Quick, sacrifice a Day Planner

The calendar gods have not been kind to Yum! Brands these last few months. The December morning after the world learned of an E. coli outbreak within the company’s Taco Bell chain, executives had to meet with financial analysts at Yum!’s annual investment conference, having set the date months earlier. Then, last Friday, even primitive tribes in the Rain Forest were watching YouTube replays of rats dancing the big production numbers from “West Side Story” inside a Taco Bell-KFC combo unit in New York City. Two business days later, Yum! officials were once speaking into a microphone before a roomful of investors and portfolio managers, this time at the Bear Stearns investment conference. It was held in New York, about two miles from the affected store.

And, just to keep life interesting for the Yum! team, their appearance came as the stock market was starting its steepest slide since 9/11.

It’s all of course just an unfortunate coincidence. But on the day of Yum!’s next analyst conference or earnings call, I may dine with one of its competitors.

A stray tidbit of gossip from the Bear Stearns conference, which concludes Thursday: Among those in attendance was Dan Snyder, whose private-equity fund is in the process of buying the Johnny Rockets retro-diner chain. Snyder also owns the Washington Redskins, theoretically a football team. It was unclear if he was scouting for the Redskins, trying to learn the restaurant business, or hunting for other acquisition candidates.

Wake up--you can't smell the coffee

A decade ago, when airports, colleges and other facilities were junking their no-name feeding operations for satellites of the big streetside chains, Starbucks was notoriously picky about whose calls it’d return. All the institutions wanted the hot (and then seemingly shiny-new) brand. Yet Starbucks wouldn’t consider a location if it required one stirrer to be out of its usual place. Plenty of would-be partners shook their heads in disbelief that the upstart would walk away from captive A++ sites for the sake of absolute concept integrity. But more than a few confided their admiration for a fast-growth company that would preserve its character with that sort of zeal.

Those days come to mind as the blogosphere dissects the memo that was intercepted last week from Starbucks conscience Howard Schultz to current chief executive Jim Donald. According to the version posted at http://www.starbucksgossip.com, Schultz doesn’t like the smell of today’s Starbucks—or, more precisely, the lack thereof.

In measured prose that suggests a passion running toward anguish, Schultz argues that Starbucks is sacrificing too much of its personality for the sake of growth, right down to the coffee aroma that once served as a halo. As the chain expanded further and further from its Seattle roots, its coffee had to be carefully preserved in transit, and that meant “flavor locked packaging,” Schultz writes, apparently referring to sealed transport containers. The freshness of the ground coffee was maintained, “but at what cost?” His answer: “The loss of aroma—perhaps the most powerful non-verbal signal we had in our stores.”

With fresh, bagged coffee now being shipped into stores, the concept no longer needs “our people scooping fresh coffee from the bins and grinding it fresh in front of the customer,” costing the brand “tradition and our heritage,” he asserts.

Similarly, he tells Donald, the stores have lost their “soul” and become “cookie cutter” and “sterile,” the results of efforts by the company to boost returns with more efficient, templated designs.

Schultz even laments the height of the automated espresso makers that Starbucks now uses. He doesn’t revisit the internal debate that raged over the switch to those machines, which led the chain away from its early insistence that a barista make each espresso base for a drink. The new equipment serves up drinks more quickly, but with the loss of the showmanship and sent of craft that set Starbucks apart.

Instead of reopening that discussion, Schultz notes that more “romance and theatre” was lost to the machines because of their height. Customers can no longer easily watch their drinks being made, which tempers “the intimate relationship with the barista.”

“Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience,” Schultz says. “But in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces.”

As a result, he asserts, the chain is losing “trial and loyalty” to “fast food operators and mom and pops.

“This must be eradicated,” he declares.

At this stage of the game, Schultz has enough money to make Bill Gates hesitate if both were reaching for the lunch check. The fact that he’s still trying to preserve the uniqueness of his brand seems to have less to do with money than with the pride that drove industry elders like Dave Thomas, Ray Kroc and J.W. Marriott. Wealth? Great. That kind of passion? Beyond dollars and cents.

