Archive for August, 2012

Restaurants Brace for Commodities Impact

Friday, August 31st, 2012

Restaurant operators are braced for dry, stiff headwinds in commodity costs as America’s food-producing regions continue to face the most persistent drought in a half century.

Operators from Krispy Kreme to high-end steakhouses are raising flags about the drought’s effect on wheat, corn, soybeans, and other produce, as well as pastureland, beef and poultry, and the effect it will have on the market basket. And little weather relief is in sight.

The U.S. Department of Agriculture’s Aug. 21 update said: “Serious agricultural drought effects persist east of the Rockies, despite cooler weather and recent showers.” For the week ended Aug. 19, the USDA reported that 51 percent of U.S. corn and 37 percent of soybeans were rated in very poor to poor condition.

Jeff Powell, president and chief executive of the 15-unit Razzoo’s Cajun Café, said he expects his Addison, Texas-based chain “will be negatively impacted by the drought and other pressures on grain supply.”

“Corn particularly is a baseline driver of economics in the supply chain,” Powell said. “A shortage of corn caused by drought or other dilution of supply by other uses (ethanol, etc.) obviously negatively impacts the dynamic. Corn is a necessary feed and source of oil, and when in shortage the impact on beef, pork and poultry prices is immediate.”

John T. Barone, president and commodities analyst for Market Vision Inc., wrote earlier this month that higher wheat prices for bread, pizza crust, pasta, flour tortillas and bakery products “are obvious.”

“The ‘sneaky’ price increase will come from the big bump in corn and soymeal prices,” Barone said. “That’s because they are the primary feed inputs for poultry, dairy cows, pork — and this year, cattle, because grazing pastures have also been toasted by the drought,”

Popeye’s Chicken & Biscuits recently pointed to the drought and high prices for corn, which is the main feed source for chicken, as the main cause of its higher costs. The company said commodities prices rose 1.5 percent for the second quarter, and company executives expect a 3-percent increase in food costs for the remainder of the year.

A volatile year ahead

Barone also pointed out that beef prices will see a “boomerang” effect. “Cattle ranchers are liquidating, selling off inventory and breeding stock at an accelerated pace,” he said. “This is currently having the effect of inflating available beef supplies and, as a result, beef prices have been moving lower over the past month.”

During the company’s second-quarter earnings call with investors, Wendy’s executives said they did see some relief on beef costs for the balance of the year, as the price of ground beef is dropping with more cattle being sent to slaughter. Next year, however, is shaping up to be more difficult.

“Come spring of 2013, when seasonal beef demand kicks in, there will be hell to pay,” said Barone. “The USDA says beef prices will be 4- to 5-percent higher next year.”

Produce prices are also seeing pressures, said Powell of Cajun-inspired casual-dining chain Razzoo’s. “Drought and other negative environmental conditions compromise the vegetable supply chain,” he explained. “Supply brokers scramble to find global sources of basic staples in both hemispheres. A reliable supply of jalapeños from Mexico may dissipate while a more reliable supply may emerge in Chile. … Our produce costs are volatile.”

Even companies dependent on a narrower slice of commodities are concerned. Douglas Muir, Krispy Kreme’s chief financial officer, said in a second-quarter earnings conference call on Aug. 22, that “commodity markets have been volatile lately and the effects of the drought have been significant on many products,” noting that Krispy Kreme expects costs to rise modestly.

“I should emphasize, though, that next year is a long way off and much can change in volatile times,” he said. “Except for sugar, we have not purchased a significant portion of next year’s need and we are therefore looking to lock in attractive pricing for next year whenever we can.” He added that the company is currently purchasing flour and shortening for the first and second quarters of next year.

Planning price increases

Many restaurant companies are considering modest menu price increases to mitigate rising commodities costs.

Powell said Razzoo’s is expecting its basic food costs to increase by 5 percent to 8 percent over the next year. He said that in response, the Cajun-inspired casual-dining chain anticipates a minor price increase, of 1 to 2.5 percent, over the next 18 months.

Stephen Hare, chief financial officer of Dublin, Ohio-based Wendy’s, said in a conference call with analysts on Aug. 9 that the higher beef costs will be the “largest driver” of commodity spending for the 6,500-unit chain. Hare also said the company would make cuts and “implement selective price increases.”

Similarly, Arne Haak, chief financial officer of Ruth’s Hospitality Group Inc., said in July that the Heathrow, Fla.-based chain of upscale restaurants was looking at menu engineering possibilities and “pricing opportunities.” And casual-dining chain Red Robin of Greenwood Village, Colo., said the commodities outlook was forcing the chain to look at “modest price increases.

Execution is a key part of successful price increases, noted James Morgan, Krispy Kreme’s chairman, president and chief executive. “If we do increase prices [we want to ensure] that we are increasing value to our guest and customers at the same time,” he said, “and I think the two are compatible.”

