Bloomberg – Subway Is Giving Away Free Sandwiches. Will Franchisees Pick Up the Tab?

Photograph by Amy Sussman/AP Photo for Subway

Franchise units are sometimes sold to would-be entrepreneurs as businesses-in-a-box. The entrepreneur plunks down some cash and gets the equipment and branding she needs, not to mention detailed instructions on how to run the business. Those instructions can be a lifeline for the business owner—or a leash that allows the franchiser to yank an entrepreneur’s prospects in any direction.  Read more

The San Diego Union Tribune – McDonald’s goes custom

McDonald’s ‘Build Your Burger’ trial comes to San Diego

Katherine P. Harvey

Katherine P. Harvey

Customers at two San Diego-area McDonald’s restaurants can now use a tablet to build their own customized burgers with a menu of 20 new mix-and-match fixings, and receive more personal attention from employees.

The burger chain began testing the Build Your Burger concept at two Orange County stores last year in an effort to win over more young people, and last month expanded the trial to San Diego’s Midway and Santee stores.

The concept features the same burger patties found on a Quarter Pounder sandwich, but freshly grilled for each custom order. The patty is served on a buttered and toasted roll of your choice (artisan or brioche), and dressed with your choice of cheeses, guacamole, grilled mushrooms, pickled jalapenos, garlic aioli and other toppings. One of these a la carte sandwiches rings up at $5.49 plus tax. Bacon, the only “extra” that costs extra, adds 80 cents to the total.

At the recently renovated store on Midway Drive, an employee in a black-and-white uniform stands at the front of the restaurant and greets customers, educating them about the Build Your Burger option, then guides them through the ordering process. There’s one hitch: Guests who want to order anything off the standard McDonald’s menu have to step over to the counter.

When each made-to-order burger is ready, instead of sliding a plastic tray across the counter, a McDonald’s employee delivers it to the guest’s table in a metal basket. When the customer is finished eating, an employee comes by to bus the table and ask how everything was.

For nearly 60 years McDonald’s Corp. has had a reputation for producing affordable, consistent food for the masses, but the Build Your Burger experience costs, feels and tastes more like fast-casual than fast-food. That’s kind of the point, said industry analyst John Gordon, owner of Pacific Management Consulting Group.

Many of the most desirable consumer groups today demand more personalization and a higher-end flavor when it comes to what they eat.

“The problem for chains like McDonald’s is that with this generation, the Millennials in particular, the standard of expectations has risen,” Gordon said. “The standards that were OK for our parents, aren’t necessarily OK for us.”

The percentage of 19- to 21-year-olds in the U.S. who visited McDonald’s monthly has fallen by 12.9 percentage points since the beginning of 2011, according to a Wall Street Journal analysis of data from Technomic, while the percentage of customers age 22 to 37 visiting monthly during that period has been flat.

That’s one of several reasons why overall sales have been either flat or falling for most of the year at the burger giant’s U.S. stores, as young people who grew up on Happy Meals develop fussier palates and a deeper interest in having it their way with everything from fashion to food.

It’s also why we’re seeing some fast-food restaurants begin to roll out more upscale menu items and services, and in the case of Taco Bell’s U.S. Taco Co., even upscale versions of themselves.

Customization has been a big driver in the restaurant industry for the last 10 years, said Gordon.

“Honestly, McDonald’s is behind on this,” he said.

Now the world’s largest hamburger chain has to win back a crowd that already prefers Five Guys Burgers and FriesThe Habit Burger Grill and Smashburger.

“This is very much a step up and gets them away from the mass-produced food,” Gordon said, adding that he believes the concept will appeal to everyone.

Dan Coudreaut, Executive Chef and Director of Culinary Innovation says the Build Your Burger concept was born out of a desire for McDonald’s to deliver the best burger, and to compete with a growing number of fast-casual restaurants offering fresher tastes and better customer service.

“This is a holistic view of how we build the best burger possible for McDonald’s,” Coudreaut said. “We gathered from our guests that it has to be great ingredients treated really well, and there has to be some customization component.”