The memo is extraordinary, for a lot of reasons. It provides a glimpse at the inner workings of a brand with an image strong enough to cast shadows. But, perhaps more important, it captures why Starbucks was so different, and why Schultz was successful—the emphasis on personality and distinction, instead of returns, returns, returns and returns. It’s a powerful lesson for the steward of any chain whose shareholders are constantly pointing out that a quarter has only 13 weeks to it.

Rat tales

Editor’s note: The Scoop regrets to inform readers that the interviewee originally slated for this installment, President George W. Bush, has been re-scheduled so we can bring you this exclusive conversation with the big newsmaker of the day. Here, without further ado, is our interview with the leader of the Taco Bell rats.

The Scoop: Thanks for making time for us on this monumental day for you and your team of rats—for all rodents everywhere, come to think of it.

Rat: Glad my agent could work you in. But I’m doing Conan’s show tonight, so we should get to it.

The Scoop: Were you surprised by how much publicity you drew by running around that Taco Bell-KFC combo unit in New York City last night, in plain view of passers-by and TV cameras?

Rat: It might seem like a case of overnight success and fame, Scoopy, but it’s really been a long, hard slog to get the public’s attention. We’d spent hours on our acrobatics and dance routines, though the mime was a mistake. Three hours of Rodent In a Glass Booth is too much. We were at it for more than two months, and we did get noticed, as the restaurant’s latest health inspection clearly shows. The report was dated Dec. 11, and it plainly states that we were in the restaurant. But if that buttinsky walking by hadn’t summoned the local TV-network affiliate to come down and film us scampering around like kittens, right there behind the plate-glass window, we might still be re-enacting scenes from “Willard.” Instead, there we were on this morning’s “Today” show, being intro’d by Matt.

Scoop: So what was it like to live in a Taco Bell-KFC combo?

Rat: Paradise, man. Really paradise. Chicken three days a week, chalupas and tacos the other four. Heck, with KFC’s newest item, I can even have fish on Friday during Lent, so I can stay okay with the Big Guy upstairs. And the restaurant was in Greenwich Village, el primo real estate and the coolest place to live in the city. One night Drew Barrymore stopped and peered in. I swear she licked her lips.

Scoop: Any idea why the New York Department of Health and Mental Hygiene continued to let the restaurant stay in operation even after it had found evidence that you’d set up a colony inside?

Rat: How can you expect them to deal with things like a rat infestation when they’re trying to safeguard the public with a trans-fat ban, or the requirement that restaurants like Taco Bell and KFC post calorie counts on their menu boards? They have some heavy public-safety matters on their minds, man. Though someone should rethink that “Mental Hygiene” part of their name.

Scoop: So, now that the restaurant has been shut down until it’s sanitized and certified as safe, what’ll you be doing? Any more TV appearances? Or will this matter die down?

Rat: Well, we’ll be on YouTube.com and the other video websites forever [laughs]. So no one is going to forget our appearance any time soon. Years from now, people will still be talking about the Taco Bell rats, even though we had a one-unit run. And other video opportunities will come up. You know how TV news works: If one station has something that gets attention, all the others will chase anything remotely similar for months. So you'll see Al Roker seguing to us again. Which is a shame, because I don’t want to get pigeon-holed as an on-camera performer. What I’d really like to do is direct.

A dusting of news

News sometimes arrives like an avalanche, at other times like snowflakes. This has definitely been a day of flurries, with a few intriguing developments that might have gone unnoticed without this accumulation:

Warren Buffett certainly supports the leveraged buyout of Outback Steakhouse parent OSI Restaurant Partners. He’s already tendered his 1.8 million shares, according to Lon Juricic, who spends far too much time spelunking SEC documents for StreetInsider.com.

Kentucky is considering legislation that would ban machines that allow consumers to inhale alcohol instead of imbibing it. I kid you not. The devices are called AWOL machines, for alcohol without liquid, and they’ve been around for several years now. Users press a mask to their faces and take a hit of hooch, absorbing it through their lungs. Supposedly you get a buzz without any of the taste issues that can turn off neophyte drinkers. Hence AWOL’s popularity among young people. Some of Kentucky’s leaders are determined to shut off that option for the state’s youth. Being the cornerstone of bourbon country had nothing to do with the ban proposal, I’m sure.

