Balance of trade

Foodservice know-how has long been a prized export, with most nations viewing the United States as the Hogwarts where ketchup-blooded whizzes learned how to conjure fortunes from the need to eat. After all, the chain restaurant industry was forged and refined here. What better source for the how-to’s on turning burgers and fries into silver and gold?

But recent innovations abroad suggest the flow of breakthrough ideas may be reversing. Perhaps it’s because overseas markets are younger, or inhibitions are generally lower, or decades-old thinking is less revered when a country’s history extends back a thousand years. Whatever the reasons, overseas outposts of American brands have lately been flashing considerably more daring in what they put on a menu or how they attempt to solve major problems of the business.

Consider the outposts of McDonald’s alone. Units in Britain, as we noted online several weeks ago, are testing a larger version of the chain’s signature Big Mac as a limited-time offer. It seems highly unlikely the home office would risk tinkering with such an icon on this side of the Atlantic. But over there, boldness reigns, perhaps because it’s so direly needed. The chain has acknowledged that the U.K. has been a difficult market for the brand.

Turning the Big Mac into more of a whopper seems tame compared with the new recruitment technique McDonald’s is trying in the U.K. As we report in the May 30 edition of Nation’s Restaurant News’ electronic newsletter (accessible from our website), stores there are in effect offering jobs to whole families instead of individual members, with the household allowed to decide who’ll be working on what days. It reminds me of the days when an elder child ostensibly had a paper route, but actually the entire family pitched in to fulfill the responsibility. As our story reports, McDonald’s U.S.A. is keeping an eye on the experiment, to see if it makes sense to import here.

And then there’s McDonald’s Japanese operation and the marketing dares it takes. If you doubt that a braver mindset prevails, consider this take-off on Ronald McDonald, used to promote a burger available there called the Tomato McGrand: http://www.youtube.com/watch?v=T6jQlzr6Gjg&search=Japanese%20McDonald%27s%20

There’s also a version of the commercial that features a male model, similarly done up in Queer Eye-approved Ronald McDonald threads.

It’s only fair to note that McDonald’s did try to put some spice in Ronald’s image back in the mid-1990s, when commercials showed the mascot engaging in adult activities like shooting pool. But in a matter of months the world’s best-known clown was back in his old guise, hanging out with the Grimace and the other lovable McDonald’s characters in the usual heart-warming situations.

Perhaps those overseas markets suffered earlier from the issues currently afflicting homeland operations, like the relevance of consistency, speed and bargain prices to a clientele decidedly more appreciative of adventure, freshness and quality. Or the underside of being such an entrenched symbol of the American establishment. Come to think of it, sky-high fuel prices have been known there for decades, though it’s tough to see how that reality translates into greater marketing.bravo.

The question is whether that overseas audacity will convince home operations to loosen up a bit and take more risks on their own. It’s hard for someone of my vintage to appreciate Burger King’s bizarre new Gen X marketing programs, but you have to acknowledge that the chain's effort is original and unorthodox.

Will more players take similar risks, or will safe and steady translate into stolid and slow? And will that make Europe and Asia the new crucibles for killer chain ideas?

Our balance of trade is bad enough already.

Peltz communicates

Nelson Peltz still hasn’t called me, as I’ve lamented here a time or two. But he has written!

Well, not actually to me. And the letter had nothing to do with my requests or any of the columns in which I’ve mentioned him. He wrote a letter to Nation’s Restaurant News, taking issue with a recent page one story about the changing of the guard at Arby’s, the sandwich chain owned by his Triarc Cos. (You’ll be able to read it in the May 29 issue).

It wasn’t exactly what I’d hoped to get. But at least I know that he has our address.

'And the winners were...'

Now that sensation is returning to my legs after four days of zipping around the National Restaurant Association’s annual convention, it’s time to commemorate the 2006 confab with the first-ever The Scoop Post-Show Awards.

