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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

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THE STATE OF MOBILE PAYMENTS 2015, MOBILE PAYMENTS COULD HIT $142 BILLION BY 2019 FROM $52 BILLION IN 2014

 

Thanks to big moves from Apple, Samsung, Google and others, the world of mobile payments is rapidly evolving. More retailers accept digital payments than ever before and these 11 tech companies — as well as the world’s most famous coffee chain — are leading the charge.

 

Mobile payments in 2015

Apple, Starbucks and Disney are all strong brands with loyal followings, but they also have something else in common: They're early leaders in the ever-evolving mobile payments market.

Some analysts predict 2015 will be the first year all the pieces — including a larger base of NFC-enabled devices and terminals, and growing consumer acceptance — come together to take mobile currency mainstream. A number of additional companies are also entering the world of mobile payments, such as American Express, which you might expect to see, and Jawbone, which might seem surprising.

Here's a high-level look at the current mobile-payment and wallet adoption levels, as well as a breakdown of

Mobile payments today

By the end of this year, 5 percent of the world's 600 million to 650 million NFC-enabled phones will be used at least once every month to make "contactless in-store payments at retail outlets," according to consulting firm Deloitte's annual "Technology, Media & Telecommunications (TMT) Predictions" report.

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While five percent is not a staggering number, it represents a considerable increase over last year's mobile payment usage rate. As of mid 2014, less than 0.5 percent of the 450 million to 500 million NFC-enabled phone owners used their mobile devices for in-store purchases, Deloitte says.

While contactless mobile payments won't go mainstream this year, "niche adoption" will continue to grow, according to the report. Down the road, mobile payments use via NFC-enabled devices should "rise steadily" as consumers become more familiar with the concept and banks and retailers readily accept mobile payments.

Mobile payments tomorrow

U.S. mobile payments to national brands and local merchants will grow from $52 billion in 2014 to $142 billion by 2019, according to a 2014 Forrester report.  

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Forrester say.

"The adoption of mobile payments is an evolution — not a revolution — and the evolution is well underway,"

Forrester's numbers includes in-person mobile payments as well as remote and peer-to-peer payments.

Capgemini's "World Payments Report 2014" suggests mobile payments will increase to 47 billion transactions through 2015, up from 29.2 billion in 2013.

And according to Gartner, "rampant interest in mobile payments" and a "significant increase in mobile commerce" will drive mobile commerce revenue in the United States to represent 50 percent of all U.S. digital commerce revenue by 2017. Mobile commerce currently represents 22 percent of all digital commerce, Gartner says.

Amex on Apple Watch, Jawbone UP4

American Express is experimenting with facial recognition and wearable technology that could form the foundation for new mobile-payment and security features, according to The Wall Street Journal. Amex tests new ways of using its payment services on devices such as the Apple Watch and Google Glass in its own tech development lab. The company is evaluating facial recognition as a more secure way for mobile consumers to use Amex when paying for goods or sending money transfers. However, the technology isn't ready for prime time and is still in early testing phases, The Journal says.

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Amex also recently partnered with Jawbone to add mobile payment features to the company's upcoming UP4 fitness tracker.

Pay attention to Apple Pay

The Apple Pay mobile-payment and digital-wallet system debuted in October 2014. It lets consumers with NFC-enabled iPhone 6, iPhone 6 Plus, and Apple Watch devices pay in stores at contactless terminals and buy goods using apps that support the service.

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Apple Pay's impact was significant and immediate. Apple said more than a million credit cards were registered for use with the service in its first three days of availability. Denée Carrington of Forrester Research says.  

"Apple Pay will influence every discussion of mobile payments through 2015.  Apple Pay will be the catalyst for new debates on balancing data privacy with customer engagement and loyalty" and will be "the standard-bearer for the best use of tokenization to secure payments and biometrics to combat fraud."

CurrentC coming summer 2015

CurrentC is expected to be available in mid 2015, and it will combine mobile payments and loyalty benefits. Merchant Content Exchange (MCX), a company owned by a consortium of U.S. retailers including CVS, Best Buy, Lowe's, Sears, Target, and Walmart, backs the CurrentC platform. 

