Shape of things to come?

The buying spree by private-equity firms has grabbed the headlines, but another sort of conglomeration is similarly shuffling restaurant-brand portfolios, without the hoopla. You could spot it in a recent edition of our Daily NewsFax, when three of the seven stories dealt with the acquisition of regional chains by companies formed expressly for that purpose.

Not coincidentally, every one of the buying concerns was hatched by industry veterans who can recall the days when “coffee shop” meant a place like Denny’s. Chain-headquarters executives with that depth of experience used to kick back during the final quarter of their careers by securing a few franchised restaurants and narrowing their focus to a territory. Now they build mini franchising empires.

Case in point: Sid Feltenstein, the man who midwifed Dunkin’ Donuts classic gotta-make-the-donuts campaign. Feltenstein made a bundle when he bought a nearly defunct A&W concept, spiffed it up, and sold it to Yum! Brands for a return that would’ve made Warren Buffet offer a high five. Instead of retiring, Feltenstein has teamed up with former Long John Silver’s and Marriott Corp. exec Ron Powell to amass established regional QSRs for a holding company called Sagittarius Brands. As we announced that day in the Fax, the company bought the West Coast-concentrated Del Taco system to complement the East Coast-centric Captain D’s fast-fish chain.

On the same day, an upstart called Restaurant Holdings Inc. disclosed that it had acquired 36-unit New York NY Fresh Deli—ironically, a franchise chain based in Phoenix. RHI was already the owner of the regional Steve’s Pizza and Playa Grille & Margarita Bar fast-casual chains. It, in turn, is the holding of Chris Thomas, the operations savant who saved the Sizzler family-steakhouse brand during one of its grimmest times, and John Creed, the man who founded the Chart House dinnerhouse group and built it into one of casual dining’s highest-volume concepts.

Completing that afternoon’s trifecta was another acquisition by a company that should be no stranger to regular visitors here, Creative Eateries, parent of the Kokopelli Sonoran Grill franchise chain. Led by former Ponderosa/Bonanza chief Frank Holdraker, the company added a fifth concept by buying Tuscan Italian Kitchen, a four-unit group of full-service restaurants in Los Angeles, for $2.8 million. Creative noted that it paid four times EBITDA for the brand, a steal compared with the multiples of many recent private-equity deals.

Those were merely the mini-conglomerates making news that day. There are plenty more out there, similarly led by seasoned chain builders. How will they fare as a pack?

They won’t. The success or failure of each player will depend on a host of variables—from the unit economics of the acquired brands, to how carefully the expansion is shepherded, to what kind of operators they sign as franchisees, to how many compromises in quality they’ll strike for the benefit of expansion and those all-important royalties.

But it’s interesting that these mini-Brinker Internationals are forming as many of the multi-concept giants are being forced to pare back their portfolios by activist shareholders. It’s as if the concept-stable approach is being damned on one echelon, but embraced as the new steroid on another.

Not just bare facts

First, just the facts: Hooters of America, the casual chain that features waitresses in tank tops and short shorts, is a sponsor of the Women’s Foodservice Forum, a group devoted to elevating women into leadership positions at foodservice companies. Its logo—that big orange “Hooters,” which even the chain acknowledges is slang for part of the female anatomy—was much in view at the WFF’s annual leadership development conference in Dallas, where I am as I write this. The other nearly 3,000 people here are largely executive women in business attire, hoping to rise into C-level posts, if not board rooms.

Now, the politically correct analysis: How could this happen? A poor man’s Playboy Club, which openly hires waitresses on the basis of how well they meet an adolescent male fantasy, allowed to associate its name with a cause that celebrates the abilities and potential of women? It just doesn’t fit.

The reality: Good for Hooters, not only for furthering a noble cause, but also for being straightforward about what it is and what it does. “Sex appeal is legal and it sells,” declares the chain’s website. “Claims that Hooters exploits attractive women are as ridiculous as saying the NFL exploits men who are big and fast.”

It acknowledges hiring women “who best fit the image of the Hooters Girls.” But “Hooters' business motto sums it up, ‘You can sell the sizzle, but you have to deliver the steak.’” In other words, you need ability, too, and that’s solely what it’s about at the management level.

I didn’t feel that way when I was handed a registration packet and first spied the Hooters logo. But I’ve spoken with other members of the WFF, who speak highly of the chain’s active member in the association, vice president of training and development Kat Cole, a former Hooters Girl herself. As they suggested, is that work any different than being an actress, model or newscaster? Through Cole and the support of the WFF, the chain is acting to enhanced opportunity for women. It has its shtick, for sure, and some, like me, may not appreciate it as much as others. But the organization deserves credit for working in other respects to bolster the prospects of women. And for that, it deserves praise, not politically correct censure.

Why didn't we think of that?

Take down that “Help Wanted” sign and stock up on uniforms for new hires. The leading minds in our industry couldn’t manage it. But a U.S. Representative from California has resolved the labor shortage.

If you’re having trouble drawing sufficient employees, Rep. Dana Rohrabacher publicly commented yesterday, all you have to do is be more creative in your recruitment efforts.

Makes you go all weepy with relief, doesn’t it?

But the congressman didn’t stop there. He even offered an illustration of what he means about being inventive. If there truly are jobs that Americans won’t take, like picking fruit, then have prisoners do it as part of the payback for their crimes, the conservative Republican asserted.

You may need to let that sink in a bit, so here it is again, in his widely quoted exact words: “Let the prisoners pick the fruit,” Rohrabacher said. “We can do it without bringing in millions of foreigners.”

That’s why, he said, there’s no need to allow more immigrants into the country, a step the restaurant industry avidly wants the government to take. It’s pushing for a provision in the immigration bills currently before Congress that would allow foreigners to come and work in the United States temporarily, on a so-called guest-worker visa.

The trade also favors the development of programs for turning illegal immigrants into legal ones. The notion probably throws Rohrabacher into the sort of fit we’ve not seen since “Network” left the movie theaters.

Rohrabacher’s opposition to matching unfilled jobs with candidates eager to fill them is especially perplexing given his heritage. You so seldom see Native Americans with that surname.

Going to the dogs

A colleague at Nation’s Restaurant News is drafting a story about the efforts of full-service chains to pull more children—presumably with parents in tow—away from fast-food restaurants. Judging from what I hear over the cubicle partition, she’s uncovered plenty of activity. But you have to wonder, given recent news developments, if those places should be focusing on another member of the family. And not Mom or Dad, either. They’ve had their day in the cross hairs. The target of the spring and summer, believe it or not, could prove to be Fido.

Loyal readers will know I pulled a Jerry Seinfeld after legislation was proposed in Florida to permit human-canine co-seating in restaurants’ outdoor dining areas. I mean, what’s up with that? It’s not that the proposal is dumb. It’s just a patently trivial matter, given more pressing concerns like healthcare and immigration reform. And I say that as the housemate of two dogs who have lives most rock stars would envy.

Well, the proposal is well on its way to being passed. The surviving measure allows cities to exempt outdoor seating areas from state regulations that ban dogs from areas where food is served and consumed. Certain conditions have to be met, and the go-ahead is technically a three-year test, with a review expected at the conclusion of that period. But the cat lobby clearly failed, overcome by pro-dog support that could only be called rabid. Sheri McInvale, the bill’s sponsor, said her office heard more comment on the matter than it has on any other issue.

Yet, unlike having dinner at 4:30, that disposition is not peculiar to Florida. In Des Moines, café operator Holleen Lawrence reportedly wants to open a second outlet, called Buddy and Rosie’s Bark and Brew, where dogs would be welcomed. First she has to convince Iowa regulators to permit it. So far, it’s been a no-go. But she’s still trying.

And as I reported here earlier, an Austin, Texas, restaurant tried to get around the health regs in its state by deputizing someone at the higher end of a leash. The law clearly states that security personnel are allowed to bring dogs into restaurants. Make the two-legged component of a dog-human pairing a security officer, and any health-code violations disappear. It’s Texas ingenuity at work.

Countless restaurants in other areas merely look the other way. My dogs all but know how to adjust the café umbrella for maximum shade. And, not coincidentally, they’re in those places precisely because they’re permitted, albeit with a wink and a look the other way.

And you don’t even have to buy them a kids’ meal, which is a good thing. All they do is chew the toy to bits.

Not to be taken latte

To catch the full wallop of recent news developments, you’ll have to engage in some scary what-ifs. Imagine, for instance, that you woke up tomorrow and your business life had been reset, all the way back to zero. You had no career, no references, no reputation, no nest egg, no credit, no awards—nothing. All you could do is start over, in the sort of hourly positions you’ve struggled as a restaurateur to fill.

So where would you go? The Gap? McDonald’s? Wal-Mart? A Mobile station? Even if you started at any of those places, you’d likely find yourself focusing before long on landing a job at Starbucks, a place to which you’ve likely lost a worker or two (or 12) over the years. Who, if you’re in a minimum-wage strata, wouldn’t head over for an application? You can get health care insurance, even if you only work part-time, and all sorts of benefits that even the managers in other systems can’t land. It’s also cool to work there, so your friends and family won’t view the job as a stigma. You don’t even have to wear a dorky uniform.

Now consider the recent news stories about what’s happening in Starbucks units, particularly in New York City. A labor organization that we all studied in history class, the 100-year-old Industrial Workers of the World, also known as the Wobblies, is trying to unionize the chain. Among the stated goals of the drive is wresting more benefits and better wages from the coffee giant.

The union’s penetration is negligible to date, but it keeps plucking away. Recently it secured an agreement brokered by the National Labor Relations Board, obliging Starbucks to forego such anti-organization tactics as buying pizza for employees, or providing gym memberships, or tickets to a baseball game, and thereby currying favor with the employees. It can’t even bar the staffers from wearing pro-union buttons or pins. The list of Starbucks don’ts goes on and on, as you can read for yourself at http://www.starbucksunion.org/files/usgovsettle.pdf. And while you’re web-surfing, swoop on over to www.starbucksunion.org, to get a full picture of the organization effort.

Which brings us back to the really scary round of what-if: If the union is finding a modicum of success with Starbucks, imagine what it could do with some of the other companies out there. Like yours.

Windy City, blow this way

An Open Letter to the Residents of Chicago:

We, the restaurant trade and clientele of New York City, would like to settle this amicably, or at least with a minimum of slams against each other’s style of pizza. But a score has to be settled, and quickly. You constantly read on the business pages about the United States’ glaring imbalance in international trade. That’s nothing compared with the discrepancy between what we’ve sent you restaurant-wise, and the next-to-nothing we’ve gotten in return.

