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January
2007
SPECIAL REPORT:
E&S Industry Growth to Ease
By: Mike Sherer
Trying to
predict what lies ahead for a new year is like grabbing onto
a fistful of air.
So instead
of speculating what 2007 could bring—higher gas
prices, spiraling materials costs, new regulatory battles,
for example—equipment spec/buyers from top foodservice
companies say they’ll focus on what’s in their control:
everything that can make them more productive, efficient and
profitable.
And they
want it all: greater equipment efficiency, better service
and improved partnerships with suppliers, all in an effort
to handle whatever this year throws at them. As one told us,
“You can’t always design for Easter Sunday, but you’d better
be prepared for Easter Sunday.”
Read on for
perspectives from six multiunit spec/buyers and the ways
they’ll meet their operational challenges in 2007.—Ed.
McDonald’s: Remain Consistent While Innovating
Bernard Morauw, Senior Director Worldwide Operations
McDonald’s Corp., Oakbrook, Ill.
Existing Units: 31,010
2007 Activity: 350 new units
When you’re
a market leader, you have to do two things well: deliver
your brand’s products and services consistently in all your
stores, and continue to innovate to stay ahead of your
competition. At McDonald’s Corp., conformity and reinvention
go hand in hand.
“If you look
at McDonald’s overall,” says Bernard Morauw, “we’re trying
to stay the course in leadership and marketing, and continue
to innovate around the menu. On the equipment side, we look
at delivering a standard around the world.”
The
company’s strategy for the past three years has been to
optimize performance in existing restaurants, not just put
up new ones. The chain has taken a hard look at how to
increase sales in its 31,000 restaurants. At the same time,
the 14,000 U.S. stores and thousands more in maturing
international markets need to be upgraded and improved on an
ongoing basis.
With sales
growth coming from menu innovations, Morauw says the company
has to find ways to gain greater production and efficiency
from existing units.
“The growth
of the menu and the different types of products we now serve
have an effect on what kind of equipment we need,” Morauw
says. “We need flexible equipment in a limited footprint
that can accommodate a wider variety of menu items.
“Another
challenge for us is the area of service support and
reliability. We must find suppliers who have preventive
maintenance and extended warranty programs, and come to us
with a new model of service.”
And, Morauw
says, new equipment that meets the company’s needs has to be
energy efficient and meet new standards of compliance, such
as the WEEE/RoHS directives that took effect in Europe last
year and go into effect in Japan and China in 2008.
Surmounting
challenges like these, though, is all in a day’s work at
McDonald’s.—MS
Brinker: Look For The Return
Rick McCaffrey, V.P. Architecture & Design
Brinker Int’l., Dallas
Existing Units: 1,622
2007 Activity: 200-220 new units
Rick
McCaffrey isn’t asking for much in 2007. “We’re focusing on
engineering, speed of service, quality of our food, labor,
energy and building construction costs.”
If McCaffrey
sounds like he wants it all, he does. But he boils it all
down to ROI. “Where are the paybacks in terms of building
systems? It used to be ‘cut costs, cut costs.’ Now we look
at where the paybacks are.”
In terms of
equipment, payback comes through Brinker’s own look at
equipment efficiency. “We used to rely on manufacturers for
information about performance. Now there are monitoring
systems to evaluate equipment, HVAC and lighting systems,
and we can do our own business payback models. For example,
we can evaluate hot water heaters and how they perform so we
can look for a system that’s not only energy efficient but
also uses less water.”
This year,
McCaffrey says, Brinker expects labor costs to go way up.
“Speed is what consumers want, so we have to be able to
deliver the same product faster. Energy costs have to be
balanced with other needs, such as labor and speed.” To do
it all, “we have to partner with suppliers and
manufacturers. We can’t do it on our own.”
As part of
the Brinker-supplier partnership, the company allows
suppliers to test equipment in its stores so new technology
can be fine-tuned and made available to the entire market.
