New York City once repelled fast-food chains. Now it is their hottest market

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By Aaron Elstein
http://www.crainsnewyork.com/article/20171106/SMALLBIZ/171109948/new-york-city-once-repelled-fast-food-chains-now-taco-bell-chik-fil-a-and-more-think-its-the-place-to-eat-fast-food

The busiest place in town during lunch hour is the Chick-fil-A at the corner of West 37th Street and Sixth Avenue, where a fried chicken sandwich is sold every six seconds. To keep the frenzy from turning into a free-for-all, staffers are trained to be scrupulously polite. “I always ask them, ‘Did you bring your smile to work today?'” said the restaurant’s owner, Oscar Fittipaldi, who opened the Atlanta-based chain’s first standalone New York outpost two years ago.

The Garment District franchise sells more than 3,000 sandwiches a day, often with a side of waffle fries, and generates about $13 million in revenue, Crain’s estimated based on data from Fittipaldi. That means it sees the same revenue as Balthazar, the chic SoHo brasserie where the average check is $70, nearly seven times a typical Chick-fil-A tab.

The company wouldn’t comment on Fittipaldi’s revenue, but his success is clearly drawing a slew of followers. Chick-fil-A has plans to open roughly 12 more restaurants in the city, starting next year with a 5-story, 12,000-square-foot emporium in the Financial District. In September Taco Bell announced plans to triple its current 25-store city footprint, and Five Guys, which has grown to about 20 restaurants here since 2009, will soon be opening another one near Fittipaldi’s Chick-fil-A.

New York City is quickly becoming the capital of fast-food nation. More chains are moving in to replace diners and other independent restaurants forced out by relentlessly rising rents. Although many chains have broadened their menus and are experimenting with fast-casual dining, the bread and butter for most remains fried meat and a hefty soft drink.

“Fast-food chains used to draw a skull and crossbones around New York when they were looking for places to expand,” said Gary Occhiogrosso, who runs consulting firm Franchise Growth Solutions. “Now they all want to be here.”

In 2008 the Center for an Urban Future began tracking the growth of local chain retailers and restaurants, and counted about 5,400 city locations. By last year the figure had grown by more than a third, to 7,300. What struck Executive Director Jonathan Bowles was that one sector was responsible.

“All the growth is in food,” Bowles said.

Today New York is home to 3,419 chain-restaurant locations, according to the Department of Health. Leading the march is Dunkin’ Donuts, which has 596 city stores, a 75% increase since 2008. Over the past four years, meanwhile, the number of independent restaurants has declined by 8%.

Chain ganging
While chains still represent a minority of the city’s 26,546 restaurants and bars, their growth is startling because fast-food purveyors have been a popular punching bag for city officials for more than a quarter century. Former Mayor Michael Bloomberg banned trans fats from cooking oils and forced fast-food restaurants to post calorie counts for all menu items so people could better understand the health implications of what they were eating. Earlier this year the city also required restaurants to post sodium content.

Gov. Andrew Cuomo targeted the industry with legislation raising the minimum wage for fast-food workers until it reaches $15 per hour at the end of next year. And Mayor Bill de Blasio has singled out fast-food companies, claiming they are especially exploitive of their 65,000-strong New York workforce.

“If you want an example of how the 1% have gotten wealthier on the backs of working people, here you have it: the fast-food industry,” he said last year.

So why are these restaurants growing in such a seemingly hostile environment? Turns out, the environment isn’t so hostile after all.

A record 4.4 million New Yorkers are employed, and many want something fast and cheap for lunch. Tourism has doubled in the past 20 years, to more than 60 million, and many visitors look for familiar fare to munch on. And while there appears to be a glut of fast-food restaurants across the country—which experts see as a growing threat to the industry as a whole—New York is still relatively underrepresented. According to the Department of Labor, only 2% of the city’s private-sector employees work in limited-service restaurants, compared with 4% nationally.

“There are some big opportunities for fast food in New York because foot traffic is tremendous,” said David Henkes, a senior principal at consulting firm Technomic. “For the chains, premier locations here are all about showing their colors and strength.”