Just this week, for instance, your city was graced by the opening of an Il Mulino, a clone of the Greenwich Village institution that’s repeatedly cited as one of New York’s best Italian restaurants. You also were treated to a new steakhouse, David Burke’s Prime, which is admittedly a bit like bringing coals to Newcastle. It’s especially true since Burke came to prominence working for Smith & Wollensky, parent of the steakhouse chain of the same name, which of course has an outlet in your downtown area, along with a sister concept called Mrs. Park’s Tavern.

You have a Vong’s Thai Kitchen, an adaptation of the highly regarded New York outpost of Jean-Georges Vongerichten, the world-renowned chef who now calls the Big Apple home.

Heck, you even have a branch of P.J. Clarke’s, the quintessential midtown watering hole.

And what have you sent us in return? Pizzeria Uno and McDonald’s—the latter a transplant itself, from the West Coast.

Granted, you’ve tried. In the 1980s, your concept phenom, the golden-handed Rich Melman, helped to open a new Playboy Club, of all things, in midtown Manhattan. Its sole point of notoriety was having beefcake waiters, called Rabbits, and certainly not the food.

Why aren’t you willing to share the wealth a little? Why not a Rick Tramonto outpost, or a glitzy place in the Meatpacking District from Melman? Heck, we’d settle for an Al’s #1 Italian Beef storefront, especially if it sold Old Style.

You’ve teased us with the prospect of getting a place from Charlie Trotter, veal-cheek to pig-jowl with Per Se and Masa in the Time Warner Center. But then he begged out, citing the costs. What’s a budget of $11.5 million?

But the time to pay up is here. If you take requests, we’d really like an outlet of Paul Kahan’s Blackbird, or a distillation of Everest. I’ve also always been partial to Shaw’s Crab House, and Hot Doug’s, the self-described encased meat emporium, tops my list of places to try the next time I’m in your city.

So get with it, Mon Ami Gabi. We need to correct this imbalance right now. Do it, and we might even let your baseball team play in the World Series again.

Tangled in tape

We’ve hit one of those troubling moments when technology forces us to make tough choices without much guidance from the past. The head-long slam into new realities came Monday in southern California, where the news media were expecting to see a video showing the murders of two customers and the critical wounding of two others at a Denny’s in Pismo Beach, Calif. The gunman, a homeless man who strutted into the restaurant with a gun in each hand, took his life after blasting indiscriminately for several moments. The suicide, too, was caught on the tape.

This being 2006, and Denny’s being a 24-hour restaurant, the place was outfitted with security cameras. Understandably, the tapes from last Wednesday were turned over to the police, who are still trying to determine what motivated the shooter. So far, it’s a simple and straightforward situation.

But here’s where it gets complicated: The tapes became part of the police investigation, which, several local newspapers argued, makes them part of the public record. And as such, the media asserted, the videos should be accessible to the public’s proxies, the organizations that gather and deliver the news. It’s a matter, they said, of being able to see exactly what happened, and thereby accurately recount a public occurrence to a disturbed host community.

Local police officials agreed that the media had a right to see the tapes. After all, snippets of the 911 calls from witnesses to the shootings were already being played in radio and television news reports.

The authorities scheduled a viewing for reporters. But before the newspeople gathered, Denny’s Inc. convinced a judge to halt the release, at least until the matter could be argued and examined fully in a court of law. The franchisor’s lawyer argued that the tapes focused on gruesome murders, not issues that affected the public’s well-being. “There is…no public interest to be served by airing these videos,” Denny’s explained in a statement widely quoted by the local media—the very papers who were denied access to the tape. “Airing them only panders to the fascinations of those who view violence and gore as entertainment even when it is delivered in a news context. We cannot in good conscience allow this to occur without challenge.”

Superior Court judge Roger Picquet was sufficiently swayed to bar a public showing of the video until a formal hearing could be held on May 4.

But in the meantime, a grave debate will likely grind on. Yes, I’m speaking as a member of the media when I say this, but the public good would indeed be served by allowing local newspapers, television stations and radio programs to view the tape. How can they be expected to capture the news completely accurately if they’re closed off from an official account?

Yet at the same time, you have to feel for the family of Harold Hatley and Frank Valesquez, the two men who were shot dead at the restaurant. And you just know those images will drift sooner or later to the internet, where they’ll be sheer entertainment for the yahoos who watch NASCAR races in hopes of catching a dramatic crash.

Whatever the outcome of the hearing, it will likely be a preview of what we can expect in the months and years ahead, as surveillance cameras become commonplace within the industry. It promises to be an emotional debate, but not a pleasant one.

These just in

To make sure we haven’t missed a news development at NRN, I scan anywhere from 100 to 500 wire stories a day. Sometimes, I can’t believe the restaurant-related headlines I read, like these grabbers from today:

“Body Found in Calgary Restaurant Being Treated As Suspicious.” Um, yeah.

“Pizza Tossing Turns Pro in Pittsburgh.” The National Calzone League must be on strike. This is a town clearly in need of a curling team.

“Al & Al’s owner forced into spotlight.” Some free consulting: Reclusive restaurateurs seldom make it.

“Restaurant to be cleaned before it opens.” Okay, this is one that shouldn’t be the stuff of jokes. It refers to the Denny’s in Pismo Beach, Calif., where a homeless gunman went berserk last week, killing two and wounding two others before taking his own life. The story, by the Santa Maria Times, specified that a private cleaning company was retained to clean up the blood and “other biologically hazardous materials” before the restaurant was adjudged ready to re-open. We wish the restaurant and its staff well. We wish the newspaper might play this one a little straighter, and perhaps remember that not every bit of information has to be reported.

Safety rules. Already.

If a tree falls in the forest, does it pose a danger? Unless the government certifies it as safe, you’d better believe it, say the watchdogs of public well-being in New York City. Heck, without guidelines in place to avert potential harm, it shouldn’t be permitted to happen. This is a situation in need of regulation!

Okay, health officials might not have used those exact words. But it’s virtually their rationale for the regulatory about-face that had some of New York’s top-name chefs cussing like libertarians from Idaho last week. One day they’re preparing meals using sous vide, the decades-old technique of sealing foods in air-tight pouches to preserve the flavor and freshness until the contents can be re-heated and served. The next, they’re being told they can no longer do it because it’s not sufficiently regulated, and hence poses an acute public danger.

Mind you, it’s not as if New Yorkers were staggering out of WD-50 or Daniel to toss their foie gras and flag down an ambulance. As far as we’ve been able to determine in covering the matter, there’s not been a single incident of someone getting ill in the city because of sous vide. The practitioners could not have adopted that prep method lightly, given the technological requirements. And these are some of the world’s leading culinarians, professionals who presumably know far more about food and its qualities than a person who joined the health department because he or she couldn’t pass the NYPD entry exam. They’re well-versed in the standards and techniques that have been used for generations in Europe, where sous vide is nearly as commonplace as the garlic press.

What seems to have roused health officials is not any evidence of public danger, but the lack of civic regulations. The food-safety code for restaurants covers traditional prep methods, not this extension into ungoverned territory. And if there aren’t rules saying what can or can’t be done, these lifelong, highly trained, profoundly knowledgeable food handlers have complete freedom to do something wrong. In the minds of the officials, safety equals regulation; lack of regulation means intolerable risk. They can’t believe that professionals will act in a safe manner out of choice, rather than from the fear of being sanctioned. In other words, you’ll do wrong unless laws force you to right.

In fairness, I should point out that the officials’ main gripe is with the sous vide treatment some chefs are giving raw ingredients, a variation not used in Europe. Yet, at the very least, why didn’t the regulators just suspend that variation until standards and safeguards could be put in place? Instead they’ve advised chefs to halt the practice altogether until a HACCP plan is drafted and submitted by the restaurant for each food it prepares sous vide.

Doing it takes a great deal of time and money. No wonder some chefs are just ignoring the ban, at least until outside experts can complete the HACCP plans and submit them for approval. They figure the $300 fine is a risk worth taking. We learned that firsthand when a bunch of us went to dinner at a Manhattan restaurant as a colleague was still researching a story on the topic. On the menu of the place where we ate: A sous vide lamb entrée, explicitly described as such.

It wasn’t clear if the proprietor kept the item on the menu because of economic considerations, or as a protest against muddled government thinking. Either way, it was an act of civil disobedience we were glad to support with our patronage.

Living in New York, we know that the city fosters a renegade spirit. But in this instance, regulators are being far too heavy-handed and untrusting.

An Rx you could like

We set out to write a story about Arkansas’ new healthcare program, which has been hailed by many as the remedy small business has been seeking. It promises to extend reasonable coverage to the 100-or-less employees of concerns that currently don’t offer health insurance, at a price that won’t bankrupt the employers, the state, or the covered individuals. It seems almost too good to be true—as, we quickly learned, it is, if the small business happens to be a restaurant.

Or at least that will be the case if the program isn’t modified after a pilot test that commences later this year, involving 25,000 participants. Here’s how it will work during the burn-in phase: Companies that employ fewer than 100 employees and haven’t offered them health insurance during the prior 12 months can enroll every employee—and that’s not a variable; it has to be every employee—in the state-run plan. The employer pays $100 per month for an employee who earns more than $19,600, or twice the federal poverty level for an individual, but only $15 for each staffer below that pay threshold. A participating company could require employees to contribute some or all of the fees, state officials explained to the media.

In exchange, the employees get a package of bare-bones services, so minimal the state had to get approval from the U.S. Department of Health and Human Services before it could offer the sub-Medicaid level of care. Enrollees are entitled annually to six visits to a doctor, seven days in a hospital, two outpatient procedures or emergency-room visits, and two prescriptions per month. Enrollees have a $100 yearly deductible and pay 15% of the fees for the services, up to a maximum of $1,000 a year.

It ain’t grand, by any stretch. But, to put it frankly, it’s better than no coverage at all.

And certainly that level of coverage, at an affordable rate, would be a godsend to restaurant operators and their employees. But one provision of the package will render most of them ineligible: Either all your employees have to agree to enroll, or none of them can. It’s an all-or-nothing thing.

