The year’s head-spinning moments: 5 that screamed for neck braces

More than 200 scraps of information have been plucked from the news stream and dissected here on Fridays because the tidbits signaled a shift in relations between restaurateurs and their seldom-sane triumvirate of masters: consumers, investors and government. Phenomena ranging from zombie attacks to can-crushing breasts were invoked to alert our tribe to developments that packed often hidden business intelligence.

Even if you caught every one of our weekly installments, these five head-turning developments from 2014 might draw your attention from the year-end bedlam. As the most arresting events among the year’s standout occurrences, they’ll likely keep necks sore well into the New Year.

1. Shareholders vote to cut the pay of Chipotle’s leaders

The memory might be dim because the proposed pay packages of co-CEOs Steve Ells and Monty Moran were rejected back in May, after Chipotle’s comp-sales increases had been clocked merely in the low double digits.  The fast-casual chain would go on to generate same-store gains of 17.3 percent and 19.8 percent in the second and third quarters, respectively.

The company’s stock price would top $697 per share; Chipotle went public in 2006 at $22.

Still, shareholders made the extraordinary move of saying Ells and Moran didn’t deserve what they’d been paid in recent years. And their checks were indeed whoppers: Ells collected $25.1 million in salary and stock, and Moran, his friend since boyhood, pocketed $24.4 million. That’s $49.5 million for fulfilling the duties of CEO, albeit by two people.

It’s unusual for shareholders to use their say on pay to challenge a CEO’s deal. In the instance of Chipotle, some 75 percent of shareholders voted that the pair at the company’s helm were collecting too much. It was the highest nay vote on CEO compensation among the nation’s 3,000 public companies. The vote was nonbinding, but the company agreed to make adjustments. 

2. Darden’s whole board is replaced

It’s routine for disgruntled shareholders to push for a seat or two on an ailing company’s board. The Chicago Cubs have won the World Series as often during the last century as dissidents have succeeded in sweeping out all of the sitting directors. But such was the situation this year for the parent company of Olive Garden, LoneStar Steakhouse and The Capital Grille. Darden Restaurants, whose management had reigned for years as one of the industry’s most respected team, was handed a broom and told to get sweeping. And that’s after the renegade shareholders succeeded in ousting CEO Clarence Otis and forcing the sale of the company’s largest asset, Red Lobster.

If there was ever a barometer reading of more shareholder activism ahead, this was it.

3. Word leaks of a possible $1 billion IPO for Shake Shack

The retro-burger concept, the brainchild of fine-dining Midas Danny Meyer, has about 50 restaurants and estimated annual operating profits of less than $20 million. Yet Reuters and Bloomberg reported that the 10-year-old brand is being packaged for a sale to the public at a sky-high valuation that could hit 10 figures, as in $1,000,000,000. If that sounds like craziness, consider that 38-unit Portillo Restaurant Group was sold by its founders this year to the private equity firm Berkshire Partners for what press reports pegged at $1 billion.

Both Shake Shack and Portillo’s, PRG’s main business, are regional fast-casual businesses with a hardcore cult following, plenty of room to grow, and a proven business model.

4. Seattle pushes through a $15 minimum wage

Suddenly, the so-called living wage was more than the moonshot hope of labor groups. The 60 percent hike in Seattle’s minimum came quickly and without the overt political wrangling that erupted in areas like Chicago and Wisconsin. It also buoyed the hope and determination of union-backed groups to push through a more-than-100-percent increase over the federal minimum wherever they could. And the public can point to the situation in Seattle and say, “See, it isn’t the end of the world. The city’s still alive.” It should have evoked one mega gulp from restaurateurs everywhere in the United States.

5. San Francisco mandates a two-week notice for changes in employee schedules

This one could signal the phase-out of a longstanding restaurant convention and employer prerogative, for places far afield from the Bay Area. With apparently little notice by the industry, the precedent-setting city passed a law last month that requires chain restaurants to give staffers at least two weeks’ prior notice of any changes in their work schedule.

If a storm should suddenly erupt, keeping customers home instead of filling a restaurant’s seats, the manager can’t send scheduled servers or kitchen workers home without a penalty. If a water main should burst, unexpectedly closing the street, it’s the same thing. The establishment has to compensate employees for any sudden cutback in hours with four hours’ worth of “predictability pay,” so the wage earners won’t be blindsided by a drop in take home.

The requirement only applies to restaurants that employ 20 or more workers and share the same name and format of at least 19 other places worldwide. At least that protection for workers should make chain establishments more attractive in the eyes of potential recruits.

The law takes effect in another five months.

The rest of the industry needs to remember that this is San Francisco, where universal healthcare and paid sick leave were mandated some time ago. It has long been the weathervane of things to come for restaurant employers everywhere.

A statewide version of the law has already been proposed in the California legislature, and other jurisdictions are reportedly studying it.

Writing this weekly report has been one of the great joys of my long career, but I’d love to learn what you think of it and how I can make it better. Email me now or at any time with feedback, promeo@cspnet.com.

We’ll be back with you on January 9. In the meantime, warmest regards for the holiday, and may your New Year be a head-spinner. In a good way. 


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