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Philadelphia Passes Soda Tax

October 18th, 2016

Philadelphia’s city council has passed a tax on soda and other sugar-sweetened beverages sold in the city, making it the first large American city to do so.

Berkeley, Calif., passed such a tax in 2014 at the rate of one cent per ounce.

Philadelphia’s tax, which will go into effect January 1, 2017, is 1.5 cents per ounce and, like the Berkeley tax, is levied on distributors.
For syrups and other concentrates, such as those used at soda fountains, the tax rate is 1.5 cents per fluid ounce of the finished drink prepared according to the manufacturer’s specifications.

The tax also affects diet sodas containing artificial sweeteners such as stevia, aspartame and sucralose, but specifically does not include baby formula; medicine; drinks that are more than 50 percent milk, fruit or vegetables by volume; or unsweetened drinks to which consumers might add sugar, such as coffee or tea. Syrups or concentrates that a customer might add by himself or herself also are not affected by the tax.

Philadelphia mayor Jim Kenney advocated for the tax, although he wanted it to be 3 cents per ounce. According to The Philadelphia Inquirer, the tax is expected to raise around $91 million per year for the city and will be spent on prekindergarten programs, community schools, parks, recreation centers and libraries, as well as a tax credit for businesses that sell healthful beverages.

The New York Times observed that similar taxes have been proposed across the country many times without success, but Kenney took a different tack — proposing it as a simple fundraising measure rather than as a “nanny state” tactic to change the drinking habits of citizens.

In fact, the compromise tax, which passed by a vote of 13-4, was only passed after it was expanded to include diet drinks, according to the Inquirer.

John Longstreet, president and CEO of the Pennsylvania Restaurant and Lodging Association, said the PR&LA objected to the tax on three grounds:

1) It’s a regressive tax that inordinately affects the poorest people in the city, many of whom get their first jobs in restaurants.

2) It’s “exorbitant,” with 5-gallon syrup bags that normally cost $20-$25 facing a tax of around $75. “It’s impossible for anybody who understands business to say that it’s not going to be passed on to the consumer,” he said.

3) In previous city referendums about a soda tax, the measure has failed. “So it’s not the will of the people,” he said.

Longstreet said he spoke to McDonald’s franchisees in Philadelphia who predicted that they would have to move soda fountains to the back of the house to be refilled by employees and would have to eliminate free refills.

“So it’s discouraging all around,” he said.

The American Beverage Association, which represents manufacturers and distributors of non-alcoholic drinks, said the tax would inordinately affect poor people. It also questioned its legality.

“The tax passed today is a regressive tax that unfairly singles out beverages — including low- and no-calorie choices. But most importantly, it is against the law,” it said in a statement. “So we will side with the majority of the people of Philadelphia who oppose this tax and take legal action to stop it.

“The fact remains that these taxes are discriminatory and highly unpopular — not only with Philadelphians but with all Americans. Similar tax proposals have been rejected 43 times across the country in the past eight years, including twice in Philadelphia.”

In a commentary in the Philadelphia Inquirer, forwarded to NRN by the ABA, former chief justice of Pennsylvania Ronald Castille argued that the tax is “a thinly disguised sales tax,” and is in violation of the state constitution’s “uniformity clause,” which states that taxes must be uniform across the state.

Organizations advocating for reduction in the amount of sugar in the American diet hailed the tax.

“The bold action by Philadelphia’s mayor and city council, in the face of $5 million worth of industry pressure, is a win not just for the health and well-being of Philadelphia kids but for communities across the country,” Jim Krieger, executive director of Healthy Food America, which advocates for soda taxes, said in a statement. “The move to recapture a sliver of profits from an industry that pushes a product that contributes to diabetes, obesity and heart disease in poorer communities in order to reinvest in those communities is sure to be inspirational to many other places.”

Former New York City mayor Michael Bloomberg, who tried to ban the sale sugar-sweetened beverages in portions larger than 16 ounces in New York, congratulated Philadelphia’s government on the tax, which he actively supported: The billionaire former mayor reportedly spent $1.6 million supporting the measure.

“Obesity and poverty are both intractable national problems. No policy takes more direct aim at both than Philadelphia’s tax on sugary drinks,” he said in a statement on his web site.

