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Starbucks 2Q sales improve as transactions decline

Nation's Restaurant News - Thu, 2017-04-27 20:54

Starbucks Corp. same-store sales increased 3 percent in the second quarter, the company said Thursday, although declines in transactions offset an improving average check in the period.

Same-store sales improved as the quarter went on, and again into April, the company said.

The Seattle-based coffeehouse operator gained traction in the rapidly growing China market, where transactions increased by 6 percent and same-store sales rose 7 percent.

“With our U.S. business accelerating throughout the quarter and strong performance in China, we are poised to deliver strong revenue growth in the second half and into the future,” Starbucks CEO Kevin Johnson said in a statement.

Johnson recently replaced Starbucks founder Howard Schultz as CEO. Schultz is now executive chairman.

The results were lower than investors expected, and Starbucks’ stock fell 3 percent in after hours trading on Thursday.

Revenue in the quarter ended April 2 increased 6 percent, to $5.3 billion, the company said. Net earnings increased 13.5 percent, to $652.8 million, or 45 cents per share.

Starbucks said customers paid higher prices and bought more expensive items in the quarter, and average check rose 4 percent. Transactions fell 2 percent.

Factoring out “order consolidation” from the Starbucks Rewards loyalty program, average ticket grew 3 percent, while traffic was flat, the company said. 

Scott Maw, Starbucks CFO, said investments to increase speed of service and upgrade the brand are “paying off” with the improving sales. The improvements, along with upcoming food, beverage and technology innovations, should boost same-store sales throughout the year, he said. 

Starbucks continued to get more orders through digital channels. Starbucks Rewards represented 36 percent of company-operated sales in the U.S. in the quarter, and 29 percent of customers paid via mobile. 

Mobile order and pay now accounts for 8 percent of transactions. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

FDA delays menu labeling rule

Nation's Restaurant News - Thu, 2017-04-27 20:45

The Food and Drug Administration is pushing back the deadline in implementing menu labeling regulations.

The FDA submitted an interim final rule to the White House Office of Management and Budget on Thursday that signals a delay in the agency’s final menu labeling rule, set to take effect on May 5, according to a release issued by The Association for Convenience & Fuel Retailing (NACS).

The move comes after NACS and the National Grocers Association formally requested that the FDA intervene prior to the deadline.

The impending regulation had been headed toward next week’s scheduled launch since Nov. 25, 2014, when a ruling was released that outlined updated menu-labeling requirements for restaurant chains and “similar retail food establishments.” 

Those falling under the new law’s jurisdiction would be required to post calorie counts for food items on standard menus or menu boards. Other transparency measures also would apply should the law come into effect unhindered.

NACS said in a statement that “the menu-labeling regulations established by the FDA do not account for the varying approaches to foodservice between big-chain restaurants, convenience stores, grocery stores and delivery operations such as pizza chains.”

But the National Restaurant Association disagrees with the delay.

“The National Restaurant Association strongly cautions against any actions that would delay implementation of the menu labeling law,” Cicely Simpson, the NRA’s executive vice president of government affairs and policy, said in a statement.

Menu labeling laws had previously been passed at the city, state and sometimes county levels.

“If the federal standard is repealed, we will once again return to this patchwork approach that will be even more burdensome for restaurants to implement and will not have the legal safeguards included in the federal law,” Simpson said.

Contact Dan Orlando at dan.orlando@penton.com

Follow him on Twitter: @danamx

How to prepare for May Day activism

Nation's Restaurant News - Thu, 2017-04-27 20:37

With May Day quickly approaching, restaurant operators are bracing for possible walkouts and other activism around immigration, lawyers representing the industry said Thursday.

Following “A Day Without Immigrants,” on Feb. 16, immigration advocates have set their sights on May 1, or May Day, for further protests, according to lawyers at the Houston-based law firm of Monty & Ramirez LLP.

“May 1 has been a day of activism, particularly in the area of labor, for many years,” the firm said in an advisory. “This year, immigrant employees and business owners are being urged to stay home on May Day in an effort to demonstrate the important role immigrant workers play in the U.S. economy.”

