ImaginativePRO Blog

McDONALD'S CEO FACES FRANCHISEE REBELLION, BRAND IS IN A 'DEEP DEPRESSION' AND FACING 'ITS FINAL DAYS'

Can McDonald's new CEO Steve Easterbrook lead the company through a franchisee rebellion? (Click Image To Enlarge)

According to a new survey, McDonald's franchisees believe the brand is in a "deep depression" and could be facing its "final days." 

One franchisee wrote in response to the survey by Nomura analyst Mark Kalinowski.

"We are in the throes of a deep depression, and nothing is changing.  Probably 30% of operators are insolvent."

Another wrote,

"The CEO is sowing the seeds of our demise. We are a quick-serve fast-food restaurant, not a fast casual like Five Guys or Chipotle. The system may be facing its final days."

More than a dozen franchisees expressed frustration with McDonald's management, saying that CEO Steve Easterbrook's turnaround plan — which includes initiatives like all-day breakfast and a shift to digital ordering kiosks — is a distraction from the core issues of McDonald's, like food quality and customer service.

One franchisee wrote.

"The lack of consistent leadership from Oak Brook is frightening, we continue to jump from one failed initiative to another." 

A second wrote.

"I have been in this business since the early 1970s but have not seen us this leaderless in all my time."

The company's reaction to their frustration, one franchisee claimed, is for operators to "get out of the system" and quit the business.

Several franchisees complained about all-day breakfast, saying that it has complicated kitchen operations and goes against Easterbrook's repeated promises to simplify the menu.

One franchisee wrote.

"The system is very lost at the moment.  Our menu boards are still bloated, and we are still trying to be too many things to too many people. ... Things are broken from the franchisee perspective."

Franchisees also criticized the "Create Your Taste" program, which allows people to customize their burgers with premium ingredients.

One franchisee wrote.  

"They are throwing everything they can against the wall to see what will stick." 

Kalinowski interviewed 29 US franchisees covering about 226 restaurants for the survey. McDonald's has more than 14,000 restaurants in the US. 

In response to the survey, McDonald's said it's hearing a different story from franchisees — specifically pertaining to all-day breakfast. 

A company spokeswoman told Business Insider.

"We’re hearing from customers and the overwhelming majority of our 3,100 franchisees that all-day breakfast is a hit!  In fact, since the launch, McDonald’s has reached its highest brand score in two years according to YouGov BrandIndex."

McDonald's is trying to revive business following seven straight quarters of same-store sales declines in the US.

In addition to adding all-day breakfast and "Create Your Taste," McDonald's has also made some changes to its core menu items.

The company started toasting its hamburger buns longer, making its beef patties slightly larger, and changing how the patties are seared.

McDonald's has also announced plans to remove antibiotics from its chicken.

There are at least a few franchisees who are on board with the changes.

Among the myriad negative responses to Kalinowski's survey, several franchisees expressed hopeful attitudes.

One wrote.

"I think our leadership is headed in the right direction.  It will take time."

Another said.

"The CEO seems to be doing OK so far!"

COMMENTARY:    Although McDonald's new CEO Steve Easterbrook does not have the confidence of a lot of franchisees, there seems to be a disconnect between how McDonald's shareholders perceive Easterbrook's leadership and how the franchisees feel about him.  Proof this lies in the performance of McDonald's share price.    

McDonald's Stock Up 10% For Year

McDonald’s has been the target of relentless analyst fire for all of 2015; yet here we are in mid-October and McDonald’s shares are up 10% for the year. This week they hit a new all-time high of $103.84.

McDonald's Corporation Share Prices Last Five Years - Jan 2011 Through Oct 2015 - Google Finance (Click Image To Enlarge)

McDonald's Brand Stronger Than Ever

The naysayers mistakenly aim at the small target, but they miss the big picture: McDonald’s formidable brand recognition and performance-oriented culture virtually guarantee long-term success.

On the former, McDonald’s is a top 10 global brand, according to Interbrand, a brand management consultant. McDonald’s ranks ninth on Interbrand’s list, with a $42.3 billion market value. Strong brands have the same effect on consumers that magnets have on metal shavings – they draw them in.

McDonald’s magnetism is especially strong on kids, and not just kids in the United States. Here, I speak from experience. On a weekday road trip from Antibes, France to Geneva, Switzerland, my wife and I stopped at a McDonald’s near Digne, France. We stopped not because of hunger, but because of curiosity. The parking lot was packed.  When we walked in, we found a restaurant overflowing with middle-school-aged kids. So much for indomitable French cuisine.

McDonald's Culture Remains The Same 

But it’s really McDonald’s culture that magnetizes the brand. As Steve Wynn, chairman and CEO of Wynn Resorts (NASDAQ: WYNN), said in a 2014 Wall Street Journal interview,

“You got the culture, you got the problem solved.”

McDonald’s has the culture, and has had the culture for decades, so the problem always gets solved.

Franchisee Rebellion Is A Distinct Possibility

After much anticipation, the newly installed chief executive officer of McDonald's, Steve Easterbrook, has announced a sweeping turnaround plan aimed at cutting annual costs by around $300 million at the struggling fast-food behemoth. Wall Street was unimpressed: the stock fell after Easterbrook made his announcement.

But a far important constituency is also grumbling: the franchisees who own most of the outlets. Many have already expressed skepticism about Easterbrook's leadership, complaining that McDonald's was imposing new burdens, products and obligations without any understanding of the strain the changes will place on franchise owners.

There's little evidence that Easterbrook's plans to turn McDonald's into a "modern, progressive burger company" -- which include selling 3,500 of the restaurants it owns -- allayed the concerns of the franchise owners, who have experienced falling sales in many parts of the world.

Easterbrook's plan seemed largely aimed at creating value for shareholders, not helping franchisees. The vexed history of franchising suggests it may be a mistake to disregard this constituency.

After World War II, McDonald's and other fast-food restaurants introduced "business format" franchises. Unlike conventional franchises, this wasn't a way to delegate distribution; it was a means to sell an entire way of life to aspiring small-business owners. McDonald's founder Ray Kroc described this as an "updated version of the American Dream," and his company, along with Howard Johnson's and other restaurants, made it a mainstream phenomenon.

In business-format franchising, the parent company maintains a rigorous level of control over franchisees, holding them to standards of appearance, cooking times, the dress of employees, accounting methods, and just about anything else that can be standardized and controlled. McDonald's went so far as to create its famed "Hamburger University" in 1961.

In principle, this insured success for both the corporation and the franchise owners. But in practice it relegated franchisees to a genuinely subordinate position. Harold Brown, a lawyer and critic of business format franchising claimed in 1970 that "numerous franchisors have stated that their franchisees are like children, demanding constant discipline and control."

This attitude didn't always sit so well with franchisees. The control imposed from above was fine so long as the decisions made at corporate headquarters worked well on the ground, but that wasn't always the case. In the late 1960s, a number of high-profile franchising ventures ended in revolts. 

• Domino's Pizza, for example, expanded its franchise operations throughout the 1960s, but failed to deliver sufficient support, financing and training. Profits plummeted and the company almost went bankrupt in 1969.  Two years later, enraged franchise holders sued Domino's, alleging that the corporation had imposed obligations on outlets without providing the necessary support. There was much anger as well at Domino's insistence that outlets only purchase supplies from the parent company or an approved supplier. Eventually, Domino's bought out the embittered franchisees, increasing the number of outlets under direct ownership.
• Chicken Delight, founded in 1952, expanded over the course of the succeeding decade, but then failed to deliver the necessary support to franchise owners, despite forcing them to pay the corporation higher prices for everything from paper plates to batter for the chicken. A number of franchisees eventually sued the company, setting in motion a chain of events that led to what the Wall Street Journal described in 1972 as "the virtual dismantling of the Chicken Delight organization."
• Shakey's Pizza, Mister Donut and other companies faced similar revolts around the same time. Some, notably Mr. Donut, mended fences with their franchisees, granting them increased control over local decision-making, financing, accounting, and even the expenditure of ad dollars. Others moved away from top-down decision-making, setting up venues where franchisees could express their concerns. Still others sought to curtail the number of franchises, bringing stores back under corporate control. All of this worked: many companies turned around, and the reputation of business-format franchising eventually improved.

McDonald's, which sailed through this period without problems, might want to take a page from the past as it tries to right the ship. It's suffering from many of the same problems. In a recent survey, franchisees struck much the same tone as their disgruntled predecessors of the 1960s, citing an out-touch management that seems more interested in off-loading costs onto franchisees than fixing the problems that beset the chain.

