Archive for July, 2013

Court Upholds Ruling Against New York Large Soda Ban

Wednesday, July 31st, 2013

A state appeals court upheld a lower-court ruling Tuesday stating that New York City could not ban the sale of large sodas and sugary beverages at restaurants and other venues throughout the five boroughs.

The First Department of the State Supreme Court’s Appellate Division said the city’s Board of Health had overstepped its authority last September when it agreed to restrict restaurants, sports venues, movie theaters, street carts and delis from selling soda and other sugary beverages in cups or containers larger than 16 ounces.

Retail food and convenience stores, which fall under the jurisdiction of the state of New York, would not have been impacted by the ban, thereby creating an unfair marketplace, opponents maintained.

The initiative had been championed by Mayor Michael Bloomberg, who argued that large, sugary beverages were contributing to the city’s obesity and health-related problems. “Since New York City’s ground-breaking limit on the portion size of sugary beverages was prevented from going into effect on March 12, more than 2,000 New Yorkers have died from the effects of diabetes,” he said in a statement.

Bloomberg said the city would appeal the latest ruling, calling it a “temporary setback.”

The National Restaurant Association together with other groups and individuals had challenged the city’s ban in a lawsuit filed last October in the New York State Supreme Court in Manhattan. In March, one day before the ban was scheduled to take effect, that court ruled in favor of the plaintiffs and against the city, calling the regulations “arbitrary and capricious.”

In this latest ruling, the New York Supreme Court said initiatives like the soda ban were more appropriately addressed by the state legislature or New York City Council. “The [city’s] Board of Health overstepped the boundaries of its lawfully delegated authority when it promulgated the [ban] to curtail the consumption of soda drinks,” Appellate Justice Dianne Renwick wrote. “It therefore violated the state principle of separation of powers.”

The NRA called Tuesday’s ruling “a great victory” for thousands of restaurant operators.

“The National Restaurant Association has been a lead plaintiff in the lawsuit against the New York City proposed beverage ban, along with the American Beverage Association and a number of other organizations,” said Dawn Sweeney, president and CEO of the NRA. “We are very gratified by today’s ruling and believe it will send a strong message to other jurisdictions that may have been considering similar bans.

Rick Sampson, president and chief executive of the New York State Restaurant Association, said the NYSRA had not participated in the lawsuit, but he was glad to see the ban overturned. “The mayor means well — I don’t doubt it,” Sampson said. “But this isn’t the way to go about it. When you start to limit the size of a drink, you have to ask, ‘What’s next? Fifteen fries per serving?’

“Let the consumer decide. We don’t need the government to dictate portion limits.”

Dunkin’ Signs First California Franchisees

Wednesday, July 31st, 2013

Dunkin’ Brands Group Inc. has signed its first three Dunkin’ Donuts franchisees in Southern California, the company revealed as it reported that its profit more than doubled during the second quarter.

The three new franchisees are scheduled to open 44 units that will begin opening in 2015, said Dunkin’ Brands chief financial officer Paul C. Carbone.

Carbone also noted that by the end of the year, the first nontraditional Southern California unit might be open at the historic travel center on Route 66. That location, he said, is owned by an existing franchisee.

Dunkin’ Donuts said in January that it would renew its western expansion to Southern California. Dunkin’ Brands chief executive Nigel Travis said at the time that there could eventually be as many 1,000 Dunkin’ Donuts locations in Southern California. Baskin-Robbins, Dunkin’ Donuts’ sister brand, already has about 250 locations in the region.

Last fall, Dunkin’ Donuts opened a distribution center in Phoenix, which brought the brand closer to the Southern California region. And in June, the company opened its first Dunkin’ Donuts location in Utah.

For the second quarter, the parent to the quick-service Dunkin’ Donuts and Baskin-Robbins chains attributed positive results to new Dunkin’ Donuts unit openings in the United States and strong sales of cold beverages and breakfast sandwiches.

