If you believe what you read in the financial pages, the world could be coming to an end. The stock market keeps bouncing like a yo-yo, Europe keeps teetering on the brink of financial calamity, and the economy here in the United States has all the animation of molasses in, well, January.
Fortunately, many of you in the industry don’t pay attention to what others are doing, instead remaining bullishly focused on your own businesses and how to make them even stronger.
We asked some of the top chain execs, from presidents to facilities, equipment and supplies officials for their observations on how to cope in such uncertain times. They told us keys to their success and growth include staying focused on what they do best and what differentiates them from the guy down the street, keeping a sharp eye on the costs within their control, and listening to customers and adapting to what they want.
Bob Evans Farms: Build On Your Strengths
Mac Dyer, Senior Director of Engineering & Corporate Sustainability
Bob Evans Farms, Columbus, Ohio
Units: 563 (plus 145 Mimi’s Café units)
2012 Plans: five to 10 new Bob Evans restaurants; 100-plus remodels
Bob Evans Restaurants epitomize the company’s humble beginnings on the farm with fresh, homestyle food in friendly surroundings. When the company embarked on a remodeling program a little more than a year ago to revitalize aging units, it built on its strengths.
“The Farm-Fresh Refresh program gives our restaurants a more consistent and cleaner look,” says Mac Dyer, senior director of engineering and corporate sustainability. “It’s all straight edges and white wood—versus the old spindle railings and natural walnut—which dramatically lightens the interior and creates a ‘wow!’ factor. It makes people think it’s a new restaurant.”
At a cost of about $150,000 per unit, the company realizes a quick payback for what customers perceive as a “new” restaurant. Though the remods take only about a week, they are more involved than simply throwing a coat of paint on the walls. The chain has half a dozen basic floor plans, but each has about five variations on a theme, so the remodel isn’t exactly cookie-cutter.
To take advantage of its heritage, Bob Evans Farms has added a new retail bakery area to remodeled restaurants that customers see first thing when they walk in. New soffits over the glass display case and a new menu board and lighting promote about 25 items, including brownies, cookies, lemon bars, pies, cinnamon rolls and muffins from the Mimi’s Café chain. (Bob Evans also owns Mimi’s Café, which also is undergoing a remodeling program, but the larger restaurants of the French-inspired casual-bistro chain cost about twice as much per store to refurbish.)
Another area of stores that’s getting attention is carryout. “Our biggest opportunity is carryout,” Dyer says, “and we’re emphasizing it in all our new and remodeled stores by redirecting carryout customers inside the restaurant with new signage and even separate entrances in some locations.”
Excellent operational execution is the chain’s goal when it comes to home-meal replacement, so it has added features like a new mobile app that lets customers order and pay from their smart phones. Where it’s functionally feasible, stores are adding curbside service to make pickup even more convenient for busy families.
The chain continues to look for energy savings, Dyer says, and now specifies Energy Star equipment in the kitchen and has changed specs on HVAC systems and walk-ins to more energy-efficient equipment, too.
The goal of its current prototype design cycle is improving throughput and peak-hour performance. “We’re looking at how we can decrease the wait time during peak periods, when it [currently] can take 20 mins. to 25 mins. for customers to be seated,” Dyer says. The company tested some ideas in 2011 that Dyer says will roll out in stores this spring.
In the meantime, the chain still has a lot of restaurants to remodel.
Hurricane Grill & Wings: Help Out Your Franchisees
Mark Bartholomay, Chief Development Officer
Hurricane AMT, West Palm Beach, Fla.
2012 Plans: 15 to 20 new units
Depending on your viewpoint, the recession and subsequent slow economic growth either had absolutely no effect on Hurricane Grill & Wings or it molded the company into what it is today.
“Current ownership and management fell into place about the time of the recession,” says Mark Bartholomay, chief development officer of West Palm Beach, Fla.-based Hurricane AMT. “So the company was structured and has grown in this economy. We don’t see it as terrible. We’re growing steadily by a fairly large annual percentage, but we’re still small.”
The casual-dining chain offers customers an attractive value proposition. The company sees its competition as everything from Panera to Applebee’s, so it seeks to provide good quality for the price, making it a destination of choice. “We have a lower price point than many casual chains,” Bartholomay says, “so we haven’t gotten caught up in discounting or couponing.”
Hurricane AMT pursues a slightly different strategy from that of most franchising companies. Rather than require franchisees to build from scratch or build out a lease space to exacting specs, the company helps its partners find and take over existing restaurants.
“We have a standard kitchen equipment package,” Bartholomay says. “But it has to be adaptable to whatever space and existing equipment a franchisee inherits when he takes over a lease space.”
The company gets involved in the entire process, helping with everything from real estate selection and lease review and negotiation to recommending designers or consultants to help renovate the space.
