“Operational Excellence” was the topic illuminated by a roundtable of veteran foodservice executives recently in Los Angeles.
The expert session on restaurant operations, sponsored by the Colgate-Palmolive Co., was moderated by Nation’s Restaurant News columnist Jim Sullivan, president of Sullivision.
Participating in the panel were Jose Cofino, president and chief operating officer of Adir Restaurants, a Pollo Campero franchisee; Deb Fratrik, chief operating officer of bd’s Mongolian Grill; Dave Iverson, operations director of RAM International; David Kaiser, vice president of operations for Wing Zone Franchise Corp.; Bonnie Rhinehardt, vice president for Southern operations of Hooters of America; Liz Smith, director of operations for Arby’s Restaurant Group; and Antonio Swad, founder and chief executive of Pizza Patrón. Representing Colgate-Palmolive were service and training manager Mike Wiacek and account development manager Rich Castaneda.
Below are excerpts from the proceedings.
SULLIVAN, SULLIVISION: What are the three biggest challenges that you face operationally today, and what are you doing to address them?
FRATRIK, BD’S MONGOLIAN GRILL: The first challenge is food safety. Second is the ability to find a passionate, professional and prideful workforce. The third is maintain[ing] quality food while we sustain our margins.
We have a hand sanitizer for the guest to use. It makes the consumer feel that we’re in touch with their concerns.
SULLIVAN, SULLIVISION: What about attracting passionate, professional, and a prideful workforce?
FRATRIK, BD’S MONGOLIAN GRILL: We profile our teammates that come into the restaurant, and we look for people who have a higher level of experience than what we’re actually hiring for. If you can make the job fun and motivate people in a positive way, I think you can keep your turnover down. That can be a day’s discussion in itself: How you hire the right people. But the way that our organization has profiled people with our interview guide in looking for specific personality traits, I think it’s helped. We can teach them the day-to-day skills of an operation, but we need that personality, and we need that fun, energetic profile.
SULLIVAN, SULLIVISION: The classic advice I’ve always suggested is: “You have a choice to either hire tough and manage easy, or hire easy, [and] later manage tough.”
FRATRIK, BD’S MONGOLIAN GRILL: “Hire a level above” is what we’re really trying to sell. Even someone with a multiunit supervisory background can be a general manager of a restaurant. Because many people are looking for a different quality of life, especially some of the Gen Y and Gen X applicants.
RHINEHARDT, HOOTERS OF AMERICA: Our challenges are sales in the shrinking market. Profits, of course, go along with that, [and another challenge is] the workforce.
For sales in the shrinking market, we’ve used focus groups. There’s always surprises in there. The female group we’ve asked: “What can we do to market more towards you?” And they’re all like: “No. No. We’re good. We like what you have going on. We’re just going to choose whether we go in or not. If we do, we just want to be catered to.”
Another thing that we’re looking at, especially in the South, is staff appeal. A lot of people are pushing to get out of the four walls and get into the communities and neighborhoods, which is truly important right now because Generation Y is extremely civic-minded. So they’re always looking for people who are going to do more for their communities. But I don’t think in the hospitality industry we do enough to aggressively pursue the staff that we have, to get them to stay on and grow within the company. So we’re looking more towards that and to be great to customers [than community activities].
With cost of goods, and profits, we’ve really focused on the seasonal menus and some marginal marketing. Each time we put out a product, we’re definitely looking at quality, but we also have to look at what it’s going to do to our bottom line. We have picked a test market [and] even gone as far as changing the whole look of our menu. For years we have had seafood and crab legs and oysters—it hasn’t been just chicken wings. But it’s surprising how many of our customers didn’t know that. So we really jazzed it up and put more focus to those items, trying to establish those long-term contracts with vendors and getting promotional funds for those items, and revisiting our workforce. We have a lot of great things that we offer our employees: tuition reimbursement, several programs that focus basically on hourly employees, and “Hooters’ Girl of the Year.” Each quarter an employee gets recognized. One person out of our HOA does a great job with the staff. That girl, she fits the concept. She’s an all-American girl next door, a great server, and is loved by her team. We also have it with the kitchen crew: Hooters’ Kitchen Crew of the Year. That team does great with food safety and cleanliness and gets that food out and it looks fantastic. Those guys get $10,000 and they split that amongst the kitchen.