“Our performance in the second quarter was driven by strong comparable-store sales and net unit development for Dunkin’ Donuts U.S.A.,” said Nigel Travis, Dunkin’ Brands chairman and chief executive. “Innovative marketing and new product innovations, as well as a focus on delivering a great customer experience, continues to deliver attractive franchisee returns and exceptional results for Dunkin’ Donuts in the U.S.”

For instance, Dunkin’ Donuts is positioning itself as an all-day snack and food location, Travis said.

“The introduction of the chicken salad and tuna salad wraps and the launch of the new chicken sandwiches both exceeded our expectations and are further examples for growing outside of the morning daypart with products that build on our bakery heritage,” he said, adding that 40 percent of the chain’s doughnut sales occur after 11 a.m.

“There is very consistent growth in the p.m. across all the geographical segments,” he said.

Travis also said high beverage sales contributed to the strong quarter. “These gains were driven by our cold-beverage platform, such as iced coffee, Frozen Coolatta [drinks] and iced tea, as well as gains in our specialty coffee, espresso and hot tea categories,” he said.

The breakfast sandwich business, led by introductions like the Turkey Sausage Breakfast Sandwich, grew as well. The sandwich has fewer than 400 calories and launched nationwide in May.

“We also saw a very strong gains in our core sandwich line, as the limited-time offer messaging spurred repeat trial by our guests of existing favorites as well,” Travis said.

At Baskin-Robbins, a Flavor of the Month promotion boosted sales of hard ice cream scoops, executives said. High sales of ice cream cakes around Mother’s Day, Father’s Day and graduations also contributed to same-store sales growth.

During the quarter ended June 29, Canton, Mass.-based Dunkin’ Brands Group reported net income of $40.8 million, or 41 cents per share, an increase of 120.6 percent compared to $18.5 million, or 33 cents per share, in the prior-year quarter. The company reported revenue of $182.5 million, an increase of 5.9 percent from $172.4 million during the year-earlier quarter.

Same-store sales increased 4 percent at U.S. Dunkin’ Donuts locations and declined 1.7 percent at international locations. At domestic Baskin-Robbins locations, same-store sales rose 1.6 percent; at international Baskin-Robbins locations, same-store sales rose 2.6 percent.

Nicole Miller Regan, senior research analyst at Piper Jaffray, wrote in a report that Dunkin’ Brands should finish 2013 strong. “We remain encouraged by continued momentum of operational initiatives, development of the company’s menu pipeline, and continued consumer preference for the Dunkin’ and Baskin brands as evidenced by continued strength in top-line trends,” she wrote.

Mark Kalinowski, managing director of restaurants at Janney Capital Markets, was similarly encouraged by the report. “Our Buy rating on DNKN is based on solid same-store sales trends in the core Dunkin’ Donuts U.S. business, menu innovation, and long-term opportunities for unit growth (particularly for the Dunkin’ brand in the U.S., especially west of the Mississippi River),” he wrote in a report.

At the end of the second quarter, Dunkin’ Brands had more than 10,600 Dunkin’ Donuts locations and more than 7,000 Baskin-Robbins units systemwide.

Qdoba Begins Shuttering Units

Tuesday, July 2nd, 2013

Nine Qdoba Mexican Grill locations were scheduled to close Thursday, and another 36 units are expected to shutter Friday across the country as part of a plan to remove underperforming restaurants.

Earlier this month, officials with parent company Jack in the Box Inc. said 67 company-operated Qdoba restaurants would close by Sept. 29, the end of the company’s fiscal year. The move followed a comprehensive review of performance and real estate across the 647-unit fast-casual chain, which included 340 company-owned units.

At the time, company officials declined to reveal which restaurants would close, saying they needed time to inform the employees. However, this week news of specific unit closures appeared on the company’s Facebook pages within certain markets.

Restaurants are scheduled to close in the Chicago, Southern California, Boston, Cincinnati, Ohio, New York City, Florida and Tennessee markets.

