McCain vs. Obama: What's a restaurateur to do?

With the presidential election just a few days away, we at Nation's Restaurant News decided to present this story from the issue that publishes Monday. It covers a debate we coordinated at our MUFSO conference specifically to help restaurateurs decide who'd be better for their businesses, John McCain or Barack Obama. It's being posted here in hopes of providing the industry with fodder for thought for those members who are still conducting their own internal debate as to which contender should get their vote (and if you want to practice, take our poll to the right).

Washington – A MUFSO debate between stand-ins for the U.S. presidential candidates proved as contentious as the actual face-offs between Barack Obama and John McCain, with the participants disagreeing on everything from Sarah Palin’s competency to what makes a good Oval Office occupant.

The two-person teams squabbled over such issues as which candidate offered the best prospects for small businesses; how much the financial crisis should be weighed in picking the next president; which contender was more of a capitalist; which candidate would surround himself with better people; and, in a strange twist, which of the two had mentioned Warren Buffett first during a televised debate.

Both sides included a one-time restaurant company leader who had sold his charge in the last few years: former Cold Stone Creamery CEO and chairman Doug Ducey, representing McCain, and Phil Hickey, who held the same posts at former LongHorn Steakhouse parent Rare Hospitality, speaking on behalf of Obama. Each was teamed with someone with a legal background. Melissa Rothring, the former executive vice president of legal affairs for current Cold Stone owner Kahala Corp., rounded out Team McCain. Cathy Hampton, the former general counsel of Rare and now a full-time volunteer in Obama’s campaign, joined Hickey.

Both sides offered assertions as to how the winner might affect the restaurant industry. The only concurrence seemed to come on the overarching question of which side had the best candidate. Both teams readily insisted they did.

Team McCain portrayed their candidate as the better capitalist, leader, commander in chief, decision-maker and independent thinker. “This guy’s a survivor, he’s a leader, and he’s always been mission-driven,” said Ducey, a resident of Arizona, which McCain represents in the Senate.

Teammate Rothring acknowledged that she had been drawn to McCain “by gut instinct.” But, in preparation for the debate, “I went to a website and looked up the issues. The common thread I saw with McCain is that he is a capitalist.”
She lauded the Republican candidate as someone who was likely to slice corporate taxes, cut the estate tax and lower the exemption on that industry-hated measure, push for tort reform, and seek a permanent research and development credit. All of those measures are favored by the restaurant industry.

In contrast, she asserted, Obama would push for a $9.15 minimum wage, unionization, paid sick leave, a rise in corporate taxes and the real estate tax, and a health care proposal that would cost “10 percent of your payroll.”

Team Obama’s Hampton challenged those assertions. “Just this weekend Sens. Obama and [vice presidential candidate Joe] Biden revealed their plans for small businesses,” she calmly retorted. “What they’ve done in their plan is direct money to help small businesses. One thing is to take away — completely eliminate — capital gains taxes for investing in small businesses.” She also cited a $3,000 tax credit for each new full-time employee a small business hires during the next two years.
“We’re talking tax cuts for 95 percent of hardworking families in America, and tax cuts for 98 percent of small businesses,” Hampton said.

Hickey professed to “take it up to the taller trees,” where he could see a bigger picture. Explaining that he’s a registered Republican who has contributed more than $1 million to industry lobbying and campaign efforts, he recounted that he was a staunch McCain supporter in the 2000 campaign.

Yet, he continued, the country has had eight years under a Republican Administration, “which was voted for by most of us. Let me ask you, how are things today? How’s your business? How’s that working for you?” His rhetorical questions came as the industry was contending with a pronounced downturn in sales, profits and traffic.

“My sense is, an Obama presidency would deal with bigger issues that would ultimately help our businesses,” Hickey said.
He cited such pressing concerns as the energy situation and the high gasoline prices that have resulted. “The leadership on that has been lacking,” he said. “As a result, it’s come out of control.”

Overall, he said, “The underpinnings of the economy are very uncertain. Who do you trust to lead for the next four years in the U.S. economy? Who do you trust to fix this?”

One of the constant points of contention during the hour debate was how much the economic crises should factor into a voter’s choice of candidate. The session was conducted after one of the worst weeks Wall Street had ever seen, and a day after the Bush Administration disclosed plans to buy stakes in nine banks as a recovery measure.

“Two years ago, we were all pretty happy with the economy. The issue was Iraq,” Ducey said. The economy “is unraveling, but it’s really all about housing. Once we get through the housing part of it, what will we have?”

He suggested, “People may go back to, ‘What are these issues?’ rather than, ‘What are these crises of the moment?’”
Team Obama would have no part of that. “I really wish we could turn the page on the economy, but it’s very hard to do that,” Hampton said.

Hickey asserted that the economy was an attitude-changer, not a short-term distraction. “There’s a strange dynamic in this room, in that there are a number of Republicans,” he said. “My support for Obama started out in the minority. But other people have come up to me and said, ‘I just can’t go there. I just can’t vote for McCain.’”

The debate was moderated by Nation’s Restaurant News editor Ellen Koteff.