A Breakfast Concept Grows in SoCal

September 2nd, 2016

Johan Engman feels breakfast is underserved in San Diego. So he is building a small morning-food-focused empire that is moving beyond that corner of the country.

Engman is founder and owner of the Rise & Shine Restaurant Group, based in San Diego, which is parent to the Breakfast Republic concept, as well as a growing number of other restaurant brands.

Breakfast Republic, however, is the concept so far that Engman feels has legs.

First launched in June 2015, the company has two units open in San Diego. Three more are scheduled to open over the next nine months: Encinitas is scheduled to open Nov. 1; downtown San Diego in February; and Carmel Valley in March or April.

Open from 7 a.m. to 3 p.m. and serving breakfast only during those hours, the full-service Breakfast Republic is known for its innovative menu, whimsical design and full bar, offering more than the typical mimosa and bloody Mary options. A popular drink, for example, is the Sunny Side Up, made with whiskey, lemon, cane sugar and red wine, with whipped egg white on top and a rounded orange peel, resembling a fried egg.

One of the restaurants also has 20 beers on draft, said Engman. “People were like, ‘Are you crazy? Trying to sell beer that early?’ But it flies out of the bar from 7 a.m. on.”

But it’s not the bar that makes Breakfast Republic stand out, said Engman. It’s the food and design.

“To me, the breakfast scene has gotten redundant. Ninety nine percent of what’s out there is diners offering the same things,” he said.

Breakfast Republic, meanwhile, offers dishes like a Vietnamese Chicken Wing Breakfast Bowl, with five spicy wings over rice, with Asian veggies and three eggs any style; or S’mores French toast with graham-cracker-crusted brioche topped with toasted marshmallows and chocolate sauce. A limited-time offer this month features bone marrow and chorizo with quail eggs, black beans and guacamole with tortillas.

Engman has also worked humor into aspects of the décor, from the “walk-ins only” sign that includes actor Christopher Walkens’ face, to the recording in bathroom stalls recommending that users remain seated for the duration.

Units have gotten bigger as the chain grows. The first was about 1,500-square feet, but subsequent units range between about 2,700-square feet to closer to 4,000-square feet for new locations in the works.

“A smaller restaurant is easier to manage from a staffing perspective,” he said. “But I’d like to think this is a concept good enough where we could still have a wait with adding more seats. Overall, our profitability is very healthy.”

Branding is a key aspect, and Breakfast Republic sells t-shirts, hats, coffee mugs, and the branded coffee, which is roasted locally. “They’re like walking billboards,” said Engman. “Each restaurant sells $3,000 to $4,000 a month in apparel.”

Engman, who is originally from Sweden but moved to the U.S. when he was 16, opened his first restaurant at age 27 called the Fig Tree Café, now with three locations. Fig Tree is also a breakfast and lunch concept, though some units also have dinner.

With Breakfast Republic, he said the company was able to focus more specifically on breakfast.

And, soon, the company plans to add yet another breakfast concept to the portfolio: North Park Breakfast Co., a larger 2,100-square foot restaurant in the same “hipster” North Park neighborhood as the original Breakfast Republic but with a more contemporary and rustic design and different menu. It’s scheduled to open in March 2017.
“I didn’t want to compete against myself,” he said.

In addition, next door to Breakfast Republic in North Park, Engman is also building another concept called Pizza Republic, featuring Neapolitan-style pies and private label wines. That restaurant is scheduled to open late summer or fall next year.

But that’s not all. In October 2016, Engman also plans to open Como Ceviche in downtown San Diego, a fast-casual concept where guests can choose from ceviches from around the world and build a meal over coconut rice, quinoa or as a wrap.

And finally, Engman is also developing an 8,600-square-foot Mexican restaurant, including massive patio, called El Jardin, which will feature dishes from the Guadalajara and Baja regions of Mexico, as well as an emphasis on tequila and mezcal. It’s scheduled to open at the end of 2017 or early 2018, he said.

Engman is not at all interested in franchising. Instead, he plans to build his infrastructure to support the planned additions to the portfolio. He said he’s talking to investors about setting Breakfast Republic on a path for growth beyond Southern California.

“It’s the most scalable of all the concepts I do,” he said. “I do plan to take that to a large number of locations.”

