August 2009 Archives

Several months ago I attended a VC Conference and one of the guest speakers was Forbes Publisher, Richard Karlgaard.  Of course, six months ago how could you do anything but talk about the recession.  What stayed with me was Karlgaard's take on the recovery.  He said we will see the recovery very soon, but it won't feel like it because so many others will have yet to feel it and the media will concentrate on those who remain downtrodden.  I believe there's much truth to that notion.  Those who have a real stake in Wall Street ... well, they are seeing the recovery in their retirement, in their stocks, in their overall portfolio.  That translates to spending among the affluent in real estate, automobiles, homes or at least investment property, retail and yes, restaurants.  However, the majority of the population, those still employed but hanging on by playing it conservative and those unemployed, they'll spend their $4 on McDonald's because they need quantity over quality.  That simply means the recovery is slower for casual and fine dining.  

Fifty-one weeks ago today the White House took over mortgage giants Fannie Mae and Freddie Mac and pledged up to $200 billion to back their assets. From there, you know the story. The U.S. economy hasn't been the same since.

The full-service segment has taken some serious blows and just about everyone is offering deep discounts and promotions to stay in the black. But how much longer will it go on? Hudson Riehle, the National Restaurant Association's senior vice president of research and information, predicted October for a turn around, which means there's only about 30 days to go!

But reports are beginning to surface now that prove we might already be in recovery mode. Just today, Reuters reported that a year-long dive in economic activity in the Midwest finally came to an end in August.

And signs point to renewed confidence in the food and beverage segment as well. In a recent KPMG survey, 60 percent of the food and beverage CEOs surveyed expect the industry to recover ahead of the rest of the economy.

As a person who watches business news closely and reports regularly on the state of the industry, I, for one, am a little tired of the recession. "XYZ Company Does XYZ Despite Tough Economy" is not a thrilling story to report on or read about after the first three months.

And I've got a feeling consumers have had their fill of recession-proofing their lives, too. Like any good trend, being a recessionista is only fashionable for one season. As proof, look at the success of McDonald's Angus Burger. A $4 burger in a recession? Never going to work ... unles ... we're not in a recession anymore ...

So, what are you seeing? Can we declare the recession dead and gone? What do you use as your economic bellwhethers? Give me some happy news!

My vote is for Julia Stewart, CEO of IHOP.

Perhaps that's because we used to be neighbors (Julia literally worked down the street from my office when she was President at Applebee's International...headquartered in beautiful Lenexa, KS). But I have to say, I did not have the pleasure of meeting her at that time. And frankly, it's her work in the industry since leaving Applebee's that has impressed me the most.

Julia Stewart comes from humble beginnings; she waited tables at IHOP in high school and earned her degree in Communications from a state university-not your typical pedigree for someone running a multi-billion dollar company and especially not for someone who also happens to be the only woman running a publicly held restaurant chain.

Since her stint began at IHOP, she has completely revamped the business model, asking franchisees to acquire property and build their own facilities. She is also responsible for the IHOP acquisition of Applebees' purchased at the rock bottom price of $2.1B. IHOP (Dine Equity) stock is up 62% in the last year-I'd say her strategy is a success. That is one woman that makes business happen.

Maybe my affinity for Julia Stewart comes from the fact that I have two daughters. I think it would be great if they'd like to get involved in the food industry someday. There's truly a lot of opportunity for women in this industry, especially with women like Julia Stewart leading the way.

How great would it be for women if the most recent winners of Miss USA and Miss Universe stated that their lifelong ambition was to be an influential figure in the foodservice industry.  That could pave the road for so many young women in this country to enter the field and balance the scales.  NOT.  Does anyone even watch those programs any more?  They seem as relevant as the AT&T Yellow Pages books that continue to kill trees.  I can't say I know who would be in the top 100, but I thought I would take the liberty of singling out a few noteworthy women who are raising the bar, challenging men and elevating women's status in the industry.  This year's top new chefs of Food & Wine features Naomi Pomeroy of Beast, one of 11 chefs featured and the only female.  One out of 11 which seems crazy to me.  Even Top Chef can do the math.  