Those premier locations don’t come cheap, but fast-food joints are well-positioned to pay the rent because many of the busiest locations are company-owned or controlled by large operators. The city’s leading Wendy’s franchisee, for example, is The Briad Group, a New Jersey–based firm with 21 locations in the five boroughs, plus about 60 TGI Fridays and at least two Hilton hotels.

Fast-food restaurants are also expanding to create more locations to distribute their food to home-delivery outfits like UberEats and Seamless, said Nick Colas, co-founder of market analysis firm Datatrek Research. “The best way to get orders quickly to people who use these services is to have restaurants scattered around the city,” he said.

That growth is not only changing city storefronts; it’s also making New York’s traffic worse. Because fast-food restaurants often have little storage space, they require frequent food deliveries, which means more trucks on the streets. Mark Solasz, a vice president at Master Purveyors, a Bronx-based firm that supplies meat to about 400 restaurants, including local chains such as burger spot J.G. Melon, said the only way he can cope with soaring demand is by deploying bigger vehicles. “We’re sometimes doing three deliveries a day,” he said. Last month the mayor responded to the growing crush by announcing a pilot program banning deliveries on the city’s most congested streets during morning and evening rush hours.

At the same time, overall restaurant-industry sales are stagnating, so the name of the game is to seize market share from rivals. The environment plays to the strength of fast-food giants with vast marketing resources and purchasing power. And it helps explain why share prices of McDonald’s and the company that owns Burger King and Popeyes are up 53% and 49%, respectively, over the past 12 months.

In addition, steakhouses catering to the expense-account set have struggled: Del Frisco’s stock is down 2%. “Momentum is really on the side of quick-service restaurants,” Henkes said.

Before the Big Mac
Fast food came to New York relatively late. The first McDonald’s in Manhattan, at the corner of West 96th Street and Broadway, did not open until 1972, seven years after Wall Street bankers took the company public. The response was rapturous.

“A rush of pleasure surges through my body as it makes contact with my tongue,” a Village Voice reporter wrote. “The ecstasy is complete as I swallow the first bite of a Big Mac.”

The thrill didn’t last. In 1974 McDonald’s attempt to open an Upper East Side location was greeted by a group called the Friends of 65th Street, who gathered 15,000 signatures demanding the Golden Arches stay out. The New York Times wrote a disapproving editorial, and McDonald’s slunk away. “For the first time, we were on the defensive,” an executive said, according to John Love’s book, McDonald’s: Behind the Arches.

That was just the beginning of fast-food’s woes in New York. In 1986 McDonald’s agreed to begin disclosing nutritional information after state Attorney General Robert Abrams began investigating how the company marketed its McNuggets. Burger King followed in 1991, under pressure from the Dinkins administration’s Consumer Affairs commissioner, Mark Green. The 2004 movie Super Size Me also caused a big stir by documenting how filmmaker Morgan Spurlock gained 24 pounds after exclusively eating at McDonald’s for a month.

Fast food has long been linked to ill health. But it looks as if calorie postings are not doing much to stem demand. In a study last year, researchers at New York University found that only about 1 in 12 customers chose a healthier option after seeing calorie counts on fast-food menus.

“Dietary changes are more difficult than anything we’ve tackled,” said Beth Weitzman, an NYU professor of public health and policy. “We all really struggle to find what’s right.”

But even as scores of Burger Kings and McDonald’s set up shop in the city, other chains decided coming here wasn’t worth the bother, especially since it was tough to find enough space to accommodate their restaurants’ cookie-cutter formats.

“New York, especially Manhattan, was seen as just too hard,” recalled Lisa Oak, a former executive in charge of real estate at Subway.

But in the 1990s, the sandwich chain took a leap and moved into Manhattan even though it meant squeezing into storefronts as small as 300 square feet. There are now around 140 Subways in Manhattan, plus about another 300 throughout the rest of the city.

“People who lived in the suburbs and worked in the city were waiting for us,” Oak said.

In short order the rush was on, led by upstarts challenging the established chains. In 2003 Chipotle Mexican Grill debuted in Manhattan, and the next year restaurateur Danny Meyer opened the first Shake Shack, in Madison Square Park. In recent years the old warhorses have counterattacked. The number of Popeyes in the city has grown by 60% in less than a decade, to 90. Arby’s, which opened its first New York location in 1980, in Penn Station, expanded into Brooklyn in 2010, and a spokesman said, “We believe Manhattan and the boroughs are prime for future development.” The Checkers burger chain has doubled its footprint in the city over the past five years, according to Bowles’ research, to 37 locations.