Clearing the smoke from product intros

Enough with the handicapping of the presidential election. What we really need is an analysis of what this week’s menu changes mean for the country.

Let’s start with the scheduling. Once upon a time, restaurant chains would schedule their menu overhauls to correspond with the seasons—salads and beverages added in the summer, heavier fare like soups and stews featured in the fall and winter. Now chain parents are announcing menu changes either right before or immediately after releasing poor financial results.

Earlier this week, for instance, DineEquity announced that its IHOP brand had added Coffee Cake Pancakes. Simultaneously, the franchisor disclosed that its losses had deepened to $16.4 million. It was as if the company expected investors to say, “Whoa. Who cares if the company lost money. IHOP has Coffee Cake Pancakes!!”

Similarly, Popeyes parent AFC Enterprises disclosed last Friday that its domestic same-store sales for the third quarter had slipped 2.8 percent. On Monday, Popeyes announced that it was adding a new bowl meal and a chicken sandwich—the foundations of what the chain trumpeted as a whole new menu platform.

Is the new trend to use menu additions as a distraction from bad financial numbers? Two instances would’ve been merely a coincidence that suggested no. Then came today’s one-two announcements from Denny’s. In the morning, the company crowed that it was updating its late-night Rockstar menu with items supposedly developed by stars like Katy Perry, Taking Back Sunday and Hoobastank. Hot-selling rock bands, working together in their kitchens to come up with items like the Melty Grilled Chicken and Sausage Quesadilla. Sure, I buy that.

Nevertheless, roughly eight hours later Denny’s released its third-quarter financial numbers, including a 6.1-percent drop in same-store sales for franchised restaurants and a 2.7-percent decrease for company-run units. If three instances suggest a trend, we’re there.

Yet my smokescreen theory is severely undercut by Denny’s profits. Net income more than doubled, to $10.6 million. Why blunt good news like that with yee-haws about the new Hooburrito, supposedly a brainchild of the band Hoobastank?

Denny’s may be an exemption to that trend, but it certainly fits another pattern in how chains are announcing new products these days. Not so long ago, they tended to introduce a whole new menu and stress the additions. Afterward, they might’ve showcased a limited-time offer now and again. The introductions were either grouped together into one event of note, or peppered over an extended period in a bid to stay top-of-mind.

Contrast that with the approach that was taken yesterday by Jack in the Box. The (now) multiregional burger chain announced at 9 a.m. East Coast time that it was resurrecting its Teriyaki Bowls line; at 12, that it was bringing back its Mini Churros; and at 3:30, that it was introducing two new “homestyle” chicken sandwiches (translation: sandwiches made with fried chicken) in its central and southeastern regions. What would have normally been one news item became three web postings. Which, presumably, was exactly the point. By staggering the release of three separate press announcements, it garnered at worst a story and two updates, and at best three separate articles, without a penny in ad fees. Pretty smart.

And what of the products that were added this week? Clearly they prove that “new” is a relative term. Popeyes declared its new meal in a bowl to be new, but it’s been featuring similar items for years. And its new Big Easy chicken sandwich sounds exactly like an item it’s carried for some time.

And, with all due respect to Melty quesadilla creators Taking Back Sunday, or Hooburrito midwives Hoobastank, those items aren’t exactly groundbreakers.

Need we point out that two of Jack in the Box’s three menu additions were resurrected products, and that the third sounds conspicuously like McDonald’s chicken biscuit sandwiches?

So, what does all of this mean for the country? Clearly the emphasis is on recycling retreads, which raises some alarming questions about levels of creativity. But then again, the industry is showing surprising innovation in the most mundane of areas, how product introductions are handled. Business may be down, but it’s hardly lacking in craftiness.

The industry's knee-deep--in fertilizer

For a preview of the renaissance that’ll up-end the restaurant industry in a few years, look to a shuttered dinnerhouse in Spartenburg, S.C.

After 29 years in business, the Steak & Ale there died with the rest of the brand this summer, locking its doors to the 50 or so employees before they mustered for a shift that could’ve been a replay of the prior day’s, and probably the day’s before that. Later this week the place will fire up its grill again, this time as Steak and Spirits, with many of the former employees back in their familiar roles. Yet they’ll hardly be aiming for business as usual now that they’re the ones deciding what’s best for guests and the operation. All those ideas that arise from talking with and serving patrons can actually be implemented, instead of dying in some corporate suggestion box.

“Now that we’re not corporately owned, we have the freedom to do some things,” past and future manager Carol Easler told a local news media for a story.

Easler and her reassembled team will indulge their pent-up entrepreneurship because the new backers apparently appreciate the staff’s intuition for what works, what doesn’t, and, most important, what guests really want. The same dynamic will likely come into play as the economic downturn erodes the corporatism that has homogenized casual dining into the foodservice equivalent of rice cakes—plain, unsalted rice cakes. A death knell for hidebound restaurant companies will undoubtedly put restaurant operations within the grasp of more free thinkers, if not downright radicals. With sites becoming affordable and new ideas trumping big-company resources with a public craving originality, we’re heading into a period of unparalleled creativity for the business.