Experts: New Dietary Guidelines Reflect Current Eating Trends

January 26th, 2016

The new dietary guidelines recently released by the federal government reflect changes consumers are already starting to make to their diets to some extent, and may have long-term effects on eating patterns in the country, although changes are less likely in the short term, according to consumer trend watchers.

The guidelines are issued every five years by the U.S. Departments of Agriculture and Health and Human Services. The release of the 2015-2020 report was delayed, and was not issued until this month.

As usual, the guidelines recommend more consumption of fruit, vegetables, whole grains and lean meat, and less consumption of saturated fat. They also said no more than 10 percent of daily caloric intake should be from added sugar. They removed the 300 milligram limit on dietary cholesterol, saying instead that people should eat as little of it as possible.

The guidelines also suggested that men and teenage males should eat less meat, poultry and eggs, and instead consume more vegetables or other foods that are underrepresented in their diet. Those underrepresented items vary from individual to individual.

Despite those specific restrictions, the guidelines for the first time stressed the importance of focusing less on adding or eliminating individual foods and thinking more of overall dietary patterns to ensure a balanced diet.

“These Guidelines … embody the idea that a healthy eating pattern is not a rigid prescription, but rather, an adaptable framework in which individuals can enjoy foods that meet their personal, cultural, and traditional preferences and fit within their budget,” the guidelines said.

Rachel Kalt, senior strategist for The Culinary Edge, a restaurant consulting firm based in San Francisco, said the guidelines echo sentiments that many consumers already have.

Many Americans are focusing less on specific ingredients and more on a holistic approach to their diets, while moving to alternative sweeteners, whole grains, fruit and vegetables, Kalt said.

“These kinds of healthy eating habits have really entered the mainstream,” she said.

Whole grains and legumes are moving from the “hippy, crunchy, granola vegetarian restaurant” to emerging fast-casual concepts and even toward restaurants that are part of the mass culture, Kalt said. For instance, Chick-fil-A recently said it would drop coleslaw from its menu and introduced a Superfood Side, which features kale, broccolini, dried fruit and nuts.

Chicago-based consumer research firm The NPD Group noted that the restriction on sugar also reflected consumer patterns.

“Overall, U.S. consumers have indicated that sugar is the number one item they try to avoid in their diet,” NPD said in a recent release.

The guidelines’ reduced emphasis on cholesterol restriction is also reflected in consumer attitudes, NPD said, noting that concern for foods’ cholesterol content has been on the decline since 2006.

“Eggs, which bore the brunt of the anti-cholesterol push, are back in vogue and consumption is up as consumers look for more sources of protein,” it said, adding that consumers are eating more fruit, too, as the guidelines recommend. However, “vegetables are still fighting to find their way into Americans’ hearts and stomachs,” NPD said.

Kalt said that although the FDA guidelines reflect consumer trends, “Whether or not [the guidelines] will create a widespread ripple effect is less likely.”

Laurie Demeritt, CEO of The Hartman Group, a consumer research firm based in Bellevue, Wash., said the impact of the guidelines would depend on media response to them.

“We know that consumers increasingly utilize a wide variety of sources for information,” she said, especially online resources not related to the government. “Therefore, consumers’ reactions will likely be based on how the new guidelines are discussed by social media sources rather than the consumer’s gut reaction to the guidelines themselves.”

Although these guidelines have no legal force, they tend to affect the food offered in school lunches, and can also have an impact on food assistance programs for the poor, according to the New York Times.

Former Costco Exec Launches Certified-Organic Concept

December 14th, 2015

Erica Welton, a former food buyer for Costco Wholesale Corp., has opened what she says is the nation’s first ‘certified organic fast-food’ concept.

The Organic Coup opened in Pleasanton, Calif., on Nov. 10, offering a focused menu of fried chicken sandwiches, wraps and bowls. All ingredients are certified organic by California Certified Organic Farmers, or CCOF, a trade association and certifying agency accredited by the U.S. Department of Agriculture National Organic Program.

Welton, Organic Coup founder and CEO, said she spent 14 years as a buyer for Costco, watching the number of organic products grow in response to consumer demand.

But as a mother trying to ensure that her kids ate organic foods, Welton said she began to notice how few restaurant options there were for a completely organic experience.

“When they were babies, I made their baby food and tried to stay away from fast food. But as they got older, there just weren’t a lot of options,” she said. “We would go to restaurants serving organic greens or veggies, but then the salad dressing wasn’t organic.”

