Difficult times require fearless assessments, bold moves and big ideas. Restaurant executives strived to deliver that caliber of leadership this week with candid disclosures of plans to invigorate their charges. Here’s a sampling of the innovations and strategic changes they divulged during calls with investment specialists.
1. McDonald’s mic-dropping plan
It’s such a doh! of an idea that it’s surprising every iPhone-using executive hasn’t pushed it. If Siri and other smartphone virtual assistants can recognize voice requests, why couldn’t one be programmed into a drive-thru microphone? Translating customers’ spoken orders into text, as voice-recognition systems can readily do today, would theoretically cut down on errors and shave time and labor out of the drive-thru ordering process.
McDonald’s doesn’t need any convincing. CEO Steve Easterbrooks revealed during a call with financial analysts that the chain is looking at a voice-recognition system as part of a larger effort to improve drive-thru efficiency. “There's a lot of work we're doing where we believe we can also enhance service, speed and accuracy and get technology to do some of that heavy lifting for us,” he said.
No target date for a test or rollout was mentioned.
2. Bloomin’s painful self-assessment
The casual-dining market could fill a whole week of the Dr. Phil show with its recent soul searching and critical self-examination. How did the hot segment of the 1990s become today’s doormat for the fast-casual market? Few assessments have been as candid as the one Bloomin’ Brands CEO Liz Smith offered to the investment community.
“For the last 11 years, casual-dining traffic has declined,” Smith said at the start of a presentation to analysts, a statement that was presumably less than comforting to stockholders of a casual-dining giant. “Price promotion, which ramped up in earnest during the recession, continues to increase, but has not restored traffic growth. At the same time, additional capacity continues to come to market.”
Indeed, she continued, about a fourth of the consumers who have stuck with casual dining are heading to whichever concept is offering the best bargain at the moment.
“The industry, including our brands, has overspent chasing this group through discounting and price promotions,” said Smith, whose charges include Outback, Carrabba’s, Bonefish Grill and Fleming’s. “As a result, [casual-dining] brands trade share back and forth among this subset of customers who are both less brand-loyal and are less profitable.”
The solution for Bloomin’, Smith said, will be a cutback in discounting, with the spared efforts serving the dual duty of differentiating the company’s brands from other discounters.
3. Flexibility trumps predictability
One of the reasons for chains’ difficulties in maintaining sales growth has been the loss of market share to independents, who typically have more leeway in tailoring themselves to the peculiarities of a local market.
For that reason, Qdoba is throwing away its cookie cutter and letting units adopt pieces of a new design and format. “The improved design for new construction and remodels is essentially a kit of parts,” explained Lenny Comma, CEO of parent company Jack in the Box. “We have minimum standards, but it won't be a one-size-fits-all approach.”
The flexibility also allows franchisees to match a store to the real estate and overall land investment.
One of the options for renovated units will be a full bar. One store with complete alcohol service is open in Philadelphia, and a second is opening in a suburb of Kansas City, Kan.
4. Kiosk ordering kaput?
One of the few full-service chains that hasn’t experimented with tabletop ordering kiosks is Texas Roadhouse, and don’t expect that distinction to change. CEO Kent Taylor acknowledged during the casual brand’s recent analyst call that younger customers are eager to place their own orders from the table and settle the bill themselves, “and not talk to people.”
But “they prefer to do just a quick thing on their phone,” he said. “Everybody that's invested in those kiosks on the table will probably be throwing those away in the next two years, because I think everybody's going to switch to phone applications.”
5. Applebee’s turnaround tweak
While Bloomin’ Brands pulls back from discounting, arch-rival Applebee’s is trying to figure out how to position its upgraded menu and cooking method as a bargain. In May, the chain turned a spotlight on newly installed wood-fired grills and steaks. The objective was upgrading the impression of Applebee’s food.
That strategy was successful, said Julia Stewart, CEO of parent company DineEquity, but “this quality improvement was met head-on by consumers looking for value.” Her comments suggest that the switch to grills didn’t deliver the traffic headquarters had expected, leaving Applebee’s with a 4.2% decline in same-store sales for the second quarter.
To overcome bargain hunters’ resistance, Stewart this week revealed, “We are currently working very closely with many of our franchisees to test and validate various value messages to help win short-term traffic.
6. Peyton is the man
One strategy that won’t be changing at Papa John’s, this year or in the foreseeable future, will be the chain’s reliance on retired Denver Broncos quarterback Peyton Manning. A stock analyst learned of that truth when he foolishly asked if the football legend’s retirement would prompt the chain to use another sports star in its commercials.
“We'll never replace Peyton Manning because Peyton Manning is not replaceable,” responded CEO John Schnatter. “Peyton Manning's in the spots. So we have no idea or desire to ever replace Peyton Manning. Peyton Manning is the Michael Jordan of football. Period. End of conversation.”