Archive for March, 2015

Seattle’s $15 Minimum Wage Phase-in Begins April 1

Monday, March 30th, 2015

The first phase of an increase of Seattle’s minimum wage to $15 per hour will go into effect on April 1, as state lawmakers consider next week a broader wage hike to $12 per hour that would impact employers across Washington State.

A city ordinance adopted last year in Seattle will increase the minimum wage of $9.32 per hour to $15 over the next seven years for Seattle employers of 500 or fewer workers, and over three years for those with more than 500 workers.

Franchised restaurants are defined as larger corporations under a “joint employer” definition, though the International Franchise Association has challenged that distinction in court as discriminatory. Last week a federal court ruling denied an IFA request for a delay in the wage increase, though the franchise association has pledged to appeal that decision.

Meanwhile, hearings are scheduled on Monday in the Washington state Senate on a statewide minimum wage bill that was approved by the House earlier this month.

House Bill 1355 would increase the state minimum wage rate from $9.47 per hour to $12 over the next four years. Some lawmakers are pushing for the bill to include an override clause that would supersede Seattle’s city ordinance, effectively capping the city’s rate increase at $12 per hour, said Anthony Anton, president and CEO of the Washington Restaurant Association.

While it remains to be seen what negotiations will bring next week, Anton said the association is taking the position of compromise, saying the industry will adapt to the increase in labor costs.

“At the end of the day, the math of the industry has to change,” said Anton. “Seattle will have to invent a different restaurant model than the historical one.”

Restaurant operators will likely experiment in various ways to make it work for their businesses and consumers, he said, including the possibilities of increasing menu prices, using new technology or working with a smaller staff.

“We can find a way to make this work,” Anton said. “We can continue to have a thriving small restaurant scene and work on a better situation for employees. Those don’t have to be mutually exclusive.”

For the vast majority of Seattle’s restaurants, which have fewer than 500 employees, the minimum wage will increase to $10 per hour next week, which Anton noted, “is not a massive jump.” For larger employers, the wage rises to $11 per hour next week.

The phase-in, however, also allows for consideration of medical health benefits and tips in some cases as part of that wage.

Last week, several news reports blamed the impending wage hikes in Seattle for restaurant closures, but a report in The Seattle Times found those reports to be false.

In fact, not all restaurant operators in the city are opposed to the minimum wage increase, said Angela Stowell, president of the Seattle Restaurant Alliance and chief financial officer of Ethan Stowell Restaurants, which operates multiple concepts across the city, including Chippy’s Fish and Drink; Red Cow; and Anchovies & Olives.

“I love that Seattle is taking initiative on (income) inequality,” said Stowell, who noted that her company falls in the under-500-worker category.

While too early gauge the impact of the phase-in, Stowell said restaurant operators have had to adjust their business models in the past, and “it’s do-able,” she said.

“We all got into this business to be business people and have an entrepreneurial spirit. Part of that is figuring out how to make things like this work,” said Stowell. “We’ll figure it out.”

Mobile Pay Makes Headway in Restaurants

Monday, March 23rd, 2015

Mobile payment technology is growing fast as a must-have component in the restaurant business, alongside customer demand for speed, convenience and a willingness to use the technology. While many operators rely on third-party services, some have chosen to develop proprietary smartphone apps in house.

“[Technology] has become a part of everyone’s daily life, and this is just the beginning,” said Kevin McCarney, owner of the 10-unit Poquito Mas restaurant group in Los Angeles, which last year introduced mobile payments and online ordering through a third-party provider.

“We are in the hospitality business, and today our guests use technology to connect to friends, to the world and to us as restaurants,” McCarney said.

That adoption has been swift. Roughly one-quarter of consumers say technology options are important features that factor into their decision to choose a restaurant, according to the National Restaurant Association in its 2015 Restaurant Industry Forecast, published in January.

That was an increase from less than 20 percent the prior year, which underscored that “technology rapidly is becoming an expectation rather than a novelty when dining out.”

NRA research found 9 percent of consumers at least once a week used smartphones or tablets for meal payment, and 26 percent used it at least a few times a year.

Many restaurant brands look for mobile payment solutions that incorporate other services, such as ordering and loyalty programs, including rewards.

