The ear trumpet must be on the fritz again. How else to explain the revelations this week that sounded so clear but were too far beyond conventional restaurant wisdom to be an accurate listen? Who, for instance, would readily believe they heard…
Domino’s is more of a supplier than a restaurant chain. Everyone this side of Wall Street thinks the chain’s core business is delivering pizza. But the franchisor said Wednesday that 61 percent of its second-quarter revenues—some $303 million—came from the sale of supplies to Domino’s-brand restaurants. That’s double the stream of company-restaurant sales and franchise royalties, combined.
In addition to selling pizza ingredients, the home office supplies franchisees with the equipment needed for the chain’s ongoing renovation push, part of a recast of the brand as more of a fast-casual concept, replete with a display kitchen a la Chipotle. With that program still in the early stages, and unit sales growing at a comparable-store pace of 12.8 percent, that side of the business is a supercharger for the topline.
It’s not a bad contributor to the bottom line, either. The gross margin is about 11 percent.
Yum! executives speak English. That’s a mindblower, since Wall Street seems convinced the franchisor of Taco Bell, KFC and Pizza Hut is a Chinese company. Conditions in China were all financial analysts wanted to talk about during Yum’s call this week about second quarter financial results. Not about Taco Bell’s 6-percent comp-store sales gain in the United States, or Pizza Hut slipping further and further behind Domino’s. They wanted “color” on KFC’s rollout of seafood items and a breakfast menu in Asia and why the company is straining to regain momentum in its most-populated market.
CEO Greg Creed tried to dampen the China lust by saying right up front that Yum is not going to jettison the ailing Asian business through a spin-off. But the questions about conditions on the other side of the globe continued to roll in like stoners at a Taco Bell drive-thru post-1 a.m.
Finally, an analyst asked the sort of question that makes CEOs squeamish, about why their charge is under-performing the competition. But Creed was delighted to talk about Pizza Hut’s difficulties in its home market. “Thank you for asking a non-China question,” he remarked.
Restaurants and government make good partners. At least that’s the hope of the Buffalo Wings & Rings chain and officials of Obetz, a village in Ohio. The town just signed on as a franchisee of the Ohio-based concept, with a development schedule that calls for opening one store. Obetz has been wooing national chains to locate a branch there, seeing the addition as a quality-of-life enhancement. The courtship produced no takers. So now Town Hall is assuming the development and ongoing operations itself.
Dave & Buster’s is mounting a challenge to Candy Crush, though its smartphone games promise more than frustration and wasted time. As an extension of the concept’s in-restaurant arcade amusements, management is inviting consumers to try digital versions of three console-type games that are among the most-played in stores. Winners are rewarded with virtual tickets, loadable onto a swipe-card account, that can then be redeemed in-store for prizes, just as actual tickets from on-premise games can be swapped for loot. Winners will have a strong reason to visit a restaurant.
"We wanted to enhance our in-store experience by providing a virtual experience," said Kevin Bachus, Dave & Buster’s SVP of entertainment and games strategy. It’s probably not a coincidence that he previously worked in the video-games business.
Baltimore’s business leaders ganged up to eat local restaurants’ lunch. And dinner, too. Most important, they paid full-freight for it. The Greater Baltimore Committee, a group of businesses and nonprofits devoted to promoting local business, pledged this week to have each of its board members hit local restaurants as if they were out-of-town tourists nearing starvation. Each was expected to have a lunch or a dinner.
The directors were also obliged to pay for restaurant meals for five employees each.
The 500 businesses and nonprofit groups that belong to the GBC were asked to do the same.
The fit of local boosterism was an effort to offset the traffic slowdown that restaurants are apparently still feeling since the eruption of racial strife in April scared away tourists and kept residents huddled at home. Riots were touched off by the death of a young black man, Freddie Gray, while he was in police custody. The National Guard was called into the city to quell the violence.
“Many [restaurants] took a financial hit from the unrest and so we want to show that we stand behind them,” said GBC CEO Donald Fry. “We also want to highlight to everyone in the region that city restaurants want and need your business."
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