‘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.

Daydream believers

I was trading air-guitar licks the other day with Bluto Pilkbean, the imaginary childhood friend who helped me invent the flying car and a way of extracting super-human strength from Twizzlers. He’s recently made a name for himself in the fanciful field that’s filled many a restaurateur’s daydreams of late, the silver bullet.

“Pilkbean,” I said after we’d decided not to take the Sports Illustrated swimsuit models to dinner, “do you really buy this malarkey? So many things are stacked against the industry that all the experts are calling this a perfect storm. An operation is going to soar out of hell just by adding sliders or upgrading its coffee?”

“This from the person who believed he could obliterate all homework by electrifying Silly Putty,” he retorted. “Besides, you’re forgetting that most adapters combine the magic pills. McDonald’s is focusing on breakfast and beverages. Taco Bell is embracing cheap-o deals and new drinks and breakfast. Applebee’s is not only touting sliders and bargain-rate lunches, but also inviting customers to submit videos for a new campaign. It’s a matter of mucho mojo, mi compadre.” Pilkbean had never been quite the same since the trip to Tijuana.

“Who cares if you offer five or 50?,” I responded. “What does it get you other than one turn of consumers’ heads?”

“A point of differentiation.”

“For how long? If these killer plays do anything, everyone and their cousin copycats ‘em. It’ll be curbside takeaway or the Bloomin’ Onion all over again.” I looked to see if he was reaching for his combination death ray pistol/Pez dispenser, because I had him now.

“There’s always something new,” he noted calmly.

“Such as?”

“Well, right now some fast-casual chains are adding table service. All kinds of concepts are giving away food to bolster traffic. Eat ‘n Park and Chipotle are supposedly looking to use more local ingredients. Red Lobster just announced that it’ll give space on the menu to a dish created during one of those cooking-contest shows.”

“Isn’t that exactly what Friday’s did?”

“Well…maybe. But there’s talk of going even farther afield. Some concepts are talking about radical steps like upgrading service, renovating dining rooms, or”—he actually shivered at this point—“trying to hire and retain the best employees. Gives you goose bumps, doesn’t it?”

“You’re an idiot,” I assured. “Now let’s get back to work on our Red Sox immobilization spray.”

A different sort of Big Mac attack

Fast food is getting less respect these days than Kevin Federline’s acting abilities, even from quick-service chains themselves. Marketing campaign after marketing campaign is disparaging the fare as the sort of mass-produced plastic you won’t have to choke down at ______ (insert the name of whatever family, casual or fast-food chain is airing the ads, be it McDonald’s, Denny’s, Taco Bell, Bonanza/Ponderosa or KFC). Invariably, the spots proceed to point out that you don’t have to pay more, in time or money, for “real” food.

Much of the mud is being flung at fast-food breakfasts, which have been selling like, well, hotcakes. Denny’s current campaign blasts them explicitly as fake, unlike the true platters you’d find at the home of the Grand Slam.

McDonald’s touts its McSkillet Burrito as “a sit-down-style weekend breakfast you can eat on the go.” Translation: The real food you’d buy after church at a Denny’s, available every day via a drive-thru.

Panera Bread is bragging that its new breakfast sandwich line is a morning option “made by bakers, not microwaves.” In Tuesday’s announcement of the rollout, CEO Ron Shaich crows that “we’ve developed a hand-crafted, made-to-order grilled breakfast sandwich that literally breaks the mold.”

Chains of all stripes are equally adamant about differentiating their lunch and dinner fare from fast food. The campaign that broke Monday for Bonanza and Ponderosa touts the sister chains’ buffet specifically as an alternative to burgers and that lot. Give it a try, the promotion stresses, “because great tasting meals aren’t served in a wrapper.” It slams quick-service value meals in particular, asserting that they’re "not much of a value or a meal.” Curiously, however, the effort subtly promotes visits to a quick-service chain. The budget steak brands are inviting patrons to submit a bag or receipt from a fast-food place to get a break on the price of the buffet. Eat at a burger or fried chicken joint one day, the promotion suggests, and you can have unlimited fresh fare the next day for $5 at lunch or $8 at dinner. “This is an incredible alternative to getting lunch or dinner in a bag at a drive-thru window,” says Sheryl Randolph, senior director of marketing for the pair.

Here again, even the major fast-food brands are scrambling to showcase products you wouldn’t associate with fast food. Taco Bell describes its Fiesta Platters as “a complete real meal solution,” “the favorite dishes of a sit down Mexican meal in a convenient and portable plate.” Promotional materials also stressed the price: a mere $4.99, or probably less than you’d spend in a full-service place.

Sister concept KFC is sounding a similar tune for its new Kentucky Grilled Chicken. President Gregg Dedrick proudly cites research indications that consumers view the fast feeder's new non-fried option as a "step above fast food."

