The year ahead promises to be a difficult one, as operating costs continue to rise — think health care, commodities, labor, taxes — and consumer spending habits still remain unclear, with spending increases one month and cutbacks the next.
Restaurant securities analyst Bob Derrington, a managing director at Northcoast Research, may have summed up the pending hurdles of 2013 best, or at least most colorfully, evoking the best-selling book Fifty Shades of Grey.
“Fears of pain and anguish. Handcuffs. Shackles. Bondage. While those terms may closely describe the action in one of the hottest reads in suburbia … it also describes the views of an increasing number of restaurant industry operators who face, potentially, a more daunting future entering the 2013 New Year,” Derrington wrote in a research note last month.
“From our view,” he continued, “2013 appears to be shaping up to be one of the industry’s more challenging years since we aligned ourselves with it over 30 years ago.”
Not all hope is lost, however. Dining out, carrying out or driving thru has become such a part of American life that there will always be pockets of opportunity for the savvy restaurant operator. In all challenging times there are people, businesses and brands that persevere and even inspire. In the restaurant industry there are many of them, as both upstarts and veterans alike learn to capitalize on new trends — ethnic flavors, millennial dining habits, digital ordering, social media marketing — to drive consumer brand loyalty and spending.
Leadership is always the driving force behind successful brands, and Nation’s Restaurant News has selected 10 executives to watch as 2013 unfolds.
CEO, AFC Enterprises Inc./Popeyes Louisiana Kitchen
An NRN Golden Chain award winner in 2012, Bachelder’s pedigree is hard to rival, with senior roles at KFC, Domino’s Pizza, RJR Nabisco and Procter & Gamble. Since taking the helm at AFC Enterprises in 2007, Bachelder has propelled the 2,060-unit Popeyes quick-service chain to a string of positive same-store sales results, improved operations and customer satisfaction, and more brand sizzle than the chain had seen in some time.
But what makes Bachelder one to watch in 2013 is her increasing role as an industry advocate, through her efforts with ProStart, the Women’s Foodservice Forum and a personal mentorship mission anchored by her new blog, Purpose of Leadership. There, Bachelder says, she wants to help develop great leaders. Even a quick review of the blog makes it abundantly clear that mentoring and leadership are passions of Bachelder’s, and ones she’s looking to use for the betterment of the restaurant industry.
CEO, Ignite Restaurant Group Inc.
All eyes, especially those on Wall Street, are on this newly public company, which owns 129 Joe’s Crab Shack restaurants and 16 Brick House Tavern + Tap restaurants. After an $83.8 million initial public offering in May 2012, Ignite admitted in July it had to restate financial reports because of accounting irregularities — a move that hurt its stock and no doubt was a distraction for management.
“Stumbling out of the IPO gate with a financial restatement and softening [same-store sales], investors are looking to see whether management can quickly return to sustainable … growth,” said Chris O’Cull, senior restaurant analyst at KeyBanc Capital Markets Inc.
Blanchette has recently shored up Ignite’s senior management team. New hires include Michael Dixon as chief financial officer, and Jim Doak as vice president of menu innovation and corporate executive . Dixon has worked in roles at Pinkberry and The Cheesecake Factory, while Doak hails from Culver’s and has held positions at Applebee’s and Metromedia Restaurant Group.
President, Cinnabon Inc.
A media darling and a social media powerhouse, Cole had a big 2012, with a star turn on Undercover Boss and an uncanny ability to respond to nearly every customer shout-out on Twitter.
At the helm of the 1,000-unit Cinnabon chain, owned by FOCUS Brands, Cole has orchestrated a larger beverage line, new frosting flavors and a licensing deal with Burger King that brings the Minibon to the more than 7,000 U.S.-based Burger King restaurants. Cinnabon celebrated its 1,000 bakery opening in December, and has plans to grow with 200 new domestic and international openings in 2013. Looking overseas, the chain has opened or plans to open locations in new markets including Libya, Nicaragua, Iraq and Ukraine, and has made major efforts in Russia.
Beyond Cole’s efforts at Cinnabon she has launched an initiative, Changers of Commerce, to encourage businesses to not only create profits, but also create connections with causes or communities they serve. “We are where Main Street meets Wall Street,” she has said. “We are perfectly poised to practice an evolved version of capitalism where we are a visible investor in the success of the community.”
CEO, Sbarro Inc.
