Tuesday, July 31, 2007

Letter fly

This is a bad time to be a postman with an undervalued restaurant company on your route. Letter writing is supposedly a dying art, but activist shareholders apparently haven't followed the rest of the world in abandoning the quill for e-mail. As this week clearly showed, they're sticking with the pen-and-paper mode of communicating with the companies they badger. Monday and Tuesday brought the sort of missives you'd expect to consist of words cut from a newspaper and Scotched Taped together. It's amazing that the notes from Luby's and Wendy's frustrated investors didn't singe their envelopes.

The letter to Wendy's, of course, came from Nelson Peltz, who's emerging as one of the industry's most prolific correspondents. Just a few weeks ago, he sent Wendy's chairman Jim Pickett a mash note about how their respective restaurant companies were made for one another—a "natural," Peltz wrote. The company that operates his Arby's business is the logical suitor for a chain of Wendy's breeding, style and physical attributes. Why not foster a marriage by facilitating an acquisition by Peltz?

Oh, and by the way, he added: Deal with us or we might consider alternative means of adding you to the family. A hostile takeover, perhaps?

Peltz dipped his pen into the inkwell again this week to let Pickett know he's ready to push matters forward. Peltz said he had a purchase price in mind that should fall between $3.2 billion and $3.5 billion. If, that is, Wendy's would stop trying to hush-hush Peltz's Triarc Cos. with confidentiality agreements. Peltz is a man who apparently likes to have his intentions known. Small wonder that his letter to Pickett was included in a securities filing, where it could be seen by every major business medium in the country. And, indeed, most of them gave it prime coverage.

That might make Jeffrey C. Smith feel like a kid whose birthday falls on Christmas. On Monday, he sent a letter to Luby's CEO Chris Pappas that should have had Peltz shouting, "Bravo!" Smith, a partner with the New York investment concern Ramius Capital Group, told Pappas that Luby's should consider selling itself, or at least peddling its real estate and passing some of the proceeds along to shareholders.

Smith also let Luby's know that Ramius didn't appreciate the second jobs Pappas and his brother hold at their privately owned company, Pappas Restaurants. Chris serves the 70-plus-retaurant operation as COO, while his brother Harris holds the CEO's post. How can they focus on running Luby's when they're moonlighting?

What's more, Smith wrote, several of Luby's executives and directors also work a second job at Pappas Restaurants. Sounds like a conflict of interest to us, snipped Smith.

It was the sort of aggressive, pointed communication that Peltz probably fires off all the time to noisy neighbors or businesses that leave him displeased. And, like Peltz's missive, the Ramius letter complemented a securities filing. It was also touted in a press release. On any other day, it would have been a M-80 of an attention-getter. But, coming on the same day as the more prominent gadfly's scolding, it seemed more like a cap pistol.

Of course, the correspondence between invest-ee and investor isn't over for either letter writer. We can also expect more noteworthy pen work from activists like Sadar Biglari, whose letter to shareholders earlier this year is a classic.

Which makes you wonder if postmen communicate amongst themselves about what they're lugging to the CEO's office.

"Another Peltz special?" one might ask a colleague holding a smoking letter.


"Wanna borrow the asbestos pouch again?"

Sunday, July 29, 2007

Stuck in neutral on idling?

This is what I get for buying Harry Potter gear from Taiwan. The damned crystal ball keeps flashing “Danger!” as it hazily depicts a gas pump. Even the Skipper and Gilligan must know by now that rising fuel prices have doubly cursed restaurants, leaving customers with less money to spend in the dining room while driving up the price of supplies at the back door. So clearly the ball's foresight function must need an adjustment. But the gas-related problem it’s predicting for restaurants—a dire one indeed—seems vividly real. Sort of like a car wreck.

Indeed, the possibility seems to glow a little brighter with every war report from the Middle East or each scary prognostication from Al Gore. It’s showing what I could swear are people laying across a restaurant drive-thru lane, stopping business as they yell at patrons to stop polluting the environment and maintaining our dependence on foreign oil. Waiting in a car, they’re screaming, is no way to be served at a restaurant. They obviously don’t appreciate that fast feeders generate more than half their business through a pick-up window.

It’d be easy to dismiss the critics as crazies, or at least zealots, if it weren’t for all the information that’s flowing on the internet right now about car idling, the new bugaboo for a nation wincing at the prospect of global warming as it simultaneously yelps about paying $60 to tank up the Camry. Message boards, blogs and sites are filled with calls for curbing car idling, an echo of the successful efforts in recent years to keep trucks from sitting stationary with the engine running. Many expressly cite restaurant drive-thrus as a fuel-conservation opportunity waiting to be realized.

