Wednesday, April 18, 2007

It's not easy being green--if you're also big

The 48-unit PJ’s Coffee of New Orleans chain is switching to biodegradable cups for its cold beverages. Fifty-two-store Good Times Burger & Frozen Custard is airing TV commercials this spring to tout the chain’s use of all-natural beef. It claims to be the largest burger chain in the nation to use additive-free ground meat.

The Bon Appetit contract-feeding concern is a holding of Compass Group, a company barely smaller than Russia. Yet the division only operates 400 feeding accounts, a pittance by contract feeding standards. The company has pledged to do its part to combat global warming through modifications like lessening its beef usage, since livestock are big contributors of greenhouse gasses, and buying as exclusively from North American sources as it can to save shipping fuel. This comes just weeks after its shift to a menu that's trans-fat free and studded with more healthful choices.

Operations of their size are following the lead of diminutive green innovators like 40-store Burgerville, with its exclusive use of electricity generated by wind power, or Salad Spinners, the Texas start-up that features organic greens, furniture made from reclaimed wood, and even interior paint described as eco-friendly. With Earth Day just around the corner, more operations of their modest size will no doubt join the parade, adding momentum to a trend that must be shaking the gargantuan national chains to their gristle: When it comes to being green, an attribute shaping up as a key marketing strength in 2007, the littler guys clearly have the edge. Or as an exec from Good Times’ ad agency said of the chain’s new green-focused marketing tack, it’s not something “the big burger chains would do, or, frankly, could do.”

And that could be the best news for little guys since David Eckstein proved someone 5’ 7”, in shoes with a good arch, could play professional baseball.

The reasons for the inverse size advantage are obvious: The big brands need a lot of any green item they spec, or typically more than is available on the market as a whole. Switching to a product, even if the operational impact is slight, becomes a big deal when you have to reorient the staff of several thousand stores, stretching from coast to coast. Even slight changes become big, big deals.

Which means, of course, that the smaller players could have a key marketing advantage—both for attracting customers and employees—for some time to come.

The advantages don’t stop at marketing, either. When PJ’s announced its changeover to cups made from a renewable organic source that breaks down after the containers are thrown away, it noted that the switch helped the bottom line as well as the top one. “In addition to being fully biodegradable, corn resin offers more stable pricing, relying less on petroleum byproducts than plastic cups,” said Randy Hollingsworth, vice president and brand leader for the chain. Translation: None of the spikes that operators have seen this year in the cost of their packaging, even if the starting price is not as low.

Buying locally would presumably help Bon Appetit’s food costs as well by lowering the fuel-related expenses of its suppliers.

You wouldn’t tell Lance Armstrong how to ride a bike, or second-guess Warren Buffett’s stock picks. It’d be like telling Barry Bonds how to alienate people. So when Dave Thomas says unequivocally that the addition of even a second frozen drink choice would hurt the Wendy’s quick-service chain by complicating operations, you tend to heed it, even if Dave himself is no longer with us. And yet that’s not what the hamburger chain is doing, as reported Friday. A vanilla version of the brand’s ultra-thick Frosty treat was added to the menu several months ago, and a Frosty Float—a chocolate or vanilla version mixed with soda—was introduced last week. That means four variations are now available, and new coffee-based choices are widely reported to be under development. The chain’s reverence for its founder is evident to anyone who’s had any dealings with the people from headquarters. But in this case, Dave’s words are not being heeded. You have to admire the system’s current leadership for having the courage to do what’s right, even if their gospel says otherwise.

Beverages are the new means of differentiation for the quick-service chains, while continuing to be a huge profit generator. Wendy’s couldn’t afford to sit on the sidelines and watch Burger King, McDonald’s and Jack in the Box give consumers another reason to visit their stores instead of the Place Dave Built. The Frosty is unique; why not parlay that product of distinction into a whole signature line? It makes sense, as Dave would likely agree if he were still with us. Sure, he was convinced that diversifying beyond a lone chocolate-flavored Frosty would be a problem. But that was awhile ago, before the market evolved to what it is today.

But breakfast—well, that’s another story altogether. Because of the chain’s past, tinkering with the morning meal would be like Bill Clinton hiring a few interns. I was covering Wendy’s for Nation’s Restaurant News when it rolled out its first a.m. menu, a collection of omelettes that would have been difficult to deliver within an acceptable timeframe for a sit-down place. Because of the operational issues, it proved a disaster, throwing the chain into a wobble that took years to correct. I can still remember the anger and pain of franchisees, how they felt the home office had forsaken its religion in a lunge for the newfound business that McDonald’s, Hardee’s and Carl’s were snagging with their grab-and-go morning offerings. The problem wasn’t marketing or communications, but operations, plain and simple.

That’s why it was chilling to read Wendy’s announcements last year that it was testing breakfast while already weaving a rollout into its turnaround strategy. The addition of breakfast was a certainty, not a possibility that would be validated or scuttled as a result of the testing. The introduction was a given; the only matter up in the air was how to get there. To quote the great Yogi Berra, it was déjà vu all over again.

Breakfast could supercharge sales for the chain, and there’s no reason it would have to be an operational quagmire. But it would certainly pose more of a risk than the mere addition of a vanilla Frosty to the chain’s one-flavor-fits-all shake line. You just have to hope, for the sake of franchisees and shareholders alike, that Dave’s caution is more of a factor in that endeavor.

It’s a situation that might have the big brands feeling a little green, though not in a good way.

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