A tree-hugging Ronald

Two years ago, a judge accused McDonald’s of selling “a McFrankenstein creation” only loosely resembling food. Who’d have believed the same company would become arguably the industry’s strongest proponent of organics?

You still won’t find much that’s all-natural on the menu of the corporation’s mother brand, or at least not for a few hours. But McDonald’s upstart ventures are another matter. Its Chipotle burrito chain has hands-down been the biggest chain making the boldest commitment to selling additive-free, naturally cultivated meats. The proteins may not meet the legal definition of organics, but they’re certainly less processed and manipulated than the meats coming in the back doors of most chains.

Virtually all the foods sold at Pret A Manger are additive-free, but the milk provided for patrons’ coffee is the real attention-getter for food finnicks. The serve-yourself pitchers are clearly marked as containing organic milks, of several varieties. Given the supply problems that keep more organic products off chain menus, or at least beyond the brands’ economic capabilities, this is a major commitment for a small chain moving that much coffee.

And now McDonald’s itself is giving organics a try. Tomorrow, 650 units in seven New England states will start selling Newman’s Own Organics Blend java. The price wasn’t revealed, but presumably the new brew will command a premium.

In any case, it certainly can’t be called joe. Not when that’s what BK is calling its revamped brew. The King’s new jolt is a premium perk, according to news stories that quote persons at the chain. But organic? Nope. That’s the sort of thing an on-the-edge brand like McDonald’s might try.

Labeling it right

It’s been three days since McDonald’s surrendered to the Dark Side, and we’re still looking for cracks in the earth. It’s a development the industry has tried to prevent for years, with dire predictions of money being torched, operations getting horribly snarled, and customers tossing down their purchases in disgust. And all for the sake of some over-zealous do-gooders who think, quite foolishly, that it will have a profound social impact.

In short, the legion of opponents said, there’s no way nutritional information could be included on restaurant-food containers. It’s just not feasible, affordable or functional.

And yet McDonald’s said on Tuesday that it plans to do exactly that next year.

An executive of the chain once observed that she could create a worldwide sesame-seed shortage merely by modifying the specs for McDonald’s buns. More recently, the fast-food giant in effect handed the orchard business a winning Power Ball lottery ticket by agreeing to sell apple slices as a side. It’d like to start selling edamame, but there may not be enough soybeans the world over to do it. The scale of the operation is almost unfathomable.

But it’s confident that it can start listing information—similar to the nutritional data printed on grocery-food boxes—on the wraps and containers for Big Macs, Chicken Selects, and almost every other food sold by the chain. It took two years of development and tests, but the home office is certain it can do it without going broke.

We’ve been waiting for a mob of competitors to grab a noose and start looking for a branch stout enough to support the mighty McDonald’s. Resentment must be running as high as it did in the 1980s, when a burgermeister of the chain made a flip remark about the minimum wage having little effect on the business—just as the trade was combating a proposed pay-floor hike by stressing the damage it’d wreak industrywide.

Here, too, the industry took a stand: Labeling, it said, just couldn't be done. Yet McDonald's piped up on Tuesday with assurances that it can.

The industry has been remarkably quiet then, which suggests there’s more resignation than anger out there. Maybe the other chains realize the time has come to throw in the napkin and just do it, especially now that they’ll look socially insensitive otherwise. McDonald’s CEO Jim Skinner has publicly urged them to make the same move, even if it blunts a distinction that might be favorably regarded by fast-food shoppers. The benefit of shielding the whole sector from social reproach (and perhaps legal challenge) seems more important to Skinner. It’s a brave new attitude.

But the industry’s opponents in the health debate also have to accept some new realities. For one thing, McDonald’s and the fast-food chains planning to follow suit are dropping their resistance voluntarily, not because of a poke from lawmakers. So legislative proposals mandating labeling should be shelved. If the issue is the release of information, and the industry is meeting that demand on its own, why slap the trade with heavy-handed requirements and sanctions? At the very least, restaurateurs would have to prove their compliance in some fashion, and that means another complication in a business that’s already dauntingly complex.

Second, this doesn’t change the industry’s objection that labeling won’t work for full-service restaurants, and independents in particular. There’s just too much customization, even within the multi-unit systems. True standardization has been gone since Tom Cruise seemed normal.

