Operational efficiencies, green initiatives and strategies to offset economic woes were key topics of discussion at a recent roundtable that brought together eight foodservice executives from all industry segments. The event, sponsored by Colgate-Palmolive Co., was held at the Gaylord National Resort & Convention Center in National Harbor, Md., during Nation’s Restaurant News’ annual Multi-Unit Foodservice Operators Conference.
Participants were Bill Casey of HMS Host Corp., Chris Contino of Culver Franchising System Inc., Paul Hitzelberger of Utah Del Inc., Jurgen Kruger and Joanne Lauckner of Colgate-Palmolive Co., Walter McClure of the Palm Management Group, Scott Taylor of Beef ‘O’ Brady’s, Jim Valentino of Tropical Smoothie Franchise Development Corp., Lenny Valentino Jr. of Rita’s Water Ice Franchising Company LLC, and Ian Vaughn of Raising Cane’s Chicken Fingers. Jim Sullivan of
Excerpts from their conversation are published here.
SULLIVAN, NRN: What specific things has your company done to offset the current challenges in the economy and the marketplace?
VALENTINO, TROPICAL SMOOTHIE CAFE: We re-engineered our menu. In our Tropical Smoothie Cafes, we’ve got 35 different real-fruit smoothies, eight wraps, salads, sandwiches and soups. [Sandwich meat] is all pre-sliced now, so our franchisees don’t have to buy $3,000 slicers, nor do they have to spend $20 a week prepping all those meats.
On the technology side, we use Micros Systems now as we evolve away from Aloha. We’ve got about 130 stores on Micros. We brought in a new program called My Micros, which is an Internet portal so they can be sitting here and log onto their stores in Las Vegas and look at real-time sales down to the ticket, labor, the theoretical food cost.
MODERATOR: JIM SULLIVAN, columnist, Nation’s Restaurant News, and president,
PARTICIPANTS: BILL CASEY, regional vice president, operations, HMS Host Corp., Bethesda, Md.
CHRIS CONTINO, vice president, marketing, Culver Franchising System Inc., Prairie du Sac, Wis.
PAUL HITZELBERGER, president and chief executive, Utah Del Inc., Salt Lake City
JURGEN KRUGER, business development manager, Colgate-Palmolive Co.
JOANNE LAUCKNER, team leader, Commercial Customer Group, Colgate-Palmolive Co.
WALTER McCLURE, executive vice president and chief operating officer, Palm Management Group, Washington, D.C.
SCOTT TAYLOR, senior vice president, development, Beef ‘O’ Brady’s, Tampa, Fla.
JIM VALENTINO, president and chief operating officer, Tropical Smoothie Franchise Development Corp., Destin, Fla.
LENNY VALENTINO JR., president, Rita’s Water Ice Franchising Company LLC, Philadelphia
IAN VAUGHN, vice president, operations, Raising Cane’s Chicken Fingers, Baton Rouge, La.
The next piece of the technology that we’re adding is called My Inventory, which is a basic recipe that’s built into the POS system, so it puts the theoretical food cost together. You do your inventory on it as well. It calculates your actual versus your theoretical, and shows you the variance by food product. We get all the information from the headquarter office by region, by store.
CONTINO, CULVER’S: We have to increase prices not only to remain competitive but to stay in business with the rising cost of labor and food and everything else. We deal in very high-quality products. We have a fast-food restaurant look to ourselves. It’s hard to charge more than $8 for a burger, fry and a drink. So how do we do that? Just by trying to get a blended price out there. So we have things as high as $10 but as low as $1.79, which is our regular hamburger, which we haven’t played with yet as an entry point for people to get to enjoy the brand and move up after that.
McCLURE, PALM MANAGEMENT GROUP: The menu engineering is certainly the biggest tool we all have. The Palm for the first probably 80 years or close, 75 years, the menu was virtually untouchable. Then the owners started allowing a few small changes. As these economic challenges have been coming at us, they’ve opened up a little to the engineering. We’re looking at it initially as a vehicle to drive sales, to offer a more diverse and perhaps more current look to our menu. We’ve actually redesigned the menu, put a flap on and have a seasonal menu. As with many of our competitors, we put a bar menu out this year, signature cocktails. That is a great opportunity for us to increase the beverage side and offer another option.
HITZELBERGER, UTAH DEL: In the area of expenses, labor has been a huge opportunity for us. We’ve used labor matrices for years, and we zero-based it starting last November and re-looked at every quarter-hour, every half-hour and when people are coming on the shift and when they’re leaving. We were able to cut 2 percent of sales off of our labor and improve our service. Sales are up, speed of service is up, our accuracy is up, and [we] cut 2 percent off of labor, plus cut employee benefits because of payroll taxes, and workers’ compensation insurance is also impacted.