The state-administered program is being funded in part from the settlement fees that big tobacco companies paid Arkansas and the other states several years ago to avert future liability lawsuits, along with dollars from the federal government. But a big part of the expense will have to be shouldered by employers, and, at a maximum contribution of 100 per employee, widespread participation is necessary to deepen the pool of available funds. Apparently that was the reason behind the all-or-nothing provision; the state is clearly betting the enticement will convince whole staffs to opt for participation.

Clearly they haven’t met many restaurant staffs. They don’t know that youngsters think they’re invulnerable and can’t see any benefit in wasting money on something like health insurance, when it could be used for important things like buying iTunes and clothes.

It’s going to be a tough-sell for restaurateurs. You can only hope they focus their attention on the state and push as one to bend the all-or-nothing provision. They’ll have a few opportunities to do so. The program is the brainchild of Gov. Mike Huckabee, who wants to de-bug the program with that first 25,000-person trial before expanding it, first to 80,000 participants, and then to the whole state.

Hopefully the industry will be able to fine-tune the program, for the benefit not just of operators in Arkansas. According to The New York Times, the federal government is already eying the set-up as a model that could be rolled with its encouragement into other states. It already looks that good.

Picture this

My success as a prognosticator has been limited to buying VHS instead of Beta and picking George Michael as the one who’d become the star after Wham!. But I’m going to test my powers of prophecy with another prediction, this time specifically for the restaurant business: The new piece of technology you’ll all be embracing in the near future is neither a self-service guest ordering kiosk, a hand-held credit-card processor for servers, nor tabletop TVs for customer’s entertainment, despite the intriguing potential of those gizmos. Judging from recent events, the next Device of the Moment—the industry’s equivalent of the iPod—will be that new-age security guardian, the digital video camera. And with it, predictably, will come a fair amount of controversy.

You might recall the dust-up of about a year ago, when news reports revealed that some fine-dining restaurants had fixed cameras on guest tables so the kitchen could monitor how a meal was progressing and pace the preparation accordingly. There was a short-lived fit of head-shaking about the propriety of having Big Chef watching you, or the garde manger possibly playing voyeur as he cleaned the lettuce.

A louder yelp will likely be sounded by the public when cameras become as commonplace in dining rooms and walk-up service areas as they presently are in banks. Customers may not appreciate that the optical monitoring was undertaken for their safety. A test of sorts will soon commence in Australia, where cameras are reportedly being installed and trained on the salad bars of 28 Sizzlers to avert the sort of tampering that recently prompted the chain to close the outlets for a few days. A 57-year-old guest, now in custody, had allegedly sprinkled rat-poison pellets into soup tureens on the bars of two restaurants, making several other customers sick.

The U.S.-based chain’s Australian operation is apparently taking no chances of a copy-cat incident. But are customers going to like being taped as they mound their plates with potato salad and bacon bits?

Guests might object to the scrutiny, but restaurants could have no choice but to install the monitoring equipment. A high-profile measure under consideration in Chicago would require any business open for at least 15 hours to install security cameras both within and outside the premises. Eating places could find themselves back in the rock-and-a-hard-place squeeze they lamented when smoking restrictions were first being put into place. Customers won’t understand that their host is merely the agent of an unpopular law, not the author. The establishment becomes the lightning rod.

Patrons may not be the only ones who dislike the use of cameras to keep a watchful eye on a restaurant’s activities. In Pike County, Ky., a former employee of a Papa John’s pizza franchise has reportedly sued the proprietor for installing a video camera in a rest room for two days last month. According to news reports, the plaintiff was told the device was installed to detect drug-related activities. But the woman alleged that her privacy had been violated in the process. It’s difficult not to be sympathetic, though the purported reason for using the camera, if true, is also worthy of merit.

Balancing security benefits against guests’ discomfort at being watched while they order or eat is a tough task. Add such considerations as expense-account customers not wanting to be video’d while they conduct business, or couples not desiring to be recorded as they bill and coo on a date, and you’ve got a picture that’s filled with static. But I think it is indeed date-stamped, “Tomorrow.”

Monumental problems for D.C. operators

Have a good thought for your colleagues in Washington, D.C., where the U.S. Congress is considering a bill that would devastate the local dining scene. The measure, already approved by the Senate, would prohibit congressmen from accepting a meal from a lobbyist. Think about that for a minute. The industry felt the squeeze when Congress merely discouraged business meals by rolling back the 100% tax deduction for restaurant entertaining. Imagine the effect on your business of banning business meals altogether.

Yet that, in essence, is exactly what Congress is looking to do in the District. The business of Washington is politics, and restaurants are where much of that business is conducted. The Restaurant Association of Metropolitan Washington has estimated that as much as 30% of the city’s fine-dining revenues come from keeping congressmen fed and happy. And that’s with a $50 per-meal cap on any meal purchased for a pol by a lobbyist. The law would make a free Slim Jim illegal.

Granted, a few politicians abused the situation, as has been noted here several times. But there’s a big difference between five figures’ worth of free meals and a $35 lunch where politician and stakeholder discuss the pros and cons of complicated legislative matters. The pendulum is swinging too far back the other way.

The senators and congressmen will no doubt continue to eat just fine. It’s the city’s restaurateurs who will forego their daily bread.

Exciting news!

A note to all the restaurant publicists out there who grind out release after release (after release after release) to announce additions to their chain clients’ menus: Grab a latte, find the crossword puzzle in today’s paper, check your eBay bids, or otherwise catch a breather. We’re about to take the labor out of that bread-and-butter task by giving you a fool-proof template for touting virtually any new-product introduction. Or at least the sort that have been clogging our e-mail inboxes as of late.

We’ve even put it in a customizable, fill-in-the-blanks form:

[Insert headquarters city] – [BoBo’s, Krusty’s, Fat & Fried, other chain name], an [innovative, exciting, orgasm-producing, other breathless descriptor] new type of [quick-service, family, pancake] restaurant, is inviting lovers of [lobster, porterhouse, caviar, other high-end foodstuff]to sate their craving for a [fraction, bare trace, teensy-weensy bit, other synonym for negligible amount]of the price they’d pay in [Per Se, Spago, Tru, Gary Danko, Mansion on Turtle Creek, other fine-dining standout].

“We’ve introduced a new [Frutta di Mare Burger, Tiger-Prawn Salad, Moroccan Prime Rib Sandwich, other highfalutin-sounding product] to let customers enjoy the finer things in life without going broke,” said [insert name], chief executive of the [see earlier unabashedly effusive descriptor] chain. “It’s what customers could previously only get in a fine-dining restaurant, now available in a form that meets their budget and need for convenience.”

Of course your bosses will wonder how you drafted such an insightful, dead-on document, perfectly attuned to the trend in menu making at the low end of the chain spectrum. But we’re watching your back there, bunky. You merely need to explain that you’ve been monitoring the news lately, and see that Champagne-at-a-beer-price has been the siren for most of the sector’s new products in recent weeks. Think about it: You can now get lobster (or at least langostino) at Long John’s, Kobe beef at Ruby’s, prime rib at Quiznos, steak at Taco John’s, oversized shrimp at Sizzler, premium coffee at McDonald’s and Del Taco, and, soon, possibly, salmon at McAlister’s Deli and McDonald’s.

Food available at a bargain price has been one of the key draws for fast food and family since A&W and Hot Shoppes respectively dominated those market in the mid-20th century. Now the formula has been modified a bit, to tout better food at a slightly higher price.

But it shouldn’t be a worry for you. With the raise and bonus you’ll get from presenting our snazzy new announcement, you’ll be able to afford lobster or steak anywhere you’d want.

A four-door by the window?

America’s penchant for dashboard dining has already transformed the foodservice industry, with drive-thrus presumably providing most of the 33 restaurant meals that consumers each munched in their Chevys, Fords and Hyundais last year. Now the phenomenon is reshaping the dashboard part of the phenomenon, as automakers add ease of eating to the list of reasons for considering their brands.

Amenities that turn cars into better four-wheeled dining rooms have been much noted in coverage of this season’s auto shows. The trend that began with cup holders is now stretching to include scaled-down kitchen appliances, including an in-car microwave, according to some of the news reports.

Those features may be years away. But you’ll be able to spec a mini-refrigerator for your Dodge Caliber starting in 2007. Ford’s Volvo division is already including fold-out snack track trays in the newest version of its XC90 SUV, including one for the driver. And Honda’s Pilot SUV comes with a rear console specially configured to accommodate the dipping sauces for passengers’ chicken nuggets.

Most are intended to minimize the danger of spills. But Jeep, inexplicably expecting its customers to use their Grand Cherokees and Commanders for actual off-road riding, is playing it safe. It’s reportedly focusing on new anti-stain seat covers with microbe-inhibiting qualities.

Religious freedoms

The uproar over newspaper cartoons depicting the Prophet Muhammad have been a dramatic illustration of how religious tenets can clash with broader societal norms. The restaurant industry hasn’t been without its examples, either, though fortunately the effects have been far less profound.

Take the situation in Rexburg, Idaho, where it’s illegal to sell liquor by the glass. Not coincidentally, the town is the home of Brigham Young University-Idaho, an institution affiliated with the Church of Latter Day Saints, which forbids members to drink. Now local economic-development forces are hoping to improve the surrounding county’s financial health by luring franchises of national restaurant chains to the area. What casual-dining chain wants to invest in an outlet that has to forego the booster-rocket effect of bar sales? After 59 years, some civic visionaries are saying enough is enough. They’re urging local lawmakers to consider more than the convictions of a vocal minority, and to allow visitors or residents to enjoy a margarita with their fajitas. You can know the resistance will be significant.

But you never know how business sensibilities can temper an ideological matter. In my experience, no restaurant chain has been more steadfast in preserving the attributes of the brand than McDonald’s, and no icon has been more sacred to that system than the Golden Arches, the brainchild of no less a god than Dick McDonald himself.

Yet when a Tel Aviv rabbi kvetched that Israelis had no signal that McDonald’s burgers are kosher (as long as they’re cheese-free). Amazingly, the chain agreed to beam that fact from two units in the Israel city by changing the background color behind its Golden Arches to blue, instead of the customary red. Blue, like the color of the Star of David on the Israeli flag, would be a stronger suggestion that the places offered kosher items. Just to reinforce that fact, the word “kosher” was worked into the trademark.

Remember, this is McDonald’s, a chain that refused to so much as offer any non-branded McDonald’s products except soft drinks until just a few years ago.

But it adapted this time, and the Golden Arches didn’t tremble and crack. It strikes me as a very wise decision, a laudable middle path between religious and business considerations.