Unfortunately, Easterbrook's turnaround plan made almost no mention of the franchisees that are the public face of the company. Worse still, is his vow to increase the number of stores in the hands of franchisees from 81 percent to 90 percent — which some franchisees believe will make the company even more remote from the concerns of the owners on the front lines.

Easterbrooks Turnaround Plan

In May 6, 2015, McDonald's CEO Steve Easterbrook announced a restructuring plan to help it compete with fast-casual restaurants like Chipotle Mexican Grill. To foster a quicker reaction to changing trends, McDonald’s is restructuring its units into four groups based on the maturity of its presence in the particular market, where previously the business was segmented by geography.

• The flagship U.S. market.
• Established international markets such as Australia and the United Kingdom.
• High-growth markets such as China and Russia.
• The rest of the world.

McDonalds also said that 90 percent of its more than 36,200 restaurants around the world will be franchised over the next four years. This is up from 81 percent currently, and will mean the company will rely more heavily on franchising fees and move away from the daily running of restaurants. The organizational changes will contribute to 300 million dollars in cost-cutting targeted by McDonald's, most of which will be realized by 2017.

The company is working on streamlining its menu recently cutting seven items including the Deluxe Quarter Pounder burger and six chicken sandwiches, while at the same time working on improving perceptions about the quality of its food with a trio of new sirloin burgers being added.

Standard and Poors were left underwhelmed by the plan and subsequently downgraded their rating on McDonalds to A-, while Moody’s put their rating on review for downgrade. Both rating agencies showed concern over McDonald's plans to return between 8 and 9 billion to shareholders in 2015 and to hit the high end of its 18 to 20 billion 3-year goal by the end of 2016, worrying that any stock repurchases will be at the expense of higher debt levels than initially anticipated.

The fast food chain in April reported first-quarter comparable sales down 2.3% and revenue of 5.96 billion, falling short of the 6.02 billion analysts had expected. Unfortunately for McDonalds shareholders, the quarterly results were a familiar tale, which for nearly two years has seen its share price fall and same-store sales crumble in the U.S. market and abroad.

Conclusion

Having served as the CFO for a tanning salon franchise, I was at the forefront of a franchisee rebellion. This taught me some valuable lessons:  1) Do not deviate from your core franchise principles and vision, 2) Always deliver on your franchise promises, 3) Select the most qualified and experienced franchisee owner/manages, 4) Location, location, location, select the best franchisee locations, 5) Invest in adequately training and providing marketing support to your your franchisee network 6) Don't let unresolved problems and differences vent themselves into an allout franchisee rebellion.

It would not surprise me if McDonads top management has ignored or strayed away from some of the above franchise must-do's.  In many businesses the customer comes first, but in a franchising business environment, the franchisees come first, because they are the face of McDonalds.  It is doubtful that the vast majority of McDonalds customers know who McDonald's CEO is.  They don't care either. They want their Big Mac sandwich made exactly the same each time they visit and served as quickly as possible.  

By paying more attention to the bottom line and improving shareholder value, McDonalds top management may have violated one of the most important covenants of franchising.  Take care of the franchisees, and they will take care of you.

Courtesy of an artricle dated August 9, 2015 appearing in Bloomberg, an article dated October 19, 2015 appearing in ETF Daily News, and an article dated October 16, 2015 appearing in Business Insider

Follow Me:   Twitter: turk5555    Facebook: 797743955    LinkedIn: turk5555 

Subscribe To My Blog Newfeed

URBAN STATION'S UNIQUE 'MOBILE CAFE' OFFERS PATRONS THE COMFORTS OF AN OFFICE AND A CAFE EXPERIENCE

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

More people are working remotely than ever before, which is bad news for coffee shops. Once the province of college students and stoned poets, suddenly they’re teeming with everyone from copywriters to pushy corporate types willing to raise fisticuffs over a free electrical outlet. What’s a cafe owner to do?

You could ban laptops -- the favored route of New York coffee houses nowadays -- or you could make the cafe more conducive to work. That’s the approach at Urban Station in Buenos Aires's hipsterish Palermo Soho district. With copious desks, conference rooms, and electrical outlets in spades, the place feels like a trendy workplace that happens to serve coffee and croissants. From the company press release:

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

So how does Urban Station make money?  It rents desks. We don’t know the exact pricetag but they tell us it’s “less than a promotional breakfast in any Palermo bar.” The conventional wisdom is that charging for anything in a cafe is a bad idea; that people won’t even pay for wireless, let alone a seat.Urban Station’s trick is to throw in a raft of perks: Wi-Fi channels; food and drink included in the cost of the hour; printers; fax machines; scanners; lockers; and even a couple of bikes you can bang around on when you need a break.

There’s a real and growing market for this sort of thing. Seventeen million to 26 million people work remotely at least some of the time depending on how you calculate it. And the figure will only swell as companies look to cut costs and workers increasingly eschew desktop computers for mobile technology. Freelancers and part-timers already spend hundreds of dollars a month -- or more -- on co-work spaces. Urban Station’s the same idea, but with free food.

One quibble: The design, while cheery, feels a tad unpolished. (A green futon with purple earplug tables? This is not a Deee-Lite music video, people.) Corporations are always prettying their offices, then holding them up as company billboards; if Urban Station is going to be the workplace of the future, it might wanna do the same.

COMMENTARY:  I love the Urban Station office cafe concept very much. To my knowledge, I don't believe we have anything similar in the U.S.  

I don't believe they are going to get a lot of college students, who spend very little at cafe's offering free WIFI, and very often bring their own food, and tend to hog the tables for hours on end.  Many cafe's in the U.S. have gone the other way, and stopped offering WIFI in order to discourage these practices. 

Urban Station's concept provides a lot of value-added features, offering an environment designed specifically for the mobile office worker.  Instead of tables, they are more like workstations.  Patrons pay for the food and beverage and for actual spent working at their "workstation".

This is a very cool idea, but Urban Station does did not divulge whether they are actually making any money with that concept.  Just the same, I sent off for some information.

Courtesy of an article dated August 25, 2010 appearing in Fast Company Design     

STARBUCKS OPENS NEW ORLEANS STORE WITH THE LOOK OF A SPEAKEASY WHILE RETAINING THE OLD NOLA JAZZY CHARM

THE COFFEE COMPANY EVOKES EARLY 1900S MERCHANT CULTURE FOR ITS LATEST OUTPOST IN NEW ORLEANS'S FRENCH QUARTER.

Starbucks has opened a new store in New Orleans that's designed to channel the mystical feel of the city itself. Evocative of an early 1900s apothecary, the store is latest in Starbucks's portfolio of hyper-local shops aimed at being part of a neighborhood's culture, rather than disturbing it.

 A mix of local and Atlanta-based artists created a mural, wrought iron chandeliers, and a hanging mobile of brass jazz instruments. (Click Image To Enlarge)

Andrew Bello, a design director for Starbucks, says.  

“We discovered New Orleans’s history as an import-export shipping port.  There was a time [in the early 1900s] when it was the largest coffee importer in the area.”

For the exterior, the team preserved some original architectural details and used wrought iron, a material found on facades and balconies throughout the French Quarter. (Click Image To Enlarge)

Bello and his team ran with their imaginations, designing the space as if it were the home and store of an old-timey merchant. Floor to ceiling shelves sit behind the register. Back then, Bello says, “those shelves would be filled with boxes and bags and herbs and spices--and coffee.” Today, of course, they’re stacked with bags of Starbucks coffee.

To bring that to life, they built floor-to-ceiling shelves behind the counter. (Click Image To Enlarge)

The lettering is on the bathroom door--in part because the new outpost belongs to a growing portfolio of stores that have what Bello and Starbucks designers call, “local relevance.” 

The philosophy behind “local relevance” is that a trip to Starbucks can be a more faceted experience than just getting a reliable cup of coffee. Even simple actions like a customer posting a picture of the store to Instagram, or actually telling a friend about a visit to Starbucks, are measurements of this.  He says.  

“Hopefully customers discover something new when they return to the store.”

 

In this case, the design team imagined the space as an early 1900s-era merchant shop. (Click Image To Enlarge)

Any visitor that goes to New Orleans is going to walk down that street.  It bifurcates two parts of the city: the downtown business district, and the gentrifying warehouse district.  The goal? Let tourists be on vacation, and make locals feel at home, all in one place.