A New York City councilman plans to push through a local resolution that would press the federal government to mandate caffeine-disclosure labels for foods and beverages. We New Yorkers may have an exalted perception of our city’s importance, but few of us would have the audacity—some might choose a baser term—to think our elected officials could order the national government what to do. Councilman Simcha Felder says he’s aware the city lacks the authority to order Uncle Sam around, but said he wanted New York’s preference to be entered into the record. What more is necessary, huh? Now let’s see how the Yankees are doing in spring training. Of course, as ridiculous as this situation may seem, it’s a glimmer of a nightmare greatly feared by the restaurant industry. Some of the trade’s Paul Reveres have been warning for years that caffeine would be the next target of the health-thumping nannies. This is another sign that they could be right.

Famed chef Alain Ducasse is rumored to be opening a restaurant in Chicago. Joel Robuchon, another of Europe’s culinary super-heroes, has already confirmed that he’ll be adding a Chicago outpost to his cross-Atlantic operations. If this keeps up, New York won’t be able to tell Dayton what to do, much less Washington, D.C.

It gets worse: The industry’s most brazen act of civil disobedience in recent memory was logged last week by hotdog impresario (and a veritable X-Man to The Scoop) Doug Sohn, proprietor of the legendary Hot Doug’s tubed-meat emporium in—you guessed it—Chicago. Sohn became the first restaurateur to be caught violating the city’s foie gras ban. Not that the authorities could ignore it any longer. He was touting the offending special—Foie Gras and Sauternes Duck Sausage with Truffle Sauce Moutarde and Armagnac-Truffle Chicken Mousse—on his website. And he’d been warned before to yank the liver-adorned dog. He’d even framed the letter of warning from authorities and hung it by his cash register. Is this a man or what? And who’d have thought the first chef to get nabbed in the foie gras crackdown would take the hit with a $6.50 hotdog?

Maybe this Chicago deserves a second look.

Blast turns ad into a hit with legs

Indulge me one more look at the overreaction by the National Restaurant Association to the Super Bowl ad that depicted Kevin Federline as a fast-food worker who dreams of a rap star’s life, because the matter's not closed yet. The NRA’s initial harrumphing, explored here and from countless other online and newspaper soapboxes, was initially tagged as simple hypersensitivity. Now comes evidence that it was much more of a shoot-yourself-in-the-foot event, and a stellar one at that.

If you missed the spot, chances of catching a re-run are extremely high. The advertiser, Nationwide Insurance, has decided to keep airing the ad for about another year. That’s a routine lifespan for one of company’s ads, a Nationwide official told Columbus Business First, a publication serving the Ohio city. But, acknowledged VP of advertising and brand management Steve Schreibman, this spot was something special. Because of the controversy that the NRA ignited, Internet downloads of the commercial delivered another $22 million-worth of advertising for Nationwide. The article noted that some 1.2 million impressions were seen just at YouTube.com, and that’s merely one of the video sites hosting the ad.

By publicly blasting Nationwide for depicting a fast-food job as the farthest possible thing from being a music star, the NRA ensured that the portrayal it found offensive would be shown to several million more people. It’s a backfire of monumental proportions.

Keep in mind that the NRA initially warned Nationwide to yank the commercial or risk a blow to its business. The association noted that it would tell restaurateurs about the insurer’s disregard for the industry’s image, and it suggested that many of those foodservice operations were likely to be Nationwide customers.

Instead of slapping Nationwide’s wrist, the NRA landed it an estimated $22 million in free advertising.

The saving grace for the association: Sensitive indeed would be the watcher who picked up a negative impression of a foodservice job from the ad. The joke was on Federline, not the industry, with the spot suggesting he’d fallen far from his days as K-Fed the aspiring rap star, and husband of Britney Spears. Nothing negative about the job was suggested, except that it doesn’t land you in furs, bling and the arms of arms of accommodating babes.

If that’s the worst that can be said about foodservice jobs, the NRA may want to pay for a few Nationwide spots itself.