Related to inventory and ingredients…we’ve gone to three shift inventories a day and on the key items, and by doing that, it really has fine-tuned the variance.
In the area of cheese, we get these 40-pound blocks of cheddar cheese in that we grate fresh, and if you don’t have a sharp blade, that affects your yield, so now every three months we change all our blades. That’s improved our cheese variance dramatically.
TAYLOR, BEEF ‘O’ BRADY’S: We’re focused on a couple different things. We are a franchise organization. We have 260 opened franchise restaurants. We’ll open 42 this year. We hope to open 50 next year. Opening 50 restaurants, we have to have happy franchisees and also franchisees that understand the growth of the franchisor that benefits them on growing resources, purchasing and so forth.
We’ve taken a position this year with our Regional Franchise Consultants, and these are the guys who are out in the field that talk to the franchisees that touch each restaurant. We have about 230 points of contact because we have a lot of individual-owned franchises. So with 260 units and 230 franchisees, it’s a lot of folks to talk to. So we’ve tried to figure out how can we streamline their job where we’ve had them responsible for lots of reporting and paperwork and flash reporting and all this stuff.
On the franchising side, we want to open up restaurants. We’ve looked at what’s it cost to build Beef ‘O’ Brady’s, how can we improve cost, can we re-engineer or value-engineer our build-out.
VAUGHN, RAISING CANE’S CHICKEN FINGERS: One of the big things for us is we’re not allowed to mess with our menu at all. So what we have to do is take a look internally and see how we do what we’re doing better.
I would say as of now the big focus has been we’ve just recently opened a prototype, much, much smaller, much more efficient. The cool thing was that operations played a very heavy role in the design of the interior, so everything is within arm’s reach from every position. It requires fewer positions than what our other prototypes require. Where it takes 16 people to fully staff one restaurant, these new prototypes take around 12.
HITZELBERGER, UTAH DEL: We eliminated all budgets when we took over in 2001, which the financial side of the business would say is crazy. Most people compensate based on improving against budget. We eliminated budgets and said let’s improve based on being better than last year. It continues improvement. And we have enjoyed every year double-digit sales increases and 20 to 30 percent on the bottom line because our people are paid based on the absolute EBITDA bottom line and they get 19 percent of all improvement.
VALENTINO JR., RITA’S: The first perspective is corporate: Internally what we can do? Second is existing partners. The third would be our new partners coming in because people are nervous. They’re nervous with this economic climate, what are we getting into, what’s due diligence beforehand, how can we take them from A to Z? The fourth aspect, which I think is most important, we call our franchisees partners. We also call our vendors partners. How can we take the cost down together? [We’re] not going to be unfair to our vendor partners, but [we] want to understand cost. If you give us an increase, you better inform us what the aspect of that increase is.
SULLIVAN, NRN: [What are] the three biggest challenges you expect to face operationally in 2009?
VALENTINO JR., RITA’S: In our sector, we see a lot more complications. There’s a lot of systems out there that are trying to finish the meal and finish the meal with a treat, so there’s a lot more competition coming after us. How do we do that? You’re going to have to understand your business. We’ll sit down with a vendor…[and say] “I want to understand what the fiscal year is.” A lot of times they try to make certain numbers and you’ll see increases. There are a lot of different aspects that you can look at, but again, it’s different in each situation. If you have an increase, we want to understand it and we want to understand the components of it.
VALENTINO, TROPICAL SMOOTHIE CAFE: One of the biggest challenges on our plate is the rollout of our new menu. We’re re-evaluating all the smoothies. We’re going to go in and re-look at the salads. We’re going to look at the breakfast items that we offer, and we’re going to look at the kids’ menu. So the big challenge for us is we made a commitment by June 21st of 2009 to have the rest of the menu ready to rollout.
The second piece of that kind of goes with what Lenny was talking about. We’re planning on opening 50 to 70 stores next year, so we need to be working with a lot of different organizations to make sure we can comply in finding the wherewithal for all the franchisees. We opened 42 this year. We should open 70. With the banking industry in crisis, a lot of those loans got pulled.
The third piece goes back to what’s near and dear to me; it’s called taking care of your guests and hospitality.
CONTINO, CULVER’S: We’re fortunate that next year we’re planning 20, 30 restaurants. All of them secured financing for next year already, so we’re happy about that. We haven’t closed a restaurant yet in 25 years, so we’re going to try to stay there as well.
But the bigger challenges would include hiring, retention and training. People are the lifeblood of our company, and to keep them, retain them, pay them correctly, train them, it’s always going to be the biggest challenge no matter what economy we’re in.
