Chains at the Crossroads
Nine restaurant executives whose decisions will impact balance of power
By Scott Hume, Executive Managing Editor -- Restaurants & Institutions, 7/1/2004
The makeup of next year’s Top 400 Chains ranking, covering sales for 2004, is taking shape now. Decisions chain executives make during the second half of the year on brand strategies and tactics, acquisitions and divestitures, investments and cutbacks, pricing and promotions, and hirings and firings will help determine how the balance of power is realigned.
As the future unfolds, two key categories of executives can be identified: successors, who have stepped into top-management roles at pivotal times for their brands; and successes, who confront significant opportunities.
SUCCESSORS
President and CEO, McDonald’s Corp.,
Oak Brook, Ill.Top 400 rank: 1
Charlie Bell’s ascension to CEO of the world’s largest foodservice brand was about as difficult as could be: taking over after the sudden death of Jim Cantalupo and shortly thereafter being diagnosed with colon cancer. But Bell has made it clear he is confident in both his and the company’s health and intends to accelerate, not just maintain, the turnaround begun under his late predecessor’s tenure. In May he told company shareholders he will “work with focus and discipline as we continue the revitalization of a great brand.”
Telling stat: Year-to-date systemwide sales through May 2004 were up 9.2%, the highest in 20 years.
Key challenges: Make good on his vow to refocus the chain’s training and once again make its employees a competitive advantage; strengthen its Boston Market brand; maintain Chipotle’s growth momentum.
President,
Burger King North America, MiamiTop 400 rank: 3
John Chidsey recently was elevated from finance chief to president of Burger King North America (succeeding Bob Nilsen, who resigned), but his rise may not be over. At press time, published reports claimed that the three equity groups that acquired Burger King in late 2002 were seeking a replacement for CEO Brad Blum, with Chidsey a candidate for the top post. Whoever ends up with Burger King’s reins needs to rebuild its franchisees’ confidence in the long-term plan for its turnaround. New menu items with lasting appeal are vital, as is creation of marketing that lures new customers.
Telling stat: Net systemwide decrease of 150 units over the past two years.
Key challenge: Counter perceptions that the chain has lost touch with and control of what once was a powerful brand.
DOUG BENHAM
President and CEO, Arby’s (Triarc Cos.), Fort Lauderdale,
Fla.
Top 400 rank: 12
OK, the Oven Mitt character Arby’s introduced last year doesn’t appear to be the answer, and Doug Benham, who succeeded Michael Howe as CEO in January, needs to find something that solidly connects with the adult consumers Arby’s has been targeting for years. Benham was CFO for RTM Restaurant Group, the largest Arby’s operator, so he understands money and franchisees’ point of view, a good skill set to have.
Telling stat: Domestic average-unit volume slipped 1% to $832,000 in 2003.
Key challenge: Move the sales needle with new Market Fresh Low-Carbys Wraps.
KIM LOPDRUP
President, Red Lobster (Darden
Restaurants), Orlando
Top 400 rank: 16
Red Lobster remains the dominant force in the seafood-menu category, yet Kim Lopdrup in May of this year became the brand’s fourth president in two years. His two immediate past predecessors in the job, Dick Rivera and Edna Morris, are both well-respected industry veterans who didn’t find the right balance of promotion and profitability. Lopdrup brings marketing experience from another troubled chain, Burger King, and effective marketing is what Red Lobster needs.
Telling stat: Same-store sales for fiscal year ended in May down 3.5%.
Key challenges: Giving the brand more relevance and reach; making it more than Lobsterfest.
l PETER MIHAJLOV
Executive chairman, interim CEO,
Buca Inc. (Buca di Beppo), Minneapolis
Top 400 rank: 110
Buca co-founder and board member Peter Mihajlov is keeping the hot seat warm while the company searches for a permanent successor to Joe Micatrotto, who resigned as chairman and CEO in May. Whomever is selected has work to do: 2003 declines in guest counts and average-unit sales at both the Buca di Beppo and Vinny T’s of Boston restaurants continued in 2004’s first quarter.
Telling stat: A 3.7% dip in same-store sales for Buca di Beppo; 1.8% at Vinny T’s in 2004’s first quarter.
Key challenge: Make the new “Buca Small” menu, designed to entice couples and small parties, a winner.
SUCCESSES
JACK SCHUESSLER
Chairman and CEO, Wendy’s International, Dublin, Ohio
TOP 400 RANK: 5
Never flashy but long a solid performer, Wendy’s keeps plodding along, helped by CEO Jack Schuessler’s long-term thinking. Rising chicken and produce prices hamper profits at some chains, but Smith Barney analyst Mark Kalinowski recently lauded Wendy’s for locking in prices in both categories. Breakfast? Wendy’s doesn’t have it and isn’t interested, but its units average $1.3 million anyway. Its Tim Hortons unit could do $2 billion in sales this year.
Telling stat: April same-store sales up 8.4% for company Wendy’s, and 6.6% for franchises.
Key opportunities: Tim Hortons’ acquisition of Bess Eaton chain further boosts U.S. presence; new Baja Fresh Mexican Grill CEO Bill Moreton has a mandate to expand the brand.
PATTYE MOORE
President, Sonic Corp., Oklahoma City
Top 400 rank: 17
Sonic Drive-In’s systemwide sales rose nearly 8% last year and the chain expects its fiscal 2004 to exceed it. President Pattye Moore is pushing the aggressive expansion plan that she and Chairman-CEO Cliff Hudson have crafted. It includes completing the rollout of the Sonic breakfast menu as well as innovative items in other dayparts (such as new Fresh Tastes Salads), backing the brand with heavier media ad support (with spending projected to hit $110 million this year, up 10%).
Telling stat: Three-for-two stock split in April.
Key opportunity: Breakfast takes a few years to mature as a daypart, Moore told analysts this year. With the rollout about complete, Sonic could see average-unit volumes push the $1 million mark soon.
JULIA STEWART
President and CEO, IHOP Corp.,
Glendale, Calif.
Top 400 rank: 26
The marketplace has been rough on family-dining chains: QSRs continue to steal breakfast share; pricing sensitivity makes it difficult for family-dining concepts to create dinner entrées to compete with casual dining. But Stewart has IHOP’s system and average-unit sales growing again through effective menu additions and heavier television advertising.
Telling stat: Same-store sales rose 7.1% for the quarter ended March 31, 2004.
Key opportunity: More than 220 units in development.
MARTIN SPROCK
Founder and CEO, Raving Brands
(Moe’s Southwest Grill), Atlanta
Top 400 rank: 322
Is Raving Brands the next multiconcept powerhouse a la Yum! Brands, Brinker International and Landry’s Restaurants Inc.? Moe’s Southwest Grill joins the Top 400 with a bullet, starting at No. 322. The chain could more than double in size this year. Sprock has aggressive agendas for its other concepts: Mama Fu’s, PJ’s Coffee, Planet Smoothie and the newest, Doc Green’s Gourmet Salads.
Telling stat: Company this year expects to add 150 Moe’s to the 100 open at year-end 2003.
Key opportunity: Former Hooters CEO Rick Akam, named Raving Brands COO in December, brings management/franchising experience.
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