See more about immigration and the restaurant industry >>

Jacob Monty, a partner in the law firm, said in an interview Thursday that restaurant operators can take steps to mitigate business disruptions on May 1.

“You need to talk to your employees this week about the walkout,” Monty said. “And you need to express your support for immigration reform.”

Monty added that the restaurant industry “doesn’t need to be taught that immigrants are valuable. It’s something that the industry and the business owners acknowledge.” 

Employers can remind workers that immigrants are generally embraced and promoted in the restaurant industry, he said, and state and national organizations like the National Restaurant Association are supportive. 

Monty said employers can proactively ask workers to show up.

“We have some restaurants in Austin [Texas] that are already planning to close that day, but businesses can’t keep closing during the immigrant protests,” he said. 

If workers don’t show up on May Day, Monty said, “the last thing you want to do is a knee-jerk termination.” 

That could provide bad publicity to consumers or alert Immigrations and Customs Enforcement and provoke a notice of intent to inspect I-9 forms for employment eligibility. 

A termination could also run into protections provided by the National Labor Relations Act, he said, adding that employers are prohibited from taking adverse action against an employee for exercising rights to plan actions like this.

Monty’s firm noted that an employer who receives notice that an employee is encouraging others on Facebook to stay home on May 1 cannot discipline that employee for this behavior. 

Employers can also remind employees of the company’s attendance policy in advance, Monty said.

“It is very important not to assume that employees who participate in a walkout or support executive action are undocumented workers,” Monty’s firm noted. “There is no legal basis to assume that employees who demonstrate, or display emblems and flags in solidarity with the protesters, are themselves undocumented workers.”

Monty said it is likely the May Day actions will be bigger than those in February.

“There are ways you can show support for immigration causes that don’t involve shutting down the restaurant,” he said, suggesting company donations to causes and organizations that are assisting immigrants. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

TGI Fridays names Aslam Khan CEO

Nation's Restaurant News - Thu, 2017-04-27 18:46

TGI Fridays has named industry veteran Aslam Khan as CEO, the company said Thursday.

Khan, who founded and most recently served as chairman of multi-brand franchise company Falcon Holdings LLC, in Westlake, Texas, succeeds John Antioco in the role at the Dallas-based casual-dining brand. 

“I believe this is an iconic brand,” Khan said in an interview at TGI Fridays headquarters. “It has a lot of legs in its history and heritage.”

Khan founded Falcon Holdings in 1999, in partnership with Sentinel Capital Partners, which is the majority shareholder in TGI Fridays. Falcon grew to become Church’s Chicken largest franchisee and also operates Hardee’s, Carl’s Jr., Long John Silver’s and Piccadilly Cafeterias.

Khan remains an owner of Falcon, which has 350 restaurants and manages another 150 units. Khan said a seasoned executive team has taken over at Falcon. He brought Giovanna Koning, chief financial officer at Falcon, to assume the same role at TGI Fridays.

“Our strategy will be people first,” Khan said when asked about challenges in the casual-dining segment. “That’s No. 1.”

Khan said his background as a franchisee will help as he takes on the role as a franchisor executive. About 80 percent of TGI Fridays’ 470 domestic restaurants are now franchised, the result of a refranchising program started after the chain was sold in 2014.

“I manage by consent,” Kahn said. “I talk to the franchisees and sell the ideas to them. My job is to help them understand where we are coming from.”

TGI Fridays has 900 restaurants, with about 430 locations abroad. 

“Overseas, American food is very popular,” Khan said, which gives TGI Fridays, a pioneer in taking its brand international, an advantage. 

He said he will work with Stephanie Perdue, who joined TGI Fridays as chief marketing officer from Taco Bell in February, to hone the menu and marketing message.

“I think Fridays has great food. It could be better,” Khan said. “Stephanie has already come in with some new food products. We can upgrade the food quality. My focus will be on quality of food and quality of service. Service is everywhere a problem, whether you are fast food or casual dining.”

With Khan’s arrival, Antioco returns to his position on TGI Fridays’ board of directors.

