Week of April 12, 2010

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Pizza Pizza Founder Michael Overs Passes Away at 70
Michael Overs, founder of Pizza Pizza, lost his battle to cancer last week at the age of 70. Overs launched the popular pizza chain in 1967, when he opened a 300-square-foot unit at Parliament and Wellesley streets in Toronto. From that single unit, the company mushroomed into one of the country’s leading pizza chains with a total of 635 restaurants across Canada, primarily in Ontario and Quebec, as well as the Alberta-based Pizza 73 chain. Overs is considered one of the foodservice industry’s key innovators. He coined the popular telephone jingle, 967-11-11, and is credited with creating what’s believed to be among the world’s first insulated pizza delivery bag. Paul Goddard, Overs’s son-in-law, will replace him as Pizza Pizza’s CEO.

MTY Food Group Targets Restaurant Trusts — Analysts
Urged on by investment bankers, Montreal-based MTY Food Group is poised to acquire one or more Canadian restaurant trusts as they enter their final months of existence, according to Globe and Mail financial writer Andrew Willis. Income trusts lose their favourable tax status at the end of this year. Despite making three acquisitions in 2009, including Country Style doughnuts, TSX Venture-listed MTY has more than $20 million in cash, has a $195-million market capitalization, and its stock trades at a premium multiple of 15 times last year’s earnings. Founded by Stanley Ma, MTY’s principal focus is food-court dining, and it has launched some 25 different brands, including Tiki Ming and Thai Express. According to Willis, there are a number of trusts worth less than $100 million, including Priszm, owner of the KFC, Pizza Hut and Taco Bell franchises in Canada and coffee chain Second Cup.

MTY Group spokesman Jean-François Dubé told The Globe and Mail last week that MTY’s  long-term strategy is to continue expanding by purchasing rival chains, though he declined to name specific targets. Analyst Sarah Chiasson at Beacon Securities said in a report issued last week, “We expect future growth to come from the acquisition of additional banners in Canada.”

Extreme Brandz to Open Mucho Burrito Locations in the U.S.
Mississauga, Ont.-based Extreme Brandz is opening its first two Mucho Burrito franchised locations in the U.S. The first unit is slated for Seattle and is expected to open in May. The fast-casual, healthy Mexican concept is targeting some 60 to 100 locations in Arizona, California, Florida, Illinois and New York over the next five years. Mucho Burrito currently has 26 locations in Canada. Parent company Extreme Brandz is already operating in the U.S. market with 34 franchised locations for its Extreme Pita concept (There are 230 Canadian locations.). Extreme Brandz also owns Purblendz, an all-natural smoothie concept, which is currently twinned with 16 Extreme Pita operations and can be twinned with Canadian and U.S. Mucho Burrito locations to build incremental sales volume.

Commenting on its website, Alex Rechichi, co-founder and CEO of Extreme Brandz, noted that Mexican food makes up 62 per cent of the ethnic cuisine market in the U.S. “The idea of expanding Mucho Burrito into the United States has been our plan from early on, as Mexican food has always been extremely popular there,” he said. “We look forward to bringing our upscale offering to local consumers and positioning ourselves as the premier concept in the Mexican category.”

50-Year Agreement Covers 23 Service Centres on Ontario Highways
A 50-year agreement to build 23 new service centres with restaurants on Ontario’s 400 and 401 Highways has been announced by Bethesda, Md.-based Host Kilmer Service Centers and Toronto-based Kilmer Van Nostrand Co. Limited. Restaurants appearing in the network of service centres could include: Tim Hortons, Casey’s, East Side Mario’s, Extreme Pita, Pizza Pizza, Teriyaki Experience, Yogen Früz, NY Fries, Starbucks Coffee, A&W, Burger King, Brioche Dorée, Cold Stone Creamery, Quiznos and Pusateri’s fine-food markets. In addition, The Market, a customized convenience store developed by HMSHost for travel venues, will feature a large selection of fresh, hot and cold gourmet “foods to-go” as well as newspapers, maps and magazines. The full-service fuel stations will be operated by Canadian Tire. Host Kilmer Service Centers are a division of HMSHost Corporation. Kilmer Van Nostrand Co. is the private investment holding company of Toronto businessman Larry Tanenbaum, best known for ownership of Maple Leaf Sports and Entertainment Ltd.

McDonald’s Canada Offers $1.99 McMini Sandwich
McDonald’s Canada has rolled out a new nationwide menu item — the McMini sandwich. It made its test-market debut in Quebec as a limited-time offer, and it’s now available coast-to-coast. Priced at $1.99, the chicken breast sandwich comes in crispy or grilled versions, in either pesto or spicy-Thai flavours, and is served in a 4.5-inch baguette. “Canadian customers demand variety, quality and convenient menu items without sacrificing on taste,” said Anne Parks, director of Menu Management. “We received such positive feedback on the McMini from the Quebec market that, in the spirit of listening to our customers, it was only natural to extend the product offering to other parts of the country.”