All of the initiatives echo what Carl’s Jr. did several years ago with its Six Dollar Burger, a sandwich touted as being as good as the burger you’d spend $6 to get in a casual-dining restaurant, available at just over half that price from the West Coast stalwart. You’d think it’d be the most zealous proponent of the movement. Yet the CKE Restaurant holding is one of the few quick-service burger brands not to adapt the café-caliber coffee that consumers can now find at almost every other player of size. Nor is Carl’s racing to develop the Jamba Juice-caliber smoothies you’ll soon be able to buy at fast-food places ranging from a Taco Bell to a Dairy Queen.

If Carl’s is once again astutely gauging which way the pendulum will swing, the key question could be how long fast food remains the standard against which all chains, even the brands most readily affiliated with that style of fare, are favorably gauging what they serve.

'President Skinner here'

It’s 3 a.m. and American families are safe and asleep. But there’s a phone ringing in the White House. Who do you want to answer it? If it’s a financial crisis, I’d vote for Jim Skinner, CEO of McDonald’s. With the chain posting an 8.3 percent leap in domestic same-store sales for February, after a nearly unbroken stream of bad news from other restaurant chains, he and his team have shown they know how to pull prosperity out of a trying situation. Indeed, we might want to consider steroid testing.

Okay, okay—Leap Year helped a lot, with Feb. 29 getting credit for four percentage points. But we’re still talking about a pretty heady jump in comps. And from what? The chain says the pole vault over last year’s tally is due to the push behind breakfast, coffee and everyday bargains. With the exception of Yum’s and CKE Restaurants’ brands, what quick-service chains aren’t doing that right now? How many have succeeded the way McDonald’s has?

Of course, it helps to have the chain’s marketing kitty, which is roughly equivalent to NASA’s budget for the Saturn project. But even competitors will have to acknowledge that they must be doing something right up at Oak Brook. Barack and Hillary should stop by for a quick tutorial on turning a wheeze into a “Whoa!”

Splashing into the family market

Fast food’s success with beverages clearly hasn’t gone unnoticed by family specialists one notch up the pricing spectrum. Today brought news of IHOP and Steak n Shake both giving their drink menus a tweak, possibly foreshadowing an overhaul by the whole sector. And all you can think is, What took ‘em so long?

With few exceptions—IHOP and Steak n Shake among them—the segment has been squeezed flatter than a short stack by casual chains edging down market and quick-service players, particularly fast-casual upstarts, creeping upscale. Beverages were always a part of the casual sector’s assault, since places like Friendly’s or Denny’s could hardly compete mojito a mojito. Then came the more recent onslaught of the quick-service restaurants, touting their coffees and floats the way they once hyped burgers. What’s a family restaurant chain to do?

Village Inn responded with a new format that incorporates a distinct coffee bar inside. Clearly the venerable chain is giving more than a nod to Starbucks, the concept that kicked everyone’s butt until the QSRs started kicking back.

But it’s not alone in flycasting new beverage choices into the public’s pool of options. Today IHOP opened the curtain on its new Dr. Seuss-inspired promotional items, including one that sounds like a Bill Cosby hangover remedy. The Beezlenut Splash consists of cherry and blueberry-flavored Jello cubes plopped into lemon-lime soda. It’s just the thing to sip while wolfing down the limited-time special of Green Eggs and Ham, which aren’t nearly as Cat and the Hat-appropriate as they sound. The eggs are your conventional color, though scrambled with spinach to justify the name. “Green” only modifies the eggs; the ham is roughly the hue of a Spalding Pinky.

Steak n Shake’s new drinks are far less surreal. In a breakfast marketing push aimed directly at QSRs, the always-open concept today added a line of morning smoothies. Curiously, although the equipment to whip up the smoothies is obviously always there, the drinks will only be offered at breakfast, suggesting the concept doesn’t want to undercut its lunch or dinner selections, or possibly slow service.

Those brands may actually be a little behind one of the sector’s sumos, Denny’s, which has been steadily expanding its roster of drink choices. Last April, it added a new line called Juicy Fruit Fusion Favorites—basically, blends of juices and soft drinks reminiscent of mocktails.

It remains to be seen if beverages will deliver the sort of sales boost that has helped the QSR segment during a trying time for the industry as a whole. But clearly the family sector is giving that route a try.

Will there be another fajita?

Wendy’s touted its Frescata line as a major point of different—deli sandwiches made with bread baked in the restaurants. It was canned in December. Panera Bread said its Crispani pizza would rev up dinner sales and please patrons looking for all-natural options. The franchisor quietly yanked the item sometime after November. In 2006, Starbucks trumpeted its new premium-priced breakfast sandwiches as the long-sought way for the chain to grab more food sales. Instead, the array is on the way out. Is the blockbuster new product going the way of two-for-one happy hours and free matchbooks?

Well, there is the incredible success of sliders, the mini-sandwiches that everyone from Good Time Burgers to Cheesecake Factory is selling these days. They, in turn, are part of the miniaturization that has also led to the widespread availability of spoon-sized desserts, small plates and even small-pour glasses of wine. But, as your nearest White Castle or Krystal attests, that mini mania is nothing new.

