By Sarah E. Needleman

Two closely watched disputes now playing out in the courts are shining a spotlight on tensions between franchise owners and management. Read more

Ignite Restaurant Group looks for bonanza in acquisition of Romano’s Macaroni Grill

Ignite Restaurant Group’s announcement in February that it agreed to acquire Romano’s Macaroni Grill from Golden Gate Capital, including its management and investors, raised some eyebrows. Read more

By Mark Brandau

Thu, 2013-09-05 15:10

McDonald’s Corp.’s test of a “Dollar Menu & More” offering poses a new value proposition to guests, but its effect on owners-operators’ ability to operate their kitchens or grow profitability is far less clear, two franchise consultants said. Read more

By Alan J Liddle

Mon, 2013-08-19 16:22

In a business where differentiation is key to success, strong positioning is driving the momentum of The Next 20 -a group of restaurant chains among which some are poised to crack into the ranks of Nation’s Restaurant News’ Top 200 by virtue of their sales volumes. Read more

By Mark Brandau

August 9, 2013

Officials from McDonald’s Corp. pushed back against reports of mutiny among its owners-operators this week after public comments from McDonald’s franchisees revealed ongoing discussions with the franchisor over its rent structure, value strategy and remodeling program. Read more

In the spring of 2010, McDonald’s quietly began pushing more franchisees to remodel units, providing them with additional incentives to accelerate the chain’s efforts to rebuild each of its locations. It was a bold move at the time, particularly given its already massive lead over its fast-food competitors. Read more

By Mark Brandau

Tuesday, 2014-01-28 14:38

McDonald’s, Pizza Hut, Domino’s Pizza and KFC are evolving elements of their service to defend market share. Read more

By Telis Demos, July 28, 2014

Shares of Mexican restaurant chain El Pollo Loco Holdings Inc. flew the coop after its initial public offering Thursday, jumping 60% in first-day trading. Read more

Posted Aug 5, 2015 at 12:01 AM
Updated Aug 6, 2015 at 5:15 AM

Wendy’s is taking a look at the bottom of its menu to drive
higher returns. The Dublin-based burger chain beat analyst
estimates of second-quarter revenue, and net income rose
year-over-year. However, its same-store sales, which rose 2.2
percent, lag those of competitors.

Wendy’s is taking a look at the bottom of its menu to drive higher returns.
The Dublin-based burger chain beat analyst estimates of second-quarter revenue, and
net income rose year-over-year. However, its same-store sales, which rose 2.2 percent,
lag those of competitors.

The company believes it lost opportunities to juice its sales in the quarter because of
weakness in its value menu, CEO Emil Brolick said. He told analysts during a
conference call on Wednesday that the chain’s “Right Price, Right Size” value offerings
are not good enough.

Analysts asked about the changes and how they would add to the bottom line. Michael
Gallo of CL King & Associates wanted to know how Brolick plans to make Wendy’s
value menu relevant again.

“We are clearly seeing a shift” away from individual low-priced items to meals, Brolick
said. ” The consumer today is looking for more relevant bundling.”

Presto. Wendy’s is now testing value bundles in the $4 to $6 range, and Brolick said he
hopes to see better results from the value menu by the end of the year.

John Gordon, principal of Pacific Management Consulting Group and a food-service
consultant and analyst, thinks tweaking the value menu is more window dressing than
profit driver.

Wendy’s reported better profit margins for its restaurants and increased its annual
outlook for restaurant margins as well.

The fatter margins are thanks to easing beef and pork prices but also strong limited time
offerings, which carry premium prices.

“You know why the margins are better, right?” Gordon said. “The higher-priced items.”
Gordon thinks Wendy’s needs a better story for how it will improve its same-store
sales figures. Burger King reported a 7 percent jump in U.S. same-store sales in the
second quarter.

Wendy’s booked $489.5 million in revenue in the quarter, down from $506 million a year earlier. That’s largely because the company owned 141 fewer restaurants this year. Net income rose to $40.2 million from $29 million, thanks to the proceeds from the sale of Wendy’s bakery in Zanesville.

The company also is progressing toward the sale of 560 stores, which should net $400 million to $475 million, said Todd Penegor, Wendy’s chief financial officer.