Fairmont Recapitalizes, Raises $847 M from New Investors
Toronto-based Fairmont Raffles Hotels International has raised $847 million of capital through new cash-rich investors. Of that, $467-million was raised by selling newly issued shares, representing 40 per cent of the shares outstanding to Voyager Partners Ltd., a company based in the Cayman Islands. In a separate deal, Fairmont agreed to sell a Singapore-based hotel to Qatar’s sovereign wealth firm, Qatari Diar, for 275-million, with an agreement that Fairmont will win $105 million worth of management contracts to run some of their properties over the next five years. Qatari Diar is described as the largest purchaser of luxury hotels in the world. “We are becoming more of an asset-like company, whose business is in brands and management contracts, not the bricks and mortar of real estate,” said William Fatt, Fairmont’s CEO. “2010 will be a fantastic year for us,” added Fatt. “[We] have the wind at our backs.” There are nine new Fairmont properties coming on stream in the next year, including the Fairmont Pittsburgh, the Makkah Clock Royal Tower in Saudi Arabia, the two-year refurbishment of The Savoy in London and the Peace Hotel in Shanghai.

Couche-Tard Bids $1.9 M for U.S.-Based Casey’s C-Stores
A U.S. convenience store chain featuring convenient meal solutions, prepared in-store for takeaway, has been targeted by Montreal-based convenience store operator Alimentation Couche-Tard Inc. The $1.9-billion, all-cash hostile takeover targets Ankeny, Iowa-based Casey’s General Stores Inc., which operates 1,507 corporate stores in eight states. The offer values each of Casey’s stores at about $1.3 million. The highly successful, publicly traded, Casey’s has recorded 24 consecutive quarters of same-store sales growth despite the U.S. recession. In a letter delivered to Casey’s board last Friday, Alain Bouchard, CEO of Couche-Tard, commented, “Despite our repeated efforts, starting in October 2009, to engage in negotiations, and without the benefit of discussing our proposal with us or our advisors, your board of directors unanimously rejected our proposal. Due to your unwillingness to engage…we are compelled to make this proposal known to your shareholders.”

Retail Convenient Meal Solutions Target Restaurant Clients — NPD
“Restaurants are not the only game in town,” says restaurant industry analyst Bonnie Riggs of NPD Group in Port Washington, N.Y. “Supermarkets have taken advantage of consumers wanting convenient meals,” she was quoted as saying in Chain Leader magazine. Riggs warns restaurant operators that supermarkets are increasingly providing convenient meal solutions. “Customers are looking for convenient meal solutions and getting the best value for their dollars, and they’re finding some of that at retail outlets,” she added. “What’s available to consumers today [in home-meal replacement] is so much different and so much better than what’s been available historically. Supermarkets have made inroads into what consumers believe are healthy alternatives and fresh ingredients.”

Prime Restaurants Becomes Public Company
The reorganization of Prime Restaurant’s Royalty Income Fund into a public corporation, Prime Restaurants Inc., has been approved, effective April 1. Mississauga, Ont.-based Prime now directly owns and operates the trademarks and businesses that were previously held and operated by the Fund, PRC TradeMarks Inc., and Prime Restaurants of Canada Inc. The management, directors and trustees of these former entities are now the management and directors of Prime. The Class-A Limited-Voting Shares of Prime will be listed on the TSX under the symbol EAT. Prime now has 6,546,428 Class-A Limited-Voting Shares issued and outstanding.

East Side Mario’s Recommits to Family
East Side Mario’s is returning to its roots with a rejuvenated Budda-Boom, Budda-Bing campaign, including $2.5-million worth of new TV and radio ads, online advertising and a redesigned website to augment the new value-added menu. “Focusing on family, fun, value and quality has enabled East Side Mario’s to be a leader in casual dining for more than 20 years. Today, we’re recommitting ourselves to those principles,” said John Verdon, vice-president, Marketing, East Side Mario’s. The family feel extends to the new menu. While the signature pastas and pizzas remain, new dishes include ribs, steak, shrimp, rotisserie chicken and ribs, wings and nachos. Breaking it down further, the ‘Mario’s Everyday Values’ menu highlights the best value dishes on one page. The kids aren’t left out of the new plan, with a “best-in-business kids program,” which includes: Kids Eat Free Days, activity books, an improved toy chest and more.

ClubLink Fined $56,000 for Alcohol Infraction
ClubLink Corp. (now known as ClubLink Enterprises, after amalgamating with Tri-White Corporation in July 2009) has been fined $56,000 for its role in an occurrence at a Lake Joseph, Ont., resort that resulted in the drowning deaths of three young Torontonians. The Mississauga-based ClubLink pleaded guilty under Ontario’s Liquor Licence Act to one count of allowing drunkenness on its premises. In July 2008, three young men and a young woman were allegedly served more than 30 drinks at the club over a three-hour period. After leaving, their car swerved off the road, flipped and landed in the Joseph River. Only the young lady survived. ClubLink also faces a 45-day suspension of its liquor licence because of the tragedy, effective June 1. An employee working in the bar on the night of the deaths was fined $1,000, after pleading guilty to one count of serving alcohol to an already intoxicated person.