And those advocates are hardly fringe elements. Consider this advisory: “Try parking your car and going into restaurants, banks, and the like instead of idling in drive-up lanes.” It comes from the U.S Environmental Protection Agency, though you’ll find it echoed in the recommendations of New Hampshire regulatory groups and plenty of other parties.

One posting indicated that 11 Canadian cities have already considered legislation that would prohibit cars from idling for more than three minutes.

The proposals would not outlaw drive-thrus outright, since patrons could conceivably shut down and start their cars and then restart them as they moved up in line. But certainly the convenience of that service mode would be tempered. Ditto for parking and going inside a restaurant instead of waiting in a queue of cars. Without the convenience of the drive-thru, might some time-harried patrons skip a quick-service place altogether?

Santa Cruz, Calif., reportedly banned restaurant drive-thrus years ago. But the present chatter on the internet does not cite a town, city or county that is currently considering car-idling limits.

Yet the momentum is clearly building, as the yakking about the prospect continues to grow louder on the internet.

Which brings me back to my crystal ball, as flawed as it is. I’m hoping it can show me that magical moment when the restaurant industry will start talking about the matter, or at least about how it plans to cope.

Thursday, July 26, 2007

Take note, Bob Evans Farms

Relations between a diner and its accountant may not be sweetened by the old timer who parks himself on a counter stool all day, nursing a bottomless cup of coffee. But the experience is doing wonders for the customer's social wellbeing, according to a report from the clipboard-and-white-coat set. The scientific study found that seniors who lose a loved one or otherwise suffer a social disconnection often get the tea and sympathy they need from a local diner's staff and clientele.

In effect, concluded researchers from Northern Illinois and Arizona State Universities, the corner joint becomes the elderly person's social network. The researchers calculated that a regularly frequented diner provides 30 percent of the companionship needed by someone who retires or sees his or her children move away. If the person should be lose a spouse, the percentage jumps to 58 percent. "Clearly, your body doesn't care whether it obtains companionship from co-workers or from diner cronies," said Mark Rosenbaum, who wrote the study.

The information was gathered during observations of the regulators who frequented an unidentified diner in Chicago.

Wednesday, July 25, 2007

A pothole on the information superhighway

Life as you know it may be coming to an end, a result of the fallout from a new employment website that's certain to be copycatted. Tablesetter.com intends to do for waiters and waitresses what the internet has already done for car shoppers: Negate the come-ons and promises by revealing what kind of deals they can really expect from various places in the market, based on the real-life experiences of those who've preceded them.

The site compiles what servers say they've made in salary and tips at restaurants in their cities, with the information arrayed by experience level. Someone looking for a waitstaff job in New York will learn that rookie servers reported pocketing $845 a week at Spice Market, Jean-Georges Vongerichten's Asian restaurant in the Meatpacking District, while newcomers said they pulled down more than $1,000 a week at not-so-far-away Perry Street.

The information will undoubtedly steer job hunters to one place versus another, and that may cost you some applicants. But even worse is the chance that one of your veteran servers may learn he or she could make a bundle more by just popping down to that place a few blocks over. Veteran waiters and waitresses said they made $876 per seven-day cycle at the venerable Keane's Steakhouse. Their counterparts at Angelo & Maxie's, a steakhouse within walking distance, collected $951 in the same timeframe, or about $4,000 more per year.

The underlying concept is the same as the notion behind any number of car-buying websites, where shoppers can learn what earlier seekers of the same models ended up actually paying, or what rates are being offered by dealerships across the nation, as posted by the retailers themselves.

Tablesetter.com offers the info for bartenders as well as servers. Job holders in eight cities are invited to reveal what they made in those various locations, though the listing for New York places is by far the most robust.

If the site catches on and competitors follow its lead, the industry can expect to see the same sort of empowerment that is enjoyed by online shoppers for any number of goods or services, from insurance to mortgages. And that's not likely to be a good development for restaurants trying to keep a full employment roster.

Sunday, July 22, 2007

When Canadian maniacs go trans-fat-free

The tactic might’ve been shrugged off as an oddity of the international market, like serving squid burgers or charging Morton’s prices for fast-food staples, if it wasn’t for the asterisk. But KFC’s Priszm franchisee operates in Canada, the United States’ fraternal twin in terms of culture. And the blunder is hardly alien to the Kentucky-based chain’s domestic operations, which made a similar move about three months ago. Now the U.S. home office can only hope for better long-term results in the motherland.