In addition, said Razzoo’s Powell, a “fatal response” for operators would be to compromise quality for a lower cost or to cut portions with the hope that the consumer wouldn’t notice.

“I see this as a healthy and heightened challenge to buy and execute better,” he said, noting that the challenge leads operators to “eliminate waste while maintaining value on the plate while also improving the overall service experience of the guest.”

He added, “Solid operators will react to these challenges and will meet what will be a substantial and increasing customer need. Others will be driven from the market.”

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Restaurants Can Find Opportunities with Ethnic Cuisine

Friday, August 31st, 2012

American consumers have grown more interested in eating ethnic food away from home, but many find their options at restaurants lacking.

That means the foodservice industry has an opportunity to drive traffic and sales with globally inspired flavors, new research from Technomic Inc. finds.

The Chicago-based market research firm found in its new Ethnic Food & Beverage Consumer Trends Report that only about a quarter of consumers polled said they were satisfied with restaurants’ selection of ethnic foods — including just 23 percent of consumers speaking for limited-service chains and 28 percent of those for full-service brands.

“Authenticity is crucial to the ethnic food and beverage purchasing decision,” Darren Tristano, the firm’s executive vice president, said in a statement. “Sixty-five percent of consumers say food that tastes authentic is one of the most important factors in deciding which establishment to visit for ethnic food and beverages.”

Restaurants could meet that demand with menu items that incorporate different flavors, taste profiles and preparation methods from around the world, he added.

“Consumers also say that dishes prepared by someone from that region are given greater credibility as authentic,” Tristano said.

Once customers find restaurants that reliably sell ethnic foods they like, they frequently buy those items, Technomic found, as 77 percent of consumers polled for the report said they purchase ethnic food and drinks away from home at least once a month. Minority groups largely drive this trend, as 90 percent of Asian-American respondents and 88 percent of Hispanic respondents said they eat ethnic flavors at restaurants that often.

Many respondents said they considered not only cuisines from foreign countries but also from specific regions of the United States to be ethnic food, such as Cajun and Creole, which were identified by 89 percent and 86 percent of consumers, respectively, as ethnic cuisine.

Still more consumers are open to trying new flavors and foods from abroad. According to Technomic’s report, 33 percent of respondents strongly agreed that there are many ethnic foods they would like to order at restaurants but are unable to find.

In the company’s Consumer Food Trends newsletter, Technomic senior research analyst Anne Mills wrote that consumers drawn to ethnic cuisines like Mexican, or Southeast Asian styles like Thai and Vietnamese, often are satisfying a demand for something new.

“Primarily, consumers choose ethnic offerings as a way to discover and experiment with new foods and flavors,” Mills wrote. “Ethnic meals allow consumers to diversify their diet with innovative flavors and ingredients, which can add a sense of adventure to even an ordinary meal.”

Of the Ethnic Food & Beverage Consumer Trend Report’s 1,500 respondents, 64 percent said they opted for ethnic food over typical American fare at a restaurant “to look for something different,” while 61 percent also cited a reason “to discover new flavors.” Another 55 percent of consumers also opted for ethnic foods to satisfy “a craving for a particular ethnic food,” including 59 percent of female respondents and 51 percent of male respondents.

Forty-two percent of respondents said they ordered ethnic food at a restaurant recently “for spicier flavors,” including 47 percent of male consumers and 38 percent of female consumers.

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Smashburger Names Brett Willis SVP of Franchise Sales

Monday, August 20th, 2012

Smashburger has named Brett Willis as its new senior vice president of franchise sales, the Denver, Colo.-based company said on Monday.

In his new role, Willis will lead franchise recruitment initiatives for the company, focusing on developing and executing strategies for nontraditional, domestic and international unit growth of the better-burger restaurant chain.

Most recently, Willis led franchise development for Johnny Rockets, focusing on nontraditional locations. He also led franchise development for Arby’s Restaurant Group. Before that, Willis worked as a franchise sales manager and financial analyst for Sonic Drive-In.

“Brett is a well respected member of the restaurant industry, and his significant franchise sales experience with high growth concepts makes him a very positive, strategic addition to our senior team,” Dave Prokupek, chairman and chief executive of Smashburger, said in a statement. “His experience specifically on nontraditional unit growth is particularly relevant as we continue to look for new ways to bring Smashburger’s fresh, premium burgers and menu variety to airports and other nontraditional locations such as food courts, college campuses and casinos.”

Starting out in his new position, Willis will concentrate on domestic expansion in key markets like Chicago, Miami, Washington, D.C. and Boston, as well as continued expansion internationally in Canada.

Smashburger currently has 167 restaurants in 27 markets in the United States, as well as one in Calgary and one in Kuwait.

