Darden Restaurants unveiled a new Olive Garden logo this week, and criticism from the peanut gallery has been . . . well, unkind. Slate’s L.V. Anderson, for instance, complains:
The new logo looks like the homework assignment of a teacher’s pet in second grade. The cursive letters are perfectly formed, circular, evenly sized. Clearly, Olive Garden is aiming for a youthful audience with its “brand renaissance,” but it has aimed far too young—no adult has ever written two words in cursive as perfectly formed as the new wordmark.
See for yourself.
Olive Garden’s new logo. Maybe not the best choice for a typeface design?
The new logo strikes me as looking too simple, too basic. Had it been the original logo, it would have suggested simple, peasant fare at reasonable prices. And maybe in a fast-casual environment.
But, of course, that wasn’t the concept at all. And it’s not the concept today.
Then there’s the “Italian Kitchen” part. So 2010. I’m not sure what it adds to the “Brand Renaissance” that Darden officials announced this week. ”Kitchen” nonetheless has been popular for several years among chains. Popeyes, which has been using the word on its outlets since 2008, said it would insert “kitchen” into its corporate name.
Clearly, the word is meant to evoke the idea that food is foremost on the mind of the brand (apparently, the building and its interior are not quite capable of doing that). Now, are you wondering how far away is OG from talking about local sourcing? Well, don’t.
Do you believe that management’s plan to spin-off Red Lobster will create value?
That was the question posed this week by Hedgeye, a website that describes itself as a “bold, trusted, no-excuses provider of actionable investment research and a premier online financial media company.”
The question raging this week among financiers: Should Red Lobster re-examine its real estate before deciding whether to spin the aging brand off?
The site was asking visitors to vote as to whether spinning-off beleaguered Red Lobster, the plan management has floated in recent weeks, would add value to Darden Restaurants. Hedgeye itself thought the spin-off was a terrible idea.
“Red Lobster may become less profitable and, as a result, less valuable.” Hedgeye says. “The plan does not address the issue of managing multiple brands.Management’s proposed initiative simply removes one underperforming brand from a large portfolio. . . . . It is time for significant change.”
Apparently, visitors to the site feel the same way. Those agreeing that Red Lobster should stay put for the time being (80%) easily outnumbered those who did not (20%) — at least as of today.
Not surprisingly, Hedgeye’s objections to he spin-off mirror Starboard Value’s, a hedge fund that owns 5.5% of Darden stock. Star Value has been vociferous in its criticism of management, publicly airing its concerns earlier this week in a letter to shareholders, which said, in part:
Starboard believes that the Company should undertake a comprehensive review of all available operational, financial, and strategic alternatives to create value for shareholders before hastening to complete a Red Lobster Separation that may destroy substantial value. Starboard is concerned that if the Company completes a spin-off or sale of Red Lobster without first fully and objectively evaluating all opportunities for the Company’s owned real estate, then substantial shareholder value could be destroyed.
And just in case Darden’s senior managers and shareholders didn’t fully grasp how upset Starboard was, the letter-writer reminded them in boldfaced caps:
SHAREHOLDERS DESERVE AN OPPORTUNITY TO HAVE THEIR VOICES HEARD BEFORE DARDEN COMPLETES ANY SEPARATION OR SPIN-OFF OF THE RED LOBSTER BUSINESS
For our part, we’re not taking sides, having no dog in this fight. But we can’t help but think that Darden — one of the most respected multi-unit operators in the business — needs to to invigorate its increasingly moribund seafood brand. If that means re-examining real estate, then we’re all for it.
Posted in chains, hedge fund, Investing, M&A, restaurants, value
Tagged darden, headge fund, real estate, red lobster, seafood, spin-off
The restaurant industry is in a no-growth — or, very modest growth — mode. According to figures released today by the NPD Group, the number of commercial eateries swelled by less “than one percent from a year ago reaching a total of 633,043 units” in 2013. Restaurant units increased by 4,179, a slight 0.7 percent increase over last year. Take a look:
*Percent change from a year ago Source: The NPD Group/Fall® 2013
Part of the problem is consumers, whose reluctance to visit restaurants like they use to is reflected in the industry’s comparable sales numbers. Restaurant managements, in turn, have deemed it wise not to open new outposts.
Growing! Fiesta Restaurant Group intends to add 21 company-owned Pollo Tropical to its stable in 2014.
Then again, chains are indeed adding new units. Fiesta Restaurant Group (FRGI), which operates Taco Cabana and Pollo Tropical, is bullish on expansion of the latter concept, says an updated analyst’s report from Piper Jaffray:
Updating FY14 Expectations: For FY14, total revenues are expected to increase 10.9% to $611.5 million, reflecting our +4.2% system-wide same-store sales projection comprised of +5.0% at Pollo Tropical and +2.0% at Taco Cabana. We are maintaining our FY14 EPS estimate at $1.25 based on our expectation of 21 new company-owned Pollo Tropical units and 3 new company-owned Taco Cabana units.