Ditto for burgers, which are truly undergoing a second coming. Sure, they may be made now with Kobe or Angus beef, but it’s still the American classic, just gussied up with better ingredients and garnishes.

Indeed, with the exception of beverages (the mojito, cosmopolitans, Pisco sours) can you name a new chain menu addition since the middle-decade premium salad blitz that has really wowed consumers? Double points if it’s something other than McDonald’s Snack Wrap.

The dearth says something about the growing sophistication of consumers. They’re not as dazzled as they once might have been by sheer novelty. Instead, they’re looking for a true advance—better flavor, a meal more in keeping with their lifestyles or eating habits, a meaningful alternative to what they know. If that’s not in the set of options, then go with the best among the choices offered.

And, of course, now it will no longer extend to Frescattas, Crispanis or a microwaved Egg McMuffin a la Starbucks.

Testing less testing

Taco Bell probably has nothing against surveys, but it won’t be getting the usual Christmas card this year from whatever company makes the forms and the stubby pencils that consumers use to fill them out. The chain alerted financial analysts last week that it, too, is veering away from the traditional process for gauging customers’ reaction to possible menu additions, a detour that’s already being explored by McDonald’s, Wendy’s, Baja Fresh and presumably other chains. The old standard of exhaustively testing new products is apparently going the way of the rabbit-ear TV antenna as restaurant brands try to respond with more alacrity to the zigging and zagging of consumer preferences.

But not all franchisees view shortened product tests—or the elimination of testing altogether—as a positive shift. Some licensees of McDonalds, Wendys and Baja have yelped about having to add products or a whole new menu line before the operational and marketing support has been adequately pressure-tested. And misfires, they complain, can do more damage to their businesses than to a franchisor. They say the streamlined assessments fail to balance sales benefits against such factors as local labor expenses, the cost of capital, or the longer-range perceptions about service times.

At least one Baja franchisee is irate because he believes the home office isn’t effectively gauging even the top-line impact of introductions. He asserts that the chain recently shot-gunned a product into the market with advertising support, only to discover that it didn’t have sufficient supplies to meet the heightened demand. But, in fairness, that couldn’t be confirmed with the franchisor.

Wendy’s, on the other hand, has publicly disputed franchisees’ even louder assertions that the chain is inadequately testing new products and operational changes. The charges were levied in a letter sent to headquarters late in the summer by 16 franchisees, who cited the current testing mindset as one reason for “the slow decline of our brand.”

Having seen my share of franchisee disputes, I’d be a fool to take sides in a fracas like that one. But it certainly was curious that Wendy’s current management included a rollout of breakfast in the turnaround strategy it disclosed last year. The same announcement noted that the meal service would be tested. That’s like proposing as soon as a blind date opens her door, then suggesting the two of you discuss compatibility after you’ve been getting together for a year or so.

Franchisees of McDonald’s have been more discreet in their complaints about the chain’s recent quickness in adding new products, particularly beverages. But the dismay was evident in the latest survey of McD’s licensees by former analyst and current restaurant-company investor Mark Kalinowski. In his most recent quarterly canvass of the operators, several complained that lattes and other specialty drinks were being shot-gunned into the market without sufficient research on service issues or even the long-term payback of buying the required equipment.

"The Combined Beverage Initiative is a real concern for me," said one respondent, refering in McDonald's-speak to the beverage program."I have heard a number of
estimates from $100,000 to $130,000. The train has left the station, stores surveys are being done and we have yet to see any FACT-BASED INFO to know if this is a good
investment or not."

One anonymous respondent suggested that franchisees form a renegade association that’ll be more vocal than the official franchisee organization in shaping the chain’s strategy.

In fairness to Taco Bell, there are no evident signs that its franchisees have an issue with the new testing strategy, known internally as the Explore in Store process. The shift is intended to help the chain double the number of new products it fly-casts into the market in any given year. To crank out products at that speed, Taco Bell execs told analysts at last week’s special meeting, possible new options will be introduced in just a few stores, with the new choice highlighted in signs. If the reception by consumers is encouraging, the item could be quickly rolled systemwide, presumably as a limited-time offer.

Lehman Brothers’ Jeffrey Bernstein, one of the restaurant analysts who attended the meeting in Taco Bell’s hometown of Irvine, Calif., said in a report that some products will continue to be developed and tested in the chain’s usual fashion. Indeed, he noted that Taco Bell is still testing breakfast, an initiative that executives disclosed at the same meeting one year earlier. Yet the testing is continuing, and “the expansion appears slower than initially expected,” Bernstein wrote in a report to clients.

The new streamlined rollout process could serve Taco Bell well in catching up with other quick-service chains on two fronts. During the meeting, executives aired intentions to add a frozen beverage to the Mexican chain’s menus, and to explore some health-oriented “better-for-you” products.