October 2009 Archives

For more than a year, we have watched, read and experienced the challenges of driving consumers to our brands, finding money to open new concepts and identifying qualified franchisees.  There are signs that point to a consistent recovery incline happening as we speak.  We are certainly seeing it in our Planet Smoothie and Shane's Rib Shack concepts.

 

Sourcing money is a different challenge, but with the stock market's impressive run, investors are returning to the game.  However, they remain few and far between and so we believe dollars exist for those brands with compelling stories, differentiated products and a vision to scale beyond the four walls of their business.  Let's reserve that topic for another blog entry. 

 

That leaves us with finding good franchisees.  By good we mean experienced, reasonably well capitalized and eager to be engaged in the business.  If not the latter, then they better be married to an impressive GM.  Today, I believe to find good franchisees, one must explore multi-concept, multi-unit, retired military, entrepreneur and what we call buddy-share (three or more colleagues investing).  I also believe it takes multiple versions of franchising:  traditional vs operating partner that lends itself to varying degrees of financial commitment and profitability.  Once you have defined your strategy for who, then you must address the question how do you find these candidates.

 

Without handing over the golden goose, I can tell you it's an involved recipe of PR, Social Media, Market Tours and overall brand visibility that enables you to show up on the radar of good franchisees while not burning too much time sorting through the bad and the ugly. 

It seems a mock version of the Flannery O'Conner title is appropriate given the fact that Good Franchisees Are Hard to Find, these days and in general.  As the story begins innocently enough, the family ventures out on vacation, led by a cantakerous grandmother.  They eventually come across the Misfit character, an escaped murderer who seems harmless enough ... maybe even a good man until he ultimately kills the entire family at the close of the story, only to be revealed as the son of the grandmother.  Isn't that what makes the search for a good franchisee so hard.  So many can look good on paper, but once they get in the system, it's difficult to know who is going to be a team player ... who is going to be active in their local store marketing ... who is going to be a role model vs who is going to be absent, litigious, a violator of the brand.  Multi-unit and multi-concept operators do take the guess work out of it because they have a track record of compliance, of engagement of management and ultimately of success.  So that may be the best starting point.  And the fact is, those "men" are easier to find at industry shows, in the press, on LinkedIn, etc.  At the end of the day, I do believe, if you are a good franchisor, "A Good Franchisee Isn't So Hard to Find."  

I'm sure you remember the now famous "Where's the Beef?" ads (the ones with the three old ladies and the fluffy bun). I remember how good those commercials were and that they were spot on in defining the Wendy's brand in a clear and focused way. Those ads were great! But in the years since the death of Mr. Thomas, and with the several failed Marketing campaigns, the brand's image has struggled to find its place.

QSR's associate editor, Sam Oches, snagged an exclusive interview with Odoba's vice president of franchise development, Todd Owen, last week. In the Q&A, Owen points to the brand's large number of multi-concept franchisees as the source of its success.

Owen goes on to explain that there are three reasons the brand is attractive to such high-level partners. According to him, Qdoba is good for franchisees who have already built out their market with their other brands, who are looking to transition from the hard-hit casual-dining segment, and who are interested in an all-around good brand.

But, dare I remind everyone, there's a recession going on. I keep hearing that qualified (read: financed) franchisees are as hard to find as Balloon Boy. Are there even multi-concept franchisees out there that are looking to expand?

In interview after interview, I'm hearing that corporate is ready to pounce on a market but execs can't find any solid franchisees to take the reins. Banks aren't lending, the SBA is struggling, and few existing franchisees are in the market to take on another concept.

Qdoba, of course, isn't the only brand woo-ing these types of franchisees. Most brands would love to have more multi-concept partners on their teams, and some are finding them. But just like a good man, great franchisees aren't just cruising Match.com waiting to be picked up.

Where can brands find these types of people? Is it all about who you know? Or are there even big, stable, experienced franchisees even out there to be had? Tell me what you're seeing.