Dairy Queen’s Blizzardmobile Marks 25th Anniversary of the Blizzard
Dairy Queen is celebrating the 25th birthday of the Blizzard with the help of a truck with a giant Oreo Blizzard attached to its side. The custom-designed Blizzardmobile began its journey in New York City last week, and will travel to 25 cities across the U.S. and Canada. It will make stops in London, Ont., on May 17, in Toronto for a huge event on May 18, in Vancouver on July 26 and 27 and in Calgary on August 12 and 13. The Blizzardmobile will distribute more than 75,000 free Mini Blizzards, which are about half the size of a small 12-oz. Blizzard. The new item will be available in DQ restaurants in August. A Blizzardmobile festival will includes activities, games, music, a chance to win prizes and giveaways of tens of thousands of the free Minis, all while raising awareness and funds for Children’s Miracle Network. Denise Hutton, vice-president, Marketing, Dairy Queen Canada Inc., commented, “The Blizzard is our signature product and such a huge part of our DQ culture that it was imperative Canada be part of the 25th birthday celebration tour.”

Pizza Pizza Recycling Old Cellphones to Aid Food Banks
Canada’s Pizza Pizza locations are celebrating Earth Month this April by serving as drop-off centres for old cellphones and other handheld devices. As part of its annual Cells for Slices recycling program, people who drop off old devices will receive a free slice of pepperoni or cheese pizza. The money raised is being donated to Food Banks Canada. A recycled or refurbished phone can yield between $2 and $5. Since the program’s inception, Pizza Pizza has collected 4,656 cellphones.

Subway Launches New Breakfast Menu in U.S. and Canada
A new breakfast menu, which includes a western egg-white omelette on a light wheat English muffin, is now available at Subway locations across Canada and the U.S. The items are part of a new lineup of nutritious, low-calorie breakfast options. Chris Martone, Subway’s executive chef, commented, “It’s Subway customers that create the best sandwiches, with their choices of toppings, sauces, cheeses, breads and condiments. Our breakfast menu will be no different. Customers can have a little fun by adding anything from sliced tomatoes to spicy jalapenos to our signature Sweet Onion Sauce on a regular or egg-white omelette sandwich.”

NRA Testing “Greener Restaurants” Program in U.S.
A U.S. pilot program focusing on Greener Restaurants has been announced by the National Restaurant Association (NRA), based in Washington, D.C. It will also nationally recognize restaurants, which have implemented environmental sustainability plans. The program is being developed the NRA’s Conserve initiative, in partnership with the Turner Foundation, Kendall College, the Food Service Technology Center and EPA Energy Star. Dawn Sweeney, NRA president and CEO, commented, “As we perfect the final program details in the pilot stage, we are working with our state restaurant association partners to introduce it industry-wide.” She added that the goal of the Greener Restaurants program is to help restaurant operators save money and manage costs while incorporating sustainability practices throughout the restaurant.” For more information, click here.

ORHMA Toronto Golf Tournament, June 21, Wooden Sticks
The 76th Annual Golf Tournament of the Ontario Restaurant Hotel & Motel Association (ORHMA) Toronto Region will be held on Monday, June 21 at Wooden Sticks in Uxbridge. Registration is now open, but is limited to 144 golfers. For information: 416-944-3183 (x 222).

Heinz Foodservice Launches New Ketchup “Megapak”
Heinz Canada Foodservice has launched a 26-ml Heinz Ketchup pouch for the first time in 40 years. Dubbed the Megapak, it is three times the size of the regular pouch; it’s more efficient and it cuts down on waste. “With Megapak, we will reduce the use of corrugate by 20 per cent and we will use 39 per cent less film on a per-ml basis, versus the old pouches,” said Phillip Pavlov, senior product manager for Heinz Foodservice. “The Megapak will provide operators with cost savings, it requires less storage and handling and it offers a way of standardizing portion control.”

Minimum Wage Battle Heats Up in Manitoba
The Canadian Restaurant and Foodservices Association (CRFA) expects that the recently announced 50-cent minimum wage increase could amount to nearly $16 million a year in extra labour costs. The wage hike is expected to take effect in October. “A mandated wage hike couldn’t come at a worse time for Manitoba’s restaurants, the vast majority of which are operated by small, independent business people,” Courtney Hirota, vice-president for the CRFA, said. “Yet another wage increase of this magnitude will end up hurting the very people it is intended to help, because many employers will have no choice but to control their costs by cutting hours or even jobs.” The hike will increase Manitoba wages to $9.50 an hour. Jennifer Howard, the province’s Immigration and Labour minister, was quoted as saying by the CBC, “The improved wage will give them a fairer income while helping Manitoba businesses recruit and retain workers.” Fortunately for the restaurant industry, some tax cuts are coming courtesy of the elimination of the Small Business Tax. That said, Hirota is still concerned that the tax break will be cancelled out by increased labour costs. Minimum wage increases like the current one are not unusual. According the CBC, wages have risen steadily from $6 onwards since 1999.

 

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