Biggest-name attendees you didn’t know were there: Everyone was aware of President Bush’s surprise appearance, which was shoehorned into the packed schedule just three days before he took the stage. The NRA didn’t even have a venue available for the Commander in Chief, and had to borrow a hall from another convention, a retail-technology show that was being held concurrently, in another continent of McCormick Place.
Little noticed were the other A-list politicos who were also in the borrowed arena: Dennis Hastert, speaker of the U.S. House of Representatives; Major Richard J. Daley; U.S. Rep. Judy Biggert; and Rep. Ray LaHood.
Honorable mentions: Former Yankee coach and Red Sox baiter Don Zimmer; and the Black Crows, who played at one of the after-show parties.

Scariest pronouncement of the show: A tie between two head-turners, both related to avian flu.

Bill Anton, acting as chairman of the NRA’s Government Affairs and Public Policy Committee: "It is expected that the U.S. will see its first instance of avian flu sometime this summer.”

President Bush, when asked about the nation’s state of preparedness for an outbreak outbreak: “…The fundamental question is, if there's an event big enough, should the federal government be able to prevent state authority -- should there be an automatic declaration of a state of emergency that will enable me to rally federal troops to keep the law?”

Most appreciated exhibitor-floor amenity: A chair. Any chair.

Best food consumed off the show floor: Rabbit wrapped in Serrano ham, served in lavender tea, at Butter, one of Chicago’s hotter new restaurants.

Worst food consumed off the show floor: Bacon ice cream, at Butter. The accompanying condiment, a maple reduction, didn’t improve the experience.

Show person most strongly suspected of having been cloned: Mary Pat Heftman, the NRA official who set up and oversaw operations of the show, yet could be seen casually walking through the booth areas for a look-see, or checking the processes drafted in a flash to distribute 4,000 tickets in a few hours for Bush’s appearance. (She used the interest from attendees to generate exhibit-floor traffic, positioning the ticket-distribution centers at the far ends of the halls so that attendees had to walk by booths).

It’s just not natural for someone to be in so many places at one time, and seem outwardly cool throughout. The mere responsibility of overseeing the show would turn any single human into a Don Knotts. I’d have suspected cyborgs, but the Mary Pats I saw also kept their sense of humor.

The NRA should lend that cloning technology to the city, to create more taxi drivers at show-closing time.

My day in lockdown

I was officially part of the White House press pool yesterday, with the achy joints and overstretched bladder to prove it. As Nation’s Restaurant News’ designee to cover President Bush’s speech at the association’s annual convention in Chicago, I expected a journalistic thrill, if not a sniff of glamour. Instead, I came away with considerable sympathy for witnesses placed under government protection.

For one thing, you’d think they’d have let the national correspondents get close to the President, given their mission of capturing every word and nuance of the presentation. But during my day of hanging fire with that illustrious crew, we were seated in another zip code—the equivalent of the rooftop across the street from Wrigley Field. And this was after one-time members like me had been “credentialed,” which meant supplying information for a security clearance. No wonder the regular correspondents shout out questions to Bush every time he gets in a car or skips up the ramp of Air Force One. Those may be the only times he’s within earshot.

But the biggest surprise was how little freedom we had. We were encouraged to be there early, so most of us were on the scene before 8 a.m. for what was then supposed to be a 9 o’clock appearance by the Commander in Chief. I learned en route to the event that Bush would actually take the stage at 10:30.

So there I was at 7:45, sitting in what amounted to a cattle pen. We’d been escorted to our seats by a delegate of the White House press office, which had enough of a posse there to monitor us on roughly a one-to-one, tender-to-aisle ratio. If we tried to move to better seats, someone scrambled over to goad us back. If we wanted to use the bathroom, we had to be escorted. When a case of bottled water was somehow smuggled in, the containers were as prized as food packets in a famine area..

Mercifully, the NRA had supplied members of its crackerjack communications staff as “volunteers” for the press office (apparently no other body can officially do the press office’s work, so any assistance from affiliated parties has to come from “volunteers.”) They were friendly despite having shown up hours earlier than we had, and once even allowed us to violate the rules by—oh, the scandal!—taking a cup of coffee to our seats (no food or beverage was allowed in the theater, apparently lest it be hurled stage-ward).