Meanwhile, some independent restaurateurs have learned that the best way to fight the big chains is to start their own.

Made to order
In 2012 Danny Hodak opened Taboonette, a fast-food offshoot of Taboon, the full-service restaurant he runs in Hell’s Kitchen. Inspiration came from listening in his car to McDonald’s founder Ray Kroc’s memoir, Grinding It Out.

“I loved systems and finding procedures that solved problems,” Hodak said.

Today Taboonette does great business from its location near Union Square because the kitchen can serve up restaurant-quality kebabs or a falafel dish with a side of rice, salad and a Yemeni hot sauce called zhug in just three minutes. It costs about $13, which is considerably more than what most fast-food outfits charge for meals. With his 900-square-foot space generating $1.8 million in revenue, Hodak plans to start looking for franchisees to spread his concept around Manhattan.

“I feel a real sense of urgency because so much competition is coming,” he said.

Indeed, many fast-food giants are trying to mimic Hodak’s success and capitalize on changing tastes by offering high-end fast food. Several of the Taco Bell restaurants coming to the city will have a cantina format, in which alcohol might be served and diners will be invited to linger. For his part, Hodak plans to take a page from the big players and install a kiosk to take customer orders in a bid to make lines move faster.

Across the city, fast-food restaurateurs are installing automated kiosks at a rapid rate to replace human order-takers, whose wages are rising. At Shake Shack’s 19th and newest location in the city, on Astor Place, customers can place orders only via kiosks, though employees, dubbed hospitality champs, are on-site to help tech-challenged diners use the devices. Automation explains why employment growth at fast-food places has been cut in half over the past year and is running two-thirds below its 2011 rate, according to state Labor Department data.

“While new limited-service restaurants continue to open in the city,” said Andrew Rigie, executive director of the New York City Hospitality Alliance, “employment growth in the sector has increased at a much slower pace since New York started its minimum-wage experiment.”

Demand for kiosks means more work for Alejandro Swaby, director of sales at tech-services firm Cervion Systems. He charges $149 a month to rent a kiosk—”Equal to 15 sandwiches,” he said—and believes the devices have potential beyond fast food. He is talking to full-service restaurants about installing them at their bars to make it easier for diners to order a snack while waiting for a table. Swaby said he much prefers the pizza at Campania on his native Staten Island to any chain’s and sees kiosks as a way to help independent operators maximize profits as fast-food giants muscle in.

“I’m not anti-employee at all,” he said, “I’m pro–independent restaurant.”

The rising minimum wage is also opening doors for Avi Sharon, who runs a produce wholesaler in Long Island City called Adams Apple. After selling commercial time on Howard Stern’s radio show and cars in California, Sharon took over his father’s business serving mom-and-pop stores three years ago and invested $200,000 in machinery that peels onions, dices tomatoes and cuts carrots. He now supplies such fast-food restaurants as Wok to Walk and Maoz Vegetarian, a Mediterranean-themed chain.

“With the minimum wage going up, I figure there’s no way a fast-food place can sell a burger for $2.99 unless they hire someone like us,” said Sharon, who is planning to buy another $400,000 worth of equipment.

Greasy gourmand
Mike Abrusci, 29, is a native suburbanite who likes stopping by the nearest Taco Bell after gigs at comedy clubs before heading to his home in Ridgewood, Queens.

On a recent afternoon at the Union Square location, Abrusci ordered a Crunchwrap Supreme filled with guacamole and potatoes, which he described as “a quesadilla on steroids,” and a 7-Layer Burrito for later. His bill rang up to $14.

Growing up in Central Islip, Long Island, Abrusci and his buddies would hang out at Taco Bell after school. He loves the city and its variety of restaurants, but fast food fits his budget, and hitting the familiar chains has proved reassuring.

“One day I was feeling anxious about being in the city. I went to a Target, walked around and felt better,” he said. “Taco Bell does the same thing for me.”