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Four Restaurant Chains Reveal Better-for-You Best Sellers

Monday, August 20th, 2012

Although the restaurant industry is still waiting for the Food and Drug Administration to finalize rules on menu labeling for chains with 20 or more locations, which will likely include the posting of calorie counts, many chains are proactively promoting menu items that are less likely to expand waistbands.

During the Olympics, McDonald’s began promoting its “Favorites Under 400 Calories” menu platform, which the company said includes about 80 percent of national menu items, including classics like the Egg McMuffin, a medium order of fries, and a snack-size McFlurry with Oreos.

Wendy’s has a new mobile app that allows guests to select menu items under a certain number of calories or calculate the calories of a customized meal.

Even Carl’s Jr., the chain once known for indulgent burgers topped with pastrami or prime rib, now has on its website a section devoted to customizable “Better For You” options with a nutrition calculator to find what fits your diet.

Meanwhile, across the industry, the use of the term “low calorie” on menus increased 154 percent in 2011 compared to the prior year, according to research firm Technomic.

Here’s a look at the successful better-for-you menus at four restaurant chains — The Cheesecake Factory, Corner Bakery, Denny’s and Einstein Bros. Bagels — including the best-selling items from each menu.

The Cheesecake Factory

The Cheesecake Factory expanded its popular SkinnyLicious menu options, all under 590 calories, since it was first introduced last year. Company officials say the lower-in-calorie platform has continued to be a strong seller as an alternative to the chain’s indulgent offerings.

Better-for-you best seller: The SkinnyLicious Burger line, featuring beef, grilled turkey and veggie options.

Other popular items from the SkinnyLicious menu include:

• Freshly baked flatbreads, including the margherita; wild mushroom; sausage and ricotta; and roasted pear and blue cheese.
• Mushroom lettuce wraps with shiitake mushrooms, green onion, ginger, garlic and water chestnuts, sautéed with mushroom soy and served with crisp lettuce leaves.
• Santorini farro salad with cucumbers, tomatoes, beets, red onion, feta and tzatziki, tossed with vinaigrette.
• Spiced salmon rolled in spinach, fried in a crisp wrapper and served with a sweet hot chili sauce.
• Asian chicken salad with grilled chicken, romaine, snow peas, carrots, bean sprouts, green onions, cilantro, almonds and sesame seeds with a SkinnyLicious sesame-soy dressing.

Corner Bakery

The Corner Bakery website lists 100 combo options that are under 600 calories. Many individual dishes also fit that description.

Corner Bakery BBLT

Better-for-you best seller: A combo with half of a BBLT — with bacon, more bacon, lettuce, tomato and cracked pepper balsamic mayo — and an arugula salad.

Other top-selling low-calorie combos include:

• Half a chicken pomodori panini, with roasted chicken, basil, spinach, oven-roasted tomatoes and provolone with pesto mayo, and roasted tomato basil soup.
• The avocado and spinach power panini thin, with scrambled eggs, Parmesan and cheddar cheese, avocado and spinach on thinly sliced whole grain harvest toast.
• Half an uptown turkey sandwich, with smoked turkey, applewood-smoked bacon, sliced avocado, lettuce, tomato and mayo on harvest bread, and a Caesar salad.
• Asian wonton salad with spicy Thai coconut soup.


Denny’s launched its Fit Fare menu last year, which features items that are lower in calories and fat or high in certain nutrients. Menu items designated “lean,” for example, have 15 or fewer grams of fat per serving; “light” items have fewer than 550 calories. “Protein” items are also highlighted, containing more than 20 grams per serving; and “fiber” items have more than eight grams of fiber.

Denny’s Fit Slam

Better-for-you best seller: The Fit Slam, which is a lighter and higher-in-protein version of the chain’s classic Grand Slam. This version includes egg whites scrambled with fresh spinach and grape tomatoes, two turkey bacon strips, an English muffin and a side of seasonal fruit.

The Fit Slam menu also includes:

• The new Fit Fare Veggie Skillet, which includes seasoned red-skinned potatoes, roasted peppers and onions, mushrooms and broccoli served on a hot skillet and topped with two egg whites scrambled with spinach and grape tomatoes. Served with a side of salsa, this item is “light” and also higher in protein.
• The banana pecan pancake breakfast includes two wheat pancakes topped with banana slices and served with two scrambled egg whites, two strips of turkey bacon and a side of warm syrup. This item carries the “lean” and “fiber” designations.
• Cranberry apple chicken salad with grilled seasoned chicken breast, glazed pecans, apple slices and dried cranberries on a bed of spring lettuce mix with balsamic vinaigrette. This dish is labeled “lean” and “light.”

Einstein Bros. Bagels

Einstein Noah Restaurant Group earlier this year expanded Einstein Bros. Bagels’ reduced-calorie offerings under a new Smart Choices menu with 14 items under 350 calories. Many options feature the chain’s popular Bagel Thins, a thinner, lighter version of the traditional bagel.

