Nation's Restaurant News On the Go #95
Nation's Restaurant News
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Hi all, senior editor Joanna Fantozzi here. You know what’s scarier than the ghouls and goblins from Halloween this week? Just how many restaurant chains are continuing to struggle this quarter. As earnings season reaches its peak, traffic woes continue to pile up, as do the bankruptcies and store closures (with strong rumors that a couple more major Ch. 11 filings may be on the way).
The quick-service segment continues to lose customers as traffic dwindles for even the largest of brands, with analysts and data blaming both high prices that have outpaced inflation, as well as recent trends of poor customer service.
If that wasn’t enough, the massive E. coli outbreak that was initially linked to McDonald’s Quarter Pounders and has since led to a recall of slivered onions, a CDC investigation, and a lawsuit against McDonald’s, certainly complicates an already challenging operational environment.
However, there is a silver lining to this parade of bad industry news: Starbucks might be turning things around. Largely looked to as an industry leader, Starbucks is making a lot of changes under new leadership. Brian Niccol is looking to bring the company back to its glory days, with the announcement of the return of handwritten names on cups, as well as the condiment bar which had disappeared during the pandemic. Plus, the coffee chain will no longer be charging for non-dairy milk: one of the most-requested changes from consumers.
If Starbucks’ turnaround plan is any indication, it sounds like listening to your customers could be the key ingredient to staying afloat in choppy waters.
Eight Applebee’s restaurants close after franchisee files for bankruptcy
Eight Applebee’s locations in and around Kansas City, Kan., have closed, leaving just two left in the market. According to the Kansas City Star, the locations were shuttered abruptly in Kansas City, Kan., Mission, Kan., Overland Park, Kan., Raytown, Mo., Olathe, Kan., Lee’s Summit, Mo., and Leavenworth, Kan.?
Blue Springs and Northland, Mo.,?locations remain open. All are operated by the same franchisee, Apple Central KC LLC, which filed for Chapter 11 bankruptcy protection in the District of Kansas this week.?
In a statement emailed to Nation's Restaurant News, Applebee’s president Tony Moralejo that the decision to close was made by the franchisee and appeared to be based on financial circumstances.
"Applebee's restaurants are independently owned and operated by the franchisees. The closure of eight restaurants in the Kansas City market look to be the result of financial circumstances and decisions made by the franchisee," he said. "This situation is unfortunate, and we continue to believe the Kansas City area isa great neighborhood for Applebee's restaurants. We are exploring options about the future of these restaurants."
Wendy’s plans to accelerate some unit closures
The Wendy’s Co. will be closing additional restaurants, accelerating planned closures from 2025 into this year, executives said Thursday.
The Dublin, Ohio-based burger chain, which released earnings for the third quarter ended Sept. 29, said it had “made the strategic decision to close additional restaurants this year that are outdated and located in underperforming trade areas these restaurants have AUV's of approximately $1.1 million and operating margins well below the system average.”
The company is looking to replace them with restaurants doing average unit volumes of $2 million and more.
Kirk Tanner, Wendy’s CEO and president, said: “We have designed this initiative to ensure that many of these units will be replaced by new restaurants at better locations with significantly improved sales and profitability.”
McDonald’s slapped with a class action lawsuit over E. coli outbreak
During McDonald’s earnings call earlier this week, executives noted that the E. coli outbreak is contained and laid out a plan for near-term recovery from the crisis to regain some of the momentum it was experiencing prior.
The legal fallout from the crisis, however, seems to be just getting started. On Tuesday, consumers filed a class action lawsuit against the quick-service giant, led by Amanda McCray of Chicago and William Michael Kraft from Florida, claiming they experienced symptoms consistent with E. coli after eating Quarter Pounders earlier this month. They are seeking unspecified damages, but exceeding $5 million, on behalf of all United States consumers who purchased contaminated Quarter Pounders.
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Another lawsuit has been filed by a Colorado teenager who alleges she is experiencing acute kidney failure after consuming three Quarter Pounders between Sept. 27 and Oct. 8. The 15-year-old has been hospitalized and is undergoing dialysis, Newsweek reports. Her attorney, Ron Simon from Ron Simon & Associates, represents 33 total alleged McDonald’s E. coli victims, nine of whom were hospitalized and two who have developed kidney issues.?The?outbreak has sickened at least 75 people and killed at least one.
Starbucks will no longer charge extra for non-dairy milks
Starbucks will be removing the extra charge for non-dairy milks, including soy milk, oat milk, almond milk, and coconut milk starting Nov. 7, the company announced in conjunction with the release of its fourth quarter earnings.
Vegan activists have protested the company’s extra charge for non-dairy milks for years. At the last company shareholders meeting, Starbucks shareholders declined to create a report to reconsider non-dairy-based milk pricing.
Removing this upcharge of 70-90 cents on average has been one of the top requested changes from customers, and according to Starbucks, substituting for non-dairy milk is the second-most-common substitution, behind only adding a shot of espresso.
“Core to the Starbucks Experience is the ability to customize your beverage to make it yours,” CEO Brian Niccol said in a statement. “By removing the extra charge for non-dairy milks, we’re embracing all the ways our customers enjoy their Starbucks.”
10 changes Brian Niccol is making to bring back Starbucks success
Starbucks CEO Brian Niccol is wasting no time in his first few months at the helm, as he makes sweeping changes to bring the Seattle-based coffee chain back to its glory days. In his first earnings call as chief executive, Niccol briefly touched upon the company’s disappointing fourth quarter, but mostly spent time laying out a “Back to Starbucks” plan full of many small and major changes.
As previously reported, Starbucks reported a 7% global same-store sales decline in the fourth quarter ended Sept. 29 driven by an 8% decline in traffic. U.S. performance was particularly thorny for Starbucks, as the company reported a 10% decrease in North America traffic that was only partially offset by menu price increases.
Despite the continued challenges for Starbucks, Niccol’s focus during the Oct. 30 Q4 earnings call was on the long road ahead. The two basic tenets of his Back to Starbucks plan are to uncomplicate the company’s operations and to refocus the company on customer service and the third place that it used to be known for.
“Regardless of whether you walk in to just pick up your coffee and go, I want you to feel like you've walked into a special place,” Niccol said Wednesday. “I know we've got it right when people are questioning whether or not they want to order mobile, because maybe if they have a few minutes, they’d rather stay and get that cafe experience. I have a strong belief that we can make the cafe experience something special, welcoming, and warm.”
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In this episode of Take-Away with Sam Oches, Sam talks with Jeni’s Splendid Ice Creams CEO Stacy Peterson and director of innovation Beth Stallings.
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