For example, one ventilation specialist tested on-demand
ventilation in a Brinker store six years ago, pulled it out
and refined it, and later introduced it to the market.
“We know
that if we can develop a product so the technology is
available to everyone and not proprietary, we’ll get it at a
less expensive cost,” McCaffrey says. “We’ve seen some
examples in the past year of manufacturers’ solutions to our
areas of focus that have really ‘wowed’ us.”—MS
Culver’s: Succeed Through Partnerships
Art Cone, V.P. Supply Chain Management
Culver Franchising System Inc., Prairie du Sac, Wis.
Existing Units: 349
2007 Activity: 35-45 new units
Culver’s,
famous for its frozen custard and Butterburger, is in the
enviable position of having no shortage of new and existing
franchisees interested in opening restaurants. And while the
chain expects to open 35 to 45 units a year for the
foreseeable future, expansion itself isn’t at the top of the
company’s priority list.
“We grow one
restaurant at a time,” says Art Cone, “but our real emphasis
is on improving profitability and growing comparable sales
and transactions in existing restaurants.”
An integral
part of that strategy is the way Culver’s specs and
purchases equipment, and specific areas the chain will focus
on this year include service and technology.
“We want the
best service available for our equipment,” Cone says. “We
expect to have the most highly qualified service technicians
in our restaurants with a goal of attaining a first-time
fix.
“And
technology is the other area we want suppliers to address,
how to get folks to think three to five years down the road
in terms of technology,” he says. “We want suppliers to
bring us ideas for maybe a totally different cooking
platform, or integration of the NAFEM Data Protocol that
would enable a service technician to trouble-shoot a piece
of equipment.”
With prices
rising on raw materials like stainless steel, the company
expects higher prices on equipment. “We’re looking for
continuous improvements in quality, service and technology
and are willing to pay for them,” Cone says.
Even so,
Culver’s has created its own lifecycle costing template to
help franchisees.
“While we still analyze every piece of equipment from an ROI
perspective, we also look at a number of other factors,”
Cone says. “There’s no question that this is where the long
term partnerships come into play. We can buy something less
expensive up front, but in the long run it’s not always the
best business decision.”—MS
UC-Berkeley: Plan For More Training
Chuck Davies, Associate Director/Executive Chef, Cal Dining
University of California, Berkeley, Calif.
Existing Units: 10
Coming off a
recent round of new construction and renovations isn’t the
biggest challenge Cal Dining faces at the University of
California at Berkeley. The recent completion of a new
residence hall adds a 10th foodservice facility
to the campus, giving students more choices and easing the
load for some of the other facilities.
And having
to reinvent itself anew each year isn’t Cal Dining’s biggest
challenge, either, though it does present some issues. “We
get a whole new batch of customers every year,” says Chuck
Davies, “so we have to stay on top of trends. We have to
keep them happy as well as keep the staff happy and
interested in what they’re doing.”
Labor, in
fact, is the ongoing issue, Davies says. Or more
specifically, trying to produce “a fresh, seasonal menu like
ours with labor that doesn’t have the skill sets we need.
“We moved
from a three-week cycle to a seasonal menu recently for more
flexibility, and we have to cater to a large Asian
population with authentic Asian food. We’ve even introduced
new programs like a completely organic salad bar. Our
mission is to serve food that tastes good, looks good and
provides great nutrition.”
New
equipment offers some efficiencies, he says, but doesn’t
solve all the problems. A sushi bar was added in one recent
renovation, for example, and Cal Dining considered an
automated sushi-making machine. But it would have been
costly, and still would have required labor.
Rather than
opt for digital, programmable equipment that does the
thinking, equipment purchases have been flexible workhorse,
such as a bank of convection ovens and more energy-efficient
steamers. To keep up with trends, new hearth-style pizza
ovens were added and are as productive as conveyor ovens
while providing more customer appeal.