It would also be in the interest of everyone to hold off sniping for a bit. But Michael Jacobson, head of the Center for Science in the Public Interest, was quoted the very next day as saying McDonald’s plan isn't ambitious enough. He wants the information posted on menu boards, where customers can see the data before they order. With the planned set up, they won’t know a Double Quarter Pounder with Cheese packs 730 calories until they buy one.

The likelihood that patrons will remember that distinction the next time they order is something Jacobson seems to have overlooked.

He also told The New York Times that he’d like fast-food chains to warn patrons of super-caloric meals, like a bundled deal that topped the 1,000-calorie mark.

The CSPI and the other nutrition nags should realize that the industry moves in steps, not radical leaps. They fail to understand that commercial entitites need to figure out how they can make a change without losing money. Otherwise, the suggestion will be met with pitched resistance, as labeling long had been.

Few could have predicted a few years ago that McDonald’s would even consider what it’ll start doing in a few months. And now it's happening. Give the trade a chance.

Ho-ho-oy this gift-card season?

First, the bad news for mall-based restaurants: Consumers are planning to spend less on holiday shopping this November and December than they did in 2004, according to a new survey. That could mean less time spent in retail centers, since ionospheric gas prices were cited as a main reason for the cutback.

And now the good news, for restaurants of almost every stripe: The same canvass found that one of the presents consumers are most likely to buy this year is the gift card or certificate, the little somethings that have added up to a huge boon for restaurants in each of the last two Christmas-Hannukah seasons.

About 70% of respondents in the survey by Unity Marketing said they planned to spread cheer this December by giving either cash or credit for a purchase. Restaurant gift cards are among the most popular types of the latter. Chains have found that the offer of the cards not only pulls in shoppers before the holidays, but delivers a boon in the otherwise dead months of January and February, when the gift recipients come in to use their present. Card-bearers also tend to spend more than what’s on the card, or what they’d usually lay out if they were using their own cash.

But there is a huge asterisk to a finding that should otherwise be as warming as a mug of cocoa. It’s already prompted the catalog-shopping industry to up-end its marketing strategy this year. As The New York Times <www.nytimes.com> reported last week, the major mail-order houses have already shipped their catalogs to prospective customers, weeks ahead of the usual posting dates. The move is a cagey defense against the budget-gobbling effects of higher fuel costs—not gas prices, which theoretically should help catalog retailers, but fuel-oil charges. The shop-by-mail specialists are hoping to get consumers to place their holiday gift orders before the first heating bill arrives. Otherwise, a dramatic gulp could be followed by a dip into the Christmas kitty.

We figured that restaurant companies would follow suit, given how important gift cards have become to their wintertime sales. Yet in poking around, we’ve not found any accelerated activity. It may be that the industry is still relatively new to holiday retailing, and doesn’t comprehend yet the dynamics which affect that small but growing aspect of their business. But certainly the big players must have hired retailing talent to put them in that arena. Shouldn’t those experts jumpstart marketing efforts right away, before the fuel trucks start pulling up to card-buyers’ homes?

Sorry to be a Grinch. But the industry may have slipped into hibernation on this issue.

Viral marketing makes one pundit nauseous

You know advertising’s old sensibilities are turning to dust when the Rolling Stones appear in an ad for a Mercedes-Benz mini-van, as the band did in a New York Times full-pager today. But that’s nothing compared with the latest frat-boy marketing ploy from Burger King, which prompted Slate.com advertising columnist Seth Stevenson to blast the chain’s zany agency as a passel of tricksters and liars who no doubt forget their mother’s birthday, if anyone would even admit to being their parents. And if his suspicions are correct, Stevenson is being easy on them.

As he reported in Monday’s Ad Report Card column < Masked - Is Burger King trying to put one over on me? By Seth Stevenson>, Stevenson started receiving e-mail queries at the end of September from “readers” who wanted to dress this Halloween as the wooden-faced king that appears in Burger King’s current television ads. Any idea about where they could buy a mask of the Whopper-loving monarch?

Before long, Stevenson had fielded six or seven of the requests, including one that that included misspellings like “comercial.” And that “smelled pungently fishy,” he asserted, adding that he's a big fan of BK’s new campaign.

“Why were these readers so eager to dress as a corporate mascot?” he wrote. “Why did they get the idea at the exact same time? Why was no one asking about, say, Geico caveman costumes? And wouldn't it be infinitely funnier to dress as the Dove Ladies?,” the full-figured real women who now star in the soap’s ads.