Is KFC's newest publicity stunt in the best taste? Maybe not. Effective? I think so. Sometimes it seems the most off the wall stunts are the ones that gain the most attention. The image of Colonel Sanders demanding a seat in the UN General Assembly for "Grill Nation", giving free chicken to UN employees, and declaring this coming Monday UNFryday while handing out free grilled chicken at 5000 stores is really pretty clever. I believe this latest stunt will indeed boost sales and create a major buzz. As you said, Blair, we're all already talking about it.

While some consumers think Colonel Sander's wacky plea to the UN is quite funny, others will undoubtedly think the stunt is far from humorous as well as inappropriately timed, considering the global recession, wars in the Middle East, and UN Climate Negotiations in Copenhagen just over a month away.

My thought is that YUM! Brands' screwball marketing campaign, as silly as it is, be met with serious commitment to corporate responsibility on a global level. Perhaps in their plea to the UN, they should have also promised to adhere to the UN Global Compact's Ten Principles for Corporate Sustainability. At least that way we all know that for them, responsibility comes first, even if the approach is tongue-in-cheek.

In today's news, the Fed is slashing Wall Street salaries, Iran is in negotiations that could slow its nuclear program, and KFC is lobbying to get a seat in the United Nations.

OK, which one of these doesn't belong?

If you guessed the KFC publicity stunt, I'd say you're 100 percent correct. KFC has a history of these types of antics. I remember in 2007, the company asked for the pope's blessing of its then-new KFC Fish Snacker. Did KFC ever get a response? Who knows. But the buzz was great. We covered it on our Web site, and I specifically remember telling parishoners about it that Lenten season.

Yesterday's stunt with the U.N. is really no better or worse. What it is, is unoriginal.

The motive behind the U.N. request is the company's "Grilled Nation"--the 60 million people who have tried the chicken brand's newest grilled menu item. On Monday, Oct. 26, the company is celebrating "UNFry Day" by giving away a piece of free grilled chicken to customers across the country.

If the goal is to get as many people through the door to try the product, why involve an international governing body? The pope stunt was unique, but this latest publicity attempt makes the company's marketing efforts seem unoriginal and (dare I say) annoying.

The international community is waging two major wars, battling a global recession, and trying to keep nuclear proliferation to a minimum. Does the U.N. really need KFC knocking on its door asking to sit in on talks? I think not.

It's not that the company is incapable of launching a smart marketing campaign. Just last year, it had a great one. If any of the 2008 presidential candidates mentioned world hunger in a presidential debate, the company offered to donate $20,000 to hunger relief efforts. Now, that's edgy.

All this, of course, is just my opinion. What do you think of KFC's new marketing effort? Is it time the company stops wasting people's time or is it publicity pay dirt? What other brands have you seen use these kind of tactics? Do they really work?

Either way, we're already talking about it. So I guess the joke's on us ...

Now this is what I call eye opening. What I love about this receipt is that it tells me how many calories my order has based on the way I choose to customize it. In addition, it tells me what percentage of my daily caloric intake has been fulfilled, which in turn will definitely make me think twice about what I eat for the rest of the day.

Overall, I think this is a great idea. As you can tell, an 888 calorie lunch is a little over the top, but this restaurant was not afraid to put it out there. Instead of waiting for legislation to make QSRs advertise calories and other not so glamorous nutritional information on their best selling menu items, why not just tell the consumer up front what they're getting. Could this be one proactive solution to this problem of impending doom? I think so. By spelling it out for consumers, QSRs put the ball back in the consumers' court and in the process empower them to make decisions they can live with. I believe consumers will respect this decision and thank them for giving this gift of power.

There's no doubt, playing CEO requires some ego.  Afterall, you're responsible for large numbers of employees, shareholders (at some level), vendor contracts and in some cases, a financial role in your local community.  It can be an awesome responsibility so ego is in play.  I say that because I think it's one of the biggest challenges in having dual CEOs.

That's a great deal of ego in the room.  Can it work?  Sure, but only under the best of circumstances -- two people with distinct talents where the sum of their parts makes for a better company.

