Week of Sept. 28, 2009



MAFSI & FCSI Worldwide Meet in Toronto
With a turbulent economy front and centre, the Manufacturers Agents Association for the Foodservice Industry (MAFSI) held their annual conference at the Westin Harbour Castle in Toronto from Sept. 22 to 25. Created in Massachusetts in 1949, MAFSI celebrates its 60th anniversary this year. The group’s conference was held in conjunction with the Foodservice Consultants Society International’s Super Regional meeting. Themed “Re-charge, Re-invent and Re-Emerge,” the conference attracted 320 attendees, mostly from the U.S. and Canada, to learn, network and exchange strategies. Many of the sessions focused on helping manufacturers’ reps become more profitable in their day-to-day operations.

Kicking off the four-day conference was a panel of designers and operators speaking on “The Design Process of a Foodservice Facility – What’s MAS got to do with it?” The panel addressed the importance of manufacturers, clients and designers working together to produce winning foodservice facility designs. According to John Cornyn, MAS Consultant, The Cornyn Fasano Group, “We’re dealing with layers of complexity. One of the things we try to bring to the process is that the client recognizes the need to do homework.” He stressed the need to understand the big picture, focusing on issues such as recycling, labour and menu development, as all of these factors impact on how the restaurant functions.

Joe Fugere, owner of Tuttta Bella Neapolitan Pizzeria in the U.S., agreed, stressing the importance of thinking it all out before designing your restaurant. “There’s a lot of complexity in a start-up. When we opened our restaurant we thought it was risky to sell 200 pizzas a day, but we ended up selling 600 to 700 a day.” That changed the dynamics of how his kitchen worked and what kind of equipment was necessary.

At the conference, the pervasive theme was the importance of manufacturers working together with designers and operators, especially amidst a climate of declining sales. According to Robin Ashton, publisher of FER magazine in the U.S., who moderated a panel dealing with the challenges of operating today, the foodservice industry south of the border has suffered through one of its most difficult times. Eight per cent of fine-dining restaurants have closed and there’s been a 2.5 per cent decline in foodservice sales. According to Ashton, most of the growth taking place in the foodservice industry is now focused internationally. “A total of 380 KFC units have opened in China over the past year; North American growth has slowed or stopped,” said Ashton. “The industry is moving toward renovations instead of new builds.”

John Radchenko, president of FCSI Worldwide, and a Canadian designer, echoed those sentiments, saying, “everyone is trying to get a bigger piece of the pie, and there’s more work being done in China, India and Saudi Arabia, but everyone expects instant results. The weak economy raises expectations of lower prices. Due to increasing constraints, most clients think they can design their own restaurants; they don’t appreciate what a consultant does and how it can impact a business.”

The highlight of the conference was a keynote address given by Joe Hahn of Strategex, whose session was entitled “Fourth Quarter Profitability Action Plan – Learn How to be More Profitable Tomorrow.” Hahn poised the question: “what is stopping companies from doing things differently, better and making more money?” He cited some of the typical excuses for failure ranging from “the economy is so bad; the competition is so desperate; change is so difficult.” But, according to Hahn, “the economy doesn’t matter…much; the competition doesn’t matter…much. What does matter is your willingness to change. ”He went on to claim that “change becomes easier if you practise it often. You aren’t doing all that you can possibly do, no matter who you are or what business you are in…there’s always one more thing you can do.”

According to Ken Wong, professor of Marketing, Queen’s University, “Everyone today is asking the question ‘How do we deal with a down economy?’” His answer: “There is no single panacea to the problems created by recessionary times. While any number of strategies and tactics can and must be employed, none of these represent a complete and total solution by themselves.” In presenting from his white paper entitled, “The Paradox, The Myth and the Practice,” Wong looked at the impact of price cutting and reduced marketing effort. He stated that “the greatest incremental impact on profitability is not volume, but pricing. On average, firms who reduce prices by a single per cent, can expect, on average, to experience a loss in profitability of just over 11 per cent.”

In the area of customer loyalty, Wong believes the value cannot be overstated. “It is widely noted that it costs five to seven times more to acquire a new account than to service and retain an existing account.” And, though it’s getting more challenging to operate any business given the economic constraints, Wong stressed survival in a recessionary era is about far more than simply cutting prices, reducing spending and hoping you can hold out long enough for the recovery to gain traction. Above all, he said, “At the core of all efforts to raise productivity is the ability to take customer intimacy beyond the conceptual stage. Firms need to use that knowledge to constantly challenge whether existing methods and practices are truly adding value in the customers’ eyes. If not, the managerial prescription is to manage those activities as a cost centre.”

