Watch Your Mouth

After all of these years you’d expect me to have gotten used to the idea of people failing to value things they don’t understand, but it still annoys me as much as anything else. Writers deal with this almost constantly, given the vast numbers of people who seem to think that writing is the same thing as typing, but you can also find examples in business, government, academia, and even in the military. One particularly vexing version, of which you can find examples in the news on almost any weekday lately, is people who believe that speech writers aren’t necessary; that any idiot with a microphone and a podium can just spin out oratory off of the top of their head…

The truth is that even something as trivial as a ranting blog post can take hours to craft, at least if you don’t want to sound like the kind of blogger who wears their underpants on their head and believes that the World Health Organization is beaming vegan pastry recipes directly into the President’s false teeth. Great orators – and there are far fewer of these than people seem to think – can make it look like the awe-inspiring speech they are giving is just something off the top of their heads, but that’s showmanship and acting, not wordplay. Even for very smart people, just saying the first thing that comes to mind can get you in trouble faster than you would believe…

If the public sector examples of the last two years aren’t enough for you, consider the case of “Papa” John Schnatter, founder of the Papa John’s Pizza chain. Anybody who starts with a single pizza oven located in his father’s tavern and ends up with over 5,000 retail locations and corporate earnings in the $1.7 billion range (according to Forbes) can’t exactly be a blithering idiot, but you could be excused for thinking so if you’d encountered his remarks about the NFL player protest controversy, or his more recent attempts to justify them…

You can pick up the Forbes and CNBC stories about this if you want to, or go back and check the news broadcasts for the relevant days. I’m not going to say that the issue isn’t controversial, or that Schnatter doesn’t have a right to his own opinion, but I will suggest that making unscripted remarks about an emotionally-charged topic isn’t a great idea even if you do know what you’re talking about. In this particular case, there’s something particularly tone-deaf about a wealthy and powerful white man criticizing African-American athletes for staging a respectful and non-intrusive protest against institutionalized violence aimed at their community. But as bad as that was, attempting to justify your remarks by saying that Colonel Sanders used the “N” word may be even worse…

Now, I’m not going to suggest that everyone should run all of their public remarks past their Public Relations department before speaking them; many of us don’t have a PR department, and not everyone has a spouse or a partner who can tell them when they are about to put their foot into their mouth. But, by the same token, it doesn’t take a master’s degree in Communications with a Public Relations emphasis to realize that making uninformed or casual remarks about anything as complex and emotionally charged as race relations in America is probably not something that a career in food service management would qualify you to do…

The truth is that most of us won’t ever be important enough that our remarks will be noted by millions of people, let alone result in a multi-billion dollar loss in our stock price and get our sponsorship deals with the NFL and Major League Baseball cancelled. All I’m saying is that if you are in a position where a poorly-chosen, carelessly-worded, or badly-informed remark can have a major negative impact on a company, a country, an international treaty organization, or the stakeholders whose jobs or lives may depend on those institutions, there’s nothing wrong with hiring someone who does have expertise in those areas to help you…

Did You Have a Point?

A few days ago I ran across yet another article making fun of the USDA grading system for beef – you know, the kind of thing where they think it’s somehow clever to say things about “Utility” grade beef. I’d be the first to admit that grades like “Utility” or “Commercial” don’t sound all that appealing, while things like “Cutter” and “Canner” make you wonder if they are used for prison food or passed along to whoever makes dog food or hotdogs. I even made jokes like that, back when I was in my early 20s and food safety wasn’t something you could just look up on the Internet (because you couldn’t look anything up on the Internet yet). But today, all this does is obscure a serious business issue with silly wordplay…

I’m not going to link to the article, but if you’d care to see the actual beef grades used by the USDA you can find the link to the official web page here. There are three things you actually need to know about the system, even if you’re just a casual consumer. First, the USDA rating system has nothing to do with food safety. If whatever you are buying (or eating) has a USDA rating in the first place, it has already been inspected and is safe to eat. Second, the eight ratings are based on a variety of measures that should result in better flavor from a piece of beef when you cook it on a grill or a griddle – amount of fat marbling, age and size of the animal it came from, and so on. There’s no way to be sure of how any given cut of beef will actually taste; these are just industry standard estimates. And third, the rating system is a voluntary program…

The upshot is that the only cuts you are going to see in the supermarket, or in a quality restaurant, are going to be from the top three grades: Prime, Choice, and Select. The other five are just as safe to eat (or not; ask your cardiologist about that), but are not going to broil up into something people will pay $12 for at Applebee’s, $20 for at Outback, or $40 for at an actual steakhouse. On the other hand, if you grind them into hamburger, soak them in marinade, braise them in some strong sauce, or slice them up and package them as part of a canned soup or stew (along with the appropriate seasonings) they’ll taste just fine. Or, at least, no worse than those foods usually do…

Where all of this stops being an amusing Internet story (or perhaps a sophomoric joke) is that food safety really isn’t funny, and the rise in international trade is making the whole issue that much more complicated. Consider, if you will, that the US has banned importation of beef from several countries because of the threat of BSE/Mad Cow disease, while several other countries have banned importation of American beef because USDA supervision does not comply with their own national standards for food safety. In the last few years we’ve seen food recalls on everything from romaine lettuce to strawberries to breakfast cereals, for everything from e coli contamination to metal shavings, and who’s even mentioned the whole “Pink Slime” and ammonia controversy yet?

Now, I’m not saying there’s anything wrong with silly Internet articles making fun of the official terminology for something we’d all prefer to ignore. Heaven only knows, if we outlawed silly wordplay on the Internet half of these posts would just be the word “NO!” written over and over again in progressively larger and more elaborate fonts. But the official USDA terminology isn’t really any funnier than most of our Federal regulations. And I don’t know about anyone else, but I’d hate to live in a place where the USDA inspectors weren’t doing their jobs…

At the very least, I’d have to stop going out to lunch…

Something's Fishy

I probably shouldn’t have found the story out of New York regarding a seafood company’s claims of using “local” fish failing to pass the “sniff test” as amusing as I did. After all, mislabeling any food product is a crime, and misrepresenting the source of seafood products is a Federal offense. That doesn’t even consider the fact that telling people you purchase your fish from “traditional fishing communities” in their area, when you actually outsource the fishing to providers on the other side of the world, is considered fraud in most jurisdictions in the United States. It’s just that in this case, in addition to the usual schadenfreude of someone using purple prose to describe something they don’t (and can’t) actually supply, there’s something funny about a company insisting that they have “locally” sourced species of fish that are not found within 3,000 miles of where you live…