No such thing as a free lunch?

The bugle has been sounded so often in this space that my lips are in danger of freezing in a pucker. Yet the industry slumbers on, oblivious to the business that’s at risk.

If you doubt it, consider an Associated Press story that moved on the wires today about Santa Fe, N.M., a town that doesn’t exactly rival Las Vegas or New Orleans as a lost-weekend setting. Yet in a single 30-day legislative session, wrote Barry Massey, lobbyists peeled $230,307 from their bankrolls to wine and dine politicians in the state capital.

Indeed, mandated filings of the lobbyists’ expenditures suggest a whole corporate-donors wing should be added to our Rogues Gallery, a virtual pantheon of outstanding politicians-turned-freebie-sponges. Regular readers will recall that prior inductees include Duke Cunningham, the disgraced California congressman who has confessed to accepting bribes, including more than $10,000 in free restaurant meals and hotel rooms. And then there’s former Illinois governor George Ryan, who’s been accused in his corruption trial of running up a $7,500 bill at a single Florida restaurant.

But those purported excesses seem like a split watercress sandwich compared with some of the indulgences that were noted in Albuquerque. Mind you, the latter instances were all completely legal and proper; I don’t mean to suggest the entertain-ees engaged in the sort of shenanigans that were ascribed to Cunningham and Ryan. But they certainly didn’t balk at being pampered by influence-peddlers, including Presbyterian Health Care Services. The religion-affiliated wellness concern threw a $20,190 dinner for legislators and the governor. It also spent more than $13,000 on a prayer breakfast for the governor. The virtues of poverty were likely not the topic.

Of course, similar outlays are probably expensed every day in the other 49 state capitals. It’s just a cost of legislative business—the fee for making sausage, you might say.

Yet, with an ear cocked to scandals like Cunningham and Ryan’s and an eye on this fall’s elections, the beneficiaries themselves are starting to feel squeamish about how much money is flowing to you on their behalf. Lobbying-reform measures are under consideration in a number of states, as they are in Washington, D.C. Consider, for instances, the new mindset taking hold in Albany, where meals purchased by a lobbyist for an elected official have long been capped at $35. Once, the rule was applied on a per-meal basis. Now the authorities are asserting that the $35 is an annual cap. Fortunately, we do have White Castles in the state.

On the industry’s list of legislative or regulatory worries, the impact of lobbying reforms probably falls close to the bottom. But that won’t soften the wallop to the relatively few places that count on lobbyists for a big chunk of their trade.

Man Bites Dog

Over-cooked pasta with no sauce? White bread in a bowl of milk? Pat Boone singing Lawrence Welk favorites? Pfft. You don’t know blandness until you’ve seen most of the press releases that cross our desks—or, more accurately in this age, our desktop. We as reporters look for man-bites-dog stories. Press statements make every situation seem like a pup getting its belly rubbed. Every flake of spice, every hint of controversy, any variance from the expected-and-boring is hidden under language that dulls and obscures. Chipotles become marshmallows; heavy metal is diluted into the elevator music at a retirement home.

And then come last week’s releases from Creative Eateries. Two parts Fellini to one part Michael Jackson, the statements were so outside the norm that you wonder if they somehow figured into a little-known reality show.

Loyal readers will know that this space recognized Creative’s unique statement of a few weeks ago, in which it gushed about the strong initial stock offering and general market might of Chipotle Mexican Grill, a competitor to its Kokopelli Sonoran Grill. At that time, I pointed out that a major investor in Creative has demanded prior approval of press statements released by the company.

Either that stockholder botched the job, or it needs to consider seriously the help of an outside PR firm, because Creative could have been a Daily Show sketch last week. First, it issued a statement urging stock pickers to help the company determine what party had issued a recommendation that investors buy Creative shares. It also urged stock pickers to ignore the purchase advice, explaining that the counsel had been based on faulty information. And it asked anyone who received a postcard or e-mail to forward that information to Creative’s Scottsdale headquarters, so the source could be verified. Creative said it suspected the disseminator was a concern called Early Bird Messenger.

Even if you don’t work for a public company, you’re likely aware that most corporations would welcome someone’s stock-purchase recommendation. Creative was arguing against it, and perhaps even stoked deeper shareholder concerns by referring to incorrect information, without saying what it was.

Then, a few hours later, Creative followed with what it labeled a correction. That second statement “explained” that the company had issued the earlier press release because it believed the stock-buy recommendation had been based on “misleading information,” specifically an indication that Creative had 70 restaurants open. In fact, said Creative, it had only three stores in operation, with 61 additional franchises sold.

Yet, it acknowledged, the service that advised buying Creative’s stock had not been at fault; the incorrect figures had been approved by Creative, apparently before the positive statement about the company’s share price had been issued by Early Bird Messenger, the promotional company that Creative had suspected of spreading the word. Creative “sincerely” apologized to Early Bird for slamming it in the earlier statement.

So let’s recap: A public company alerts shareholders that a buy recommendation on its stock should be ignored, and asks for the public’s assistance in silencing the source. Then, within hours, it suggests that it had exercised some right of approval over what was disseminated, which raises questions about the connection and why Creative wasn’t certain of the broadcaster’s identity.

I just love those guys.

But enough of a break from the ordinary. Time to read some more releases, and see how many times “exciting” can be work into a sentence.

Reality TV

Thanks. Thanks a lot.

It could have been a relaxing night at home, starting with an uneventful commute. Instead, there I sat on the 6:59 out of Penn Station, being eyed by my wife in the same way you’d regard an airplane seatmate who asks for extra air-sickness bags.

“You,” she finally hissed. “You deal with an industry that I hate. I just hate it.”

This was definitely not good. The last time we had a thoughtful discussion about the restaurant business, McDonald’s was trying to open a unit in our town. My child-bride, a vegetarian who has wondered aloud why we can’t tend our own goats, was not in favor of that community enhancement. I felt differently, as I was reminded by hours of silence and a collaborative read of “The Art of Listening.”

“What could have angered you this time, my sugar-dusted beignet?” I bravely asked.

“KFC is running a new ad that’s designed to be TiVo-proof,” she snapped back. “And now that they’ve decided to do it, everyone will be doing it.”

I used to ask my wife, “If you, your TiVo and I were in a boat that overturned, and you could only save one of us, which would it be?” Now I merely inquire if she’d use my body as a floatation device to keep the recording device dry. She likes her TV, but she doesn’t like your commercials.

Now, she had read, KFC was going to thwart people like her with a commercial that carried an encrypted message. If a viewer TiVo’s through the spot, he or she won’t catch a code that’s needed to get a free Buffalo Snacker sandwich. Indeed, you have to play the spot at slow motion via a VCR or a digital device like the TiVo if you wanted to catch the instructions. Skip the commercial, and there’s no sandwich.

More important to my wife, the anti-TiVo movement was beginning in earnest.

Not good, not good at all.

I explained that KFC is merely trying to deliver a message in an interesting, entertaining fashion, and that they were losing eyeballs to techno-TVers exactly like her. After all, we have three TiVos, three DVD players, four VCRs, and a video iPod.

That was when she decided some iPod time right here on the train was absolutely essential. I’ve yet to hear her voice since. Then again, it’s hard to hear through the front door, especially when you’re shivering. But I could have sworn I heard her yell, “Go see if the Colonel has room at the plantation,” and an unsavory remark about sheep.

Fortunately, there’s a KFC not far from me, for dinner. At least they could give me a discount.

Getting their number

Benjamin Disraeli, the British prime minister, famously observed that there are “lies, damned lies, and statistics.” Mercifully, he died about 125 years before the incorporation of research figures into a publicity ploy would push stats to a whole new level of infamy.

In case you missed the news, Taco Bell today released survey results as evidence the chain’s Crunchwrap Supreme, a hand-held, self-contained meal, could boost the resale value of your car. The research, conducted by the Kelley Blue Book Marketing organization, found that only 34% of vehicle owners regard a clean interior as an important factor in the value of their chariots, as opposed to 66% who regard a pristine exterior as a sales-price-booster. On the basis of that finding, Kelley’s hired guns concluded that car sellers could get far more for their clunkers by keeping the passenger area Felix Unger-clean. “Cars in excellent condition and appearance -- both inside and outside -- can be valued thousands of dollars higher than those in good or fair condition," soberly noted Jack R. Nerard, Kelley’s executive editorial director and market analyst.

And how do you keep an interior spotless? Why, buying a Crunchwrap Supreme when you’re dining a la car, of course.

It’s only fair to say that the whole publicity push has a tongue-in-cheek feel to it. And I’m appreciative of how the communications team of Taco Bell’s parent, Yum! Brands, has periodically used humor to leaven their messages to the public. On April 1, for instance, I still keep a wary eye out for an April Fool’s prank, after watching Taco Bell generate a flurry of newspaper headlines a few years back with the hoax that it was buying the Liberty Bell for marketing purposes.

But this is doesn’t have that Gen X zing. Too bad the Bell didn’t collaborate with the Frisbee Institute, to demonstrate that flying discs are 57% more fun if you can eat them. Show some kids tossing around a Crunchwrap Supreme on a California beach, and you've got yourself a promotion.

No 'A' for effort

Trying to keep kids clean turned Alex Ray into a law-breaker last summer. The New Hampshire restaurateur doesn’t deny that a few of the young people violated wage-and-hour violations by being in the work area of his operation before 7 a.m. It’s the mindless application of the law, the utter disregard for why the kids were there, that burns him. That, and the $5,100 in fines.

Ray doesn’t even fault the state Department of Labor agent who hit him with the penalties months after the infractions, when the kids were safe in school. “The law says, ‘you can’t work before 7, for more than eight hours a day, or more than 40 hours a week,’ “ he said. “We had people there sometimes at 6:30, working eight-and-a-half hours a day, and 41 hours a week. The guy was just doing his job.”

But the violations weren’t counterbalanced against the good Ray was trying to do. He’d offered up one of his restaurants as the setting for a program run by a local organization devoted to keeping kids drug and alcohol-free. Youngsters aged 13 to 15 were encouraged to draft their own business plan and management strategy for a dining room, then put their ideas to a real-world test by working the breakfast shift at Ray’s Common Man Inn in Plymouth. According to press reports from the area, the program had been a hit with parents, guests and, most important, the kids themselves, which prompted some to show up before their 7 a.m. start times. Apparently, some also loaded on the hours.