 

I liken a CEO to a Quarterback because the QB carries a great deal of responsibility, on and off the field, as leader and motivator.  Yet few teams have dual quarterbacks.  Having played QB at Clemson, and now serving as CEO of Petrus, I can tell you that soloing is easier ... in part because of ego.  However, if you have a QB who has an amazing arm and a QB who can run the ball, well then it's time to put aside ego and go with the dual QB strategy.  Many CEOs are equipped with running and throwing skills, but it take a bigger CEO to say, let's get someone in here who can throw the bomb when we need it.  I'll manage the running game and collectively, we will dominate. 

It is true.  The Hispanic and Latino markets are growing rapidly.  Some US-based companies have learned the dynamics of communicating with these markets.  Many continue to do a poor job, thinking if they simply translate communications in the native tongue, Hispanic and Latino communities will welcome them with open arms.  With an Hispanic area of concentration in our firm, we see these mistakes all the time.  The communication strategy must begin with community initiatives that are designed to foster a better quality of life.  Those initiatives will vary based on the market and the demographic like it would with an Asian, African-American or White population.  It does seem rather intuitive that if we are seeing a heavy consumption of fast food, then we should be focused on health education.  If we are seeing a high dropout rate, then we should focus on literacy and education.  If we are seeing a higher crime rate, then place attention on after school programs and athletics.  Then I would like to see companies use advertising to promote great community based programs, first and foremost.  There's plenty of vehicles -- PR, social media -- to speak to products and services.  Smart companies will use paid media to take on more of a public service announcement strategy than an overtly commercial one.  That's how you build brand loyalty.

Coca-Cola has announced it will offer a slimmer can size in 2010. The new slim can will hold a 90 calorie serving size in comparison to the regular size can which holds a 140 calorie serving size. This announcement comes after a similar one last week that Coca-Cola will also start displaying soft drink calorie counts visibly on the front of all of its products.

This is a great step for Coca-Cola and a giant leap for the industry. Pending legislation to tax soft drinks as a result of the obesity crisis in America is likely to have forced Coca-Colas hand on this. But I say, so what? If beverage and snack companies who are seemingly being sought after as the scapegoats for the crisis are willing to change their ways, then why punish them?

Our primary concern here should be awareness and education, not money making (although that would be ideal). We cannot stop people from making the choice to smoke a pack a day or making the choice to drink a coke with every meal and then some by imposing a "sin" tax. While tax increases on cigarettes may have impacted the number of smokers out there somewhat, municipal codes to regulate smoking in public have hands down made the most impact. And let's be real here, are we going to stop serving Coke at McDonald's or any other fast food restaurant out there? No, never. My point is that a simple tax is not going to make a significant difference in changing the way Americans think.

There are some things money can't buy including a person's choice. But, we can make the choices healthier. Let's not sell consumers short by assuming they are not willing to make the switch to a healthier lifestyle on their own. If a person is living a healthy lifestyle, then they certainly deserve to have a Coke without paying a premium for it. By penalizing the beverage and snack industry, we are only creating hurdles for everyone involved - consumers and companies alike. We have to give companies a chance to step up and evolve before we condemn their products with hefty taxes. We have to stop and think about the repercussions of our actions in this legislation.

Coca-Cola employs some 200,000+ Americans and an estimated 3 million in supporting industries. By implementing a "sin" tax on the snack and beverage industry are we going to achieve the goal of changing peoples' minds? Or are we going to achieve some unwanted outcome in the process, such as jeopardizing jobs? This simple tax is just not as simple as it seems.

Coconut water has come quite a long way in the five years since New York based One World Enterprises L.L.C. introduced their respective natural coconut water products. In fact, from 2008 to 2009, sales are projected to grow by $15 million. Even Coca-Cola and PepsiCo have invested in coconut water companies, probably with hopes to redevelop their Gatorade and Powerade products.

Companies like McCormick and Company are putting coconut recipes on their website, using it in soups, sorbets, and as an addition to fish. And Sabinsa Corp recently got the a-ok on using coconut water solids as a nutrient in alcoholic and non-alcoholic beverages, frozen dairy, snack foods, gum, teas, coffees, and more.

With natural sweeteners, light flavor, natural electrolytes such as potassium, magnesium, calcium, phosphorous, and sodium, and low in calories....I wouldn't think it would be too long before we are seeing coconut water as a major beverage on health store and qsr shelves alike.