Reaching guys when they least expect it

A person has to set some rules. Me? If I’m admonished by the urinal drain during a moment of repose in the men’s room, I know it’s time to skip the next drink and find a ride home from the restaurant. Amazingly, I’m apparently not alone in that conviction. Even more astounding is New Mexico’s plan to wield that code as a curb on car accidents. According to news reports, the state has just outfitted alcohol-selling establishments in several areas with 500 talking urinal cakes, those sanitizing disks that make you feel there’s a touch of the hospital in even the nastiest men’s room. They’ve been placed in the men’s rooms of restaurants and bars in hopes of reaching the patron who’s impaired enough to have trouble with his aim but is still planning to get behind the wheel of a car.

The devices are motion- rather than touch-activitated, negating the need for accuracy. The stroke of brilliance is loading the cakes with the purring voice of a woman, who actually refers to you as “big guy.” Put a big check on the safety punch-list next to “Step 1: Get impaired patron’s attention.”

Then the voice admonishes Lover Boy to “call a cab or ask a sober friend for a ride home,” according to an Associated Press story. First the flirt, then the hurt—she’s only playing with you, to get you to do the right thing. The voice may be simulated, but the situation is real life.

The AP story says that the talking cakes cost $21 each and have already been used in a number of other states, both as a way of curbing impaired driving and as an advertising medium.

Reports of a toilet sanitizer that yells at a user to put the seat down appear to be purely urban myth

What was he thinking?

Lapses in judgment can fall within a wide spectrum. There’s your simple gaff (forgetting a date’s name, say), the cardinal error (defending yourself by remarking that you never remember a woman’s name) and the certifiably blockheaded (trying to break the tension with a few jokes that Howard Stern wouldn’t touch).

And then there’s the blunder that belongs in a whole other league, if not a different dimension. Like deciding to hold a fund-raiser for a high-profile attempted-murder suspect who drove cross-country in a diaper to attack a potential rival for a co-worker’s attentions, earning herself near-universal designation as a lunatic. The people to whom she’s close, you decide, are going to be your beneficiaries. Even worse, you go ahead with the event even after the planning triggers a nationwide uproar of indignation.

Some might admire Silvestro’s restaurant in Cocoa Beach, Fla., for ignoring public opinion and doing what it thinks is right. But most of us just marvel and wonder, why? Why do you hold a charity dinner for former space-shuttle crewmember Lisa Marie Nowak after she’s accused of plotting a brutal murder out of jealousy, in an alleged fashion that leads the tabloids to christen her the astro-nut?

Proprietor Tony Bless said he wanted to stand by Nowak during her time of need, and noted how she’d been kind to his staff while eating in his place after her shuttle mission had returned to Earth. So he hosted 70 patrons on Sunday night to raise funds for Nowak’s family, negative publicity be damned. He didn’t say how much the event generated (Bless didn’t respond to calls or e-mails from Nation’s Restaurant News), but pre-dinner projections estimated the proceeds at $3,000.

Couldn’t he have just sent the family a nice fruit basket, or maybe a gift certificate?

Granted, he’s helping the woman’s family, and God knows they’re likely to need assistance and moral support after Nowak bumped Anna Nicole Smith’s death off the front page. But did he have to let word out, or even cooperate with the media in spreading it?

The intention might have been noble. But the judgement—well, did you hear the one about a shepherd, three Vegas dancers and Hugh Grant?

Death, taxes, now healthcare charges

With almost two years until the presidential election, the race is way too distant to handicap. But few political bookies would bet even now against an upsurge in restaurant labor costs after we round the bend into 2009. Regardless of who wins the Oval Office, the industry will likely foot a considerable bill for extending health-insurance coverage to more Americans. Or at least it seems unavoidable given the current field of candidates.

John Edwards, an aspirant for the Democratic nomination, unveiled a plan last week that would hit employers with a 6-percent payroll surcharge if they don’t offer coverage to employees. The contender he has to beat, Hillary Clinton, is the queen of healthcare mandates, and has championed similar pay-or-play provisions in the past. Barack Obama, the other big brand in the Democratic contest thus far, says he wants coverage to be universally available by 2013, but hasn’t detailed how the cost will be covered.