You can pick up the New York Post story if you’d like to see more of the company’s rather florid marketing language, but the basic idea is that a company calling itself “Sea to Table” has been claiming to have caught fish that are native to the Central Pacific and Indian Oceans in Long Island Sound, to have harvested Red Abalone (which have been a protected species for decades now) on the wrong coast of North America, and to have just had boats arrive with a new catch when satellite imagery demonstrates that they didn’t have anybody at sea that day. To me the question isn’t even whether the “farm to table” movement has finally jumped the shark (so to speak) as how it took them this long to get caught…

Now, I want to emphasize that this story isn’t about an atrocity; no one is claiming that the company sold anything that was past its sell-by date or otherwise unsafe to eat. I’m also not saying that there is anything with importing fish from where the species your customers want to purchase actually live, or that there is anything wrong with farm-raised shellfish or crustaceans. I do believe that basing your business model on the concept of offering a higher-quality product than you can actually provide is not a particularly smart or ethical idea, and doing so in flowery language playing up what good and responsible people you are is just asking for trouble…

I’m also not willing to state that anyone who cooks, processes, or re-sells seafood should also be required to hold credentials as an ichthyologist; if I’m paying someone to make my dinner I’m really more concerned with the dish tasting good (and being safe to eat, of course) than I am in knowing the exact species names of the fishes involved. And frankly, I think blaming the company for the working conditions and pay scales of the companies from whom they have been buying the outsourced fish, as the Post article also does, isn’t really fair. A small company operating in Brooklyn does not have the resources of a firm like Nike or Apple, and can’t very well travel the world assuring that both the fish and the fishermen involved with their products are being ethically treated. Although, again, it would probably be better not to brag about how much you love and respect fishing communities and fishermen, just in case…

Food Snark

I wasn’t planning to do a follow-up on yesterday’s post about IHOP – or, as they have temporarily re-branded themselves, IHOB for International House of Burgers. I figured that mocking them for the promotion – not so much because it was ill-advised as much as it was pointless and probably redundant – would be a fun post to write, and hopefully read, and that everyone else would lose interest in the story as quickly as I did. A generation ago, or even a decade ago, that would probably have been the case, but in the world of social media nothing ever goes away quietly…

Not surprisingly, Business Insider ran a short piece on Tuesday recounting some of the replies that competing hamburger chains had tweeted, which is a valuable service for those of us not currently on Twitter, by the way. Wendy’s already has a reputation for snarky tweets, so you would probably have been expecting them to comment. Their reply was “Can't wait to try a burger from the place that decided pancakes were too hard,” which I feel shows the proper spirit. Red Robin, another likely competitor I had mentioned in yesterday’s post tweeted that “We’re as serious about pancakes as @IHOb is about burgers,” which is probably also what you’d expect. Seeing A&W Restaurants get into it by tweeting a version of their logo turned upside-down and adding “We don’t know what it means either,” was a bit more unexpected, because I hadn’t realized that the restaurants division of A&W was still in business…

IHOP appears to have been expecting the tweet storm, as well, since their response “We don't want any beef with you, we just want to share our beef with the world," seems a little too rehearsed to be natural. Their CEO was later quoted as saying that “If we have other people in the world of burgers commenting on our burgers, it can only help,” which also suggests that they had anticipated the reaction from the industry. I personally thought that Waffle House had the best reply, though; asked by one of their fans (in a tweet) “Please stay waffle house don’t become burger house!” the company’s own Twitter account replied “No worries here...”

We’ve discussed the question of whether all publicity is good publicity, or whether being publically mocked – regardless of the platform on which that is happening – is worth the lost business from people who will decide that your original move was bone-headed enough to motivate them to avoid your company. In this case, I really doubt whether IHOP is actually going to lose business over the IHOB strategy; they’re an iconic part of American life, and anybody who wants cheap breakfast food at all hours of the day or night (and doesn’t have a Waffle House nearby) will probably continue going there…

Whether or not their new burger offerings gain traction, or whether people start visiting the restaurants during the off-peak lunch and dinner shifts in which they were trying to pick up ground remains to be seen, however…

It's a Stunt

Over the weekend, the International House of Pancakes, or IHOP, as they are often called, announced a temporary change in their name to IHOB, without any indication of what that was supposed to mean. Today we learned that the “B” stands for “Burgers,” and the temporary measure is part of the launch of their new line of burgers. There’s been the amount of chatter you would probably expect out there in cyberspace, or at least in the comments sections of the various articles about this promotion, with some customers claiming that the last thing they want to smell in the morning while at breakfast would be burgers cooking, while others applaud the “free” publicity the stunt is generating. Personally, I’m disappointed…

You can pick up some of the articles about this promotion here or here, if you have a mind to. My personal disappointment stems from the fact that IHOP has already got a number of burgers on their menu, including two of the ones they are pushing for this new promotion. I haven’t been in to an IHOP location to see if they’ve really added anything new, but I’ve been eating one of the products mentioned by name in the Market Watch article for years now – pretty much any time we go to IHOP at a non-breakfast time of the day and I don’t feel like eating chicken and waffles…

Now, I would be the first to admit that it is difficult for an established brand like IHOP to change its public image after this many years. At least three generations of customers (possibly five by now) have associated the company’s restaurants with breakfast foods served more or less 24/7, with a smattering of other menu items for people who may not want to eat pancakes at three in the afternoon. This ignores the fact that the IHOP menu is made up of at least as many non-breakfast items as the more traditional faire with which it is associated, or that the company’s biggest advantage is probably the same reliable uniformity that supports most other national chain restaurants, rather than pancakes, waffles, and bizarrely-named breakfast specials. I’m skeptical about the current promotion, however…

It isn’t difficult to figure out that a restaurant chain most closely associated with breakfast foods would want to promote its non-breakfast options in an attempt to increase customer traffic at the other times of the day. In fact, IHOP has been running television spot (and in earlier times radio and print media ads as well) for as long as I can remember, without any noticeable change to its customer demographics or peak operations times. I couldn’t tell you for sure without auditing their books – and nearly all of the IHOP locations are franchised, so even that might not help – but it would appear that the company is going to need more than advertising stunts to change these stats…

What, exactly, the company could do to draw more customers for lunch and dinner shifts isn’t clear from the articles, or from my observations as a long-time customer, for that matter. Without bar facilities available they can’t really expect to take on Chili’s, TGI Fridays, Red Robin, or the other players in that segment, and with kitchen operations (mostly) limited to frying things or toasting things it’s difficult to see what other segments they could move into. They can’t attempt to implement greater differentiation without massive upgrades to their facilities and equipment, and if they attempt to go low cost they run the risk of bumping into McDonald’s and Burger King on the low end, or losing market share to Denny’s and Waffle House in their current segment, or possibly both…

It should be interesting to see whether this promotion will lead IHOP into a major change in menu, marketing, or operational strategy – or whether it’s just another marketing stunt that no one will remember by this fall…