Tim Casey, who was hired as president of Qdoba in March, contends that the restaurant closures will help the chain emerge as a stronger brand.

The company is planning to focus future growth on high-density markets where Qdoba has strong brand awareness.

“By closing these locations and optimizing our company footprint, we can be more effective in focusing our advertising and marketing resources to support existing and planned restaurants in our core markets where we have high levels of brand awareness,” Casey said in a statement. “We also expect to provide an even better dining experience for our guests as our operations team concentrates its efforts on supporting these markets.”

In all markets except Northern Florida the company will continue to maintain a presence with either company-owned or franchised units, or both, said Jack in the Box Inc. spokesman Brian Luscomb.

All seven Qdoba locations in Manhattan were scheduled to close Thursday, but restaurants in Staten Island, Queens and Northern New Jersey remain open. Two locations near Nashville, Tenn., including Hendersonville and Cool Springs, also closed Thursday.

The market to lose the most Qdoba restaurants in this round of closures is Chicago, where 18 units were expected to shutter Friday. Addresses of the closing units are listed on the chain’s local Facebook page. In a note to Facebook fans, the company said, “It has been great serving you, and we thank you for your patronage at these restaurants. We’re still serving your Qdoba favorites at other locations in the Chicagoland area, including Wheaton, Schaumburg, Lincoln Park and the Loop.”

The Southern California market’s Facebook page lists 10 locations designated for closure on Friday around the greater Los Angeles area, including units in Westlake Village, Valencia, Moreno Valley, Redlands, Alhambra, Ontario, Thousand Oaks, West Covina, Simi Valley and Temecula.

In the Boston area, four units are designated for closure on Friday, as well as one location in Saugus, Mass. Two locations in Jacksonville and Tallahassee, Fla., were also scheduled to close Friday. In Jacksonville, the company will not proceed with a new restaurant that was planned for the city’s Southside neighborhood. Two Cincinnati-market locations were also scheduled to close.

At an analyst conference Wednesday, Linda Lang, chair and chief executive of San Diego-based Jack in the Box Inc., said Casey is continuing to look at Qdoba’s organizational structure and where the company might better leverage synergies with quick-service sister brand Jack in the Box. Results of that effort will come later, she said.

Starbucks Tests Handcrafted Sodas

Tuesday, July 2nd, 2013

Starbucks is testing some new beverage innovations in various markets, including handcrafted sodas and a “cold-foam mocha.”

According to the unofficial fan website StarbucksMelody.com, in June the coffeehouse chain began a second phase of testing new carbonated beverages, including a proprietary root beer and ginger ale, in a limited number of stores in Atlanta and Austin, Texas.

A spokeswoman for Starbucks confirmed the test locations, saying, “testing is a way of life for Starbucks.” But she could not offer specifics.

Wall Street analyst Mark Kalinowski of Janney Capital Markets wrote in a report that Starbucks first tested three types of sodas — including a Lemon Ale — at a few locations near Seattle in mid-April. The company was also looking at carbonating other beverages, like the new Cool Lime Refreshers rolled out last year.

In a report on Monday, Kalinowski wrote of the expanded soda test, saying “the odds favor” a national rollout, perhaps during fiscal 2014.

“While not everything Starbucks tests eventually makes it to a national rollout, we are pleased to see that the company isn’t resting on its laurels,” he wrote.

Kalinowski also wrote that he plans to follow the test of the cold-foam mocha, which began last week in a few stores in Nashville, Tenn., according to StarbucksMelody.com.

The drink is described as including a special cold foam, which is prepared in advance in whipped cream canisters. Shots of espresso are poured into milk steam pitchers with ice, then stirred. The cold espresso is poured over the foam with mocha flavoring. In the cup, the drink appears to be half foam, half espresso.

StarbucksMelody.com warns that this drink is still early in the test phase. “Don’t hold your breath that these drinks are coming to a store near you,” the blog site said.

Seattle-based Starbucks has more than 18,000 locations worldwide, including more than 11,000 in the U.S.