Friday, September 30, 2005

Gas pains

About a third of consumers are dining out less often because of the space shot in gas prices, according to a survey from a company that sets up carpooling for companies.

The canvass of NuRide’s 7,000 members, who reside predominantly in the East, found that a staggering 98% have adjusted their household’s spending because of the climb in gas prices, which soared past $3 a gallon in early September. Some pundits think the cost will top $5 a gallon because of the damage and disrupted production caused by Hurricanes Katrina and Rita, as well as turmoil in the Middle East.

In a single seven-day stretch during August, pump prices climbed 18.2 cents per gallon. The following week, sales at casual-dining restaurants fell dramatically, according to Knapp-Track, a service that monitors the weekly intake of chain outlets. In analyzing the data for all of August, the service noted that drivers were paying 74.4 cents more per gallon of gas by the end of the month than they were spending on Aug. 31, 2004.

The week after Katrina devastated the Gulf Coast area, per-gallon prices shot up by more than 45 cents.

Dining dollars were the most likely form of fun money to be reallocated to tanking up the car, according to the NuRide data. Fifteen percent of consumers spent less on entertainment because of gas hikes, and the same percentage throttled back on leisure travel, which typically translates into restaurant business.

Tuesday, September 27, 2005

Outback acknowledges plans for another concept

Outback has quietly confirmed that it plans to launch a new seafood concept called Blue Coral Seafood & Wine Bar, a venture expected to be a seafood version of the company’s upscale Fleming's steakhouse brand.

Like Fleming’s and Outback’s new Paul Lee’s Chinese Kitchen concepts, Blue Coral was conceived by Phoenix restaurateur and philanthropist Paul Fleming, who is also the P.F. in P.F. Chang’s. Outback already operates a seafood chain, Bonefish Grill, which executives have described as a seafood version of the company’s namesake steakhouse concept. Blue Coral is expected to be pricier than Bonefish, with a far stronger emphasis on wine.

Seafood also constitutes much of the menu of Roy’s, Outback’s Hawaiian concept.

A newspaper near Outback’s headquarters city of Tampa, Fla., The St. Petersburg Times, reported in July that the company had secured a lease in Newport Beach, Calif., for a restaurant called Blue Corral Seafood & Wine Bar. But the company would not confirm at the time that it planned to try a new venture.

Last week, Outback disclosed that chief branding officer Nancy Schneid was leaving that post to launch a consultancy. The company noted that Schneid’s new concern would offer guidance on a number of its upstart brands. Blue Coral was one of the brands cited as likely to get Schneid’s attention.

But Outback isn’t revealing any details about Blue Coral. A spokesperson wouldn’t respond to requests for information.

Monday, September 26, 2005

Updating your decoder

If you want to understand that exotic being known as the present-day customer, add two new acronyms to your consumer-speak translation guide: GF, and No WBRO. Both deal with what some chains are calling the new challenge in meeting the dining public’s increasingly varied special needs: Menu items fit for celiac sprue sufferers.

If that’s Greek to you, don’t be embarrassed, but don’t tarry in learning what it means, either. Until recently it was regarded as a relatively rare ailment, afflicting just 2 million people in total throughout the U.S. That works out to about one sufferer in 133 people. But the recent surge in interest and concern suggests the condition may be under-diagnosed. Indeed, you may have already dealt with a customer who had it, but referred to it as a gluten allergy.

In truth, persons with celiac sprue can’t process gluten, a wheat flour. The almost universally used ingredient throws their digestive system out of whack, and they have trouble absorbing nutrients. When a person suffers from the ailment, his or her children have a dramatically stronger chance of also being afflicted. That may or may not be a factor in the pronounced activism of the group, which is using the internet to share information about what restaurants offer a gluten-free menu, or GF in the shorthand of that community. GF bills of fare are already being offered by a number of the national chains, including Outback and P.F. Chang’s, as well as progressive regional operations like Legal Sea Foods and Cameron Mitchell’s Fish Market restaurants.

At Nation’s Restaurant News’ Culinary R&D Conference last week in Orlando, during informal discussions of allergies’ impact on recipe development, several chain menu-makers cited gluten intolerance as something they’ll all have to address if they want to avert a different type of veto vote. As one put it, “If we don’t give them what they want, they’ll find someplace that will.”

Part of the challenge is the ready communication between sufferers. The web abounds in sites and organizations. The community even has its own Zagat guide of sorts, the Clan Thompson Celiac Pocket Guide to Food. One group, the Celiac Sprue Association—“Celiacs helping celiacs,” according to its website—is trying to burn a new buzz-phrase into the minds of its constituents and the institutions that serve them: No WBRO Is The Way To Go. That means no wheat, barley, rye or oats.

The translation: Unless you reformulate, they can't buy your bread, pizza dough, pasta, cereals, and breaded fried foods, to name just a few restaurant staples.