At Organic Coup, all ingredients meet USDA organic standards, Welton said. The only ingredient that isn’t certified organic is the boxed water, because the USDA doesn’t have organic standards for water, she said.

The restaurant’s pest control and cleaning practices meets organic standards, and the certifying agency audits restaurant invoices “to make sure you’re not filling holes with non-organic food,” Welton said.

Organic Coup uses Mary’s Chicken, based in Fresno, Calif., which produces air-chilled organic chicken that Welton said is superior to the typical water-soaked birds.

The chicken is fried in organic coconut oil, which Welton noted is more expensive. “But we chose this oil because if you’re going to fry, it really is the best, cleanest oil,” she said.

The signature chicken sandwich on a bun is priced at $8.99 and served with a topping of spicy shredded veggies. Customers can choose from mustard vinaigrette, spicy barbecue ranch, sesame ginger or ranch sauces.

There are no fries on the menu, Welton noted, and the only dessert option is organic popcorn drizzled with caramel and chocolate. Sodas are, of course, organic.

The first location is about 2,200 square feet, but Welton already plans to shrink the footprint to 800 square feet to bring the concept to malls, college campuses, airports and sports arenas.

Welton said the company plans to open 25 locations over the next 14 months without franchising, although she declined to specify how those units will be funded. “We have what we need to get going,” she said.

After working at Costco for 14 years, Welton said she has the supplier contacts to grow. From Costco, she learned much about focusing on delivering a great customer experience over margins, and making investments in people.

Workers at Organic Coup start at $14 per hour, Welton said, well above the $9 minimum wage in California.

With a growing number of consumers looking for the “certified organic” label, Welton said Organic Coup is tapping into a passion for clean food and concern about labeling for genetically modified organisms, or GMOs.

“People like to say organic must mean healthy, but organic means clean food,” she said. “The only way to eat non-GMO is to eat organic.”

Shaping Your Restaurant’s Food Safety Defense Plan

November 23rd, 2015

Heightened roles for restaurant managers and voluntary certification programs may be part of your restaurant company’s future foodborne outbreak defense plan.

That was the position of three food safety professionals who spoke during the 10th Annual Nation’s Restaurant News Food Safety Symposium, sponsored by Ecolab, which was held Oct. 4-6 in Newport, R.I.

Miriam Eisenberg, manager of food safety and public health for the EcoSure division of Ecolab, offered her thoughts about what might be included in future additions of the U.S. Food and Drug Administration Model Food Code.

The Food Code, which is updated every four years, but may have annual supplemental information appended, had its last full edition issued in 2013. It is intended to assist local, state and federal jurisdictions by providing a scientifically sound technical and legal basis for regulating retailers and foodservice. Provisions from editions issued as far back as 1995 or as recent as 2013 have been incorporated in part or wholly into the rulebooks of more than 3,000 regulatory agencies.

Eisenberg said that restaurant managers will become “more and more crucial as an applied science team member as we go forward.”

She noted that some states and other jurisdictions, either on their own or by adopting “certified food-protection manager” provisions from the 2011 Food Code supplement, now require that foodservice establishments have a supervisory employee certified for food safety knowledge by an American National Standards Institute-accredited program. That requirement compares with an older requirement still used by some jurisdictions that such a person in charge “demonstrate knowledge” in a less formal way.

“It is important that you keep your eyes on that and know if you have to be certified or not,” Eisenberg said.

She said operators also need to better understand “active managerial control,” an increasingly cited concept in regulatory circles.

“It is thinking about them [managers] as being the person who answers to the regulatory agency when they come in,” Eisenberg said. Among other things, she added, “There is more information that is being required of them, in terms of understanding disease monitoring for foodborne illnesses.”

The 2015 Food Code supplement talked about managers needing to be able to verify and monitor cooking temperatures, holding temperatures, hot and cold, and cooling temperatures, she said, but is not particularly clear about how they are to do that. Eisenberg said her group is a strong believer in checklists, but such changes will require more checklists and training people to do more checklists and then monitoring the checklists.

“So it really is becoming more of a mini HACCP [manufacturing like hazard analysis critical control points process] in terms of what you do every day,” she said.

Again referring to managers she urged, “Help them understand and learn because it is putting more of a burden on their shoulders.”