Back then, Bello says, 'those shelves would be filled with boxes and bags and herbs and spices--and coffee.' Today, of course, they’re stacked with bags of Starbucks coffee. (Click Image To Enlarge)

COMMENTARY:   This New Orleans Starbucks definitely retains the "old world" charm while showcasing today's upbeat speakeasy and dixieland jazz atmosphere.  I wonder if they will serve bourbon coffee with whipped cream.  I say do it, break from tradition, and whoo the drinking and happiness crowd.

Courtesy of an article dated December 13, 2013 appearing in Fast Company Design

HOW TACO BELL INNOVATED TO RE-INVENT THE TACO BY PARTNERING WITH FRITO-LAY'S DORITOS TO CREATE THE DORITOS LOCOS TACO

FROM HANDSHAKE DEALS TO EXPERIMENTS AT HOME DEPOT, THE HISTORY OF TACO BELL'S DISRUPTIVE FAUX CHEESE-DUSTED TACO.

In early 2009, three years prior to Taco Bell's 50th anniversary, CEO Greg Creed was already experiencing something of a midlife crisis.  I said:

"Our target audience is [customers] in their 20s. Turning 50 makes us sound old, and I didn't want to sound old."

Creed explains.

" 'When we have our birthday, I don't want a cake or a celebration.'"

So he issued a bold directive to his team instead: "I said, '[let's] reinvent the crunchy taco,'" Creed recalls.

Taco Bell brand marketing director Stephanie Purdue, who helped Creed write the original team brief said.

"He was really looking for a big innovation to coincide with our anniversary."

Creed explains:

"If you look at all the buns the burger boys sell, and the bread at Subway, they are forever coming up with a new bread bun. The crunchy taco: It was yellow and made of corn. We sold a couple billion of them, but there had been no innovation."

He gave his staff until March 2012--slightly under three years--to pull off a complete rethink of traditional Mexican cuisine.

 

The team soon assembled for an all-day ideation session at Taco Bell headquarters, where 30 different product concepts were considered, Purdue says, including new forms of burritos, nachos, and taquitos. But one idea, from Doritos-maker Frito-Lay, stuck out: a Doritos-based taco shell pocketed with Taco Bell ingredients.  Purdue says.

"It was basically an image [of this taco] on a piece of paper, with a written description. I don't know what technology they use. We didn't even taste it; it was just more of, 'Hey, this is what it could look like.'  It was like, 'Holy crap!'  Nobody had ever done this before: turning a Dorito into a taco shell. It was just mind-blowing at the idea stage."

Steve Gomez, Taco Bell's food innovation expert, recalls seeing the first mock-up.  He says.

"Every day I see a lot of concepts--sketches on paper, written words about products--and my job is to turn those products into reality.  But in all my years as a product developer, I've never seen a concept like this. The product didn't even exist yet, and already people knew this idea was going to be huge."

Click Image To Enlarge

Like any serious renovation, Taco Bell's started with a trip to Home Depot. It was April 2009. To show executives how the companies could fuse the flavor of Doritos with taco shells.  Creed recalls, with a chuckle.

"The dev teams basically went out to Home Depot to buy a paint-spray gun, and then sprayed [Doritos] flavoring onto our existing yellow corn tacos.  It was pretty funny watching people from behind glass spraying our tacos with a paint gun. But it was enough for us to know conceptually that we had a big idea."

Creed jokes now that,

"Really smart people got together with a spray gun and the rest is history."

Click Image To Enlarge

But that glosses over the true story behind the Doritos Locos Taco, as it came to be known. After the company completed a round of concept testing with 200 consumers, which indicated stellar demand for the Doritos Locos Taco, Gomez's team created an edible version using Taco Bell's yellow corn shell and Doritos' Nacho Cheese seasoning.  Gomez recalls.  

"The way you might put powder sugar on cookies, that's basically the way we applied this seasoning [to our tacos]." 

At last, consumers got a taste. But after all the concept drawings and testing, trips to Home Depot, and prototype development, initial consumer taste tests flopped, to the disappointment of the team.  Purdue says.  

"They completely called us out."

Gomez recalls feeling crushed.  He says.  

"It was total buzzkill in the room."

¿Por Qué?

Even though the first tests failed to impress sample consumers, Taco Bell had forged the foundation for its biggest innovation in decades: the Doritos Locos Taco--either a revolutionary product or a low point for fast food, depending on your perspective. But there's no debating the success of the DLT, as it's called internally. Since it launched in early 2012, Taco Bell has sold more than 450 million Doritos Locos Tacos. A Cool Ranch follow-up, introduced in March, has already sold millions of units.  Creed says.  

"We had to hire about 15,000 people last year--two to three per restaurant--in order to handle the sales growth and demand of the Doritos Locos Tacos business."

Taco Bell is now planning to roll out more Doritos-flavored products, and Frito-Lay has even announced that it will offer Taco Bell-flavored Doritos.

Click Image To Enlarge

The real tale of how the DLT emerged from disappointing tests to become a massive hit involves a range of challenges and innovations, especially in engineering and manufacturing.  Creed says.

"We knew this was a breakthrough idea, so we put on our relentless hats and were determined to not let [this thing] beat us."

For the first group of testers, the problem was the taste. The combination of Doritos with Taco Bell's shells didn't capture either the zest of Doritos chips or the punch of Taco Bell's tacos. Rather, they formed a displeasing amalgamation of the two flavor profiles.  Gomez says. 

"This idea of merging a chip and a shell together--it sounds simple, but it's very hard to make a reality.  To tackle this huge challenge, for months we shared know-how between the technical teams at Frito-Lay and Taco Bell."

Click Image To Enlarge

Think Outside The Bun

The central issue was that Taco Bell's shells used a different type of corn masa than Doritos chips. But it wasn't simply a matter of adjusting the recipe. In order to create the DLT, the teams had to consider everything from seasoning mechanics to the taco's structural integrity throughout 2010 and 2011. Creed says.

"Frito-Lay wanted what's called a 'teeth-rattling crunch,' so they wanted it to snap and crunch more than the current Taco Bell shell snaps and crunches.  So we had to get that formula changed, then we had to find a way to deliver the flavoring, and then the seasoning. I mean, it was actually important that we left the orange dusting on your fingers because otherwise, we're not delivering the genuine Doritos [experience]."

All in, the teams experimented with more than 40 recipes over two years. During that time, the teams faced several roadblocks.  Creed says.  

"Remember, a taco shell has to bend, so we had to make this crispy [like a chip], but we also had to make it be able to bend so it didn't crack.  This was a really big engineering challenge, [especially considering] we would have to make hundreds of millions of these shells."

Click Image To Enlarge

Gomez says.

"When you buy a bag of Doritos and you open it, and some of the corners are broken off, you're probably not going to be that mad, because they're still Doritos.  But if our taco shells are broken in transit or in the restaurants, we can't do anything with them.  That was a big obstacle for us. How do we make these shells chip-like, but also be able to ship them and still be able to build a taco without having them break? There were some [prototypes] where we would barely even touch them and the shell would break."

Seasoning was another major issue, which was as much of a challenge of taste as it was for manufacturing.  Creed recalls.  

"A Doritos chip is a flat triangle, and it gets seasoned by being tumbled around in a huge seasoner barrel that rotates. But we couldn't do that with a taco shell because they would break. We could get the seasoning to stick to the top but we couldn't get it to stick to the bottom--we just couldn't get it evenly coated.  You don't want to take one big bite at one end, and it has flavor and the other end has nothing. We had to make sure it was evenly distributed."

Gomez says.

"That was the really tricky part.  Just like anything in manufacturing, it's all about speed and efficiency. So our seasoner had to season shells fast and it had to season them right every single time. We had teams of engineers working day and night to get the seasoner working."

In fact, the companies ended up creating a proprietary seasoner in the process, not least because for workers on the manufacturing line, the plumes of Doritos seasoning would create an almost Nacho Cheese gas chamber.   Creed says.  

"We realized pretty quickly that we had to seal that all in, because in the facilities, we couldn't have all that stuff in the air.  It would've been too much seasoning and flavor for our workers. We had to enclose it so the seasoning wouldn't escape. It would've been overpowering."

[Eds. note: Not a bad way to go.]

Click Image To Enlarge

Gomez admits to losing faith at times.  He says.  

"There was a tremendous amount of pressure. There were days when we would get bummed out and worried that this would be too hard to pull off."

But eventually his team refined and narrowed down the recipes to three prototypes, which were readied for market testing. Creed says.  

"There's a little bit of black box magic that went into the final prototype of the DLT, which not many people have seen."

He won't elaborate, but regardless of the secret recipe, the true beauty of the DLT is its deceptively basic concept.