From a food cost perspective, pricing management control. Take advantage of the tools and procedures that have been written years ago for a reason. When times were tough and we only had a few restaurants out there, what did they do best to keep going? That’s the time to do it now, whether it’s inventory control or making sure you’re making the recipes correctly; what we call re-running custard and stuff that hasn’t sold: put it back through the machine again and off it goes, so you’re not wasting anything.
Then finally from a food cost perspective, don’t skip on quality but find efficiencies where you can.
MCCLURE, PALM MANAGEMENT GROUP: No. 1 would be covers. No. 2 would be covers. No. 3 would be covers. The high-end steakhouse business continues to grow, to become saturated in every market. We have a lot of great people, we have a lot of great systems, and we run a lot of great restaurants. But there’s a lot of competition, and it’s all about how we’re going to market ourselves using our club and inside our four walls. It’s going to be next year about driving sales.
HITZELBERGER, UTAH DEL: Others have said it: Increases in costs and managing the value equation so we keep the customers and our guests coming in. Fuel surcharges and all the different things that are hitting us, we felt we can’t really pass them along to our guests. We have to figure out how to be efficient internally.
From a growth standpoint and building new restaurants, I think one of the big challenges for 2009 has already started in 2008; that is, the city planners and those departments are becoming more and more sophisticated and have higher and higher expectations. They reduce the ability to market. Signage is reduced. They take more property with setbacks anticipating future road needs. They want more design elements that are costly and affect the break-even points, and then the process is longer through the city.
The third challenge, which is especially important right now, is maximizing cash. Having cash is king. So we want to continue doing that and minimizing debt.
TAYLOR, BEEF ‘O’ BRADY’S: [First] how we manage cost while exceeding guest expectations. [Consumers] are demanding more because they’re going out less, so how do we manage and work with our franchisees to understand that you’ve got to deliver better service, you’ve got to have great shifts and you’ve got to manage your costs and just be there a little more than you were before.
The second thing is internal discipline. In a franchise system, you have to balance the entrepreneur with the franchisee because they’ve got a lot of great ideas too. How do you not squash their idea and say we know best, follow us?
Then the third point being obviously there’s financial growth of the company. SBA financing is a lifeblood for us, making sure that our restaurants are profitable, making sure that our franchisees are profitable and happy to be part of the brand.
CASEY, HMS HOST: Our three biggest challenges coming here, a real decline in airline passengers. There’ve been huge reductions anywhere from Oakland and Honolulu, over 25 percent less passengers, less customers for us.
Staffing at the airport, every year we could probably say that. We do background checks. JFK, for instance, by the time we start interviewing an associate, it takes them four weeks to get a badge to be able to work. Typically, in our industry, they’re not going to wait four weeks. They’ll go to another employer, so that’s tough.
Food prices, obviously we’re all facing that. We’re facing the highest food prices in years. We’ve tried to manage that with lower menus. Again, we’re a 110-year old company. In the history of airlines and airports, we’ve never had more than two years of declining passengers. Clearly, in 2008, there were fewer people traveling than in ‘07, and ‘09 could be the same thing. It’s really positioning ourselves so when 2010 comes around we’re ready and we’re a strong company.
VAUGHN, RAISING CANE’S CHICKEN FINGERS: For us, one of the biggest things is, overall, educating the future talent for the company. I’m not talking about people that already work for us. I’m talking about people that will be working for us in the future. We spend a lot of time in the local colleges, universities, high schools and so on. Career and restaurants don’t seem to go in the same sentence a lot of times, so what we’re trying to do is educate a lot of these students that there is a great career to be had in the restaurant industry, and we want to turn them onto the restaurant industry and let them know what is out there for them to achieve.
Also, as a part of that, finding the ownership, quality people to run the restaurants has been a very challenging thing for us as well.
The other one, of course, the continual rising cost of goods. For us, using all fresh ingredients is tough, especially fresh chicken that you get three times a week in all the restaurants. It’s also a very particular spec for us, so that’s continually going up, especially. It’s continually escalating, especially paper products.
And the last thing I think right now is customer eating habits. Customers are growing more and more to just frequently snacking and not eating larger meals. Our menu is set up in a way to where it’s a meal. It’s not really something that you can snack on, unless you get a kids’ meal.
LAUCKNER, COLGATE: I wanted to better understand from you how you’re addressing green cleaning.… Would the perception be that you’d be paying a premium for something that was environmentally friendly?
TAYLOR, BEEF ‘O’ BRADY’S: Not so much on the chemical side. I think that the costs there aren’t as dramatic. Once again, that’s the training and education on how to use chemicals in general, more is not better, conserving of water. It’s not the old days of the hose in the kitchen and spray and it’s all out the back door. Teaching folks how to use chemicals.