It’s exactly what happened after the economic shin kick of 1991. If memory serves me correctly, the IPO class of ’92 included Outback, LongHorn and LoneStar, to name a few high-flyers of the next decade. At the time, each brazenly shot a finger at the status quo. Now they’re as subversive as a powder-blue leisure suit.

It’s a shame that the industry has to lapse into shambles for a new generation of innovators to arise. But does anyone doubt that it’s long, long overdue?

Sighs of the times

This is an entry about the economy, but it poses as a lapse into what blogging’s detractors call The Cheese Sandwich Syndrome. They bemoan the tendency of many bloggers to recount the mundane aspects of their lives—i.e., “Today I had a cheese sandwich”—in the mistaken belief someone cares. But you might be interested this time if you’re one of the restaurateurs who’ve been contending the economic crisis of the last month has largely been contained to the financial world. “Wait until it hits the general public,” they warn. Based on my experiences of the last few days, we’re already there, folks.

As my bio notes, my wife and I share our house with three greyhounds that were retired from racing. On Monday we were asked to take in a fourth because its adopter had been evicted from her home because of a change in her economic situation. The dog is 12 years old, which means she’d had him for at least seven years, and possibly a decade or longer (greyhounds can only race between ages 2 and 5, and rare is the dog that stays competitive for that long.) Jim B. also has some health issues. The woman had to give up Jim, her lone companion, because she couldn’t afford to keep him.

It’s the sort of story my parents would tell about the Great Depression.

That’s Jim to the right, by the way.

Taking care of him requires a fair amount of time, which has been in particularly short supply since Monday. That’s because much of the last few days has been spent in conversations with friends who’ve lost their jobs or key clients and are looking for leads. Each is a highly qualified individual whom I’d hire in a minute, and unemployment is as novel for them as it is unpleasant. These are victims of the times, not symptoms.

A looming economic crisis? I suggest you look out your door. The crisis is here. The question is, how much worse will it get?

‘Clean-up attempt on Aisle 5’

An army of cliches gave their lives during our recent confabs to alert restaurateurs they’re in the bomb sights of a rival they probably discounted long ago. The new mantra of that resurgent enemy should’ve readily done the job: Restaurant meal replacement. It underscores how determined the grocery business is this time around to take away restaurants’ lunch, dinner and breakfast sales.

But back to a moment of silence for the clichés that are no longer with us. Topping the casualty list is “share of stomach,” the clever tag for the struggle between restaurateurs and grocers for the public’s food outlays. That battle, the supermarket business realized, lapsed into a one-sided contest long ago. Smart grocers have left such conventional warfare to the retrogrades who still believe they can trump restaurants with clamshells of Buffalo wings stacked in a refrigerator case (“Best sold before 2010”), right next to the vintage sushi.

The new grocery militia has also given a blindfold and last cigarette to the old adage that they have to beat restaurants at their own game. The often-tried strategy of bolting a restaurant onto the public’s source for Metamucil and Handi Wipes just hasn’t worked. As menu watcher Nancy Kruse suggested during our MUFSO conference, dates are seldom wowed by dinner at a Piggly Wiggly, even if the moonlight hits the plate glass just right.

But, Kruse stressed during that convention and our Culinary R&D conference a week earlier, regional and upstart grocers have quietly mapped a more effective strategy, in part by enlisting chain menu planners in the brainstorming. Whole Foods’ development of ready-to-eat meals, for instance, is being handled in part by Tina Freedman, a longtime veteran of the Fresh Choice buffet chain’s test kitchen. Fresh & Easy, the fast-growing American outpost of British retailing giant Tesco, has entrusted its R&D efforts to chef Michael Ainsle, who apparently coined the battle cry of “Restaurant meal replacement.”

That term, of course, is a rewrite of the label Boston Market gave its targeted market back in the days when it was still the concept that was going to upend the industry. Asserting the brand didn’t really compete with conventional restaurants, executives cited their strategic objective as “home meal replacement.” For the year or so that Boston Market continued to fly high, it was the buzz-phrase that captured the industry’s attention. Today we forget that Boston Market-inspired concepts were tried by McDonald’s, Brinker International, Cracker Barrel, Hardee’s (through its Roy Rogers holding), Arby’s and Ruby Tuesday (through Morrison’s), to name just a few converts. They were convinced the future would belong to a concept that could combine restaurant-quality meals with the convenience of takeout and the lower prices of groceries.

Another cliché that should be taken behind the barn: Be careful what you wish for.

As Kruse noted during her “State of the Plate” presentation at MUFSO, some supermarkets have finally mastered that alchemy. Because a consumer tends to shop for groceries about four times a week, food stores have the convenience factor wrapped up. Grocers foolishly figured shoppers would buy basically anything carbon-based for a heat-and-eat dinner, since they’re in the stores anyway. Who cared if the meatloaf was older than their kids, and roughly the color of a bruise.

Casualty No. 14: “If you stock it, they will buy.”

But now, Kruse observed, progressive supermarkets are delivering the quality and freshness that weren’t there during the Era of Rotisserie Chicken, the long stretch when store meals were merchandised no differently than mop heads or turnips. She noted that some restaurant chains are putting grocers like Ukrop’s on their list of direct competitors.