Don’t expect the Republicans to give restaurateurs and other employers a pass. Mitt Romney, the former Republican governor of Massachusetts, will likely tout the universal insurance plan he pushed onto the books of that state. It mandates citizens to get insurance, rather than obliging businesses to provide it. But to subsidize the cost for Joe or Joan Public, employers have to pay a per-head fee of $295 for every employee they don’t insure.

Then there’s Ah-nold’s model for California. Schwarzenegger isn’t expected to run for his party’s ticket, but plenty of admiration has been voiced for his plan, which calls for a 4-percent payroll surcharge for most restaurants.

Newt Gingrich, once the Doberman guarding businesses against staggering health-insurance mandates, is sounding far more like a Pekinese these days in his discussions of healthcare reform. He’s even appeared on stage with Clinton, literally, to promote healthcare measures they both champion. Once, the two presumably couldn’t agree on how to spell “healthcare.” Not coincidentally, pundits say Gingrich is evaluating the possibility of seeking the Republican presidential nomination. The former Speaker of the House has not renounced his dislike of employer mandates as a means to universal insurance coverage. But he’s sounding a lot more middle-ground-minded these days.

Sure, several of the more formidable presidential aspirants, including John McCain, have yet to bay for the sort of sweeping healthcare reform that would necessitate a significant contribution from employers. But the political climate coloring the presidential race, even at this extremely early stage, suggests the industry may have to pay a significant cost to help protect the 47 million Americans whom experts say do not have health insurance. The question is, how much.

Grin and bear it

Let the record show that the National Restaurant Association has no beef with Kevin Federline. We can only presume it’s also hunky-dory with Angelina Jolie, Clay Aiken and Madonna. But don’t be surprised if it takes to the mattresses soon in its ongoing feud with Nationwide Insurance.

As was reported here earlier, the association sent a letter to Nationwide before the Super Bowl, objecting to an ad the insurance conglomerate would be airing during the game. It blasted the company for running an ad that portrayed Federline in a fast-food job, a suggestion that he’s hit rock-bottom since getting the heave-ho from significant-other Britney Spears. The NRA said it’d heard the commercials were a real slam on working in restaurants, and demanded that Nationwide pull the spot. If not, it said, members would be told about Nationwide’s intransigence, and many of those restaurants are no doubt customers. As even Federline must have realized, it was a barely bridled threat.

Nationwide went ahead and aired the ad, which was milder than elevator music in a convent. It poked a little fun at Federline, noting how he daydreams about being a rap star when he’s actually scooping orders of fries. But many commentators thought the NRA had over-reacted, seeing malice where most found only humor, and I unhesitatingly include myself in that group.

Regrettably, the NRA couldn’t stop there. On Wednesday, it sent another letter to Nationwide CEO Jerry Jurgensen, expressing “deep disappointment” with the company’s decision to run the ad despite the group’s no-show request. At least Federline had apologized, the NRA noted.

The association acknowledged that the spot was probably not intended to be provocative, and it didn’t press the earlier warning that Nationwide’s foodservice customers would be told of the perceived slap at the trade. But then it folded to hypersensitivity and political correctness: “Using humor that offends others is not the right approach to take,” scolded NRA CEO Steve Anderson, who’ll be leaving the job on Feb. 23. “Implying that a certain job represents failure is simply not acceptable.”

He also challenged Nationwide to run a follow-up commercial that “more accurately portrays our industry and its workforce.”

So what would the spot show? That working a fry station is such a great job that the holder would never dream of being a rap star in the company of beautiful women? That he’d rather be wearing a quick-service uniform than sporting bling and the threads of a millionaire?

I greatly respect and appreciate the NRA, but I think it’s playing this situation wrong. It should just leave it be and move on, to real slights of the trade.

Read in triplicate

The IRS should cut the coyness and outfit its agents with hockey masks, chainsaws and meat hooks. Like the hacker movie villains who make their homes in vacant summer camps and creaky abandoned mansions, the collectors are determined to get you. And right now you can practically hear the music well up and a few bodies drop out of closets, because they have a new scare in the works for restaurateurs.