Capping off the event was a series of operator trend roundtables focusing on the fast casual, educational and healthcare, and schools and colleges sectors. The sessions helped operators and manufacturers understand how each other operates and what the other is looking for. For operators, one of the crucial points is ensuring the claims and specifications of the equipment live up to the expectations. “On paper everything sounds great,” said Brandon Melton, development purchasing manager, Chipotle Mexican Grill, referring to the claims made by certain equipment manufacturers. “But clearly, that’s not the case, and it can be a little frustrating for the end user.”

Subway Becoming World’s Largest Restaurateur Based on Number of Units
Subway Restaurants, Milford, Connecticut, will become the world’s largest fast-food chain, based on number of units, this year as it adds about 30 to 40 stores a week. Prominently displayed on its website, it had 31,776 units in 91 countries last week, not far from McDonald’s 32,158 worldwide restaurants. On its website, it reads, “As a matter of fact, the Subway chain operates more units in the U.S., Canada and Australia than McDonald’s does.”

However, sales volume is another matter. According to Chicago-based Technomic, the average Subway restaurant had US$445,000 in sales last year; about one-fifth of the average U.S. McDonald’s, which had some US$2.3 million in sales. Don Fertman, Subway’s development director, told the media, “Our customer wants quality products, not pure convenience, and [our customer also wants] customization — more or less vegetables on the sandwich, cucumbers or no peppers — [a sandwich] made exactly the way [he or she] wants it,” he said. “And, there aren’st a lot of folks that do that on fresh-baked bread.”

Subway’s rapid growth is attributed to two factors: its healthy eating message (think Jared Fogle who lost 245 pounds on a Subway diet) and last year’s introduction of the $5 foot-long sandwich promotion, emphasizing value in a tough economy. Subway Franchise Advertising Fund Trust (SFAFT) chief management officer, Tony Pace, said that the promotion was rapidly building same-store-sales for double-digit sales gains in the U.S., “we jumped in front of the pack, by taking the lead in the value category. Others then had to chase us.”

SFAFT is independent of Subway franchisor, Doctor’s Associates Inc. and was set up to manage funds contributed by Subway franchisees to create advertising and marketing programs.

Five Dollars, Key Fast-Food Price Point in U.S.
“$5.00 has emerged as the second most important price point in the U.S. fast-food industry, after $1,” according to Tom Forte, an analyst at Telsey Advisory Group in New York. He attributed the strength of the $5 price point to Subway’s $5, foot-long sandwich deal introduced last year. “I would not be surprised if Subway was outperforming many of its peers due to the promotion,” Forte said. According to Forte, the Subway promotion initiated many copycat deals such as KFC and Arby’s $5 meal deals, while Subway rival Quiznos, attempted to undercut the company with a $4 sandwich special.

Tim Hortons Now a Publicly Traded Company in Canada
Tim Hortons Inc., Oakville, Ont., has been reorganized as a Canadian public company, effective
September 28; it previously operated as a U.S., State of Delaware company. Tim Hortons’ shares will be traded on both the Toronto Stock Exchange and New York Stock Exchange under the same stock symbol “THI”. A meeting of shareholders held last Tuesday, representing 74 per cent of the 180,680,748 eligible common shares, returned a vote of 99 per cent in favour of the move.

“After the reorganization, Tim Hortons expects to continue to conduct our business in substantially the same manner as it does today,” a company statement reads. Tim Hortons’ shareholders will have their existing common stock automatically converted into an equal number of common shares in the new Canadian public company. For details of the transaction, click here.

Fairmont to Open Five-Star 369-Guest Room Abu Dhabi Hotel
Toronto-based Fairmont Hotels & Resorts will manage the newly built Fairmont Bab Al Bahr luxury hotel in Abu Dhabi when it opens October 1. The five-star 369-guest room hotel is located close to the International airport and will feature a variety of world-class restaurants and more than 2,500 square metres of functional space, a private beach for guests, two outdoor swimming pools, a fitness centre and a spa. Room rates start at US$239. The property is owned by the Al Fahim Group, a division of RMAL Hospitality. Fairmont is owned by global hotel company Fairmont Raffles Hotels International, with 91 hotels worldwide. In the pipeline for Fairmont are: the Fairmont Nile City in Cairo to open in November; the Fairmont Palm Jumeirah in Dubai to open in late 2010; and the Fairmont Mina Al Fajer in Fujairah, another of the seven Emirates of the United Arab Emirates in 2011.

