Man Bites Dog

Over-cooked pasta with no sauce? White bread in a bowl of milk? Pat Boone singing Lawrence Welk favorites? Pfft. You don’t know blandness until you’ve seen most of the press releases that cross our desks—or, more accurately in this age, our desktop. We as reporters look for man-bites-dog stories. Press statements make every situation seem like a pup getting its belly rubbed. Every flake of spice, every hint of controversy, any variance from the expected-and-boring is hidden under language that dulls and obscures. Chipotles become marshmallows; heavy metal is diluted into the elevator music at a retirement home.

And then come last week’s releases from Creative Eateries. Two parts Fellini to one part Michael Jackson, the statements were so outside the norm that you wonder if they somehow figured into a little-known reality show.

Loyal readers will know that this space recognized Creative’s unique statement of a few weeks ago, in which it gushed about the strong initial stock offering and general market might of Chipotle Mexican Grill, a competitor to its Kokopelli Sonoran Grill. At that time, I pointed out that a major investor in Creative has demanded prior approval of press statements released by the company.

Either that stockholder botched the job, or it needs to consider seriously the help of an outside PR firm, because Creative could have been a Daily Show sketch last week. First, it issued a statement urging stock pickers to help the company determine what party had issued a recommendation that investors buy Creative shares. It also urged stock pickers to ignore the purchase advice, explaining that the counsel had been based on faulty information. And it asked anyone who received a postcard or e-mail to forward that information to Creative’s Scottsdale headquarters, so the source could be verified. Creative said it suspected the disseminator was a concern called Early Bird Messenger.

Even if you don’t work for a public company, you’re likely aware that most corporations would welcome someone’s stock-purchase recommendation. Creative was arguing against it, and perhaps even stoked deeper shareholder concerns by referring to incorrect information, without saying what it was.

Then, a few hours later, Creative followed with what it labeled a correction. That second statement “explained” that the company had issued the earlier press release because it believed the stock-buy recommendation had been based on “misleading information,” specifically an indication that Creative had 70 restaurants open. In fact, said Creative, it had only three stores in operation, with 61 additional franchises sold.

Yet, it acknowledged, the service that advised buying Creative’s stock had not been at fault; the incorrect figures had been approved by Creative, apparently before the positive statement about the company’s share price had been issued by Early Bird Messenger, the promotional company that Creative had suspected of spreading the word. Creative “sincerely” apologized to Early Bird for slamming it in the earlier statement.

So let’s recap: A public company alerts shareholders that a buy recommendation on its stock should be ignored, and asks for the public’s assistance in silencing the source. Then, within hours, it suggests that it had exercised some right of approval over what was disseminated, which raises questions about the connection and why Creative wasn’t certain of the broadcaster’s identity.

I just love those guys.

But enough of a break from the ordinary. Time to read some more releases, and see how many times “exciting” can be work into a sentence.

Reality TV

Thanks. Thanks a lot.

It could have been a relaxing night at home, starting with an uneventful commute. Instead, there I sat on the 6:59 out of Penn Station, being eyed by my wife in the same way you’d regard an airplane seatmate who asks for extra air-sickness bags.

“You,” she finally hissed. “You deal with an industry that I hate. I just hate it.”

This was definitely not good. The last time we had a thoughtful discussion about the restaurant business, McDonald’s was trying to open a unit in our town. My child-bride, a vegetarian who has wondered aloud why we can’t tend our own goats, was not in favor of that community enhancement. I felt differently, as I was reminded by hours of silence and a collaborative read of “The Art of Listening.”

“What could have angered you this time, my sugar-dusted beignet?” I bravely asked.

“KFC is running a new ad that’s designed to be TiVo-proof,” she snapped back. “And now that they’ve decided to do it, everyone will be doing it.”

I used to ask my wife, “If you, your TiVo and I were in a boat that overturned, and you could only save one of us, which would it be?” Now I merely inquire if she’d use my body as a floatation device to keep the recording device dry. She likes her TV, but she doesn’t like your commercials.

Now, she had read, KFC was going to thwart people like her with a commercial that carried an encrypted message. If a viewer TiVo’s through the spot, he or she won’t catch a code that’s needed to get a free Buffalo Snacker sandwich. Indeed, you have to play the spot at slow motion via a VCR or a digital device like the TiVo if you wanted to catch the instructions. Skip the commercial, and there’s no sandwich.

