The events with the highest risk of neck strain this week had more to do with restaurants’ futures than the actual developments of the last seven days. Most medical plans would have covered chiropractor treatment because of the business import of what leaked from Washington, D.C.—and the irrepressible mouth of Donald Trump. And then there was the suggestion the Golden Arches would be redone in paisley if that would help traffic.
Keep reading to see what we mean.
Overtime-pay bomb is fused and just about lit
Regulatory changes that will undoubtedly cost the industry millions in overtime pay are likely to be announced within two weeks, according to leaks this week from federal rule makers. Indeed, several reports cited a specific day: May 15.
The updated rules will raise the salary threshold that determines when a restaurant assistant manager or other supervisory employee is exempt from overtime pay regulations. Currently, salaried employees paid more than $23,500 annually are not eligible for overtime if their work week exceeds 40 hours, a level easily surpassed in the restaurant business. The Obama Administration has suggested raising the trigger to $50,000.
The good news: Government sources have whispered that the threshold has been dropped to $47,000, and is still not set yet; it conceivably could go lower.
The bad: The rules had been expected by most Beltway watchers to be issued during the second half of the year, and perhaps not until the tail end of 2016, preserving margins for a few more months. Clearly the matter has been fast-tracked.
Research on tip models
The National Restaurant Association is conducting a series of focus groups with consumers and restaurateurs to assess their attitudes on tipping and possible alternative ways of compensating servers, according to Cicely Simpson, SVP of policy and government affairs. The research is intended to help the full-service segment of the industry navigate new tipping realities, including tighter government regulation.
The effort came to light during an interview for an upcoming Restaurant Business story on the industry’s top government concerns.
The same day, the rigors of that challenge were underscored by the announcement from Joe’s Crab Shack that a no-tipping setup was bombing in 14 of the 18 stores where the alternative means of compensating servers was being tested.
Donald Trump’s latest head spinner
No, it wasn’t The Donald’s effort to curry favor among Hispanics by eating a taco bowl on Cinco de Mayo from one of his restaurants, though the political showboating deserves a mention. Trump noted the dish had come from the Trump Tower Grill, a restaurant in his hotel. In fact, the Grill did not serve the bowl—it came from the Trump Café.
Pundits also observed that Cinco de Mayo is less of a true Hispanic occasion than a, um, trumped-up gringo event—as Eater.com put it, a chance for “frat bros” to pound tequila shots and Mexican beers.
The real head turner, which slipped past almost unnoticed, was the Republican candidate's change in position on wages. In an interview with CNN’s Wolf Blitzer, the hotel mogul and possible next president said he was open to raising the federal minimum wage, a reversal of his comment in November that American wages are already too high.
He did not say how much of a wage hike he would accept if elected president. But now all three of the remaining candidates have indicated they’ll raise the pay floor.
Jack to give Qdoba the heave-ho?
Speculation (and some obvious hopes) arose this week from Wall Street that Jack in the Box is about to announce a spinoff of its Qdoba business into a freestanding operation. Analysts say the word could come at Jack’s investor meeting on May 25 in Kansas City, the first gathering of its sort to be held since Lenny Comma took over as Jack’s CEO.
Reports of an imminent split in the company have circulated for years. Before Comma took the top job, the company had even acknowledged that it was exploring such options as a sale of the Qdoba chain, which has resoundingly out-performed its burger parent in recent quarters.
Jack has not commented publicly on the speculation.
‘Tis the season for spinoffs, a result of Wall Street preferring so-called pure plays in the restaurant business. Yum Brands filed papers this week in preparation for the recast of its China operations as a separate entity. Fiesta Restaurants, the quick-service company divested from Burger King franchisee Carrols Corp. a few years ago, revealed plans in February to split its Taco Cabana and Pollo Tropical brands into separate companies.
Is this the same McDonald’s?
Grey heads might have snapped particularly sharply this week at McDonald’s announcement that it’s tinkering with its French fries. The development combines two arguments for a protective neckbrace.
First, there’s the notion that the brand would alter what is arguably its most esteemed product, an icon praised by chefs and 4-year-olds alike. Once—and not that long ago—the sacred icon, the proclaimed gold standard of fries, would have been off limits to the smallest of tweaks. And now the product is being mixed with a garlic puree as what amounts to a limited-time offer.
Second, there’s the fact McDonald’s crowed about what it was doing. It was once the most secretive of brands, never disclosing what might be under consideration for the menu (its test kitchen at headquarters has shades that can be pulled down to keep even employees from getting a sneak peek). And now it was proudly pointing to a fairly radical experiment as proof that it intends to regionalize the menu (the fries are only available right now in the San Francisco Bay area).
The fries revelation comes a few weeks after confirmation the chain is experimenting with riffs on the Big Mac, its sterling signature. Clearly, the new management team isn’t kidding when it says no cows (or clowns) are sacred in the chain’s turnaround effort.