Perhaps that’s because grocers are starting to eat restaurants’ lunch, at least at dinner. Kruse cited NPD/Crest data that shows restaurants’ evening share of stomach—sorry, proportion of all supper opportunities—as slipping between 2001 and 2006. She also mentioned NPD’s finding that consumers are dining at home more often to economize, not only on their meals, but on their gasoline usage. If they’re going to be in a supermarket anyway to pick up staples like bread, milk or cereal, why not grab a dinner that involves no tipping or a separate trek to the mall?

Among the more surprising indications to arise from the enemy camp, Kruse added, is an intention by the grocery chains to elbow their way into the away-from-home breakfast market, a major area of growth for quick-service restaurant chains. Retailers have apparently been getting up before their stores open to count the cars lining up at drive-thrus. A push for that market would change the game, since grocers would have to position their outlets as a morning destination, not a place to grab a meal while you’re there for other reasons.

Which brings us to an old expression that most restaurateurs would probably like to put on the list of cliché casualties, but definitely won’t find for some time: May you live in interesting times.

Restaurateurs for Obama?

When Chris Matthews took the stage at MUFSO, he jokingly asked, “Any Republicans in the room?” Even outsiders know the industry of inclusion is a lot more single-minded when it comes to politics. But clearly a few Obamanacs have snuck under the tent, and the number will likely grow as the recovery plans issued this week by the presidential candidates are digested by the industry. At least on paper, Barack Obama seems to have the better prescription for a wheezing restaurant business.

For one thing, he’s proposing that employers be given a $3,000 tax credit for each full-time employee they hire over a two-year stretch. Repeatedly during MUFSO, executives cited a need for talent at all levels of their organizations as Priority No. 1. Couple that with all the people who are being displaced from their jobs by the economic meltdown, mix in the Democratic sweetener to hire, and you’ll likely have a lot of pleased restaurateurs.

What’s more, Obama’s plan would eliminate capital gains taxes on investments in small businesses. That provision could be a stout wrench in re-opening a rusted-shut capital pipeline.

That could get enough credit flowing for restaurants to makeover their current restaurants and even build some new ones. If they do, Obama’s plan would grant them a $250,000 write-off on the investments through 2009.

Ironically, John McCain’s plan is far more focused on consumers than Obama’s business-centric proposal. The Arizona senator wants to ease the plight of restaurants’ customer pool by allowing people to tap their retirement accounts now without paying an income tax rate that sounds as if it was a vig set by Louie the Horse. Up to $50,000 could be withdrawn during the first two years at a rate of just 10 percent.

The Republican also proposed that the capital gains taxes on stocks and other investments held for a long time be cut in half, to 7.5 percent. That, too, could help consumers enhance their liquidity, as the financial types say.

But other provisions of the plan are designed to encourage saving, not spending. This is just a guess, but restaurateurs probably don’t want at this point to see consumers socking away more dollars that might otherwise go into their tills.

Is it any wonder that some industry executives are openly voicing sympathy for the Democratic candidate—correction: for Barack Obama—as the election approaches?

“I’m a registered Republican,” said Phil Hickey, an unrepentant capitalist who, by the best of our recollection, made upwards of $30 million when he sold the company he led, Rare Hospitality, to Darden Restaurants in a multi-billion-dollar deal last year. “My family’s maxxed out on the Ed Tinsley campaign (a push to turn restaurateur and National Restaurant Association director Tinsley into a Republican Congressman from New Mexico). I’ve sent (industry lobbyist and leftists’ scourge) Rick Berman almost a million dollars in checks over the last 10 years.”

Yet, Hickey stressed from the stage at MUFSO, he’s pushing for Obama on Nov. 4. Indeed, Phil agreed to serve as the Democrat’s proxy in a debate NRN staged during MUFSO (Doug Ducey, the former CEO of Cold Stone Creamery and an Arizona resident, served as the main advocate for McCain.) In normal times, arguing for the policies of a Democrat is akin to wearing pork chop cufflinks during a visit to an attack dog school.

As Hickey noted, the country has had eight years under a Republican Administration, “which was voted for by most of us. Let me ask you, how are things today? How’s your business? How’s that working for you?”

It’s now a cliché to term the industry’s economic plight a perfect storm. Regardless of whether or not you agree with Hickey’s choice for president, you have to agree that his question merits asking. Voting for a Republican in knee-jerk fashion just doesn’t make any sense during times like these.

Live from MUFSO, Day Two

This is being written live from the Washington, D.C., ballroom where some 600 chain-restaurant leaders have gathered for their annual download of ideas, insights and connections. For the complete thread of what's happening at MUFSO, read from the bottom up.

Tues., 11:20
The panelists' advice to a young person who wants to evolve into a leader:

"Find someone who can mentor you and work with you closely."--Wingstop's Flynn

"Pay attention to detail."--BJ's Deitchle

"Be a teacher."--Kenneth Pondery, CEO of First Watch

"Hire good people, listen to them, be very clear about what you want them to do, and respect them."--Puzder

"In order to grow your business, you have to grow yourself. Study constantly. Read books. Go to seminars. Look at every aspect of your business. Master your craft by developing yourself."--Joseph Tortorice, presidet, Jason's Deli.