“We weren’t chaining them to the tables, or having them use slicers,” said Ray. “There was no thought put to it.”

He’s not bagging the program, despite the outlay in fines. “We’ll just figure out a way to do it and stay within the law,” he said.

Ray told me that his fines amounted to $5,100, but local media reports suggested he was able to negotiate a discount.

Another day, another toilet-water debate

Pounding the keyboard for a common good, you presume a certain familiarity with the other editors of Nation’s Restaurant News. Then comes a 12-year-old’s science experiment, and you discover what colleagues really think of bathroom bacteria.

But before we get to the point of controversy, you have to understand a little about our lives. We probably eat more restaurant meals than any non-relative you know. One colleague dines out literally every night except Valentine’s Day—“amateur night,” he sniffs—and possibly a holiday here or there when the industry shuts down. It’s rare to hit a restaurant opening in any of our seven bureau cities without finding an NRN-er there, making sure the host isn’t embarrassed by a still-filled appetizer tray. I’m proud to say the only workable heating elements in my kitchen are a coffee maker and a microwave (in case the coffee-maker breaks down). We’re the super-heavy users whose traffic you’d all love to have.

That’s why it was unsettling to learn the iced drinks we buy from you at lunch are Petrie dishes worthy of a CDC bulletin. Or so we were informed by seventh-grader Jasmine Roberts of New Tampa, Fla. According to press reports, Jasmine was searching for a worthy science project when she hit on the idea of sampling the toilet water of fast-food restaurants. The 12-year-old decided to analyze the water samples and compare the bacterial content to the microbe population of the ice served in the places’ drinks.

You know where this is heading. Working with scientific types who were likely on the wrong end of many an atomic wedgie at her age, Jasmine reportedly found a restaurant’s toilet water harbored less bacteria than its ice did in 70% of the comparisons.

What might surprise you is the flurry of e-mails that bounced around the staff after a reader brought the matter to our attention. One editor averred with all-caps vehemence that bacteria are our friends. Another conceded the point, but stressed that mold could be part of the pathogen parade that ends in a disposable soft drink cup. That prompted the bacteria apologist to note that mold is what adds deliciousness to many cheeses, and is the life-form that gave us penicillin.

At least one citation of other restaurant-ice analyses also figured into the dialogue. It stoked the prevailing sentiment that bacteria are generally bad, despite the redeeming attributes of a bacillus here, a spirillum there

I, being totally Switzerland-like in my neutrality on bacteria, merely scraped the three-day-old residue from my coffee cup and had another pick-me-up of java and hopefully non-hostile micro-organisms. It gave me time to wonder what the people in the cubicles around me might really think of amoebas, and what the staffs might be debating at other business-to-business publications.

Investors vs. casual-dining giants?

Wall Street is already speculating that Outback Steakhouse Inc. may be the next restaurant company to be goaded by shareholders into spinning off secondary chains. Some say that’s a reason, at least in part, for the 30% catapult in the company’s stock price since the fall. With six chains available for auction, the proceeds would be helium to investors’ holdings.

No word yet on how much the casual-dining giant could garner by selling tickets to a headquarters-investor brawl. And it likely would be an event worthy of World Wrestling Federation sanction. Outback’s ad theme—“No rules. Just Right.” — could just as easily apply to its management approach. Or, as a former executive put it before he left, “We get a ‘D’ in conduct, but an ‘A’ in results.” It’s a company that likes to do things its own way, and seems to cherish that independent thinking, right down to the propensity of a co-founder to show up at solidly Brooks Brothers events in a cardigan sweater.

Yet that slugfest would look like a Golden Gloves warm-up compared with the real heavyweight bout: Darden Restaurants vs. a pushy hedge fund. Mind you, no activist shareholder has disclosed an interest in the Red Lobster and Olive Garden parent, just as no green-mailer has publicly leaned on Outback (though the banking firm Friedman Billings Ramsey has tabulated that a break-up would add $20.85 to Outback’s share price, according to a report in the Tampa Tribune). But there are two things the hedge hogs like: Real estate, and headquarters spending. Darden loves to buy the real estate for its brands, and has a lot of it. It also has an infrastructure that’s an envy of the industry, with money (wisely) spent on extensive research and R&D (its menu-development facility not only has a mock-up of a Red Lobster kitchen, but also a model of an Outback hot line, apparently so the ease of knocking off a new item can be assessed). Executives who have left the firm speak wistfully of those resources and the company’s willingness to invest. They realize the value of that spending. But a hard-nosed return-calculator might view it all as G&A begging to be machete’d.

Yet Darden has seemingly relished its independence since being spun off from General Mills in the mid-1990s. At the time, executives spoke of the advantages of being a restaurant company run by restaurateurs. Second-guessing from an outside investment concern, quite likely with no hands-on experience in running restaurants, could be a bad clam for Darden to swallow. And it’s not a company lacking in leadership, resources or determination.

It would be an Olympian contest, without the snow and ice.

Gaming Strategies II

The restaurant executive should not live by bread alone, even of the artisan sort. Some recreation amid the ideation is a good thing, as the industry seems to know intuitively. When I worked for another publication, we hosted a gathering of chain officials at a fancy West Coast resort. The place begged us to come back the following year because its lounge had been packed with attendees every night of the conference. Every afternoon, too. Fortunately for presenters and sponsors, the bar didn’t open until midday.

Certainly a dash of post-work diversion can be refreshing. But why should a much-needed battery-recharge have to wait until quitting time? We’re practically doing your employer a favor by providing this link, an escape you can enjoy right from your workplace computer: http://www.mcvideogame.com/index.html. Best of all, it could actually hone your career capabilities. Where else can you experience what it’s like to run McDonald’s or subsidiary operations?

I hate to be a hair-splitter, but the sampling may not be a completely, totally, 100-percent-accurate depiction of life at the top. The interactive simulation, for instance, allows you to extend the volume of hamburger coming out of your meat supply house by adding “animal flour.” It’s not clear what that might be, but it’s probably not on the revised food pyramid.

Similarly, if you’re plumping up the cattle that will become tomorrow’s Quarter Pounders, you can increase your yield by mixing toxic waste into the feed, along with heaping doses of bovine growth hormone.

The computer game allows you to manage what its creators put forth as the four underpinnings of McDonald’s business: a farm; a feedlot/meat-processing plant; a restaurant, complete with three kitchen lines; and corporate headquarters. In each setting, you can exploit employees, poison the environment, erode food integrity, and generally act like the social lout that anti-corporate forces have long portrayed McDonald’s to be. All for some innocent but edgy fun.

Hardly. The game’s creators, a group of Italian artists and programmers, readily acknowledge they have an agenda. They call their approach gamevolution, and explain that it’s a concept inspired by the anti-global protests in Seattle a few years ago. “We can free videogames from the ‘dictatorship of entertainment,’ using them instead to describe pressing social needs,” explains the game maker, a concern called Molleindustria.

In other words, it’s subtly selling a political viewpoint by slipping it into a fun, seemingly innocuous activity like playing a computer game (which, I’ve been told by a colleague who’s done extensive research on the matter, can be highly addictive). Ironically, the technique is akin to what detractors have slammed McD’s and other fast-food chains for doing with their hug-able mascots, Olympic sponsorships, and other disarming promotional techniques.

Makes you wish that hotel lounge were open right now.

Gaming strategies

It’s a trend of the moment to provide more tableside craft and showmanship. Shop around the dining market of a major city and you’ll likely find places to have your guacamole custom-mashed, your Caesar tossed to order, your margarita hand-shaken, your roast carved, all a few feet away from where you’re sitting.

But perhaps restaurants are going too far with a new variation on the age-old practice of letting guests pick their lobster. In the contemporary twist, places install a crane-type game, similar to the ones you see in an arcade, where hopefuls put in some coins, work some levers to position a mechanical claw, and then let it drop, hopefully to hook a stuffed bear or some other inexpensive prize. But in the seafood variation, you’re trying to snag a lobster, not a toy. If you manage to snatch one, the restaurant cooks it and serves it for free. According to press reports, each attempt costs $2, though you can pump enough greenbacks into the machine to qualify for volume discounts.

PETA has already forced some restaurants to ship the games back to the manufacturer. I hate to say it, but I’m somewhat sympathetic, though not because of any animal-cruelty considerations. Putting a lobster on the same footing as a crappy teddy bear made in Taiwan just doesn’t enhance its dinnertime appeal. What’s next, Whack-a-Capon?

Say what?

Companies issue press releases for all kinds of reasons, but rarely to gush about a competitor. Yet consider the love note Creative Eateries, parent of the fledgling Kokopelli fast-casual chain, put on the wires Friday about the 500-pound gorilla of its intended market, 489-unit Chipotle. The rival brand’s initial stock offering was a “triumph,” with shares doubling in value on the first day of trading, making it the “second-best opening day for a restaurant chain,” crowed Creative. It pointed out that Chipotle’s natural menu was clearly “rousing” for investors, as was the McDonald’s-controlled business’ rapid expansion rate.

Why risk lip chapping with a kiss-up of that scale? It’s clearly an embodiment of that old adage, If you can’t beat ‘em, assert you’re a twin. “Tremendous similarities exist between the Chipotle and Kokopelli concepts, not only in the types of foods and focus on all-natural ingredients, but in the business models themselves,” Creative CEO Frank Holdraker is quoted in the release as observing.

Elsewhere, Creative asserts, “Chipotle’s IPO success calls attention to the comparable marketing opportunity for other, similar concepts.” Okay, we get it.

It should also be pointed out that Kokopelli plans to franchise, while Chipotle doesn’t.

One way the two concepts are not familiar is in size. Chipotle is about to hit the 500-store mark. Kokopelli has three units open, with another 58 in development. That leaves lots of territory open to Kokopelli. But if it’s similar to Chipotle, and the latter brand operates in a market earmarked for Kokopelli development—well, that raises a question, doesn’t it?

Two days before Creative issued the release about Chipotle, one of its investors, Franchise Capital Corp., issued a statement noting that it had amended some agreements with the restaurant concern. Among other things, FCC said, “Creative Eateries has agreed they will seek Franchise Capital's approval on all future press releases regarding Kokopelli Sonoran Grill and Comstock Jake's,” a sister concept.

You can kind of see FCC’s point.

Good news on the cost front?

Zimbabwe has just introduced a new currency denomination, a $50,000 bill, to help citizens contend with runaway inflation. With prices increasing at a rate of 600% per year, the new bill has the same buying power as 50 cents does in the U.S.