SWAD, PIZZA PATRÓN: The workforce in my concept is predominately Hispanic, and that’s in the top of the news. I have stores that are understaffed not because I’m trying to run better labor cost [but] because I can’t find enough quality people.
We try to reach out to our employees so they see their employment as more of a safe place.
I have paid thousands of dollars to immigration lawyers just to talk to some of my people and give them counseling advice. It’s not uncommon to see one of the people who work in the restaurants want to have a lease that they’re about to sign and bring it to the office and they’ll ask one of the guys to review it. And I have smart bilingual people who work at the corporate offices. I like to see that because they are seeing their job not as just a place to get a paycheck. It’s a place they can get counseling [or] advice if they’re having a problem with a utility company or something like that.
THE PANEL
MODERATOR:
Jim Sullivan, columnist, Nation’s Restaurant News, and president, Sullivision
PARTICIPANTS:
Rich Castaneda, account development manager, Colgate-Palmolive Company
Jose Cofino, president & chief operating officer, Adir Restaurants dba Pollo Campero
Deb Fratrik, chief operating officer, bd’s Mongolian Grill
Dave Iverson, director of operations, RAM International
David Kaiser, vice president of operations, Wing Zone Franchise Corp.
Bonnie Rhinehardt, vice president of Southern operations, Hooters of America, Inc.
Liz Smith, director of operations, Arby’s Restaurant Group
Antonio Swad, founder & chief executive, Pizza Patrón
Mike Wiacek, service & training manager, Colgate-Palmolive Company
We grow our management, it seems like organically. I try to look outside of my business to hire people for managers, and they just never work out. So I find that we still have the best development people within our own organization and putting away a lot of equity for them personally as well as their employer.
The other thing that I see is occupancy costs. We’re doing a lot of leases, particularly here in Southern California.
Commodity prices, every day you read something. Flour—that’s the new thing. The wheat harvest is horrible. We’re predicting double the cost of flour in the next couple of months.
Another thing: Have you noticed how flavor profiles become more and more complex even in the lower-priced restaurants? I mean, come on, we’ve gone to McDonald’s to get a salad and it has a wonderful pack of a very complex flavor profile salad dressing that you go, “Holy cow, this is McDonald’s, and I spent, like, five bucks.” That is setting a higher and higher expectation for customers’ palates.
You mention a community. We’re redesigning our lobbies. For years people would come in and say, “Can I put this in your window? I lost my dog.” Or “We’re having a circus down at the Catholic church.” And we were like, “No. We have to have a policy, you can’t have anything in the windows. The guy who runs the company doesn’t allow it.” Finally, we said, “Why don’t we do something?” So we took the menu board down, we’re relocating it, and we put a nice community board with a cork and supplied pushpins. Now, when people want to put something up and it’s community-oriented, we’ve gone completely 180 degrees.
SULLIVAN, SULLIVISION: I’ve heard some companies now are bringing in financial experts to have small seminars with their people or one-on-one to help them understand how to manage their money. Obviously, if they get better at managing their own personal money, the basic theory is they get better at managing your goods in the restaurant as well.
IVERSON, RAM INTERNATIONAL: One of our challenges is hiring right [and] trying to get our people, our leaders especially, out on the floor, not in production so much that they tend to go into more of an observing and coaching role. Especially, it seems to be harder and harder to find mature hosts to do the job. Because they’re the first and last points of contact with the guest, we’ve put our focus on trying to prove that.
We’ve tried to hire more mature people, pay more, put in more training, renew their training.
Secondly, expenses: It’s kind of the perfect storm. Minimum wage goes up, cost of food goes up and oil prices are going up.
We’re micromanaging our costs where we can. We’ve gotten our teams to look at ways to hammer down each one of those line items. That’s an ongoing process we do annually, but this year we’ve started doing it more frequently.