"Take a risk."--Greg Creed.


Tues., 11:06
Is there a disconnect with reality here? As someone just asked from the audience, how can the heads of six major chains say they're not worried about the economy, as the panelists have repeatedly professed?

Given that food is not a luxury, there's no need to be on suicide watch, one of the panelists explained. "If I was selling Mercedes-Benz, if I was selling jewelry, I'd be worried," said CKE's Puzder. "But I'm selling fast food. If that soccer mom stops coming into Carl's Jr. for a burger, then our economy would be in worse shape than I thought."

Greg Creed, president of Taco Bell: "You can't go to a supermarket and get the ingredients and make it yourself for what we charge."

Puzder again: "We think next year will be a good year for this industry and a good year for us."

Doherty: "I don't know about the audience, but I'm surprised there's not much gloom and doom up here. There's just some problems that have to be worked through."

Tues., 9:40
Andrew Puzder, CEO of Carl's Jr. and Hardee's parent CKE Restaurants: "Our margins have improved for each of the last four quarters." But, he acknowledged, "Our margins are certainly not what they were in 2006." One of those statements was not a surprise.

Puzder recounted how CKE's purchase of Hardee's "crippled" the company, driving its stock price down to $2 from the low 40s. He was the general counsel for the company at the time, and the problem was apparently tossed onto his lap. Under his leadership, the company's concepts are now outpacing most of their competitors.

Puzder just noted how one official of CKE has just instituted a rule that new hires in his area be able to speak English, an unimaginable requirement in the tighter labor market of a year ago. That policy was also mentioned by a panelist yesterday, for the same reason. The greater availability of English-speaking hourly talent seems to be an overlooked silver lining of the current economic storm.

Tues., 9:32
Jim Doherty, Nation's Restaurant News' group publisher and moderator of the Presidents' Panel, has just asked the five CEOs on the panel about how much time they spend in their chains' units. The lowest figure was 20 percent of the time; the highest, 50 percent of the time.

Tues., 9:27
Flynn has just recounted a few details of working at Popeyes when the concept's eccentric founder, Al Copeland, was still involved. He noted that he tries to be at his desk by 5:30 a.m. Copeland would routinely roll into the office at 3 or 4 p.m., Flynn explained.

Copeland, who died a few months ago, has come up a number of times in conversations here at MUFSO. One of the more interesting mentions was a ghost story starring Al. It seems that some AFC veterans went to Copeland's funeral, where a priest recounted how Al traveled through Europe toward the end of his life, looking for a cure of the rare cancer that had afflicted him. Among the stops was Lourdes, a major shrine in the Catholic faith because the Virgin Mary is said to have appeared there. A priest accompanying Copeland said he looked over at one point and saw a woman kneeling by Al's wheelchair. When he looked back, the woman was gone.

The caravan-for-a-cure continued on to Germany, where Copeland visited another place that was known as a site for miracles. The priest saw the same woman again, kneeling once again by Copeland's wheelchair. Once again she disappeared.

Tues., 10:22
Bingo: Jim Flynn, CEO of Wingstop, just noted that he's a graduate of the Naval Academy. He made reference to serving on submarines. Flynn was asked if he knew John McCain, since their attendance of Annapolis apparently overlapped. Flynn drew a laugh by divulging that McCain had a reputation of being an avid hazer and hellraiser.

Tues., 10:12
The Presidents' Panel, traditonally one of the true high points of MUFSO, has just begun. This year's panel includes Jerry Deitchle, CEO of BJ's, who just mentioned something that's often overlooked when industry veterans talk about what makes a successful chain CEO. Deitchle, like so many of his peers, spent some time in the military. It's a common trait of industry leaders, whether we're talking about Norman Brinker, Joe Lee, Roland Smith of Arby's or Jim Skinner of McDonald's.


Tues., 9:30
A gem from Jim Sullivan: "Look, it's no secret today that things are tougher than a woodpecker's lips."


Tues., 9:20
An interesting statistical tidbit from the presentation of the Spirit Awards, an honor bestowed on outstanding foodservice employers: The average turnover of hourly employees within fine dining is 102 percent. Morton's, the winner for that segment, has brought down its churn to 39 percent.

Tues., 8:40
Motivational speaker Marcus Buckingham is on the stage. Having seen Marcus before, I'm not feeling motivated, though he's clearly resonating with the crowd. But perhaps this affords an opportunity to present two informational gems from yesterday's sessions. Both came from Kent Rathbun, chef-owner of the Jasper's high-end restaurant chain. The concept had been chosen by NRN's editors as one of the year's hottest concepts.

During a panel of those concepts' operators, Rathbun noted in passing that Jasper's had cultivated a nice little niche business with private-jet catering. Its home base of Dallas, he explained, is surrounded by small airports that serve the executive traveler who has her or her own plane. As he noted, the downturn really hasn't put much of a crimp in their spending. Rathbun said he reaches out to the personnel at the airports, who are often asked by the jets' passengers and crews about where they could get a good meal. Jasper's has taken steps to make sure it's the concept that's named.