“Aslam brings to Fridays more than three decades of enormously successful and highly relevant restaurant operations and franchising experience,” Antioco said in a statement. 

Antioco had served as interim CEO before and after Robert Palleschi, who left late last year.

Khan said the move to a franchisor role means he will be required to listen more.

“I’ve been on the other side as the franchisee,” he said. “I know their pain.”

He said he is setting up franchisee committees to work on all aspects of the business, from marketing to purchasing. 

Khan has received a number of awards as a franchisee, including the International Franchise Association’s Ronald E. Harrison award for his commitment to diversity in his operations in 2011, and IFA Entrepreneur of the Year in 2014. 

John McCormack, co-founder and senior partner for Sentinel Capital partners, added in a statement that he had worked with Khan for more than 20 years and was confident because he had “successfully managed and grown branded franchise systems and has a deep understanding of how to work with private-equity ownership.”

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Domino’s same-store sales growth marches on

Nation's Restaurant News - Thu, 2017-04-27 17:14

Domino’s Pizza Inc.’s U.S. same-store sales increased 10.2 percent in the first quarter, the company said on Thursday.

If that sounds familiar, it’s because it is: The Ann Arbor, Mich.-based chain has reported double-digit same-store sales growth in nine of the past 11 quarters.

On a three-year basis, Domino’s same-store sales have risen 31 percent. And that was a slowdown from the fourth quarter, when the three-year figure exceeded 34 percent, according to Nation’s Restaurant News analysis.

That’s a remarkable run for an established chain, especially one that has now seen 24 straight quarters of domestic same-store sales growth. The strength of the results surprised investors, who expected an eventual slowdown.

Domino’s stock rose 3 percent and is nearing an all-time high of $192.01.

“Franchisees and operators worldwide continued stepping up to the challenge of sustained success,” Domino’s CEO Patrick Doyle said during an earnings call Thursday. “Our performance is the result of many years reshaping our brand by improving the food, reinvesting in our digital capabilities and improving our stores.”

Revenue increased 15.8 percent in the first quarter, to $624.2 million, from $539.2 million in the same period a year ago. Net income surged 37.4 percent, to $62.5 million, or $1.26 per share, from $45.5 million, or 89 cents per share the previous year.

But Domino’s same-store sales run in the U.S. might not even be the most remarkable thing about the company right now. 

Same-store sales at international locations increased 4.3 percent in the quarter ended March 26. That was the 93rd straight same-store sales increase outside the U.S.

To put it in perspective, Bill Clinton was in his first term as president of the United States the last time Domino’s international same-store sales declined.

Domino’s strategies to generate strong same-store sales performances didn’t come recently. Doyle said it can be traced to the company’s long-term focus.

“Our story is one of a true long-game approach,” he said, noting that the chain took “smart risks” years ago. “While they took time to bear fruit, they eventually reshaped our brand and system.”

That includes moves like improving the pizza recipe and a decision years ago to develop Domino’s own point-of-sale system and manage it in-house, which has helped the company more easily expand technology offerings. 

“We know the cumulative effect of a lot of long-term decisions over many years is what is ultimately driving our success,” Doyle said, adding that sales results now are due to “investments made three, five, 10 years ago by franchisees and the company.”

Doyle is also confident that competitors will struggle to keep pace, in part because they don’t take the long-term view.

“A lot of competition out there frankly doesn’t look at things that way,” he said.

To be sure, Domino’s doesn’t expect its run to continue — double-digit same-store sales growth can only last so long, after all. The chain’s medium-term guidance is for same-store sales increases of 3 percent to 6 percent.

Doyle noted that Domino’s strategy is not focused on innovative new products, which many restaurant chains are using in a bid to capture consumers’ attention.

“Our typical customer orders their favorite pizza on an ongoing basis,” he said. “If somebody is a pepperoni pizza customer, we’re working on how to make that pepperoni pizza experience for them better next year than this year.” 

Some analysts have speculated that Domino’s could start losing sales as more restaurants add delivery. For instance, the online restaurant aggregator and delivery company Grubhub reported 39-percent revenue growth in its first quarter. And a number of chains are working on delivery, from Buffalo Wild Wings to McDonald’s.

