Light bulbs above some heads

A few weeks ago, the restaurant industry was reeling from a shortage of customers, and hence sales, and therefore profits. Worst of all was an acutely low supply of something just as critical: Creative ways of contending. Now, at least, it looks as if that drought is easing.

A glimmer here and a rumbling there suggest economic conditions are separating the industry thinkers from the Dan Quayles—the folks who think brilliant leadership is picking the right idea to copy. They’re lemmings looking for the parade sign reading, “Cliff this way.” It’s the mindset that has landed much of casual dining in its current predicament.

Contrast that spud-headedness with a few initiatives that have come to light in recent days. Daily Grill’s parent company is cutting its cash outlays by paying executives 10 percent of their compensation in stock instead of dollars. It gives new meaning to the cliché, “win-win.” The company saves on salaries, the executives get paper that could be worth far more if they can drive up the stock price, and other shareholders get a management team that’s highly motivated to work for their benefit. Raise the value of the stock and everyone gains.

There’s also the public relations value of letting the world think the home office has cut its top-paid execs’ take-home, when in fact it’s given them something with the same face value and the potential of being far more precious. Indeed, from the recipients’ standpoint, it’s better than getting stock options—provided they don’t let the stock price decline any further (see earlier reference to management’s and shareholders’ perspectives being aligned.)

But that’s not the only ah-ha notion that’s been aired recently. Consider Sonic’s plan to lower its labor expenses while boosting customer service and possibly increasing the take-home pay of carhops. The drive-in chain is in effect reclassifying the runners who bring orders to patrons’ cars as tipped servers. It hasn’t said how it’ll trumpet that recasting to customers, but executives said in disclosing the plan that most guests already leave a gratuity. By formalizing the tendency and encouraging carhops to strive for tips, the chain can claim a tip credit, thereby cutting what it’s required to pay the staffers as a minimum wage. Yet the carhops are likely to end up with more money than they did when they were collecting the full wage.

What’s more, with an hourly-staff turnover of about 100 percent, the chain can phase in the program by merely extending it to new hires. The transition would only take a year, presumably with no shock to carhops who are accustomed to getting the full minimum wage.

Not all of the innovations are far afield. The Pollo Tropical fast-food chain, for instance, merely replaced its sandwiches with wraps. It correctly anticipated that wraps would be easier to eat on the go, and presumed that benefit would appeal to the chain’s mobile clientele. Units are selling 50 to 60 wraps a day, compared with the 15 to 20 sandwiches they formerly peddled, executives told investors Wednesday.

In still other instances, the course was apparent. It just took leadership and courage to pursue it. Every franchisor would readily attest that its success rests on the financial wellbeing of franchisees. Yet few have backed up that assertion with the sort of action that Papa John’s and Domino’s have recently taken.

The former made news Tuesday when executives revealed that the franchisor’s commissary operation would roll back the prices of the cheese it sells to franchisees. The wholesale cost paid by corporate likely hasn’t receded; Papa John’s must be absorbing the cut in its margins. It’s taking the hit to enhance the profitability of franchisees, even though royalties are based on sales, not the bottom line. But by keeping licensees healthy and thriving, the home office is betting it will benefit in the end.

To keep franchisees growing, Papa John’s is also looking at ways of becoming their bank. Because they’re struggling to find the capital needed for expansion, the franchisor is willing to serve as their pipeline until the tap is reopened by more traditional sources. One of the core rationales for franchising is the use of licensees’ capital to build a chain. Papa John’s, much to its credit, is rethinking that tenet of the situation.

It may be inspired in part by arch-rival Domino’s, which disclosed last month that it was providing franchisees with financing. “It will never be my preference to provide financing to our franchisees,” CEO David Brandon commented to investors. “We would rather keep our relationship with them focused on being the franchisor rather than their bank. However, we are wading through uncharted waters.”

Better to be slogging through them than being carried along by the current, hoping you’ll eventually land upright.

Web watchdogs can definitely bite

The Wall Street Journal outed several chains this weekend for switching to smaller beer glasses without adjusting prices or otherwise letting on. You’d think that’d trigger a fit of spin-doctoring from the likes of Hooters, GameWorks, Damon’s and Romano’s Macaroni Grill, but they wisely offered nothing more than the few qualifiers and no-comment that were included in the article. Even then, they came within a maraschino cherry stem of being sentenced to eternal avoidance by the modern-day equivalent of vigilantes: Web habitués who share a fanatical cause. In the era of the keyboard-empowered consumer, reckless indeed is the consumer brand that tries to pull one over on patrons, especially when it comes to value.

The situation is nearly a perfect homily as to why. The Journal, after all, was merely a messenger, relaying the lynch-mob talk that the chains and other beer-serving establishments had frothed up by switching from true pint glasses, capable of holding roughly 16 ounces of brew, to variations with a thicker glass bottom that leaves room for only 14 ounces. The motivation is obvious: With grain prices driving up the cost of beer, cagy operators are holding the price of their standard tap serving while slyly providing less beer.

As the article noted, consumers are catching on, and fast. Seven months months ago, a college researcher with a blog called Beervana started what he dubbed The Honest Pint Project, whereby he’d push for a full 16-ounce tap beer by publishing the names of drinking establishments in his native Portland, Ore., that offer a serving of at least that volume.

The parent of the Honest Pint Project, identified in the Journal article as Jeff Alworth, has raised his ambitions since then. “I will support a statutory change if it comes to that—and maybe it should,” he wrote in a blog installment posted today.

Yet Alworth sounds like an aggravated PTA member compared with the hops panthers who offered their comments, suggestions and assessments on beeradvocate.com. “So if there’s a beer bar on this site that has recently adopted this practice, can we call them out?,” asks a poster identified as guzzle211, who joked that he was already lighting a torch.

“What would it take to get legislation passed with regard to this? How did they do it in other countries?,” asks Josquin.

It goes without saying that establishments switching to what a Journal source dubbed “falsies” shouldn’t try to deceive patrons about the change (for the record: GameWorks said a mistake in glassware was made at a single unit, only franchised Hooters units offered the smaller glasses, Damon’s does not deny the change, and Romano’s had no comment). Risking the alienation of longstanding customers over two ounces of tap beer is crazy enough. Amplify that by the speed of gripe on the internet and there’s no doubt about the glass being half-empty.