Smelling a rat along with the fish, Stevenson called BK’s agency, Crispin Porter + Bogusky, and mentioned the queries to the shop’s highly regarded team. In an astounding coincidence, they told him, Burger King had just started selling a king’s mask on its website for $9. And the minimal costume went on sale at almost exactly the time Stevenson had started receiving the queries.

Somewhere, Rod Serling was likely savoring a Whopper at that very moment.

Stevenson said he out-and-out asked the agency if had sent the e-mails as one of its viral-marketing ploys. After all, this was the same shop that once dressed someone in a chicken suit and put him on an unadvertised website where visitors could command him to do things like dance or hit the deck for a dozen push-ups. It was Crispin’s way of selling chicken sandwiches.

“The PR guy answered, ’Not that I know of,’” wrote Stevenson. “His mealy-mouthed tone convinced me that my suspicions were justified.”

Indeed, “not that I know of” is one of those smoke-screen responses, like “I can’t be quoted as saying that,” or “that’s not my recollection.” It’s a slick way of saying, “Could be, but I’ll be damned if I say so.”

Stevenson admits “there’s a chance that I’m wrong, and that these e-mailers—of their own volition—suddenly, earnestly, and simultaneously wondered if they might buy Halloween masks from a fast-food conglomerate.” But his suspicions were strengthened by word from Crispin that the masks had sold out, as if BK is so popular that anything it offers is a sales hit. Right. How about those chicken baguette sandwiches?

The irony, as Stevenson admits, is that the ploy has worked despite his condemnation. “For now, Crispin gets precisely what it wanted: I'm writing about their fricking Halloween masks,” he noted.

But the viral-marketing ploy—if that indeed is what it was—is only fostering a groundswell of concern about the fundamentally deceptive form of branding known as buzz marketing. Lawmakers are already calling for outlawing or regulating the practice.

That’s a high price to pay for what could better be called shenanigan promotions.

Reforming immigration reform

Behind me on this morning’s train, an immigrant couple practices English.

“How you doing?,” the man enunciates with the seriousness of a judge.

“No, no, no,” says the woman. “How are you doing?”

“How are you doing?” parrots the twentysomething man.

“No! Listen: How are you doing?” she says, shedding the emphasis.

“How are you doing?” he says. He’s delighted with himself for getting it right, and decides to push it. “Hey, how are you doing?” he warbles in a lounge lizard’s voice. He and his companion collapse into giggles, then revert to an unfamiliar foreign language.

Their stab at assimilation comes to mind as politicians in Washington, DC, try to determine where they should stand on immigration reform. In the posturing to show constituents they’re conservative beyond reproach, or truly pro-working class, or absolutely, positively law-and-order, lawmakers seem to have forgotten that lives are at stake as much as votes. People will be fundamentally and profoundly affected by how our purported guardians act on the Hill—the immigrants, of course, but also you. Not to mention your partners, shareholders, native-born employees, and guests. Without that labor supply, the locomotive could run out of coal.

The situation seems simple enough for a turnip to comprehend: Immigrants come here because they need jobs; the restaurant industry has to fill jobs to sustain its key social and economic roles. Insert Group A in Slot B, cue the band to play “Celebration,” and let the conga line commence.

To its credit, the Bush Administration has tried to facilitate that straightforward solution by suggesting the I-9 based system for regulating immigrant employment, a clunker unmatched since the Yugo, be scrapped for something more realistic. The President wants to eliminate illegal immigration by making legal residency easy enough for a straight-Ds turnip to obtain. For a considerable fee, non-citizens could obtain a three-year worker’s permit, renewable for a second three-year term. If they fail to naturalize after six years, they have to head back to their native country for a year before giving it another go here.

Sounds very reasonable. But the very idea has the traditionalists of both parties scrambling for air-sickness bags. Old-line protectionist Democrats decry the loss of American jobs to American workers who no doubt have an Old Glory flapping in the yard. Republicans, meanwhile, almost bust a button on their three-piece suits when they consider that foreigners here illegally could be forgiven their transgression. Why not just give criminals a gold star?