This blog gives us a lot to think about - as does the article from Tommy Thompson and the excerpt from Soledad O'Brien's book Latino in America. However, I'm not sure that I can take a firm stance on exactly how advertisers should spend their dollars when there are just so many factors to consider.

I definitely support corporate social responsibility (especially when it comes to multi-billion dollar corporations). And yes, we all know Latinos will soon be the majority population in America. But because the Latino population in America has grown so rapidly, I wonder if the media has not had a hand in skewing our perception of this cultural group. We hear a lot about illegal immigration where the Latino population is concerned.  It's as though they are sometimes being reduced to a race and ethnicity, only without any insight into the culture itself.

That said, if QSRs are going to spend a large amount of money on reaching out to these communities, I think they need to do it in conjunction with advertising that sheds light on the hard-working familial aspects of the culture, and their transition into American culture. After all, the Latino culture is one that is changing America and being changed by America, and what's most important is an educated and united society. If corporations like McDonald's and Burger King can help to achieve that, then they should.

We've discussed reality TV on this blog before, but this time the focus is slightly different. CNN (news can be considered the ultimate reality TV, right?) will be running a series called "Latino in America" next week, hosted by Soledad O'Brien, that examines the--you guessed it--Latino experience in America today.

While "Hispanics Now Largest Minority" might have made for an interesting read six years ago, we're all well aware today that the segment is growing rapidly and on pace to become the majority in the near future

McDonald's, No. 5 in overall Hispanic media spending, shelled out $94.3 million in 2008 to reach the demographic. Yum Brands? It ranked No. 34 and spent $37.9 million. And Jack in the Box ranked No. 16 in top advertisers on Spanish-language TV with a price tag of $10.7 million.

There's no doubt our industry is taking notice. Latinos are practically a quick-serve's dream client: young (check), value-oriented (check), and big spending power (check, please!). But a recent column by Ad Age's Tommy Thompson asks companies to stop and look closer at the growing segment. He writes:

"I wonder if sometimes the process of selling the idea of marketing to Hispanics, we get more caught up in evangelizing about the younger age, larger families, and almost $1 trillion spending power this consumer has and we overlook the fact that this lucrative consumer segment is more than just a consumer segment."

Thompson goes on to challenge brands, especially those already devoting marketing money to Latinos, to become actively involved in combating some of the issues challenging the community. The school dropout trend, teenage pregnancy, and anti-immigration sentiments are all fair game.

"I challenge you to get professionally and personally involved," he writes.

I tend to support most community outreach performed by companies, but these are some pretty heavy topics. Is it realistic to ask companies to bare this burden? Are brands likely to jump on board? And what are the risks and rewards of such a move?

(The stats listed above come from Ad Age's 2009 Hispanic Fact Pack.)
 

 

Underground supper clubs are open for business. And if you're not familiar with this term, you may want to acquaint yourself. This could be the dawn of a new food era.

In cities around the country, people are getting together to share meals with strangers at locations announced just hours before dinner is served (password pending). It goes like this: organized dinners are held at various peoples' houses, garages, lofts, and any other structures that suit a makeshift dining room for the evening. Events are usually staffed by anyone from up and coming chefs, to restaurateurs trying out new dishes, to obsessed foodies who love to whip up a mean meal just for fun. These factors combined create at traveling restaurant, if you will, that depends on word-of-mouth buzz for business.

In NYC, a standard four course meal at one of these secret dining clubs could run you about $50/person. Not too bad for a four course meal, but the real value in an event like this runs deeper than just the food. People are seeking something different, something new and exciting. They exclusivity of such events lends itself to the concept of a common man's country club. And with the craze over reality shows centered around the culinary arts (i.e. Hell's Kitchen & America's Top Chef) this trend is to be (dare I say) expected?

QSR's should take note that mainstream consumers are growing more adventurous in their dining out-ings. They're jumping at the chance to mingle with new people and explore new foods in a new-to-them atmosphere. So how can QSR's capitalize on such a trend? Can you find a way to create some mystique in your restaurant?

Whether through the food you offer, or the atmosphere you create, hopefully this trend could spark some new ideas and give you permission to try out that questionable idea that's been sitting on the shelf for the past year. People are ready for a change. Think outside the restaurant.