“I think the next big thing we will be looking for is allergens” centered, Eisenberg said of likely additions to future Food Code editions, although she acknowledged that she has not seen clues as to whether such rules would be around training or simpler requirements such as allergen awareness posters or menu notices.

Apart from hearing about the Food Code and the latest developments around the U.S. Food Safety Modernization Act, as highlighted by Ruth Petran, Ecolab vice president of food safety and public health, conference participants were briefed on news from the Global Food Safety Initiative, or GFSI.

An industry-driven global collaborative platform to advance food safety that initially focused on manufacturers and two years ago began developing guidance for the retail industry, GFSI this year launched a technical working group to create the concepts around which compliance schemes and certification programs could be built for the benefit of foodservice food safety.

Harmonizing food safety requirements, more

Tom Ford, vice president of food and food safety for the global retail services arm of Ecolab, who is part of the GFSI working group for foodservice, explained how the developing compliance and certification program might look to operators.

“You have a corporate component that you build your systems on — you have recall procedures, you have training programs, you have supplier programs — and that is all housed in your corporate entity. And then you have this [system] enacted at the restaurant level,” he said. “They [auditors] are going to have to spend time at your corporate office seeing if the systems are appropriate and match with what the schemes say they should and what the key elements say they should, then they will go to your restaurants to see whether this is actually happening.”

Ford said he thinks his technical working group can wrap up its job next March in Berlin, although he conceded that it will still be some time before a viable program is in place for foodservice because the underlying infrastructure, such as the compliance schemes by third-party companies and an army of competent auditors needed to verify compliance, don’t yet exist. However, he indicated, the retailer program is fairly close to fruition, and its launch should provide clues as to how GFSI voluntary certification will be received by the targeted industry.

“The first thing you will see from this will be a grocery chain from around the world that says, ‘I’m certified,’ and your upper management is going to go, ‘What is this?’ and you’re going to say, ‘Two years from now, we’ll be chasing this, as well,’” Ford predicted, adding later that he thinks doing the right thing and “peer pressure” will be strong motivators among business owners to get certified.

Cindy Jiang, head of global food safety and supply chain compliance for McDonald’s Corp., who is also active in GFSI programs, explained, “The reason we want to do this is that we want to harmonize food safety requirements for retail and for foodservice.”

“We have seen the benefits of having globally recognized food safety schemes for manufacturers, and now, more and more governments — for example the U.S. FDA, and in Canada and Holland and the Chinese — are trying to leverage GFSI food safety certification in their countries,” she said.

Along with the other obvious incentives to support strong universal food safety standards and compliance schemes, Jiang said such an approach should also be appealing to companies interested in greater efficiency.

LA Operators Mixed in Response to Proposed Wage Increase

June 8th, 2015

Restaurant operators in Los Angeles expressed mixed reactions to the Los Angeles City Council’s move Tuesday to pave the way for a minimum wage increase to $15 an hour by 2020.

The City Council’s Economic Development Committee voted 14-to-1 in favor of drafting an ordinance for the minimum wage increase, which would be phased in from the current $9 per hour over the next five years. Smaller businesses with fewer than 25 employees would have an extra year to comply.

The measure is scheduled to return to the committee for final approval next month.

Under the measure, the minimum wage would rise to $10.50 per hour for employers of more than 25 workers by July 2016, gradually increasing each year until reaching $15 per hour in 2020.

At that point, the minimum wage would be tied to the consumer price index for automatic adjustments for inflation.

In 2014, Los Angeles Mayor Eric Garcetti proposed a minimum wage increase to $13.25 by 2017. He said in a statement Tuesday that he looked forward to signing the $15 an hour wage measure.

“Today, help is on the way for the 1 million Angelenos who live in poverty,” Garcetti said. “I started this campaign to raise the minimum wage to create broader economic prosperity in our city, and because the minimum wage should not be a poverty wage in Los Angeles.”

Restaurant operators’ reactions were mixed.

Andy Wiederhorn, CEO of Beverly Hills, Calif.-based Fatburger, said the wage hike will likely result in higher menu prices.

Consumers “are going to see menu items increase in price because restaurants already operate on narrow margins, so there is only so much of the increase in labor costs that the restaurant can eat,” Wiederhorn wrote in an email. “A large percentage of it will be passed on to the consumer, and the public needs to be ready for that.”