Increasing consumer demand for natural and unprocessed food products is creating a new challenge for food product developers. Until now, food scientists have always been able to put texture development on the back burner, turning to it only after flavor has been fully optimized, but not anymore. This is because the range of "acceptable" ingredients typically used to manipulate and design texture is shrinking. Products that are gluten free, or have fiber added, are especially creating challenges for scientists.

With so much of our perception of taste coming from the texture of foods that we're eating, it will be a challenge to create natural foods that still have a satisfying taste and texture. While many of us really want healthier products, I'm curious to see at what cost. How will consumers respond to the taste and texture differences in some of our favorite products? Will our demand for all-natural tortilla chips wane after we discover that they never may be as thin and crunchy as a typical restaurant style tortilla chip? I think in order for all-natural foods to go completely mainstream, product developers may have to find a way to alter our palates', not so much the texture of our foods.

Forbes recently released its list of The World's 100 Most Powerful Women. [Spoiler alert: German chancellor, Angela Merkel, won the No. 1 ranking.]

But what's really interesting for this woman in foodservice is that two of the top-10 women were from the food and beverage industry. Indra Nooyi, CEO of Pepsi, came in at No. 3, and Irene Rosenfeld, CEO of Kraft Foods, came in at No. 6.

Even though a debate about how Forbes chose its 100 winners would be an interesting one (where was Sarah Palin?), that's not where I'm going with this. Instead, I started wondering who the most powerful women in our industry are.

I interview a lot of industry game changers--most of them men. But there are women in the foodservice industry that should be considered pretty powerful, too.

There's two QSR cover subjects, Linda Alvarado (138-unit Yum! franchisee) and Valerie Daniels-Carter (CEO of one of the nation's largest quick-serve holding companies), for starters. In fact, there's a whole organization called the Women's Foodservice Forum that's full of powerful women from our industry.

So I'm turning over the question to QSR's all-male blogger team and you, the reader, for a different perspective. Who do you think would make the list of Foodservice's 100 Most Powerful Women?

As Dean points out, we don't know what Ms Benjamin's intentions were in serving on the corporation's science advisory board. And the truth is, we may never really know...but having worked heavily in the R&D side of the business myself for many years, I can tell you that at present most companies are investing in ways to make their fare more healthy, not less. That said my quasi-educated guess is that her expertise was enlisted to further this cause.

Personally, I find it hard to make a case against Ms. Benjamin seeing as she was just hired last year and has been paid a mere $10,000 for her services at BK thus far. That to me hardly seems like a vested interest. She's either not doing a whole lot there or she believes whole-heartedly in what she's doing and isn't demanding a lot of money for it. And hopefully, that's all there is to it.

In my opinion, it really all comes down to this: Your view of the game depends on where you're sitting. And in this case, where you're sitting probably means to the right or left of the middle.

Click on Blair's Conflict of Interest reference to get Greg's insight on the topic. He claims ...

"From a public health perspective, fast food restaurants like Burger King and McDonald's have done far more to help people than harm them. The fat-bottom line: People in America and around the world aren't dying from malnutrition because places like B.K. have made food fresh, cheap and simple to prepare. Seriously, where ever you find a fast food restaurant, you'll find fat kids, but not starving ones."

If the Surgeon General's role is to safeguard America against starvation, great. However if the role is about nutrition, the reduction of obesity, diabetes, heart disease ... I think this issue is simple. The Surgeon General is supposed to set the bar, be the standard, serve on a higher plane. He or she (in 2009) shouldn't be a chain smoker ... obese ... hasn't exercised in 20 years or an employee of a fast food restaurant. It's just that simple.

Here's an idea. Let's find a healthy, active individual who happens to be smart or at least have the necessary degrees to get the job. Maybe Jack LaLane!

Since I don't know all the facts, I can't comment conclusively on this topic other than to throw out some specific points of consideration and acknowledgment.  One, kudos to Burger King for securing Dr. Regina Benjamin to its scientific advisory board.  Obviously Burger King didn't know she would be considered for such a post but it was a smart move to align with someone whose credentials must be impressive.  Secondly, if Dr. Benjamin's intentions for joining the board were based on taking a company such as Burger King and moving it from a polluter of the American diet to a model corporate citizen, then I say sign her up.  That's exactly the type of person we need in that position.  It's really no different than a firefighter joining a band of arsonists with the intention of transferring their fixation from fire or a dog abuser becoming the spokesperson for a humane society if his intentions are to stop young people from abusing dogs.  At the end of the day, it comes down to intentions.  If Dr. Benjamin's intentions were anything but converting Burger King, then I'm afraid I would rather see her flame broiling burgers in the back of a BK than in the role of SG.  Sorry PBO.