Pass It Along

I didn’t really intend to do a follow up to the “automated ordering kiosk” stories this quickly, but then I suppose I should remember that I don’t make the news, I just report it. Or at least make nasty, sarcastic remarks about the news, anyway. One of the things I’ve been talking about for a while now is the question of how companies that are suddenly forced to begin paying a higher minimum wage will respond to the situation. With rare exceptions, there are only three ways to deal with an increase in a specific cost (in this case Payroll): lower other costs to compensate, accept a lower profit margin, or raise prices. In theory, if the Federal minimum wage were to be increased to $15 per hour, businesses that employ low-paid workers could attempt to lower other operating costs, raise their prices, or just settle for making less money. Unfortunately, as I’m sure you’ve realized by now, things in business policy and strategy are rarely that straightforward…

Consider, for example, one of the hot spots for this debate: the Restaurant business. Unless you’ve worked in the Food Service industry you may not be aware of it, but in addition to the quick-serve personnel, who almost always start at minimum wage, most of the states allow employers to pay anyone who routinely gets tips at an ever lower rate; often as low as $2.13 an hour. Clearly, getting a salary increase to $15/hour, or even to regular minimum wage, would be a significant improvement for any of these employees. At the same time, the increase in salary costs would hit those companies even harder than usual, since they’d be going from $2.13 to $15 instead of the $7.25 to $15 that everyone else would have to absorb. At that point it seems quite likely that companies in this industry would respond by raising prices – especially considering that they are already doing so…

You can pick up the original story off of the Wall Street Journal site, and the Consumerist site commented on it, too, if you don’t happen to have a WSJ subscription. According to the Journal, restaurants in a number of states are experimenting with a “labor surcharge” added to the bottom of your bill to cover the cost of wage increases. It’s not a new idea, really; as the Consumerist people note, other restaurant chains have tried this before, and the cable television and telephone companies have been using exactly this tactic for years to obscure the amount you are actually paying them each month. Whether or not this will work on a large scale in an industry where people will routinely spend hundreds of dollars on a drink and then balk at leaving anything for their server remains to be seen, of course…

Another interesting question is whether any of these companies will abolish tips altogether, and just attempt to pay their employees a living wage. All of the data we’ve seen over the last few years suggests that forcing people to work for tips does not improve either performance or service, and contributes to several kinds of counterproductive work behaviors. Meanwhile, the handful of companies that have tried eliminating tips have reported better performance, higher morale, and improved customer relations, although some people do have trouble adjusting to not leaving a tip after a lifetime of habit…

I’ve worked on both sides of this issue, as well as seeing it from the consumer side, and I have to admit that while I’ve never had a problem leaving a tip, I’ve seen and felt the corrosive effects of people stiffing tipped employees, either because they are miserable cheapskates, or just sadistic assholes having fun. I’d be perfectly okay paying a bit more for my meals to ensure that nobody ever had to experience any of that crap again. I’m not sure how many customers share my point of view, or how many business owners would be willing to take a chance on this new approach. But unless something derails the $15/Hour movement soon, I suspect we’re all going to find out…

The Trouble With Franchises

Actually, there are a lot of problems with a franchised business model, both from the franchisor’s standpoint and also from that of the franchisee. If you have purchased a franchise from someone then by definition you have given them a large sum of money in exchange for the right to open a branch office of their business and contribute to their bottom line. You may not ever see a dime of that money back; you may in fact go bankrupt even before you make your first franchise fee payment, but the company will still get its money. In some cases this might work out very well, such as the McDonald’s franchises, some of which have been estimated as being worth more than the franchise fee in marketing advantages alone. In other cases it might be a nightmare, as it was for the Krispy Kreme franchise holders who were basically used as a revenue source to enrich the personal fortunes of the CEO and his cronies in the early 2000s…

As bad as that is, things are frequently worse on the franchisor side. As attractive as it is to have people paying you to expand your business, the fact remains that every time you sell a franchise you are putting your company’s honor, reputation, and financial future into the hands of someone who you can’t control, who has no reason to like you or protect your company beyond the need to recover their investment. This can lead to improperly maintained locations that give your company an unwanted reputation for slovenly management and unsanitary conditions, public relations disasters that impact the performance of other franchisees miles or time-zones away, or human resources atrocities so absurd that they get you mocked by scruffy bloggers all over the globe…

I picked up the original story from the local television station in Houston, but in case you missed it, there are reports of a Popeye’s franchise demanding that the shift leader in one of their stores pay back the money that was stolen during an armed robbery because it was her fault the registers had enough money in them to be worth stealing. When the woman in question refused, saying that she’d already been robbed at gunpoint and couldn’t have afforded to replace the money anyway, she was fired. This would have been bad enough, but it turns out that the fired employee is a mother of three children who is currently pregnant with a fourth – and now facing unemployment in addition to her other problems…

Now, I don’t know enough about employment conditions in Houston to comment on whether firing someone because your company was robbed of less than $400 makes any financial sense. Typically, we assume that recruitment/replacement costs for supervisory personnel run between one-third and one-half of the first year’s salary, which in this case would mean somewhere between $5,000 and $10,000 for a supervisor in the $8 to $10 per hour range; possibly much more than that. Unless there are so many employed first-tier managers in the Houston area that a replacement can literally be found sitting in the restaurant itself, this was already an asinine decision on the part of the business. But once the story got out things became even worse for both the franchisee and the company…

There’s only one Popeye’s location within a fifty-mile radius of my office, and I already don’t go there because I would literally have to drive past dozens of other fast-food restaurants to get there. And I know that our local franchise has absolutely nothing to do with Z&H Foods in Houston, except for the fact that both companies purchased a franchise to make and sell fried chicken and biscuits. But even knowing that, I feel rather more negatively toward Popeye’s in general than I did before I read this story, and even more so since the franchisor in this story is refusing to comment and just dumping all responsibility for this fiasco on the local franchisee. Just imagine how much worse that could get if everyone who sees this story, on the air or on the Internet, has the same reaction…

Still want to go into a franchised business model? I can wait while you think it over…

From the People Who Brought You the Cat Café…

As I have noted on several previous posts, there are times when you run across something online that just seems too improbable to possibly be true – but you hope it is anyway. I try to avoid turning this blog into a collection of Internet freaks and oddities, since there already are sites that perform that function brilliantly. But the world is a strange and wonderful place, and there are going to be times when you encounter something as bizarre and amazing as a café where you can interact and play with a variety of tame owls…

Regular readers of this space (assuming I have readers) may recall a post I brought you some years ago about the “Cat Café” – a business type originally found in Japan which has now migrated to North America and Europe. A number of observers – including me – were initially unsure if this business model would succeed outside of Japan, where people are apparently much more fond of cats than you would reasonably expect, but it turns out that there are enough people who enjoy playing with a friendly cat while having a coffee in other regions of the world to make such operations commercially viable. But apparently playing with domestic cats at the coffee house was not weird enough for some customers…