A&W Speeds Up Multi-Site Franchise Awards in Ontario
Three more multi-site development agreements in Ontario have been announced by Vancouver-based A&W Food Services of Canada Inc. Granted to existing A&W franchisees in Ontario, they include five-store commitments in both London and Kitchener/Waterloo and a four-store commitment to develop A&W restaurants in a number of smaller towns in southern Ontario. Earlier this month, A&W awarded its first-ever multi-site commitment for 12 new restaurants in Hamilton, Burlington and Milton. All of the restaurants included in the multi-site program will be freestanding, with drive-thru capabilities. “We are proud that so many of our best franchisees in Ontario are coming forward to take advantage of multi-site agreements,” said Graham Cooke, A&W’s vice-president of New Restaurant Expansion. “We are currently working on several more such agreements with existing franchisees and also hope to sign our first agreement with a new development group later this year.”

Restaurant Chains Urged to Cut Salt in Foods — CSPI
Canadian restaurant chains and food processors are being urged to cut salt content in foods by a new report, Salty to a Fault, issued last week by the Centre for Science in the Public Interest (CSPI), Ottawa. The report also challenges the frequently heard claim that high sodium levels are needed to preserve product integrity and flavour in the food, pointing out that many foodservice and retail products have already reduced salt content to recommended levels, even in the most competitive food categories. The study was done in August 2009 and is available here. Highest and lowest examples of variations in salt content include:

Hamburgers: MG sodium per 150 G and as a percentage of base line
Burger King Whopper: 440 MG – even with base line
McDonald’s Quarter Pounder: 515 MG – +17 per cent
Harvey’s Angus Burger: 715 MG – +63 per cent
A&W Mama Burger: 765 MG – +74 per cent

French Fries: MG sodium per 70 G serving and as a percentage of base line
Swiss Chalet Hand-Cut Fries: 40 MG – 76 per cent
McDonald’s: 170 MG – even with base line
Dairy Queen: 470 MG – +176 per cent
Harvey’s: 555 MG – +226 per cent

Ketchup: MG sodium per 15 ML and as a percentage of base line
Heinz: 140 MG – even with base line
Heinz Organic: 140 MG – even with base line
President’s Choice Blue Menu: 170 MG – +21 per cent
President’s Choice Organics: 210 MG – +50 per cent

“The report shows most uses of salt are gratuitous,” said the report’s author Bill Jeffery. He points out that the average Canadian consumes more than 3,000 mg of sodium per day, nearly a third more than the maximum daily intake recommended by Health Canada.

Top 200 Canadian Chains Increased Sales in 2008 — Technomic
Despite the economic downturn in 2008, the Top 200 Canadian restaurant chains increased total sales by three per cent, while decreasing their number of stores by 0.7 per cent, to 22,530 units. With total sales of $22.8 billion, the Top 200 chains accounted for more than 50 per cent of the restaurant industry, according to the Chicago-based foodservice research firm Technomic. In the 2009 Technomic Top 200 Canadian Chains Restaurant Report, Tim Hortons was once again the leader in sales, with $4.2 billion in 2008, up 7.7 per cent over 2007; U.S.-based quick service chains McDonald’s and Subway ranked second and third, with $2.7 billion and $1 billion respectively in estimated sales. “The Top 200 Canadian chains continue to grow sales while shedding underperforming units by focusing on the value proposition for the customer,” says Darren Tristano, executive vice-president at Technomic. “It’s not just about pricing. The leaders have re-tooled their menus in many cases with local and organic fare, stepped up value-oriented limited-time promotions and revamped restaurant décor. The limited-service category, and in particular the fast-casual segment, continues to benefit from the value focus and trade downs from full service.”

Top 200 Restaurants 2008 Results By Sector — Technomic
Limited-service restaurants grew sales by 2.5 per cent over 2007 to $16 billion, accounting for 70.1 per cent of the Top 200 Canadian chains’ sales. The segment’s 19,323 units made up 85.8 per cent of the Top 200 total store count, showing a decline of 0.6 per cent from the previous year. Though fast-casual restaurants are a relatively small portion of limited-service sales at 1.9 per cent, their sales grew 11.7 per cent. Chains to watch are U.S. players Panera Bread and Chipotle Mexican Grill, both of which expanded into Canada last year. The fastest growing limited-service clusters were Asian, at 14.5 per cent, Mexican at 7.3 per cent and Donut with 7.1 per cent growth.

Major contributors in these clusters were Tim Hortons, growing at 7.7 per cent (Donut), Sushi Shop and Thai Express at 40 per cent and 51.2 per cent respectively (Asian) and Taco Del Mar at 32.4 per cent (Mexican). Full-service restaurants represented 29.9 per cent of the Top 200 chain sales, or $6.8 billion, growing 4.2 per cent over 2007. Full-service outlets represent 14 per cent of the Top 200 chains’ total units, after declining by 1.1 per cent to 3,207 in 2008.