While the new buns, toppings and sauces play a big role in the Build Your Burger program, the extra service is important too, Coudreaut said.

“We’re taking a broader scope than just the burger, so it’s all about how we’re cooking it, how guests are ordering it and how we’re serving it.”

The project is being piloted at McDonald’s stores on Cuyamaca Street in Santee and Midway Drive in San Diego, and Coudreaut said it will continue indefinitely. Midway franchise owner Paul Schmid declined to share how much it cost to launch the program, but said he believes it could easily become the McDonald’s of the future.

“I don’t want to think of this as a test,” Schmid said. “You’ll have to drag it out of here.”

John Williams, 65, of South Mission Beach, called the Build Your Burger system smooth and intuitive on a visit to the Midway store Thursday. It also allowed him to try new combinations.

“I don’t normally get caramelized onions or smoked bacon,” Williams said. “That’s a good thing.”

Tom Biddlecome, 51, of Point Loma, said the presentation mimicked the advertised picture, a rare occasion.

“I wasn’t expecting all of this, to be honest,” Biddlecome said. “I’ll be back for more.”

The San Diego Union Tribune – Rubio’s grilling up fresh look and brand

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 ( 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 (­US/default.aspx?type=default) and Jack in the Box’s Qdoba ( 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
(­to­hold­third­annual­coastfest/), 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.

The Sacramento Bee – The Nosh Pit: French fry war comes to Greater Sacramento

Restaurant Finance – Could Darden Be A Buyout Candidate?


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.

The New York Post – Dunkin’ Donuts heats up war against Starbucks

Dunkin’ Donuts CEO Nigel Travis is trying to rally his troops to mount a fresh attack after coffee rival Starbucks gained ground in the latest quarter with a low-priced assault.

Shares of Canton, Mass.-based Dunkin Brands fell to a 52-week low on Thursday after the doughnut and coffee chain blamed bad weather for disappointing US same-store sales growth of 1.8 percent in the second quarter.

Later on Thursday, Seattle-based rival Starbucks — seemingly unaffected by the unseasonably cold and rainy start to spring — beat the Street’s estimates with a 7 percent gain in US same-store sales, thanks to discounted coffee prices that took direct aim at Dunkin.

While Travis tried to put a positive spin on the results and talked about the chain’s march westward into new territories, he struck a different tone in a rare all-hands-on-deck conference call with more than 200 franchisees concentrated in the Northeast.

As part of his plan of attack, he urged store owners to push pricier options, such as steak sandwiches, to get people to spend more per visit.

“We need to drive the top line,” he told the franchisees during the call.

He also pushed dark roast coffee, which he says compares favorably with Starbucks.

“Everyone needs to get behind dark roast coffee,” Travis said. “It is critical to our war with Starbucks.”

The CEO is pushing the franchisees to boost the dollars per ticket after a rewards program he championed largely failed to perk up business.

While the DD Perks rewards program now has 1.3 million members, traffic in its stores has risen only slightly, while the average ticket price fell for the first time.

“I would say the rewards program has not been a success,” Pacific Management Consulting Group founder John Gordon told The Post.

A Dunkin’ spokeswoman defended the perks programing, saying it “will be a significant driver of growth in the future.”

Unlike Starbucks’ chain of company-owned stores, Dunkin’ relies on franchise owners to carry out its coffee war. This prompted one Queens franchisee to ask Travis during the call, “How are we going to turn this around?”

“We are obviously a franchisee system,” Travis said in response. “Starbucks can turn on a dime,” adding that its larger rival can sell certain products for little profit to move volume, while Dunkin’ cannot force its franchisees to eat a loss.

One problem for Travis is that Northeast franchisees control the $300 million-plus ad budget, and prefer not to highlight dark roast coffee in Dunkin’ ads since it is not as popular in their region. Dark roast has more appeal in the West, where Dunkin’ is trying to expand.

During the call, Travis also spoke about rolling out a new “Blender” drink program, such as the Island Oasis Blender that will be tested soon in the South.