The 21,800-unit Seattle-based Starbucks Corp. has more than 9 million My Starbucks Rewards program members, and many have adopted its smartphone app. While Starbucks has become a gold standard in this regard, smaller brands are finding ways to tap into the all-in-one mobile offerings.

In mid-February, Chicago-based Wow Bao, the five-unit fast-casual division of Lettuce Entertain You Enterprises Inc., introduced a branded mobile payment app that includes messaging, online ordering and gift purchases.

“Wow Bao customers can now select a favorite location, buy gift cards, reload gift cards easily and much more with this new version.” Geoff Alexander, managing partner at Wow Bao, said in a statement.

The brand worked with Denver-based Mocapay, its mobile marketing provider, on the mobile app, which includes the points-based loyalty program. Users get one point for joining the program and one point for every dollar spent.

“Once the customer reaches 50 points, they will receive a $5 credit that is automatically provisioned to their Wow Bao app via the mobile wallet,” Mocapay said in a release. The technology also enables in-app messaging, options to request a payment token for secure payment, purchase of gift cards, and online ordering for pickup and delivery. The app is available for both Apple and Android devices.

McCarney of Poquito Mas, which worked with ChowNow for its Apple Pay-based mobile payment and ordering solution, said he was looking for a product that was intuitive, state of the art and affordable.

“We looked at all the options out there,” McCarney said. “We wanted a solution that gave us our own app and did not put us on a list of dozens of others restaurants.”

Poquito Mas began the mobile payment implementation about a year ago, starting with one location, and it added the other units once it saw a performance improvement in to-go sales.

“Guests were quick to embrace the app,” he said. “We saw an immediate increase of over 50 percent in online takeout orders. As we hoped, phone orders began to gravitate to the app, which makes taking orders much more efficient.”

Efficiencies in to-go orders convinced St. Louis-based Panera Bread Co. to fast track its own Rapid Pick-Up, or RPU, offering in its Panera 2.0 initiative to the entire system before other aspects, such as kiosks and table ordering.

Ron Shaich, founder and CEO of Panera, said in a February earnings call with analysts that the RPU expansion was based on the improvements it generated for the chain.

“RPU was originally conceived as an element of Panera 2.0,” Shaich said. “It offers our to-go customers the convenience of ordering and paying for their meals via our website or mobile app and then picking up their order at a designated time. As the name implies, RPU allows customers to grab their orders directly from our pickup shelves without ever having to stand in line.

“After seeing the power of Rapid Pick-Up in Panera 2.0 units, we decided to roll it out fully to the system in 2014 instead of waiting for full Panera 2.0 conversion,” he said. The rollout was completed in the fourth quarter.

Rapid Pick-Up is only available online or through the iPhone app with a credit card.

“We expected adoption of RPU to be modest as the customer is still learning about it and how to use it,” Shaich said. “What we’ve seen has surprised us. Rapid Pick-Up is now representing 3 percent of company transactions. That’s today. Again, that’s with very little marketing push behind RPU, beyond in-store communications in MyPanera,” which is the company’s loyalty program.

Shaich said he was astounded that about 8 percent of the brand’s sales at the end of the fourth quarter occurred digitally.

“That rate of digital adoption is more than double where we were at the end of the second quarter,” he noted, adding that big box retailers are generating digital sales of 2 percent to 5 percent, and the big pizza brands are seeing digital sales in the range of 35 percent to 50 percent.

The pizza brands appeal to a younger audience, who are adopting mobile payment technology faster than other demographic groups, according to the NRA 2015 forecast.

“As with most technology-related matters, this sentiment is much stronger among younger consumers,” the NRA noted. “But older generations are starting to increase their usage as well. In addition, people with children under 18 in their households are more likely to say that technology options factor into their restaurant choices.”

Research firm Technomic has found in its consumer research that younger people are increasingly expecting mobile pay.

Jackie Rodriguez, a senior manager at Technomic, said that “it’s a very fluid environment. Things are happening rapidly.”

In a survey at the end of 2014, the Chicago-based researcher revealed that the number of people who had used a smartphone to pay at a restaurant had doubled, to 19 percent, from the beginning of the year.

Like the NRA, Technomic found it was younger consumers, a big audience for quick-service restaurants, who were adopting mobile payment at a faster rate than the market as a whole. A Technomic survey in the second quarter of 2014 asked consumers if they were “interested” in mobile payments: overall, 39 percent answered yes, but among consumers ages 25 to 34 years, that number skyrocketed to 56 percent.