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Filed under Uncategorized, Fast Casual, Quick Service, Health, Growth, Revenue, Chicken, Sandwiches, Fries, Fast Food, Technology

Coors Light has had a rough year, but not as bad as Bud Light

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By Greg Trotter
http://www.chicagotribune.com/business/ct-biz-miller-coors-light-beer-decline-20171026-story.html

Coors Light, the second-best-selling beer in the U.S., is having a rough year.

The amount of Coors Light sold in stores in recent months has declined at a faster rate than even its slide of recent years, according to scan data and industry experts. The good news for Chicago-based MillerCoors? At least for now, Bud Light, the top-selling beer in the country made by competitor Anheuser-Busch InBev, is in even steeper decline.

Premium light beer, as it’s called in the industry, peaked in 2007 and 2008. Since then, many American drinkers have turned toward craft beer and Mexican imports; others have drifted into wine and spirits.

Make no mistake: MillerCoors and Anheuser-Busch InBev still sell an enormous amount of light beer in the U.S., just not as much as they once did. Combined, the two beer giants — which sell the vast majority of light beer in the U.S. — are down about 26 million barrels in shipments to wholesalers since 2008, according to figures provided by Beer Marketer’s Insights, an industry trade publication.

“They’re getting hit from all over. They’re really taking a lashing,” said Vince Trunzo, co-owner of Affiliated Marketing, a managing company of about 350 liquor stores in the Chicago area, including Armanetti, Miska’s and Cardinal stores.

Trunzo estimated that sales of premium light beer have been down about 4 to 5 percent a year in his stores. Meanwhile, sales of wine, spirits and craft beer have increased. Customers who used to buy a 24-pack of Coors Light are now getting a 12-pack — along with a sixer of craft beer, Trunzo said.

Trunzo said he’s not devoting any less shelf space to MillerCoors products just because the light beer is in decline.

“MillerCoors has been a good partner for many years. We’re not going to kill ’em because they’re going through a little struggle,” Trunzo said.

MillerCoors executives declined to comment during the quiet period leading up to parent company Molson Coors’ Wednesday earnings release.

But in a recent post on the company blog, MillerCoors noted that Coors Light case volume was down 3.4 percent year-to-date through Sept. 30, according to Nielsen data, compared with Bud Light, which was down 5.7 percent over the same period. Chief Marketing Officer David Kroll called it a “challenging year” for Coors Light in the blog post but said he expected next year to be better because of improved marketing and packaging.

To help offset such sales declines, Anheuser-Busch and MillerCoors have both acquired craft breweries and introduced new brands in recent years. MillerCoors plans to roll out Two Hats, a fruity light beer aimed at millennials, and Arnold Palmer Spiked Half and Half early next year. MillerCoors also recently struck a 10-year deal to import and market Sol, the company’s first Mexican import beer.

There are obvious success stories in MillerCoors’ vast portfolio: Blue Moon keeps rising despite an overabundance of craft competitors. Leinenkugel had one of its best summers ever. Coors Banquet continues to grow. Hamm’s is going great as the hipster beer of the moment.

Still, it’s unclear at this point how MillerCoors will reach its publicly stated goal of revenue growth by 2019 if its two top-selling beers continue their slow descent.

Together, Miller Lite and Coors Light represent about 57 percent of the company’s business, said Eric Shepard, executive editor of Beer Marketer’s Insights.

“The numbers are the numbers. They’re going to have a very, very difficult time making up that volume,” Shepard said.

The future for light beer doesn’t look much brighter in bars and restaurants than it does in stores. On-premises sales of domestic light beer are projected to decrease another 1.2 percent this year, following five straight years of decline, according to data from Beverage Marketing Corp.

One exception to the domestic light beer fizzle: Michelob Ultra Light, owned by Anheuser-Busch, has been quietly blowing up, growing sales by double-digit percentages.

“To some degree, growth of one is coming at the expense of the other. It’s hard to grow two struggling brands in a shrinking category,” David Henkes, senior principal at Technomic, a Chicago-based market research firm, said of Miller Lite and Coors Light.

At Nisei Lounge, a beloved Wrigleyville dive bar, Miller Lite remains the top-beer, said Nisei Lounge beer buyer Pat Odon.

But what’s selling most on draft reflects how times and tastes have changed.