Because Priszm’s, as the operator acknowledged on Thursday, were discouraging indeed. The company posted a net loss of $1.9 million on a 4.2 percent sales decline. The results reflected the performance of the company’s 484 restaurants, including its Taco Bell, Pizza Hut and Long John Silver’s franchises. Yet the analysis centered on Priszm’s KFC holdings and the marketing tactic that president and chief operating officer Jeff O’Neil admitted pursuing “maniacally.”

For most of the second quarter, he and his team had trumpeted the chicken restaurants’ switch to trans-fat-free Canola oil, “to the detriment of everything else,” O’Neil reportedly said in a conference call with investors. “Our promotion did not gain the traction we hoped it would.”

No doubt those hopes are shared by KFC’s domestic operation. Like Priszm, it, too, decided to crow about changing the oil in its deep fryers to a variation with zero grams of trans fat. Around May 1, it started advertising the switch via television commercials and print spots, using the tagline, “The Bucket’s Back.” The ads were apparently intended to draw patrons who may have been put off by an unhealthy impression of the chain’s signature fried chicken.

“This gives us the ability to break through the clutter,” James O’Reilly, KFC’s chief marketing officer, told Nation’s Restaurant News marketing editor and fellow blogger Gregg Cebrzynski. “We have a very powerful message for consumers. When they see that message, they’ll think positively about the brand.”

He made no indication about pursuing the tactic maniacally, however.

KFC’s parent, Yum! Brands, has already posted results for the quarter in which the ads began, though the reporting period ended only six weeks after the campaign started. The company didn’t specify how KFC stores fared, but it noted that the comp sales for all its brands, considered as one operation, were flat.

KFC is the only one of Yum’s five North American brands that has advertised a change in its oil.

Friday, July 20, 2007

Turnng the tables on pesky customers

A newspaper’s recount of a bad restaurant experience is news of the dog-bites-man variety. But a critique of restaurant patrons’ behavior? That’s Britney Spears gnawing on the leg of Paris Hilton’s Chihuahua, with Michael Jackson holding the leash. Clearly The Scoop would be remiss if it didn’t note the 2,000-word roundup this week in The Dallas Morning News of restaurant employees’ pet peeves about customers.

The report was a counterpoint to a March Herald story on the little things about restaurants that irk consumers. Then, as with Wednesday’s article, the report was based on first-hand experiences of the aggrieved parties.

Joyce Saenz Harris, the author of the Wednesday’s article, noted that the March story drew 500 responses from readers. The run-down of server and manager’s gripes will probably draw more objections, even though many of the complaints were the same as the ones voiced by patrons. Server and serve-ee both loath parents who let their wolf pups tear through the dining room like a starved pack in a clearing filled with gazelles.

Ironically, patrons were just as likely as restaurant personnel to complain about boorish patrons; the ones who spend the meal on a cell phone were particularly likely to be regarded as snakes by both camps.

But restaurant professionals did cite some curses that are peculiar to their side of the table. Like getting stiffed routinely by customers who either don’t know how to tip—they leave a flat rate like $5, regardless of the bill—or are quick to rescind it for the slightest infraction, like forgetting the third refill of an iced tea for one person in a party of 12.

Ramon Infante, a former waiter at Dallas’ Old Warsaw restaurant, recounted how he’d lost take-home money several times to wives who held back after a family vacated a table and then took a few of the dollars their husbands had left as tips.

In particular, Harris noted, servers are “unhappy with campers,” as her article put it. Several noted how parties would camp out at a table for the equivalent of several table turns, and then tip as if they’d eaten expeditiously. “Customers should realize that each table is only as valuable as the amount of time a server turns it over,” noted Monica Newbury, a manager at Sali’s Pizza.

Reservation no-shows were also blasted.

You can check out Harris’ article at the Morning News and consider the solution she puts forth, for aggrieved patron and restaurant employee alike: “Treat other people the way you would like to be treated,” she writes.

Tuesday, July 17, 2007

'Oh, yeah? Well, we proved it.'

Eskimos supposedly have twelve gazillion words for snow, but that's nothing compared with the industry's arsenal of ways to say "NO!" to governmental meddling. The list of Defenses Against the Dark Political Arts starts with an uh-uh, and progresses to the neutron bomb of counter attacks, "It'll cost jobs."