“Thirty-three percent expect to use their smartphone at restaurants,” Rodriguez said. “Not only are they interested, but they fully expect to use their smartphone to pay at restaurants more often.”

Technomic is closely watching how mobile payment applications are being integrated with other smartphone solutions, such as ordering and loyalty programs.

“The thing to look at is how seamless it is,” she said, referring to Google Wallet, which was introduced in 2011, and Apple Pay technology, which was introduced last October for use with the iPhone 6 and adopted quickly by brands including McDonald’s, Subway and Panera Bread.

“The third leg of that, to complete the cycle, is the tie-in with loyalty programs,” Rodriguez said. “What consumers seem to be receptive to is linking loyalty with ordering and payment.”

She said companies like Starbucks provide a glimpse at that integration. “They are frank about the role technology can play in improving customer service,” she said.

“It’s really exciting,” Rodriguez said. “It’s very competitive, and it can be intimidating for a restaurant. We tell our clients: focus on the function and not the tool. It’s about what you need it to do.”

Denny’s Targets Millennials with ‘The Den’

Monday, March 9th, 2015

Denny’s may have found a concept that hits the sweet spot for Millennial diners.

The Den by Denny’s is a fast-casual concept that has evolved from locations the family-dining chain has on college campuses.

Last month, after reporting its highest quarterly sales in eight years, Denny’s president and CEO John Miller said franchisees are interested in opening The Den in off-campus spots that skew to a younger adult audience.

Greg Powell, Denny’s vice president of concept innovation, told Nation’s Restaurant News that the response to The Den indicates a huge opportunity for the Spartanburg, S.C.-based operator. But he hesitated to call The Den a fast-casual version of Denny’s.

“A lot of family-dining chains have tried to do fast-casual versions of themselves, with varying degrees of success,” Powell said. “We didn’t want to just do that. This is meant to be a concept we can take to Millennials, not only on college campuses but in urban centers and other places. It’s a Denny’s built for them.”

Denny’s has been working for years to update the image of its brand, which was born in 1953 as Danny’s Donuts in Lakewood, Calif. It became Denny’s in 1961.

Known for its Grand Slam Breakfast and 24-hour service, Denny’s has found success in reaching a younger audience in recent years by using edgy marketing campaigns and social media.

Web series like “Always Open” with David Koechner and the more recent cartoon “The Grand Slams” have gone viral. Menu promotions have linked the brand with “The Hobbit” movies and throwback Atari video games.

But The Den specifically targets Millennials, Powell said.

The menu features a line of Millennial-friendly breakfast burgers, which are available at all dayparts — as breakfast is at Denny’s.

The burgers are topped with traditional breakfast foods, like eggs and bacon, with “bigger, bolder flavors,” Powell said. For instance, the Huevos Crunch Burger is topped with egg, American cheese, sliced ham, grilled peppers and onions, and served on a brioche bun.

A line of street tacos and salads that trade on breakfast flavors is also in the works.

“It’s about taking some of the heritage of Denny’s and putting it back into the menu,” Powell said.

One of the few menu items The Den has in common with Denny’s is the classic Grand Slam Breakfast and its sandwich counterpart, the Grand Slamwich, items that Millennials are more likely to order at 10 p.m. rather than 10 a.m., Powell noted.

Denny’s currently has four locations on college campuses branded as The Den. Another 10 limited-service outlets on campuses are branded under the Denny’s All Nighter and Denny’s Fresh Express brands, both of which are also fast casual. The company is working with foodservice contractors to convert those units to The Den over the next 12 months, Powell said.

A franchisee opened the first off-campus location of The Den last month near San Diego State University. The 1,700-square-foot space has a large patio, and customers order at the counter.

The Den is also expanding at military bases. By August, three locations will be on military sites.

“That’s a different demographic,” Powell said. “Yes, they’re Millennials and younger, but they’re different than college students.”

The Den has seen success at Fort Meade in Maryland, operated by the Army and Air Force Exchange Service. Two more locations are in the works.

The challenge is to maintain brand loyalty as college students graduate and grow older.

“If we can introduce them even to a different Denny’s, they will get the tie-in,” Powell said.