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Small-scale trials are currently underway in undisclosed U.S. markets, according to IDG News Service, but some critics express doubts about CurrentC.  Forbes says.  

"MCX seems completely unaware of how people actually shop at its partner stores."  

CurrentC doesn't support credit cards, to help merchants avoid those fees. Instead, CurrentC uses debit cards, which don't provide the same level of fraud protection as credit cards. The system will also initially use QR codes instead of NFC or another wireless technology.

Disney 'MagicBand' at the Magic Kingdom

According to Wired.'

"If you want to imagine how the world will look in just a few years ... skip Silicon Valley and ... (go) to Disney World," 

Disney World guests can wear a "MagicBand," a waterproof, plastic wristband that contains a short-range RFID chip and a 2.4-GHz wireless transmitter. MagicBand is also a mobile payment system, and it lets guests at Disney resorts purchase food, beverages and merchandise, and gain admission to attractions.

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Wired says. 

"You don't need to carry cash, because the MagicBand is linked to your credit card.  You don't need to wait in long lines."

Apple Pay lifts Google Wallet

Google Wallet, a mobile-payment and wallet system that uses NFC to enable payments between compatible devices and point-of-sale (PoS) readers, was released in 2011. However, the system failed to gain traction, partially because some wireless providers supported the then-rival Softcard payment system, previously (and unfortunately) known as Isis.

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In February 2015, Google acquired Softcard, integrated it with Google Wallet and announced its Wallet app would be preinstalled on compatible devices from AT&T, T-Mobile and Verizon Wireless later this year. You can use Gmail attachments to send money from your Google Wallet, too, even if the recipient doesn't use Gmail. Apple Pay's success ironically ignited interest in Google Wallet, and today more stores accept NFC payments from both competitors.

Jawbone, UP4 and Amex

Jawbone, which makes fitness trackers, portable speakers and other consumer electronics, recently entered the world of mobile payments. In mid April, the company announced that its upcoming UP4 ($200) activity-tracker wristband would let wearers make contactless payments via pre-registered American Express cards at PoS terminals this summer. UP4 will use Jawbone's app to link Amex cards to UP4 for NFC wireless payments. (Microsoft Band is another wearable with some mobile payment capabilities.)

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For UP4 transactions, Amex will provide retailers with tokens instead of consumers' credit card numbers, according to PC World, and Jawbone says it won't store credit card numbers or receive sensitive data about user transactions.

'Microsoft Payment,' Windows 10 and 'tap to pair'

Microsoft will likely enter the mobile payments space in a big way. Here's the gist of what's known so far, according to The Motley Fool: The payment platform may be called "Microsoft Payment;" the company filed official forms to become a money transmitter in the United States and already received permission to act as one in Idaho; and Windows 10's "tap to pair" feature could be used to transmit payments via NFC.

From PC World: 

"For now, we can only imagine what Microsoft might do. Perhaps the company is cooking up a direct mobile payment competitor to Apple Pay — though any effort on that front may be hamstrung by Windows Phone's meager adoption."

Microsoft's Band wearable already lets you pay for goods at Starbucks.

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PayPal, Paydiant and mobile payments

PayPal has been an ecommerce force for years. In March, news broke of PayPal's plan to acquire startup Paydiant, a platform that companies use to build branded mobile-payment and loyalty-card services. Subway, Capital One and retail consortium Merchant Customer Exchange (MCX) already use Paydiant's platform, according to the IDG News Service. Paydiant lets consumers pay for items via their mobile devices using NFC and QR codes.

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PayPal also said in March that it would sell NFC-equipped versions of its credit card readers to merchants.

Samsung Pay, NFC and MST

In March, Samsung announced Samsung Pay, which uses two different wireless technologies: NFC and magnetic secure transmission (MST). Startup LoopPay developed the latter, which has been embedded as a copper ring inside the new Samsung Galaxy S6 smartphones, according to Computerworld.