So we sat there for three hours, unequipped for anything but transcendental meditation and sleep. Most of the time you couldn’t even get a cell-phone signal. A colleague had brought the book-review section of the prior day’s paper. There was more than brief talking of mugging her.

A lucky few had their laptops with them. The rest of us dreamt of a world where a deck of cards could be readily procured, or you could head to the bathroom without a guardian at age 49.

But even that privilege was revoked during the final hour of the wait. We couldn’t eat, drink, stand up, or even use the bathroom. It was a total lockdown.

Even worse was the post-speech holding time, when we had to sit there until the President had left the premises. We, the ones with the deadlines, were kept in our seats by a police line of volunteer handlers while the rest of the 4,000 attendees blithely skipped up the stairs and into freedom, where they no doubt enjoyed coffee with abandon. We sat and sloshed for a good 15 or 20 additional minutes, trying to remember what porcelain looked like.

You can read what the experience yielded in the Breaking News section of our website, www.nrn.com.

'No, Tim McGraw isn't a pitcher'

Judging from the first 36 hours, Ed Tinsley’s year as chairman of the National Restaurant Association will likely feel “a little bit country,” to borrow the tag he used at the inaugural party to characterize his family and himself. The fete was more West Texas than Chicago Hilton ballroom, where waiters and a reporter who failed to read the invitation were seemingly the only ones in city duds. Most guests sported denim and cowboy garb, and loaner cowboy hats were provided on each table for yankees eager to get in touch with their inner cowpoke.

But Tinsley, a Texas expatriate who runs the franchising operations of New Mexico-based K-BOB’s Steakhouses as his day job, might need to give his fellow NRA-ers a quick orientation on country, or at least its music. Many seemed to know the party would feature performances by country-western stars, but clearly had no familiarity with the singers’ names. One said ahead of time that it was LeeAnn Rhimes who’d be taking the stage. Another said casually in preview that it would be Sheryl Crow. And plenty just shrugged and offered, “Some country singer.”

For the record: It was Crystal Gayle and Lee Greenwood.

Dateline: NRA Show

Two days into the National Restaurant Association’s annual convention here, two themes have clearly emerged—one very positive, the other as scary as an urgent call from the doctor after some routine tests.

The good news first: The industry is clearly shifting away from the notion that it can mold matter into something edible and call it food. During one of my first NRA shows, the hot product was an abomination called ketchup crystals, a form of the condiment that looked like sugar and could be shaken onto burgers like salt. It fit the prevailing imperative (circa 1980) to cut a restaurateur’s effort and costs, regardless of how distantly the end result might have resembled anything found in nature. Flavors were the result of manipulation in a lab, not in a kitchen.

Contrast that with some of the notable items from this year’s exposition. Usually you’d only find natural products in the small booths in the outer zip codes of the exhibit hall, near the inventor demonstrating his new neck-tie guard or the entrepreneur hawking musical salt shakers. They were garage operations, relegated by their budgets and scale to marginal status.

But this year, minimally processed choices were showcased by a number of the industry’s major processors. Few nudist colonies offer more au natural. Clearly suppliers are being pushed by restaurateurs—undoubtedly shoved themselves by customers—to provide simpler, less-chemically enhanced food choices. As a result, restaurateurs dependent on so called value-added items can now spec such halo-bearing products as proteins flavored with natural marinades, or naturally preserved cold cuts. The 45-item list of ingredients, chockfull of –ites, -ates, acids and gums, is being supplanted by a short roster of recognizable foods, like chicken, salt, or spices.

And that’s a decidedly good thing, judging from a roundtable discussion I moderated on health and nutrition during the show. The degree of interest in simpler, more natural preparations, even by huge mass-market chains, was stunning. Meeting just as the show was opening, the participants all but clamored for the very things they could find later on the show floor. A good thing indeed, for all concerned.

Not so for another frequent topic of discussion during the show. Avian flu has loomed as an industry threat for some time. Now it may be close to arriving. During the NRA’s board meeting, directors quoted experts as saying an instance of the disease will likely be detected within the United States this summer. One cited a Harvard University study that showed 46 percent of consumers would stop eating poultry if the virus is found in U.S. farm stock.