Creed says.

"It's really one of those breathtakingly simple but huge ideas.  I remember trying to sell guacamole in the Midwest and people were like, 'What's all this green stuff in my burrito?' But this was a fastball, down the middle. It's what you'd expect from Taco Bell, but supercharged."

Click Image To Enlarge

I Would Walk 900 Miles

By September 2011, Taco Bell had rolled out the DLT prototype at a handful of restaurants in a few cities around the country for testing. Soon, hype around the DLT spread like lukewarm baja sauce. Customers began blogging about their experience; a slew of video reviews hit YouTube; and one Taco Bell addict even drove 900 miles from New York to Toledo, OH for an early taste of the DLT. Stephanie Purdue says. 

"They were just fanatical, and the results were off the charts. I've never seen so much word of mouth generated for one single product."

But while buzz for the DLT's national launch was locked in, a deal between Taco Bell and Frito-Lay was not. As Taco Bell legend has it, though the companies had spent years working together on the DLT, no official contracts had ever been signed. Taco Bell's 50th birthday was fast approaching when Greg Creed and then-Frito-Lay CEO Al Carey met in Creed's office to hash out final details.  Creed recalls.  

"We both realized that if we let the lawyers get involved, this thing would get slowed down and bogged down. So we did a handshake deal--that's all we had: You're going to spend the money, and I'm going to spend the money [on the DLT].  Everyone was like, 'You can't launch without a contract.' And we were like, 'Just watch us.'"

Legal wrangling aside, meeting demand for the DLT was another problem for Taco Bell. Purdue says. 

"We were going from three cities to 6,000 restaurants.  We didn't have the manufacturing capacity."

Adds Gomez.

"How do we stockpile millions of shells to be ready for a launch of this magnitude?"

Initially, the company thought its suppliers could build two dedicated DLT lines to produce enough shells to meet demand.  Creed says.  

"We built a pilot plant, but then we sold so many that we were like, 'Whoops, we got a problem.'"

Taco Bell's suppliers ended up building six dedicated manufacturing lines for the DLT, which are handled by roughly 600 employees. In fact, the Cool Ranch version of the DLT was originally supposed to launch late last year, instead of in March 2013, but it was delayed to add more manufacturing lines.  Creed says.  

"We realized we needed more capacity, because we couldn't slow down the Nacho Cheese line in order to create capacity for Cool Ranch."

When the DLT went nationwide, it was a smash hit, with millions of tacos sold in the first week on the market alone.  Morgan Stanley analyst John Glass explains. 

"When it launched, there was a significant impact--Taco Bell's [sales] numbers were up 13% in the second quarter of last year, which is big.  Brands like Taco Bell or McDonald's or Wendy's--you just don't see double-digit [growth] in same-store sales."

Soon, a contract was written up between Taco Bell and Frito-Lay, according to Creed.

Creed recalls.  

"When we met in my office [before launch], we said that if either one of us gets sacked or promoted, we would actually have to write a contract.  When [then-Frito-Lay CEO] Al [Carey] got promoted to run the PepsiCo beverage business, I phoned him up and said, 'So I guess we better write that contract then.' Well guess what? We sold 100 million tacos in the first 70 days. If we waited for those contracts to be finished, we would've sold 100 million less."

Flamas Future

After Nacho Cheese and Cool Ranch, a spicy Doritos Flamas-flavored taco is next on the docket. But that's not all the company has in the works.  Creed says.  

"Someone said to me, 'Well, when you launch three or four of these things you'll run out of ideas.'  I'm like, 'Not really.'"

To Creed, the partnership between Taco Bell and Frito-Lay is more than a one-off collaboration. Like Android is to Google or iOS is to Apple, Doritos-based flavors represent a whole new framework for Taco Bell to build on.  Creed beams.  

"It's not just a product; it's now a platform--Nacho Cheese, Cool Ranch, Flamas.  We're going to blow everyone away in the next few years in terms of how big this idea and platform will become."

The company is now considering crowdsourcing the next iteration of the DLT, and with 123 flavors of Doritos, there's certainly no shortage of possibilities. But perhaps more compelling than the company's innovations in taco shells are its plans to rethink what goes inside the DLT. Creed gives Fast Company the scoop:  

"At the moment, all the ingredients we have inside these shells are the same. The shells keep changing, but the ingredients are still ground beef, sour cream, lettuce, tomatoes.  Well, we got a load of other flavors at Taco Bell, and we could put a whole lot of different ingredients inside those shells that would create a different taste and sensation."

When pressed, Creed would only say it could be different "proteins or a special sauce." Additionally, customers themselves are already experimenting with their own reinventions of the DLT.  Creed says.  

"The Cheesy Gordita Crunch people are asking us to make one with either a Nacho Cheese or Cool Ranch shell."

That's likely to come down the road.

John Glass, the Morgan Stanley analyst, imagines there are more Doritos-based products on the horizon, but questions whether they will be as successful as the first Doritos Locos Taco.  He says.

"I don't know how many variants there will be, but I think it's the type of platform that could come back year after year.  It doesn't just have to be a taco. There's already a burrito with Fritos in it. Could you do Doritos nachos? A Doritos taco salad? Maybe. Creative guys will come up with different ways to use the same idea in ways we hadn't thought of before."

However complex the DLT line eventually becomes, the innovation behind the idea is its elegant simplicity, according to Creed. The combination of Doritos and Taco Bell, he says, is just so universally appealing that it's feeding its success in the market and driving its place in pop culture.

 Creed explains. 

"It's like sliced bread.  If you like bread, why wouldn't you want it sliced?"

COMMENTARY:   The Taco Bell Doritos Locos Taco -- the gift that keeps on giving.  A very captivating story of how the DLT was created from ideation to finished prototype and how it was promoted during the launch.  Anytime you can have that kind of success without a hitch, you are on to something.  I think you can definitely say that the folks at Taco Bell are definitely "thinking outside the bun."

Courtesy of an article dated May 1, 2013 appearing in Fast Company

HOW MOMENTUM MACHINES PLANS TO DISRUPT THE FAST FOOD INDUSTRY WITH A ROBOTIC BURGER MAKING MACHINE

Momentum Machines, a startup out of Lemnos Labs, plans to automate the fast food industry, starting with the perfect burger.

Science fiction has always positioned the idea that one day our human jobs would be replaced by machines. For those working in burger assembly lines, that day might be sooner than you think.

Momentum Machines' robotic burger making machine technology (Click Image To Enlarge)

Introducing a machine that makes burgers. Literally, it’s a burger making machine, in prototype, that takes unprepared ingredients like whole tomatoes, onions, uncooked patties, untoasted buns, and spits out a completely assembled burger:

Momentum Machines, the San Francisco-based robotics company responsible for the concept, notes that they are aiming to have a functional demo model by June 1st, 2012.

Momentum Machines robotic hamburger making machine prototype goes through testing (Click Image To Enlarge)

About a month ago, the company got a quick nod by the tech community and a shaky video by StartupGrind that caught the group during a work day. Jump to 2:38 for the interesting stuff, see company president Alex Vardakostas speak, joke about their CAD model and give a brief explanation about the power of their product.

How does it work?

The machine takes unprepared inputs (including whole tomatoes, onions, pickles, uncooked patties, untoasted buns, etc.) and then, as each order comes in, the device prepares the ingredients (slices tomatoes, char-broils patties, etc.) and assembles the entire burger.

Momentum Machines robotic burger has feeding tubes that automatically add lettuce, tomatoes, onions and pickles to their hamburgers (Click Image To Enlarge)

Customization occurs through a simple user interface, allowing the button-pusher to opt out of certain ingredients and add extras of stuff they like. When it’s done doing the assembling, it even puts the burger into a bag, if that’s what your company needs it to do.

Momentum Machines robotic burger is equipped for containers that automatically add mayonnaise, mustard and catsup to each hamburger (Click Image To Enlarge)

Vardakostas even commented on the possible additions of proteins outside of beef patties. He said they plan on integrating chicken sandwiches and fish sandwiches into the technology, and that their current setup isn’t too far off from handling such requests.

Momentum Machines robotic burger machine convenyor belt (Click Image To Enlarge) 

When asked about the limitations of his machine, Vardakostas said. 

“The machine is already capable of handling different sizes of buns, tomatoes, et cetera.  It’s also really customizable in that the restaurant owner can tell us the proportion sizes desired of each ingredient and we can very easily modify the machine to suit their demand.”

Daily upkeep for potential restaurant users involves reloading the machine with ingredients “every once in a long while.”