Wall Street shrugged at the company’s results. Wendy’s stock fell 18 cents, or 1.75 percent, to close at $10.11 on Wednesday.

jmalone@dispatch.com

By Katherine P. Harvey (/staff/katherine­poythress/) 3:35 p.m. Sept. 24, 2014

Updated 11:06 a.m. Sept. 29, 2014

San Diego ­based fish taco chain Rubio’s (http://www.rubios.com/) is freshening up its brand, its menu and its stores to better embody its coastal roots, the company announced this week.

The fast­ casual restaurant chain, which began selling fish tacos at its first store on Mission Bay in 1983, is dropping “Fresh Mexican Grill” from its logo and replacing it with “Coastal Grill.”

It’s also redesigning 60 of its Southern California stores with more modern elements reminiscent of the beach.
Senior Vice President of Marketing Karin Silk said the changes are an effort to distinguish Rubio’s from other fast­casual Mexican restaurants like Chipotle (http://www.chipotle.com/en­US/default.aspx?type=default) and Jack in the Box’s Qdoba (http://www.qdoba.com/). Rubio’s is setting itself apart, she said, by putting a greater emphasis on seafood.

The company has added several grilled seafood items to the menu over the last two years, including a salmon taco, mahi burrito, shrimp taco, and an array of grilled seafoods that can be added onto the restaurant’s salads and bowls. The grilled items tend to be a little pricier than their beer ­battered counterparts, Silk said, but the farmed tilapia dishes have a more approachable price point.

“As we evolved our menu, we began to feel that the name ‘Fresh Mexican Grill’ didn’t really fit anymore,” Silk said. “We began to really separate ourselves from the other competitors out there.”

The new menu demanded a new, modernized look for Rubio’s, which has never overhauled the design for its full chain before, she said.

The company’s Carmel Mountain Ranch restaurant test marketed the new look, which includes natural wood, cobalt, green, indigo and sand colors throughout, and blue tiles showcasing the chain’s salsa bar.

The redesign is also expected to hint at the company’s involvement in seafood sustainability and beach cleanups
(http://www.utsandiego.com/news/2014/may/07/rubios­to­hold­third­annual­coastfest/), with wall panels depicting the restaurant’s history and artwork detailing the brand’s recipes and ingredients.

Restaurant analyst John Gordon, owner of Pacific Management Consulting Group in San Diego, said the rebrand and redesign are both good things for Rubio’s, which doesn’t have many direct competitors.

“The physical refresh is very important,” Gordon said. “Anything that has a customer­facing area just needs a new look periodically.

You’ve just got to do it because people are attracted to that and don’t want to just see the same old, same old all the time.”
Placing greater emphasis on grilled foods is smart, he added, because more consumers are opting for them as a healthieralternative to fried items.

Still, the chain needs to consider more customizable menu options, Gordon said, if it’s going to continue to compete with other fast casual concepts.

Rubio’s Senior Vice President of Real Estate Greg Semos said the response to the changes at the test store was “overwhelmingly positive,” and sales improved noticeably.

Rubio’s operates almost 200 stores in California, Arizona, Colorado, Nevada and Utah. The company this year topped the list of Mexican chains in Consumer Reports’ latest survey, and came in second behind Chipotle on the publication’s burrito ranking.

Note: This story has been updated to clarify the fact that Ralph Rubio did not invent the fish taco, but began selling it in 1983.

© Copyright 2015 The San Diego Union­Tribune, LLC. An MLIM LLC Company. All rights reserved.

Published: 2014.04.18 02:07 PM

Could the battle between Darden Restaurants and its activist shareholders end up with the big casual dining operator owned by a consortium of private equity groups?

We have no information that this will happen. But it’s definitely feasible.

Darden is a big company. Its market cap is about $6.4 billion. A buyout would cost the acquirer a premium on that. At 20 percent, that would make Darden worth $7.7 billion. At 33 percent, that would be about $8.5 billion. The total value would be even higher, given that Darden has about $2.7 billion in total debt.

Either number would make Darden, by far, the costliest restaurant buyout in history, easily besting the $4.2 billion acquisition of Burger King by 3G Capital. Even if Darden succeeds in getting rid of Red Lobster before selling, it would still be the biggest restaurant acquisition.

The restaurant consultant John Gordon, in fact, believes that Darden could be pushing hard its Red Lobster divestiture largely to make itself prettier to a potential private equity buyer. By selling or spinning off Red Lobster, Darden could get rid of a good portion of its debt while improving margins and shrinking the company size to make it an easier pill for a buyer to swallow. And the buyer wouldn’t have to worry about fixing Red Lobster.

