The challenges of leading a restaurant company through today’s business obstacles, including a struggling economy, penny-pinching consumers and a heated regulatory environment, were top of mind for seven industry executives during a recent roundtable discussion.
The conversation, held during Nation’s Restaurant News’ annual Multi-Unit Foodservice Operators conference in Dallas, brought together winners of the publication’s Golden Chain awards, which honor excellence in restaurant leadership.
Moderator: ELLEN KOTEFF: editor, Nation’s Restaurant News Participants: JERRY DEITCHLE: chairman and chief executive, BJ’s Restaurants, Huntington Beach, Calif. CHUCK FALLON: president of North American Operations, Burger King Corp., Miami PHIL FRIEDMAN: president and chief executive, McAlister’s Corp., Ridgeland, Miss. JAMES GRECO: chief executive, Bruegger’s Bagels, Burlington, Vt. JEFFREY HARVEY: president and chief executive, Burgerville, Vancouver, Wash. RANDY KIBLER: chief executive, Bojangles’ Famous Chicken ‘n Biscuits, Charlotte, N.C. CAMERON MITCHELL: president, Cameron Mitchell Restaurants, Columbus, Ohio CURTIS WILSON: vice president and general manager of Restaurant Industry, American Express, New York
The panel, moderated by NRN editor Ellen Koteff, was made up of 2009 Golden Chain winners Chuck Fallon of Burger King Corp., Phil Friedman of McAlister’s Corp., James Greco of Bruegger’s Bagels, Jeffrey Harvey of Burgerville, Randy Kibler of Bojangles’ Famous Chicken ‘n Biscuits and Cameron Mitchell of Cameron Mitchell Restaurants. They were also joined by 2008 Golden Chain winner Jerry Deitchle of BJ’s Restaurants. Curtis Wilson, a representative of American Express, which sponsored the event, also participated.
Excerpts from their conversation are published here.
Ellen Koteff, NRN: What’s been the toughest thing to deal with for your company [in the current economy]?
Randy Kibler, Bojangles’: I think it’s not letting your people get caught up in how bad things are. From every angle of media, the primary news that you get every day is how tough things are. And, you know, I made a statement really early on: ‘There may be a recession, but we’re choosing not to participate. We’re not going to talk about it in a way that gives us excuses.’ We can’t let our people fall into that mindset. If they start thinking negatively, they will stop expecting certain results. And when they stop expecting certain results, you don’t get them.
James Greco, Bruegger’s: You get complacent.
Kibler, Bojangles’: In this business, you really can’t accept [what you’re given]. You’ve got to go out and fight for it every day.
Curtis Wilson, American Express: There are great examples of restaurants around the country that haven’t changed any of their business, and they’re no longer with us. We could see it a year ago, we could see it six months ago. There’s some folks who said, I’m going to maintain my business irrespective of the economic environment. That’s not reality.
Cameron Mitchell, Cameron Mitchell Restaurants: I think it’s created a lot of opportunities. We challenged our team, and everybody from the deepest corners of the operation have come up with ideas, whether to be saving $500 here or whatever, without cutting one bit of quality or without detracting one inch from the brand. We just had our annual leadership conference with our GMs and executive chefs and above and corporate team [and] it was the best we’ve ever had. We didn’t travel this year…as part of the whole message, but on the same token, we have people hugging each other and crying and standing up and giving testimonials and it was just, you know, pretty amazing. We’re a much closer, together [and] tight-knit organization than we were a year ago because of this.
Jerry Deitchle, BJ’s Restaurants: That was our reaction internally at our company. We said, you know what, we’re not going to let a good recession go to waste here. Those businesses that have not pushed the panic button, that are well-positioned, that are continuing to have the courage to make investments in their concept [and] their people in these tough times…[are] going to come out on the other end of this in a much better, stronger competitive position. Our vital organs are our people, and once your vital organs start to fail in a business like this, the rest of your business just tends to crumble.