You can check out the original article online if you want to; some of the pictures of the owls are adorable. Some of them are also clearly faked – you can’t have a bloody great bird of prey perch on your bare skin without getting punctured by the massive talons – but there are a good number that are either for real or extremely good Photoshop. It’s also kind of amazing that it’s possible to pet an owl (or touch one at all) without getting your fingers bitten off, but if this story is for real then it seems as though the birds enjoy the attention. And if interacting with humans involves getting tasty things to eat, well, most animals would probably be okay with it…

Now, we should probably note that there is no way this business model would work in the United States or any other country with strict laws about ownership of wild animals (or exotic pets, depending on your point of view). Just getting permission to own an owl in the US would be a major undertaking, and getting liability insurance for the café that will cover both owl-related injuries and allergy attacks and also defend against frivolous lawsuits of various kinds would be the next best thing to impossible. It might be possible to pull this off in the UK, where (as we saw when the Harry Potter movies were coming out) people do keep owls as pets despite the liability issues and the inconveniently large aviary you need to keep one in. Whether the British public is likely to be attracted to owls in the same way that American and Japanese consumers would be remains to be seen…

Personally, I don’t know that I’d want to handle an owl without specialized training and adequate safety equipment. But it might be interesting to sit down at the table with one and have some tea together. Well, I’d probably have a mocha, and I’d imagine the owl would be happier with a fresh prey animal to snack on, but the principle is the same. And if you actually managed to get an owl café up and running, it would certainly stand out from the huge crowd of coffee and tea shops I have encountered in my travels…

In a crowded industry, and in a world where cutting through the noise is becoming harder and harder to do in any business setting, I can think of worse gimmicks on which to base a business model…

Of Course They Are

This past week a story ran on Huffington Post that surprised a lot of readers and resulted almost immediately in a vast chorus of scorn and derision – as usual. On any given day you can expect to find stories of varying impartiality on every topic from international politics to local sports, some attempting to sound mature and some that are openly incendiary. But what made this story different was that the controversy was arising over food, and specifically about a listing of the 30 best barbeque restaurants in the United States. What made it so controversial is that not one of the 30 restaurants listed are from Tennessee, Louisiana, North Carolina, South Carolina, Mississippi, Alabama, Arkansas, Georgia, Florida, or Missouri, while states like New York, Vermont, Wisconsin and Ohio all had multiple entries…

One might reasonably ask how any such survey managed to bypass the entire region of the United States most associated with barbeque – but only if you had also failed to note the headline of the article, which states that these are the 30 best barbeque restaurants as identified by Open Table, the online restaurant reservation system. To their credit, the folks at Huffington Post do note that these are the top 30 barbeque restaurants that accept reservations on Open Table, and speculate that many of the great Southern barbeque joints don’t take Open Table reservations. Given that a lot of great barbeque is produced by hole-in-the-wall operations with a devoted local following, which therefore do not want or need Open Table, this is likely correct. However, I thought it was a good example of how bias gets into otherwise interesting data – and renders it utterly worthless…

Clearly, there is no practical way for a single reviewer to sample all of the restaurants in a given category in the United States in one lifetime; there’s just too much ground to cover. But unless the same reviewer (or group of reviewers) is doing all of the samples, there is no way to avoid having matters of personal, regional, national, ethnic, professional or other preferences from influencing the data. But in this case we are adding an additional problem in that all of these choices have been filtered by a factor that has nothing to do with how well a restaurant produces food, let alone how well it makes a specialty type of food relative to other providers. Even granting that having the technical ability, knowledge and willingness to use Open Table would allow you to make better barbeque – which seems unlikely, frankly – this sample is automatically excluding everyone else from the survey…

Now, this type of bias isn’t limited to business applications. You can see it in everything from people hiring employees because of pre-conceived ideas about gender, ethnicity, socioeconomic background, or appearance to former Vice President Dick Cheney leading the search for the best candidate for Vice President and discovering (no doubt much to his own surprise) that it was himself. You will sometimes see this referred to in the management literature as Confirmation Bias, which is the tendency to see whatever information is available as proof that your existing opinions are correct. In some cases this will result in bad decisions, when people use unrelated or even negative evidence to convince themselves that the choice they already wanted to make was the best one, while in other cases people will stop gathering information once they find enough to confirm whatever they already believe…

I don’t have any magical way of dealing with this issue – I’m as capable of confirmation bias as the next man. It is only by questioning our assumptions – not just at the start of the project, or at the end of the day, but continuously – that we have any chance of recognizing these errors, let alone avoiding them. But if you need a good example to work from, consider that you may confidently expect that the best restaurants in any category take Open Table reservations – if the only restaurants you are considering are from the Open Table database, that is…

Flying Cheese

Over the years, I have seen a number of very odd food concepts taken to market with varying results. I can still recall the infamous “Space Food Sticks” marketed during the early 1970s, when everyone I hung out with was a least a little caught up in the hype surrounding the Apollo missions. I’ve seen dozens of things covered with batter and deep-fried, from cheese and hot dogs to Twinkies and Snickers bars. I’ve seen chocolate brushed, sprayed and coated on products where chocolate should never go. I’ve seen foods that explode when they come into contact with your mouth, hot sauce so potent it can literally cause tissue damage, and packaged vegan brownies that were complete unchanged by being stepped on and then molded back into shape (fortunately, the plastic wrapper didn’t break). But I don’t think I’ve seen a concept so completely insane, and yet so appealing, as the idea of a flying grilled cheese sandwich…

I picked up the story from the Huffington Post article about them, but you can visit the company’s own website here if you want to. There isn’t a lot of information about them online, but the basic idea is you pay for a sandwich online (it’s $5) and then go to a location marked with an “X” on a street corner – the location of which will be revealed to you after you pay your money. A short time later a small orange parachute with a sandwich attached will float gently down from the sky, where you can grab it. The company says that if you sandwich gets caught on something on the way down, or otherwise fails to show up, they will “probably” make you another one – but it’s hard to imagine any entrepreneur losing public relations, let alone potential repeat customers, by failing to replace product that happens to get stuck in a tree…

It’s not clear how serious these people are about the company, which they call Jafflechutes – a “jaffle” is Australian slang for a grilled cheese, and they drop them via parachute, hence Jafflechutes – but assuming a customer base with sufficient whimsy there’s no reason this couldn’t work. All you would need is a kitchen located in the upper floors of a building somewhere with a significant population density (the North American location they’re talking about expanding into is New York City, naturally) and a city government which is prepared to be lenient about litter from miss-delivered sandwiches. The business model isn’t functionally different from any other quick-service restaurant with an unusual delivery method, and we have already seen other gravity-based systems (e.g. chutes, elevators, rolling trays) used in this role. There are even restaurants already in operation where all ordering and payment transactions are handled via touch screen on the tabletop, and you have no personal interaction with the employees…