Dunkin’ shares tumbled 4.2 percent, to $42.01, on Thursday while Starbucks rose $1.66 to close at $80.45.

The New York Post – Fortress poised to get biggest stake in bankrupt Quiznos

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.

Independent Joe – Dunkin’s Choices Keep it a Strong Competitor for Breakfast Business

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

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

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

“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

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

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.”

The Hill – Franchise owners flock to DC in defense of McDonald’s


Franchise owners flock to DC in defense of McDonald’s
© Getty Images

Fast food restaurateurs, hotel operators and other franchise owners from around the country are descending upon Washington on Tuesday to register their opposition to a National Labor Relations Board (NLRB) finding they say threatens to undermine their business model.

The latest salvo in an escalating battle between labor and business, the fly-in is part of the International Franchise Association’s (IFA) strategy to overturn a preliminary NLRB decision that corporations like McDonald’s share joint employer status with their franchisees.

If upheld, the finding would force corporate managers to the table in collective bargaining discussions and expose them to claims of labor rights violations from workers at chain stores and businesses.The fight began only recently, but the business group is moving to quickly shore up crucial support within Congress.

“We’re going to make our voices heard,” IFA President Steve Caldeira said, describing the developments at the NLRB as “a threatening situation” for an otherwise healthy industry that added jobs during the economic crisis.

“It would have a chilling effect on job creation,” he said.

The fight centers on a July finding by the NLRB’s Office of General Counsel that McDonald’s USA LLC could be named as a “joint employer respondent” in scores of cases alleging workers’ rights were violated in response to protests for higher pay.

Franchisors have traditionally been insulated from such cases, but the NLRB finding supports a view held by unions that corporations like McDonald’s enjoy control over virtually every facet of its stores while bearing little responsibility for worker treatment.

“The reality is that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge,” said Micah Wissinger, an attorney representing McDonald’s workers in New York City.

New York, Chicago, Detroit and other cities have been home to a series of protests in recent years involving workers demanding wages of at least $15 an hour.

The Fast Food Forward movement has succeeded in grabbing national headlines, most recently this month, when dozens of workers were arrested for their parts in coordinated protests around the country.

The campaign asserts that anything less than $15 an hour is not a livable wage. And the push was buoyed by the NLRB’s joint employer designation, which could shift significant leverage to workers engaged in such labor disputes, if it stands.

However, the finding will be subject to review by an administrative law judge, once complaints naming McDonald’s are formally made. The losing side in those cases could then appeal to the full NLRB and, after that, federal courts.

Even if ultimately upheld, the McDonald’s joint-employer status would not automatically apply to other franchise chains, which would be judged individually going forward.

“Each company potentially coming under any form of review by NLRB has different policies and practices that would need to be evaluated in a case-by-the-case basis,” said John Gordon, a California-based restaurant analyst at Pacific Management Consulting Group.

But business groups fear that the dispute could create a damaging precedent for the industry, which has enjoyed steady growth in recent years, even as other segments of the economy faltered.

Businesses are seeking to portray the protest campaign as a clear effort orchestrated by the Service Employees International Union to organize the nation’s fast food workers and replenish the powerful labor group’s dwindling ranks.

And while workers take their case to the streets, the IFA is turning its attention to Capitol Hill.

More than 350 franchisees and franchisors are expected to participate in this week’s event in Washington, which will include remarks from Speaker John Boehner (R-Ohio) and former Mississippi Gov. Haley Barbour (R).

The business owners plan to flood lawmakers’ offices, pressing them to oppose the NLRB’s finding. While they have no direct role in the fight yet, the IFA believes Congress will play a critical role in its outcome, whether through oversight of the NLRB or direct legislation.

To date, industry groups critical of the NLRB’s position have found a sympathetic ear from Republicans. In the House, the Education and the Workforce Committee convened a hearing last week to rail against the decision.

Senate Republicans have also jumped to the businesses’ defense.

“The franchise relationship is an American success story that allows entrepreneurs to climb the ladder of economic success, and the NLRB is attempting to change that model by creating great uncertainty for workers and business owners about who’s in charge,” Sen. Lamar Alexander (Tenn.) said.