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Samsung Pay is expected to be available in the United States and South Korea this summer. The system's support for NFC and MST means Galaxy S6 users will be able to make purchases at many more retail locations than Apple Pay users, because Apple Pay requires NFC-enabled terminals.

Avivah Litan, Gartner analyst, told Computerworld.

"Samsung Pay certainly heats up the competition.  But Samsung still has a lot of work to do to improve the user experience before it can effectively compete with Apple."

Hip to be Square for mobile payments

Square's PoS card readers are already a hit with small businesses, including food trucks, restaurants and other local retailers. The Square Wallet mobile app, introduced in 2011, didn't catch on with consumers, however, so the company pulled it and replaced it in 2014 with Square Order, an app that lets people preorder drinks and food from local vendors. Then in March 2015, Square shut down that app, too. The company currently focuses on its Square Cash peer-to-peer mobile payments app for consumers and businesses, as well as its various PoS systems for merchants, including the Square Register app.

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Starbucks leads by example

Wired says Starbucks is "the master of mobile payments." AForbes headline says "Once Again, Starbucks Shows Google And Apple How To Do Mobile Payment." So what's the big deal?

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The coffee chain says it nabbed as much as 90 percent of the $1.6 billion spent in U.S. stores via smartphone in 2013. CEO Howard Schultz says the company's loyalty program drives mobile payments. Coffee drinkers purchase Starbucks cards, load them with funds from a credit card, then scan barcodes in the Starbucks app or iOS Passbook wallet to pay for food and drinks at its cafes. The more they buy, the more points they earn toward freebies.

Starbucks is also reportedly testing beverage delivery (via the Postmates service) as an extension of its mobile payment offering.

COMMENTARY:   Seth Priebatsch, 23, and CEO of SCVNGR, a Cambridge-based startup that began as company with a location-based social gaming app, could not get sufficient traction, so it pivoted in late 2011.  Priebatsch's no goal now is to dominate the market for mobile payments, allowing cellphones to be used in place of cash or plastic to buy things.

Already, 250 businesses around Boston allow consumers to use SCVNGR’s LevelUp mobile app to pay, and Priebatsch says another 100 will come online soon.  The system, deployed in eight other cities, is handling more than $1 million in transactions each month. One analyst believes the only app used by more consumers today for mobile payments is the Starbucks app.

SCVNGR has had several incarnations.

It started in 2008, enabling sites like museums or colleges to create text-based games that could be played on any mobile phone as players navigated a real-world environment.

Then, SCVNGR started chasing Foursquare, a Manhattan company that was the first to encourage mobile users to “check in’’ and share their location with others.

In March 2012, SCVNGR launched LevelUp, which was seen as an attempt to cash in on the Groupon craze.  But while Groupon’s prepaid coupons only created an incentive to go to a business once - to take advantage of, say, $50 worth of tanning time for $25 - LevelUp offered an enticing second and third deal once you cashed in the first. The idea was to try to engender loyalty, rather than just drive a swarm of bargain-hunters to the business.

The original LevelUp product didn’t take off.  SCVNGR was pitching it to merchants when dozens of other companies were also trying to persuade them to offer new kinds of digital deals.

SCVNGR introduced the current version of LevelUp in July 2012. Once you enter a credit card number into the app, you can use your cellphone to pay at businesses that accept LevelUp. The merchant puts a SCVNGR-supplied mobile phone on the counter in a special plexiglass holder. When you open the app, it displays a QR code - a more pixelated version of a bar code - which is read by the merchant’s phone and initiates the transaction.

The LevelUp scan works more reliably than a credit card swipe, and it’s generally faster.

But the big incentive is that most businesses accepting LevelUp offer deals to get you in the door. The app lets you see a list of businesses near you, and how much they will knock off your first purchase: a $4 credit at Naked Pizza, for instance.

Once you make that first purchase, a business can dangle future discounts based on a certain spending level. That’s an easy way to run a loyalty program without having to dole out those annoying punch cards.

When you use Twitter to survey people who use LevelUp regularly, they cited discounts and the simplicity as their two favorite features.