More important to my wife, the anti-TiVo movement was beginning in earnest.

Not good, not good at all.

I explained that KFC is merely trying to deliver a message in an interesting, entertaining fashion, and that they were losing eyeballs to techno-TVers exactly like her. After all, we have three TiVos, three DVD players, four VCRs, and a video iPod.

That was when she decided some iPod time right here on the train was absolutely essential. I’ve yet to hear her voice since. Then again, it’s hard to hear through the front door, especially when you’re shivering. But I could have sworn I heard her yell, “Go see if the Colonel has room at the plantation,” and an unsavory remark about sheep.

Fortunately, there’s a KFC not far from me, for dinner. At least they could give me a discount.

Getting their number

Benjamin Disraeli, the British prime minister, famously observed that there are “lies, damned lies, and statistics.” Mercifully, he died about 125 years before the incorporation of research figures into a publicity ploy would push stats to a whole new level of infamy.

In case you missed the news, Taco Bell today released survey results as evidence the chain’s Crunchwrap Supreme, a hand-held, self-contained meal, could boost the resale value of your car. The research, conducted by the Kelley Blue Book Marketing organization, found that only 34% of vehicle owners regard a clean interior as an important factor in the value of their chariots, as opposed to 66% who regard a pristine exterior as a sales-price-booster. On the basis of that finding, Kelley’s hired guns concluded that car sellers could get far more for their clunkers by keeping the passenger area Felix Unger-clean. “Cars in excellent condition and appearance -- both inside and outside -- can be valued thousands of dollars higher than those in good or fair condition," soberly noted Jack R. Nerard, Kelley’s executive editorial director and market analyst.

And how do you keep an interior spotless? Why, buying a Crunchwrap Supreme when you’re dining a la car, of course.

It’s only fair to say that the whole publicity push has a tongue-in-cheek feel to it. And I’m appreciative of how the communications team of Taco Bell’s parent, Yum! Brands, has periodically used humor to leaven their messages to the public. On April 1, for instance, I still keep a wary eye out for an April Fool’s prank, after watching Taco Bell generate a flurry of newspaper headlines a few years back with the hoax that it was buying the Liberty Bell for marketing purposes.

But this is doesn’t have that Gen X zing. Too bad the Bell didn’t collaborate with the Frisbee Institute, to demonstrate that flying discs are 57% more fun if you can eat them. Show some kids tossing around a Crunchwrap Supreme on a California beach, and you've got yourself a promotion.

No 'A' for effort

Trying to keep kids clean turned Alex Ray into a law-breaker last summer. The New Hampshire restaurateur doesn’t deny that a few of the young people violated wage-and-hour violations by being in the work area of his operation before 7 a.m. It’s the mindless application of the law, the utter disregard for why the kids were there, that burns him. That, and the $5,100 in fines.

Ray doesn’t even fault the state Department of Labor agent who hit him with the penalties months after the infractions, when the kids were safe in school. “The law says, ‘you can’t work before 7, for more than eight hours a day, or more than 40 hours a week,’ “ he said. “We had people there sometimes at 6:30, working eight-and-a-half hours a day, and 41 hours a week. The guy was just doing his job.”

But the violations weren’t counterbalanced against the good Ray was trying to do. He’d offered up one of his restaurants as the setting for a program run by a local organization devoted to keeping kids drug and alcohol-free. Youngsters aged 13 to 15 were encouraged to draft their own business plan and management strategy for a dining room, then put their ideas to a real-world test by working the breakfast shift at Ray’s Common Man Inn in Plymouth. According to press reports from the area, the program had been a hit with parents, guests and, most important, the kids themselves, which prompted some to show up before their 7 a.m. start times. Apparently, some also loaded on the hours.

“We weren’t chaining them to the tables, or having them use slicers,” said Ray. “There was no thought put to it.”

He’s not bagging the program, despite the outlay in fines. “We’ll just figure out a way to do it and stay within the law,” he said.

Ray told me that his fines amounted to $5,100, but local media reports suggested he was able to negotiate a discount.

Another day, another toilet-water debate

Pounding the keyboard for a common good, you presume a certain familiarity with the other editors of Nation’s Restaurant News. Then comes a 12-year-old’s science experiment, and you discover what colleagues really think of bathroom bacteria.

