Regulations, casual dining key issues at UCLA Extension Calif. conference

Regulations, casual dining key issues at UCLA Extension Calif. conference

LOS ANGELES —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

The state of casual dining was a recurring theme at the 11th annual UCLA Extension California Restaurant Industry Conference here this month, which drew national and regional operators, including Rick Federico, chairman and chief executive of P.F. Chang’s China Bistro. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

He was presented with the conference’s 2007 Innovation Award by last year’s winner, Bill Allen, chief executive of Outback Steakhouse parent OSI Restaurant Partners of Tampa, Fla. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Conference attendees heard Federico assess Scottsdale, Ariz.-based P.F. Chang’s launch last year of the Taneko Japanese Tavern [3] concept, which features the pub-style atmosphere of Japan’s izakaya restaurants. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

So far, however, Taneko has generated lower-than-expected sales and higher-than-planned average tabs. P.F. Chang’s namesake bistro chain also has suffered negative same-store sales since last summer—as have many other casual-dining chains, from Applebee’s [4] to The Cheesecake Factory [5]. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Still, several operators at the UCLA conference revealed plans for new “polished casual” restaurants that aim to buck the segment’s lackluster sales trends. One of those would be a new American bistro concept by Paul Fleming, creator of P.F. Chang’s, and another is a planned Japanese concept from Los Angeles-based Innovative Dining Group [6]. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

One hot topic among conference speakers and attendees was California’s regulatory climate, which some argued has the potential to become even more oppressive. Among legislative proposals confronting the state’s operators is one that would require chains with more than five units to post nutrition information. Mandated health care and a statewide ban on artificial trans fats are other regulatory threats facing operators in California. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Jot Condie, president and chief executive of the California Restaurant Association [7], told attendees that more government agencies regulate the state’s restaurant industry than regulate its hazardous disposal industry. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

“At what point does the regulatory environment resemble that of Eastern Bloc nations of old,” he asked, “and have we already gotten there?” —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

However, CRA chairman Jeff King, who also is chairman of King’s Seafood Co. [8], the Costa Mesa, Calif.-based operator of high-end and upscale-casual restaurants, said the time had come for the state’s operators to stop fighting such legislation and instead focus on ways to make onerous proposals more business-friendly. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

“We have been historically adversarial to government, but where has it gotten us? Nowhere,” King said. “I don’t think we can afford to be adversarial anymore.” —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Harald Herrmann, president and chief operating officer of the 17-unit Yard House [9] chain, based in Irvine, Calif., agreed, saying that regulatory threats can force operators to become more creative. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Yard House, for example, has already begun offering customers nutrition information—in part because of a consumer demand reflected in the chain’s No. 1 e-mail request, for dietary data. As an example of how to provide such information without mandatory menu labeling, Herrmann said Yard House’s servers are able to access a range of ingredient data through point-of-sale terminals and print it out for customers in a matter of minutes upon request. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Mandated health care, if enacted by the state Legislature, could also have an upside, UCLA conference attendees were told. Teresa Siriani, president of the Dallas-based human resources research firm People Report, said companies that provide health insurance to at least 40 percent of their employees have dramatically lower rates of turnover, “so it pays for itself.” That’s particularly important at a time when nationwide turnover rates for hourly workers are the highest in six years, and management turnover is the highest it has been in four years, she said. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

In a keynote presentation, Paul Westra, managing director for consumer equity research at private-equity firm Cowen and Co., said management turnover can be one of the most important variables in restaurant-level profitability. Restaurants whose general managers have tenures of at least five years generate profits 15 percent to 20 percent higher on average than restaurants with average manager tenures of two years, he said. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Overall, Westra was bullish on the underlying strengths of foodservice, despite weaknesses in the casual-dining sector over the past year. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Asked by Technomic Inc. president Ron Paul whether he thought casual dining was the “family dining of the decade” in terms of the recent shift toward lackluster same-store sales growth and lower rates of expansion, Westra said the casual sector could be as late in the game as the “seventh inning,” as fast-casual alternatives siphon away market share, particularly from lower-end concepts. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

“Why go to Applebee’s when you can save $5 and go to [the fast-casual variant] California Pizza Kitchen [10] ASAP, if you want to grab a bite before a movie?” he said. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

However, Westra remains high on “polished casual” concepts. The sluggish sales at P.F. Chang’s, for example, could be blamed on “complacency and the need for brand adjustment,” he said, but more likely was a result of the sector’s recurring sales recession cycles over the past three years, including a March same-store result that was the worst in five years. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Federico said P.F. Chang’s has responded to the sales challenges with several adjustments, such as changing server uniforms and focusing more on new-product development. The Chinese bistros have introduced menu promotions highlighting dishes from specific regions of China, such as Szechuan and Yunnan. The chain also is testing a grill at a branch in Troy, Mich., which allows the menu to include more than wok-cooked dishes. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Asked whether he was happy with the way Taneko was performing, Federico replied, “Kind of.” Its sales are averaging about $61,000 per week, which would track to a yearly average of just above $3 million—which Federico said is about $750,000 to $1 million less than expected. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

He said customer feedback so far has been positive regarding the food, yet management was “probably having trouble getting people to understand what we’re trying to do. But that is part of being a pioneer.” —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

So far, per-person checks have averaged about $7 more than was originally targeted. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

“It was designed to be in the mid-$30s, but it has been about $42 a head,” Federico said. “I think people have thought it was too expensive.” —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Other panelists at the conference said they were planning new casual-dining concepts to debut this year. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Ed Bartholemy, president of Phoenix-based Paul Fleming Restaurants [11], said his company is scheduled to debut a concept called Paul Martin’s American Bistro in the Sacramento, Calif., area in September. Designed by Fleming—also co-creator of the Fleming’s Prime Steakhouse & Wine Bar [12] and Z’Tejas Southwestern Grill [13] chains—the new bistro would focus on premium ingredients from local purveyors. Plans call for a 7,000-square-foot building with about 200 seats, and pricing that would yield a per-person average of about $15 at lunch and $30 at dinner. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.

Officials of Innovative Dining Group, which operates the popular and stylish Sushi Roku [14], Boa Steakhouse [15] and Katana [16] brands, discussed plans to develop another Japanese concept that would open in October in Los Angeles, though details were not divulged. —Casual dining may be in the “seventh inning” of its segment growth game, one analyst said, but West Coast operators remain in love with the category.