This Week's Hottest Restaurant Headlines
CEOs were the focus of this past week. Perhaps most notably in the somewhat stunning news involving Domino’s. The brand’s leader, J. Patrick Doyle, announced he was leaving in June, sparking rumors, and making us all wonder what his next move might actually be. About all we know right now is it won’t be Chipotle.
Here were the top headlines from around the industry this past week:
The delivery game is a furious race right now. This extends from casual chains to McDonald’s to your local Chinese joint wondering where its monopoly on the business went. When White Castle revealed this week it planned to start delivering its famous sliders nationwide through Grubhub, I felt like we were seeing fast-food kismet in action. I’m sure anything makes more sense delivered to your couch than White Castle. Maybe Taco Bell? Yes, they’re working on that, too. Here are the details: Expanding on Grubhub services affiliated with more than 75 White Castle locations in New York City, Chicago, St. Louis, Detroit, and more, the burger chain will begin to offer delivery at 45 additional locations starting this month. While the franchise is concentrated in the Midwest, there are White Castles in Tennessee, Kentucky, Las Vegas, and more, and delivery services will operate in areas where White Castle and Grubhub overlap.
If I’m being honest, I was inspired to write this story during a recent trip to LongHorn. My 12-year-old brother is obsessed with it. He’s like my father: He hates pretty much all food unless it’s covered in ranch or ketchup. He even brings salad dressing in a backpack to restaurants. But LongHorn? That’s a place he’ll eat 12 times a week, always ordering the shrimp and sirloin. It was the first time I had been in a couple of years and I left impressed. Darden, in general (more on this later), is writing a blueprint for casual dining chains by sticking to a simplified approach that focuses on execution. Anyway, thinking about steakhouses around the country, and why they’re always packed, led me to a search of the 19 most iconic.
On the surface this is a big deal simply because Starbucks doesn’t really mess with its core products too often. In fact, the Starbucks Blonde is the brand’s first new espresso stateside in four decades. Starbucks said the move was in response to consumers’ growing demand for espresso, and that makes sense. It’s also a lighter option. I think this kind of menu innovation, though, speaks to something a bit deeper. Starbucks’ traffic declines in recent years, mainly in the U.S., are something the brand is working on. That includes smoothing out its order-ahead capabilities. It also includes bringing on beverages that help Starbucks compete with the local coffee shop pouring heart-shaped foam patterns in your cup. Starbucks will need to bring on artisan options like this to keep on-trend and remain a status symbol for people carrying its iconic label down the streets. Because, without question, there’s a gap forming between the brand and those local vendors. Can Starbucks close it?
How often do you read about casual-dining companies investing, not retracting, these days? Not often. But Darden has been a different kind of organization lately. Early in the week, the parent company of Olive Garden, LongHorn, Cheddar’s, Yard House, Eddie V’s, Seasons 52, The Capital Grille, and Bahama Breeze, lifted its fiscal 2018 guidance. This popped the company’s stock, naturally. CEO Gene Lee also noted that Darden will invest $20 million “in initiatives directly benefitting our workforce.” One of the more interesting currents behind the news was the tax reform details. Darden said excluding the deferred tax revaluation benefit, the company believes the impact of the lower corporate tax rates will reduce its fiscal 2018 effective tax rate by 600 basis points. Darden added that the “anticipated resolution of other tax maters, unrelated to the Tax Act” will reduce the company’s effective tax rate by an additional 100 basis points, resulting in an effective tax rate of about 18 percent for fiscal 2018. I’m not great with taxes and all that nuance, but that surely sounds like a good thing for the company.
1010data took a look at millions of non-cash transactions over the past several years to answer the question: Who’s winning quick service? Even though cash, which is still a big deal for most, wasn’t included, the data did provide some very interesting notes. For starters, Chick-fil-A and McDonald’s are better than anybody at keeping customers. I understand the sentiment. People who eat at Chick-fil-A don’t abandon it for years. The customer who eats at McDonald’s probably eats at McDonald’s all the time. The data also showed that Domino’s is taking market share from Pizza Hut and Starbucks and Dunkin’ Donuts are pretty much splitting since they each have specific loyal bases. Here’s an intriguing fact: On average, McDonald’s customers fork up $26 per month, whereas Burger King and Wendy’s customers spend $17 and $18 per month, respectively. Check out the story for much, much more data.
We took a deeper dive into the legend behind steakhouses, and why they’re so successful around the country. Think about it: When you visit a new town, which establishment has typically been there the longest? But that doesn’t mean steakhouses can resist the tide. Staying current, expanding their menus, and shedding that stodgy, men’s club atmosphere is key to remaining relevant as consumer sentiment ebbs. Yet, regardless of where this industry takes us, chances are a great steak—and even better service—will always reign. Pictured is Texas Roadhouse.
Try to write a better turnaround story than CEO J. Patrick Doyle and Domino’s. You could look at the pizza chain’s current success in several ways (hey, the pizza isn’t terrible anymore, right?) but here’s the clearest: The company’s stock was trading in the mid-teens when he took over eight years ago. As I sat here typing, it was trading at $209.95. So if you bought in when Doyle came on board, you’re probably a very happy investor. The question now is where will Doyle land? Many people immediately saw a vacancy in Chipotle’s CEO role, Doyle’s sudden free agency, and tried to connect the dots. He squashed that the very next day, saying there was zero chance. Doyle plans to take six months off before plotting his next move. If that timeline holds, circle the date as a major moment in foodservice. Wherever he lands will be big, big news.
Spin the C-suite wheel. Ruby Tuesday’s next leader, the company announced, will be Ray Blanchette, the former CEO of Au Bon Pain. Before that, Blanchette was a full-service, casual-dining mainstay. He helped revitalized Joe’s Crab Shack during an eight-year run as CEO, including taking parent company Ignite Restaurant Group public in 2012. During his tenure, he also developed the Brick House Tap & Tavern concept, and oversaw the rebranding of the company from Joe's Crab Shack to Ignite Restaurant Group. He was replaced as CEO of Ignite by Bob Merritt in 2015. Blanchette started at Carlson Restaurants, then parent company of TGI Fridays, as a manager-in-training in the late 1980s. He held roles as vice president of USA Franchise Operations, vice president of operations for the company's East Division, and executive director of its International Division serving Europe, Africa, and the Middle East. He left to become president and chief operating officer of Pick Up Stix, Inc. before joining Au Bon Pain in June 2016. Blanchette sounds like a great find for Ruby Tuesday, which recently went private in a deal to NRD Capital. Expect to see some menu innovation in the near future.