But before we get to the point of controversy, you have to understand a little about our lives. We probably eat more restaurant meals than any non-relative you know. One colleague dines out literally every night except Valentine’s Day—“amateur night,” he sniffs—and possibly a holiday here or there when the industry shuts down. It’s rare to hit a restaurant opening in any of our seven bureau cities without finding an NRN-er there, making sure the host isn’t embarrassed by a still-filled appetizer tray. I’m proud to say the only workable heating elements in my kitchen are a coffee maker and a microwave (in case the coffee-maker breaks down). We’re the super-heavy users whose traffic you’d all love to have.

That’s why it was unsettling to learn the iced drinks we buy from you at lunch are Petrie dishes worthy of a CDC bulletin. Or so we were informed by seventh-grader Jasmine Roberts of New Tampa, Fla. According to press reports, Jasmine was searching for a worthy science project when she hit on the idea of sampling the toilet water of fast-food restaurants. The 12-year-old decided to analyze the water samples and compare the bacterial content to the microbe population of the ice served in the places’ drinks.

You know where this is heading. Working with scientific types who were likely on the wrong end of many an atomic wedgie at her age, Jasmine reportedly found a restaurant’s toilet water harbored less bacteria than its ice did in 70% of the comparisons.

What might surprise you is the flurry of e-mails that bounced around the staff after a reader brought the matter to our attention. One editor averred with all-caps vehemence that bacteria are our friends. Another conceded the point, but stressed that mold could be part of the pathogen parade that ends in a disposable soft drink cup. That prompted the bacteria apologist to note that mold is what adds deliciousness to many cheeses, and is the life-form that gave us penicillin.

At least one citation of other restaurant-ice analyses also figured into the dialogue. It stoked the prevailing sentiment that bacteria are generally bad, despite the redeeming attributes of a bacillus here, a spirillum there

I, being totally Switzerland-like in my neutrality on bacteria, merely scraped the three-day-old residue from my coffee cup and had another pick-me-up of java and hopefully non-hostile micro-organisms. It gave me time to wonder what the people in the cubicles around me might really think of amoebas, and what the staffs might be debating at other business-to-business publications.

Investors vs. casual-dining giants?

Wall Street is already speculating that Outback Steakhouse Inc. may be the next restaurant company to be goaded by shareholders into spinning off secondary chains. Some say that’s a reason, at least in part, for the 30% catapult in the company’s stock price since the fall. With six chains available for auction, the proceeds would be helium to investors’ holdings.

No word yet on how much the casual-dining giant could garner by selling tickets to a headquarters-investor brawl. And it likely would be an event worthy of World Wrestling Federation sanction. Outback’s ad theme—“No rules. Just Right.” — could just as easily apply to its management approach. Or, as a former executive put it before he left, “We get a ‘D’ in conduct, but an ‘A’ in results.” It’s a company that likes to do things its own way, and seems to cherish that independent thinking, right down to the propensity of a co-founder to show up at solidly Brooks Brothers events in a cardigan sweater.

Yet that slugfest would look like a Golden Gloves warm-up compared with the real heavyweight bout: Darden Restaurants vs. a pushy hedge fund. Mind you, no activist shareholder has disclosed an interest in the Red Lobster and Olive Garden parent, just as no green-mailer has publicly leaned on Outback (though the banking firm Friedman Billings Ramsey has tabulated that a break-up would add $20.85 to Outback’s share price, according to a report in the Tampa Tribune). But there are two things the hedge hogs like: Real estate, and headquarters spending. Darden loves to buy the real estate for its brands, and has a lot of it. It also has an infrastructure that’s an envy of the industry, with money (wisely) spent on extensive research and R&D (its menu-development facility not only has a mock-up of a Red Lobster kitchen, but also a model of an Outback hot line, apparently so the ease of knocking off a new item can be assessed). Executives who have left the firm speak wistfully of those resources and the company’s willingness to invest. They realize the value of that spending. But a hard-nosed return-calculator might view it all as G&A begging to be machete’d.

Yet Darden has seemingly relished its independence since being spun off from General Mills in the mid-1990s. At the time, executives spoke of the advantages of being a restaurant company run by restaurateurs. Second-guessing from an outside investment concern, quite likely with no hands-on experience in running restaurants, could be a bad clam for Darden to swallow. And it’s not a company lacking in leadership, resources or determination.