For others, the wage hike was not bad news.

“It excites me, as it will bring a higher caliber mentality to the job force. I think people will respond to it by seeing their worth more in the workplace, and investing time and energy, more long term, where they work,” said Natasha Case, co-founder of the Los Angeles-based Coolhaus ice cream shop and food truck.

Denver-based Smashburger, which operates company locations in the Los Angeles market, said it already pays workers about 20 percent to 25 percent above the minimum wage systemwide.

“It’s ultimately a win-win for us,” Josh Kern, Smashburger chief marketing officer, wrote in an email. “The employee is happier, which then results in better customer service for our guests, which will then result in a better experience and more frequent visits. It pays in the long run to pay more up front.”

At $15 per hour, however, that positioning above minimum wage may not be possible, he said. Still, he noted, employees would have other incentives and bonus potential.

The California Restaurant Association, which has lobbied for a tip credit and other concessions at the state level, expressed disappointment that Los Angeles lawmakers voted in favor of “an extreme approach.”

The CRA successfully lobbied against the inclusion of a paid leave requirement that was initially included in the wage hike measure. But its attempts to allow a tip credit or consideration of total compensation, as well as a proposed lower wage for teens, were not included in the draft that was approved.

“This action was taken knowing that it will cost jobs and the closure of small businesses, especially in the restaurant industry,” the CRA said.

If approved, Los Angeles would join a growing number of cities that have adopted a $15-per-hour wage. Seattle is phasing in an increase that would reach $15 per hour over the next three to seven years. San Francisco voters approved an increase to $15 per hour by 2018.

Labor activists have been pushing for a minimum wage increase to $15 per hour at the federal level, staging periodic protests to draw attention to the “Fight for $15.”

Lawmakers in the San Francisco Bay Area city of Emeryville, Calif., went a step further Tuesday, approving a minimum wage of $16 per hour by 2019.

New Tech Efforts Revolutionizing Restaurant Labor

May 18th, 2015

Steve Jackson, the CEO of 560-unit pizza chain Hungry Howie’s Pizza, admits he was a latecomer to the technology revolution enveloping the business, especially in the pizza segment. It was still a lot easier to pick up a phone than it was to boot up a computer, after all, he had told himself.

But he got on board six years ago when his Madison Heights, Mich.-based chain added online ordering, and then extended ordering options to its mobile app.

Since then, mobile ordering at Hungry Howie’s has soared by about 30 to 40 percent per year, and the efforts are taking sales along for the ride. So far this year, same-store sales are up more than 10 percent.

“Technology has become a very big part of our business,” Jackson said. “Sometimes I wonder whether we’re in the technology business more than the pizza business.”

Restaurants are in a technological arms race, adding mobile apps, online functionality, social and digital media capabilities and plenty back-of-house applications, all in the name of updating business models.

Many of these efforts are revolutionizing restaurant labor. Tools are enabling owners to improve operations, reduce labor costs and even keep from running afoul of government regulators and litigious customers.

The efforts can free up managers and staff to focus on customers, which is a must in an intensely competitive business.

Driving efficiencies

The move by Chili’s Grill & Bar to overhaul its restaurants’ kitchens in 2011 has enabled the chain to expand its menu, which has helped drive sales. But it has also improved efficiency within the kitchens, helping Chili’s and its franchisees improve profits.

Tabletop tablet technology added by many chains, including Chili’s, Applebee’s and this year across many brands at Darden Restaurants, is in part designed to improve wait staff efficiency. Because customers can order their own drinks, appetizers, desserts and pay their own bills using the tablet, speed of service improves, and wait staff can handle more tables.

The rapid development of mobile applications, meanwhile, is also being done in part to make employees more efficient, enabling customers to choose their meals on their phone or pay with the touch of a button.

“If a store takes 100 orders online and the average phone call takes one and a half
minutes, do the math,” Jackson said of Hungry Howie’s efforts.

He said the company hasn’t reduced the number of workers in stores or the number of hours. But staff is now freed to handle other items. They can also answer the phone calls that do come in, reducing the number of hang-ups when people are placed on hold.