The finished robo-burger as it comes off of Momentum Machines' robotic hamburger maker (Click Image To Enlarge)

The anticipated output is currently around 360 hamburgers per hour.

The aim of the robot, which remains without a name currently, is to produce food more consistently, with higher quality and at a lower cost.

Ultimately, a sterile machine opens the opportunity for a much more sanitary work environment. For those that think burger making robots sound superfluous, let the ramifications sink in.

Vardakostas notes that their potential customers include “hamburger restaurants of all kinds, food trucks, airports, train stations and other high traffic locations.”

Momentum Machines management team (left-to-right) is Jack McDonald, Alex Vardostas, Steven Frehn and Ari Atkins (Click Image To Enlarge)

Most exciting, as Alex put it, is all the new restaurant concepts that could be unleashed with their technology as the backend.

The utility for a restaurant owner is evident, less people on the line with more output. If Momentum Machines does their due diligence, it may even be beneficial to make available an adaptable API — opening the floodgates to unique visual ordering experiences.

COMMENTARY:   Vardakostas grew up with firsthand exposure to the labor that goes into the burger-making process—his father owns a mini-chain of burger joints in Southern California. He turned his childhood experience into the idea for a company. Vardakostas said.  

"I thought, 'What's the one tool a restaurant could have to destroy its competition'"  

He estimates that their invention will save the standard quick-service restaurant $135,000 a year in wages, and build a more consistent product.

However, rather than making plans to peddle their apparatus to existing fast food restaurants, Vardakostas and his friends seem more interested in starting a restaurant of their own. Vardakostas says.

"Fast food sucks, and we want to change all that."

They envision a restaurant with a menu similar to that of a Five Guys or In-N-Out, but without the vast, stainless steel kitchen full of cooking equipment and scrambling employees. All the food prep will be done by machines, with human staff working the register and delivering the food. Vardakostas said.  

"Maybe we'll have the cashier behind a podium with just a garden or vines on the wall behind them."

He explained the company's vision for how their machine-powered restaurant would be a serene landscape compared to the typical fast food environment.

I like the idea of a robotic hamburger making machine, but Momentum Machines must test their system thoroughly in order to insure that the finished hamburgers meet their high premium quality standards, the equipment can keep up with orders, and can produce burgers without mechanical breakdowns.  They must also have a backup system in place to insure that they can produce those burgers in the event of machinery failure.  Those finished hamburgers sure look good and tasty looking, but I believe that they are at least a year before they launch their first fully-automated hamburger operation.

Having your own hamburger restaurant is a great way to take the robotic hamburger making system through its paces, fix any mechanical issues and insure that the burgers produced meet its high premium quality standards.  It will also serve as a test bed that they can use to prove the effectiveness and reliability of the system should they decide to franchise their restaurants or license the technology to end-users.  

Courtesy of an article dated December 19, 2012 appearing in Robotic Trends and an article dated October 11, 2012 appearing in Serious Eats! 

FACEBOOK'S EPIC CAFE SERVES FREE FOOD 3X A DAY, LOOKS LIKE A SCHOOL LUNCH LINE AND CONSTRUCTION SITE, BUT THE FOOD ROCKS

Facebook's Epic Cafe (Click Image To Enlarge)

ROMAN & WILLIAMS HAS CREATED NOSTALGIC INTERIORS THAT MOST OTHERS CAN ONLY EMULATE. HERE’S THE LUNCHROOM THEY CREATED WITH FACEBOOK.

Facebook's Epic Cafe cafeteria greats staffers with the words EAT at the start of the waiting line lane (Click Image To Enlarge)

Google ruined everything. Microsoft gave out free soft drinks, but Google let employees eat gourmet food for free. How can you possibly differentiate mealtime in Silicon Valley with that act to follow?

Facebook's Epic Cafe knows how to put out the food fr Facebook staffers -- and there's plenty of it (Click Image To Enlarge)

Facebook's Epic Cafe food looks delicious. Here's one of the salad bars (Click Image To Enlarge)

Facebook aimed for cool. They hired Roman & Williams--the ultra-hip powerhouse firm behind landmark projects like the Ace Hotel--to create their Epic Cafe.  In reality, Roman & Williams is mostly the vision of husband-and-wife design team Robin Standefer and Stephen Alesch, who are largely credited with the trend of alluring, faux-nostalgic interiors, pieced together through an alchemy of heirloom furniture, found objects, warm woods, grommets, and occasionally, even flannel. Their look is what the New York Times calls the "Benjamin Button school of design," or a nostalgia for a time that never actually existed. Indeed, if interiors had an Instagram filter, it’d be Roman & Williams.

Facebook’s Epic Cafe is their Menlo Park eatery created by Ace Hotel designers Roman & Williams (Click Image To Enlarge)

Facebook's Epic cafe is full of reclaimed furniture and custom pieces, all which create a post-industrial space that’s reminiscent of a schoolhouse or factory (Click Image To Enlarge)

Everything is left a step unfinished, to give the Epic Cafe's space a feel of constant flexibility and iteration, like the Facebook platform itself (Click Image To Enlarge)

The meeting between Facebook and Roman & Williams was happenstance. Everett Katigbak and Ben Barry, who head Facebook’s Analog Research Lab, actually bumped into Standefer and Alesch in the lobby of the Ace Hotel. What eventually resulted was a collaboration on Facebook’s Epic Cafe, a cafeteria that sits somewhere between a schoolhouse lunch line and a half-finished construction site. The spa has all the carefully curated objects of a Roman & Williams design mixed with the “don’t you dare finish painting those walls!” mentality of Facebook’s corporate culture.Facebook’s Everett Katigbak tells me.

“[That culture] indirectly starts with the product, not that we leave it unfinished, but we leave the product open to iteration.  It’s a continual work in progress.”

Ben Barry and Everett Katigbak at Facebook's Analog Research Laboratory (Click Image To Enlarge)

Much of Katigbak’s job is ingraining Facebook’s culture into their buildings, designing interior spaces to ensure going to work at Facebook doesn’t feel like going to work anywhere else. So when Facebook opened its Menlo Park campus, Katigbak didn’t want one big design firm painting the grounds with a single stroke. Instead, he was inspired by Facebook’s roots, the tiny company that sprouted in Palo Alto, snagging a patchwork of buildings downtown to accommodate a quickly growing workforce.

Facebook's Epic Cafe has big, communal areas for socializing (Click Image To Enlarge)

Facebook's Epic Cafe also has quieter nooks for ideating  (Click Image To Enlarge)

Facebook's Epic Cafe also has some neat, vintage prints hanging around too. But there isn’t a piece of taxidermy to be seen (Click Image To Enlarge)

Katigbak reminisces.

“It was interesting to have to run to meetings across town, navigate through the city.  It had this feeling of energy we really liked and connected with.”

The Menlo Park campus itself is largely modeled to “feel like a city.” With the building serving as one blank canvas, employees were free (even encouraged) to claim their own spaces, creating a mini urban environment inside a corporate office.

And Epic Cafe had to feel like a social hotspot in this city--a place you wanted to go, meet, eat, and collaborate with friends in the company that you may not see in your normal office area.

Katigbak explains.

“On the general employee side, we wanted them to have something they felt proud of, a place ‘I’ get to eat as a destination, but flexible in a Facebook way.  They could add to it without changing the overall vibe of it.”

The resulting space is like your childhood lunchroom, reformulated for adults. It’s largely Roman & Williams, filled with postindustrial furniture (some discovered, some crafted), found print art (magazine clippings), exposed light bulbs, and plenty of rivets. But whereas Roman & Williams’s brand of alchemy generally finishes these components, Facebook’s culture demands they stay raw. It’s no pseudo-swank hotel lobby; the cafeteria is built on a concrete floor and topped with exposed rafters, like a construction site waiting for the laminate and drywall guys to show up already. Since it’s Facebook, you could probably carve your name in a chair, but since it’s Roman & Williams, destroying the cultural artefact would be sacrilege.

I asked Facebook if they’d used any tricks of social hacking in the space, much like Google had found eight-person tables were the perfect number to prevent cliques yet maintain conversations. Katigbak says.

“We don’t get that granular, to find the optimal metrics and measurements.”  

But he does see the value of communal seating in empowering “chance encounters,” and a few smaller tables have clearly been set up to allow two people to run a more focused discussion over lunch.