Personally, I was a little disappointed when I saw the details of the operation in the online articles. When I saw the headline I had envisioned a fleet of drone aircraft, possibly akin to the quadracopter drones Amazon is supposedly looking into using for a delivery fleet, soaring over the rooftops of a major city and then releasing sandwiches from an internal cargo bay when they reach the specified GPS coordinates. And once that technology is up and running, I can’t see any reason why the unmanned, jet-propelled, laser-guided, self-chilling beer keg that the Aussies (and the U.S. Marines) have been asking for over the last few decades wouldn’t be possible…

For now, I suppose we should probably just keep watching the skies. Although, if you find yourself standing on an otherwise unexplained “X” on the pavement, you might also want to keep a glass of milk or a cup of tomato soup handy…

Take a Stand

One of the great controversies of our time has arisen again, and no matter which side of the issue you find yourself supporting, you may be quite sure that sooner or later this divisive issue will confront you in one of its many forms. So I ask you, dear reader (assuming I have readers), to consider for yourself and make your own decision: is tofu actually evil, or merely unpleasant?

The matter has taken on an unprecedented urgency in this time, because just last month Chipotle announced that they will begin carrying tofu as one of the protein options on their menu at all 1,572 of their restaurants nationwide. This entire bean-curd menace began just one year ago, in only seven test markets, and initially met a great deal of resistance from customers dedicated to the idea of burritos with meat in them, but has gradually spread to nearly half of the company’s locations. And while the company has offered a number of (effectively) vegetarian options for years (usually including some combination of rice, beans, cheese and fajita-style vegetables) this is the first time they have actually stooped to the dreaded bean curd. The question all Americans must now consider is whether this is a good thing or a bad thing…

I kid, of course, but for anyone associated with the company this is a non-trivial issue. On the one hand, it seems reasonable for the company to attempt to accommodate people who can’t or won’t eat animal products by making a true vegetarian option available on their menu. Cheese is inherently an animal-based product, of course, being made from cow’s (or goat’s or occasionally buffalo’s) milk, but many common types of cheese are also made with rennet, which is a collection of enzymes taken from the stomach of a cow or calf. Tofu, on the other hand, is generally not made with any animal products or by-products, and neither are the rice or black beans sold by Chipotle as it stands. In theory, this should increase the company’s potential customer base, both directly in terms of additional people they will be able to serve, and also indirectly, in the case of parties containing one or more vegetarian diners who will now be able to go to Chipotle together…

On the down side – well, there is very little risk involved. The number of people who are allergic to tofu does not appear to be any greater than those affected by any other food allergy, and anyone who isn’t allergic to the stuff can just not order it. It is possible that there will be some investment required in additional kitchen equipment and/or modifications to the restaurants’ food assembly lines so that they can handle the new ingredient, as well as some additional expense in setting up procurement and distribution of the new ingredient, but given the gradual introduction of the product it seems likely that the company has worked out any bugs that might have appeared in their system. Which only leaves the philosophical problem I mentioned at the beginning of this post…

Personally, I’ve never give a fetid dingo’s kidney about what other people think of my eating habits. As long as they mind their own business and let me get on with mine, we can always get along – and anybody who actually has problems with somebody eating a nice steak burrito (or, for that matter, one which contains only tofu and beans and rice) should probably not be allowed to eat out in public in the first place. So while it is possible that PETA and the American Cattleman’s Association might be headed for a showdown sometime soon over a tortilla-wrapped entre, it seems much more likely that both sides will just pay their money, eat their lunch, and go back to fighting over something more important…

Remember, though: if a range war breaks out in your local Chipotle restaurant, you heard it here first…

Spite and Ketchup

Every once in a while you will run across a business story that reminds you of small children squabbling on a schoolyard, and you will reluctantly have to acknowledge that no matter how hard we try to be adults, professionals, and leaders of commerce, people don’t always change that much between the ages of five and fifty. This may take the form of business people sabotaging deals that would have earned them billions of dollars because a hated rival would have made millions on the same transaction, or of people refusing to work together because of something one of them said about the other decades before, and this past week it took the form of the world’s largest quick-serve restaurant chain severing ties with a valuable supplier because that supplier’s new CEO used to run a rival company…

If you missed the story on Reuters by way of Yahoo Business you can pick it up on the link, but the story is simple enough. McDonald’s announced this week that they are ending a relationship with the H.J. Heinz company, and will no longer purchase their ketchup, because the new CEO of Heinz is the former CEO of Burger King. Why exactly this would be a bad thing from McDonald’s point of view is not clear; certainly it doesn’t suggest that the executive in question is inexperienced in large-scale food service operations or that he wouldn’t understand how important condiments are to a quick-serve hamburger restaurant. It’s possible that the leadership at McDonald’s is reacting to some of the more outrageous (and stupid) management blunders Burger King has made over the past decade (the advertising debacles come to mind, as does Burger King’s insistence on treating its franchise-holders like crap); it is also possible that the leadership knows the new CEO of Heinz from industry functions and just doesn’t like him…

It’s also possible that someone associated with the McDonald’s organization has, or would like to have, a relationship with the Heinz company’s primary rival in the ketchup field, Hunt’s, which is owned by ConAgra Foods. Or, alternately, that someone at McDonald’s is concerned about Warren Buffet’s Berkshire Hathaway group purchasing Heinz, and wants to keep at arm’s length from the operation. These considerations may not seem all that important in the short run, but once we start considering corporate acquisitions in the $28 billion range it becomes much harder to dismiss these concerns as mere spite or simple defensive posturing...

In any event, the move should have minimal impact on your enjoyment of McDonald’s products within the United States, as only two domestic markets (Pittsburgh and Minneapolis) actually feature Heinz products as of this week. For some years now McDonald’s locations across the US have given out condiment packets marked, simply, “fancy ketchup,” and most of the in-store dispensers make no mention of brand names either. It’s possible that the leadership at McDonald’s has obtained a supplier contract that will lower their ketchup-related expenses outside of the US (which the company has been using Heinz products) enough to make up for any losses associated with dropping the name-brand product; it is even possible that the mention of possible rivalry and/or animosity toward the new CEO of Heinz is nothing more than a ruse to misdirect anyone who might be looking away from the details of that new deal…

And, of course, it’s also possible that the people running a multi-billion dollar company have just make a major purchasing decision on the same basis that you might have used in picking players for a dodge-ball team when you were nine years old. We should probably keep an eye on this one…

How Does This Relate?