LAUCKNER, COLGATE: So you guys agree that it would be on-cost to being environmentally friendly?
VAUGHN, RAISING CANE’S CHICKEN FINGERS: Green savings operationally, the immediate thing you think about is packaging. It all surrounds packaging. Unless it’s told to you about chemicals, I don’t think it really comes up in conversations. On most cases, I don’t think my people realize or even anticipate understanding what it is.
HITZELBERGER, UTAH DEL: The other area we’re getting hit with is water quality compliance and testing and fines. I think of dairy products and salsas and pickle juices and that down the drain. But they’re testing carefully in a number of the cities where we’re at.
TAYLOR, BEEF ‘O’ BRADY’S: If you’re trying to mitigate impact fees, a lot of it is water usage. So it’s a lot less paper and disposables in the restaurant but you’re using more plates and washing dishes now and you become a water hog. If you go back to a little bit more of a deli basket and disposable type thing, you’re using less water so you benefit on that side, but you’ve got more garbage.
VALENTINO,TROPICAL SMOOTHIE CAFE: The cleaning part based on our reaction could be real low-hanging fruit that you could knock off right away. We all want to be socially responsible, and those other pieces are much more difficult for us to develop. If our distributor says, “I know you’re buying X, Y, Z cleaning supplies and working our green program; let me tell you what I got from these guys over here, it’s not going to cost you more than what you’re paying now, maybe less,” that becomes a no-brainer. That’s an easy check-mark to have somebody work on that piece because the other ones are much more difficult.
CONTINO, CULVER’S: Education, once again, when we got into this great thing, we actually had people come to talk to us who are environmental people. That helped us a lot in how to then get a perception of going green. In this case we took our plastic, to-go bags and made it paper, but not just paper but brown paper with recycled materials and had a recycled message on there. That says a lot to the guests. It also stressed to the team members what’s going on as far as what our commitment is. All the company vehicles are hybrids right now, so we made that switch. All our family restaurants, their paychecks are going to switch to all have to have direct deposit; no check they’re going to get anymore.
We take our old fryer oil and some of our restaurants warm up their water with it. We have water heaters that work on fryer oil. Our company vehicle, maintenance vehicle runs on fryer oil. We took it to Texas on one tank, so that was kind of cool.
We’re pushing ice cream cones versus having a dish. You can eat your package. There’s other ways to do it. I think green equals greenbacks in many people’s mind, especially an operator’s mind.
HITZELBERGER, UTAH DEL: We switched the hot-water tanks to the on-demand in all the restaurants and that was a real plus for us.
CONTINO, CULVER’S: We’re shutting down fryers at off times.
HITZELBERGER, UTAH DEL: We’re now getting paid for our oil. We used to pay to get rid of it. Now they’re paying us to take it, so that’s changed that whole industry.
VALENTINO, TROPICAL SMOOTHIE CAFE: We had one of the new sign guys bring up LEDs instead of fluorescent and neon. It’s a little more expensive up front, but you use a lot less energy.
HITZELBERGER, UTAH DEL: The repair costs are dramatic. LEDs are the only way to go. Also in lighting, and we haven’t done it yet, looking at LED lighting, that saves like 90 percent on utility costs and more effective lighting.
McCLURE, PALM MANAGEMENT GROUP: In fine dining, they think bigger. They think about the lobsters and seafood, are you buying from companies that believe in sustainability and practice it. We get all of our seafood from the North Coast in Boston, who will not claim total sustainability but are well-respected as leaders going down that path. The only problem is that we have to fly it to all our restaurants.
SULLIVAN, NRN: If you look at what Europe has experienced over the last five years, and they’ve been dealing with incredibly expensive energy grids and finding ways to be not only green from the socially acceptable point of view but from a practical point of view, saving cost, they really are—we need to learn more about what they’re doing.
KRUGER, COLGATE: What is the one most important thing, and we’ll just say one only for the time factor, that you look for in any general cleaning company or chemical manufacturer?
VALENTINO, TROPICAL SMOOTHIE CAFE: You want [education and training] to be one-stop. You want to have it simplified so it’s—I don’t want to say idiot-proof—but hard to screw up. Is there a reasonable cost involved? The training piece is the other part of that. Everything you stated is something I would be looking for.
VAUGHN, RAISING CANE’S CHICKEN FINGERS: The education side to that crewmember. [Maybe the cleaning solution dispenser] has a little stopwatch on the side of it, a time chart that if you’re cleaning a 10-foot section you run it for this long or this long. If that was integrated as part of the machinery, that would be very helpful—percent dials or what-not.
That’s the biggest dollar savings in getting them to use it 100 percent the right way. That’s the biggest thing we face.