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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

‘Clean-up attempt on Aisle 5’

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

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

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

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

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

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

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

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

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

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

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

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

Live from MUFSO, Day Two

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

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

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

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

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

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

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

"Take a risk."--Greg Creed.


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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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

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

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

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

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

Live from MUFSO

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

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

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

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

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

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

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

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

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

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

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


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

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

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

Reality bites

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

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

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

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

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

Speaking of immigration

One of the highlights of last week’s Multi-Unit Foodservice Operators conference was a panel discussion of the nation’s immigration problem and what should be done about it. Discussion, debate, argument—why get hung up on semantics?

And yet semantics, as the panelists noted, is often what keeps tempers burning when the topic arises in any public forum. As National Restaurant Association chairman Dick Rivera observed, a hardliner on the panel referred to “legal immigrants” but “illegal aliens.” Clearly “aliens” is a more pejorative and loaded word, applied more often to mutant invaders from space than foreign students who over-stay their visas.

Rivera was brilliant in arguing for a moderate approach to resolving the issue of illegal immigration. And, perhaps not surprisingly, he suggested the process begin with the adoption of a new glossary. A key point of contention is whether the 12 million illegal aliens estimated to be in the country right now should be forced back to their countries of origin before they can begin to seek legal residence within the United States. To do otherwise, conservatives argue, would be granting amnesty to obvious lawbreakers.

“I prefer the term ‘plea bargain,’” said Rivera. The illegals should have to pay taxes and perhaps fees or fines, rather than get away scot-free, he explained. But they should also be allowed to stay, which he defined as “being on parole.” As long as their behavior remains lawful, why not let them continue to work and live here while they seek legal residence?

It was a dash of reason and level-headedness, elements that sorely seem to be missing from the discussion of immigration, if you can even call that screaming match a discussion.

One other interesting tidbit that emerged during the panel: One expert noted that about 7 million of the nation’s estimated 12 million illegal immigrants are currently working. The restaurant industry has estimated that it alone employs about 1.4 million of that illegal workforce, or 20 percent of the tally.

Clearly the “problem,” to use another loaded word, is a major one for the trade. It’s fortunate that Rivera has suggested a vocabulary that will serve the business well in its attempt to foster an actual discussion on immigration. And, thanks to that presentation at MUFSO, it’s a give-and-take that shouldn’t be alien to the trade.