Archive for February, 2013

Boston’s Restarts Growth in Mexico

Wednesday, February 20th, 2013

Boston’s Restaurant & Sports Bar is expanding in Mexico at a time when more restaurant chains are looking south of the border for international growth .

Mexico offers growing restaurants several advantages, including its proximity to U.S. corporate headquarters. The nation also has a younger population, rising household incomes and a stable Gross National Product.

Casual-dining chain Boston’s currently has four units in Mexico, 358 in Canada and 40 in the United States. The concept is owned by Canada-based Boston Pizza Restaurants L.P.

“We had one unit there [in Mexico] that opened about 11 years ago,” said Mike Best, chief operating officer of the Irving, Texas-based U.S. Boston’s division. “Two years ago we started refocusing ourselves on Mexico development.” The company has sold 12 additional units there over the past 14 months, and three of those will open this year, he said.

“We said we spent a lot of money getting ourselves established in Mexico, so we said, ‘Let’s go try to leverage that,’” Best said. “I hired a gentleman out of Mexico City to be a sales rep for us, and we embarked on trying to add some units there.”

The first two restaurants opened in Merida, Yucatan; the third in Ciudad del Carmen; and the fourth, in Villahermosa, opened in May.

Best spoke with Nation’s Restaurant News about operating in the country.

How does the Mexican market differ from the U.S. market?

Of the four stores, the average square footage is approaching almost 8,000 square feet. They’re big. They seat, on average, about 345 people, excluding how many kids you can jam into the play zones. That compares to about 289 seats in U.S. units.

What differs beyond the size of the restaurants?

The feel is pretty much the same. You have the dining room on one side, the bar on the other and a patio. But each of the four locations does have a play zone. These are all inside the building, heated and air-conditioned. The original store in Merida had one to begin with, but it has been expanded.

The play area seems to be a big attraction. How has it changed?

The newest one in Villahermosa has two sections to the play area: the toddler area, where they climb on things, and the other side with video games. Each one of the locations has an attendant to make sure the children are signed in and signed out.

Is the Mexican customer’s approach to casual dining different than the U.S. customer?

People in Mexico consider it an event. They will linger in the restaurants two-and-a-half to three hours. The happier their kids are, the longer they stay and the more they spend, which works out very well for us. These [playgrounds] are fully exposed to the dining room with soundproof glass, so parents can keep their eyes on the children.

What about outdoor seating?

The patios there are huge, and each one has a full, functioning outside bar. We have patios at our stores in the U.S. and Canada, but they are just seating areas. In Mexico, the bartenders can go back and forth. The patios also have lounge areas, as opposed to tables and chairs. These are wicker seating areas where you can have appetizers and drinks, but probably not full meals.

Are the demographics different?

The proportion of families is higher in Mexico. The casual-dining user is similar to the United States. With the four stores, we’ve noticed people will go to Boston’s for a special event, such as a birthday, anniversary or date. That’s not who we are in the United States. In Mexico, Boston’s is perceived to be a bit higher level of casual dining. It’s more upscale.

What about the bars?

The bar demographic is very similar — big on sporting events. All four of the restaurants have pull-down screens in the dining room for the big soccer tournaments. The entire facility turns into a big sports area.

How have volumes tracked?

The volumes have been shockingly good. Per person check averages are very, very strong. In Mexico, more than 40 percent of the pizza sales are the large size. They share it as a prelude to dinner. They do appetizers, entrees, desserts and coffee.

Are menus significantly different?

We have 91 items on the U.S. menu, and there are 91 on the Mexico menu. There are eight products that are specific to Mexico. Nachos, for example, don’t translate well. Nachos are a big seller in the U.S., but in Mexico it’s a Texas creation and they don’t want anything to do with it.

How about sourcing?

We try to source locally as much as we can. About 38 percent of the product on the menu comes from the U.S., and that’s more proprietary, like sauces and pizza dough.