Dan Croak of Cambridge said he liked the way it cuts down on visits to an ATM, and doesn’t require him to sign a credit card receipt.

Katie Cohen of Boston said the app’s only drawback is that "I feel more like a nerd every time I use it."                                                                  

Merchants say they appreciate LevelUp’s low transaction fee: about 2 percent.  Mike Conley, director of marketing at Sebastians Cafés, says.  

“Accepting other credit cards can be as high as 5 or 6 percent.  Plus, LevelUp gives us a wealth of data about our customers: how often they come in, and how much they spend.’’

Conley says nearly 4,000 people have used LevelUp to pay at Sebastians, and their average purchase is higher than other customers.

Patrick Lynch, who runs the Bon Me food truck, says.  

"I  have found it’s worth our while to give a little discount with LevelUp to try to convert people into regulars.’’

Bon Me offers $2 off a customer’s first purchase with LevelUp.

Building a mobile payment product that consumers and merchants like is a significant accomplishment, and Yankee Group analyst Nick Holland says that SCVNGR has maneuvered into a very strong position. Holland says.  

“It’s arguable that they’re number two behind Starbucks.  But we’re still in the very low single-digit percentages, in terms of people using their mobile phones for anything transactional.’’

Handling $1 million in monthly transactions is not generating much revenue for SCVNGR, which so far has raised $20 million in venture capital ($12 million was raised in May 2012).  The 120-person company collects $20,000 in fees on that $1 million, some of which it must pay to credit card issuers and middlemen. Even getting to $100 million a month in transactions would not create a very big business.

But Priebatsch has already figured out his next move. He said.  

“In three years, we’ll be handling $10 billion a month of transactions - and making zero on the transactions.’’

Instead, LevelUp will charge merchants a monthly fee (perhaps $100 per location) for help bringing in new customers, transforming them into repeat customers, and analyzing their spending habits.

Priebatsch says. 

“Google has had great success with selling advertising that understands what you’re searching for, and generates revenue every time you click on one of their ads.  Our ad unit is based on the transaction, on getting you into a business to buy something. We think that what we are building is the largest financial advertising system on the planet.’’

Priebatsch’s lofty vision could get SCVNGR acquired, as established players in the payments industry, such as PayPal, Google, and credit card companies, try to formulate winning strategies for mobile. But building a profitable business atop the vision would give SCVNGR a chance of becoming a major player in its own right - perhaps the 21st century’s version of American Express.

Courtesy of an article dated April 22, 2015 appearing in CIO Magazine and an article dated March 25, 2014 appearing in The Boston Globe

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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     

IBM EXEC RAISES $500,000 IN ANGEL CAPITAL FOR CULINARY AGENTS, A LINKEDIN-LIKE SOCIAL NETWORK FOR CHEFS AND RESTAURANTS

 

Alice Cheng started her career in the tech world as a temp in the mailroom at International Business Machines Corp.

By the time she left 13 years later, she was a high-level executive in IBM’s emerging-business division, frequently used as an example by her bosses when they explained to new hires that talented young people can rise quickly.

Alice Cheng, CEO and founder of Culinary Agents (Click Image To Enlarge)

But when she started her new career as an entrepreneur, more than 70 meetings with investors did not lead to financial backing, she said. Now she is taking her first steps toward another meteoric rise, with $500,000 in seed funding for Culinary Agents Inc., a sort of LinkedIn for culinary professionals.

Culinary Agents Homepage (Click Image To View)

Thanks to the Food Network and a flourishing foodie culture in America, Ms. Cheng believes it’s time for chefs to have their own networking and hiring site. Today, the top chefs and most well-known restaurants use word of mouth to connect, but there are few sites beyond general sites like Craiglist for reputable, experienced culinary professionals to find the right job, she said.

RRE Ventures, Correlation Ventures and various angels apparently agree, having invested a half-million dollars in Ms. Cheng’s fledgling business.

Jim Robinson, the founder of RRE Ventures who led the seed round for Culinary Agents said.