Posted in Analytics, chicken, expansion, fast food, Growth company, quick-service restaurants, restaurants, statistics
Tagged fast food, growth, restaurants, stats
Do you have a tendency to compare your company to its competition? Of course. What business — or businessperson or athlete, musician, actor or writer, for that matter — doesn’t? I mean, how else do you gauge where you stand, competitively speaking, at any given moment?
But is it really that crucial to “stand” somewhere in relationship to rivals? Perhaps there’s an alternative way to think about other companies (or people) engaged similar pursuits. Maybe merely being better than they are (or more cutthroat) won’t take your company as far as it can otherwise go.
Author and blogger Bernadette Jiwa caught my attention recently addressing this issue. “It’s far more productive and more profitable to obsess about what your customers are doing,” she writes.
The big question: Should Firehouse Subs add a drive-thru window because it meets a customer desire? Who knows? But it’s a better question than asking whether we should add one because our competitors have.
As far as I know, Jiwa doesn’t understand the restaurant business like you do. In the blog post I’m citing, for instance, her example is Uber.com. But what she’s suggesting here should nonetheless sound very familiar to operators.
“Becoming the competition doesn’t always mean using the same old rules to beat others at their own game. Focusing on the tiniest gap in your customers’ desires might be a better strategy.”
Well, duh. What business besides restaurants is eminently capable of doing just that, in spades? That has always been the touchstone strategy for success in this business. The best independent operators typically listen to customers in an attempt to exploit that gap — and quickly.
But what about multi-unit operators? A good case study is now shaping up among some fast-casual chains testing drive-thrus. A notable example was recently reported by Jonathan Maze on Restaurant Finance Monitor’s website. Here’s the problem.
The biggest challenge is speed. “We’re not fast food,” [Firehouse Subs CEO] Don Fox said. But drive-thru customers expect their food quickly. When Fox became CEO of Firehouse in 2003, the company had two locations with drive-thru windows, but “I would not say they were well executed,” he said. Speed was “very slow,” even for a chain that heats its subs the way Firehouse does. Fox put a freeze on new locations with windows, until the idea could be studied further, and then the idea was shelved for a few years.
Note that Fox isn’t asking: How soon will my competitors be up and running with drive-thrus? Instead, he is wondering: How well can we do this and keep those customers happy who desire a drive-thru experience?
“Our speed of service standards are not, certainly, fast-food standards,” Fox said. “We had to understand customer expectations.”
So deliver on that ”gap in your customers’ desires” and sales should increase — at least enough, in the case of fast-casual restaurants, to earn their businesses a healthy return on the drive-thru investment.
In the January issue of Restaurant Finance Monitor, “The Answer Man” declares technology is a major 2014 trend. No argument there. But when he wonders why restaurants are making such big investments in point-of-sale systems, for example, when mobile technology is the thing. RTS Partner Mike Lukianoff had to speak up.
First, here’s the The Answer Man’s complete statement:
“Mobile transactions are the wave of the future. Olo, a restaurant mobile ordering service that counts Five Guys and Noodles as customers, reports four million users, double that of a year ago. Restaurants using the service report higher check averages and increased order frequency. This begs the question: If customers already have a smartphone in their pocket and the technology is proven to build restaurant sales, why are restaurant owners installing more POS, table-top devices and kiosks? Why not use the customer’s smartphone and save the big IT dough?”
Is smartphone technology making POS technology obsolete?
There is no question about where the trends are headed. Digital mobile technology is going to change the standard service model across the entire industry. However, ordering from your own mobile device inside a restaurant is very bleeding edge. Even kiosks and tablet ordering has far from 100 percent consumer acceptance – particularly if we segment customers and potential customers by generation and income. The key to adopting new technology in restaurants is to understand how it enhances the experience by providing more diverse ways for people to tailor their own experience. If it’s used purely as a cost-control to save labor, it will just narrow the appeal of the experience rather than improve and expand it.
You may be aware that thanks to the Internal Revenue Service your restaurant can no longer automatically add a gratuity charge to large parties without having to pay tax on said charge.
That’s right: The restaurant must report an automatic gratuity, not the server who handled the party, who now likely has to wait to receive a wage for the work.
An IRS ruling now in effect may complicate the issue of adding an automatic gratuity to large parties.
That because a 2012 IRS ruling, which went into effect January 1, considers automatic gratuities as “service charges” and treats them as taxable sales income. To be sure, server tips are taxable, too. But they are reported the day they’re collected and cashed out.