Reducing costs

Technology-centered efforts in the restaurant industry are coming at a time when businesses are increasingly pressured on the labor front — typically the second highest cost center behind food costs. By 2016, for instance, 15 states will have minimum wage rates of at least $9 per hour, and many will have rates of at least $10. Cities like Seattle, Los Angeles, Chicago and New York have pushed, or are pushing, minimum wage pay even higher than that.

General macro-economic labor pressures are also hitting restaurants. The industry hired more than 150,000 people between December and February, according to federal data. That’s the highest three-month rate of hiring in the industry’s recorded history. Such hiring puts pressure on restaurants to increase wages and
benefits to recruit and retain top talent.

And there are social pressures as well, with protests and union efforts aimed at pressuring minimum wage rates at restaurants and retail businesses as high as $15. McDonald’s Corp., one of the top targets of these protests, stepped into the ring by offering to raise pay at corporate stores to $1 an hour above local minimum wage rates. While that’s only about 1,500 locations, it nevertheless could help establish a market price for quick-service employees. Walmart, Target and other retailers are
raising pay, too.

Together, all of this makes efficient labor more important. That makes scheduling software programs increasingly popular in the restaurant business.

HotSchedules, a software based labor management solution for restaurants and retail, can help enable restaurants to manage employees’ hours effectively, ensuring that locations are properly staffed based on historical data for a particular day and time. This helps employees with easier shift trades, so workers who want to trade a shift can do so without asking around for someone to cover for them. It also helps restaurants monitor worker hours so they’re not going over 30 hours a week — it lets the company run afoul of rules classifying such workers as full-time, and thus eligible for health benefits.

The platform can help with overtime, automating whether workers are in danger of overtime and enabling managers to cut hours earlier in the week, so they’re not sent home on a Saturday night.

David Cantu, the company’s chief revenue officer, said the system doesn’t just help drive efficiency and trim costs, but also helps improve sales because employees are focused on the guest, improving experience and customer service.

He said that sales-challenged restaurants could shift staff from the back of the house to the front of the house to focus on service and improve sales.

“This provides visibility not just to managers, but to leadership [as well],” Cantu said. “They can focus on keeping customers happy.”

While technology adoption is important because customers expect it, workers want it, too.
“It’s just a sign of things to come,” Cantu said. He noted that the HotSchedules app is downloaded between 25,000 to 30,000 times a month, and that 72 percent of system log-ins come through that app.

Not everything is about high-tech labor efficiency. St. Louis-based salad and pizza concept Crushed Red Urban Bake & Chop Shop is using technology to enforce hand washing.

The chain’s founder, Chris LaRocca, installed voice recognition technology machines just above soap dispensers in the company’s restrooms, which identify each worker and ensures that they wash their hands before returning to work. Workers are required to wash their hands at the beginning of each shift and then every hour during their shift. The system monitors that rule.

LaRocca and managers get reports on hand washing and workers are informed when they don’t meet the requirements. For those that consistently miss company goals, it can be the difference between getting a raise and not getting a raise.

“It’s all relative,” he said. “A lawsuit is a lot of money. What would you rather have? I know of a number of restaurateurs [who are] crippled because of poor hand washing habits and their restaurants have closed. I don’t want to be that guy.”

He said it isn’t hard once employees get used to the culture, and after a while, employees compete to see who can wash their hands over 100 percent of the required number.

“We’re instilling habits in employees,” LaRocca said. “Whether they stay here or go somewhere else.”

Some of the restaurant industry’s technology adoption combines old-style technology with new capabilities to provide restaurants with more possibilities. Total Connect Now is a cloud-based phone system from Portsmouth, N.H.-based Unified Office that uses voice over Internet protocol, or VOIP, technology to enable restaurants and chains to develop virtual call centers.

The phone lines are used with software, viewed on a large screen, to help workers monitor the calls. They know how many calls are coming in, how long they take and how long before customers will hang up. It can even provide specific lines for Spanish-speaking customers. The system is particularly helpful for quick-service chains and pizza concepts that get a lot of call-in orders, said Raymond Pasquale, the founder and CEO of Unified Office.

“It allows more owners to capture more revenue,” Pasquale said.

Like phones, videos have been around for some time, but technology changes are enabling restaurants to do more.

Colorado-based Envysion, which provides surveillance tools, was founded by former executives from MCI and Level 3 Communications — “hard-core Internet guys,” CEO and cofounder Matt Steinfort says. They decided the video surveillance industry was ripe for
Internet disruption.