It would be an Olympian contest, without the snow and ice.

Gaming Strategies II

The restaurant executive should not live by bread alone, even of the artisan sort. Some recreation amid the ideation is a good thing, as the industry seems to know intuitively. When I worked for another publication, we hosted a gathering of chain officials at a fancy West Coast resort. The place begged us to come back the following year because its lounge had been packed with attendees every night of the conference. Every afternoon, too. Fortunately for presenters and sponsors, the bar didn’t open until midday.

Certainly a dash of post-work diversion can be refreshing. But why should a much-needed battery-recharge have to wait until quitting time? We’re practically doing your employer a favor by providing this link, an escape you can enjoy right from your workplace computer: http://www.mcvideogame.com/index.html. Best of all, it could actually hone your career capabilities. Where else can you experience what it’s like to run McDonald’s or subsidiary operations?

I hate to be a hair-splitter, but the sampling may not be a completely, totally, 100-percent-accurate depiction of life at the top. The interactive simulation, for instance, allows you to extend the volume of hamburger coming out of your meat supply house by adding “animal flour.” It’s not clear what that might be, but it’s probably not on the revised food pyramid.

Similarly, if you’re plumping up the cattle that will become tomorrow’s Quarter Pounders, you can increase your yield by mixing toxic waste into the feed, along with heaping doses of bovine growth hormone.

The computer game allows you to manage what its creators put forth as the four underpinnings of McDonald’s business: a farm; a feedlot/meat-processing plant; a restaurant, complete with three kitchen lines; and corporate headquarters. In each setting, you can exploit employees, poison the environment, erode food integrity, and generally act like the social lout that anti-corporate forces have long portrayed McDonald’s to be. All for some innocent but edgy fun.

Hardly. The game’s creators, a group of Italian artists and programmers, readily acknowledge they have an agenda. They call their approach gamevolution, and explain that it’s a concept inspired by the anti-global protests in Seattle a few years ago. “We can free videogames from the ‘dictatorship of entertainment,’ using them instead to describe pressing social needs,” explains the game maker, a concern called Molleindustria.

In other words, it’s subtly selling a political viewpoint by slipping it into a fun, seemingly innocuous activity like playing a computer game (which, I’ve been told by a colleague who’s done extensive research on the matter, can be highly addictive). Ironically, the technique is akin to what detractors have slammed McD’s and other fast-food chains for doing with their hug-able mascots, Olympic sponsorships, and other disarming promotional techniques.

Makes you wish that hotel lounge were open right now.

Gaming strategies

It’s a trend of the moment to provide more tableside craft and showmanship. Shop around the dining market of a major city and you’ll likely find places to have your guacamole custom-mashed, your Caesar tossed to order, your margarita hand-shaken, your roast carved, all a few feet away from where you’re sitting.

But perhaps restaurants are going too far with a new variation on the age-old practice of letting guests pick their lobster. In the contemporary twist, places install a crane-type game, similar to the ones you see in an arcade, where hopefuls put in some coins, work some levers to position a mechanical claw, and then let it drop, hopefully to hook a stuffed bear or some other inexpensive prize. But in the seafood variation, you’re trying to snag a lobster, not a toy. If you manage to snatch one, the restaurant cooks it and serves it for free. According to press reports, each attempt costs $2, though you can pump enough greenbacks into the machine to qualify for volume discounts.

PETA has already forced some restaurants to ship the games back to the manufacturer. I hate to say it, but I’m somewhat sympathetic, though not because of any animal-cruelty considerations. Putting a lobster on the same footing as a crappy teddy bear made in Taiwan just doesn’t enhance its dinnertime appeal. What’s next, Whack-a-Capon?

Say what?

Companies issue press releases for all kinds of reasons, but rarely to gush about a competitor. Yet consider the love note Creative Eateries, parent of the fledgling Kokopelli fast-casual chain, put on the wires Friday about the 500-pound gorilla of its intended market, 489-unit Chipotle. The rival brand’s initial stock offering was a “triumph,” with shares doubling in value on the first day of trading, making it the “second-best opening day for a restaurant chain,” crowed Creative. It pointed out that Chipotle’s natural menu was clearly “rousing” for investors, as was the McDonald’s-controlled business’ rapid expansion rate.