Close to the other end of the spectrum is the food-cost situation for restaurants, as I’m learning in researching an upcoming NRN feature on margin management. Last year, restaurateurs clutched their chests from time to time as they read about the rocket ride that prices were about to take because of hurricanes and the moonshot in fuel prices. In reality, those vertical climbs never took place.

The outlook for 2006, as I’m learning, is extraordinary. Experts agree that the major restaurant-consuming commodities will likely provide some relief to restaurateurs. For instance, the U.S. Department of Agriculture has forecast that ranchers, after getting an average of about 87 cents a pound for choice steers in 2005, will be getting anywhere from 81 to 87 cents this year. The cost of hogs could fall by as much as 16%, and chicken’s decline will accelerate by another 6%.

What I’m learning is that operators are still deliberating how to take advantage of the environment, since parallels with similar past situations might not hold. With fuel prices not likely to recede to the levels of a few years ago, and the housing markets in some areas starting to sputter, consumers might ratchet back their spending, some economists warn. The margin boon of charging the same for less-expensive foodstuffs might not be feasible. Yet cutting prices, the industry has learned, is hard to un-do when food costs climb, as they undoubtedly will again, especially with transportation costs on the rise.

My story is looking at what operators are doing. If you want to share your approach, speak up, please. Drop me a note at promeo@nrn.com, or post your thoughts here.

The whopper of a deal

That wooden-faced king in Burger King’s ads may soon be flashing an Alfred E. Neuman-scale smile. The chain announced today that it plans to file the paperwork for its initial stock offering within the next month or so. Amid the ongoing private-equity buy-o-rama, the industry is likely to witness one of its biggest-ever public-equity deals.

BK didn’t say how many shares it will issue, or the possible price of each. But some British media, reporting last week that the filing was imminent, speculated the IPO would generate about $2.5 billion. The chain’s current owners—Bain Capital, Texas Pacific, and Goldman Sachs—bought it three years ago for about $1.5 billion. A billion-dollar gain from three years of nurturing an asset? Not bad. Even a tech-sector braggart wouldn’t have promised returns like that.

Surprisingly, the IPO will mark Burger King’s first time as a pure play for stock pickers. It’s been part of a public company for much of its nearly 50 years, most recently as a holding of Diageo, Grand Metropolitan and Pillsbury. But never has it been the whole of a public concern.

It will be interesting to see how it handles such common public-company problems as the availability of financial-performance gauges to competitors, or having public franchisees (of which it already has several). And, of course, there’s the matter of who’ll run the company. CEO Greg Brenneman is a Texas Pacific principal, put into the corner office to restore the brand’s luster.

The IPO will tell what kind of job he did.

A two-sake week

Consider the emotional seesawing this week has held for executives of P.F. Chang’s, a company whose signature brand is second only to The Cheesecake Factory in average restaurant volumes, at least among the big chains. Yesterday brings word that arch-rival Outback Steakhouse was bailing on its Asian dinnerhouse venture, Paul Lee’s Chinese Kitchen, a would-be competitor of Chang's. Outback announced that it would sell the four restaurants in existence to the Paul Lee referenced in the title, Paul Fleming, who, ironically, is also the P.F. in P.F. Chang’s.

Fleming will presumably still operate those outlets, and may even open more. But Outback’s resources will no longer be stoking the growth.

It must be particularly sweet for Chang’s since Fleming brought the concept to them first. But they didn’t like the notion of building a concept that sported a lower average ticket than Chang’s. It requires a plot that can be just as expensive as the setting for a Chang's, yet generates less per sale, making Cheesecake-like volume a necessity for success. In the prevailing mindset of the big casual-dining companies, that’s not the way to go. So Chang’s decided instead to develop a high-end Japanese concept.

The announcement must’ve been delicious indeed. But the conga line likely ground to a halt with today’s blockbuster announcement. Buckingham Research restaurant analyst Mark Kalinowski, a keen market-watcher, alerted clients today that he’d learned of the start-up of another Asian dinnerhouse chain. This time, by Cheesecake Factory. Although Mark couldn’t provide many details, he recounted that his source had said the venture would be an Asian version of Cheesecake Factory. And Cheesecake, in case you haven’t noticed, is successful. Very, very successful, with a good-sized ticket and stunning levels of traffic, particularly repeat business.

For Chang’s executives, it must have been similar to a cop letting you off with just a warning for speeding, then noticing as he’s walking away that you're not wearing your seat belt.

But don’t feel too bad for them. Their Chang's is lightyears in front of any challenger at this point, and they’ve done what Outback decided it couldn’t, or at least shouldn’t. Outback is no slouch, so perhaps Cheesecake Factory will find an Asian concept to be tougher to refine and launch than it anticipates. After all, Darden Restaurants, another casual titan, saw its China Coast concept lose its feng shui almost as soon as the first basket of Chinese breadrolls were served (I kid you not on that; the cheese-bun-like dough balls, presented as soon as you sat down, were supposed to make the Chinese experience less alien to Middle America. Ditto for the Asian-sounding-but-New-York-style cheesecake that was offered for dessert.)

And, of course, that’s if Cheesecake indeed intends to enter the field. Howard Gordon, the company’s senior vice president of business development and marketing, told Southern California editor Lisa Jennings this afternoon that no lease or letter of intent has been signed for a prototype of an Asian concept. Indeed, he balked at confirming the test of an Asian venture altogether.

Then again, nor did he deny it.

Breaking casinos' bank

The restaurant industry has never wielded more lobbying clout than it flexes at present. Yet in the intensifying struggle over smoking bans, the trade looks like Woody Allen trying to body-slam Mike Tyson. The fight against smoking laws is no longer a head-on attempt to beat back the prohibitions; that doesn’t work anymore. The strategy today is to keep all leisure-dependent businesses subject to the same clean-air mandates, so none has an advantage in competing for smokers’ dollars. And in that contest, the industry is having its lunch eaten by the gaming business.

A number of areas that snuffed out smoking were unable to extend the bans to Native American-run casinos because the gaming parlors were technically on the ground of a separate sovereign nation, and hence exempt from state law. Okay. Not good, but at least there was a rationale to the exemptions.

Not so in New Jersey, where some Atlantic City casinos will be exempt from a statewide smoking ban when it takes effect April 15—fittingly, Tax Day. The stated reason is that gamblers smoke; indeed, lawmakers apparently decided, many of those game-of-chance fanatics would rather smoke than gamble, so if they can’t do the former, you can forget about the latter. The casinos’ revenues, now topping $5 billion a year, could be eroded.

And what about restaurant patrons who might scramble some eggs at home rather than have a breakfast and a cigarette at the local diner? Or the yuppie who spends so much time outside smoking that he orders a drink or two less at the bar? Or the party that hurries through dinner, foregoing dessert or a second bottle of wine, because some members want to light up on the drive home? Aren’t there financial implications to thwarting those smokers, too?

The real reason is the financial might of gaming. It delivers more state revenues—some $400 million annually—than Jersey could generate this side of a Soprano crew operation. And what’s left after the gaming taxes are channeled to the treasury—what the casino operators get to keep—funds an obviously effective lobbying effort for the bet-meisters. The pool of funds is large enough to have a horse dive into it on the Atlantic City pier.

And now the same thing is happening in Colorado. State representative Jim Sullivan, a Republican, has said he can’t support a proposal to ban smoking in all workplaces unless an exemption is granted to the state’s 19 casinos. His reasoning: “Gamblers are smokers," he was quoted in Denver’s Rocky Mountain News as saying.

Last time we checked, so are some restaurant patrons. If workplace smoking bans are going to fair, and effective, the field of coverage has to be leveled. Because this is one of the instances where the restaurant industry can easily be misspent, it has to tout its own numbers—the headcount of employees (translation: voters) who will be affected. The trade lost in Jersey, but it needs to regroup and keep the situation there an exception, not the rule.

Need a worker? Hire a family.

McDonald’s has often trod down paths that peers overlooked in their quests for employees. It was the first major chain to reach out systematically for elderly recruits, for instance. Ditto for persons with mental disabilities.

But few of those efforts were as startling in their ambition as the recruitment technique Big Mac is trying right now in Great Britain. According to news reports from across the pond, McDonald’s units in six U.K. markets are offering workers a Family Contract, whereby immediate clan members rather than an individual is awarded a job. Members of a family can share a lone job, splitting the hours amongst themselves, or trade off days, without having to alert management. So that if Junior can’t work from 5 to 9 on Wednesday, perhaps Sis could. Or Mom could work from 5 to 6, Grandpa could pitch in from 6 to 8:30, and Elrod, Junior’s 16-year-old little brother, could handle the last half hour. Prior approval isn’t necessary, and McDonald’s is willing to pay each family member in accordance with the hours they log.

It’s a staggeringly bold idea, and the advantages are evident. Suddenly, a job at McDonald’s becomes a family’s side business. They participate as a group in generating additional funds for all. It’s in effect a mutual project, like having a home store, without all of the aggravations.

But the limitations are also obvious. Five potential recruits in effect become one. You also have to assume they can work the hour and day splits out themselves. And how do you handle differences in abilities or commitment? If Elrod’s a dream employee, but Junior’s a pebble in the manager’s shoe, does the youngster get a pay raise, while Junior’s put on probation? Can you fire one family member, but keep the rest of the crew employed?

McDonald’s, in its usual painstaking care on such matters, probably has scenarios already drafted to handle such matters. But it’ll be interesting to see how they fare in real-life tests.

'And now for tonight's title bout...'

Another day, another restaurant company pressed by shareholders to restructure.

Or so reveals the extraordinary statement that Cracker Barrel’s parent issued late today, after the market had closed. CBRL Group disclosed that it’s in the first stages of “reviewing potential capital structure initiatives,” a lawyer’s way of saying a For Sale sign could be hung on at least some part of the company, if not the whole store. That clunker of a term could cover almost anything. A sale to a private equity company. A stock tender deal to go private. A merger with another complementary restaurant concern. Perhaps doing nothing at all.

Or, given the clues any seasoned press-release decoder could spot, the possible sale of Cracker Barrel’s sister chain, 156-unit Logan’s Roadhouse.