Wilson, American Express: There’s a competitive structure within [successful] corporations that [rewards those] who are performing well. Those performing well, they stay and they get recognized. Those who don’t, somehow we divest those folks from the organization by need or by right based upon performance.
Koteff, NRN: When do you think that the industry’s numbers are going to turn positive?
Greco, Bruegger’s: I think that there’s been a long-term change in consumption patterns. They are saving far more and they are spending less as a percentage of their disposable income, and that includes restaurant sales. I think that until people see an improvement in their stock portfolios and in the value of their homes—in other words, until they start to see their net worth start to recover and their retirement nest eggs start to recover—they’re going to continue to save at this elevated rate. So the result, I think, is that you probably continue along like this for some time into next year. And the things that I think that are important to watch are the measures of people’s stock portfolios and the measure of real estate. So we watch, you know, the S&P 500, and then we watch the Case-Shiller home price index.
Mitchell, Cameron Mitchell: I just don’t see any change next year. I have a much more bearish approach to it. The small business’s credit is horrible. People are getting their personal credit lines slashed, you now, so there’s consumer spending. Until we get jobs moving and get credit moving, [I don’t see] any real growth in consumer spending whatsoever.
Koteff, NRN: Are value menus and price wars avoidable and are they good for the industry?
Chuck Fallon, Burger King: The value menu is merely another tactic or approach to broadening our overall base of business. The value menu, as we see it, is the nature of the game today, in this cycle of thrift. It really comes down to value for the money.
Jeffrey Harvey, Burgerville: We made a conscious decision to focus on differentiation in different ways. We chose to focus on local sourcing and high quality and seasonal rotation of products in a quick-service model, and that’s really stood well by us. We have known all that time that we’re not the cheapest game in town, so we focus on making sure we’re communicating value in and knowing where the product is coming from, knowing where the sourcing is for all of that, putting together a flavor profile that the guests prefer.
Wilson, American Express: What do you guys look for [when checking out the competition]?
Phil Friedman, McAlister’s: I look for quality of food, what the guests are reacting to, how it’s presented, you know, the fundamental things that we try to manage. More than anything, I really want to understand the food.
Greco, Bruegger’s: Yeah, the food. I want to experience the guest service and also take in the atmosphere. How does the environment make me feel?
Harvey, Burgerville: I think it might be important to note that this idea of competitors are moving targets. Whoever we think the competitor is today changes over time. I mean, I don’t know that any of us would have necessarily seen grocery store deli counters as competitors, but there’s full-blown restaurants there now. So when I go out, I try to move it around. I don’t just go to the people who you think are competitors. I go upscale, I go downscale, I go to different kinds of food concepts. What I’m looking for bottom line is innovation. It might be in the service model, it might be in a labor model, it might be a food item, but I’m looking for innovation ideas.
Koteff, NRN: Could you gentlemen talk a little bit about what things you have been doing [at your companies] that show degrees of innovation in the last year?
Harvey, Burgerville: I was really kind of impressed with the level of loyalty the guests had to street food. I saw there might be kind of a little bit of a reverse opportunity, so I commissioned and launched July 15 the Nomad, which is Burgerville’s mobile kitchen. It’s designed not just to do events; it’s a full-blown restaurant. It’s expected to run like a restaurant six days a week. And the strategy behind it was to help offset lost revenue when we had to remodel a restaurant, to be able to engage in events and more robustly engage in events on a regular basis at a higher level of quality and brand.
Greco, Bruegger’s: We deployed three street teams in three cities this year, this summer. One in Minneapolis, one team in Pittsburgh and one in Boston. And they traveled around in a PT Cruiser that was all logoed in our colors—the Bruegger’s Cruiser, we called it. And they would go to fairs, road races, events, sometimes just parks. They would hand out all sorts of Bruegger’s logoed things as well as product. We also did something called a Neighborhood Heroes Award where we just delivered platters to charitable organizations or public servants, fire departments, things like that.
Friedman, McAlister’s: We’ve gone to [reusable] tableware and plating in restaurants and just use disposable for takeout. And that actually took about a point out of our costs, and part of that is our trash expense went down a lot. We got the green halo for that that we wanted, but it was really driven by a financial concern.