Imagine for a moment that you are the owner of a successful business, and you want to expand your operations. There are a number of ways to go about this directly, such as opening new markets, moving into new customer demographics, or trying to take business away from your competition. Alternately, you could move into closely related products or services – if your company currently makes hammers, for example, you could move into screwdrivers or files, or other products that are made from similar ingredients (tool-steel) and marketed to similar customers (hand-tool users). This will increase your potential revenue, and will also provide some protection against disturbances in the market – if the market for hammers drops off, the market for screwdrivers may not. This type of strategy is referred to as related diversification; it’s distinct from unrelated diversification, which would be expansion into completely unrelated industries. For example, if we own a company that makes hammers and we decide to open a flower shop. Or, perhaps, if we own a company that makes and sells men’s clothing and we decide to open a restaurant…

Whether you consider unrelated diversification a valid strategy or not is a matter of personal preference, but you may want to watch how Brooks Brothers does with their steakhouse before you make your final decision on that point. A story in last week’s New York Post claims that the famous retailer is planning to repurpose a large retail space around the corner from its New York flagship store into an upscale steakhouse sometime during the 2014 calendar year. There are no details yet, but New York City is already home to a number of premium steak restaurants, and it seems obvious that anyone attempting to break into that market will require more than name recognition and a clever stunt to get the public’s attention. If the company can somehow come up with an absolutely top-grade steakhouse operation they might be able to compete on either cost or value or both, and if they can use their name recognition to get people to come in and try the place, they might have a chance…

How likely any of that is remains to be seen. Clearly the company has a well-established brand image that goes back to 1818 and conveys the impression of superior quality and workmanship, if not the most competitive price. And this is hardly the first attempt to use an unrelated brand and/or reputation to develop a food service operation. In recent years we have seen a number of companies not normally associated with food open (or license someone else to open) branded restaurants using their name and logo, notably including cable television network ESPN and motorcycle manufacturer Harley Davidson. And while the company does not appear to have any significant experience in food service, they are very well known for both superior customer service and world-wide product distribution. With over 300 retail locations in place and a number of possible ways to cross-promote products, this idea may not be so odd after all…

I can’t help wondering how many other companies might be contemplating similar moves – or would if they saw Brooks Brothers pull this off. Would we next encounter McDonald’s sportswear? Apple coffee houses? Starbuck’s health and beauty products? The one constant I have noticed in my years as a business teacher and a management consultant is that no idea is too outlandish that someone somewhere hasn’t considered turning it into a consumer business – and if bacon-flavored salt, vodka and personal lubricant can all be winners, what’s wrong with a super-premium retailer branching out into a super-premium restaurant?

This isn’t to suggest that the new venture will be easy, if it isn’t just a publicity stunt in the first place. I’m just noting that it won’t be the strangest thing we’ve seen this week, let alone this decade…

Adventures in Supervision

One of the questions we can discuss endlessly – but never actually solve – is the issue of how closely employees should be supervised while on the job, and whether the resulting layers of management are really worth the cost. On the one hand, span of control research is reasonably conclusive that the largest number of subordinates (or subordinate units, when you get to higher levels) any given manager can handle is 5. Or, at least, it’s as conclusive as you can get in a soft science. On the other hand, there’s good evidence that over-supervision, or micro-management, is just as harmful to the company’s successful operations as too little. Personally, I believe that a universal rule isn’t possible, and that the exact amount and degree of supervision will vary enough from one team to another, or even one shift to another, that the only reasonable approach is to hire good managers, train them well, and let them decide case-by-case from then on. But however you do it, there’s a wealth of evidence that supports the contention that someone needs to be watching…

Take, for example, a story that popped up on the DetroitFree Press website this week, about a Muslim customer who is claiming that servers at a TGI Friday’s in Garland, Texas, tricked her into eating bacon. The story goes that the customer requested the bacon be left off of a Cobb salad, and this for some reason offended the wait staff. So one of them decided to stuff a plastic drinking straw full of bacon and serve it to this customer in a glass of tea. When presented with this lapse in judgment, the restaurant’s manager refused to believe the customer, which could only have made matters worse. The company is declining to comment, pending an internal investigation, while the story goes viral and millions of scruffy bloggers repeat it around the world, embellishing just a bit in each telling…

Neither of us were present when these events took place – unless someone who works in that TGIF location is reading this post, in which case please leave me your perspective on the story in the comments. Based on what I’ve heard so far, however, there are only two possibilities in this case: either the customer is telling the truth, or she is not. If not, we should probably ask the obvious questions of how she managed to obtain one of the company’s drinking straws, fill it with bacon, and smuggle it into the restaurant undetected – and what she expects to gain by doing so. Feeding pork to a Muslim is a vicious cultural insult, but no actual physical harm seems to have come to the customer as a result of this “prank,” and I’m dubious about her chances of suing successfully over this, especially in Texas. On the other hand, if she’s telling the truth we have to ask why the TGIF employees thought they would get away with such an insult, or if they are really stupid enough to risk their jobs and a possible lawsuit over a minor practical joke. In either case, however, we need to ask where the line supervisors were when all of this was going on…

Now, I don’t mean to suggest that it would be desirable to observe every member of a busy restaurant’s serving team every minute of every shift, even if that was possible. But a properly-trained, properly-managed employee would know better than to do any such thing, and much more to the point, any good employee would not want to risk damaging his or her own company for a joke. If TGI Friday’s is employing wait staff who are so poorly trained, limited in experience, devoid of people skills, or hostile to the company and desirous of its destruction that they would actually do something like this, both their Human Resources personnel and whoever was supposed to be supervising the staff at this particular store need to be reprimanded, and quite possibly moved to less sensitive duties. And if the manager and/or supervisors of this location are too over-worked or too oblivious to look out for scammers (at least those dedicated enough to bother stuffing drinking straws with bacon) then the company needs to send them more help, as soon as possible…

Because unless the person or persons responsible are identified and dealt with appropriately, I can almost guarantee that the company will have to deal with similar human resources failures and/or scams just like this one again in the very near future…

Gimmicks

Over the years I’ve encountered a number of business models based on unique, innovative, or just plain weird concepts – what are often thought of as “gimmicks,” especially by people outside the field of management. This isn’t always a fair assessment, of course; the term “gimmick” carries the connotation of something used in a con game to create the illusion of value when none actually exists, and many forms of business innovation offer real value to the customer. Still, it is difficult to blame an observer from applying the term to some of the more outlandish examples. There is always going to be some temptation to dismiss businesses of this type; to claim that they are not fundamentally sound, and are simply relying on the novelty of whatever specialty item or service they offer to the customer. And in some cases this is undoubtedly true – a combination singles bar and Laundromat did very well in Texas for a number of years, while a traffic school and wine-tasting operation in California did not stay open long enough for me to decide whether or not it was a joke…