But competition isn’t impacting Domino’s yet. The company said same-store sales increased 14.1 percent at company locations — primarily located in urban areas where delivery is most popular. Franchised same-store sales rose 9.8 percent.

“To date, we have certainly not seen any evidence that the growth of aggregators on the digital side, or the increase in delivery activity, has had any effect on our business,” Doyle said. 

Would Domino’s consider selling its expertise in those areas to take part in the trend? No, he said.

“The competitive advantage we’ve created in digital and delivery is something we’re going to use to grow the Domino’s brand,” Doyle said. “When you’re selling one in six or one in seven pizzas in the U.S., there’s an awful lot of growth for us in sticking to our knitting.

“The potential distraction of doing it for others is not a risk worth taking.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

10 Most Commonly Observed Food Safety Challenges - QSR Edition

FastCasual.com - Thu, 2017-04-27 16:49
In 2016, outbreaks of norovirus, E. coli, Salmonella and even hepatitis A hit quick service restaurant locations, indicating there’s still much to be done in the area of food safety.

10 Most Commonly Observed Food Safety Challenges

FastCasual.com - Thu, 2017-04-27 16:39
In today’s competitive restaurant market, casual dining restaurants are struggling with filling open positions. High turnover and lackluster training may be putting food safety at risk.

4 Components of an Integrated Food Safety Management System

FastCasual.com - Thu, 2017-04-27 16:34
In today's highly competitive market, your customers have more choices than ever before. Customers visit your foodservice establishment because they desire a certain brand experience, but they wouldn’t step foot in the door if the food was considered unsafe.

Suggested Best Practices & Policies In-Use Utensils

FastCasual.com - Thu, 2017-04-27 16:23
Utensils are important tools in busy kitchens and foodservice environments. Knowing how to properly handle these tools is just as important as knowing how to use them.

Say No to Norovirus

FastCasual.com - Thu, 2017-04-27 16:12
Important information to keep your customers safe from foodborne illness.

Buffalo Wild Wings faces challenging chicken wing costs

Nation's Restaurant News - Thu, 2017-04-27 16:04

Buffalo Wild Wings Inc. faces a sizable challenge in 2017 as it looks to generate sales and traffic while protecting margins: Chicken wing costs. 

The Minneapolis-based chicken-wing chain ended a streak of declining same-store sales, with an increase of 0.5 percent at corporate restaurants in the first quarter ended March 26.

The company said its Half-Price Wing Tuesdays drove “significant traffic” in the period.

But Buffalo Wild Wings faces pressure from investors to improve margins. And chicken wing prices are forecast to increase 8 percent to 10 percent this year, the opposite of what was expected. 

When the promotion was announced, chicken wing prices were $1.70 a pound, and were expected to decline by 10 percent this year, executives said.

“As such, we’re aggressively evaluating other offers for Half-Price Wing Tuesdays that still offer a value to our fans but help protect our margins,” Buffalo Wild Wings CEO Sally Smith said during an earnings call Wednesday.

The challenge illustrates the tightrope many operators are walking as they work to lure customers in a highly competitive environment, but face pressure from shareholders to maintain profits. 

Buffalo Wild Wings is doing battle with activist shareholder Marcato Capital Management, which has nominated four people to the company’s board of directors. Marcato has been critical of the company and its management, and called for Smith to resign. 

One issue Marcato has raised is margins, especially at company-operated restaurants.

Buffalo Wild Wings said this week it will cut costs by as much as $50 million, in addition to refranchising 13 percent of company locations, or 80 units.

One of the cuts: “Guest Experience Captains” who work at 90 percent of company-operated locations. Alexander Ware, Buffalo Wild Wings’ chief financial officer, said their responsibilities would be shifted to other employees.

Buffalo Wild Wings introduced the position in 2015, in a bid to improve customer service. However, that did not translate into higher sales: Same-store sales fell in 2016. 

Marcato was especially critical of the program. In a presentation filed earlier this month, the investor quoted a corporate employee who said the role “has shown negligible positive impact on store experience.”