We’re [also] measuring guest counts like we never have before. We’ve always measured them, but we’ve never really done much with them because we haven’t had to. But now we’re graphing them and finding out where our weaknesses are, and what we have to do to get those extra ten guests in on a Monday afternoon, or whatever. It’s all restaurant-specific. There’s no magic behind that for our company.
COFINO, ADIR RESTAURANTS: I believe that the battleground is not going to be price because there’s going to be people who are going to sell 300 pieces of chicken for a $1.97. [Regarding] product development, we’ve talked about flavor profile, and related to that is the speed with which these new products come out to the market. Fifteen years ago at Taco Bell, if in a year we put out three new products, we were high-fiving all around. Now, it’s three products a day. It seems the product life cycle has shrunk so much. It seems that the expectation for the consumer is: “What’s new? What’s new? What’s new?”
I think the battleground going forward is really going to go into service. Particularly fast casual [and] QSR. Nobody nationally is doing a good job of it.
We look at labor line not as expense line but as an investment line. We put in our systems early on to invest in our employees. Our turnover last year at crew level was roughly 40 percent, including involuntary turnover.
Early on we’re providing health benefits to our part-time employees and we pay part of the premium, 401(k), credit union.
I think as an industry, we have to learn better how to look outside of our own industry: The fact that chicken prices went up because grain went up because ethanol production was going up.
SMITH, ARBY’S RESTAURANT GROUP: The first [challenge] is obviously recruiting and right along with that comes retention. One of the solutions is to provide a clearer profile of what we’re looking for to our managers. We provide our general managers with very tactical solutions. We’ll teach them how to do on-site career fairs. We have a program that we hand them and say, “We’re going to teach you how to build your team.”
One of the things we do well is empower people to have fun in their restaurants. Certainly they have to have some guidelines, but fun might be different [at different units]. It’s amazing if you ask the kids in the restaurants to create some fun and what fun means to them. Whether it’s putting up boards or whatever, having honks vs. bell ringing and you’re talking about drive-thru excitement. You can get your customers involved in that as well. The second part to that I believe is creating a flexible work schedule, especially in the QSR environment, where a large percentage of your employees are from 16 to 18. Their world is operating in a whole different planet than ours. So we have to be smart enough to give them flexible hours and to work with them and to understand where they are coming from.
KAISER, WING ZONE FRANCHISE CORP: I’m coming from a little different spin because we’re dealing with mostly franchisees. For us, some of the challenges are franchisees that are opening their second, third, or fourth location and getting them to make that paradigm shift. In some cases they forget that critical step. They may not be the general manager of one of their stores, but they do need to be the district manager or the regional manager to make sure that role is being taken care of in the stores.
Another challenge is having franchisees understand when it’s time to not pull from within to bring up the next shift supervisor. Sometimes you have to go outside, you’ve depleted your talent pool, and you don’t have somebody who is at the level of shift management right now. But knowing when it’s okay to go outside [and] sprinkle some talent from outside into your business is a very important thing.
We’re in the process of rolling out a graduate school: When a franchisee comes to Wing Zone and says they want to open a second store, they’re going to come back to Atlanta and they are going to go through a three-day training program on the understanding of how your work chart looks, understanding your finances of multiple units, and how that all fits in. Also understanding when you go from one to two, you’re not necessarily going to double your profits. You might make 25 [percent] to 30 percent more profit.
CASTANEDA, COLGATE-PALMOLIVE CO.: You said 60 percent of QSR is drive-thru. I’m a big drive-thru fan. I’m generation next, I live alone. I think one of the things that misses, there’s no facial interaction. One suggestion would be the [menu] board comes up and says some items that you ordered.
FRATRIK, BD’S MONGOLIAN GRILL: Confirmation board.
CASTANEDA, COLGATE-PALMOLIVE CO.: But maybe in the little corner you can see how another person is walking around in the back-of-the-house, but have a visual of who is serving you, or have a correlation of face-to-face service of some kind.
FRATRIK, BD’S MONGOLIAN GRILL: There’s a test in a McDonald’s in Detroit. You don’t order to the menu board. They have the menu boards there, but then you go to the window and there is an individual there who takes your order, which is exactly what you are talking about.