Rathbun also offered some insights into music, a key component of ambience that's often overlooked by the style addicts who notice things like color patterns or staff uniforms. Rathbun acknowledged that the element is important enough to merit his personal attention to the selections that play. His strategy is drafting four distinct lists--one each for lunch, dinner, after 8 p.m. and after 10 p.m. Each list steps up the intensity of the music both in volume and tempo, he explained. The energy-building process has been successful enough to prompt requests by patrons for the playlists.

Tues., 8:15 a.m.
The day is starting with a presentation from the National Restaurant Association about its revamp, the result of a strategic study that was expected to cost the organization in the neighborhood of $1 million. The plan calls for updating the association by focusing on four key areas. For a quick rundown, check out our story from this week's issue of Nation's Restaurant News. Link to it here.

Live from MUFSO

Greetings from the ballroom where some 600 industry leaders have gathered for NRN's annual MUFSO conference. I'm going to provide the highlights, as well as an overall sense of the conference's mood, by live blogging for the first time. This is best read from the last posting up to the first.

Mon., 2:05
Tase noted that Wienerschnitzel has saved $125 per restaurant per month by swapping out its incandescent light bulbs for flourescent versions.

Ken Reimer of Baker Bros., the fast-casual deli chain, is echoing what other operators have said during MUFSO: Using standardized restaurant features can cut costs and construction times. Reimer said that many of his chains' units buy their supplies from Home Depot.

Leondakis said her company's fine-dining restaurants cut costs, not to mention water and detergent use, by foregoing tablecloths. She noted that restaurants are being designed with hardtop tables, even when they're position as a fine-dining choice.

Mon., 1:55
Denise Tase revealed that Wienerschnitzel is trying end-cap locations because of the lower costs. He noted that the chain will spend about $500,000 for one of those locations, turnkey, while the cost of a traditional store could run to more than $1 million.

Mon., 1:40
Among the fast-circulating pieces of gossip here at the conference is the departure of David Goronkin from Redstone American Grill, where he'd served as chief executive and president since early January. Goronkin had resigned the same posts at Famous Dave's of America to join the upstart Redstone concept, a venture of Champps founder Dean Vlahos.

Staffers in New York were able to confirm that Goronkin did indeed part with the chain last week. They're awaiting a callback to get the details.

Mon., 1:35
Niki Leondakis from Kimpton Hotels & Restaurants is offering the wartime perspective of fine dining. Discounting or deal-making "has to be more subtle," she explained. She recommended "doing anything that conveys a sense of value."

She addressed what she acknowledged is the fine-dining version of "bundling," where disparate elements of a meal are packaged into an attractively priced packaged deal. At Kimpton, that means combining a meal with theater tickets.

Similarly, she said, the company's in-hotel restaurants are going to local businesses and offering a discount to employees who come for a special "event." A slight twist, she said, was creating a Hungry Actors' Club, to draw in folks who are drawn by both the networking opportunity and the deal that's extended.

Among the new things Kimpton is trying is cutting the price of a bottle of wine in half.


Mon., 1:30
On stage are the three chain executives participating in our "Capital Ideas in Challenging Times" panel, a look at the tactics operators are using to weather the grueling current economic environment.

Dennis Tase of Galardi Group, parent of the Wienerschitzel chain, just touched on what has proven to be a theme of the conference: Discounting may get butts in seats today, but what's it going to mean when conditions improve? Won't it ultimately cheapen the concept? Will the discounting binge leave a hangover of sorts?

Clearly much of the industry regards that issue as purely academic; they're discounting like Christmas tree vendors on Dec. 25. Yet the question underscores the underlying optimism that the industry will rebound from the current mess. It's just a matter of time.

Reality bites

A long-time acquaintance confided tonight that his restaurant company will soon have to cut its staff because of the economic situation. The operation is of a size, he explained, where he’ll have to let go friends and what he termed members of his family. He didn’t need to tell me how upset he is by the prospect.

Welcome to the restaurant industry post-meltdown. Tonight we kicked off our annual MUFSO conference with a slam-bang cocktail party featuring the specialties of Washington, D.C.’s top restaurants. The conversations were as varied as the drink orders. But sooner or later they tended to flit back to the issue of the moment: How bad is this economic situation, and when might the industry feel some relief?

There was hardly a uniform opinion on the when, though the consensus seemed to be that we’re many months away from relief—at best. And as for the depth of the downturn, the universal assessment could be summed up as a shrug. The one point of agreement: The situation is unprecedented. And I heard that from persons whose tenure ranged upwards to 24, 35 and even 50-plus years.

Undisputed was the notion the economy is in standstill mode until the public gains some confidence that relief is foreseeable. The hope for resolution has been tossed aside. Executives spoke wishfully of a change in the trend lines, never mind a solution.

Yet, virtually everyone stressed, the cycle will turn. It may be a different industry that enjoys the rebound—and certainly a smaller one, most agreed. It’s the pain many will feel between now and then that seemed to be the concern of attendees.

A Blum of an idea

MUFSO hasn’t officially started yet, but it’s already clear that one issue will be hotly debated during the three days of the conference: Is Brad Blum crazy?