Why risk lip chapping with a kiss-up of that scale? It’s clearly an embodiment of that old adage, If you can’t beat ‘em, assert you’re a twin. “Tremendous similarities exist between the Chipotle and Kokopelli concepts, not only in the types of foods and focus on all-natural ingredients, but in the business models themselves,” Creative CEO Frank Holdraker is quoted in the release as observing.

Elsewhere, Creative asserts, “Chipotle’s IPO success calls attention to the comparable marketing opportunity for other, similar concepts.” Okay, we get it.

It should also be pointed out that Kokopelli plans to franchise, while Chipotle doesn’t.

One way the two concepts are not familiar is in size. Chipotle is about to hit the 500-store mark. Kokopelli has three units open, with another 58 in development. That leaves lots of territory open to Kokopelli. But if it’s similar to Chipotle, and the latter brand operates in a market earmarked for Kokopelli development—well, that raises a question, doesn’t it?

Two days before Creative issued the release about Chipotle, one of its investors, Franchise Capital Corp., issued a statement noting that it had amended some agreements with the restaurant concern. Among other things, FCC said, “Creative Eateries has agreed they will seek Franchise Capital's approval on all future press releases regarding Kokopelli Sonoran Grill and Comstock Jake's,” a sister concept.

You can kind of see FCC’s point.

Good news on the cost front?

Zimbabwe has just introduced a new currency denomination, a $50,000 bill, to help citizens contend with runaway inflation. With prices increasing at a rate of 600% per year, the new bill has the same buying power as 50 cents does in the U.S.

Close to the other end of the spectrum is the food-cost situation for restaurants, as I’m learning in researching an upcoming NRN feature on margin management. Last year, restaurateurs clutched their chests from time to time as they read about the rocket ride that prices were about to take because of hurricanes and the moonshot in fuel prices. In reality, those vertical climbs never took place.

The outlook for 2006, as I’m learning, is extraordinary. Experts agree that the major restaurant-consuming commodities will likely provide some relief to restaurateurs. For instance, the U.S. Department of Agriculture has forecast that ranchers, after getting an average of about 87 cents a pound for choice steers in 2005, will be getting anywhere from 81 to 87 cents this year. The cost of hogs could fall by as much as 16%, and chicken’s decline will accelerate by another 6%.

What I’m learning is that operators are still deliberating how to take advantage of the environment, since parallels with similar past situations might not hold. With fuel prices not likely to recede to the levels of a few years ago, and the housing markets in some areas starting to sputter, consumers might ratchet back their spending, some economists warn. The margin boon of charging the same for less-expensive foodstuffs might not be feasible. Yet cutting prices, the industry has learned, is hard to un-do when food costs climb, as they undoubtedly will again, especially with transportation costs on the rise.

My story is looking at what operators are doing. If you want to share your approach, speak up, please. Drop me a note at promeo@nrn.com, or post your thoughts here.

The whopper of a deal

That wooden-faced king in Burger King’s ads may soon be flashing an Alfred E. Neuman-scale smile. The chain announced today that it plans to file the paperwork for its initial stock offering within the next month or so. Amid the ongoing private-equity buy-o-rama, the industry is likely to witness one of its biggest-ever public-equity deals.

BK didn’t say how many shares it will issue, or the possible price of each. But some British media, reporting last week that the filing was imminent, speculated the IPO would generate about $2.5 billion. The chain’s current owners—Bain Capital, Texas Pacific, and Goldman Sachs—bought it three years ago for about $1.5 billion. A billion-dollar gain from three years of nurturing an asset? Not bad. Even a tech-sector braggart wouldn’t have promised returns like that.

Surprisingly, the IPO will mark Burger King’s first time as a pure play for stock pickers. It’s been part of a public company for much of its nearly 50 years, most recently as a holding of Diageo, Grand Metropolitan and Pillsbury. But never has it been the whole of a public concern.

It will be interesting to see how it handles such common public-company problems as the availability of financial-performance gauges to competitors, or having public franchisees (of which it already has several). And, of course, there’s the matter of who’ll run the company. CEO Greg Brenneman is a Texas Pacific principal, put into the corner office to restore the brand’s luster.

The IPO will tell what kind of job he did.