“Consumers at this specific bar have no interest in macro beers on draft, except Miller High Life,” Odon said. “On draft, people want IPA, IPA, IPA.”

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Technomic’s Take: The Changing Face of Foodservice Purchasing

Dave_articleBy David Henkes, Senior Principal on August 17, 2017
https://www.technomic.com/newsletters/technomics-take/changing-face-foodservice-purchasing

Independent restaurants have been central to the success of both foodservice distributors and food and beverage companies serving the industry. They are more profitable (mostly due to inefficiencies of the purchase process and pricing practices that aren’t transparent), and their health has been a stabilizing force in an industry where many chains (particularly large casual-dining chains) have struggled to grow as saturation, value issues, competition and lack of differentiation have impacted their success.

However, while independents are generally healthy (relative to the rest of the industry), distributors and manufacturers cannot assume that these operators will continue to drive incremental profitability. As costs increase at the operator level, due to commodity swings, labor costs, rent and other input costs that continue to rise, operators are increasingly looking for options that are perceived to save them. As a result of this changing nature of foodservice purchasing, Technomic estimates that there is $1 billion to $2 billion in additional manufacturer profitability at risk over the next five years. This will be driven by the following:

Penetration of GPOs is continuing across all foodservice segments, but critically we see that many GPOs are now focused on growing share within the independent restaurant segment. Recent Technomic research indicates that nearly 14% of independent operators are active within GPOs and a larger number than ever before are considering joining in the near future.

While chains don’t have the same growth trajectory that they did several years ago, they continue to add units, and smaller midsize chains continue to excel. Most of these operators negotiate directly and receive contract pricing, further reducing the profitability of the market place.

Most major noncommercial segments (not only healthcare, but colleges, B&I, etc.) are heavily driven by contract pricing. For most of these segments, actual discretionary purchases that are not part of a GPO or foodservice management firm contact amount to 10% or less of their purchases.

These dynamics have several major implications for the foodservice industry, most notably:

  • Distributors and manufacturers have less leverage as chains and group purchasing organizations become power buyers. To a large degree, the growing nature of contracted procurement in foodservice has prompted many of the mergers and acquisitions over the past several years.
  • Distributor economics don’t work as well with contracted business. Most of this is cost plus and distributors, who covet the higher profitability of the true independent operator, need to become much more efficient in terms of logistics and drop sizes in an environment where the margin is generally under 10%.
  • GPOs have taken their negotiated prices meant for certain customers and have extended them into adjacent operator segments, often without manufacturer or distributor approval, further suppressing margins throughout the value chain.
  • The nature of the operator sales call, particularly for manufacturers, changes to one where they are not truly selling their products or solutions, but working to ensure compliance with a contract. It also impacts the fees and compensation that manufacturers are willing to pay to brokers and distributors, given that manufacturers often perceive selling to a GPO account to be less valuable to the manufacturer than bringing in a higher-margin independent account.

Technomic predicts that over 70% of the foodservice purchases will be contracted within the next five years (up from about 65% today) and the industry needs to be prepared as this shift continues. Margins, which have already been compressing over the past several years, will continue to tighten, and forward-thinking companies should strategically address this as part of longer range strategic planning and work to manage the change proactively to ensure the continued health and strength of the business. To do so, Technomic recommends that companies:

Fully understand the sales and volume incrementality of GPO and other contract business relative to the lower overall margin.
While lower margin, contracted business can be desirable if it provides incremental sales or volume opportunities. Manufacturers and distributors must understand and view GPOs and other contracted business in light of strategic priorities and which segments, products and entities will drive growth. While often lower margin, contract business can benefit distributors by increasing drop size and giving primary distributors a bigger share of purchases.

Understand and expand upon your leverage.
Contracted business is often viewed negatively because of the perceived loss of control of the operator. However, understanding key leverage points is critical, particularly for manufacturers to create pull at the operator level to avoid the commodity trap.

Audit contract compliance.
Another reason that GPOs and other contracted business is often viewed negatively is due to compliance and the complex nature of the purchase. Auditing and managing trade-spending programs, understanding true cost to serve and having dedicated personnel to oversee contract compliance are all best-in-class methods of reducing the leakage of funds that can have a negative impact on profitability.