The nation's second-largest burger chain was thrown into the political fray last week thanks to President Obama's nominee for surgeon general.

Last Thursday, the Washington Times broke the story that Dr. Regina Benjamin has been serving on Burger King's scientific advisory board since last year, earning $10,000 for her work with the company. Benjamin's ties to the company were made public in recently filed financial disclosure documents.

And it took no time for the "conflict of interest" debate to begin. Media organizations and experts are questioning Benjamin's nomination wondering how she can ethically represent Americans' best health interests after working for a quick-serve powerhouse. Others defend the nomination (including some Republicans and Democrats), applauding her post-Katrina clinical work.

As for Benjamin herself, a spokesperson vowed that she would leave her role with Burger King upon confirmation by the Senate.

But I want to know where you stand. Does Benjamin's work with one of the world's largest fast-food companies make her incapable of being responsible for the health of our nation? Or does it give her a better perspective, a view from the inside you might say, on the obesity problem?

Or, perhaps, the answer is somewhere in the middle.

I think something we can all agree on here is the fact that both of these Quick-Service Superpowers have, ultimately, been two of the most successful companies in American history. They have exceeded expectations of consumers on a regular basis and managed to withstand the test of time and the peaks and valleys of the American economy.

Aside from both McDonald's and Starbucks commitment to social responsibility, these companies have been ultra savvy in the way of constantly reinventing themselves in order to "keep up with the Jones's" - the Jones's being the American consumers, of course. McDonald's was smart enough to add new menu items, focusing on more appealing and healthier food, more chicken, apple dippers, and salads, not to mention their McCafe line.  They added longer hours to capture late-night diners, started to focus on quality and customer service, updated the interior in thousands of their locations, including flat-screen t.v.'s and video games for children, and started giving away coffee drinks on Mondays.

Starbucks has completely reinvented their menu, turning themselves into a QSR where you can dine on healthy and natural fare and can find smoothies, muffins, salads, and more, all under 500 calories. And in the latest buzzworthy Starbucks news, the coffee giant has decided to open new locations, only not with the Starbucks brand name. In Seattle, they've just opened 15^th Avenue Coffee and Tea,  a coffee shop with a more "neighborhood" spirit. This location is selling wine and beer plus hosting live music and poetry readings, ultimately, to encompass the spirit of a local neighborhood coffee spot. Though still serving Starbucks products, their cups and bags will reflect the 15th Avenue Coffee and Tea logo.

So really, whichever way we choose to look at it, we can't avoid knowing that both of these giants have had the genius to overcome the rough times and still remain pretty close to where they've spent a lot of time...very near the top.

These are two iconic brands, for what it's worth.  Starbucks has accomplished much in 30 years.  McDonald's will be celebrating 70 next year.  Good or bad, both brands represent America around the world.  They are big, capitalist machines whose iconic brands and products have pioneered industries and/or changed behaviors.

Some of us can still remember pre-Starbucks when coffee was something you consumed at home and it was a commodity product like drinking water from a tap.  You had low expectations.  Today it's a luxury item, consumed just the way you want it.  The burger category offered us the option of "Having it Our Way," but it's the coffee category that brought out the American in all of us ... Our way with little exception every time or we'll leave you.  Granted, everyone doesn't love Starbucks, but a great many people do.

For McDonald's, today it's a destination of convenience, affordability and peace of mind (if you have children).  We're not going to McDonald's because it's good or healthy or the environment is cool or comfortable.  It's a commodity driven experience like drinking tap water.  McDonald's has such an opportunity to reinvent itself ... Even Whole Foods has admitted it has deviated from its core position ... For the sake of profits.  Most of us don't see that, but Whole Foods is getting out in front of it before we do.  Starbucks reacted late to this miscues, but its CEO assumed the responsibility for departing from its core, its mission, and stepped back into the fold to right the wrongs of the brand.