What tends to get overlooked in these discussions is that all business models appear novel when first introduced, but some will continue to generate value for the customer even when the company becomes widely familiar, and some will prove difficult to imitate even after the particulars of the business model become well known. My favorite case to date is probably The Legal Grind, a business in Southern California that combines various aspects of a neighborhood legal clinic (consultations, referrals, self-help materials, etc.) with a coffee house. To the best of my knowledge, it’s the only venue in the world where you can get a latte and a bankruptcy – or a mocha and a divorce, if that’s what you need. Legend has it that the founder (a fully-qualified attorney) got fed up with traditional legal practice and wanted to open a coffee house, but people kept coming in and asking for legal advice – and a good idea is a good idea. Whether you’d consider this a coffee house with a legal service as a gimmick, or a legal service with a coffee house as a gimmick is up to you, but the firm has been in operation for over 18 years as of this writing, and has expanded into three locations now…

Then there’s the case of a “fully automated” restaurant in Germany. This isn’t actually a new story – I saw it on ABC News when they first ran the piece – but it was reprinted online this past week and struck me as a gimmick business that may or may not have staying power. The place is called Bagger’s, and their gimmick is that there is no waitstaff working there – you place your order on a touch screen at your table and your plates are delivered down a curving track by a gravity-feed system. It’s an arrangement that would be difficult to set up in a retail space where you couldn’t put the kitchen on the second floor, and it isn’t clear from context how you would send something back if it isn’t prepared correctly, but the real question from where I’m sitting is whether such an operation has any utility. Which is to say, does this arrangement offer any value to the customer above what you would expect from a more traditional method of service?

On the one hand, there would be no delay while you attempt to get the waiter’s attention or while you wait for a food runner to turn up with your plate. And there would be no issues with the waiter spilling soup on you; if the delivery system is working properly the only one who could spill anything would be you. And, at least in theory, if you wanted a drink refill, another plate of something, or to place a dessert order you could arrange for it by using the touch screen. But on the other hand, people enjoy some amount of human contact, and part of the service a traditional restaurant offers is people who will take your order, bring you what you’ve requested, and answer your questions, no matter how absurd any of this might me. People who, in fact, serve you…

I’m not sure the technical details can be easily overcome, and I’m not sure if anyone else is going to want to assume the costs of setting up the hardware or the risks inherent in a faulty delivery system spilling something hot onto a customer. But if we ever get such an operation in Central Michigan, I know I’d at least go and give it a look…

Making Things Harder

I’ve been on record several times in this space saying that I believe that food service is the hardest industry there is, and nothing I’ve seen recently has changed my mind about that. Between issues that are completely out of your control (cost of ingredients, local ordinances, traffic conditions on nearby roads), unreasonable demands and entitlement from customers, outright fraud and the fact that people who have no knowledge of the industry will assume that what you must be easy, food service is almost a perfect storm of all of the things that are problematic in the retail, grocery, entertainment, health, child care, nutrition and personal service sectors. Trying to cut through the noise in this industry and actually get your advertising noticed by potential customers is even worse, frankly, and leads to lapses of taste and judgment like the “Freaky King” and food-as-sex fiascos I’ve already referenced. And all of that is assuming that you don’t specifically make things harder on yourself…

Consider for example the recent advertising series from the Red Robin hamburger chain, as referenced on the Yahoo News site this week. For those unfamiliar with the company, Red Robin’s menu is built around hamburgers, and specifically around 24 specialty types that include teriyaki sauce and pineapple, or bleu cheese dressing, or what have you. Some of these are kid-friendly, but the majority are targeted at young adults who have moved beyond fast food offerings but not past enjoying hamburgers – e.g. the coveted 18-35 demographic. Since any restaurant that is perceived (correctly or not) as a hamburger joint will have trouble drawing customers who don’t eat meat – or even getting parties that include a vegetarian member – the company has offered vegetarian and vegan versions of all of the burgers for years. What is baffling is why they should have chosen to make fun of those options…

Now, we should probably acknowledge that vegetarians are not part of the key demographic for a company that has positioned itself as a hamburger restaurant. I don’t know how much sales volume the company has in vegetarian dishes, but it clearly is not the focus of their operations. We should also note that the use of snarky, “edgy,” and somewhat mocking styles of advertisement have become popular across a wide range of companies and industries in recent years. But by the same token it does not require any great, in-depth knowledge of the issue to realize that many people in that community take the vegetarian lifestyle very seriously, and do not react well to anything they consider mocking or disparaging of their choices – anymore than any other distinct group likes being made fun of by an organization that is allegedly soliciting their business…

In its efforts to appeal to both young adults and families, the company has long cultivated a humorous and somewhat irreverent image; in theory this serves to help differentiate them from rival chains that make use of more conventional branding (and advertising) strategies. And they can with some justice claim not to have been mocking vegetarians in general in this ad, but rather gently poking fun at the sort of teenage drama that results in a single member of a family suddenly going vegetarian and then insisting on everyone else in the household conforming to his (or in this case, her) decisions. But given how common militant vegetarians are in our culture – and how vocal they are known to be about anything that appears to disparage them – it’s hard to imagine how any marketing advantage could be gained through these ads that would offset the resulting difficult they would create…

Adults Only?

I’ve mentioned the idea of age-limited business models in this space before; the idea that there are some customers who would be willing to pay extra for the privilege of not having to worry about fellow travelers – literally, in the case of airlines or trains – who are unwilling to exercise any modicum of parental supervision over their children. This has lead to such concepts as adults-only sections on airliners, movie theaters that either do not show anything rated over PG or don’t admit anyone under 17 to an R movie (accompanied by an adult or not), and even entire communities with a minimum age requirement in order to live there. There have also been specifically child-friendly businesses appearing, notably including restaurants with built-in play areas and movie theaters offering showings specifically for parents (and nannies) looking after small children…

Naturally, this is a polarizing issue, with people on the pro-child side insisting that anyone who does not want to listen to the sounds of a toddler screaming or deal with a pack of small children running around as if they were at a playground is simply a horrible old curmudgeon who hates children, families, freedom, liberty, justice and possibly the American Way. Meanwhile, people on the pro-manners side insist that anyone who can’t afford a babysitter should just stay home with the kids, and that anyone who insists on dragging small children to events or venues that are not age-appropriate is a selfish, narcissistic, inconsiderate, delusional idiot. I’m not going to comment on the social, legal or psychological implications of the debate; as usual I’m going to leave those subjects to people who are better qualified. The question that interests me is whether age-specific (or age-segregated) businesses can be viable in this era…