I do believe the co-CEO model can be an effective way to run an organization if communication lines are clear and everyone understands who is doing what. But I am not sure that I think the restaurant industry is a more conducive environment for the concept to flourish than any other industry. It seems to me the most important factor in the success of the relationship is the people who are in it. I thought it best to share some of the insights from co-CEO's at food industry concepts who have made it work.

Co-CEOs of P.F. Chang's and Pei Wei, Robert "Bert" Vivian and Rick Federico claim that they have always worked as partners in every sense of the word. The co-CEO arrangement recognizes that and allows the partners to allocate the CEO-level responsibilities that play to their individual strengths.

Mrs. Fields Famous Brands LLC co-CEOs Michael Ward and John Lauck claim that success is based on clear and defined roles. For instance, Ward spent most of 2008 working to reorganize the companies debt while Lauck ran the day to day operations. Their offices are right next to each other and they meet together daily so that they're always on the same page. Employees don't ever have to wonder whether a question is for John or Michael, they always know who to ask.

As for Larry Flax and Richard Rosenfield, who were partners in a law firm for 34 years before they chose to share the CEO title at CPK and  A.S.A.P, they say it works for them because they work on everything together. They both have areas they really like; Larry loves food, Richard loves numbers. They both know that in order for a co-relationship to work, there has to be some chemistry. Egos must be left at home. They don't disagree about who is right. It's about finding the right answer.

Perhaps I'm sensitive to this because I recently got married, but I've noticed that marriage is often compared to a business. It can make you money--married couples earn more than singles--and it can lose you money--networths tend to start declining just before a divorce.

You get the point. But let's shelve the Dr. Phil chatter for a second. What you rarely hear about is the roles reversed: business being like a marriage.

In a recent Business Week article, Matthew Boyle tackles the issue of co-CEOs. I'm sure you can see the marriage metaphors a mile away by now.

From the article: "It's a marriage of convenience," says Michael Useem, a management professor at the Wharton School. "But like all marriages of convenience, it tends to lead to divorce pretty quickly."

Overall Boyle isn't a fan of the idea and neither are most of his sources. There are a litany of companies that have managed to make the concept as taboo as universal healthcare: Unilever, Citigroup, and Kraft to name a few. Egos get in the way, ambitions slow progress, and power struggles abound. 

But retailer Aeropastale is Boyle's shining example of a company that's making it work. The brand's sales are up, despite the economy, and the CEOs have different areas of expertise. What's interesting from the foodservice perspective is that several restaurant brands were also on the list of successful companies with co-CEOs.

Califonia Pizza Kitchen, Chipotle, and P.F. Changs all have two people sharing the role and seem to be benefiting from it. And, at our recent executive conference, Dine America, there were several smaller brands with two, three, and even four co-founders and company leaders.

Is there something about the hospitality industry that lends itself to sharing the corner office? Do you think this is a good idea? Or is it bound to end in a nasty divorce?

Plan for the worst, hope for the best is my advice. Inflation is the reality we are facing and it's not going away any time soon. I think we are looking at a new (higher) plateau where food prices are concerned and I'm sure most restaurant owners & execs out there are already aware of this. Now the question becomes what can you do to mitigate the impact of rising food costs on your profits while staying comnpetititive in the market?

First, while it is feasible to pass some of these rising costs on to your customer it is not likely that they will tolerate the entire impact. That said a large portion of the forecasted increase in costs will need to come directly from your operating budget. It's time to take another look at your already strapped operating expenditures to determine where you can cut out additional waste and expense. Get creative. Ask your employees if they have any suggestions. Offer incentives to those that contribute ideas that significantly improve efficiency and cut waste.

Next, are you doing everything you can to retain your current customer base? If ever there was a time for customer loyalty--now is that time. You can be sure that when prices go up, people are going to be even more picky about where they eat and where they buy. Ask your customers directly if they are happy with what they are getting and if there is anything you can do to improve their experience? Stay open-minded. Remember you are invested in your business, the customer is not. Listen to what they have to say. Keep your customers happy and they will keep coming back.