That seems to be the question on attendees’ minds as they register, grab a pre-conference cup of coffee, or bump into an editor as he drops bread crumbs in hopes of tracing his way back to whatever elevator serves the time zone where his room is located (the convention is being held in the Gaylord National, a sprawling, biosphere-like complex outside Washington, D.C.) A completely unscientific straw poll indicates the insanes have it, with only one dissenter contending that Blum showed true insight in choosing a “vertical sausage” concept as something to develop. That dissenter would be me, the crumb-dropper. And I’m convinced Blum is on to something big.

In case you missed our coverage, Blum is a former head of Olive Garden and Burger King. Lesser known within the industry was his key role in building a European market for the cereals of General Mills, the former owner of Olive Garden. All of those were huge jobs. But he largely dropped out of view after things went bad at Burger King.

Now he’s moved back into the spotlight with Dogmatic Gourmet Sausage System, a New York City restaurant he’s basing on a popular cart that operates seasonally in Greenwich Village, traditionally the city’s most avant-garde area. The place will feature six high-craft sausages made with ingredients that Alice Waters would sanction, like grass-fed beef or free-range chicken. That’s Strength No. 1. The halo of those more-natural foodstuffs are quickly coming to be appreciated by mainstream America—not Joe Sixpack, maybe, but perhaps his niece, Tiffany Apple-tini.

Another signature item will be organically grown asparagus spears. Outlandish, yes. But not a hard sell, not only bcause of the organic descriptor but also because asparagus is a known entity. We’re not talking about edamame or an acaci salad. That, I’m willing to bet, will become Strength 1.5.

And then there are the drinks—handmade soft drinks made from fruits along with high-craft sodas. That’s a solid Strength No. 2.

The sausage and asparagus will be served in an artisanal roll that’s toasted from the inside out from the insertion of a hot stake. The roll is configured so that the completed sandwich stands upright. Hence the vertical-sausage descriptor. And there we have Gimmicks 1 and 2.

Add it all together and you have a New Age-y concept with overtones of health, freshness, novelty, even Greenwich Village outlandishness. If the numbers make sense—admittedly, a big if; the prototype is being built in an ideal site off Union Square Park, one of the city’s high-rent districts—this could be something that catches on.

Blum has already indicated that he plans to parlay the initial restaurant into a national chain. We hear that all the time. But he has experience, connections and the chutzpah to give such a thing a try.

That’s why I’m saying it’s hardly an insane idea at all. Indeed, it’s one of the more interesting ventures the industry has seen in awhile.

Okay, back to dropping my bread crumbs. And I think I see a hungry bird flying around.


If you're interested in what our industry's leaders have to say about the nation's current plight, please check back here often. I’m going to try to blog as much as possible, including right from the MUFSO conference room.

What's in the headlines

I thought the industry had used one of its three genie wishes when the story first appeared: Modern medicine had succeeded in transplanting an arm. Finally, a way for restaurateurs to get that oft-coveted extra hand.

It took less than a half-sentence to realize the recipient was receiving a replacement—two, in fact—rather than an addition. But it just goes to show how bizarre the word can seem when the perspective is based on headlines, or even the first few words of a story. Consider these recent reports, all of which actually appeared on the news wires:

“New study finds Americans still have harsh feelings toward tequila”

“Monkey works as waiter in Japanese restaurant”

“‘Tastes like Robitussin’/New item is so bad, our teeth started to hurt,” from an AOL review of fast-food items

“‘Testicle pizza,’ ‘battered testicles’ among 31 recipes in first ‘testicle cookbook’”

“Swiss restaurant to feature breast milk.” That’d be of the human sort, Garth.

“A goomba awaits you at this Concord restaurant”

“Magical veggie challenge to right musical wrong”
KNOXVILLE, Tenn. -- "Beans, beans the musical fruit ..." For years, children have recited this memorable schoolyard chant. In fact, three out of four adults recognize the classic bean chant. But most people don't realize something is amiss in the lyrics. Beans are a vegetable, not a fruit!

As Dave Barry would say, “Folks, we couldn’t make this stuff up.”

NYC's new anti-obesity message to restaurant patrons

After the firefight over menu labeling, New York City knows better than to expressly target restaurants in its new push for healthier eating. But the products depicted in the campaign that commenced today aren’t exactly what you’d whip up at home for breakfast or lunch, unless you’re Rachael Ray or a chain R&D chef. The message of the Department of Health’s new ads is clear, even if the approach is coy: Think twice, or maybe a third time, before ordering that burrito, sub or muffin.

The ads started appearing this morning on city subways. New reports indicated that about every fifth car will feature the billboards, from now through January. An Associated Press report pegged the total “spend,” as they say in the advertising world, at $82,000.

“2000 calories a day is all that most adults should eat,” blares the placards, which will share subway real estate with ad space for impotence cures, English-language courses and dermatologists. Pictured below that headline are finger-foods that look decidedly restaurant-born. A flag in the items reveals the calories of each—475 in a muffin, for instance, or 1,170 in a burrito. One installment compares the calories content of a tunafish sub (530 calories) with a roast beef version (290 calories). “Choose less. Weigh less,” advises the ad copy. You can read it for yourself here.