Indeed, the word that comes up again and again with Katigbak isn’t “synergy” or “networking.” And it certainly isn’t Google’s creed, which would probably be “optimization.” It’s simply “cool.” For however we may try to classify Roman & Williams, identifying the unifying threads or jealously criticizing its brand of quasi-retro chic, most of us agree, in this place and time, that it does feel “cool.” And Facebook’s cafeteria is pretty cool, too--for reasons a bit beyond mere association.

COMMENTARY:   What a novel idea:  A corporate cafeteria that is not finished, a work-in-progress, if you will, where staffers can add their personal embellishments to what is supposed to be the most popular spot on the Facebook's corporate campus in Menlo Park.  

However, I differ greatly when it comes to describing Facebook's Epic Cafe as "cool."  It's not cool at all.   It looks entirely too institutional.  The school cafeteria and unfinished construction zone look is most appropriate. To this I would add boring, bland, uncool, unFacebook, to name a few.  

If you are going to use the term "cool" to describe something, it should be a absolutely unforgettable, an explosion to the senses and memorable almost to the point of being historic. Facebook's Epid Cafe does not meet those standards.

Having said this, Zuck hired away executive chef Josef L. Desimone from Google in 2011, and under his able hand, has formed quite an impressive Facebook Culinary Team (see below):

Facebook Culinary Team Tony Castellucci, Chris Moss, Josef L. Desimone, and Virgil HIdalgo (Click Image To Enlarge)      

The Epic Cafe's menu is international in scale, befitting of a company with staffers from all parts of the globe. The food is highly ultra cuisine, very creative, tasty, healthy, there's a huge seletion of it, and it's 100% free to Facebook staffers, and served three times a day, and I don't think Facebook's hackers miss a meal.  Here are a few examples from the Facebook Culinary Team page:

 

Courtesy of an article dated December 13, 2012 appearing in Fast Company Design and an article dated May 18, 2012 appearing in Business Insider

 

WENDY'S GETS A NEW LOGO, THE BRAND IS NOW MORE PERSONALIZED WITH THE PIGTAILED WENDY FRONT AND CENTER

THE BURGER CHAIN’S NEW IDENTITY FOR 2013 IS PART OF ITS FIRST BRANDING REFRESH IN NEARLY 30 YEARS

We’re living in the age of fake heritage. It’s the ideal time to be running an old-timey barbershop or an artisanal, back-to-basics asbestos manufacturing plant--anything that connects your business to a purer, more authentic-seeming past. But for the first time in nearly 30 years, Wendy’s--the fast food chain with imagery most defined by tradition--has redesigned their logo with Tesser. They’ve turned from the soda-fountain font and charmingly anachronistic billboarding to an open-air, Sharpie-scrawled creation, complete with Wendy herself--pigtails intact. Wendy’s SVP of Communications Denny Lynch said. 

“We feel that we have a very authentic brand steeped in heritage.  We want to tap into that legacy, but do it in the world of 2012.”

Like any change to a long-standing logo, it’ll wet-willy your eyeballs initially. But after the shock wears off, it appears to be an all-around solid update. The logo itself is part of a complete rebranding campaign for the company, which will roll out along with new stores, uniforms, menu boards, and packaging in 2013. For a company that’s finally challenged Burger King for the #2 burger spot, it’s actually a bit of a risk; they’re clearly doing some things right in the eyes of consumers. So while Wendy’s looked to modernize their franchise, they checked in constantly with focus groups to create a familiar branding "evolution, not a revolution."

Lynch explains. 

“We went through pretty much two years of effort and dozens of iterations of what logos would look like.  Everything from really minor changes to radical changes. As we went through this process, we stopped at every point and talked to consumers, franchisees, and then got their feedback … and we went through this process three or four times.”

Wendy's brand identity timeline from 1969 to 2013 (Click Image To Enlarge)

For Wendy’s, a radical redesign meant anything from changing their hue of red to using an avant garde font to giving Wendy herself a modern, “hip” makeover. We shudder to imagine Wendy donned in ironic '80s apparel, Wendy with a ribcage tattoo, Wendy with Wayfarers--maybe even a Midwestern-friendly Wendy sporting "the Rachel."

Lynch recounts.

“When we showed them the radical designs, they said, that’s not you, that’s not you.”  

So ultimately, after plenty of consumer feedback, Wendy’s indentified their three core brand components: the color red, Wendy herself, and what the company calls “the wave,” referring to how the the word “Wendy’s" is written on an upward slant. Removing this slant was met with a lot of negative feedback.

But while the wave remains the same, the typography--maybe the biggest visual change--is entirely new. Lynch says.

“We made it more like a signature, because we found by doing that, it was a little more inviting and personal.”  

Type design nerds, however, may find something a bit odd about the letter spacing, as Brand New points out.

Wendy's store with new corporate logo (Click Image To Enlarge)

But Wendy’s is betting most everyday people will be pleased with the new logo, and they have the large-scale focus-grouping to support that hypothesis. Much like they have more than a hunch that nine out of ten anonymous tastebuds will enjoy the precise salinity levels of the Baconator. But what may have been unexpected was the effect a new logo would have on its own employees.

Lynch says.

“It just energizes people.  You walk around the building now, our headquarters, you show people the logo. Some people have to get used to it. It’s a change. But as they do warm up to it, it energizes the whole company. It’s a new life, a new way of looking at things.”

COMMENTARY:   I love the new Wendy's logo.  It really helps personalize the Wendy's brand.  It puts a "face" on the brand.  In the old logo, the Wendy image was inconspicous.  You never noticed her very much.  The Wendy's name is what one focused on because of the larger text.  The "old-fashioned hamburgers" tagline is also gone, but replaced with a new tagline, "quality is our receipe."   The old-fashioned hamburgers component is what set Wendy's apart from the other hamburger chains.  If I were going to change anything, I would change the color of the Wendy's text from white to a bright yellow instead of the white or red.  Great job guys.

Courtesy of an article dated October 15, 2012 appearing in Fast Company Design 

HOW NATASHA CASE'S COOLHAUS ICE CREAM VENDING CONCEPT HAS MADE MOBILE FOOD VENDING CHIC AND CREATED A NATIONAL BRAND

The food truck phenomenon has taken the country by storm. From New York to Los Angeles, the number, the variety, and the quality of food trucks are on the rise. 

In 2011, the mobile food industry in the United States was estimated to be at $630 million. I think this sum dramatically underestimates the size of the industry. I believe that the mobile food industry in New York City alone is at least $450 million. The National Restaurant Association stated in 2011 that food trucks are the single fastest growing sector of the restaurant industry.

If you have any doubts, you can see this for yourself on the streets. Fans are queuing up across the country for tasty food from local trucks. According to an American Express survey, the percentage of respondents who had visited a food truck doubled, from 13 percent in August 2009 to 26 percent in July 2010.

From Food Network’s The Great Food Truck Race (a cross-country food-truck trek) to the Cooking Channel’s Eat Street, media coverage on popular television shows reflects the food truck phenomenon. Zagat’s inclusion of food truck for the first time in its 2011 New York City Restaurants guide has helped make food trucks an integral part of contemporary city life.

CoolHaus food trucks are smallish, but very stylish, and the food is gourmet class (Click Image To Enlarge)

The following interview is with Natasha Case of Coolhaus, the first gourmet branded truck with a national reach, on how she built her brand and her food-truck business. Coolhaus operates four trucks and a shop in Los Angeles, two trucks in Austin, two trucks and a cart in New York City, and two trucks in Miami. They also have a successful retail product that they sell in Whole Foods Market.

Natasha Case, founder of Coolhaus

DAVID WEBER: What are the best and worst things about street vending?

NATASHA CASE: The best thing about street vending is the creativity and flexibility that food trucks allow. Food trucks allow entrepreneurs to breathe new life into old food concepts. They can take risks that brick-and-mortar restaurants cannot. Food trucks are on the cutting edge of innovation in hospitality. They are all about enthusiasm and adventure. The uncertainty is the hardest thing about food truck vending. The trucks are very prone to break down and we have repairs almost every week. It is challenging to stay on top of breakdowns. Having trucks that cannot vend puts a big strain on management and overhead. We just opened a brick-and-mortar shop in Los Angeles. The shop is much easier to oversee because everything is stable. Because they are remote, trucks need to rely on technology and honesty.

What was your biggest lesson after you started street vending?

We started April 2009. The first lesson we learned was how to manage production. When we were first selling we made both the cookie and the ice cream for our ice cream sandwiches. We knew we’d need a better means of production if we wanted to grow because we didn’t have the resources at our commissary in Pasadena. We went to co-packing at the start. We reached out to a number of co-packers for custom cookies and ice cream. We’ve built up great relationships for suppliers who can grow with us.