SULLIVAN, SULLIVISION: On the other hand, there is a McDonald’s in Colorado Springs [Colo.] where they are testing remote ordering. When you pull up through the double drive-thru and you give your order, it’s actually being taken by someone in Phoenix, 800 miles away, who is fluent in English and Spanish. They find their initial reports on sales have gone up 8 percent for addons that way.
The [next] question is: Is the customer different today than they were five years ago?
KAISER, WING ZONE FRANCHISE CORP: Absolutely. Think about all the different ways that you need to provide service—from ATM cards, from check cards and other forms of payment—to being able to order online or gift cards. There’s all kinds of new opportunities for the younger generation that’s just natural for them. For us it’s a whole learning curve. I remember the first time I bought something online and gave my credit card information. That’s like, trauma, right? But for these kids it’s second nature.
And you refer to how they multitask and their attention span: You have a short window to grab the customer’s attention and get them to look at your sales piece or your marketing information.
SWAD, PIZZA PATRÓN: I think people are more brand-sensitive or brand-oriented than they’ve ever been. So even if you’re a smaller company, I think you have to think in terms of developing your brand.
You can co-brand with [something] seemingly unrelated. Quick story: We started selling phone cards in our pizza store. We sell phone cards that are good to talk only to Mexico.
I’m trying to differentiate my restaurant from Papa John’s or Domino’s, and my customers are predominantly Hispanic and are huge phone card consumers. We branded the Patrón phone card, and we’re selling that in our pizza stores.
SMITH, ARBY’S RESTAURANT GROUP: The younger generation of customers want a lot of alternatives. If we don’t step up, we’re going to bore them and lose them.
Then I look at the customer my age that’s thinking about health. Those are two different customers.
FRATRIK, BD’S MONGOLIAN GRILL: We’re known as a very healthy place to eat. The No. 1 item on the menu, though, is tempura shrimp.
We have fresh spring rolls that are, like, 150 calories. We have edamame hummus made out of fat-free yogurt and garlic. It’s just wonderful, and it’s very low in fat, but they order the tempura shrimp.
But they want the option to eat healthy if they want to. The other trend is, they want to be in control of their dining experience. They like it to be interactive. That is such a big trend of Gen Y but surprisingly it’s a big trend of boomers, as well. I can add one other thing: “to-go.”
RHINEHARDT, HOOTERS OF AMERICA: We just did a focus group, and the 18- to 25-year old [males] said that most restaurant chains… copy each other. They are definitely looking for somebody that’s going to come out with something that not everybody else has.
SULLIVAN, SULLIVISION: I read in USA Today recently that the average [office worker’s] lunch hour is 31 minutes. And some 58 percent of those people bring the lunch to eat back at their desk or in the car on the way back. What do the customers want service-wise today?
SWAD, PIZZA PATRÓN: Two years ago, all our pizzas were custom-made. If you wanted a pizza you would have to phone ahead, wait, we’ll make it, this came from an old belief that I guess I had: Everybody in their mind has the perfect pizza.
[Then] we came [up] with a program called “pizza lista,” which is Spanish for “ready.” All “pizza listas” are just pepperoni pizzas, it’s similar to Little Caesars’ program. I thought this would help, but [that] people were still going to want custom-made pizzas. You know what’s amazing, people make their choices based on, “What’s ready right now?” In some of our stores today—and it’s scary because 24 months ago this didn’t even exist in our company—some of are stores are doing 70 percent of their volume “lista.” People… are going to modify their expectations based on what’s ready right now.
SULLIVAN, SULLIVISION: It used to be “what kind of food do we want?” Now, it’s “how much time do we have?”
COFINO, ADIR RESTAURANTS: I think we’ve dumbed down service. I go to the airport, now, to the self-service check-in. Why? Because I can control the whole thing. I don’t have to depend on whether the person behind the counter is properly trained. ATMs haven’t been inside of a bank in so long, it’s a statement, I think, on the level of service. In the restaurant business, we have to be careful of if we’re moving that same direction with ordering kiosks, and how many other ways can we take away that human interaction?