“Obviously, we look at what’s critical to the operation and the production of our menu,” says Bartholomay. “If a franchisee needs something or upgrades a piece of equipment, he’ll use company specifications. We have a mandated décor, too, but we don’t look at every light bulb.”
The company faces three primary challenges to continued growth. “Financing for franchisees has been the biggest hurdle for the last three years and will continue to be in 2012,” Bartholomay says. “Increases in commodities prices could be a challenge. The increases have to come out of the customers’ pockets or your own. Maintaining value relative to what other chains are charging is key. And customer demand is another potential challenge. If they don’t feel like spending they won’t go out to eat, and we won’t get their business.
“For us, it’s all about ROI,” Bartholomay adds. Operators who own their land and buildings have the luxury of looking at three-, five- and 10-year paybacks. For franchisees who lease, we look at two- and three-year returns. No one can tell you what your sales and returns are going to be, but we can tell what it costs to build a restaurant. We can control those costs, and franchisees really appreciate that we watch how they spend their dollars.”
Moe’s Southwest Grill: Pick Your Spots
Paul Damico, President
Moe’s Southwest Grill, Atlanta
Units: 443 (two international)
2012 Plans: 55 new units
While a lot of restaurant chains are struggling in the current economic climate, Moe’s Southwest Grill of Atlanta can’t build new restaurants fast enough. Part of the fastest growing segment in the industry—Mexican fast-casual—Moe’s has revved up to a pace of opening at least one new restaurant a week.
Paul Damico, Moe’s president, would like to see the company open three restaurants a week, but Moe’s faces two big challenges: the availability of good real estate and training and operations support. While Moe’s invests in growing the team at a rate faster than unit growth, the fast-paced momentum has increased the workload for the grand-opening team.
Interest in the chain is high. About 2,500 potential franchisees contact the company each year. Because Moe’s is committed to choosing the best real estate and franchising partners, the chain must pick its spots. Until it can ramp up support staff, the company will sign agreements with only about 125 of those who want to buy a franchise each year.
The other pieces have already fallen in place. “We spent a good portion of 2010 working on our menu and refining our food mission,” Damico says, referring mainly to sourcing and sustainability. The menu has always emphasized fresh, not frozen, and high-quality ingredients. Moe’s, which opened more than 10 years ago, offered burritos, tacos, quesadillas, fajitas, nachos and salads that customers could build from a list of 25 fresh ingredients. Today, as in the beginning, Moe’s has never used freezers, microwaves, animal fat, lard or MSG.
The chain also makes a point of trying to be as sustainable as possible, purchasing grass-fed beef; cage-free, hormone-free chicken; grain-fed pork; and local produce whenever possible. At least 20 ingredients are gluten free, and vegetarian options are available, including organic tofu.
The company also revamped its prototype restaurant to make it more efficient and less costly to maintain. A Silver-level LEED restaurant built by a franchisee in Vermont provided some of the ideas for the prototype, including new lighting specs and more energy-efficient versions of kitchen equipment including such items as steam kettles and four-burner ranges. Tortillas, which formerly were steamed, now are heated in a press. The beverage machines have been upgraded, too, and the salsa bar is new.
Paint, furnishings and tile also were changed out in the new design. “The new surfaces are brighter and more colorful,” Damico says. “And they require a lot less maintenance. The materials add about $30,000 to the building package but cost half as much to maintain.”
All new units built in 2011 (about 40 or more) use the new design. “We’re very happy with the way it’s working,” Damico says.
Almost 15% of the chain’s restaurants end up in shopping centers that house at least one of its competitors in the segment. That doesn’t faze Damico or Moe’s franchisees. “We’re seeing our sales increase in markets where we compete,” he says.
Restaurants will open in five new states in ’12, and a deal already has been inked for stores in Moscow and St. Petersburg, Russia. Interesting spots, indeed.
Texas Children’s Hospital: Build In Flexibility
Richard Tallinger, Assistant Director of Food Services
Texas Children’s Hospital, Houston
2012 Plans: 1 new unit
Texas Children’s Hospital, Houston, has been on a building spree. As part of its $1.5-billion “Vision 2010” campaign, the organization has opened a new children’s hospital in Katy, Texas, plus a maternity hospital and a research center all within the past year and a half.
The expansion doubles the number of foodservice facilities Texas Children’s operates. The new West Campus children’s hospital has a café and coffeeshop in addition to patient feeding. The Pavilion for Women has a cafeteria that opened in November for outpatients, staff and families; patient room service will start up when inpatient services officially open in March. And the new research facility has a coffee bar.
Rick Tallinger, assistant director of food services, is used to running a variety of operations. Prior to the new project, Texas Children’s already had a food court, a McDonald’s franchise and an office building cafeteria in addition to patient room service. The food court includes franchises such as Chick-fil-A, Subway, Starbucks and Villa Pizza. The Subway franchise, for example, is Houston’s third busiest in terms of volume despite the fact it’s only open five days a week.