“Under the IRS ruling, Rev. Ruling 2012-18, a sharper distinction is drawn between tips and service charges,” a spokesman for the Tax Foundation tells us in an email. Under the new rules, to be a tip:
(1) the payment must be made free from compulsion;
(2) the customer must have the unrestricted right to determine the amount;
(3) the payment should not be the subject of negotiation or dictated by employer policy; and
(4) generally, the customer has the right to determine who receives the payment.
Because automatic gratuities don’t meet these criteria, the IRS says thy’re service charges under the ruling. That means operators must funnel them through their payroll system, making servers wait for as long as two weeks to receive them as wages.
We’ve heard that to end-run this ruling some operators will offer customers three tipping percentages on their bill (15%, 18% and 20%). Of course, there’s an unspoken option, too: No tip required. That could make it more difficult to encourage servers to take large parties.
We’d love to hear how you intend to handle this ruling and what is likely to be a complicated situation.
RTS Partner Andy Simpson traveled to Japan recently, bringing back an interesting tale about what Japanese consumers buy when they are hungry and in a hurry.
Grab-and-go and pre-made foods are in high demand in Tokyo as evidenced by their availability. These photos show some examples of what you see at every 7-Eleven store and elsewhere. Salads and small meals are available in numerous sizes, including small snack portions that merely cost a dollar.
Customers examine goods in a Tokyo convenience store in Tokyo.
Deliveries are received two and three times a day. Freshness and quality is significantly better then what you would expect. The opportunities I noticed in c-stores were in presentation, packaging and branding. There’s almost no difference in packaging (see below); all of the products are packaged similarly with little branding to differentiate the products.
Opportunity: Differentiate c-store packaging.
Train stations offer a greater variety of prepackage ready to go in self-service formats. Quality level is high and the convenience can’t be beat. You can grab a box full of ready-to go-foods while passing through the station.
Meal solution: It’s easy and convenient to grab a meal in the train station.
Have a few more minutes? High-quality home-meal replacement, much like we are accustomed to seeing in grocery stores, is prevalent in high-traffic train stations as well. I spotted many good-looking displays but astoundingly few products that appeared to be made on-site.
The display at Dean & DeLuca.
Dean & DeLuca (above) is a very popular brand in Tokyo that’s doing a better job than most with product displays and branding what they sell. They’re producing on site in a glass walled-off kitchen area as were a few other bakery-style concepts with a European feel.
Bakeries in train stations and other high-traffic areas have a European feel.
There are a lot more fried items than you would expect. There is also a large skewer craze taking place; chicken skewers are available in many outlets in self-serve formats that would never be allowed by health departments in the United States. In fact, many food displays would not meet the health codes in America. I didn’t spot any sneeze-guards and witnessed cooked products kept in non-temperature-controlled environments.
Fried foods are popular as grab-and-go items.
Quick Serve restaurants. Quick-serve American brands in the high traffic areas like train stations are missing opportunities to gain more business. For one thing, their displays are not current. Imagine a high-quality, custom-made pizza in place of this old school food-court-style presentation. I bet many of the new-wave pizza concepts would do well here.
Old-School: Pizza displays in Tokyo look as though they belong in a mall food-court from the ’80s.
Technology. The use of technology in restaurants isn’t new to Japanese customers and table side ordering and calling wait staff when you need them using a table mounted button are commonplace. Of the more unique technologies in use (to an American anyway) is a kiosk pre-order and pay system (below). While the displays on the unit were not very attractive, it’s easy to image this will be a much better experience in the near future.
Order up: Even before this customer enters the restaurant, the kitchen is cooking his meal.
Posted in branding, c-store, Customers, design, fast food, Fast-casual, Food, grab-and-go, ideas, innovation, pizza, restaurants, service, technology
Tagged c-storea, grab-and-go, technology
Anyone recall when Cracker Barrel Old Country Store was roundly hammered for discriminating against gays? You’re forgiven if you don’t; it was a while ago, and it was a rather unpleasant affair.
Coincidentally, I was writing a profile at the time of the chain’s late founder, a former oil jobber named Danny Evans. While at headquarters an executive whispered to me that the controversy was touched off by a customer in Tipton , Ga., who while dining with his family became upset when the group witnessed a male server pinch another male server on the rear end.
The Duck Dynasty stars. Phil Robertson, who made anti-gay remarks, is far left. Photo courtesy The Washington Post.
Evan’s New York Times obit mentions his company’s ensuing problems, which involved the chain’s failed defense of its anti-gay policy, in the first sentence. Cracker Barrel eventually apologized and if it never quite embraced gay issues after the incident it stopped its biased hiring (and firing) policies.