To see why Darden could be a buyout candidate, just look at the recommendations from the activist shareholders pushing major changes at the Orlando-based company. Many of the issues that Starboard Value and Barington Capital are pushing are the same types of issues that lure private equity buyers.

For one thing, there is the real estate. Right now, a huge portion of Darden’s value is locked up in real estate–which Starboard estimates to be worth about $4 billion, meaning nearly two-thirds of Darden’s market cap is real estate based. Even without Red Lobster, the company has substantial real estate holdings that would likely be monetized once a new buyer comes in.

Another issue is the number of brands that Darden operates, eight overall. One brand, Yard House, could be spun off in an IPO–remember, that chain had been considered a candidate for the public markets before Darden scooped it up for a high multiple.

Ultimately, the rest of that brands could be broken apart in some form, too. One of the issues Darden has in separating its flagship, Olive Garden, from the rest of the company is a belief that its high-growth Specialty Restaurant Group couldn’t survive on its own without a lot of debt. Even then, however, a private equity buyer could wait until that group was more able to stand on its own.

Darden has other financial levers that would make it attractive to a buyer. Its high SG&A spending, for one thing. In addition, though Darden has started franchising its flagship brands internationally, that remains an untapped market that could well lure a buyer into paying a higher price for the company. One of the reasons 3G Capital bought Burger King was its belief that the chain could grow substantially in foreign markets.

As I said, all of this is pure speculation on my part. But there are plenty of private equity groups with the wherewithal to make a run at a company like Darden. Bain Capital, which had been involved with three of the largest restaurant buyouts in history including Domino’s, Dunkin’ Brands and the previous Burger King buyout, just raised $7.3 billion for a buyout fund. That’s nearly enough to buy Darden.

July 25, 2014 | 4:01am

March 14, 2014 | 3:09pm

It’s hard to profit from selling toasted submarine sandwiches when they’re weighed down with so much debt.

The 33-year-old Quiznos sandwich chain filed for Chapter 11 reorganization on Friday, a move that will result in Wes Edens’ Fortress Investment Group owning the largest stake in the 2,100-unit chain, The Post has learned.

By filing, the Denver-based company — credited with kicking off the toasted submarine craze — is able to cut its debt by $400 million, or by two-thirds.

Big lenders, including Fortress, Howard Marks’ Oaktree Capital and Michael Dell’s MSD Capital, are hammering out a debt-restructuring deal for when they take control of the company, sources said.

Under the tentative plan, senior lenders will get 70 percent of Quiznos while junior debt holders will get the rest, according to a source with direct knowledge of the situation.

Edens will become the third large private equity or hedge fund titan to try to grow the troubled chain.

CCMP Capital, JPMorgan’s former private equity firm, invested in 2006; Marc Lasry’s Avenue Capital, in 2012. Both failed.

“This is a case of really bad due diligence,” restaurant consultant John Gordon told The Post. “The buyers had overconfidence with the franchise model. They had just an implicit belief that a franchise model is flawless.”

With the average Quiznos franchisee losing money, the new owners are considering reducing the price of goods they sell their franchisees to help them regain their financial footing, sources said.

Fortress, which holds senior and subordinated debt, stands to get 30 percent to 40 percent ownership in the chain. It also owns a minority equity position in Quiznos, but that will be wiped out in the restructuring.

Oaktree is angling for a roughly 30 percent stake as part of the debt-to-equity swap.

MSD and Caspian Capital Advisors are discussing smaller stakes, sources said.

Avenue, Quiznos’ controlling shareholder, will see its equity wiped out in bankruptcy. The hedge fund, which also holds junior debt, would see its more than 70 percent stake shrink to less than 10 percent under the proposed deal, sources said.

Lasry’s Avenue gained control of Quiznos through an earlier out-of-court debt restructuring in 2012, investing $150 million of equity.

The still-evolving plan would need to be approved by the bankruptcy judge. Creditors aim to exit bankruptcy within 100 days.

The Post first reported Feb. 24 that senior lenders were within weeks of pushing the chain into bankruptcy.

In addition to having its debt cut to $225 million, Quiznos would not have to pay interest on that money for 18 months, although interest will accumulate, a source said.

All but seven Quiznos locations are franchises, and they are not involved in, or affected by, the filing.