/There’s widespread agreement that patrons have little to fear, barring a pandemic. But there was a near-consensus that the public won’t follow reason.

“We’re just going to have to manage the hysteria, because we know it’s coming,” Todd Graves, founder and CEO of the Raising Cane’s chicken-finger chain, said during an interview at the show.

The chain is already putting together a website to provide fans of the brands with facts about the disease, and how much risk it really poses. Should the disease be detected domestically, Cane’s merely has to post a link on its home page.

The company will also “manage our money so we can absorb a 35-40% sales hit,” Graves said.

Meanwhile, the NRA is spearheading a campaign to educate the industry and the public about the malady, and how little danger it poses if proper food handling and cooking procedures are observed—provided there’s no pandemic.

And if that happens? What if the disease does morph into a deadly illness that can be passed from person to person?

An NRN colleague mentioned how a source of hers in the airport management business already has facilities earmarked as quarantine space for travelers who might have been contaminated.

Scary stuff indeed.

Heard at the show

I'm not sure how to file these tidbits that came to light during the first two days of the show, so consider this a folder marked Miscellaneous:

Joe Micatrotto has signed on as a franchisee of the Raising Cane’s chicken-finger chain. Micatrotto, a longtime industry veteran, was CEO of the Buca di Beppo casual-dining operation until regulators raised questions about his connection to a Buca training villa in Italy.

The National Restaurant Association is eyeing two new membership benefits: A $50,000 life-insurance policy that members could offer free to their employees; and a prescription drug plan, currently being tested in Louisiana.

The Association is also working with the Ted Turner Foundation to promote the principle of sustainability within the restaurant industry. No details were offered at the group’s board meeting, but director Niki Leondakis noted that it looks as if a program to make the industry more protective of the environment will be adopted, sometime after June.

Satisfying scores

Great news! Fast-food restaurants are more pleasing to the American public than the post office, domestic airlines or most utility companies. But the industry sector still lags considerably behind that epitome of customer service, the overnight delivery trade, which finished first among the 18 business categories rated on the basis of patron satisfaction by the University of Michigan.

It wasn’t always that way. Quick-service restaurants were less appreciated than the last kid picked in dodge ball when the American Customer Satisfaction Index was first drafted in 1995. At the time, consumers preferred the delights of staying in a hospital, watching the news or dealing with their telephone company. Only the U.S. Postal Service, newspapers and airlines scored lower in their ahhh quotient.

But now the limited-service sector is right up there, one of the few measured trades to raise its satisfaction index. It soared from a rating of 70 points, on a basis of 100, to the current grade of 77.

The scary finding: The post office scored the largest increase of any trade with a 16.4% lift, to a score of 71.

To see what types and specific brands of quick-service restaurants rated the highest in satisfaction, check out our story in the Breaking News section of our website.

Church and state

When a group represents the entirety of foodservice, a patchwork as varied as the nation itself, should it risk even a half-step into the divisive territory of religion? That’s the question that comes to mind after a glance at the schedule for the National Restaurant Association’s annual convention in Chicago later this week.

I attended my first NRA show 26 years ago, and I’ve seen the conference change a lot during that time. In the mid-1980s, for instance, one of the touted attractions was an appearance by Heloise, a then-popular newspaper columnist who offered home-cleaning advice. She was booked to share her secrets with wives who wanted to excel in their work.

This was just a few years before foodservice executives would meet in Chicago to form what is now the Women’s Foodservice Forum, with the express purpose of helping women clean up in their careers, not in their homes. A highlight of this year’s conference will be the presentation of a new award from the WFF to the foodservice company that’s done the most outstanding job of putting women behind desks they’ll never have to polish.

Clearly we’ve come a long way, or so it seemed until I spotted an item on this year’s agenda: A morning prayer breakfast, convened as one of the NRA’s special events. Listed under the same designation are an executive’s briefing on issues of the moment; an awards program for U.S. Air Force foodservice facilities; and one-on-one advice sessions with restaurant designers.