That’s my bet, given the reason CBRL cited for the announcement. It explained that “a significant shareholder” had come forward with a “suggestion” that the company consider some share-price-boosting “initiatives.” In the statement, CBRL did not divulge what those nudges were, but it acknowledged that some of the ideas had also been put forth by companies hoping to land the job of advising the restaurant operator during its consideration of the aforementioned “potential capital structure initiatives.” In other words, the heavy-duty suits who could hold the For Sale sign while CBRL execs hammered it into part of their spread.

“Typically we do not comment on our strategic planning initiatives before they are implemented,” said CBRL CEO Michael Woodhouse, offering what any reporter covering Cracker Barrel would certify as a monumental understatement. “But we have seen other companies being distracted by opportunistic or impatient investors who publicly pressure those companies to change their strategic direction.”

Unless you’ve just thawed out from a late-November glacier-exploration mishap, you’ll know he’s referring to the activist shareholders who’ve been recently complicating the lives of McDonald’s and Wendy’s officials. One, Pershing Square Capital, has successfully lobbied Wendy’s to earmark a portion of its Tim Horton’s donut chain for an IPO. Similarly, McDonald’s is selling its Chipotle chain, though it’s drawing the line at a partial divestiture of its company-operated stores, as Pershing has also demanded.

“Rather than be subjected to the distraction of second-guessing in a public forum, we elected to disclose our process, which was already underway,” said Woodhouse. The company “will comment on which, If any, of those we plan to implement when the review is complete.”

A review of SEC documents filed to date did not disclose any mention of Pershing or the other restaurant-focused activist shareholder that’s been in the news, Nelson Peltz’s Trian Group. CBRL’s three largest institutional shareholders were listed as Wellington Management Capital LLP, Mellon Financial Corp. and Allianz Global Investors of America LP.

No CBRL sharedholder has yet said anything publicly about the company’s statement. But in this age when shareholder-management skirmishes are often waged in public, that might soon change.

No bullseye on this one

Gun advocates and libertarians are usually fellow travelers. So it was surprising to learn that the Tennessee Firearms Association, a group devoted to removing legal fetters, is trying to ramrod a new law through the statehouse. Even more surprising is the aim of the initiative, its source notwithstanding. The measure would permit someone packing a pistol to plop down on the barstool of a Chili’s or an Outback and swap opinions on sports, politics or other barroom flashpoints with any hard-drinking folks to the left or right

It’s a recipe for disaster, as the Tennessee Sheriffs’ Association has professed. Yet the TFA asserts that its measure would spare Tennesseans from the horrifying situation of being arrested for an innocent error. The law allows gun bearers with a valid permit to tote their Glocks into a restaurant. But they’re banned by law from having a gun in their possession if the place serves liquor. And, the group stresses, how are you going to know whether or not an establishment serves liquior until you're inside it?

Oh, yeah, you’d have to be a regular Carnak to make that call beforehand. Yet that’s the strongest argument the proposal’s advocates have mustered.

Nonetheless, a similar measure was approved last year by the Tennessee Senate in a 29-3 vote, according to the Chattanooga Times Free Press . The same story quotes a TFA official as saying the group has lined up 60 co-sponsors of this year’s measure in the House. In short, it apparently has a lot of support.

I hope they’ve miscounted. Advocates point out that the law would prevent gun bearers from drinking in such an establishment. So what's the danger?

Well, that's not exactly a foolproof safeguard; think of how many brawls you've witnessed, as patron or proprietor, when only one person was snockered. But that’s not enough of a safeguard. Alcohol and guns just don’t mix, as the industry learns every Friday and Saturday night. Tempers are often the flashpoint, not how many bourbons someone has downed.

If safety's really the goal of the pro-arms contingent, they should drop their support of this one.

Consolation price

With the recent wave of private-equity deals, another sort of financial gambit is going virtually unrecognized. Let’s call it “passive accretion.” Or, in non-financial-eze, “how to make millions without really buying.”

Case in point: How the fortunes of the investor groups Newcastle and Steel Partners have changed since they jointly tried to bag Fox & Hounds, the 84-unit pub operator. At the time, Fox & Hounds had already endorsed a stock-tender offer from Levine Leichtman for $14 a share. Newcastle and Steel, both shareholders in Fox & Hound, formed a company called F&H Acquisition and bid $14.75, then, inexplicably, lowered it to $14.50.

Levine countered with a higher offer. F&H, in a move that defied reason, merely matched it.

At the time, lots of onlookers scratched their heads in bewilderment. In an auction, why merely match what the other guy is offering? Then F&H raised its bid again, by 25 cents. An apparent lapse seemed to be nothing more than that.

Levine had to hike its offer yet again, to $16. And Fox & Hounds accepted the offer yet again. As of this moment, it appears that Levine will end up with the company. Of course, it’ll have to pick up the administrative, transactional and legal expenses involved in buying all of the chain’s stock. But it could build up the value of the company and divest it at a later date, for a big kill.

Contrast that with the immediate benefits afforded Newcastle and Steel. If they sold their collective holdings today to Levine, they’d take in some $20 million more for their 10 million shares than they would have if Levine’s initial bid had gone unchallenged.

And that’s if they sold today. If Levine wants to buy all of Fox & Hound’s shares outstanding, and Newcastle and Steel control 10 million shares, or roughly 8.3% of the stock, they presumably have some bargaining flex.

In hindsight, F&H Acquisition may have matched rather than topped one of Levine’s intermediary bids to send shareholders a signal: Stay tuned. Don’t sell out. Maybe we’ll be back with a better offer.

Even after Levine’s $16-a-share deal was accepted, shares were trading above that level, suggesting that some stockholders expect a sweetened offer from F&H. Maybe, maybe not. In any case, the more the price creeps, the more pressure Levine will feel to raise its bid, and the more Newcastle and Steel stand to make.

Perception or anticipation could similarly prove a boon to Pershing Square Capital Management, the hedge fund that wants McDonald’s to spin off a share of its company-run restaurants. On Wednesday, when managing partner Bill Ackman revealed a new plan for the restructuring, he projected that the proposal could boost McDonald’s share price to $50, a 51% pole-vault from the current level.

Pershing controls 4.5% of McDonald’s stock. Whether or not its plan is ever enacted or even accepted, the fund would benefit handsomely if a critical mass of investors merely believed it might be.

Unfortunately, that expectation hasn’t yet materialized; McDonald’s shares have increased by a few cents, not by double digits.

Spoiling the pork barrel

Regular followers of NRN's blogs will know we've created a rogue's gallery of sorts to commemorate politicians' extraordinary contribution to the business. Unfortunately, the extent of that financial support has emerged in various investigations and court trials, where restaurant meals were cited as a means for lobbyists or influence-buyers to pay off the pols.

Our Top Customer remains Duke Cunningham, the former U.S. Representative from California who confessed to taking bribes, including some $10,000 in restaurant meals and lodging, the latter clearly not of the Motel 6 sort. But a dark horse is posing a challenge. Earlier this week, prosecutors in the trial of former Illinois governor George Ryan cited the politician’s use of $7,500 in campaign contributions at a Florida restaurant called Renato’s. There are rules about the diversion of electioneering funds for personal expenses. But Ryan’s lawyers have argued that there was a legitimate political objective to $4,500 in outlays at the Loew’s Vistana Canyon Resort in Arizona, or spending $5,200 at the Fountainbleau in Miami. Illinois business, to be sure.

And the trial still has a long way to go.

Of course, there is a very serious business side to this, as well as the galling defiance of morals and ethics. The federal government and any number of states are now looking at curbs on lobbyists’ expenditures for meals, which could add up to a significant sum in state capitals from coast to coast. It’s a shame that restaurateurs are likely to be hurt twice by some politicians’ excess—-first as voters, then as business people.

Stretch suits

Ripley’s could be put out of business by the stories that surface online about lawsuits, especially the ones involving restaurants. Consider the past month’s developments:

In Camden, S.C., the survivors of a man who died from complications of salmonella poisoning sued the restaurant where he was believed to have consumed the pathogen. They also sued the manufacturer of the oven in which the contaminated food, a turkey, was roasted, alleging that it was responsible for the bird being undercooked. No word yet on any action being taken against a thermometer company.

In 2003, an employee fired by an Outback in Beaumont, TX, returned to the restaurant after it closed and shot two managers, one of whom was pregnant, and a co-owner who was taking inventory with them. All three died. Outback offered a $100,000 reward, which led to the arrest of the former employee and an accomplice, both of whom are facing extended prison terms. A few weeks ago, the managers’ families sued the restaurant, alleging it was responsible for the wrongful deaths.

But those situations are nothing compared with what the tabloids in London have dubbed the Flying Prawn Case. The Benihana teppanyaki steakhouse chain is being sued for $10 million for allegedly causing a man’s death with a flung shrimp. The 43-year-old deceased businessman had taken his son to the chain’s outlet in a suburb of New York City for the boy’s birthday. The chef at their grill-top table went into his bedazzling knife display as he cooked their meal. Part of that schtick, according to the plaintiffs, was throwing pieces of hot shrimp to the patrons, who are supposed to catch the morsels in their mouths. The knifesman-cum-shrimp-tosser was asked to cut it out, they alleged. Yet, they contend, the fish kept flying. The deceased seriously hurt his neck trying to dodge the flung food. He required surgery afterward, and ultimately died from an infection, which the family attributed to the operation.

Press reports quote Benihana officials as acknowledging that their chefs would indeed toss shrimp to patrons, a trick they alleged was forced on them by a Jackie Chan movie in which the martial-arts star does exactly that. Patrons begged Benihana’s chefs to do likewise, and they apparently obliged, though that bit of showmanship has since been discontinued, the chain executives were quoted as saying.

To the best of our knowledge, no lawsuits have been filed against Chan.

I don’t mean to make light of the very real suffering that was inflicted upon that or the other victims’ families. Each is indeed a tragedy, for which, in some instances, responsible parties should pay. I just wish the courts weren’t turned into some type of Lotto system, where the scope of who should pay is constantly being tested. There’s an common-sense element to responsibility that seems to get trampled under lawyers’ feet.

Outback's idea lab refines another

Any initiative from Outback is going to be scrutinized like a Playboy magazine in the hands of a teenager. But the company’s agreement to open an Italian market inside a Publix supermarket is in a we-interrupt-this-broadcast class.

It’s not the development per se that’s so intriguing, though it’s hardly news-as-usual. As Nation’s Restaurant News reported online yesterday, Outback is adapting its Carrabbba’s Italian Grill concept to a retail setting. The test facility slated for a Publix in Sarasota, FL, will feature a wood-burning pizza oven and grill. Shoppers can choose from an array of “hand-prepared recipes” that change daily, according to promotional materials. Presumably the choices will be marketed as ready-to-eat dinners that patrons can bring home to their families.