Fallon, Burger King: We’re extremely proud of our broiler innovation. Essentially that’s the heart of the restaurant for us. Over a period of two years, we’ll completely retrofit every single restaurant with a new batch, a flexible batch broiler in our system, which heats up 50 percent less energy, puts out 50 percent less exhaust. It also provides us with a platform that allows us to cook a lot of different products. We’ll be doing ribs. We’ll be doing thick sandwiches. We can do fresh frozen. It really puts us in a place from a product innovation standpoint that a lot of our competition can’t go.
Kibler, Bojangles’: There’s another side of innovation—the whole technology side of things and how to utilize that. We hold more training sessions via webinar, and we just have an ability to do a better job of communicating and help people understand [which] allows you to move faster and make corrections. We developed a much more direct line of communications with our franchisees, and we have an online portal where any information, whether it be operations pieces or past communications or, you know, forms, sources, materials are all at a franchisee’s availability 24 hours a day.
Koteff, NRN: So how are your companies preparing for the possibility of menu labeling, and what special challenges would it pose for your operations?
Deitchle, BJ’s Restaurants: We have half of our restaurants in California and we just have the one in King County up in Washington. [Both areas have menu labeling regulations for chains.] It took our hundred-item menu and doubled the size of it—it’s like the Yellow Pages nowadays—but frankly, there’s been really no material reaction at all from the consumer with respect to what they’re choosing to buy.
Mitchell, Cameron Mitchell: How much did that cost you to get that information acquired?
Deitchle, BJ’s Restaurants: We had to hire an outside menu nutrition consultant that we believed had the databases and the information and the liability insurance to back it up. The actual cost is probably less than six figures in terms of doing the work. The menu printing was, you know, was a bit of a chore, but in terms of actually acquiring nutritional databases and having an expert put all of that together, it wasn’t that bad.
Greco, Bruegger’s: I think, again, the national policy or law with regard to menu labeling is a good idea, because otherwise what we’ll end up with is an ever-increasing patchwork of rules from city to city or state to state, and then it gets hard to follow and make sure that you’re not in one place following the law and some other place violating it.
Harvey, Burgerville: One of the things we saw in our analysis is that most of our guests, maybe 80 percent or so, customize their orders, and it’s a mechanism or a behavior we encourage in our restaurants. So given that, a calorie count on a menu board doesn’t do much for them when it’s not actually accurate. So we’ve shifted to a pilot project we just wrapped up last month and are now rolling it to all of our restaurants working with [a company called] Nutricate, which provides a receipt-based customized nutritional breakdown of the guest order.
Koteff, NRN: You mean once they’ve eaten it?
Harvey, Burgerville: Yeah, the argument against it is that they have to eat it first to get the breakdown. But again, you’re looking at repeat guests. We have a very loyal following. So over time, they actually have a better tool to adapt their behavior than a calorie count on a menu board, which probably isn’t going to be accurate anyway.
Koteff, NRN: What about health care reform?
Fallon, Burger King: There’s really not much to prepare for other than trying to educate our representatives on the impact associated with the decisions that they make. And so that’s where we’ve got our efforts focused.
Friedman, McAlister’s: [We’ve] really worked on trying to get association health care. I want my franchisees who might have one, two, three, four restaurants, even 10 or 15, to be able to marry up with us and pool our insurance. They just can’t do it. And I’m hoping that maybe some type of tradeoff in here, and there will be association health care.
Greco, Bruegger’s: I think it’s just too uncertain which way the final outcome will be. But I think that there are a lot of things that need to take place. It’s got to be health care reform; it can’t just be overlaying national health coverage on top of a system that is already broken and that’s leading to spiral in costs.
Koteff, NRN: To your way of thinking, what are the two most important disciplines to be learned by young executives aspiring to one day lead a company?
Kibler, Bojangles’: They really have to understand their business, the operation. They don’t have to be the best at it, but they really have to understand what it is the people that they are leading deal with on a daily basis and be able to relate to that, understand it, and help them manage through that as well.