These are two different brands that can co-exist.  I would simply like to see them co-exist on the high road so that the American consumer and the global consumer are better because of them.

No body, executive or company can claim to be perfect. But the American consumer doesn't ask for or expect perfect. Even the fanatic doesn't have that expectation. However, we are moving into an era where companies must strive to be better, more accountable.  Better is relative though and interpreted in many ways. Many will say, McDonald's is a great corporate citizen.  The Ronald McDonald House has served millions, right?  The Ray Kroc Award, a great concept at the high school level, has also supported great achievement.  They created the burger, the happy meal and think about all those people they employed.  Wow.  I don't discredit any of those achievements.  Let's hold that thought though.  

It wasn't too long ago that Starbucks was considered the McDonald's of coffee. Now with the brand offering an expanded menu and McDonald's offering premium coffee, it seems Starbucks just is McDonald's period.

But even though the two companies are crossing paths more frequently these days, there's still some very big differences that set them apart.

I had the chance recently to visit Starbucks' Seattle headquarters, learn about the company's newest products, and even ask CEO Howard Schultz a few questions. What struck me was the team's passion--from store counter to corporate boardroom--everyone was informed and enthusiastic. Of course, it was a media tour, but it was clear their knowledge and passion for the brand wasn't just a show.

I also spoke to McDonald's Danya Proud about the company's new McCafe line just last week. And there was passion there, too. The company is finally bringing premium coffee to the masses at a price people can afford, and they're lovin' it (Sorry, I couldn't resist).

What I'm getting at is that these two brands are aggressively going after distinctly different clientele. For example, Starbucks is testing a new menuboard in one of it's Seattle stores that doesn't post prices. Think that would ever work in McDonald's? No way!

I'm not saying McDonald's is the poor man's Starbucks, but I am saying that reducing the two brands to a simple rivalry misses a lot of what's going on in their stores.

There are some days I want to sit, relax, check some emails, and have a cup of coffee. And there are some mornings that I just want a quick mocha without breaking the bank before I get into work.

I bet you know what brand I choose in each scenario. That's because, at the moment, there's a lot more that separates the two companies than unites them.

Recently on Monday mornings, I've been stopping by my local McDonald's to support the Free Mocha Monday's campaign. Okay, I doubt it needs much "support" from little old me...I mean, how hard can it be to give away free mochas, right?

Apparently, McDonald's execs are not taking any chances, assigning the McCafe line a $100 million marketing budget. Now, that is what I would call some serious cash dedicated to what seems like a blatant effort to steal customers away from coffee giant Starbucks. So I have to wonder, does this effort have newbie Starbucks shaking in its boots? Apparently, not a chance.

Remarkably, Starbucks has chosen to differentiate itself as well by creating a new menu that is filled with natural, healthy fare. Starbucks has cut out artificial flavors, artificial preservatives, dyes, and high-fructose corn syrup in all its menu items. They've also started using more high quality, fresh ingredients like Washington apples, Oregon blueberries, and Michigan cherries. Many menu choices are under, if not considerably under, 500 calories. 

I, like many of you, tend to patron each of these chains for different reasons. But now, with the McDonald's McCafe option readily available, the question becomes will I go out of my way to get my coffee at Starbucks if there is a McDonald's closer by? Answer: probably not. On the other hand, will I go out of my way to get my lunch at Starbucks if there is a McDonald's closer by? Answer: probably, yes.

Starbucks did a great thing by reinventing their menu. They gave me a reason to keep going back.

If I were a restaurateur, my answer may be a little more complex, but as it stands I am not; so I think my best, most genuine advice would come from my perspective as a consumer.

 

Here's a list of my top complaints based on actual events:

1. Grimy bathrooms...yuck. If I'm at your restaurant, and your bathroom is gross, I am going to go out on a limb here and assume your kitchen is 10 times grosser. I expect gas stations to have dirty bathrooms, not restaurants.
2. Noise...no big deal, right? But please, don't seat my wife and me next to a 16-year old's surprise birthday party when there are perfectly good (quieter) seats elsewhere in the restaurant.
3. Unappetizing food...A good rule of thumb, if it doesn't look good to you, it probably won't look good to me either. If it's overcooked or undercooked, your customer doesn't want it. And they sure as heck don't want to have to tell you they don't want it! This makes you look like an amateur.
4. Slow, inattentive wait staff...with unemployment at an all time high, I am sure there has to be someone out there that needs a job and has the hustle and attention necessary to be a skilled server. Industry experience means nothing without delivery as we all know.

