Posted by Dale Buss on October 23, 2013 05:38 PM
As McDonald's picks through its options for goosing growth, its North American "Dollar Menu & More" gambit is getting a lot of attention. It's the most important new effort that CEO Don Thompson has discussed lately—but even he doesn't expect it to add much to the chain's top line. And franchisees are questioning its effects on the bottom line.
Such is the state of things at the world's largest fast feeder these days that the best it can expect to muster from a major new US promotional effort is to preserve its place in the downtrodden and increasingly competitive QSR segment. The national rollou to of the Dollar Menu & More will introduce items at $2 price points and even $5 price points when it rolls out across the McDonald's system next month, yet Thompson tamped down expectations about what it might do for sales growth.
"We continue to see and believe that [Dollar Menu & More] will continue to represent somewhere in [the] same percentile, 13 percent to 15 percent" of the chain's overall business, just as the current Dollar Menu does, Thompson conceded in this week's third quarter earnings call with financial analysts who follow the brand.Continue reading...
Posted by Abe Sauer on October 23, 2013 12:06 PM
Starbucks has been suffering a beating from China's press regarding its high prices lately. The state-run media outlets, including a special CCTV report, accused Starbucks of discriminating against Chinese consumers by selling coffee at much higher prices than in other nations.
But this week, everyone else dropped the hammer on CCTV, calling out China's official news organization for frothing up of nationalist disgust with foreign enterprises in China. (A fate also suffered this year by, amongst others, Apple.) In fact, CCTV's attack on the coffee giant says a lot more about CCTV in modern China than it does about Starbucks.
While Apple eventually folded and apologized, even though a significant portion of Chinese consumers were on Apple's side, Starbucks has online personalities to thank for coming to its defense against CCTV, with no 'apology' in sight. Instead, Starbucks' responded to the charges, saying, basically that CCTV was right. The chain, noting that its margins were the same, pointed to several realities of its China business that make production more expensive. This reasoning got a boost from other online media such as news clearinghouse 163.com—the "Huffington Post of China"—which published a special section dedicated to the Starbucks case, examining and explaining the perfectly normal economic practice of price discrimination.Continue reading...
Posted by Dale Buss on October 22, 2013 04:56 PM
Sbarro is busting out of the mall and airport quick-service-pizza business with an experiment in the fast-casual segment called Pizza Cucinova.
The first of three company-owned Pizza Cucinova units in the test market of Ohio opened in Columbus last week, offering high-quality Neapolitan-style pizzas made to order and baked in minutes in high-temperature Woodstone ovens. Guests can select from signature pizzas—such as steak and gorgonzola with caramelized onions and roasted garli—or build their own from a list of premium toppings, many of which will be locally sourced.
"Sbarro is known for being in malls, food courts or airports, and while that will remain an important part of our development strategy, we also recognize the importance of developing the brand outside of malls," said J. David Karam, CEO of the Melville, N.Y.-based chain, according to Nation's Restaurant News.Continue reading...
chew on this
Posted by Dale Buss on October 21, 2013 06:17 PM
Global economic sluggishness continues to hold McDonald's back, CEO Don Thompson told investors today. And the chain doesn't seem to be able to do enough to escape the muck.
When Thompson elaborated on third-quarter earnings in a conference call, he could only report disappointing news: Global same-stores sales rose by only 0.9 percent during the period, "not as high as we'd like"; October sales should be "relatively flat" even with a slow year-ago number; and gambits ranging from new limited-time Mighty Wings to McDonald's long-standing Dollar Menu just aren't attracting the sales that McDonald's had hoped.
All Thompson could do was promise the investment community that McDonald's is doing everything it can to get past these challenges and succeed despite economic sluggishness in the US, Japan, China and other markets.Continue reading...
chew on this
Posted by Dale Buss on October 21, 2013 01:36 PM
Changes are coming to Chipotle, but management assures that it will all be worth it
The bottom line is that Chipotle CEO Steve Ells believes that the restaurant's formula of serving high-quality food at a quick pace, with natural ingredients and an overall better-for-you persona, will continue to be enough to help Chipotle out-pace growth by fast-casual rivals—and any other factor that comes its way.
But there will be adjustments for Chipotle along the way, Ells made clear in the company's latest conference call. And they will include a price increase of 3 to 5 percent next year for the first time in about four years. General food-ingredients inflation will play a role, Ells said, but so will completing Chipotle's efforts to weed out all GMO ingredients from its food-supply chain. (It doesn't choose to tackle GMO content in high-fructose corn syrup in popular soft drinks at this point.)
"What it will depend on is what happens with general ingredient inflation between now and then and what it costs us to remove GMOs from the rest of our igredients," Ells told analysts, adding: "We already have—and had for a long time—spent more money on our ingredients as a percentage of sales than our competitors or [any company] for which we have the records. And so we have high food costs, and that's not something that troubles us too much as long as we are able to [have] really high sales volumes in our restaurants."Continue reading...
Posted by Abe Sauer on October 18, 2013 01:39 PM
China is the second largest economy in the world and every significant brand's future is impacted by its growth (or collapse)—but who's got the time?! Here's the week's reads that will make you look like a keen China observer in case you find yourself immersed in a cultural conversation.
This week: Apple vs. Xiaomi… iOS7 pinyin… Zhuhai Android Store… the New York Times' new China venture… NBA's Yao Ming school… Lenovo woos BlackBerry… Beijing's "tourism loans"… Beijing's RV park… "Jaguar Beer"… Under Armor… Psy's "tourist police" outfits... and more.Continue reading...
Posted by Dale Buss on October 17, 2013 01:58 PM
Is it possible that McDonald's finally has jumped the shark? Its faltering performance has put the iconic chain in the crosshairs of securities analysts and investors lately, and even some of its own franchisees, as well as the predictable coterie of nutrition critics and low-wage-worker advocates.
"I think McDonald's has reached its apex,"said a franchisee in a new Janney Capital Markets survey of 29 McDonald's franchisees. Is he right?
Clearly the world's leading fast-feeder has been struggling for a couple of years under the leadership of CEO Don Thompson, who succeeded a very good run by the initially underestimated former CEO Jim Skinner. Same-store sales in the US and some other markets are barely staying above year-ago comparisons. And while new menu items proliferate, most of them have been for only a "limited time—such as the new Southwest Chicken Premium McWrap—and they tend to slow service.Continue reading...
chew on this
Posted by Dale Buss on October 17, 2013 10:54 AM
Over the last few years, Domino's has retooled its pizza crust, broadened its menu to include more non-pizza items and, most recently, rolled out a new pan-style fresh pizza to rave reviews—and strong sales.
Yet now Domino's CEO J. Patrick Doyle says that the brand's growth in the future will be less dependent on a steady flurry of new products and more reliant on another, perhaps surprising advantage that the company has gained over most of the pizza world: its digital prowess.
That includes recent innovations such as the creation of Domino's "pizza profiles" online to facilitate ordering, and its experimentation with live cameras to show customers via web video their pizza as it is actually being made.Continue reading...