The National Hospitality Prayer Breakfast is billed as “an incredible opportunity to network,” with the added draws of appearances by Spencer Tillman, a CBS sports commentator, and Truett Cathy, the founder of the Chick-fil-A chicken chain. It’s being held at 6:30 a.m., on a Sunday, when many convention attendees would presumably be heading to church anyways.

But they’d be doing that on their own, outside the boundaries of the show itself. This is something that, by virtue of being included on the program, is sanctioned by the NRA, and that raises some qualms. The group should be fastidiously non-denominational, just as it shouldn’t declare itself an organization for Republicans instead of Democrats, or vice-versa. In short, it shouldn’t show favoritism to one faction of its constituency, since that could imply disregard for the beliefs of other members.

In this specific instance, the association is veering from that policy with the inclusion of a Christian event in its roster of special activities. The prayer breakfast is being presented by an entity called Hospitality Industry Ministries, Inc., a group formed in Atlanta with a goal of instilling prayer into industry events. But that’s just a means to a larger end, as the organization explains on its website:

“The purpose of the Hospitality Industry Ministries is to lead people in the hospitality community into a deeper relationship with Jesus Christ by creating business environments where God can be discovered.”

That sort of mission shouldn’t have a place in the major convention of foodservice, a trade that includes plenty of persons from other faiths. Why should they be excluded, or made to feel uncomfortable, as if they’re outsiders?

I’ve always been a loyal champion of the National Restaurant Association; the industry is fortunate to be represented by such a vibrant, professional and powerful organization. But the NRA made a mistake by including the event in this year’s program. It should correct the problem quickly, and forever more leave religion on the sidelines.

Me! Buy me!!

Squeegie the front windows, splash a coat of paint on the exterior trim, and hide that chair with the worn upholstery. Billionaire Warren Buffet is on a shopping spree, and restaurants have been known to snag his attention.

The man has enough money to cruise down Restaurant Row and announce he’ll take everything on the left side of the street. According to The Wall Street Journal, Buffet’s Berkshire Hathaway holding company has $45 billion in cash on hand for acquisitions, or enough to bag a sizeable foodservice operation. And the so-called Bard of Omaha has let it be known that he’d prefer to spend it sooner rather than later.

Right now, the only restaurant brand in Buffet’s stunning portfolio is International Dairy Queen, which he bought after regularly visiting a unit near his Nebraskan home. But we know the man has to eat, and that he’s prone to buying companies with whom he’s had personal experience. He likes Dilly Bars, so he buys DQ for several hundred million.

But before you send him a muffin basket with an attached invitation to dinner, keep in mind that Buffet has professed an infatuation at present with energy companies—no surprise, given how sales in that sector have vertically climbed.

Unrivaled as an opportunity-spotter, Buffet has also expressed interest in buying abroad, since overseas markets could offer better bargains than the swap-a-rama that the U.S. business scene has become.

Indeed, Buffet spent his weekend initialing an agreement to invest $4 billion in Israel-based Iscar Metalworking Cos.

But the man and his company have enough money to buy Idaho if they so chose. To put it in perspective: A management-led investment group is trying to buy Aramark Corp. for $5.8 billion, which would be the biggest foodservice acquisition ever. Berkshire Hathaway—really just the shell name for Buffet and longtime partner Charlie Munger—could purchase that company and still have enough to acquire Rhode Island or Delaware.

So don’t be surprised to see a significant foodservice player added to Buffet’s holdings in the coming months.

Meanwhile, if he’s looking to adopt, I hope he realizes that he can contact me here.

Astronomical errors

Astronomers say there wasn’t a full moon on May 1, but they should check again. That was the day thousands of immigrants flexed their economic might by not working or shopping, a peculiar social phenomenon to be sure. But the way some restaurants and lawmakers reacted was howlin’ lunacy.