As far as we could determine, many of the sufferers’ groups have yet to identify likely replacements for the ingredients that trigger their illness.

Friday, September 23, 2005

More to come from McDonald's?

Yesterday, a restaurant analyst quoted McDonald's CFO Matthew Paull as saying the burger behemoth is "very open to [strategic] ideas." That suggests "that given enough time the announced IPO of Chipotle may not be the only strategic move McDonald's makes," Buckingham Research's Mark Kalinowski observed in a communication to clients.

The company has already said it will not roll its massive real estate holdings into a real estate investment trust, a technique used in the hotel industry to realize the value of the dirt beneath a business.

Nothing has been said about Boston Market, McD’s other subsidiary brand, or smaller initiatives like its licensing programs.

Thursday, September 22, 2005

This year's model?

You have to wonder why investors tolerate the mere existence of executive teams these days. After letting their C-level charges run amok at Enron, Krispy Kreme and other scandal mills, institutional shareholders have progressed from monitoring where a company is moving, to actually plotting the course.

We saw that again yesterday with McDonald’s long-expected announcement that it’ll sell a piece of Chipotle to the public, a la what Wendy’s plans to do with Tim Hortons. In both instances, the partial sales will appease big shareholders who wanted to cash in near-term on the brands’ success. It’s akin to realizing the appreciation in your house’s value by selling part of the yard. The money’s in hand, but the situation is markedly different.

Maybe the move would be less perplexing if this new investor activism wasn’t so pronounced. If you could be certain Chipotle’s shareholders would be a passive lot who merely collect their dividends or enjoy the growth of a young public company in expansion mode, what’s the big deal? But what if they demand that the chain start franchising, or take some other dramatic step to maximize shareholder return in the shortterm? Like making a move that works against McDonald’s, which, after all, will technically be a separate company.

Sure, McDonald’s will be the controlling stakeholder, so if push comes to shove it’ll prevail. But who wants a company to be run by the threat of wielding your stake in a power showdown?

Maybe we’ll be proven wrong; life for Parent Company and Satellite Holding will be unchanged, and shareholders will get their higher returns without paying a longer-term cost. But in the meantime, with Wendy’s and McDonald’s both making this move, you know other public restaurant companies are going to take the same route. The model may be shifting from a restaurant conglomerate with multiple brands, to a master brand with a collection of majority-stake holdings in promising ventures. The set-ups will likely deliver dramatic results, one way or the other.

Wednesday, September 21, 2005

Animal rights group protests at MUFSO

The Humane Society of the U.S. tried during the MUFSO conference in Orlando to strong-arm Red Lobster into helping the Society's cause, calling via pickets and airplane banners for a consumer boycott of the chain until it agrees to cooperate. Apparently by design, the teacup-sized tempest coincided with the appearance on the stage of Red Lobster's longtime guiding force, Joe Lee, who was being recognized for his leadership of parent company Darden Restaurants.

It was unclear why the Society chose to push the boycott to an audience of restaurant-chain leaders instead of consumers. The group wants customers to stop frequenting Red Lobster until the chain pressures seafood suppliers in Canada to stop killing seals. "Say NO to Red Lobster until they say NO to the seal hunt," said an ad placed by the group in the issue of USA Today that was published on the last day of the convention. The paper was delivered to attendees' rooms that morning. During the meeting, some participants observed that comparatively little seafood is bought by U.S. chains from the waters of the northern Pacific, where the seals are hunted.

The protestors' decision to demonstrate before a gathering of restaurant-chain executives might have been a veiled threat: Work with us or you, too, could find yourself the target of a boycott.

Friday, September 16, 2005

Today's health stars: Fast-food chains

Did we hear that right? A public conference on obesity, convened by a politician known to grandstand for headlines, saluting restaurant chains for their contributions to health? Did we mention it was California? No fewer than four major grab-and-go brands were saluted by fitness star (and state governor) Arnold Schwarzenegger for their part in helping the Left Coast slim down. The four--McDonald's, El Pollo Loco, Subway and 7-11--and two industry suppliers--Dole and Kraft--were among the 26 companies included on the Governor's Summit Honor Roll, which was revealed at The Terminator's Get Healthy California conference today.

The governor's office noted that 7-11, a concept once known for roller dogs and garbage-can-sized Slurpees, is rolling out a new line of reduced-calorie and -fat sandwiches and wraps, which will be sold under the name Pick Smart. Subway is also adding a health-oriented array, called Fit meals. Each consists of a sub sandwich, low-fat milk, and either apple or raisins in lieu of chips.

At an uncounted number of past conferences on obesity, the audience often used the industry as a pinata of sorts, blaming fast-food in particular for America's weight problem. Of course it is a little disconcerting that among the health authorities invited to speak by Schwartzenegger, an entertainer by trade, were Dr. Phil and Sanjay Gupta, CNN's medical reporter. In what might have contributed to a very interesting green room, they shared the bill with organic-produce activist and renowned chef Alice Waters.