How do unit volumes compare?

In the U.S. we’re averaging just under $2.1 million in average unit volumes. At the four stores in Mexico average unit volumes are close to $2.7 million.

What do you see for further development in Mexico? Are you concerned about safety amid drug cartel fears?

We’re very optimistic about where the future will take us. Clearly, from a security standpoint, we’re pretty careful about where we go. I don’t see us putting restaurants in Tijuana or some of the border towns where we know there are problems.

Applebee’s Expands Express Lunch Test

Friday, February 15th, 2013

Applebee’s has expanded its test of fast-casual “express” service options at lunch to 23 company-owned locations, saying that the move — if proven successful — could be offered systemwide later this year.

The Kansas City-based casual-dining chain began testing the offer of express lunch service in July 2012 at two locations initially, but the test has gradually expanded to all of the chain’s corporate restaurants, as of January.

Dubbed Applebee’s Express Lunch at those locations, guests are offered the option of ordering at a counter and paying. They take a number and find a seat in the dining room. Their lunch is delivered to the table and they leave when they’re ready — no waiting for a check.

Applebee’s Express lunch
Digital menu boards are on display at one of Applebee’s Express Lunch locations.
The idea, said Becky Johnson, Applebee’s senior vice president of marketing and culinary, is to offer guests the option of having more control over the time they spend at lunch. Those who want to have the full-service dining experience can still do that.

But often at lunch, she said, “Everyone is pressed for time. They need to get in and out quickly.”

The move, along with Applebee’s value-positioned lunch offerings like the Pick N’ Pair lunch combos starting at $6.99, allow the chain to compete more directly with fast-casual players that offer a similar price point but faster service.

The Applebee’s Express Lunch service is offered in the Kansas City units from 11 a.m. to 2 p.m. Monday through Saturday.

The Express counters include digital menu boards. Guests that pay with a credit or debit card can add items at the table without having to swipe their cards again — servers can enter the order and bring an updated receipt.

Johnson said tips are encouraged and most guests leave a gratuity for the express service.

On average at units offering the express service so far, about 20 percent of guests choose to order at the counter on weekdays, Johnson said.

The move does not appear to impact guest check averages, she said, but it’s too early to say whether the offer of express service will be offered to franchisees systemwide.

The company plans to continue the test for another six months before deciding whether to make the case for franchisees. “It will depend on whether it makes sense for their neighborhoods,” she said.

Starbucks Targets Drive Thrus for U.S. Growth

Monday, February 4th, 2013

More than half of the 1,500 new coffeehouse locations Starbucks Corp. plans to open in the United States over the next five years will be drive-thrus, company officials said Thursday in a first-quarter earnings call.

The Seattle-based company also reported a 13-percent increase in profit for the quarter that was boosted by the strongest holiday season in its 42-year history, with an estimated 1-in-10 U.S. adults receiving a Starbucks gift card.

Starbucks chair, president and chief executive Howard Schultz said the record results were delivered despite a backdrop of lackluster consumer confidence and a weak global economy, “demonstrating the strength, unique resilience and increasing relevance of our global business and brand.”

Drive thrus drive profit, growth

Starbucks plans to add 1,300 new units globally this year, including about 600 in the Americas, mostly in the United States, about half of which will be licensed. Another 600 locations are scheduled to open in the China/Asia Pacific region, about half of which will be in China.

U.S. growth will focus on drive-thru locations, which the company said has become a highly profitable format. About 60 percent of the 1,500 U.S. units planned in the next five years will have a drive thru.

“Drive thrus create incremental revenues and profits compared to traditional stores and represent a fast-growing and highly profitable format for Starbucks, comprising just over one-third of our U.S. company-operated stores but contributing nearly 45 percent of our U.S. retail profit,” Schultz said.

“We are investing in this high-margin store format with innovations that will elevate the customer experience of our brand by enhancing drive-thru efficiency and consistency of service,” he added.