Powell said the company isn’t quite ready to roll out The Den as a franchised format, but there is a lot of interest from both foodservice contractors and traditional franchise operators to grow the concept.

“We want to make sure this is right,” Powell said. “We did this a little backwards in that most would go on the street first and then go into nontraditional. But this is what this demographic wants.”

Consumer Demand for ‘Real Foods’ Grows

Wednesday, March 4th, 2015

Consumer expectations of food have been in a state of flux driven in large part by dramatic demographic shifts. The huge baby boomer cohort is being supplanted by the massive Millennial generation, and both groups are forcing a reconsideration of issues relating to health and diet. Boomers seek to maintain youthfulness and vigor as they age, and Millennials seek to do the ethical thing for their bodies and the planet. The net result is a steadily growing demand for so-called real foods, a term that is difficult to define and not governed by any formal standards of identity. Real foods do have certain hallmarks in common: They’re typically perceived as fresh, seasonal and less processed. Beyond that, their definition is fluid and evolving, and they afford operators a number of opportunities to address patron demand.

Real foods are clean. A growing focal point of customer concern is food treated with antibiotics or hormones or containing artificial ingredients, and many operators are moving to allay their guests’ fears. Early in 2014, Chick-fil-A announced a five-year phase-out of all poultry raised with antibiotics. While Panera Bread has been serving antibiotic-free chicken for a decade, the chain recently declared that it would remove all artificial additives and preservatives from its menu by the end of 2016. Last December, Starbucks leapt into the fray by asking suppliers to halt the use of artificial growth hormones. Quick-service hamburger chains, often a lightning rod for criticism, have also jumped on board. Carl’s Jr. grabbed headlines by introducing the All-Natural Burger made from grass-fed, free-range beef that has been raised without added hormones, antibiotics or steroids. The burger, which carries a premium price tag and scored extremely well in test markets, is being considered for sister brand Hardee’s.

Demand is on the rise for “real foods,” a loosely defined category that can include seasonal produce, meats raised without antibiotics or hormones, natural fats and ingredients with healthful or restorative properties.

Real foods are classics. Concerns regarding the health consequences of trans fats, which are in hydrogenated vegetable oils used in many processed foods, led the Food and Drug Administration to outlaw their use and led restaurateurs to search for alternatives. Beneficiaries include animal fats in general and butter in particular, which has seen consumption jump to a 40-year high as consumers demand wholesome foods with easy-to-understand ingredient lists. Of course, many chefs and bakers never turned away from the product, but others are moving to capitalize on its resurgence. Jack in the Box, for example, introduced the Classic Buttery Jack, in which the beef patty is topped with melted garlic-herb butter, a treatment typically reserved for steaks; and Epic Burger, a Chicago-based better-burger competitor, promotes non-processed, all-natural food and touts its buttered buns.

Like butter, lard never truly lost its luster as a cooking agent of choice in professional kitchens and bakeries, despite being shunned by fat-phobic consumers. Also like butter, it’s undergoing a revival. Chicago’s Bang Bang Pie & Biscuits proclaims that it “proudly uses leaf lard,” the milder fat found along the pork loin. Nearby Honey Butter Fried Chicken has generated publicity with Schmaltz Smashed Potatoes, using chicken fat left over from the whole Amish chickens butchered there, and in Los Angeles, Top Round Roast Beef, a roast-beef sandwich specialist, cooks its hand-cut fries in 100 percent beef fat.

Real foods are beneficial. Greek yogurt, with its amped-up protein content, has taken grocery dairy cases by storm, and protein-rich quinoa has swept menus. Riding on the wave of these better-for-you powerhouses, broth has broken out all over. Prized for its restorative properties, broth has become the “it” beverage at independents like Brodo in New York City and Red Apron Butchery in Washington, D.C., which offer it as a convenient, nutritious pick-me-up. Sibling chains Sweet Tomatoes and Souplantation featured Asian Ginger Broth as a January special, and Panera Bread has launched a line of Broth Bowls that includes a Lentil Quinoa Bowl with Cage-Free Egg.

Looking ahead, the concept of real food will continue to gain currency as an umbrella term encompassing a broad range of product promises, including sustainably grown, organic and farm to table, as well as fresh or freshly made local and seasonal foods. Understanding their patrons’ expectations of real food will enable operators to successfully address the trend.