Which circuitously brings us to the question of the day: What’s the appropriate course of action when anti-gay remarks are made by someone with a connection to your restaurant chain?
For Cracker Barrel, the pendulum looks to be swinging the other way amid the Duck Dynasty controversy. The Lebanon-, Tenn.-based chain initially pulled Duck Dynasty-related merchandise from its shelves shortly after the the popular show’s star, Phil Robertson, made his widely reported anti-gay remarks. Officials announced the move on Facebook.
Producer A&E meanwhile banned Robertson from the program.
It turns out that Cracker Barrel, again, made the wrong move. After an almost immediate hue and cry on social media and elsewhere, the chain posted the following note yesterday to its Facebook page (after receiving 32,000 comments):
Dear Cracker Barrel Customer:
When we made the decision to remove and evaluate certain Duck Dynasty items, we offended many of our loyal customers. Our intent was to avoid offending, but that’s just what we’ve done.
You told us we made a mistake. And, you weren’t shy about it. You wrote, you called and you took to social media to express your thoughts and feelings. You flat out told us we were wrong.
Today, we are putting all our Duck Dynasty products back in our stores.
And, we apologize for offending you.
We respect all individuals right to express their beliefs. We certainly did not mean to have anyone think different.
We sincerely hope you will continue to be part of our Cracker Barrel family.
Posted in branding, casual-dining, Customers, Employees, ideas, labor, restaurants, Uncategorized
Tagged anti-gay, controversy, Cracker Barrel, Duck Dynasty, gay issues, gays
The protests against fast-feeders and low-wage-paying retailers continued over the Thanksgiving weekend — and continue into this week. The groups behind these protests are citing a recent study that’s likely to convince even more Americans that the minimum wage must be increased, and soon.
“The high participation rate of families of core fast-food workers in public programs can be attributed to three major factors: the industry’s low wages, low work hours and low benefits.”
“Overall, 68 percent of the core front-line workers in the fast-food industry are not in school and are single or married adults with or without children. For more than two-thirds of these workers, fast-food wages are an essential component of family income.”– Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry
The study, sponsored by the University of California, Berkeley and the University of Illinois at Urbana-Champaign, was funded by Fast Food Forward, a pro-worker and pro-union group that has ties to SEIU (Service employees International Union). The union has long been unsuccessful at organizing restaurant workers.
The union also is helping to create worker centers as a way to organize and influence the public regarding, chiefly, low wages of fast-food workers. The aforementioned protests in front of fast-food outlets is a tactic the centers have recently used to gain attention and sway public opinion.
The study was condemned by a Worker Center Watch spokesman, who declared in a press release that “the report being touted by the union PR machine completely distorts the facts and ignores the reality that fast food employers often offer the only opportunities for many people to work, gain new skills and advance.”
Not surprisingly, WCW has close ties to businesses that don’t like unions.
The WCW claims these centers are not playing by the rules the U.S. government long ago devised for unions when Congress passed the The Labor-Management Reporting and Disclosure Act of 1959. The worker centers don’t appear to be unions, however.
Worker centers have been particularly active in 2013, and no doubt their protests will persist as long the economy remains sluggish – and employers have no particular reason to add new workers to their payrolls or, indeed, raise the pay of the 4.6 million employees at or below minimum wage.
Still, there’s no arguing that the federal minimum wage ($7.25 an hour and $2.13 for tipped employees) can’t support a family. Not that it was meant to, of course, when teenagers comprised the bulk of fast-food workers.
Today, with many fewer teens flipping burgers, few fast-food companies pay minimum wage, long-term anyway. The average wage for foodservice workers (including fast-food employees) is $9 — though even that wage has come under fire as far too little.
“So can anything be done to help these workers, many of whom depend on food stamps — if they can get them — to feed their families, and who depend on Medicaid — again, if they can get it — to provide essential health care? Yes. We can preserve and expand food stamps, not slash the program the way Republicans want. We can make health reform work, despite right-wing efforts to undermine the program.
“And we can raise the minimum wage.”– Paul Krugman, December 1, New York Times
This spring proponents in Congress attempted to lift it to a federally mandated $10.10 an hour. H.R. 1010, which proposed to increase the minimum over three years, was voted to down in the U.S. House of Representatives, with all the Republicans voting against it.
In November, however, Gallup reported that a majority of Americans are in favor of increasing the minimum wage to $9 an hour. (58 percent of Republicans said they would vote for it.)
Wherever you stand on this issue, one thing is clear. As long as pro-business politicians control votes in the House of Representatives, no minimum wage bill is likely to pass. It’s really that simple.
Posted in burger chains, employment, fast food, government data, Government regulations, hourly workers, politics, quick-service, restaurants, ROC United
Tagged fast food, minimum wage, politicians, restaurants, worker center watch, workers