Restaurants share survival strategies for 2009

Restaurant operators large and small provided their outlooks for the year ahead -- and most of them were not pretty.

At the seventh annual Cowen & Co. consumer investment conference in New York, which took place Monday and Tuesday, about 20 restaurant firms presented their strategies for 2009, most of which included cutting costs, slashing development plans, retooling menus and tweaking marketing messages

High-end operator Stephen Hanson, founder and president of B.R. Guest Restaurants, a multiunit operator with concepts in New York, Chicago and Las Vegas, said consumer traffic just about died at the end of the 2008, and he worried that it may not return for some time.

“For 2008, we’re going to be like, 'That was a good year,'” he said. “I think the consumer will just shut down, and even when they do go out, they will be thinking differently about how they spend their money É 2009 will be a very, very tough year.”

Hanson, whose company boasts brands like Ruby Foo’s, Fiamma and Dos Caminos, said chain operators should focus less on the cost side of running the business during these tough times, and more on the customer.

“In general, chains need CRM [customer relationship management],” he said. “Today you need volume; you need to hug the customer.”

A laser-like focus on generating customer traffic -- through discounting, improved marketing or retooled menu items -- was an obvious theme throughout the conference.

Domino’s Pizza chief executive David Brandon said the pizza delivery chain had neglected consumers who were looking for more value, as individual operators let menu prices increase too much to fight off inflation. The lack of traffic that resulted could have led to the nine Chapter 11 bankruptcy filings by Domino's franchisees in 2008. Domino’s new oven-baked sandwiches, priced at $4.99 each, are an answer to customers seeking value, Brandon said.

Sonic Corp. executives said the drive-in chain’s new permanent value menu, with items priced at $1, will attract more customers. The company also said it would ramp up its media spending by about 5 percent from a year ago to about $200 million.

Buffalo Wild Wings is promoting its Big Jack Daddy Burger, a burger topped with pulled pork, fried onion rings, cheddar-jack cheese and honey barbeque sauce, while Papa John’s Pizza is looking to introduce “non-pizza items,” which it would not disclose.

Chipotle Mexican Grill Inc., the operator of the burrito chain that has struggled of late, said it is completely revamping its marketing efforts. A new chief marketing officer and a new advertising agency will bring a more sophisticated advertising approach to the fast-casual chain, said founder and chief executive Steve Ells. The chain just finished in December a systemwide menu price hike of as high as 6 percent in some locations.

Almost all companies said they would slow development in 2009. Bob Evans Farms Inc., for example, said it would open just one location of its namesake family-dining brand this year, and Morton’s Restaurants Inc. said it would open only two or three restaurants in 2009. Not only are financing and site selection for new developments not favorable, but returns for new units just won’t hit targets with the consumer staying at home, many companies said.

To help cut costs in the face of slowed sales, most restaurant operators said they are looking at labor scheduling that highlights sales per shift or even per hour so that efficiencies are gained. At BJ’s Restaurants Inc., for example, executives said new technology will help the casual-dining chain monitor shift progress in real time so that labor decisions can be made immediately.

At Ruby Tuesday Inc., about $60 million in cost saving during the past 12 months has come from labor cutbacks, including field management, corporate staff and executive positions, the company said.

“It’s the toughest I’ve seen out there,” said chairman and chief executive Sandy Beall. “It’s a good cleansing process, though, and it will benefit us in the long term.”