“I’m a cheeseburger guy, myself.  But there’s a lot going on in this space because of all the mid- to upper-echelon restaurateurs, who fall just below the level of the very famous. It’s a growing group, and they still use Craigslist.”

While the culinary business is a large and underserved market, RRE Ventures pulled the trigger because Ms. Cheng is a “real entrepreneur,” Mr. Robinson said.

He said.

“It’s the chutzpah and the energy. She talked some of the biggest brands into doing business with her. These are people who are marketed to all day long. To break through to them, without even a real product launched [just a beta version] really says a lot.” 

The site has been live for just over a year, Ms. Cheng said, and is filled with job postings from rock-star restaurateurs like Union Square Hospitality Group, One Off Hospitality Group, Thomas Keller Restaurant Group, the French Laundry and a range of other high-end restaurants and chains.

Ms. Cheng said. 

“These are the places that people really want to work after graduating from culinary school.  These are the names that people want to get onto their resumes. These are top names, and they used to use Craigslist as a default.”

There are more than 10,000 users of the site, she said, roughly split between restaurants looking for new staff and culinary professionals looking for new jobs. It’s free for businesses and applicants to post profiles, and actual job listings cost $35 apiece, or $100 per month for unlimited posts.

Within the next year, the company might offer an upgraded package that would provide people who post job ads with information on how many people are clicking, what they are doing with the ads, and whether they are sharing the ads, among other things, Ms. Cheng said. The pricing of such a package is still being determined.

So why is a high-flying IBM executive getting into the food business?

Ms. Cheng said.

“I spent time in food service and retail 10 or 15 years ago.  It was fun, but back then it didn’t really seem like a career type of thing. All that has changed now that the media has shed light on the business, with the cooking shows. All the drive and passion of these chefs has been exposed, and people are excited about it.  They are hard workers, like artists. They are all about honing their craft. They’re a different breed.”

And fortunately for Culinary Agents, venture capitalists now consider Ms. Cheng a different breed as well.

COMMENTARY:  The National Restaurant Association’s annual What’s Hot culinary forecast predicts menu trends for the coming year. For 2014, the NRA surveyed nearly 1,300 professional chefs – members of the American Culinary Federation American Culinary Federation (ACF) to find out what the hottest menu trends will be.

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Hudson Riehle, senior vice president of the National Restaurant Association’s research and knowledge group says:

“Today’s consumers are more interested than ever in what they eat and where their food comes from, and that is reflected in our menu trends research. True trends – as opposed to temporary fads – show the evolution of the wider shifts of our modern society over time, and focus on the provenance of various food and beverage items, unique aspects of how they are prepared and presented, as well as the dietary profiles of those meals.”

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Click here to see full results of What’s Hot in 2014 chef survey

Courtesy of an article dated January 15, 2014 appearing in the Wall Street Journal Venture Capital Dispatch

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

STARBUCKS LAUNCHES A STORE INSIDE A SWISS COMMUTER TRAIN, COMPLETE WITH WOOD TALBES, LEATHER CHAIRS AND HOT JAVA

WHAT IF YOU COULD SIT INSIDE A COZY STARBUCKS DURING YOUR MORNING COMMUTE? NOW, COMMUTERS IN SWITZERLAND CAN DO JUST THAT.

Starbucks locations already seem to be everywhere you look. But starting November 21, the company will take on a new frontier: trains. Starbucks, with the help of Swiss train company SBB, has converted a double-decker car running from Geneva Airport to St. Gallen in Switzerland into a fully functional Starbucks store, complete with wood tables, leather chairs, and, in another first for the company, waitstaff.

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Starbucks is no stranger to new concept stores. Strategically, its train is probably most like its mass-fabricated popup store. It's an idea the coffee giant is putting into the wild to see if it might scale because, while big storefronts represent the core of its business, smaller, niche Starbucks offer an opportunity to expand through unused, underserved cracks.

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Muller says.

"The Starbucks train cafe's goal is to offer commuters a wonderful experience. We wanted to make sure it feels like a club and that you could see a person across the room, so the train feels more spacious.”