Create Your Own Burger by Touch-Screen With New Aramark Concept
Aramark Higher Education, in Philadelphia, has introduced a new Burger Studio kiosk concept that allows students to design their own meals using electronic touch-screen-ordering devices. To be opened this fall at five U.S. colleges. Aramark plans to develop the concept at other similar locations and is considering expanding the Burger Studio to other contract divisions. The concept includes options such as an Angus, chicken or veggie burger, customized with more than 30 toppings, cheeses and special sauces. The kiosks visually create the order by building the sandwich, piece by piece on the kiosk screen. The average check totals between US$4 and US$6. Aramark conducted online focus groups and chat rooms to capture student feedback about all elements of the brand, from concept to final delivery. The Burger Studio name was selected from more than 1,200 entries submitted in an online contest. Student “taste testers” reviewed all menu items under consideration to ensure that the type of burger, fries and buns would appeal to students. Burger Studio is the fourth proprietary brand launched by Aramark Higher Education in the last three years, joining P.O.D. Provisions on Demand Market (convenience store), Zoca Fresh Mex to the Max! (Mexican) and Bleecker Street (bakery café).

Resort Investment Conference, October 21-22, Calgary
The Canadian Resort Investment Conference will be held at the Westin Calgary, from October 21 to 22. Managed by Big Picture Conferences, Toronto, the event will include informative sessions and panel-based discussions on both resort and urban-based projects. For more information, click here or call (416) 924-2002.

Grocery Innovations Canada, October 26-27, Toronto
The Grocery Innovations Canada conference and trade show will be held from October 26 to 27 at the Toronto Congress Centre. Canada’s premier grocery industry exposition and conference is sponsored by the Canadian Federation of Independent Grocers, Willowdale, Ont. For more information, click here or call 1.800.387.0175 ext. 231.

WACS World Congress, January 24-28, 2010, Santiago, Chile
The 34th biennial congress of the World Association of Chefs Societies (WACS) will take place from January 24 to 28, 2010 in Santiago, Chile. WACS World Congress 2010 will be the first-ever WACS congress held in Latin America in its 80 years of existence. Program details were posted here last week. “The WACS Congress reminds us of the importance of education, embracing different cultures, networking and friendship,” said WACS president Gissur Gudmundsson. To register, click here.

Online Reveal Canada Conference: January 25-27, 2010, Montreal
A multi-year strategic partnership to produce the Online Reveal Canada tourism online marketing conference has been announced by founders Patricia Brusha and Alicia Whalen, principals of A Couple of Chicks e-Marketing, Toronto. The alliance is with Toronto-based Big Picture Conferences to produce the fifth annual conference scheduled for January 25 to 27, 2010 at the Delta Centre-Ville Hotel in Montreal. “Based on significant feedback from the travel & tourism industry, the fifth annual Online Revealed Canada conference will be held earlier in the year to  complement Canada-E-Connect, the Tourism Industry Association of Canada’s online marketing strategy event slated for later the same week,” said Patricia Brusha.

Hilton Hotels Corp. Now “Hilton Worldwide”
Hilton Hotels Corp., McLean, Va, has changed its name to Hilton Worldwide and developed a new logo. “Our new identity is reflective of a refreshed company vision, mission, values and key strategic priorities and, in some ways, signifies that this is a new beginning for our company,” said president and CEO, Chris Nassetta. He said the changes are symbols of a completely transformed and restructured global enterprise. For more information, click here. Hilton Worldwide’s portfolio of 10 brands includes more than 3,300 hotels in 77 countries. The company is slated to open more than 300 hotels this year.

Chef Michael Smith Becomes Victim of Twitter Identity Theft
Chef Michael Smith has become a victim of Twitter identity theft, and he doesn’t even have a personal or business Twitter account. Last Friday, two staff members of the Montreal Gazette followed up with Smith’s public relations group regarding several negative postings about the city of Montreal and its restaurants on what looked like the official Michael Smith Twitter page. Within an hour, Smith’s staff had issued a press release, saying, “All of this is a complete surprise to Michael Smith, who does not twitter. A lawyer has been consulted, and not only is Smith trying to get his identity removed from that site, but he is calling on Twitter to notify all followers of the feed that they have been deceived.” Smith added, “Frankly I’m overwhelmed. I’m very, very angry. I can’t believe that anyone would say such horrible things about Montreal. Worse yet, they’ve been writing about my family, they’ve deceived my fans and stolen what I’ve worked so hard to build.” Smith is about to launch his new cookbook, The Best of Chef at Home, and is planning celebrations for Prince Edward Island’s Fall Flavours festival.

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