Why wait 'til March for madness?

My friends are a little worried because I like to kick off restaurant chains' earnings season with a tailgate party. And why not? We’re talking quarterly updates from the biggies, people. And then come the conference calls, where you can ease back with a hot dog and a beer while investors do some serious grilling of public-company execs. Who needs Six Flags or Vegas? Especially during a financial-reporting stretch like the current one, when the action’s been wilder at times than a Sweeps Week on Fox. Consider, for instance, the mysterious disappearances that have recently come to light.

Where, for example, was Chipotle’s copy of the memo that every other public restaurant company must’ve gotten? It’s the one about cutting expenses because of spiking food costs.

It was certainly right there in Chuck E. Cheese’s “In” box. The pizza and games chain countered high cheese and dough expenses by trimming the size of its large and medium pizzas by a half-inch.

P.F. Chang’s, another apparent recipient, is focusing its efficiency efforts in part on labor. The company told investors that it’s revising the responsibilities and recruitment processes for the unit-level managers at its Pei Wei Asian Diner concept in part to eliminate one supervisory position. It’s also simplifying and shrinking the fast-casual chain’s menu to cut prep space and kitchen labor, while also deleting some high-cost selections that don’t sell well.

Somehow, the mandate to take similar action never reached Chipotle. “It would be plausible to try to squeeze costs out of the food line or labor line or to aggressively raise prices,” said president Monty Moran. “We’re not going to do that.”

Instead, executives said, the chain is directing more units to use additive-free chicken, which costs 20 to 50 percent more than the standard version, and is buying more locally grown produce. So much for economizing on kitchen supplies.

Chipotle might also see some pressure on labor expenses because of the ongoing salmonella outbreak. Since the federal government now believes fresh jalapeno peppers could be the source of the contamination, the Mexican chain is grilling all of the peppers that it formerly served raw.

The same vanishing act must’ve been pulled with Chipotle’s copy of the Official Restaurant-Chain Handbook, or at least the page that deals with international expansion. Charging beyond the boundaries of the United States is as important to the success of many restaurant brands these days as selling soft drinks. But not, it seems, for the 778-unit burrito specialist. Founder and CEO Steve Ells revealed that the chain’s international strategy consists of opening a lone unit in Toronto. “I want to remind you that international expansion is not a key driver of our current growth strategy,” he observed after noting that Chipotle has never needed a passport before. Hopefully he spoke loud enough to override the gasps of investors who’ve grown accustomed to hearing chains project hundreds of overseas openings.

The disappearances involving Chipotle were parlor-room stunts compared with the Houdini feat that The Cheesecake Factory pulled off. One day, as he had for the prior eight years, Michael Dixon was serving as an executive of the casual-dining company. The next, he was gone. His resignation and departure as CFO came the same day.

Cheesecake founder and CEO David Overton said it was just a coincidence that Dixon vamoosed hours before the company disclosed that its profits dropped 19 percent during the second quarter. He also declined to put forward any other explanation.

Maybe he should’ve just uttered, “Abracadabra,” and been done with it.

Okay, time to throw another hot dog on the grill and see who else is reporting today.

Customers sound off

A rose is a rose is a rose, but restaurant customers come in ever-shifting varieties. Treat them right, even in a crisis, and they can be convincing apostles for a place or a chain, as Chipotle is learning from a consumer poll that’s being conducted on its handling of a food-safety situation. But burn ‘em and they’ll turn into town criers of a far different sort, as I was reminded by an e-mail, complete with a photo documenting the transgression, that was sent this morning by a disgruntled KFC patron.

“The picture I have attached is my first, and likely the last, purchase
 of what was supposed to be KFC's new Grilled Chicken Sandwich,” wrote Chris Donaldson of Westminster, Canada. “[It was] advertised at 
the ordering kiosk in the drive-thru as having a bulging piece of grilled
 chicken layered with a generous helping of lettuce and a slice of tomato.” Instead, Donaldson said, it looked like this:



He said he contacted KFC’s corporation operations, who put him in touch with the franchisee, who offered to give him a free sandwich the next time he’s in the area. Donaldson said he lives 30 miles from the store, and a free sandwich just isn’t enough of a draw.

“I appreciate the efforts by some fast food outlets to present a good fair-
for-the- money product, but this turn in my opinion with KFC has to be done 
properly and without ripping customers off, “ he wrote. He also lamented the chain’s discontinuation of Tender Roast non-fried chicken a few years ago.

Contrast that takeaway with the impressions consumers cited in a poll that’s being conducted by Kimberly Palmer, author of U.S. News & World Reports’ Alpha Consumer blog. The survey deals with Chipotle’s handling of a norovirus outbreak that was linked to its unit in Kent, Ohio, near the campus of Kent State. About 450 people were afflicted in the incident, according to local news reports. As we reported yesterday online, Chipotle is inviting victims to submit their medical bills for reimbursement.

“Imagine this: You go to a restaurant. The food makes you sick—so sick you need to visit the doctor,” writes Palmer. “To compensate, the restaurant offers to pay your medical bills. Does that leave you a satisfied customer?”

The posting includes an instant poll that readers can take to express their opinions of Chipotle’s response. Fifty-three percent said their sentiments were best expressed by the option, “It could have happened to any restaurant, and probably won’t happen again to Chipotle.” Another 31 percent said they’d be “a bit wary” but would eventually go back to the restaurant. Only 16 percent responded, “Medical bills or not, Mexican food would nauseate me forevermore.”

Do have a cow, man

Coincidence or calculation? On Sunday, the U.S. Department of Agriculture announces the biggest beef recall in the nation’s history, citing the failure of a southern California slaughterhouse to heed a particular protection against mad cow disease. Earlier, employees at the plant had been videotaped using prods to force “downer” cows—animals unable to stand, a possible symptom of mad cow disease—to stand and be slaughtered. On Monday, Chipotle Mexican Grill announces that its restaurants in Minnesota are switching to “natural” beef from animals that were “humanely raised” and fed a purely vegetarian diet. Mixing animal matter into cattle feed has been identified as a cause of mad cow disease and hence is no longer legal in the U.S.

“Our commitment to working with like-minded suppliers who share our belief that food should be raised with respect for the environment, the animals, and the people involved is helping us make superior quality food, including naturally raised meat, accessible and affordable so everyone can eat better,” Chipotle CEO and founder Steve Ells said in the announcement.

Chipotle has been gradually buying more and more hormone-free meats to supply its 700-plus restaurants. Ditto for organic beans. Insiders say the chain would hurry up the changeover if it could secure enough of a supply at a feasible price. So today’s announcement was probably in the works for some time.

If that’s the case—and I for one presume it is—then the sequence of events underscores what a compelling point of difference Chipotle is offering the public. Consumers read in their daily newspaper that 143 million pounds of beef have been recalled because of a slight food-safety concern. When they log into FaceBook, they learn from one of the dozens of Chipotle sites in that network that the chain is lessening the chances that its patrons would be exposed to a peril like that, no matter how slight. And it’s promoting the humane treatment of animals in the process.

Is it any wonder the company posted a 70 percent leap in profit last year?