They developed a system and quickly got a customer in Chipotle Mexican Grill Inc. in 2007. Soon after Chipotle adopted the system, the chain realized the potential benefits in employee training, Steinfort said.

“It started with a loss prevention focus, if we had access to video and integrated it with the POS system and with cash management,” he said. “But what they discovered is all the other applications.”

Video has improved image quality that now can show more detail. The Envysion system connects video that is available through a web interface with the restaurant’s point-of-sale and kitchen management systems, and any other available data.

That enables managers to see what’s going on in the restaurant at all times while also comparing it with data they have available to monitor operations and sales. Restaurants can analyze the data and the video to train workers, improve speed of service and see what works, and what doesn’t.

“We create data and insights from video. Things like speed of service, whether customers are waiting [or] abandoned the line,” Steinfort said. “They see demographics [or] whether a cashier is following the best practices … we augment an operator’s ability to understand store-level performance by adding a layer of video context.”

D-Carr Investments, a 10-unit KFC franchisee in Florida, turned to the company’s system two years ago as supervisors were looking for ways to combat employee theft.

They, too, figured out quickly what kind of benefits a video system could have.

“You don’t want people to steal from you,” said Bernie Quintero, director of operations for D-Carr. “But here’s the thing: We went past the point of doing that. It’s a great training process for our stores. We use it for training and developing behavior.

“We’ve done everything from training cooks and supporting cooks in the kitchen to working with cashiers and managers when they’re working with customers,” he said.
Managers and leadership can check videos from their own tablets or smartphones at any time. Quintero will often look in on restaurants on Saturday nights when he’s not doing anything else.

With the efforts, D-Carr’s profits improved by $300,000 its first year with the system. Within a month of installing the cameras, the company held a suggestive selling contest encouraging servers to up-sell customers on the company’s mini cakes. In a typical month the company might sell 100 to 200 cakes. That month the stores sold 1,700.

“We’re watching video and calling the stores we’re watching and telling them they’re doing a great job, you win this week,” Quintero said. “That is a ridiculous amount of cakes. It worked out pretty well.”

Finally, enhanced video capabilities can save on every restaurant’s nightmare: Lawsuits. Shortly after installing the system, Quintero said that a manager called him to report a slip-and-fall claim. A mother had complained that her son fell and hit his head on a slippery floor.

Quintero pulled the video on his phone, and saw that the incident was a setup. “We got a letter from their attorney,” he said. “We sent out the video, and that was the end of it.

Johnny Rockets to Open 100 Units in China

April 9th, 2015

Johnny Rockets has struck a deal to open 100 restaurants in China over the next decade, the chain’s largest development agreement to date, the company said Monday.

The deal is with a joint venture between AUM Hospitality, Johnny Rockets’ franchisee in Malaysia, and Parkson Retail Group Ltd., a Malaysian department store operator with a network of about 60 stores in China.

The focus will be on opening Johnny Rockets in Parkson-owned malls, as well as other malls and retail centers in Shanghai and Beijing, the company said. The first unit is expected to open in 2016.

Scott Chorna, Johnny Rockets’ senior vice president of international development, said the partnership was an ideal way for the Americana-themed brand to enter the China market.

“With AUM Hospitality’s success in the food and beverage industry and Parkson Retail Group’s proven track record in operating major retail outlets, this is an ideal partnership for Johnny Rockets’ entry into China,” he said in a statement. “Moreover, there is a strong demand in China for American brands, as well as a growing middle-class population with more spending power.

“Our partners have a keen sense of consumer preferences and shopping habits,” Chorna added. “While they will be showcasing Johnny Rockets’ all-American menu, including our world-famous made-to-order hamburgers and hand-spun shakes, as well as our unique signature guest experience that includes dancing servers, they will also be able to offer regional tastes and flavors to our extensive menu items.”

Based in Aliso Viejo, Calif., the 330-unit Johnny Rockets chain has been building its international presence in recent years. With more than 125 units outside the U.S., it aims to double that number by 2017.

In Asia, Johnny Rockets has locations in Malaysia, Korea, Indonesia and the Philippines.

Johnny Rockets was acquired by private-equity firm Sun Capital Partners Inc. in 2013.

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

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

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.”