Construct proper guardrails to ensure that higher margin business remains profitable.
Contract pricing should only be used for the entities for which that pricing is intended; manufacturers and distributors must ensure that guardrails are in place to avoid price-extendibility, where favorable pricing based on the contract is offered to other operators.

Realize that sales force realignment may be necessary.
As the industry heads toward higher share of contracted business, the nature of the sales call is changing. This may necessitate deployment of sales as activities change from demand creation to driving compliance.

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Filed under Casual Dining, Distributors, GPOs, Growth, Health, Independent Restaurants, Manufacturers, Uncategorized

Global restaurant scene leaves U.S. market in the dust

left-behind_1509634835http://www.restaurantbusinessonline.com/consumer-trends/global-restaurant-scene-leaves-us-market-dust

By Peter Romeo on Nov. 02, 2017

Although overseas expansion rates have slowed, the global foodservice market is still growing at a clip that makes the U.S. piece of the business look like a minivan chasing a Maserati, according to a just-released snapshot.

Overall, global sales are increasing at an annual pace of 5.6%, compared with the U.S. rate of 3.4%, according to the study, conducted by Technomic for The Coca-Cola Co. and presented at the Global Restaurant Leadership Conference this week.  The figures are nominal and not adjusted for inflation.

The researcher pegged the current size of the international foodservice market—U.S. sales included—at $3 trillion, of which the American market contributes about $872 billion. Nearly two-thirds of that amount, or 60%, is generated by restaurants, with the remainder coming largely from so-called noncommercial facilities.

The figures verify that the U.S. remains the globe’s biggest restaurant market in terms of sales, outstripping China’s $624 billion in annual intake. But Technomic noted that China’s restaurant revenues are surging at the rate of 10.9% per year, the highest in the world by far.

It already sports more restaurants than any other nation, with nearly 9 million outlets.

Many of the trends driving U.S. sales are also boosting business abroad, according to the picture presented by Technomic. Delivery and takeout, for instance, are universal phenomena, noted Joe Pawlak, a managing principal of the research company. On a global basis, “dine-in visits are the minority,” he said.  The one exception to that new world order among the major markets tracked by Technomic is France, where dining in a restaurant is an entrenched part of the culture.

Similarly, from the North Pole to Antarctica, “the availability of healthy items is becoming as important as affordability and variety,” said co-presenter David Henkes, Technomic’s senior principal. Globally, 69% of consumers cited the availability of healthy options as being a very important factor in choosing where to buy a meal.

Henkes stressed that the sensitivity is now literally universal; in every market monitored by Technomic, more than half the consumers spoke of being profoundly influenced in their choice of restaurants by health considerations.

And that quest isn’t just for healthful food options, Henkes added. “Consumers are asking for better-for-you beverages, and what they’re asking for is changing,” he said.

Henkes explained that the definition of “healthy” continues to evolve.  “We asked consumers what healthy actually means,” he said. “The No. 1 attribute among the consumers that we surveyed was ‘natural.’ Forty-four percent of consumers say that is the leading way to define healthy.”

Another universal sales driver is snacking, Pawlak observed. “In all countries save two, over 70% of consumers snack daily,” he revealed.

The exceptions: China, where three-meal-a-day dining is still the dominant pattern, and France, where eating is regarded as a celebration best reserved for a full meal.

The Global Restaurant Leadership Conference drew some 1,233 restaurant leaders from around the world to Dubai for three days of discussions on tomorrow’s opportunities. The conference is presented by Winsight, the parent company of Technomic and Restaurant Business.

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Why Hasn’t McDonald’s Gotten Rid Of Artificial Additives In The Big Mac’s Special Sauce?

It seems like every day we hear about yet another fast food chain that’s cleaning up this or that menu item to appeal to health-conscious consumers, and McDonald’s is no different: only last week, the Golden Arches announced 100% antibiotic-free McNuggets, and that it would remove high fructose corn syrup from its buns. But there’s still one popular item on its menu that contains a slew of artificial preservatives, and that same HFCS: the Big Mac’s special sauce. What gives?

The trend these days is all about simplifying recipes and cutting down the ingredients lists, but as The Street points out, McDonald’s famous “special sauce,” which is slathered on every Big Mac, has a whopping 32 ingredients.