The expansion, though, has stimulated the team to be creative and forward thinking, he says. “Our management team, lead by Claudia Conkin, R.D., director of food and nutrition services, challenged us to think about where the industry is going. Interest in being green, recycling and sustainability, for example, has exploded in the last five years. Patient room service to all patients as well as greater interest in eating healthfully is also a priority. There are a lot more options to learn about, and it’s been exciting thinking about these new concepts and a flexible kitchen design to provide this.
"In collaboration with our Facilities Planning and Engineering Departments, we were able to strike a good balance between energy initiatives and budgets," Tallinger adds. "The kitchen and café space aligned very much with the hospital’s vision for a lean facility."
The department’s bigger concerns were durability and serviceability. And in an age of consolidation, those were big challenges. “Suppliers are consolidating into master brands,” he says. “It’s hard to keep up when you consider service needs in the future. We need reliable service agencies, locally, to service us. It’s a big consideration. Equipment is too sophisticated now for our maintenance people to work on.”
The philosophy driving design and equipment specs also changed with the expansion. “We started out as a 450-bed hospital, and 200 of those beds were in the neonatal intensive care unit,” he says. “We didn’t need a lot of fancy equipment to feed our patients. But we also feed parents and staff. With the addition of the women’s hospital and the research center, we’re adding more adult population and we’re moving from convenience food to more prepared foods. That means different equipment and kitchen space.”
The original kitchen, for example, is 4,000 sq. ft. The new maternity hospital kitchen has 16,000 sq. ft. and is able to support the planned future growth of the building and services. “We were very excited to be able to be proactive in our kitchen design, which offers flexibility and creativity for retail, patient and catering operations,” Tallinger says.
The new kitchens have more combi and high-speed ovens for patient room service. Cafeterias have more induction cookers for to-order menus. Serveries now have rotisserie equipment and carving stations. Equipment in cafeterias has been turned around to face customers, and everything has been built with flexibility in mind. Serving stations have more outlets, quick-disconnects and plumbing to accommodate future changes.
“Asian stir fry is hot right now,” Tallinger says, “but who knows what will be hot in five years?”
Wendy’s: Remember Your Roots
John Bowden, Director of Food Service Equipment & Systems
Wendy’s Co., Dublin, Ohio
Units: 6,232 United States and Canada, 336 international (as of 11/15/11)
2012 Plans: 60 U.S. and Canada new units, 60 international
Turning a battleship that has strayed even a little off course takes time, but Wendy’s, located in Dublin, Ohio, has been doing just that in a tough economic climate by returning to its roots. The chain hired a new CEO last year and has improved its performance.
“Our focus is on food quality,” says John Bowden, the chain’s director of equipment. “Dave Thomas always said our goal is not to be the biggest, just the best.”
Toward that end, the chain has made what Bowden calls “substantial changes” in its menu to improve the freshness and quality of the end product. Last year, Wendy’s improved its fries and salads, switched to a new bacon and relaunched Dave’s Hot ‘N Juicy cheeseburgers.
“We let the end result drive the method of how we get there,” Bowden says, “and equipment is certainly a piece of that equation. In an ideal world from a cost standpoint, we’d use what we have. But in the case of the new hamburger line, for example, we changed to buttered toasted buns as part of the product improvement. That meant purchasing a new vertical contact toaster.”
Factors like energy efficiency, lifecycle cost and ease of operator use all drive the equipment purchase decision, he says, but they’re only part of the equation in how to get to the end result. They may play a more important role, however, when it comes to replacement equipment.
“We’re looking at existing cooking platforms to see if we have the right pieces of equipment. Old workhorses like range/ovens and fryers—where a large part of our production volume flows, and where the biggest operational dollars are spent—will be upgraded as they need to be replaced. We’re starting to see some pent-up need happen in the system, so we’ll see more replacement purchases.”
Even when equipment lasts 10 years or more, chains the size of Wendy’s likely will replace many hundreds of major equipment pieces a year, according to Bowden. Innovation, lifecycle costs and energy efficiency were big factors in the choices the chain made when setting new specs.
Relationships with suppliers also play a more important role than ever in the purchase decision. “Manufacturers are experiencing some of the same problems we are,” Bowden says. “If we stop growing, they stop selling and then don’t have the capital for innovation. Our equipment choices have been with vendors who have managed tough times in a way that they haven’t cut back on innovation or capacity.”
The company isn’t sitting still while it reengineers sales growth based on its founding principles. Expansion plans continue both domestically and abroad. “As far as challenges go,” says Bowden, “a big one is the cost to build. If unit costs go up, then sales volume must go up too. It’s a balancing act.”
By getting back to its roots, the chain seems to be handling that just fine.
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