By Carolyn Assa

My morning workout is one of the few things I
do for myself each day. The other is stopping
at Dunkin’ Donuts for a healthy, low-calorie,
breakfast on the way home,” says Sherri Horlink. The
slender blonde, soccer mom from Natick, Massachusetts,
enjoys an egg-white veggie flat bread sandwich when her
busy schedule allows time for it.

Horlink is exactly the kind of customer Dunkin’ Donuts
is courting—not just in New England, but across the
brand’s growing footprint. The strategy is simple: Offer
fresh, hot coffee paired with one of a myriad of choices at
virtually any hour of the day

“Our current focus is and has been coffee. Traditionally
people come to us for that first cup of coffee. People
want coffee and breakfast together. That puts us in this
space,” says Chris Mellgren, owner of Surfside Coffee
Company, a Dunkin’ Donuts franchise group with a
network that stretches from Miami to the Keys, and
from Sarasota to Fort Meyers.

More than just a cup of coffee

Breakfast is the meal of champions, and there is plenty of
competition for those morning meal dollars. In today’s
busy world, where everyone is overextended, starting the
day off right is about more than just a getting a good cup
of coffee, it’s about getting an enjoyable breakfast at a
reasonable price.

“Obviously there’s been a progression toward a healthier
option—egg whites, low-fat turkey. We will continue to
provide that as well as other options for customers,” says
Mellgren. “The other trend we’re seeing, and Taco Bell
is all over this, is portability of product. We are looking
for more creative ways to come up with options, ways to
create food you can carry with one hand while driving
down the road—flatbreads and wraps, for example.”
Dunkin’ Donuts builds customer loyalty with its prod
-ucts, but there’s more to it than that. “Value, speed,
quality, and convenience are the top priorities at
Dunkin’ Donuts,” says Addison Ames, a former owner

of 100 Dunkin’ Donuts/Baskin Robbins combo stores in Central
Florida.

Mellgren agrees: “We are always looking to provide speed,
quality and diversity of breakfast sandwiches. We are constantly
rolling out new offerings on an almost quarterly basis.”
Consumers want a friendly face, healthy options, reasonable
prices, a clean restaurant, and fast service—ideally, with a drivethru
window. According to Ames, 70 percent of sales take place
at the window for franchises that have a drive-thru.

DDIFO Restaurant Analyst John Gordon, who is president of
Pacific Management Consulting Group, agrees that the drivethru
option gives Dunkin’ Donuts an edge especially when those
drive-thrus are open 24 hours—something conventional restaurants
do not generally offer and many Starbucks don’t offer.

“At Starbucks—one out of every three coffee transactions has some
food transactions added on. Dunkin’ Donuts has similar numbers,
they just don’t track them. Part of the economic goal and motif
going forward is to increase sales—once you have a store, rent and
overhead to cover, you need to make money,” says Gordon.

Breakfast when you want it

“Lots of consumers look for a 24-hour-a-day option. The fact
that Dunkin’ offers that gives the company a very unique place
in the market,” says Ames. “It also helps that all menu items are
available 24-hours-a-day.”

“People’s patterns are changing. The notion of very narrow
eating times has ended for most people. People are working from
home. Everything is dispersed every which way. Kids, especially,
like breakfast food. Kids tend to be up later. Their time clocks
are different. This trend to breakfast is big,” says Gordon who
emphasized that being able to get breakfast all day is a plus.
Gordon adds, that McDonald’s, long known as the industry
leader in the breakfast wars, is losing a lot of customers because
they don’t serve breakfast after 10am. Even so, breakfast still
accounts for 25-percent of all daypart sales for McDonald’s.
Breakfast is the most profitable meal of the day for any restaurant,
so the opportunity for increased revenues is huge.

“If you are interested in making money it (breakfast) is the place
to be,” says Ames, now based in Orlando, FL, and working as the
Director of Marketing and Communications for Barnie’s Coffee
Kitchen. “There’s a lot of opportunity to expand with breakfast.
Whenever we offered new or limited time products—sales went
off the charts for that item.”

“As much as we like to think of ourselves as clever, we are not the
only ones that have identified breakfast as profitable. Especially
in Miami, but everywhere there is one of our competitors within
a mile of us,” says Mellgren, who operated Dunkin’ franchises
in the Washington, D.C. area before relocating to Florida a few
years ago.