It’s bad enough that the posturing perpetuates the current strain of hiring people who want to take the foodservice jobs that few native-borns seem to want. Now you’re being turned into bargaining wampum. In his weekly radio address last Saturday, President Bush once again urged the nation to embrace his worker’s visa idea. To make it more palatable to the law-and-order set within his own party, the President stressed that work-place enforcement of immigration laws has to be stepped up. Great. The current set-up is a curse to restaurateurs because of how much effort is required to prove they’re not breaking the law and hiring illegals. Under the so-called reform program, they’ll have to meet tougher enforcement standards?

And where exactly is the reform?

Fish trends through the ages

If oyster history is your thing, Wednesday could be the closest you’ll ever come to a Ken Burns-style retrospective. Marine biologists—known to the irreverent as fish heads—will be gathering that day in the Danish town of Kolding to review what restaurant menus from the last 150 years can tell us about the price and availability of shell and fin-fish during the last century and a half.

Glenn Johns, a paleo-oceonographer (i.e., an archeological fish head) affiliated with Texas A&M, has been reviewing more than 200,000 menus unearthed from as far back as the days Millard Fillmore was making a name for himself. The bills of fare were found in libraries, historical-society collections, and the archives of culinary institutes, according to Johns. The professor and his research associates noted the prices of various species on the bills of fare, as well as when certain seafoods began appearing as restaurant choices. For instance, Johns reportedly found few mentions of lobster prior to 1880, when the image of the crustacean changed from trash fish to delicacy. Not coincidentally, he noted, the price also rose at that time.

But it’s a matter of what came first, the lobster or the cachet. Did the price rise because of a pop in demand, or did more people want to try it because it was marketed as an indulgence, with a price to match?

It’s the contention of Jones and his colleagues that a higher price connotes something exclusive and ritzy, and hence carries a powerful allure for people who can stretch to afford it.

Although the results of Jones’ work have not yet been disclosed, he has released a few teasers for the benefit of the media and the attendees of the gathering in Denmark. “I report here on the first attempt at using restaurant menus to reconstruct changes in the retail costs and regional/temporal usage of seafood throughout the coastal United States from the 1850s to the present day,” Jones writes in a preview of his presentation. He notes that he’ll be hitting it all—“invertebrate, demersal and pelagic species.”

That's Danish, right?

BK, franchisee group reportedly sever ties

A dispute between Burger King and an organization representing most of its franchisees could prove a boon to McDonald’s and the other major competitors, a restaurant analyst alerted clients after the stock market closed today. Buckingham Research Group’s Mark Kalinowski did not reveal the nature of the conflict. Nor was he specific about the extent of the possible impact.

But www.franchiselawblog.com reported this afternoon that BK headquarters had apparently severed ties with the National Franchise Association, the group that briefly snared attention when it filed and then dropped a lawsuit against McDonald’s earlier this year. The suit had alleged that the No. 1 burger chain should be held accountable for BK’s loss of customers during a Monopoly-themed promotion that McDonald’s marketing affiliates were caught rigging several years ago. BK’s management team had not supported the NFA’s action, which sought $500 million in damages from the chain’s arch-rival.

Dow Jones reported today that BK had sent a letter to NFA at the end of September, alerting the group that contact would be minimal moving forward because the organization was unwilling to support the franchisor’s marketing programs. Some reports have indicated that NFA represents as much as 90% of BK's domestic system.

The Dow Jones story, as posted on www.cattlenet.com, said the NFA had sent a 12-page response to BK president John Chidsey last week. The article quoted NFA president Daniel Fitzpatrick, the CEO of franchisee Quality Dining, as saying in the letter that BK's home office had misconstrued some healthy discussion about the chain’s direction. Quality Dining itself operates several chains, including Grady’s American Grill, Spageddies, and Papa Vino’s. It’s also a Chili’s franchisee.

Kalinowski’s heads-up to customers was e-mailed after regular business hours for Burger King's Miami headquarters.

Carvel, Cinnabon parent has another in its sights

Look for FOCUS Brands, the parent of Carvel and Cinnabon, to make another acquisition within the next six months. A spokeswoman did not disclose what brands are being courted, but she commented that the private concern would like to add a "center-of-the-plate concept," a descriptor that would apply to a chicken, sandwich, burrito or pizza chain.

The spokeswoman indicated that the purchase would be part of the company's FOCUS 5 program, a drive to amass five foodservice companies with a total of 5,000 franchisees during the next five years.