The campaign carries the theme, “Read ‘em before you eat ‘em.” Clearly it plays off the city’s new menu-labeling requirements, which went into effect for some chain restaurants in April. Units of chains with at least 15 units nationwide are required to post calorie counts on their menus or menu boards for every item that is offered over an extended time.

Clearly the city is planning to call attention to the calorie counts by urging citizens to read them.

Lunch with Wendy's honcho, Friday's sauce on the side

Several of us had lunch yesterday with Roland Smith, the new CEO of Wendy’s, who’s shouldering that responsibility while continuing to lead the Nelson Peltz-affiliated corporation that previously ran only Arby’s. Besides providing a guilt-free chance to indulge in a Double and a Frosty—hey, it was research—the sit-down at a midtown Wendy’s yielded a few guarded indications of what the chain’s new owner may do with its $2.3-billion prize. But even better was a reality check the unit’s franchisee gave us after Smith left, not so much about Wendy’s, but about general industry conditions and his other concept, T.G.I. Friday’s.

Here’re the highlights of what Smith had to say about Wendy’s and its new parent, Wendy’s/Arby’s Group Inc.:

• Co-branding is definitely in the works for the company's two chains, particularly in high-rent locations like the midtown location where we ate. Smith said the pairing of the concepts—separate kitchens, but paired menus sporting the signature items of each brand—would be especially synergistic overseas.

• The acquisition of other restaurant brands is definitely a possibility for Wendy’s/Arby’s. Smith of course wouldn’t be specific about the possibilities, but he said the company favors concepts that are viewed as quality providers. not bargain peddlers.

• Although the two concepts will be run as separate brands, without any sharing of "trade secrets" like menu products, personnel could be transplanted from one to the other as need and availability arise, Smith said.

• The emphasis for Wendy’s near-term will be on boosting profits. Smith remarked that Arby’s unit-level margins are among the best in the business. Wendy’s was once up there as well, he said, but the profitability of company units slipped, with margins now falling below what franchisees have been able to maintain. Not that licensees are content with their incomes, either, he suggested. Asked for the top three present-day concerns of Wendy’s franchisees, Smith counted them off on his fingers: “Profit, profit, and profit.”

• Wendy’s and Arby’s may indeed cross-franchise, so an operator of one chain could open units of the other if the situation would be appropriate.

As we were leaving, we were asked about our meal by someone who was obviously a person of authority, but just as clearly not a part of Smith’s posse. Turns out he was the franchisee, Brad Honigfeld, CEO of multi-brand The Briad Group.

Honigfeld said he was optimistic about Smith and the change in ownership, and praised in particular the selections of David Karam as Wendy’s new president and Steve Farrar as the new COO.

He voiced more concern about his Friday’s restaurants, noting that Briad is that chain’s largest franchisee. Stores in Arizona are running 25 percent below what they were a year ago, he lamented.

Bakery-café concepts like Panera are stealing the lunchtime customers of casual chains, Honigfeld explained, and the battle for dinner patrons is just brutal. He dismissed discounting as the way to go, suggesting instead that the established players in casual dining need to re-invent themselves.

Perhaps not coincidentally, he revealed that Briad has just signed on to become a franchisee of Corner Bakery, a competitor of Panera.

Honigfeld also noted that his Wendy’s units in the New York area have been doing well, but that Briad’s restaurants on the West Coast suffered a “significant” decline last month. He called it a sign of things to come, which I took to mean the chilling effect could roll eastward.

Watch what you insinuate, John

It’s bad enough the presidential candidates exploit their families, friends and supporters in the lunge for votes. Now they’re going after one of our own. On Tuesday, John McCain threw the venerable Sonic chain under a bus so he could sound wise and statesman-like.

“If we do nothing, many businesses will fail,” McCain said in a mass e-mail to supporters after the House of Representatives rejected the $700-billion bailout package. He then cited Sonic’s problem in securing capital from a usual source, GE Capital. His implication was clear: The corporation could become a casualty of the financial mess. That’s at best an overstatement, and at worst a calculated misrepresentation of the franchisor’s stability, made either way for political gain.

In covering companies with financial problems—something Nation’s Restaurant News is doing with increasing frequency these days—we’re painstakingly careful not to suggest that a concern could be going under, unless of course it’s actually filed for bankruptcy. At the hint of a business failing, suppliers might deny credit, loans could be called, prospective franchisees could pass on a contract, landlords could choose another tenant, and new hires might decide to work elsewhere. It’s the business equivalent of declaring someone a criminal because suspicions have been raised.

McCain apparently doesn’t share that compunction. He went ahead and affiliated Sonic with catastrophe, when the facts don’t warrant that assertion. Ironically, Sonic CEO Cliff Hudson spent part of the next day joining with other business leaders from the chain’s home state of Oklahoma to lobby for the bailout package, the very intention of McCain’s e-mail blast. There was no need for the senator to raise the possibility of failure to get his point across. He could have merely cited the importance of the package to Sonic, and left it at that.

Instead, he demonstrated the sort of self-serving, exploitative politicking you don’t want to see in a leader who needs to inspire.