Better-for-you best seller: Bagel Thin egg white sandwich with asparagus, mushroom and Swiss cheese.

Other options on the Smart Choices menu include:

• Cheesy turkey Bagel Thin melt.
• Turkey chili soup.
• Ultimate blueberry smoothie.
• Chipotle chicken salad.

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Restaurant Trends, Challenges Addressed at Western Foodservice & Hospitality Expo

Tuesday, August 14th, 2012

Concerns about the choppy economic outlook, the impact of the federal health care mandate, and rising commodity costs were the top issues on the minds of West Coast restaurant operators who gathered in Anaheim, Calif., on Sunday for the annual Western Foodservice & Hospitality Expo.

The annual three-day conference, sponsored by the California Restaurant Association, or CRA, was co-located for the fourth consecutive year with the Expo Comida Latina, a food-and-beverage trade show featuring Latin flavors. The event is scheduled to run through Tuesday evening.

Typically, the conference alternates between Los Angeles and San Diego every year, but the show landed this year for the first time at the Anaheim Convention Center, which is about halfway between the two metropolitan areas in restaurant-chain-rich Orange County, Calif., representing a big chunk of the CRA’s membership, said Jot Condie, the association’s president and chief executive.

While the economy in California has improved significantly over the past year, Condie said challenges remain as cities such as San Jose consider a minimum wage increase and operators struggle with increasing regulation.

Voters in San Jose this November will consider a ballot measure that would raise the minimum wage there from $8 to $10 with automatic annual increases. “If it passes, it will have a contagion effect in other cities,” said Condie, and state lawmakers make see it as “setting a different floor.”

Condie said the CRA is also working with state lawmakers on the implementation of the Patient Protection and Affordable Care Act, under which employer mandates for health care coverage go into effect in 2014. “But the November election nationally could have an impact on how it’s implemented,” he said.

Consumer sentiment, food trends revealed

In educational sessions during the conference, Melissa Wilson, principal of market research firm Technomic Inc., said 2012 was off to a good start, with many limited-service and full-service restaurant chains posting positive same-store sales compared with last year.

However, consumer confidence remains low, and job growth has been sluggish. Looming next year is another round of spiking commodity inflation that is expected to result from this summer’s severe drought in the Midwest.

In a survey of consumers in early June, Technomic found that less than one-third of respondents felt the economy has improved, while 44 percent said things have gotten worse, and 29 percent said they have stayed the same, Wilson said.

Still, consumers have a pent up desire to eat out, particularly at fast-casual restaurants, which continue to show the highest rate of growth. Wilson said 77 fast-casual chains reported more than 20 percent sales growth last year, showing far more growth than other segments.

In an overview of food trends on restaurant menus, Wilson said beverages are a key area of innovation, including everything from health-friendly coconut water and fresh juices to energy drinks and specialty teas. On the show floor, which included about 500 exhibitors, emerging trends included all-natural or organic beverages.

Better-for-you items, such as Greek yogurt, also remain hot. Other increasingly popular ingredients include woodland-foraged foods, such as mushrooms, nettles and ramps, as well as heirloom grains and produce.

Chefs, execs and students compete in Culinary Clash

A number of top executives from the CRA’s board gathered at the show Sunday for the Culinary Clash: Battle Anaheim, a competition of teams from 10 chains in a benefit that raised about $45,000 to benefit the CRA Educational Foundation.

The challenge was to prepare a dish using scallops and lamb in less than 45 minutes using only two butane burners. The dishes were judged by a panel that included Ferdinand Metz of the Master Chefs Institute and former Top Chef contestant Betty Fraser.

The competition had top executives and chefs paired with high school students in the ProStart program to prepare the dishes, which were judged by varying aspects. The team from Maria’s Italian Kitchen, for example, included chief executive Madelyn Alfano, corporate chef J.J. Berardis, who is also her nephew, and Imelda Morales of Santee High School in Los Angeles.

The winner for overall taste and presentation was the team from Daily Grill — though Fleming’s Prime Steakhouse was the Ecolab Champ for having winning food safety and sanitation practices.

The team from Yard House, which included Herrmann and founding chef Carlito Jocson, along with Ramiro Rodriguez from Newport Harbor High, raised the most money with a Facebook campaign that garnered $1,240.

Also during the show, Mariann Costello, vice president of the 47-year-old Scoma’s Restaurant in San Francisco, was named CRA chair, replacing outgoing chairman Harald Herrmann, chief executive of Yard House Restaurants. On deck for the chairman’s job next year is vice chair Kevin McCarney, founder of the Poquito Mas chain, based in Los Angeles.

Next year, the Western Expo is scheduled for Aug. 18-20 at the Los Angeles Convention Center.

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