Milford, Mass., for instance, officially made it illegal as of this summer for restaurants to hire illegal immigrants, according to local media reports. Hold on, because it gets even weirder: The new regulation wasn’t adopted by the town’s lawmakers or police, but by the board of health, which argued that immigration is a food-safety matter. Hiring an illegal will be akin there to under-chilling raw meat or using the same cutting board for chicken and scallions.

Not that the xenophobic approach to food safety will make much difference; by all accounts, the town is neither empowered nor motivated to enforce an immigration regulation, even if it’s masquerading as a defense against salmonella. It’s the thought that counts.

And what do the locals think about it? Well, the nearby town of Framingham is widely expected to put the same toothless law on the books in a matter of weeks. It, too, will recast its food inspectors’ nemesis from listeria to Latinos. At least theoretically.

But government officials weren’t the only ones who turned werewolf. Judging from local press reports, dozens of restaurants decided they weren’t going to be left short-staffed that day by employees’ participation in the demonstration. So they fired staffers who didn’t show for work, all but guaranteeing the establishments would be shorthanded the next day, too, if not longer. And re-staffing could take awhile, given the message those employers sent to potential hires, and immigrants in particular. Intolerance is seldom seen as the mark of a place where you’d like to work.

Consider, for instance, having a choice of working at the Chevys in Tracy, Calif., or taking a job at any other place in town. According to local news stories, the restaurant gave three employees time off to participate in the demonstrations. Eight others say they asked for permission but were canned after they didn’t show for their shifts. Four more staffers then quit in protest. And the whole incident was widely covered in the area from which the restaurant will have to recruit replacements.

Seventeen workers warned Café Septieme in Seattle that they wouldn’t be coming to work that day. They weren’t fired, but manager Vance Wolfe was, for telling owner Victor Santiago—ironically, a Latino—that the place would be closed.

At the other end of the spectrum were the places that decided not to open that day, pointing to the big “Closed” on their door as a sign of sympathy with the immigrants. Viewed one way, it was the smart response. If you won’t have enough workers to collect a day’s revenues, at least use the occasion to show you care for and support your employees. The response also provided a little oomph for the industry’s cause of liberalizing immigration laws and thereby easing its burden of finding sufficient hourlies.

But it just seems wrong to punish the employees who needed that day’s tips and wages. It’s one thing to protest or demonstrate, and quite another to lose some of your income because co-workers opt to exercise that right.

It wasn’t an easy situation for restaurant operators to navigate. And that made for one crazy day.

What's the point?

Few restaurant companies could match the financial performance of P.F. Chang’s in recent years, but last quarter provided the chance. The high-flyer’s profits were clipped by 9.4%. The culprit: $11.1 million in compensation expenses.

The drop was even steeper for arch-rival Applebee’s, another chronic over-achiever. Its first-quarter earnings tumbled 14.2%, in part because of compensation charges.

You’d expect the executives of those operations to be in a Dick Cheney tax bracket. But how about the leaders of Texas Roadhouse, a $459 million-a-year steakhouse challenger? Its first-quarter net was hammered down 9% by comp costs and an additional $1.6 million outlay for a managing-partners confab.

All three companies posted significant jumps in revenues—a 35% pole vault, in the case of Roadhouse. And their executives’ paychecks may not have been stuffed with any more doubloons than they were during the same quarter of the prior year.

What changed were the rules governing how a public concern accounts for executives’ stock-option grants. The regulations now require companies to calculate the value of the grants—in essence, a right to buy, not an outright monetary transfer—and reflect that dispersion upfront.

The objective was giving investors a truer picture of what executives are given in total from their employers, cash and non-cash. And the aim is laudable. If an executive is getting market-value pay, but two or three times the usual long-term incentives, shareholders should be aware of that generosity.

Yet the rules seem to be backfiring. P.F. Chang’s reliance on equity-based incentives is far more obvious under the new disclosure rules. Transparency is enhanced. But a 9.4% decline in earnings isn’t an accurate reflection of the powerhouse’s financial vitality. Its revenues rose 17.7%.

As that example shows, a noble effort has clearly been subverted. With any luck, the regulators will reconsider what they sought to do, and adjust backward to that worthwhile goal.