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So the challenge was not just to fit a coffee counter into the corner, but to pull in all of the elements we associate with Starbucks into a stock mass-commuting platform. That meant accounting for weight, electrical, and fire-safety requirements, of course, but it also meant attaching all those windowed bar seats, shared tables, and the cozy armchairs to the same skeleton of fasteners that seating inside a typical train car would use. In other words, Starbucks architects had to design a whole new social floor plan using the exact same anchors of an old commuter-centric one.

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Muller says.  

“Just because it’s functional doesn’t mean it can’t be engaging.  So we asked, ‘Why can’t we?’ Just because we’re on a train, why can’t it be more comfortable?”

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(too flammable) and to create solutions (like bucking convention by deploying them anyway). In this case, the solution was opting to treat the wood to be flame retardant, plus use of thinner pieces wherever possible (because less wood essentially equates to less kindling). That approach still sounds simpler than it was, of course: Every table and chair was designed and built from scratch and tested by regulators.

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Muller explains.  

“You design a new chair, maybe one version is light cream and one in dark cream.  You build eight of each, they set them afire, and if you have a high score, you pass.”

In the end, designers were able to seat 50 commuters at once--just six fewer than a stock train car--while also having the same three core seating arrangements you find in a Starbucks store for different customers: Commuters just one stop from their destination may snag a stool at the bar, while those on a longer journey could head upstairs to sit in a plush armchair or at a shared “community table, to use your laptop or have lunch.”

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Furniture aside, it’s all of the small touches that make the project so compelling. The bottom floor was carpeted to absorb noise in the space. Surfaces have clocklike maple inlays to acknowledge Switzerland’s love affair with timepieces. A waiter takes and delivers an order upstairs so that people wouldn’t need to claim their seat, run downstairs to the line, and run back up--which Starbucks designers witnessed happening in their own field research. (A waiter can also serve the ground floor for good measure.) And in a very cool touch, tables are treated to have a textured surface, plus they wobble the slightest bit as a train comes into the station, to prevent spilling your coffee.

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In a world of travel increasingly chasing new ways to charge for a few inches of legroom, Starbucks’s latest concept has certain promise: that travel can still be as much about the journey as the destination--assuming other companies make the effort.

Muller concludes.  

“I wonder sometimes that our customers won’t understand truly what this took.”

And, of course, they won’t, which is a hallmark of any good design, isn’t it?

COMMENTARY:   This is a great idea, but I would've preferred PEET's coffee.  It's just better coffee.   Just the same, it's an idea that makes sense.

Courtesy of an article dated November 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."

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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."

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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.

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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."

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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."

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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.]

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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."

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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! 

HOW FACEBOOK'S NEW NEARBY LOCAL SEARCH FEATURE COULD BECOME A YELP AND FOURSQUARE-KILLER ONE DAY

Facebook’s new Nearby local search feature could become a Foursquare killer one day. So far, however, it’s not as comprehensive, deep or personal for users. But if Facebook can get its 600 million mobile users to think of it as a local search utility, look out.

Each month 250 million Facebook users tag posts with location. Today that data goes to work for you in a major revamp of Facebook’s Nearby feature for its iOS and Android apps. Built by Josh Williams and the Gowalla team that Facebook acquired last year, Nearby helps you discover nightlife, shopping, restaurants and more based on the Likes, check-ins, and recommendations of your friends and other users.

I got to spend the weekend trying out the feature that will rollout first to 1 percent of users later today and all users soon. Here I’ll review Facebook’s impressive first attempt at local business discovery, discuss its potential to earn money while delighting users, and explain why it spells trouble for apps like Yelp and Foursquare.

HOW FACEBOOK NEARBY WORKS

Starting today when you open the Nearby tab from the Facebook for iOS or Android navigation menu, you won’t just see a list of Places to check in like before. Instead you’ll see a relevancy-sorted list of local businesses and landmarks that Facebook thinks you’ll be interested in. Similar to how it ranks stories in the news feed, Nearby looks at a ton of signals to determine what to show you first, including friends who’ve Liked a business, checked in, left a short text recommendation, or given the Place a star rating.

