The financial conference convened this week in Orlando, Fla., provided a snapshot of what some 36 chains and a number of their suppliers are doing to land customers and channel a profit back to investors. These are the surprises that had listeners looking up from their notepads and laptop screens.
Ghost kitchens 2.0?
The ghost kitchen model is evolving, according to Jim Collins, CEO and founder of an acknowledged leader in the emerging field, Kitchen United (KU). The company has discovered that a significant number of consumers want to pick up their own meals instead of waiting for a delivery driver, provided the location is convenient. KU has also learned that location matters considerably to third-party drivers. If the kitchen complex is too remote, the drivers don’t want to handle the pickup. Plus, some of the areas in which the kitchens are located are viewed as dangerous. The company is now looking for sites a few blocks off main drags instead of venturing farther afield.
Casual-dining chains are increasing their use of promotions to pull in bargain hunters, but the approach often backfires, said Gene Lee, CEO of Olive Garden and LongHorn Steakhouse parent Darden Restaurants. Once inside the restaurant, customers drawn by a deal may not find it flagged on the menu or on in-store materials, so they go ahead and “buy up,” Lee explained. They don’t get the value that brought them there, “and there’s a real danger in that,” he said. “You have to create everyday value on your menu.”
How bad would a recession be?
Heads jolted upright when Lee offered his assessment of the industry’s ability to contend with an economic downturn. “If we do have a recession, the closures will be greater this time than they were last time,” he said, referring to the Great Recession of 2008.
Hindsight on fixing Cheddar’s
Asked what he’d do differently if Darden got a second shot at acquiring Cheddar’s Scratch Kitchen, an assimilation that’s not gone smoothly, Lee didn’t hesitate. “I would have put my own president in there on Day One, to be honest with you,” he said. “We lived with their management team for 18 months.” Any future acquisition will have to sport a culture compatible with Darden’s pronounced style and strategy, he added.
Never mind food and labor inflation—construction costs are soaring
One of the issues stinging the industry, according to Punch Bowl Social CEO Robert Thompson, is a steep climb in construction costs. “Everyone in this room is experiencing about 3% construction inflation per quarter,” he said.
A Punch Bowl hotel?
Thompson revealed that Punch Bowl is considering the startup of a hotel bearing the Punch Bowl name, though he acknowledges the venture may never go beyond a model built in the parking lot of the restaurant chain’s first unit.
Breakfast for dinner heads home
About two-thirds of the items delivered from a Denny’s are breakfast dishes, though they tend to be ordered for dinner as well as to start the day, and typically by young families, said CEO John Miller. The most popular delivery selection is pancakes, followed by burgers.
Denny’s annual pruning
Denny’s closes about 37 restaurants every year, or roughly 2% of the system, to keep the brand looking fresh. It’s currently undergoing another face-lift—a renovation called Heritage 2.0—even though 11% of the chain has yet to adopt the original Heritage design, according to Miller.
An acquisition for Denny’s?
Meanwhile, with cash on hand, the brand continues to evaluate potential uses for it, including the acquisition of other concepts, Miller said. Denny’s expects to channel an additional $30 million into the pool from the sale of real estate owned by the franchisor, he added, noting that the company controls about 90 parcels.
Ruth’s regular checkups
A single bad steak can cost Ruth’s Chris Steak House a loyal customer, said Cheryl Henry, CEO of parent company Ruth’s Hospitality Group. The high-end brand manages that risk by requiring broiler chefs to demonstrate their meat-cooking proficiency every 60 days. The added benefit, said Henry, is pride in the product. The average tenure for general managers and chefs is just under 10 years.
More pickup-only traffic
Velvet Taco is joining Chipotle Mexican Grill and Dunkin’ in adding pickup-only drive-thru lanes. As in those chains, customers order digitally and pick up the order without leaving their cars, said CEO Clay Dover.
Fridays’ ‘wartime’ team eyes a new bar
TGI Fridays has turned over its management team to facilitate the venerable chain’s turnaround. “Peacetime and wartime generals tend to be different,” said CEO Ray Blanchette. A crucial next step in the rebound plan: “This year, we’re finishing up a pilot test to reintroduce the Fridays bar,” he revealed.