And that’s why the experiment will be watched as avidly as a Super Bowl. Today, with many of the casual chains offering near-seamless takeout services, we forget how difficult it was for the full-service sector to get to that point. During the late 1980s and early ‘90s, sit-down brands tried a variety of ways to tap the off-premise market, from third-party delivery systems, to offering takeout at their bars, to setting up sections inside their waiting areas specifically for pick-up. Yet the set-ups were typically clunky, inefficient, and an afterthought to what was happening in the dining room. The attempts just didn’t deliver.

Then Outback launched its Curbside Takeaway service. It spent big bucks to retrofit stores—really re-engineering a way to sell take-home meals, instead of merely trying to bolt that sales effort onto the core business. It worked, beautifully.

Pause the replay of the earlier failed efforts to focus on a concurrent trend, exemplified by the likes of Eatzi’s, Boston Market, Cracker Barrel’s Corner Market, and McDonald’s Hearth Express. There was a pronounced sense—an intuition still with us—that consumers would embrace a retail-foodservice hybrid that enabled them to carry home restaurant-quality fare for a reasonably priced dinner in front of the TV. The list of well-capitalized but unsuccessful attempts to fill that need is longer than the phone books of decent-sized cities. Home-meal replacement became the industry’s Edsel.

Now comes the attempt by Outback to crack the code. Will the company nail it again? Will the new endeavor be the winning execution that eluded so many hopefuls, the way Takeaway delivered on the promise of full-service takeout?

The Carrabba’s Italian Market opens in 2007.

Something suspicious at another Starbucks?

By now you’ve probably heard that a homemade bomb was found in a San Francisco Starbucks on Monday afternoon and defused by the police. What you’ve almost certainly not encountered was a report on a blog called chrisdeclerico.com, detailing how a package similarly deemed suspicious was found outside of a midtown-New York Starbucks in late October and detonated to render it harmless. The Oct. 25 entry recounts how the moderator, an employee in a midtown office not far from Nation’s Restaurant News’ headquarters, arrived at work to find an area near Grand Central Station cordoned off by the police. Later, Chris Declerico explained, he heard an explosion, and someone from his building’s staff acknowledged via intercom that something had been blown up by the authorities to avert any potential danger.

Other posters corroborated some elements of Declerico’s account.

The blogosphere has already given rise to unfounded speculation that the San Francisco bomb might have been an act of terrorism. We hardly want to encourage that kind of runaway fear-mongering. So I’ll cite what Declerico concluded about his bomb-at-Starbucks experience:

“I’ll assume, for now, that the explosives were that of the bomb squad and not the package itself. I do not believe ‘a bomb went off outside Starbucks’. I think ‘a package of probably nothing was blown up inside a giant metal container outside Starbucks’ is more accurate.”

San Francisco is believed to be the only major city in the nation with a partial ban on "formula" or "format" businesses, the new euphemism used by anti-chain zealots to hold the tide against the likes of McDonald's, Red Lobster and Starbucks. The police have yet to offer any information on possible motives.

Truth stranger than fiction

If movie producers were looking for an incredible story propelled by characters who’ve not always stayed on this side of the law, they’d need look no further than Fog Cutter Capital Group, owner of the Fat Burger quickservice chain.

The company, despite its relative small size, generated plenty of ink last year when it revealed that it paid CEO Andrew Wiederhorn $6.6 million in compensation for 2004. Included, according to securities filings, were a seven-figure bonus and a $2 million payment termed a relocation fee. Wiederhorn was indeed out of the home office for 18 months, including five that year—serving a prison sentence. The federal government had convicted him of violating pension laws while working for a prior employer, an investment company that dealt with a figure of some renown in Russia’s “Sopranos”-like economy. Wiederhorn and Fog Cutter maintained that his transgressions were technical, not criminal in their intent—sort of like making an error on a tax return, but being held accountable because you’ve signed it.

Whatever the rights and wrongs might have been, the outlay to Wiederhorn left Fog Cutter $3.9 million in the red.

Nevertheless, Wiederhorn, who surrendered his CEO duties while serving out his year-and-a-half sentence, resumed the post last October after his societal debt had been paid. Fog Cutter unabashedly proclaimed his reinstatement and pledged to focus on development of Fat Burger, a chain with a near-cult following on the West Coast.

But the company was back in the news on Friday, in a development that sounds scripted by a Hollywood noir specialist. The concern disclosed that a lawsuit brought against Wiederhorn and his fellow directors by an outraged investor named Jeff Allan McCoon had been dismissed by a court, in essence because the plaintiff is a stinker. Court documents, as cited by Fog Cutter, dismissed McCoon’s charges because his "criminal record, probationary status, pending arraignment on new criminal charges, financial difficulties, and contempt of court disqualify him as a credible and trustworthy person."

Yet McCoon, who’s been party to a number of court cases in recent years, had the scruples to object to Wiederhorn’s $2 million relocation payment—which happened to be how much he was fined as part of his criminal penalties.

“This,” Wiederhorn said in a statement, “is a gratifying decision.”

To borrow from the great Dave Barry, folks, we couldn’t make this stuff up.

eBay 101

The restaurant industry could have passed as a five-bout fight card last week. We had franchisor squaring off with franchisee (Krispy Kreme yanking back licensing rights from its biggest operator, Great Circle), big chains continuing to parry the demands of big shareholders (Wendy’s defending its divestiture plan against the hurry-up insistence of hedge funds) and even a bare-knuckled family feud (the clan that owns In ‘N Out Burgers squabbling in court about who should run the cult favorite).

And then there was the War of the Suits, a real puzzler for the news room of Nation’s Restaurant News: A last-minute attempt to snatch control of Fox & Hounds Restaurant Group from the private equity firm that has twice agreed to buy it. That, in these fractious times, would not have been so extraordinary if it wasn’t for a single detail. After the equity company tendered the bid that was accepted by Fox & Hounds’ management, the rival suitor countered with another offer of its own. Yet it was a carbon copy of what the equity firm, Levine Leichtman, had already agreed to pay. The same per-share price, to be paid in a stock buy-up deal, with no advantages or sweeteners spelled out in the announcement. Which, by the way, came after Levine had commenced its open-market purchase of shares.

The party that placed the counter-bid, a consortium of Fox & Hound shareholders Newcastle Partners and Steel Partners, provided no explanation for trying to best Levine Leichtman with an identical offer. Our attempts to deduce the rationale arrived at no conclusions other than a strong conviction that Newcastle and Steel should stay away from eBay.

But there were some intriguing theories about why they proceeded as they did. Is this a way of serving notice to Levine Leichtman that they don’t intend to sell their 8-plus-percent stake in Fox & Hounds for $15.50 a share? Are they giving shareholders in effect a referendum on selling to an equity firm?

Admittedly, there could be financial details yet to emerge that provide the true motivation. But in any case, there could be more rounds to come in this title contest.

Hear ye, hear ye

Not long ago, getting assigned to cover a restaurant lawsuit was akin to discovering Hertz had upgraded you from a Neon to a Crossfire, without providing a drop of gas. All you could do was circle and gawk, and pretend you were actually getting somewhere. In the pre-Internet days, if the case was being heard in Sacramento, or Dayton, or Tallahassee, or almost anywhere you didn’t happen to be, you were limited to following the glacially slow proceedings through local media, and going through the pretense of talking to the two sides’ lawyers. No matter what they said during an interview, the message was the same: “Tut-tut, mere plebian. We, being of lawyerly intelligence, know how laughable our opponent’s argument is. And you’d see it, too, if you had the cerebral spark of a daft mallard.”

Fast-forward to the case underway right now in Las Angeles, where 62-year-old Louise Turner, a customer of a Shanghai Red’s restaurant in Marina Del Rey, CA, is suing operator Specialty Restaurant Corp. for negligence. Turner burned herself seriously when, she alleges, she felt into an open-air fire pit maintained by the establishment. Her lawyers commenced their opening arguments at midday in the Superior Court.

I know all of this because the law firm representing her issued a detailed press release on today’s proceedings. The statement was broken down into Who, What, When and Where sections, just like the releases we routinely receive about ribbon cuttings at ice cream stores, or the presentation of an oversized check by a company to a local charity. It’s a cliché that we’ve become a more litigious society. What seems to have gone unnoticed is how those legal tussles are being so deftly pushed into the court of public opinion.

In this instance, the firm of Greene Broillet & Wheeler alerted us (and several hundred thousand other journalists) that the case was even moving to trail. Tomorrow we’ll likely get more highlights, as we would if we were covering a Presidential campaign.

It may be an extreme example of flag waving to grab publicity for a firm and perhaps garner sympathy for a plaintiff suing a restaurant. But it’s hardly rare. Law firms, forbidden to advertise until about two decades ago, are now wielding publicity like the pros.

And that’s not good for restaurant-plaintiffs. Specialty, perhaps best known for its heavily combat-themed restaurants near airports, has yet to counter in kind as best as we can tell. And what can it say? “We’re sorry that Turner fell into a pit and was horribly burned, but it was her own fault”? It doesn’t exactly play well from a PR standpoint.

But I’d better shut up, before I see something on the wire saying, “Opening arguments against Romeo begin tomorrow in the Superior Court of Mineola…”

Romano eyes vita-foods

Phil Romano presaged the fast-casual trend, the embrace of Italian restaurants by mainstream America, and the food infatuation that gave rise to high-end markets like Whole Foods and Fresh Fields. What does he envision as the next big thing? Vitamin-fortified restaurant foods, according to a story carried yesterday by Investor’s Business Daily .

The investors’ tip sheet quoted Romano as saying, “we’re investigating how to add vitamins to our food in ways that would not change the taste.”

So-called forti-foods—also known as pharma-foods or or nutri-ceuticals—have long been cited as an idea waiting to catch hold with health-conscious consumers. The issue has always been the trade-off in quality, taste or texture. The emphasis was on healthfulness, to the disregard of pleasure or enjoyment.

Romano’s comments suggest he’s exploring preparations that would be relished as is, but have the added benefit of being more healthful. But that’s been a tough balance to strike.

Romano’s brainchildren include Cozymel’s, Eatzi’s, Fuddruckers, and his namesake Romano’s Macaroni Grill.