As The New York Times reported this morning, the tax agency, the Treasury Department and the now-Democratic Congress are intensifying efforts to collect on the estimated $109 billion that restaurants and other sole-proprietor businesses tend to under-report every year on their annual income-tax filings. Treasury has proposed that the IRS collect what the government is due by comparing the enterprises’ credit-card sales receipts with what’s reported on their tax returns. If your restaurants’ stated revenues are less than what’s been charged, or the reported sales seem low given how much was put on credit cards, you’ll soon be sitting across the desk from some guy with a mechanical pencil and an IRS Agents Do It By a Schedule poster on the wall above his leather-bound tax texts.

As the article noted, the Bush Administration proposed a nearly identical measure last year, but it died from lack of interest. But now the Democrats control Capitol Hill, and they need cash because of self-assumed new zero-net approach. If you want to launch a new program or extend the services of an existing one, you have to take the funds from somewhere else or generate the dollars through spending cuts. Each provision is pay-as-you-go—no increase in spending without an increase in tax revenues or spending cuts. And new taxes are right out in this political environment.

Capturing what proponents estimate as $100 million in uncollected taxes would pay for plenty of play in the new Congress. But it’s not as if those dollars are zero-sum from restaurateurs’ standpoint. They’re not paying the money now, and if the IRS hits them with a bill, for all extents and purposes it’s a new tax. And a potentially staggering one, even without the added costs of lawyers and accountants.

Makes a Halloween Night trip down to Camp Cut-‘em-up seem almost inviting.

15 minutes of infamy

It’s only right that we observe a moment of silence for all the chickens who gave their lives so Super Bowl fans would never see the bottom of a wings platter during this year’s game. And while you’re decompressing from what’s become a blockbuster event for restaurants, or at least the ones that offer takeout, delivery or catering, let me bring you up to date on the industry news of the day. The rest of the nation may be watching developments in Iraq. But our trade, strangely, is more hung up on wash-outs lunging for their second 15 minutes of glory. Which, of course, brings us to K-Fed.

For the un-cool among you, that’s shorthand for Kevin Federline, estranged husband of Britney Spears and current bane of the industry’s anti-defamation forces. He was impugned by association for starring in a Super Bowl commercial for the Nationwide Mutual Insurance, a part of the company’s “Life Comes at You Fast” campaign. The spots subtly promote the value of insurance by humorously noting how a person’s financial situation can be up-ended in a flash. The K-Fed execution shows the aspiring rap artist enjoying his wealth, fame and ability to dress like a pimp. Then it cuts to a fast-food manager yelling at him to snap out of his daydream and focus on boxing up an order of fries. Supposedly he’s gone from riches and stardom to working the fry station at some big chain, a tongue-in-cheek reference to how his real-life fortunes have changed since getting the boot from Britney.

The suggestion that a fast-food job is the other polar opposite of a dream career prompted the National Restaurant Association to send a letter to Nationwide’s CEO last week, besieging him not to run the spot. The communication suggested that the insurance conglomerate was seriously besmirching the trade. Even though the NRA acknowledged that it hadn’t seen the commercial, it gave Nationwide a pointed or-else: Yank the spot, or the association would let restaurants know how the insurer—in many cases, their insurer—had dissed the trade.

I wish the industry hadn’t done it. The letter generated a tremendous amount of local coverage and considerable discussion in the blogosphere. Much of it wasn’t favorable to the business. It made the restaurant trade, truly a collection of small businesses, seem like Big Business with a toothache—too cranky and highfalutin to bear even the mildest of jokes. And if you’ve seen the spot, you’ll know that it really didn’t slag restaurant jobs. It was a put-down purely of Federline.

He acknowledge as much in the apology he issued shortly before the commercial aired. He called it “a Saturday Night Live skit on myself,” and, in character, joked that maybe it would land him some big-time movie roles.

At least some industry chains got the joke. Taco Bell rode the wave of publicity by writing Federline to offer him a job. It cited a comment he’d made last year about wanting his pre-school-aged kids to learn the importance of working by someday taking jobs at Taco Bell.

“We're flattered,” Taco Bell wrote, “but obviously they're too young to work for us. So here's our offer to you: Come work for us, just for a one hour shift. We'll get you a uniform, a custom name tag and show you what a great place Taco Bell is to work.”

It was a take-off on a take-off. And it used humor to make a point. It’s a shame well-intentioned but louder industry voices hadn’t come up with that response first.