Buffalo Wild Wings said it can save $15 million to $17 million in the second half of the year, and $24 million to $28 million in 2018, by making changes at the unit level to improve margins. Eliminating the captain position is one such savings.

Savings would also come from a streamlined management structure at lower-volume units, food waste improvements and changes in procurement. In addition, the company said it would develop a new “activity-based labor model,” as well as improved sales forecasting and labor scheduling tools.

Buffalo Wild Wings is also working to save on general and administrative costs, and expects to save $3 million this year and another $3 million next year. 

“By controlling what we can, the net impact of these savings and the [refranchising] will enable us to offset slowing consumer traffic in the sector, greater promotional activity, higher wing costs and labor headwinds, and still deliver 20-percent restaurant-level margins” by 2018, Ware said.

The company expects that “industry softness” will continue to impact sales in 2017. Buffalo Wild Wings said same-store sales this year would be about 1 percent, at the lower end of its predicted range. 

While the company is “pleased” with its performance, given industry challenges in the first quarter, “the underlying casual-dining environment is weaker than expected,” Ware said.

Buffalo Wild Wings is also one of several restaurant chains working to quickly expand delivery. 

Third-party delivery generated $2.7 million at 180 restaurants in the quarter, and take-out as a whole represented 18.2 percent of company-owned restaurant revenue, an increase from 16.6 percent in the same period a year ago. The company wants to expand delivery to 250 restaurants by the end of the year.

“Delivery is incremental to the business, as we’ve seen take-out continue to grow in restaurants that offer delivery,” chief operating officer Jim Schmidt said. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

White Paper: Guidelines for Response to Vomiting and Diarrheal Incidents in Foodservice Establishments

FastCasual.com - Thu, 2017-04-27 15:58
It only takes a few enteric virus particles to infect an individual.

Preparation & Recovery for Flood Situations

FastCasual.com - Thu, 2017-04-27 15:53
Flooding can occur after heavy rains or when rivers and streams rise quickly. Large areas can flood in a short time, interrupting power and damaging property. The resulting floodwater may damage records, equipment, and food inventory, as well as cause structural damage.

London restaurant to open world's first 24-hour vegan drive-thru

Topix - Thu, 2017-04-27 12:21

Globally Local, known for its vegan fare, will be opening a second location at Highbury Avenue and Cheapside Street in the coming months, including a 24-hour drive-thru. "We've been extremely busy at our location downtown, so much so that we really needed another location for the city," said Globally Local owner James McInnes.

Categories: Today's Food News

Taco Bell to offer test kitchen reservations on OpenTable

Nation's Restaurant News - Thu, 2017-04-27 12:00

Many OpenTable users log on to make reservations for high-end meals at fine-dining restaurants. What’s less common is doing the same for Taco Bell.

Taco Bell has partnered with OpenTable to allow 32 customers to make reservations at the quick-service chain’s headquarters in Irvine, Calif. Fans of Taco Bell’s signature creations, such as Doritos Locos Tacos and the Naked Chicken Chalupa, can see where these and other menu items are born at the Test Kitchen by Taco Bell.

“The chance to be the first to see our innovative food, where it’s created, from the chefs who make it happen, is a unique experience that’s never been available to the public until now,” said Liz Matthews, Taco Bell’s chief food officer.

Reservations can be made via OpenTable, but the URL will not be made available until Cinco de Mayo. The first dining experience is set for two weeks later, on May 19.

“As a brand known for our firsts, we’re excited to open our doors to the magic of our innovation and give our biggest fans an experience they’ll never forget,” Matthews said.

Attendees will enjoy a meal inspired and plated by Taco Bell chefs. The dinner will feature twists on menu favorites, never-before-seen products and food creations before they are available to the general public.

“OpenTable prides itself on helping people make the hottest reservations around and is excited to partner with Taco Bell to give fans this exclusive opportunity,” said Scott Jampol, SVP of marketing at OpenTable. “We’re always looking to offer our diners the most unique dining experiences, and that’s exactly what they’ll find at the Test Kitchen by Taco Bell.”