Alexander, the top Republican on the Health, Education, Labor and Pensions Committee, and Senate Minority Leader Mitch McConnell (R-Ky.) plan this week to unveil a bill they say would “turn the NLRB into more of an umpire than an advocate.”

Though details have not been released, the legislation is not expected to directly address the joint-employer issue.

Looking to expand its support, the franchise association will argue that the NLRB finding would reduce the incentive to own a franchise by designating the umbrella corporation as a formal employer.

Caldeira said franchisees operate independently, as small-business owners who “have their own skin in the game,” via personal investment.

“It would essentially take away their autonomy to run their own business,” he said of the decision.

The IFA has at its disposal a formidable, if relatively small, lobbying force.

The group spent $745,000 to lobby the federal government last year but has shown signs of ramping up its activity. It added a third outside lobbying firm, American Continental Group, to its roster this month.

Lobbyists on the account include Stephen Pinkos, a former Republican leadership aide; Manus Cooney, a former Senate Judiciary panel counsel who also advised Sen. John McCain’s (R-Ariz.) 2008 presidential run; and C. Stuart Chapman, a past chief of staff to Rep. Carolyn McCarthy (D-N.Y.), who oversaw her work on the House Education and the Workforce Committee.

Forms indicate the American Continental Group will be taking the trade group around to offices on Capitol Hill to provide an “introduction of members to IFA.”

The group has also worked to grow its influence in Washington via the campaign circuit. The IFA’s expenditures through the association’s political action committee increased each election cycle between 2000 and 2012, when spending eclipsed the $1 million mark, according to data kept by the Center for Responsive Politics.

Through the end of July, the IFA had doled out just under $965,000, the figures show.

Caldeira said the group has increasingly looked to back members on both sides of the aisle who are supportive of its priorities. This time around, the joint-employer issue is near the top of the list.

“We’re going to ask lawmakers to become more aware of this threatening situation,” he said, later adding, “This is an election year.”

Megan R. Wilson contributed to this story.

Herb Greenberg – Getting Restaurant IPO Indignation

SAN DIEGO (RealMoney) — You could see this coming from a mile away: Noodles & Co. (NDLS – Get Report), Potbelly (PBPB – Get Report) and Papa Murphy’s  (FRSH – Get Report). All three were well-established before they went public, and all three, so far, are causing investors to grab the Tums.

Regardless of what Noodles reports today, it faces the classic retail/restaurant dilemma for an initial public offering: Quickly growing a concept that may or may not have appeal beyond a certain region to meet Wall Street’s expectations, then finding the right real estate in a market that’s often already glutted — as in the case of Potbelly — with sandwich shops.

As San Diego-based restaurant consultant John Gordon tells me, El Pollo Loco (LOCO – Get Report), from the IPO class of last month, “Historically hasn’t been able to grow north of Santa Barbara.” He continues, “This is the former Denny’s clone, under-managed for years, almost defaulted on debt in 2011. Private equity had to pump in $40 million, paying an 18% coupon. But now it’s back from the grave. They have made menu improvements and two years of (same-store sales) gains. The Street was totally blitzed with them in late-July timing (the third week is a primo IPO week), a faulty comparison to Chipotle. Traders said, ‘I want a fresh story, something to get in at ground level, it’s cheaper than CMG, geesh! But most of my non-sell-side restro-analytical friends see it as the bottom of the heap.'”

What’s at the top? In Gordon’s opinion, Zoe’s Kitchen  (ZOES – Get Report) “is a real fast casual brand (as opposed to LOCO, which isn’t), which is first in its sub-segment (Mediterranean) and is not so insanely overpriced yet such that there will be a year one-two ‘shock effect’ meltdown when earnings disappoint. Its store economics is solid.”

Reality: Just because a company goes public, doesn’t mean its concept has been validated. It means either a) the private equity or venture guys wanted out, or b) the investment bankers were persuasive, or c) the executives were tempted, or d) all of the above.

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