What is one thing you would recommend to someone thinking of opening a truck?

Take the time to do your research. There is an illusion that you can start with nothing and make a fortune. There is oversaturation in the market in Los Angeles. I see trucks opening who aren’t putting enough forethought into developing their business, their brand, and their clientele. Before an entrepreneur opens a truck they should ask themselves, am I different enough? Success on the road is about brand building.

Freya Estreller, left, and Natasha Case operate a coolhaus ice cream sandwich truck by the American Museum of Natural History in New York City (Click Image To Enlarge)

How have your operations had to change in different markets?

As we’ve gone to more cities, the biggest change has been developing our corporate team. The primary change has been more management with specific expertise. We have an executive pastry chef who oversees our food production to be sure that things are being done properly. We now have opening teams who are specialists in the food industry and who have experience opening new markets to train the initial team in each city.

What is your process to open to new markets?

As we go to more cities we are learning the right questions to ask at the start of the process to discern what is different about each market. Over time you build up better intuition. We ask about health regulation codes as they pertain to our product right at the start. It’s also important to learn where municipal boundaries end. A suburb outside a city might seem tempting, but even though the demographics are good, the reason no one is vending there is because the regulations are different and don’t allow you to operate. Developing a start-up manual has improved our launch process. Even though the rules are different, most of what we do is the same each time. We’re planning to open in San Francisco this spring. People know us in San Francisco, so it will be easier than in Miami.

Coolhaus ice cream sandwiches are to die for (Click Image To Enlarge)

What market has been the hardest to operate in?

New York City is the craziest. The fact that you can be arrested for not having a mobile food-vending badge is unbelievable. Just take a moment to think about going to jail for making an ice cream sandwich. Where does that happen? Only in New York City. We are licensed by the NYC Deptartment of Parks to vend in Central Park, and the NYPD comes almost weekly to try and shut us down. New York City has extremely strict laws, and there is a lot more vendor-versus-vendor conflict in NYC, but because there are so many people, there is also more money to be made.

How long did you work the trucks until you hired more staff?

I left my other job a month after we started, so I was on the truck full time for a year. As we grew, I spent less time on the truck and more time developing the brand and managing the growth of the company.

What types of technology do you use to manage your business?

We use a POS system to see product mix. We originally set up the Paysaver POS just to use it for processing credit cards. Over time we started using more of the features, and having access to the product mix is very useful. In the store there are security cameras. We haven’t quite figured out how to do that on the truck yet. However, we use social media to keep tabs on our operations. We ask customers about their experiences and to send photos of their favorite sandwiches. We see photos posted on Twitter and feedback from Yelp. If the sandwich looks melted or doesn’t have the right proportions, we can follow up with the team that served it to ensure quality and consistency.

What incentives do you use?

We give bonuses to corporate staff for meeting financial goals. We give a commission for sales for private events. We do pay more than most trucks. We pay from $13 to $15 per hour in Los Angeles, and I think we get what we pay for. However, more than paying high wages or bonuses, we try to make our team feel like they are a part of something important and that what they do matters. It is very important that our team feels appreciated.

How did Coolhaus end up licensing the brand so early?

We were approached by people from Austin to license the Coolhaus brand. Our original plan was to go to New York because we were more familiar with the market. Austin was interesting because it was an opportunity to try a new market without taking the capital risk. The Austin trucks are now owned by Coolhaus again because the licensees moved on. However, it was a good experiment and it gave us the opportunity to grow at a time when we couldn’t have otherwise. Ultimately, the whole situation worked out well, but we probably tried to do too much too early. We could have let the company mature. At the point we did the Austin licensing deal we didn’t even have a lawyer. Managing a licensee or a franchise is hard to do unless you are in the franchise business. There is much more involved than you might expect.

What did you learn through the licensing process?

Trying to explain how to run a Coolhaus truck to someone on the other side of the country made us realize how much of the business was in our heads. It triggered us to write all our manuals. When we made the deal we weren’t working with the co-packer as we are now, and we didn’t have the ability to ship them our ice cream. They were producing their own ice cream to our specifications locally, but it was impossible to supervise the product. In general, it was a nightmare. If you are taking your brand national, having central hubs of production is essential. In every market we also have locally made items.

How has selling at Whole Foods Market helped your brand?

The transition from food trucks to wholesale was relatively seamless because we already had our co-packing relationships in place. It is becoming more important financially as the scope of the distribution of our products increases. At the beginning we were in three Whole Foods and it was almost more work than it was worth. We were putting so much time and effort into it for such limited revenue, it didn’t make much financial sense. However, there are some nonquantifiable aspects to having your product in Whole Foods. It shows the legitimacy of your product to your customers in that it meets the Whole Foods criteria of being natural, healthful, and sanitary. Now we are in 22 Whole Foods Markets in southern California and it really contributes to the business.

How is running a restaurant different from running a food truck?

The Coolhaus store was a way to capitalize on those customers in Los Angeles who don’t use Facebook or Twitter or don’t want to chase down a food truck. Startup costs are a lot more, but for us the profit margins are actually better. We use the store as our corporate headquarters and the base for all the Los Angeles food truck operations.

--Author David Weber is the cofounder of the Rickshaw Dumpling Bar and the founder and president of the NYC Food Truck Association. Excerpted with permission of the publisher John Wiley & Sons, Inc., wiley.com, from The Food Truck Handbook: Start, Grow, and Succeed in the Mobile Food Business by David Weber (c) 2012 by David Weber.

COMMENTARY:   Coolhaus is one cool ice cream concept.  I love the uniqueness of the concept. Natasha Case has made mobile food dispensing chic and classy. The Coolhaus trucks are almost too cute to be ice cream trucks. But, its not all about the truck, but the impeccable service and quality of those ice cream sandwiches.  Boooo!! to the New York City Police Department for trying to shutdown mobile food vending trucks.  Great job Natasha!!      

Courtesy of an article dated April 16, 2012 appearing in Fast Company

 

DUNKIN DONUTS ANNOUNCES PLANS TO EXPAND FRANCHISE NETWORK INTO WEST VA, OH, ILL, ALA, GA, MICH, NC AND TENN

World's Leading Baked Goods and Coffee Chain Planning to Expand in Communities throughout Eight States

CANTON, Mass., April 3, 2012 /PRNewswire via COMTEX/ -- Dunkin' Donuts, America's all-day, everyday stop for coffee and baked goods, announced today it is seeking to expand in communities and towns throughout West Virginia, Ohio, Illinois, Alabama, Georgia, Michigan, North Carolina and Tennessee, and is looking for qualified franchisee candidates to grow the brand in specific counties within these eight states.

John Dawson, Chief Development Officer, Dunkin' Brands, Inc said.

"As part of our strategic growth plan, we are excited to offer this opportunity to qualified franchisee candidates who are interested in developing a restaurant outside of larger metropolitan areas in these regions.  With more than 60 years in franchising, we've found the development and successful operation of a Dunkin' Donuts can deliver a significant impact to the community it serves and we are actively seeking local entrepreneurs to become the face of the brand in their towns."

Dunkin' Donuts' development throughout these communities and towns is part of the Company's goal to double the number of Dunkin' restaurants in the U.S. over the next 20 years. In support of this goal, Dunkin' Donuts has tailored development approaches designed to suit the growth opportunities and consumer needs of individual markets.

Dawson says.

"We're looking for community leaders who may already operate local businesses, such as other restaurants, retail outlets or even convenience stores and gas stations, who have the passion, financial qualifications and experience to operate a Dunkin' Donuts.  Our restaurants are typically owned and operated by small business owners, and our development teams work closely with our franchisees to find the development solutions that meet the needs of individual markets."

By joining Dunkin' Donuts, franchisees become part of a nationally established brand with 98 percent brand recognition, benefit from a multi-million dollar advertising fund, in addition to having access to world-class training and ongoing operational support, among many other benefits.

In an effort to keep the brand fresh and competitive, Dunkin' Donuts offers flexible concepts for any real estate format including free-standing restaurants, end caps, in-line sites, gas and convenience, travel plazas, universities, as well as other retail environments.

Since the 1950s, Dunkin' Donuts has been a daily ritual for millions of people. For more than 60 years, Dunkin' Donuts has offered delicious food, beverages, and friendly service at a great value. To best serve its guests, Dunkin' Donuts offers an all-day menu including iced coffee, flavored coffees, lattes, Dunkin' Donuts K-Cup® Packs, Coolatta® frozen drinks, muffins, bagels, breakfast sandwiches, and a DDSMART® menu featuring better-for-you items.