Options in product and location

Ames says that Dunkin’ Donuts does a good job of creating new
and better products that consumers readily accept and are willing
to pay more to purchase. He says that consumers vote with
their dollars, and their money says breakfast is what they want.
New York City native Eva Kant waited years for a Dunkin’ Donuts
to open in her neighborhood on the Upper West Side of Manhattan.
A therapist who routinely walks to work, Kant says she
makes a regular stop at DD in the morning. She loves the coffee
and the various breakfast options. “I was happy to learn that
Dunkin’ Donuts has a variety of breakfast choices,” she says.
With greater competition from other quick service restaurants
and mom-and-pop shops across the country, Dunkin’ Donuts
franchisees are always on the look-out for new opportunities to
entice morning customers.

“We had the breakfast sandwiches. We would make combos
with muffins, coffee, sandwiches, etc. We always tried to keep it
under $5. We sold a lot of sandwiches. I did that on my own and
built those areas,” says Kathy Anczerewicz, a former franchise
owner in Chicago. She and her husband owned several Dunkin’
stores for more than three decades before retiring earlier this
year and selling their last two restaurants.

“Going into more breakfast sandwiches is one way of reaching
consumers. Dunkin’ always watches out for competitors,” says
Anczerewicz, who found the battle for breakfast with McDonald’s
extra challenging because the Golden Arches are headquartered
in Chicago.

To beat the competitors, she says, she made sure to get involved
– and stay involved – in her community, hiring local people to
work in her shops and featuring community messages on her
bulletin board.

According to the research firm NPD Crest, a leading global information
company in Purchase, NY, U.S. consumers cut back on
restaurant visits at lunch and dinnertime last year, but increased
their visits at breakfast. It was the fourth straight year of that
trend. There was a gain of three percent to over 12.5 billion for
breakfast visits last year in the U.S. Fast food, which accounts for
about 80 percent of total revenue for morning meals, showed the
strongest increase at four percent.

After Dunkin’ Brands’ third quarter earnings report delivered a
two percent increase in comparable store sales and year-overyear
revenue growth of 3.4 percent, media reports cited pressure
from strong competition in the breakfast and coffee environment
as a chief cause of the brand’s failure to meet Wall Street’s
expectations.

Bloomberg Businessweek wrote, “The only coffee and doughnut
company that is having a solid year on Wall Street is Canadabased
Tim Hortons – and that’s mainly because Burger King has
agreed to buy it,”

Franchisees see competition for breakfast dollars wherever they
look.

“Taco Bell is doing a good job with breakfast. Of course Denny’s
has always had breakfast too,” says Anczerewicz, “Just look at
the economy… people aren’t spending money. Fast food is what
people can afford, so, everyone’s trying to grab that business.
Plus, people are on the go. They want things quick, and they
want quality. You have to give quality. I feel a lot of chains
are going to look at breakfast. It’s the best area; it’s the most
profitable.

And of course, “coffee is universal and can be had at any time
of day or night,” says Gordon. “It’s true that coffee companies
and fast food restaurants do compete in the [4:00 a.m. to noon]
daypart known as breakfast – McDonald’s, Burger King, Wendy’s,
Taco Bell, Tim Hortons, Peete’s Coffee, and Tea Leafe – but the
value of this market share extends beyond breakfast.”

Gordon says that leveraging affordable breakfast, sandwiches
and snacks in addition to beverages, helps franchisees generate
sales during traditionally quiet periods. “Breakfast enables a
stronger 10:00 a.m. to 11:00 a.m. hour which builds up the lunch
crowd—breakfast consumption has been rising, and is very well
reported. In the restaurant space it’s the only daypart that is
growing. Lunch and dinner are down. The reason is that there
has been emphasis on breakfast. Breakfast also enables a more
robust overnight presence—from about 2:00 a.m. to 3:00 a.m.
people start to desire breakfast food. Overnight food offering
becomes viable. Utilizing your asset again.” The goal, Gordon
says, is to satisfy those customers so they return over and over
again.

Chuck Fries, an east coast transplant who works as an engineer
in Chandler, AZ, has become a Dunkin’ regular now that the
brand has established itself in Arizona. Fries likes the options
on the DD Smart Menu. “My family and I moved here from the
Northeast for a healthier life-style. It’s nice to know that Dunkin’
Donuts is here too, and that healthy food options for breakfast
and other meals is a priority for them as well.”