Greco, Bruegger’s: And I think that another thing that someone who is looking to some day run a brand needs to understand is that times aren’t always good and that when times aren’t good, you really have to be creative. You can’t get complacent. You have to think of things that are going to enable you to rise above, you know, thereby creating meaningful difference, and you really need to be very inventive.
Mitchell, Cameron Mitchell: Your people are most important. Mental capital is the same as physical capital. You can overspend that just as easily as you can overspend physical capital.
Fallon, Burger King: I think the other piece is willingness to make decisions and once you see a problem, not wait. I would say I have been guilty of waiting so many times that when you finally make that decision, you realize wow, why didn’t I do that two years ago?
Deitchle, BJ’s Restaurants: You know, if you had asked me that question some years ago, I would have probably said you need to have a thorough grounding and understanding of the basic economics in the business. But you also have to have an understanding of the human side of the business. Being a “recovering accountant” myself, now I see the P&L statement is really a collection of behaviors. You’ve got to understand how all of those behaviors manifest themselves in the economics of the business. Then you’ve got a better chance of getting that P&L to meet the end result that you’re looking for.
Koteff, NRN: What do you gentlemen find the most difficult in your job?
Greco, Bruegger’s: Most difficult, I think, is having to make a personnel change at a senior level. It’s difficult at any level, but I find that’s the most difficult because these people at this level are all very talented and generally hardworking. But sometimes despite that, it doesn’t work. It doesn’t work because either there isn’t the right chemistry or the things they’re doing aren’t effective.
Friedman, McAlister’s: I’ll add another dimension from the franchise side. One of the most difficult things I have to do is kind of get all the franchisees in one spot. What I mean by that is you do have to make decisions. You do have to set the directions. And there’s a lot of, you know, tough decisions on people who make an investment. They put their life on the line and it may not be the right thing for them either. You give them every shot you can, you lead them as far as you can. You try and educate and you try to tell them, and if it’s not going to work for them either, you’re either losing money or they should do something else. That’s also very difficult.
Deitchle, BJ’s Restaurants: Probably the most significant challenge that I have is to try to get the most discretionary effort out of my talent base. If you pay a minimum wage or a required wage and you’re going to get a minimum effort or a required effort, but there is another level of effort, a discretionary level, that everyone in your organization can give you if they’re properly engaged in the business and they have the tools to do their job.
There’s going to be plenty of capital for great world companies, and there’s going to be plenty of real estate available, good real estate for the good concepts, but there isn’t plenty of great talent available. That’s the No. 1 resource that we need in terms of all of our growth pipelines. And it’s how do you get it, and then how do you get the most discretionary effort out of it is the biggest challenge. As I lay awake at night, as we all do worrying about our business and worrying mostly about sales as of late, I sit and toss and turn, that’s where I always come back. How can we get more discretionary effort out of our talent base to further differentiate us out there? It’s a matter of engagement, and it’s a matter of providing the most tools that you can provide to enable everybody, every team member, whether it’s a dishwasher or an executive VP on your team, to execute more effectively and feel more engaged in the business.
Mitchell, Cameron Mitchell: We actually say our associates come first. In all of our value statements and so forth, there’s really not a mention of the guest in there. I look at it as much more of a triangular relationship. We take care of our people, our people take care of our guests, our guests take care of our company. So we have a direct relationship with our people. And we find we get maximum and our people will run through brick walls for us because they know we genuinely care about them and their well-being. So they in return will make the guest experience important to them. That’s the thing I enjoy most about our job—our people and the people development and seeing people rise to the occasion and all those success stories.
Fallon, Burger King: That’s one of the things I enjoy most about this business is the service mentality of the people who work in this business. At the franchisee level for sure, but we have a lot of company operators and everybody at our restaurant support center is thinking about one thing, is how to, you know, get a better guest experience. That’s one of the main things I enjoy about it is seeing people break their backs for, you know, their own satisfaction of creating a great service experience for the franchisee and the guest.