I think to a large degree, particularly in QSR, we’ve done it to ourselves. And I still think that service is a key competitive area. As I tell my folks, the good news is there’s not a lot of people doing it well. Is great service the absence of mistakes? Hell no. That’s a starting point, and it’s not that hard to give better service if you have the right people and you train and support them.
SULLIVAN, SULLIVISION: What challenges are you seeing or anticipating for training and developing the new generation of employees?
SMITH, ARBY’S RESTAURANT GROUP: The biggest challenge is to change with them and not be afraid to change, and to be flexible. They are so used to so many options and alternatives, and if we’re not careful, we can create a regimented environment that they’re not comfortable in. It ties into retention and turnover, and if we’re not careful we’ll continue to add to those turnover costs.
One of the things that has not been said is defining their development path. I don’t think we do a very good job of that in the industry. I know I started when I was in high school, and I didn’t know what a lucrative opportunity I had in the restaurant industry. Where else can you start out as a dishwasher and be a founder and CEO of your own company?
SWAD, PIZZA PATRÓN: I’m in a situation where most of our people are Hispanic, and they have a different kind of challenge. I don’t know that we do a very good job on developing within. Sometimes you keep looking at people and you want to will them to be better communicators or have better organizational skills, but they just don’t. I’ve had such sour luck trying to bring people from outside the company because what they don’t have [is] the [company’s] culture.
But I can take a kid who’s been with me since he was 16 and he’s 21 now, married with first kid. He’s not the sharpest kid, but he has the company culture down pat.
A lot of our time and energy is spent on teaching English. And this is a great opportunity to stop and listen to your comments. If we can combine training English with training tasks, it would be an extra bonus step.
One last thing: A lot of our kids are now business owners. We put a fund together to make loans to these folks who have been with us for a long time. And I personally have a lot of money loaned out, but it’s a great risk for me for people who have been with me five, six, seven years as kids and they’re young adults now. They have everything it takes in the pizza business, but they have no money. I have seven or eight stores right now that are owned by former employees. So you talk about seeing the path, that word spreads fast.
IVERSON, RAM INTERNATIONAL: We also have a significant number of Hispanic employees who are entering in leadership roles more so than ever before. I don’t know if it’s generations coming up through the workforce or their desire to take on more responsibility and do more, I don’t know what it is.
SULLIVAN, SULLIVISION: Language skills will come into play there as well. It shouldn’t always be one way. Let’s teach our Hispanic employees English, but also our Anglo managers Spanish.
RHINEHARDT, HOOTERS OF AMERICA: We actually have that. It was from Florida where our kitchens were mostly college students from Atlanta, where it was predominantly Hispanic. I know that I struggled a lot, and our company came out with a book that said key words with Spanish and English on both sides. That definitely helped.
FRATRIK, BD’S MONGOLIAN GRILL: The younger people today are computer-savvy at a level that anyone over 40 can’t imagine. As a result of that, with the text messaging, the chat rooms and everything else, we find that their verbal skills, their ability to communicate, their ability to deal with conflict or to give direct feedback, is really not at the level that we need to operate and handle a guest complaint, or handle a conflict between someone who works in the kitchen and someone who works in the dining room, or communicate a sense of urgency of getting a party seated that somehow got missed in the queue and has been waiting far too long.
As a result of how young people multitask today, they have a very short attention span compared to most of us at this age. You have to give them things in sound bites. It has to be, “here’s the video, here’s five minutes, here’s the book, here’s three minutes, and now we’re going to practice for three minutes.” Then you have to be on something else. It can’t be just an hour of classroom, or we’re going to lose everybody.
I also think that being very much in tune to quality of life, we just started a program for full-time [managers who] have worked for us. It’s a part-time manager position. We have a really good manager and assistant general manager who just had her second baby, having a terrible time balancing home life. We structured this program as a 30-hour a week part-time manager.
I don’t envision that we will hire people as part-time managers, but to accommodate those who have needs that we can do this for a year or two, because we don’t want to lose them. You have to retain good talent. If we can’t find a way to take care of somebody of that quality who is loyal to the brand, they’re going to go someplace else, and I don’t want that to happen.