Today, there are more than 10,000 Dunkin' Donuts restaurants worldwide - more than 7,000 Dunkin' Donuts restaurants in 36 United States, plus the District of Columbia, and more than 3,000 international restaurants in 31 countries.

Dunkin Donuts global presence. Gold = well established, Pink = Entering markets (Click Image To Enlarge)

For information on franchise opportunities or to attend an upcoming webinar, please visit www.dunkinfranchising.com.

COMMENTARY:   If interested in becoming a Dunkin Donuts franchisee this should help answer some of your questions:

Startup Costs, Financial Requirements, Ongoing Fees and Financing

• Total Investment: $368,900 - $1,735,700
• Individual Financial Requirements: $250,000 liquid assets and $500,000 net worth.
• Franchise Fee: $40,000 - $80,000
• Ongoing Royalty Fee: 5.9%
• Term of Franchise Agreement: Term of agreement not renewable

No of Franchise Locations

YEAR	U.S.	CANADIAN	INTERNATIONAL	COMPANY OWNED
2011	6,900	20	3,100	0
2010	6,566	49	2,620	0
2009	6,475	55	2,394	0
2008	5,863	63	2,156	0

-

Where Seeking Franchisees 

-

United States:  Dunkin Donuts announced on April 3, 2012, that it is seeking to expand in communities and towns throughout West Virginia, Ohio, Illinois, Alabama, Georgia, Michigan, North Carolina and Tennessee, and is looking for qualified franchisee candidates to grow the brand in specific counties within these eight states.   NOTE:  Dunkin Donuts franchise's are presently not available in the State of California.  

-

Internationally:  Franchisor is seeking new units internationally.  If you are interested in international growth opportunities, please submit an email with your location of interest to [email protected].

Franchisee Support

• Training: Available at headquarters: Varies.
• Ongoing Support: Newsletter, Meetings, Toll-free phone line, Grand opening, Security/safety procedures, Field operations/evaluations,
• Marketing Support: Regional advertising,

Franchisee Financial Support

Dunkin Donuts does not provide direct financing to franchisees, but has established relationships with preferred lenders which can offer flexible financing options depending on your individual situation.

Portfolio of Concepts

Dunkin' Donuts offers a variety of restaurant designs specifically created to thrive in different venues. Our portfolio of concepts provides a great mix of Development and Real Estate models.

Traditional Location – Full expression of the brand including stand alone and strip center locations, with or without drive thrus.

Traditional Store Concepts

Non-Traditional Location – Expressions of the brand that service a captured audience, including colleges, hotel, stadiums, medical facilities, military installations, and transportation hubs.

Non-Traditional Store Concepts

Franchise Ranking History

• Franchise 500®: #10 (2012), #15 (2011), #7 (2010), #36 (2009), #3 (2008),
• Fastest-Growing: #6 (2012), #29 (2011), #4 (2010), #6 (2009), #5 (2008),
• America's Top Global: #9 (2012), #13 (2011), #6 (2010), #31 (2009), #4 (2008),

Restaurants for Sale

If Dunkin Donuts is not offering development opportunities in the market of your choice, see "Restaurants for Sale" for restaurant franchising opportunities in your area of interest.

The Pro's and Con's

According to About.com there are some Dunkin Donut franchise Pro's and Con's:

Pros

• Name Recognition - If you can afford it, Dunkin' Donuts offers unlimited profit potential for the most astute entrepreneur.
• Competitive - Dunkin' Donuts is in the top 5 of all categories of franchises according to Entrepreneur magazine.
• Online University - The Dunkin' Donuts Online University offers numerous learning programs, courses, and resources to franchisees and crew 24 hours a day, 7 days a week.

Cons

• Candidate Profile - Becoming a Dunkin' Donuts Franchisee requires skills and resources that make this opportunity prohibitive for many investors.  After you pass your criminal background check, credit check, and proof of assets check, its on to due diligence and the development of your business plan.  Dunkin Donuts is looking for candidates with a net worth for 5 restaurants at a minimum of $1.5 million and $750,000 in cash reserves.  If you are thinking about a partnership, go ahead, but there is one caveat; one single candidate must personally meet the financial qualifications. The start up fee is a tame $40,000 to $80,000 in contrast, and yes, if you want more units you have to expand at the rate of 5 at a time.
• Many Lawsuits - Dunkin' Donuts has been involved in many lawsuits with their franchisees. They have been involved in 10-15 times the amount of lawsuits then the average franchise.

NOTE:   Although I love Dunkin Donuts, this blog post should not to be construed as an outright recommendation to become a Dunkin Donuts franchisee.  As always, do your homework, conduct adequate research, talk to existing franchisees, make sure you meet the capital requirements, obtain and carefully read the Franchisor's Franchise Disclosure Agreement, and make sure franchising is what you want to do.  For additional infiormation about becoming a Dunkin Donuts franchisee, contact Dunkin Donuts Franchising directly. 

Courtesy of an article dated April 3, 2012 appearing in MarketWatch and an article in in Entrepreneur's Franchise Directory 

 

STARBUCKS NEW CONCEPT STORE IN AMSTERDAM IS A LABORATORY FOR REINVENTING THE BRAND

A NEW COFFEEHOUSE IN AMSTERDAM WILL BE THE TESTING GROUND FOR IDEAS THAT WILL FIND THEIR WAY TO THE REST OF EUROPE.

Starbucks is known for its unwavering consistency, from its unoffensively homey store décor to its burnt-coffee smell. But this Thursday, the brand that normalized the $4 latte is opening an experimental concept store in Amsterdam that offers a glimpse of the Starbucks of the future--at least in Europe.

The historic Amsterdamsche Bank, a landmark building on Amsterdam's famous Rembrandt Square is the site of Starbuck's concept store (Click Image To Enlarge)

Close-up of the historic Amsterdamsche Bank, which has been redeveloped into a commercial center, and is now the site of Starbuck's concept store in Amsterdam (Click Image To Enlarge) 

Located in the former vault of the historic Amsterdamsche Bank on Rembrandtplein (Rembrandt Square), on the ground floor of The Bank, a commercial and retail development, the new Starbucks concept store will be a showcase for sustainable interior design and slow coffee brewing, with small-batch reserve coffees and Europe’s first-ever Clover, a high-end machine that brews one cup at a time. But the most radical departure is in the aesthetic: the multilevel space is awash in recycled and local materials; walls are lined with antique Delft tiles, bicycle inner tubes, and wooden gingerbread molds; repurposed Dutch oak was used to make benches, tables, and the undulating ceiling relief consisting of 1,876 pieces of individually sawn blocks. The Dutch-born Liz Muller, Starbucks concept design director, commissioned more than 35 artists and craftsmen to add their quirky touches to the 4,500-square-foot space.  The new concept store will officially be open for business on Friday, March 9, 2012.

Click Images To Enlarge

The designers took great care to retain some of the building’s original details, such as the 1920s marble floor and the vault’s exposed concrete. But while the design respects the bank’s architectural history, the store’s overall look approaches that of a theater, with the baristas visible from every vantage point of the multi-tiered spaces (which also cameo as stages for local bands, poetry readings, and other cultural events). The coffeehouse will also use social media to communicate relevant moments throughout the day--for example, by sending out a tweet when warm cookies roll out of its in-house bakery. The concepts that go over well in Amsterdam will find their way to other stores across Europe. They may even filter into the highly individualized local concept stores that Starbucks has been stealthily opening in the United States, including one made from shipping containers outside of Seattle.

Click Images To Enlarge

This isn’t the first instance of a quintessentially American brand revamping its approach to appeal to foreign tastes and markets. Check my other blog posts dated December 6, 2011 about the new Burger King concept restaurant in Singapore and November 22, 2011 about the new McDonald's concept restaurant in Paris, France.

Click Images To Enlarge

COMMENTARY:   Now that's my idea of what a Starbuck's store should look like.  BIG. Roomy, beautifully decorated, slick, modern and definitely a social watering hole.  Not the little 1,100 square foot stores we are accustomed to here in the U.S.    If you are ever in Amsterdam, and want to checkout the new Starbucks concept store in Rembrandt Square here's the location on Google Maps.

 Click Image To Enlarge

I love the location for Starbucks new concept store in The Bank located on Rembrandt Square. I can definitely see myself sitting under a tree doing my blogging while drinking a cup of my favorite brew. 

Courtesy of an article dated March 6, 2012 appearing in Fast Company Design and the press release dated March 6, 2012 issued by Starbucks