Click Image To Enlarge

Along with an omni-list of locations, you can search for specific spots or browse by categories, including Coffee, Hotels, Outdoors, and Nightlife. There’s also detailed sub-categories so you can browse for Mexican restaurants, brunch, or sports bars, or Shopping retailers such as clothing, electronics, groceries, or books.

Click Image To Enlarge

Results are shown on a split-screen map and list, and they give you plenty of context so you know what you’re looking at. Each listing shows a business’ name, category, profile pic, address, distance, star rating, and the names of friends who Like it. Move or resize the map and you can see the top results for any area.

Click Image To Enlarge

Tap into one and you’ll see Facebook’s brand-new mobile design for Places Pages that offers quick access to business hours; buttons to Like, call, or check in somewhere; recommendations from other users; and a slick way to leave your own hot tips on the best dishes or nights to drop by. If you want to visit, a directions button opens your device’s default maps app. You can also toggle over to see the Place’s Timeline of recent updates.

IS IT HELPFUL?

Yes. Nearby is a truly mobile-first interface designed for browsing over typing. I’ve been very impressed by how well the relevancy-ranking algorithm works. I’m big into nightlife and so are my friends, so it was great to see Nearby pulling out local spots I’d dig like concert halls and outdoor bars.

By combining rankings and recommendations with Likes and check-ins by friends, I not only know a place is high-quality, but that’s it’s my style — something Yelp can’t really do. I had no idea there was a Creole restaurant down the street from my apartment, but with four-stars and a Like from a good buddy, Nearby found me something I’m excited to try.

In your own city, Facebook’s plentiful data provides accurate suggestions of what to check out, but it could also be a big help when you’re travelling. You could follow the tracks of the few friends you know who live where you’re visiting, or go by the ratings and recommendations of strangers. Facebook began letting people leave recommendations on the web in mid-2011 and through the mobile website in January. Now those are turning up in Nearby to help you figure out what to order or what to do at a place once you’ve decided to go there.

There’s certainly some kinks to fix. Spots in the “Outdoor” category sometimes are actually indoor venues. If you search for “Mexican” it will bring up the option to browse the Mexican restaurants category, but Facebook doesn’t know to do the same if you search for “taco.” It just gives you restaurants with “taco” in the name.

WHAT’S NEXT FOR NEARBY?

Right now Nearby is very static. It doesn’t even show you Places where friends are currently checked-in. That has to change. If a friend is checked-in at a Nearby Place, that should be called out in the results and used as a strong signal of relevance.

Facebook Events is also sorely missing from the experience. Facebook should work into Nearby results Events that I’m invited to, as well as Suggested Events that my friends are attending so I don’t miss a party down the block.

WILL IT MOVE THE NEEDLE FOR FACEBOOK?

For now there are no ads in Nearby, but there sure are plenty of ways Facebook could add them. Most obviously, Facebook could let businesses pay for sponsored placement in results.

“Your business would show up fourth, for a fee it will show up first”.

On mobile where people don’t have time to do a ton of comparing, those ads could drive serious foot traffic and sales for businesses and become an important revenue stream for Facebook. Similar ads could show up if you search for a business in Nearby.

Facebook could also start pushing hyper-local ads into the standard news feed. If Facebook detects you’re within a half mile of a business it thinks is relevant to you, it could show you an ad linking to that place’s Nearby mobile Page.

SHOULD YELP, FOURSQUARE, AND OTHER LOCAL DISCOVERY STARTUPS BE WORRIED?

Yes. Simply put, people are already spending so much time on Facebook that they might be happy to stay in it to find local businesses rather than opening another app. Local discovery services only work if you have plenty of data. Foursquare still only has around 30 million users. Facebook’s location services have 250 million users a month. It might not have the long-tail of reviews or the advanced spam protection of Yelp, but it knows where your real friends go.