FOCUS, a holding of the private equity firm Roark Capital, sees its universe of acquistion candidates as franchised brands that require a per-unit investment of $300,000 to $500,000. Roark bought Cinnabon from AFC Enterprises last November, combining it with Carvel, a frozen-treat chain it acquired in 2001 from Investcorp, to form FOCUS.

A few months ago, Roark bought a controlling interest in Mississippi-based McAlister's Deli, which is being operated separately from Atlanta-based FOCUS.

Trans fats, eh?

Trans fat has surpassed carbohydrates as the foodstuff restaurant customers most want to avoid, according to a survey released at an obesity-focused conference yesterday by contract feeder Aramark.

But even more intriguing is what the study says about international differences in health concerns.

According to a report issued in Canada by the Reuters news service, 21% of respondents in an Aramark poll said they were “strongly attempting” to avoid trans fats when they dine out, while only 18% cited the same aversion to carbohydrates.

The drop in concern about carbs is hardly a surprise. The a-ha is the lack of coverage that the study snagged here in the U.S. Sure, it was released at the Vancouver convention of the North American Association for the Study of Obesity (we shudder to think of what they might serve at breaks). But that doesn’t seem to explain why the release was covered north of the border, but not here in the States.

The answer might be found in a second study, released two weeks ago in Montreal and covered by the Canadian Press news wire. The report indicated that 62% of Canadians had changed their diets to avoid trans fats, and 53% avowed that they’d stop eating their favorite treat if it contained the artery-clogging fatty acid. Not coincidentally, 80% of the 1,500 respondents in the Leger Marketing survey said they were aware of trans fats and their dangers.

In the safest wager since we plunked down a bundle against the Cubs this year, we’d wager that the percentage might be a tad lower in the U.S. At least until packaged-goods manufacturers start labeling the trans-fat content of their foods after Dec. 31.

FCC adds to its stable

Add another concept to the menu of restaurant brands partially owned by Franchise Capital Corp. The Scottsdale, AZ-based finance company has been buying into small regional chains that seem at the point in their development where they're ready for more ambitious expansiion. Yesterday FCC announced that it planned to buy a 20% stake in Lucky Lou's, a gambling-themed concept generating more than $1 million at its sole present location, in Mesa, AZ. Two more are under development. The value of the stake was not disclosed. Nor did FCC disclose if it foresaw franchising for Lucky Lou's, which specializes in steak.

FCC already holds a piece of Creative Eateries Corp., the franchisor of eight small chains, including Kokopelli's Mexican Grill. Creative is led by Frank Holdraker, a veteran of the Ponderosa franchised family steakhouse chain and Jamie Coulter's Pizza Hut franchise.

Unfortunately, it's not science fiction

With all the big stories that broke last week—the earthquake in Pakistan, the targeting of New York subways by terrorists, the disclosure that 9/11-style airliner hijackings were thwarted in 2002 and ’03—you might have missed one that was even more alarming. It deals with a possibility that would be unlike anything the nation has ever seen, and would likely devastate much of the industry.

As The New York Times <http://www.nytimes.com/> reported on Saturday, the federal government is preparing for the possibility that Asia’s avian flu will morph into an illness that could readily be passed from human to human. If that happens, a human disease that has thus far afflicted only about 100 persons could spread to tens of millions. A study generated for the Bush Administration and leaked to the Times reportedly says that casualties in the U.S. could soar as high as 1.9 million. Officials have already warned that it would be the worst disaster ever to affect the U.S.

With a projection that dire, even a remote threat of an outbreak could prompt federal or state authorities to halt travel from Asia or other infected areas of the world. Suspicions of infection could scare tourists and business travelers away from some U.S. destinations. Just ask Toronto, where hotels sat virtually empty, their occupancy rates in single digits, after the world learned that some residents were hospitalized with SARS.

In disclosing details from the report, the Times reported that food might be in short supply, and that sectors of the population could be subjected to a quarantine enforced by the military. The present-day foodservice industry is woven into the very fabric of present-day life, a key reason for its phenomenal success. But if that social fabric is shredded, the trade suffers accordingly.

This is not meant to trivialize the impact of a trans-global pandemic. Tens of millions of people die, and the restaurant industry should worry about the impact on sales? A bit myopic, wouldn’t you say? Besides, the government’s concerns are based on a possibility that may never come to pass, not a certainty.