But the
focus this year will be on training. “We have to bring
employee skills up to speed,” Davies says.—MS
Johnny Carino’s: Source For Quality And Service
Janine Hess, Purchasing Manager
Johnny Carino’s Italian/Fired Up Inc., Austin, Texas
Existing Units: 157
2007 Activity: 10 new units
For a
relative newcomer and small but growing company like Johnny
Carino’s Italian, not having the same purchasing leverage as
larger chains can be frustrating, considering the run-ups in
materials pricing.
“One of our
biggest challenges is price fluctuations,” says Janine Hess.
“Stainless keeps going up, and even if the price stabilizes,
demand exceeds availability.
“Several of
our good equipment manufacturers have done their best to
hold pricing for the past 12 months or even longer, all the
while getting bruised by volatile commodity conditions.
“So on one
hand, we are seeing plastics and fuel costs go down, but we
have numerous suppliers that are held hostage, so to speak,
by the stainless and nickel industries. Nickel is a primary
price culprit, and with only two major production sources in
the world, there are few alternatives. When the nickel
people pull the price trigger, there is price volatility,”
she says.
Materials
pricing isn’t the only issue on the radar for Johnny
Carino’s this year. Lead times, equipment life and service
are also top of mind.
“We’re
trying to source domestically wherever possible,” Hess says.
“If we can use a company in California to make a custom
product, we’ll do that instead of sourcing from China. It’s
a trade-off: pay $6.75 versus $8.95 or $10 to get it
domestically. But in the time it takes to get a sample from
China, the company in California is working on the fourth
round of the prototype and they haven’t charged us
anything.”
Meanwhile,
as equipment in some of the chain’s units approaches the end
of its useful life, Hess is evaluating replacements with
long lifecycles in mind. “We’re also from the
not-broke-don’t-fix-it school,” Hess says. “For example, our
ice machines really last, so we won’t consider replacing
them.”
Finally, Hess says she’ll be looking for excellent customer
service this year, seeking suppliers who stay on top of
Johnny Carino’s business.—MS
Old Spaghetti Factory: Manage Remodeling Wisely
Bob Martin, V.P. Development
Old Spaghetti Factory, Portland, Ore.
Existing Units: 37
2007 Activity: 1 new unit, several remodels
Old
Spaghetti Factory has launched this year with its eyes on a
mission: bringing older locations into the 21st
century. Founded in 1969, the chain intends to continue its
systemwide remodeling program in 2007.
“Over the
years, we’ve expanded our menu to attract new customers,
which required new pieces of equipment,” says Bob Martin.
“We also have a lot of 30-year-old restaurants out there,
and the equipment simply needs replacement.”
Equipment
the chain has added includes large convection ovens for
par-baking bread, microwave ovens for reheating sauces,
flat-top grills for sausage and chicken items, blast
chillers for 40-gal. batches of sauce made from scratch, and
vertical choppers.
The remodels
are major, costing hundreds of thousands of dollars and
tremendous logistical planning. “Our biggest challenge is
remaining open while we upgrade,” Martin says. “We need to
maintain our cash flow as best we can.”
Further,
more than half of Old Spaghetti Factory restaurants are in
older, downtown buildings, where rents are lower. “We can’t
just scrape a slab and start from scratch. In some cases, we
have to recapture dining space or convert a prep area to
make room for expanded cooking lines.
“We’re also
trying to convert to gas wherever possible, particularly
booster heaters for our dish machines, and buy more
energy-efficient equipment. We’ve also had to upgrade
electrical service in many buildings from 400 to 600 amps.
Electrical and plumbing costs have jumped dramatically due
to rising steel and copper costs.”
Site
selection is another concern for the company. Given its
business model, spaces in downtown locations are difficult
to find. The chain does have a prototype for a freestanding
store, but suburban locations are hard to come by.
“In the
suburbs, guests have 16 other restaurants close by to choose
from,” Martin says. “In our locations downtown, we have a
lot less competition from other chains.”—MS
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