Listen to your customers, feel their pain, address their grievances. And most importantly, be consistent...ly good.   

As Blair states, everyone knows running a restaurant is hard, but hard-working people run successful restaurants all the time. If friends and family would not describe you as hard working, then move on immediately.

Ironically, we are in the midst of interviewing candidates for a new model we are rolling out, an operating partner concept that requires only $10,000 to get a paid salary, benefits and a share of the profits. We tell candidates ... Experience in restaurant management is critical. You don't need a great deal of it ... Two plus years but you must know what it's like to manage the front and the back of the house. Second, realize everything takes longer than people are willing to admit. If you read today's New York Times, there's a story about a restaurant called Pierre Loti Café and Wine Bar ( http://www.pierrelotiwinebar.com) in Gramercy Park, forced to forgo the wait for its liquor license because the city says it will take six months. Everything takes longer. In a good franchise system, they should be able to set realistic expectations.If you go it alone, do the research in your local county regarding building permits and liquor licenses.I used to say the same thing about costs to build out a store.It will always cost more than what any builder tells you. But times are different and more often, you can negotiate a better price in your lease and your build-out.

Again, if you are going it alone, you must be willing to negotiate aggressively and ultimately, walk away.If that's not your style, find someone who can do it on your behalf.If none of this scares you because you are that hardworking personality, then you passed the first test.Most important though, don't let any of the hardships of running a restaurant bury what needs to be an engaging, friendly disposition when a customer walks in the door. Remember, at some level you must do it for the love of the game.

I know it may sound difficult to swallow, but not all restauranteurs are in it for the love of the game.  Some, many ... get into it to make money.  Stop, freeze-frame that idea.  Please ... there are easier ways to make money. Of course, there are day traders who have a knack for turning dirt into gold or at least bronze.  Let's take that small group out of the equation. For the rest of you, here's what you need to know. Running a restaurant in the year 2009 (let's say 2010 because it sounds more futuristic and many of you won't get into your biz until then) should be a little like running a restaurant in the early 20th century. Many of us wouldn't recall such a time when you walked to the local restaurant ... a place where everyone knew everyone (not counting Cheers). Restaurant owners took care of their employees ... treated them like family, sought their meats and vegetables from the local purveyor. Restaurant owners never hesitated to help out the local church, the local school and everyone in the community knew how generous they were. Restauranteurs were more the fabric of the community than anyone. Today, if you choose not to follow the practices of history ... of legitimate, neighborhood merchant protocol, you will be called out. Your neighbors will make noise, your employees will banter negatively and the competition will prey on your misgivings. No, they won't do it in the streets or in the pool halls or at the local neighborhood watering hole. They'll do it at all those new addresses -- Facebook, Yelp, FOHBOH, Chow, Myspace, LinkedIn, Ning. So if I was starting a restaurant today, I would do it for the love of cooking and feeding guests. I would set a code of standards for all employees to follow and I would be transparent, accessible and engaged in my community so when the day comes (and it will come) when someone wants to slander my restaurant for no apparent reason, 10 more people will be waiting in the wings to kick this individual out onto the street because that's what neighbors do for those who do for them.

There's a lot of people these days revisiting the restaurant industry as a viable option of employment.

From ex-Wall Streeters to retirees who have seen their 401(k)s plummet in value, Americans have gone back to basics, realigned their priorities, and realized they've always wanted to own a restaurant.

Sure a lot of them won't last (the hours are long, the work is hard, and the employees are difficult). But I'd like to offer them a fighting chance.

I'm tapping our expert panel of bloggers and our readers to find out what pieces of priceless advice they have to offer the industry's newest members. What would you never do again? What can't you live without knowing in the resturant business? And what do you wish you'd known when you started?

From menu to management, it's all fair game. Just don't hold back. Tell us what every restaurateur should know.