It's not that the restaurant industry is incorrect or unjust in trying to stop legislative or regulatory measures that hurt the business. But, as has been suggested here in recent postings, the impact of the protests may have been weakened by overuse. That's why the Washington Restaurant Association deserves the Albus Dumbledore Award for its hex against a county’s effort to mandate menu labeling by chain restaurants.

Without saying a thing to adversary or ally, the association ran an online ad for someone willing to eat three meals a day in a restaurant for a month. Definitely good work if you can get it, since the offer came with a per-diem of $40 and a stipend of $700. It's as close as real life comes to Li'l Abner's job of testing mattresses.

Not surprisingly, the WRA found a taker, a 25-year-old grad student named Jarred Lathrop, who, in keeping with the times, blogged his experiences of eating in a restaurant three times a day. The WRA hoped to prove that posting nutritional information isn't a necessity for eating healthfully in chain restaurants. All that's needed to avert weight gain, it seemed to suggest, is common sense, a reasonable amount of will power, and a willingness to ask for clarification on nutritional matters.

And it looks as if the association made its point. When the month- long experiment ended last week, Jarred had shed five pounds, a half-inch of waistline, and a number of points off his blood-pressure reading.

In fairness, it should be noted that Jarred did put some effort into eating right. As his blog explains, he asked for dressing on the side, and sometimes requested that half his meal be packaged for take-home, which cut his consumption at the table in half.

It was a creative way of proving to skeptics that consumers with anything but a flatline EEG should be able to plot a healthful diet with the amount of information that’s usually posted on menus. With menu-labeling mandates proliferating like campaign promises, the WRA’s lobbying tactic may be worthy of emulation.

Tuesday, July 03, 2007

Greetings from the Seventh Circle

Other patrons seem disturbed by the camouflage face paint, but it's life during wartime here on the East Coast, people. They're patiently waiting to order their fries and burgers in total oblivion to the industry's pitched struggle against disaster and ruin. But I'm outfitted accordingly. This, after all, is Week One of the unimaginable, the insufferable, the Worst Case Scenario on a Barry Bonds vitamin regimen. We're talking the post-apocalyptic era of the trans-fat ban, coupled with the Armageddon of mandated health care.

In case you didn't feel the earth tremble, both went into effect at the start of the week—the ban in New York City on July 1, the health care mandate in Massachusetts a day later. It'd be like Mothra and Godzilla dropping their differences to terrorize in tandem. Two of the industry's most-feared developments, actually becoming a reality. The bogeyman has crawled out from under the bed and taken a seat at the dinner table.

So what does Hell look like? To be honest with you, not a lot different from what it looked like before near-annihilation. Walk past the various restaurants here in New York and you hear nary a peep, from inside or out. Just a lot of people pointing to the guy in camouflage paint, wondering if it’s a new fashion.

It's such a non-event that my wife looked blankly at me when I anxiously observed that Doom had sauntered into town. "Didn't that happen a few months ago?" she asked. The philistine. And this from someone who prides herself on keeping up on current events.

Then again, D-Day seemed little noticed by restaurateurs, either, judging from recent peeks inside all kinds of places. Most seemed to have used the long lead time—more than six months, from regulation to enactment—to be ready for the switch-over. It might have been tough at first, as many operators attested as they searched out alternative frying oils that wouldn't be a financial heart-stopper. But that pain seems to have been felt long ago. Now, if anything, it looks like business as usual.

I can't say from personal observation if that's the situation in Massachusetts, but the media coverage suggests it is. If, that is, you manage to google-hit one of the few stories on the situation there. As a newsmaker, it's right up there with a cat encounter for Paris Hilton's dog, or rumors of a Wham! reunion.

Perhaps that's because much of the state, including its restaurant industry, seemed in favor of the measure. It was seen by many as the least of all evils, probably because it's actually a mandate on everyone in the state to secure health insurance, rather than a flat-out requirement that restaurants and other employers supply it. Indeed, businesses with more than 11 employees can either provide up to 33 percent of a worker's insurance premiums, or contribute $295 per staffer to a fund that defrays the cost of coverage for the uninsured. In short, the burden is spread across much of society, rather than being concentrated on businesses. And that, apparently, made all the difference.

Sometimes the industry is so braced for catastrophe that it comes off a little as crying wolf. The situations in New York City and Massachusetts shouldn't be pooh-poohed, but the industry appears to be adjusting. Its critics should give it credit for adapting without much of a yelp. And the trade itself should appreciate the ameliorating factors of a long-lead time and spreading the financial burden of a socially oriented mandate across all social stakeholders.

And it'd get a personal nod of thanks if it figured out how to remove camouflage paint.