Included in that list is high-fructose corn syrup and as many as five artificial preservatives, including potassium sorb ate and caramel color. Those are the kinds of additives one might have expected in the 1980s, but not in the current food mood guided by health-conscious consumers.

The Street cites an insider who says McDonald’s is looking for ways to improve its ingredients across its menu, but there’s not going to be a cleaner special sauce that’s free of artificial ingredients coming anytime soon. And when asked by The Street if HFCS and preservatives would be removed from special sauce this year, a McDonald’s spokeswoman echoed the company’s press release from last week regarding the changes to its buns and McNuggets.

So why not jump on the healthy bandwagon and just ditch all that stuff? One reason could be the iconic status of special sauce, experts say, which plays a large part in making the Big Mac the Big Mac. The company might not want to risk ticking off dedicated customers if they get the reformulation wrong, for example.

“I suspect that they’re working to make sure the flavor profile doesn’t change on that sauce,” Technomic Advisory Group Senior Principal David Henkes told The Street. “Making menu items healthier is important, but for such an important part of the menu as the Big Mac, I’m sure they want to make sure it’s right.”

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In Wake of E. Coli Outbreak, Chipotle May Have Another Scare to Contain

Amid a growing number of E. coli cases stemming from visits by people to certain Chipotle (CMG – Get Report) locations in Washington State and Oregon, the popular burrito joint may have another scare to contain.

That is, investors continuing to flee its stock should the company miss its sales guidance for the full year as consumers across the country avoid one of their favorite lunch and dinner spots due to health concerns. Shares of Chipotle are already down about 6% this week as the E.Coli news has gained nationwide attention, hinting investors are worried about fourth quarter sales trends. And they should be.

As Chipotle points out in its annual report, “instances of food-borne illnesses, real or perceived, whether at our restaurants or those of our competitors, may subject us to liability to affected customers, and could result in negative publicity about us or the restaurant industry that adversely affects our sales.”

Chipotle’s full year guidance calls for a same-store sales increase in the range of a low to mid-single digit percentage. For the nine month period that ended Sept. 30, Chipotle’s same-store sales have increased 5.5%.

Consumers voicing concerns about eating at Chipotle on Twitter suggest the restaurant chain may be currently dealing with sluggish sales more broadly.

 

Tweets

“Certainly there will be a short-term sales impact, say over the next month, given the attention and social media buzz — consumers don’t tend to think of food safety issues until they actually happen,” said David Henkes, vice president at food industry research firm Technomic.

But Henkes added that “I don’t think there will be a longer term impact as Chipotle has built up a nice reservoir of goodwill among people who believe in its food with integrity mission and they have responded proactively to the latest incident.”

Not helping Chipotle’s attempt to reach its sales goals for the year is that sales prior to the E.Coli outbreak, which were first reported last Saturday, were somewhat lackluster. The company admitted on an Oct. 20 earnings call with analysts that sales in October had been “very, very choppy” and cooled in August and September following a burrito giveaway promotion in July.

Chipotle did not return a request for comment on the status of its sales guidance. In a statement from Chipotle founder and co-CEO Steve Ells on Tuesday, no mention was made of current sales trends or financial guidance. “The safety of our customers and integrity of our food supply has always been our highest priority,” said Ells, adding, “We work with a number of very fresh ingredients in order to serve our customers the highest-quality, best-tasting food we can. If there are opportunities to do better, we will push ourselves to find them and enhance our already high standards for food safety.”

Ells’ comments come on the heels of more people reporting E. coli symptoms following recent visits to several Chipotles in Washington State and Oregon. On Saturday, the number of E. coli cases in the two states stood at 22 but that has since increased to 37.

In Oregon, the number of confirmed cases increased from 3 on Saturday to 12 on Tuesday, with at least eight of those people becoming ill after eating at a Chipotle. Meanwhile, health officials in Washington State reported six new confirmed cases of E. coli, bringing the total sickened in the outbreak in the state to 25. A Washington State health official said 23 of the 25 people ate at Chipotle restaurants.

A total of 43 of Chipotle restaurants, or about 2.3% of its total U.S. locations, remain closed in Oregon and Washington. According to Chipotle’s statement on Tuesday, it’s taking multiple measures to correct any problems at the closed locations. Specific actions underway include conducting additional deep cleaning and full sanitization of the restaurants in the area, replacing all food items in the restaurants closed, and batch testing some ingredients before resupplying.