Starbucks plans to remodel about 1,400 U.S. units this year, and about 500 of those locations will receive a major overhaul.

Strong holiday season boosts revenue

For the first quarter ended Dec. 30, Starbucks reported net income of $432.2 million, or 57 cents per share, compared with $382.1 million, or 50 cents per share, a year ago.

Revenue increased 11 percent to $3.8 billion for the company.

Global same-store sales rose 6 percent, driven by a 4-percent increase in traffic and a 2-percent increase in average ticket.

During the quarter, the company opened 212 new units globally, including its first three locations in India, for a total of 18,278 units worldwide.

Starbucks also completed its acquisition of the Teavana retail tea chain. The company plans to open about 30 new Teavana units this year, moving the mostly mall-based brand to urban locations.

In the Americas region — which includes 12,983 units in the United States, Canada, Latin American and the Caribbean — same-store sales grew 7 percent based on a 4-percent increase in transactions. Average tickets rose 2 percent.

Net revenue for the region was $2.8 billion, rising 10 percent over the prior year’s first quarter. However, expenses related to the company’s global leadership conference, litigation, and the impact of superstorm Sandy in the Northeast negatively affected margins.

Company eyes more growth channels

Following the acquisition of the La Boulange Bakery brand last year, Starbucks has been testing a new bakery menu in 40 San Francisco locations.

Schultz said those units have seen increases in sales of pastries and food overall. The La Boulange menu will be rolled out to more Starbucks locations in the Bay Area, as well as Seattle, Los Angeles, Chicago and New York before the end of the year.

The company also plans to build on its single-cup business, including the sale of new Verismo single-cup brewers launched in September. Starbucks has sold 150,000 machines so far.

Schultz described Verismo as a platform with “multi-billion dollar potential” that will include new pod products and more machine variations with different functionalities and styles.

The home brewers have not cannibalized in-store sales or other packaged coffee products, he said, and the company plans to continue to “transform the single-serve category.”

Starbucks is also planning a new line of iced coffee beverages in “iconic” glass bottles that will be available nationally by April, in partnership with PepsiCo.

Starbucks president of channel development and emerging brands Jeff Hansberry said one in five beverages purchased in the brand’s units is iced coffee. “People drink iced coffee now year round,” he said.

Holiday sales were brisk, boosted by a “12 Days of Gifting” promotion, the return of Starbucks’ Christmas Blend and Starbucks’ gift cards, “perhaps the single most-given gift,” Schultz said.

Despite the recession, the company sold $2 million of its limited-edition Steel Cards for $450 each, which sold out in six minutes after being offered on the luxury retail website Gilt.com, Schultz said.

Starbucks chief financial officer Troy Alstead said momentum has continued into the first few weeks of January. The results reaffirmed the company’s confidence in aggressive growth plans for fiscal 2013.

The China/Asia Pacific region led the way for same-store sales growth with an increase of 11 percent during the quarter. Net revenue was $214.1 million, rising 28 percent from the prior year, for the 3,419 units there.

Europe, the Middle East and Africa, or EMEA, with 1,876 units, remained the only region with negative same-store sales, which declined 1 percent in the first quarter despite a 2-percent increase in transactions. The average ticket there dropped 3 percent, which Schultz blamed largely on weakness of the economy in the United Kingdom.

Revenue in the EMEA region rose 1 percent to $306.1 million for the quarter. The company has closed some underperforming units in the United Kingdom and sold Starbucks locations in Ireland and in U.K. airport locations to licensed partners.

Starbucks’ channel development segment, which includes packaged coffees and bottled beverages, as well as the increasingly popular single-serve pods, reported revenue growth of 13 percent, to $379.8 million.

For fiscal 2013, the company expects mid-single-digit increases in same-store sales, with improving margins in the Americas and in Europe. Overall, the company expects earnings per share to be in the range of $2.06 to $2.15 for the year.