But that’s not the intent of this at all. The foodservice business is so consuming that its members often lack the time to raise their heads and look around at what’s happening in the world at large. As big as this story is, it might’ve slipped by you. You’ll likely be hearing far more about what government and science authorities will be doing to minimize the risk, or temper the damage. Hopefully this will help you understand what’s at stake.

Could Katrina and Rita zap Wendy's again?

Watch financial analysts give Wendy’s a drubbing for attributing its less-than-stellar quarterly results in large part to Hurricanes Katrina and Rita.

The quick-service company reported this morning that same-store sales at its namesake brand fell by 5% at company units and by at least 5.5% at franchised stores during the quarter ended Oct. 2. In explaining why sales had slipped, management stressed that the chain had lost more than 2,676 store days (number of stores times the number of days they were shut), and that 47 affected units had yet to re-open.

What’s more, headquarters said in releasing preliminary results, corporate revenues were lowered by the loss of royalties from the franchised stores. Yet rents and payroll expenses didn’t abate, and the concern contributed to relief efforts in the Gulf area. All told, said management, the hurricanes has likely trimmed earnings by two cents a share.

If that discouraging news had been released in a vacuum, investors might have been more accepting. But almost simultaneously investors were learning that same-store sales had increased domestically by 2% at Taco Bell, Pizza Hut, KFC and the other brands of franchising giant Yum! Brands during the quarter ended Sept. 3. And P.F. Chang’s disclosed that comp sales were up 2.8% in the third quarter at its Pei Wei Asian Diner concept, which, like Wendy’s Baja Fresh, competes in the fast-casual market. Baja’s same-store sales declined 4.1%.

To make matters worse, skepticism about the effects of Katrina had been stoked in the days and weeks beforehand by earnings alerts from companies competing outside of foodservice. Avon and Estee Lauder, for instance, warned investors that Katrina had adversely affected cosmetic sales. In an inspired piece of analysis, Associated Press business columnist Rachel Beck noted that a similar explanation than lower-than-expected earnings had been posited by mattress maker Tempur-Pedic International and ATM manufacturer Diebold. She dubbed the phenomenon the blame-it-on-the-rain excuse.

In Wendy’s instance, stores were really closed, if not destroyed. And, as it noted, gas prices have risen to a level that pilots typically announce on commercial flights as “our cruising altitude.” Most dismaying of all, it will likely be faulted rather than appreciated by investors for continuing to pay staffers who lost work because of Katrina and Rita, and for contributing to the relief efforts. That kind of good will pays dividends of a far different sort, and not merely on a quarterly basis.

Will Caribou's Islamic parentage raise eyebrows?

Caribou Coffee doesn’t sound Muslim, as indeed it’s not. But a controlling interest in the company is held by Arcapita Bank, which had switched to that name from the potentially inflammatory First Islamic Investment Bank. Regardless of what it’s called, the institution operates in accordance with shariah, or Islamic law. And that, as Motley Fool contributor Stephen D. Simpson noted in a posting this afternoon, could be an issue with U.S. shareholders of the newly public coffee chain.

Simpson speculates that there could be two areas of concern. The first is how shariah could hamper operations. The ethical code sets rules for borrowing money, which “might impair the company's access to quick sources of capital,” Simpson wrote. Similarly, he noted, the chain could be denied the go-ahead for new products that are not permitted under Islamic law.

That, Simpson observed, will probably not be a problem for a limited-menu coffee chain. But Arcapita also reportedly holds a sizeable stake in the Church’s fried-chicken chain. Items like bacon or other pork cuts may not be so far a field for a concept like that. They could not be offered under shariah.

The other risk to Caribou, said Simpson, is “flat-out” ignorance. “Islam is not exactly well understood in this country, and there are a lot of people who go into knee-jerk reactions when they hear the word,” he wrote.

But the connection between Caribou and Arcapita nee First Islamic has been a topic of discussion on the internet for years. The relationship was even reported on snopes.com, the popular site that collects urban legends, with an indication of whether each is true or not. The 2002 installment confirmed that First Islamic held a controlling stake in Caribou. “Starbucks, here I come!” remarked the site’s content controller.

A Caribou spokesman did not respond to a request for comments.