For the full story, visit www.thestreet.com

http://www.thestreet.com/story/13350634/2/in-wake-of-e-coli-outbreak-chipotle-may-have-another-scare-to-contain.html

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Fast-casual outlets are a small part of the UK’s restaurant trade – but the sector is growing rapidly, with sales growth outpacing the number of locations opening. Technomic’s David Henkes argues fast casual is set to take off in the country.

Franco Manca does not entirely use locally-produced ingredients but has "a good food story to tell that lends credibility and authenticity"

Franco Manca does not entirely use locally-produced ingredients but has “a good food story to tell that lends credibility and authenticity”

George Bernard Shaw’s quip the United States and Great Britain are two countries separated by a common language might apply to the words we use for some foods -especially chips,which you might take to mean French fries but makes me think of crisps.

But plenty of things about the USrestaurant industry translate perfectly to the UK, especially the growth potential for fast-casual restaurants, which have dominated foodservice in my home country for years. The same appealing price points and service style are likely to entice British consumers looking for something between fast food and traditional full-service restaurants.
Fast casual is quite young in the UK, with sales of just GBP1.1bnamong in theTechnomic UK poll of the top 100 restaurant brands in 2014. But the segment already has impressive momentum, with an 8.6% increase in turnover last year. The sales growth even exceeded the 5.7% increase in UK fast casuallocations last year, suggesting average sales per unit are also expanding at a healthy pace.

While that makes fast casual a relatively small part of the UK’s GBP31bnrestaurant industry, it also means there is tremendous potential for growth in the segment and virtually limitless upside. The field is about to get crowded very quickly, however, as homegrown fast-casual chains like Pret a Manger will soon be competing for retail space and consumer attention with American brands making their way to the market.

In this column, I’ve already discussed the so-called “better burger”chains eyeing the UKbut other fast-casual segments will be targeted as well, including Mexican and pizza. For instance, in September, American fast-casual brand MOD Pizza announced a joint venture with Sir Charles Dunstone and Roger Taylor to bring the concept to the UK, with the first location expected to open in London by mid-2016. Dunstone, founder of TalkTalk Telecom Group, and his partner operate 30 units of Five Guys Burgers and Fries in the United Kingdom and plan to expand that fast-casual burger chain in France.

Two practices stand out among the fast-casual brands succeeding in the UK so far, which can be found in their American counterparts as well.The first is a narrowed focus on a limited menu, which saves brands time and money by simplifying operations and minimizing needs for retail space and equipment. It also helps chains differentiate from the competition with a signature menu item, such as at The Meatball Shop in the United States, a six-unit brand that uses its namesake meatball as a canvas for experimenting with different proteins and new flavours.
Having fewer menu items puts a premium on customisation, which consumers continue to love in the United States and, increasingly, in Europe. This personalisation trend works to great effect at Chatime, which has 11 locations in the U.K. despite entering the market only in 2012. Consumers can choose from one of several Taiwanese-style bubble teas and pick the toppings and sweetness level they want in their drinks.

Another key practice for fast-casual success is honest sourcing. Providing more seasonal or locally grown ingredients fits with consumers’changing definitions of health, and the success of a concept like London’s salad specialist Chop’d bears that out. Being able to tell the story about where food and ingredients come from satisfies a big consumer demand.

But fast casuals don’t need to get everything from organic or hyperlocal sources, as long as they have a good food story to tell that lends credibility and authenticity. Take British chain Franco Manca, for example, which can crank out a personalized Neapolitan pizza in under a minute. Some of its ingredients are sourced from the UK, but many of its commodities crucial to baking a genuine Neapolitan pizza come from Italy, like Sicilian extra-virgin olive oil and San Marzano tomatoes.

On my side of the Atlantic, the fast-casual segment has been the dominant story of the restaurant industry for several years, posting double-digit gains in sales and locations even though it is a mature sector with some giant players. Britain’s roster of fast-casual companies is not as deep as that for the United States -yet -but Technomic nonetheless is forecasting serious expansion in this part of the UK foodservice industry.

To read the original article, visit www.just-food.com

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