pizza Rev and Rusty Taco.
The chain has also proven it has the smarts to keep sales growing. Comparable store sales for company-run restaurants increased 11.9 percent for the first five weeks of 2015, management revealed.
5. If Mexican is where the sales growth is …
Two of the restaurant industry’s standout performers last quarter were Chipotle and Taco Bell. If you have $150 million and a mandate to spend it on a restaurant acquisition by mid-November, wouldn’t you look at other concepts in the Mexican limited-service market?
That’s exactly what restaurant veteran and one-time concessionaire Larry Levy is doing, according to a Reuters story that broke this week. The article indicated that Levy is a leader in the bidding for Del Taco, the third largest player in the Tex-Mex sector. It may not be matching the recent sales increases of its betters, Chipotle and Taco Bell (with comp increases of 16.1 and 7 percent, respectively), but it would give Levy an entrant in a hot field.
For the same reason, you have to wonder if there’s interest in Qdoba and Baja Fresh.
Levy is expected to use the $150 million that’s at his disposal from the creation of a public blank-check company last fall. Investors bought shares with the expectation Levy would use the money to make a restaurant acquisition.
Reuters said that the acquisition of Del Taco could be valued as high as $500 million because of outstanding debt.