The feature is also Facebook’s first big foray into search. At Disrupt, CEO Mark Zuckerberg got investors salivating by talking about how Facebook is uniquely positioned to addresss questions you’d normally ask a search engine. He gave the example of wondering

“What sushi restaurants have my friends gone to in New York in the last six months and Liked?”

Nearby has the answer.

In the end, people want recommendations they can trust, and those don’t come from strangers. They come from people you know who share your tastes — your friends. Nearby lets you discover the world through their eyes.

COMMENTARY:    A business needs to have a Facebook Page to show up on Nearby. Some listings appear to be automatically generated but others businesses will need to get on Facebook to make Nearby really useful for users. Facebook also sometimes struggles with multiple pages for one location and doesn’t pick up new restaurants that fast. The company said that it will also be incorporating more third-party data so this should improve soon.

Facebook’s local data also has less depth. When you visit an actual page for a business, you get the ability to see information like hours and address and you can call the restaurant up, check in or “like” it. There’s a user-based rating systems as well as recommendations left by users. This is nice but it doesn’t provide the same richness you can get on Foursquare.

For example, a popular Peruvian chicken restaurant in my neighborhood had two recommendations on Facebook. On Foursquare, the same place had 28 tips and 50 pictures. Also, with Foursquare pages, you can save the place on a list, get directions, book a table and see a menu. And if the place is part of a saved list, you can check out what other users also like similar to that restaurant. Foursquare also provides a rating on a 10-point scale for locations,  based on popularity and user interactions with more weighting given to local experts. I appreciate that more than Facebook’s simpler five-star system which can often lead to a lot 3.5 star ratings.

Again a lot of this has to do with Foursquare’s experience in local search and its refinements over the years including one earlier this week. But the differences aren’t just manifested on the surface.

Foursquare has been using its more than 3 billion check-ins and other interactions to tune its Explore recommendation engine. That input helps Foursquare come up with more unique and personal suggestions. While Facebook recommends local businesses based on friends who have liked a business, checked in, rated a restaurant or left a recommendation, Foursquare looks at tips, likes, dislikes, overall popularity, user loyalty to a location, and the local expertise of top visitors. It also factors in whether a place is listed on one of its user-created lists. And then it looks for matches for users based on their tastes or people like them. It also considers the time of day, so the recommendations change more frequently throughout the day.

Facebook has its advantages too like its more than 600 million mobile user base. That can be helpful because it potentially means more input from real friends. And for some users, what Facebook currently provides will be enough; they may not be looking for the level of detail that Foursquare provides. But the challenge is to get people to think of using Facebook’s mobile apps and website as a local search engine, something most people aren’t trained to do. Facebook isn’t helping by hiding the Nearby tab inside the menu bar. That’s going to take a while for people to discover.

Facebook should be more competitive once businesses start running local ads that appear in the main news feed. That’s not happening yet but when it inevitably does, it will encourage people to check out the Nearby tool. And if Nearby starts displaying local deals like Foursquare does, it will be another reason to take it for a spin.

As Nearby grows, it could steal away existing Foursquare users and pick off others before they give it a try. That’s something Foursquare absolutely needs to defend against. But right now Facebook has just dipped its toe into the market and has a lot more to do to get competitive.

Foursquare has made a quick response to Monday’s announcement of Facebook Nearby, with its own announcement on December 19 that Foursquare Explore is cranking up its personalization.

The irony? It’s going to use Foursquare activity from a user’s Facebook friends to improve the recommendations in Explore.

Think of it as Foursquare judo: It’s using Facebook data to battle against Facebook itself. Touché!

If Facebook can add a voice-activated like Siri for Apple's iPhone, I think they may really have something.   This certainly opens the door to monetization either through sponsored stories ads. The revenue potential is humongous, so I do feel for Foursquare, but not so sure how this will affect Yelp.  Yelp offers a tremendous history of reviews for merchants and restaurants, something Facebook will not be able to offer, but it is best to keep things simple for now.  

Courtesy of an article dated December 17, 2012 appearing in TechCrunch and an article dated December 19, 2012 appearing in Gigaom and an article dated December 19, 2012 appearing in Search Engine Land

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