One large-scale experiment going on right now in Virginia is a restaurant called “The Sushi Place” which is operating in Alexandria. The owners announced that the place would be 18 years or older only during the run-up to their grand opening, and have apparently stuck with that decision during the first weeks of operations. So far it seems to be working; they claim to have been operating at capacity every night so far, and the reaction (both from their local community and the majority of the online comments) appears to be very supportive so far. You can watch the story from the local CBS affiliatestation here if you want to, but at least in the early going this appears to be working…

Now, I’m not familiar with that part of Alexandria or with the restaurant itself; it’s possible that The Sushi Place is succeeding because they’ve chosen a location where their customer base is mostly childless, or because their food, quality, prices and/or service are exceptional, or just because the number of small children who are willing to eat raw fish in the first place is somewhat limited. And it is possible that they are still riding on the buzz from their grand opening, and that business will drop off over time – or that local pro-child activists will start causing enough trouble for the owners that they are eventually forced to change policy. But personally I hope they make it – and I would like to see someone extend the concept to other types of business and locations outside of Virginia…

It’s not that I have any problems with families or children, you understand. It’s just that sometimes I’d like to be able to eat a meal, watch a movie, or reach my destination in relative peace…

The King is Dead…

Okay, not really, but according to a story that ran today on CNN Money, Burger King is no longer the number two hamburger/fast food chain; Wendy’s has finally overtaken them. The numbers themselves shouldn’t worry any of the Burger King stockholders just yet – the company trails Wendy’s by $8.4 billion to $8.5 billion – which may be roughly $100 million in absolute terms, but is only 1.2% in relative terms. What is rather more disturbing (for the Burger King stockholders, at least) is that Wendy’s is getting this higher performance while operating 18% fewer restaurants – 5,900 units compared with Burger King’s 7,200. If I were one of the stockholders I’d definitely want to know why my company was making less money despite having 1,300 more outlets. But then, I’d also want to know who authorized some of the dumber marketing programs at Burger King – and why those individuals haven’t been fired yet…

We’ve spoken in this space about the “Freaky King” ads (television spots featuring a character with an oversize, strange-looking plastic head piece), the “Freaky King” pillowcases and tie-in merchandise, the occasionally obscene print ads, and the fact that the complete incompetence exhibited by some of the Burger King crews (including the one closest to our house) don’t appear to be helping the public perception of Burger King offering an inferior product. From a business standpoint, the most absurd factor of all has to be the outrageous treatment of the franchise holders by the parent company, considering that the success of those franchised locations – and the quality of their products and operations – is critical to the company’s overall success. Until now, however, it was only unfounded speculation on my part that all of this exceptional idiocy was going to bring down the company…

Now, I don’t mean to suggest that the decline of Burger King (and the rise of its competition) is due entirely to management shortcomings. The increasing influence of burger competitors, such as the Jimmy John’s sandwich chain, the upscale Chipotle and Qdoba Mexican-themed fast-food restaurants, and the unholy trinity of Taco Bell, KFC and Pizza Hut have all taken their toll on the hamburger sub-industry, and new entrants such as Five Guys have fragmented the market even further. And there’s no question that high fuel costs, increasing demands for food purity and ecologically responsible farming, and the general decline of the economy have all contributed to the company’s problems over the past few years. But all of these factors make it more important for Burger King to work with their franchise holders, build good relationships with their customers, and avoid advertising campaigns that offend (or creep out) huge sections of their potential customer base, rather than less – and the company does not seem to have grasped this fact…

The fact is, at the end of the day, no one is going to bail out a failing fast-food corporation. If Burger King continues to strong-arm franchise holders into selling double cheeseburgers for below cost, running “Freaky King” spots after the franchise holders (and the public) have begged them not to, and otherwise alienating the people they need to stay in business, they’re likely to vanish off of the American scene as if they were never here, and no one will notice because regional players like Jack-in-the-Box and Carl’s Jr. will take over their share of market, and we’ll all get to eat Jumbo Jacks, Ultimate Cheeseburgers, and Western Bacon Cheeseburgers instead…

You know what, forget I said anything…

Battle of the Baked Goods

Some time ago I wrote in this space about a company called Insomnia Cookies, which uses the unusual business model of delivering freshly-baked cookies to their customers – as late as 4:00 in the morning, which is the source of the name. Since then we’ve seen a number of food-service companies leave the area (or go under completely) and several others arrive, but there’s one in particular that caught my attention. You see, it turns out that there is more than one company in this market that delivers baked goods to your door – and they’ve been around for some time…

If you enter the term “sugar shack” into your browser, you’ll find out that it’s a technical term for a small processing facility where various types of sap (primarily maple, but there are a number of others) were rendered into sugar prior to the Industrial Revolution; some are still in use today after a century or more of operations. You will also find at least a dozen businesses calling themselves “The Sugar Shack,” ranging from a café in Huntington Beach, California, to a bakery in Sioux City, Iowa, to a strip club in Lake Geneva, Wisconsin. Our local Sugar Shack is located on Clippert Street in the Frandor shopping complex in Lansing, and they sell cupcakes. They also sell brownies, and cookies, and they will make you a cake or a pie if you want one, but the most remarkable thing about them is that they deliver – until after midnight on weekdays, and until just before the bars close (1:30 AM) on weekends…

The difference between the two companies is obvious at once: like most of the Sugar Shacks around the United States, ours is a local business, and according to their website, one that has been operating in the Lansing area for nearly 40 years. Insomnia, on the other hand, is a multi-unit company operating in a number of different states and offering franchise opportunities to entrepreneurs who believe that a late-night cookie delivery service might prosper in their home town. The difference between the two business models is rather more subtle, however. Both companies sell cookies and brownies (and ice cream-related derivatives of each), and both of them will deliver these goods to you long after most restaurants have closed for the night. Insomnia’s menu is more limited and much more fixed, however; the Sugar Shack also has cupcakes available (in a bewildering array of flavors and styles) and will also maker larger cakes and pies on request, and decorate them in any fashion you’d like…

A much more interesting question is how well these companies will do in a depressed market, especially if they go head-to-head for the same customers. From what I can tell, Insomnia appeals almost entirely to the college student demographic – since that is the primary market for sweets delivered to your door at 4:00 in the morning. Their products have limited utility outside of that market segment, since people from other demographics will generally have the option of obtaining cookies from more conventional channels in advance of their need (or, in some cases, making their own). The Sugar Shack, on the other hand, has a wider utility in supplying a potential need for parties and celebrations where something more substantial than cookies (even really good cookies) is required; this should, in theory, give them a wider target market and a larger possible audience…

So far, both companies appear to be doing well in Lansing’s student-rich market, and the current national economic crisis does not appear to have impacted the demand for sweets in the area. But there’s no telling what the future could bring. I’ll keep an eye on both companies and report back in this space – purely in the interest of business education, of course…