Known as the turnaround artist behind Breugger’s Bagels and part orchestrator of the chain’s private equity purchase and sale — one of the most successful private-equity deals in the industry — Greco joined the 1,013-unit Sbarro in February 2012.
The quick-service Italian brand had just exited from a Chapter 11 bankruptcy restructuring and now is looking to retool with a refreshed menu, refurbished locations and a return to growth. The new menu includes a Neapolitan-style pizza, which tested well last summer and fall, and a switch to made-to-order pastas, which required new equipment and ingredients. Sbarro is also looking into new salads, desserts and handheld menu options that would fit well into its shopping mall operating environment.
Sbarro is also looking to leave its quick-service roots and make its way into the popular fast-casual arena. As Greco told Nation’s Restaurant News in April 2012: “The vision is to be the preeminent fast-casual Italian brand worldwide. We think it is a space that fits Sbarro well and one which nobody of any size has yet claimed. And we think it is one we can own in a relatively short period of time.”
CEO, California Pizza Kitchen Inc.
Hart took over for California Pizza Kitchen founders Rick Rosenfield and Larry Flax in September 2011, a tough time for the casual-dining chain. CPK had posted same-store sales declines of 6.6 percent in 2009 and 2.4 percent in 2010 before the chain was acquired in July 2011 by Golden Gate Capital for $470 million.
Now private, CPK has been quietly retooling. Tactics to shore up sales have included new pizza ingredients — by midyear in 2013, for example, all restaurants within the 266-unit chain will return to hand-tossed dough rather than using a dough press. Additional menu changes include a shift toward more innovative, seasonal and healthful dishes. At the restaurants, consumers will see changes in the form of pizza ovens that are front and center and a pizza bar that allows customers to see ingredients.
Securities analyst Conrad Lyon of B. Riley & Co. said Hart has the opportunity to succeed. “It could be a situation where he could really look like a hero if he can get customers to return,” he said.
Hart himself outlined his vision to Nation’s Restaurant News in December: “As we bring together the new products, with higher execution levels [and] the hospitality piece … we’ll combine all those things as we start to tell our story in 2013. We hope (lapsed customers) will come back and say, ‘Wow, this place is hip and cool.’”
Rosalyn "Roz" Mallet
President and CEO, PhaseNext Hospitality; National Restaurant Association Chair (2012)
Finishing her term as chair of the National Restaurant Association does not mean Mallet will be any less visible or active in the restaurant industry. As health care, immigration, tax reform and even swipe fees continue to affect the business of running a restaurant, Mallet will be working with politicians, association and business leaders to make positive change.
Mallet’s passion for the restaurant industry — which was build with stints at Caribou Coffee, Applebee’s, T.G.I. Friday’s and La Madeleine French Bakery and Café — cannot be overstated. In November, just following the Presidential Election, she discussed top priorities for foodservice.
“Our country needs to move forward,” she said. “We need to make decisions that will help us open restaurants … but we can’t keep waiting around for politicians; we need to pressure them.”
In addition, Mallet’s PhaseNext Hospitality, a franchise operating company, is set to continue to grow with opportunities in the nontraditional sector, with brands including Buffalo Wild Wings, Corner Bakery Café, Freshii and Smashburger. PhaseNext currently operates a Buffalo Wild Wings restaurant and a Smashburger location in Freedom Crossing in Fort Bliss, Texas, one of the largest military installations in the United States.
CEO, Zoës Kitchen
Often cited as a concept to watch, even by fellow “Exec to Watch” Cheryl Bachelder, Zoës Kitchen tallies 75 restaurants and operates within that sweet spot of fast-casual brands that focus on ethnic-inspired menus.
Founded in 1995 by Zoë Cassimus, a woman of Greek descent who wanted to share her homeland’s cuisine, the chain was purchased in 2007 by Brentwood Associates, a Los Angeles-based private-equity firm. Its current chairman, Greg Dollarhyde, also invested in the concept. Zoës now boasts a full Mediterranean-inspired menu.
Miles joined Zoës in 2009 as executive vice president of operations, was promoted to president and COO in 2011, and then named chief executive last month. He hails from such concepts as La Madeleine French Bakery and Café, Baja Fresh Mexican Grill and Pollo Campero. As chief executive, Miles may be at the helm during Zoës' most formative growth years. The chain is looking at heightened corporate growth efforts and nontraditional growth opportunities — and as 2013 marks the sixth year under private equity ownership, it could also be looking at a deal, whether through a merger or an initial public offering. At last year’s annual ICR Xchange, which is Wall Street’s premier investment conference for the restaurant industry, Zoës management team presented to a packed house.