Unlike a typical trip to Taco Bell, dinner is free. There is also no cost to secure a reservation. Those making the reservations must be at least 21 years of age.

Taco Bell customers who don’t make the cut will have a chance at the experience in the future. After this initial endeavor, a series of dining events will be added throughout the year, the company said.

The goal is to attract both established and new customers from across the country. Taco Bell noted that travel accommodations will not be provided. 

Taco Bell Corp. is a subsidiary of Yum! Brands Inc. The chain has 7,000 restaurants in the United States and 250 units overseas, with plans to add 2,000 locations within the next 10 years.

Contact Dan Orlando at dan.orlando@penton.com

Follow him on Twitter: @danamx

Using chatbots to launch delivery, keep customer connection

FastCasual.com - Thu, 2017-04-27 11:45
Using chatbots is one way to offer delivery while keeping a direct relationship with the customer.

Papa Murphy’s tests delivery with Amazon

Nation's Restaurant News - Thu, 2017-04-27 10:00

Papa Murphy’s Holdings Inc. is testing delivery at seven restaurants in the Portland, Ore., and Seattle areas with Amazon Restaurants as it seeks to join its pizza competitors while taking advantage of one of the biggest trends in the restaurant industry.

The test marks the Vancouver, Wash.-based chain’s first foray into bringing pizza directly to customers.

“One of our top priorities for 2017 is to become even more convenient for our customers, and adding delivery is a way to help accomplish that objective,” Dan Harmon, Papa Murphy’s senior vice president of operations, said in an email. “We anticipate delivery being a win for our customers and a win for our franchise owners as we refine the implementation with this test.” 

The company is also in talks with other third-party providers to expand the service to other restaurants.

The test is designed to learn how to integrate delivery into Papa Murphy’s daily operations, how the cost structure works with franchisees and customers, and whether customers think delivery is easy, Harmon said.

Executives said the service could work well for Papa Murphy’s because customers bake the pizzas at home, eliminating the fear that delivered pies will get cold on the way.

“Partnering with Amazon Restaurants makes us even more convenient for our customers,” Jean Birch, Papa Murphy’s interim CEO, said in a statement. “Our product is uniquely suited for delivery because, unlike a cooked pizza, it arrives fresh for customers to bake easily at home when it fits their schedule.”

The service is available to Amazon Prime customers, either through one of the company’s mobile apps or on its website. Users can place orders with participating restaurants and track the status of their delivery.

“We are excited to add a beloved brand to our growing selection of restaurant options for Prime members in Portland and Seattle,” Gus Lopez, general manager of Amazon Restaurants, said in a statement. “The service offers Papa Murphy’s the chance to leverage Amazon’s technological expertise in last-mile delivery to get food delivered to customers’ doorsteps in one hour or less.” 

The delivery effort is part of Papa Murphy’s overall strategy to reinvigorate the brand after a difficult stretch of declining sales. Same-store sales fell 7.8 percent in the fourth quarter ended Jan. 2, and dropped 10.9 percent on a two-year basis.

The results led to the departure of CEO Ken Calwell and the elevation of Birch, Papa Murphy’s chairman, to that role on an interim basis.

Papa Murphy’s is hardly the only chain looking at delivery, as more consumers seem willing to pay for the service.

Operators from Panera Bread to Bloomin’ Brands and The Cheesecake Factory are all looking at delivery in some format. McDonald’s also plans to expand delivery across the U.S. this year.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Why the UAE restaurant industry lacks leadership talent: Bias in pay, benefits (Part 1)

FastCasual.com - Thu, 2017-04-27 09:15
This five-part series explores why the restaurant industry in the UAE lacks top talent.

Industry execs 'Spread the Love' at Restaurant Franchising & Innovation Summit

FastCasual.com - Thu, 2017-04-27 08:44
Restaurant executives from all over the world gathered in March at the Restaurant Franchising and Innovation Summit in Dallas to not only learn from one another about growing their businesses, but also make more than 10,000 peanut butter and jelly sandwiches.