CEO, Heartland Food Corp.
Having purchased 161 Burger King restaurants during the past 20 months, Heartland Food Corp. is now the second-largest Burger King franchisee, operating a total of 415 locations across eight U.S. states and Canada.
Its chief executive, Ondrula, has spoken of efforts to complete the “Heartlandization” of acquired units, which aims to improve employee morale and build operational efficiencies with new systems and software, labor scheduling tools and the quick completion of any needed repairs or maintenance.
It’s an interesting time to be a franchisee, especially one at Burger King. Not only do macroeconomic pressures loom, most of which affect the operating franchisee more than the parent franchisor, but Burger King itself is in the midst of a turnaround. Heavy efforts surrounding the chain’s menu and marketing have begun to pay off. Many of the menu items introduced in last April’s menu overhaul, including sandwich wraps, soft-serve ice cream and salads, continued to sell well, as did the more premium limited-time barbecue and global same-store sales result rose 1.4 percent, just as its largest rival, McDonald’s, had posted its worst quarterly sales growth result in nearly nine years.offerings that ran during the summer. Burger King’s latest-quarter
CEO, Brinker International Inc.
Like G.J. Hart at California Pizza Kitchen, Roberts is stepping into large shoes, replacing Doug Brooks as chief executive at Brinker, the parent to Chili’s Grill & Bar and Maggiano’s Little Italy.
Roberts also has the distinction of being one of two new chief executives in casual dining that came up through marketing, the other being James J. “JJ” Buettgen at Ruby Tuesday Inc. The value placed on marketing is evident in casual dining since price, message, value and positioning are more important than ever as brands look to take share from within a crowded segment.
Roberts recently said Chili’s, which has been struggling, would stay the course with its customer-facing value proposition built around 2 for $20 at dinner and Lunch Combos. “We’re sticking with our strategies, and value has always been part of it at Chili’s,” he said this past fall. “We continue to outperform the category, and we think we’ll continue to take share, but it’s a softer segment than we’d seen this summer.”
Brinker’s system includes 1,540 Chili’s, 45 Maggiano’s and a minority interest in Romano’s Macaroni Grill.
President and CEO, McDonald’s Corp.
Our final pick for the 2013 executives to watch list stepped into the role of chief executive of the largest restaurant company in the world, McDonald’s Corp., last July. Replacing Jim Skinner, who had worked at McDonald’s for 41 years and had served as chief executive since 2004, Thompson takes the helm at a rocky time.
McDonald’s faltered for the first time in years this winter, when its U.S. division posted its first monthly same-store sales decrease in nine years, leading to a stock sell-off and making investors and analysts wary of the restaurant sector’s health in this unsteady economy. Thompson responded swiftly by replacing McDonald’s USA president Jan Fields in November, and also by posting a return to positive same-store sales that same month. Still, the year ahead may be tough for the chain, as same-store sales comparisons to a very solid 2012 could prove daunting.
But Thompson is no stranger to the brand nor its sales cycles and has promised to stay the course using McDonald’s ‘Plan to Win’ to focus on menu, marketing and unit-level execution. Heading into 2013, McDonald’s, which operates or franchises more than 34,000 restaurants worldwide, plans on having a faster and more prolific pipeline of new products than it did in 2012, and to heavily market both value pricing and premium products like the new Chicken Bacon Onion sandwich.
Three bonus picks for 2013:
Adding three more picks to the group of 10 — a perfect 13 for 2013 — Nation’s Restaurant News looked not just at executives, but the companies making waves in the year ahead. Wall Street is high on Starbucks, menu trend watchers can’t get enough of Taco Bell’s innovation, and brands from overseas, like 7-Eleven, will continue to target the United States as a growth market. Be sure to keep those brands, and their executive leadership, on your watch list for the New Year.
Wall Street’s Pick: Howard Schultz, CEO, Starbucks Corp.
Menu Watchers’ Pick: Brian Niccol, chief marketing and innovation officer, Taco Bell
International Pick: Joe DePinto, CEO, 7-Eleven
Correction: An earlier version of this story incorrectly totaled the chain’s unit count. Zoës has 75 restaurant locations. The story also misstated its growth strategy. Zoes is looking to grow with company-owned units.