Institutional Innovation
By Howard Riell
Taking the case that much of the American foodservice industry’s innovation springs from the major contract foodservice companies isn’t hard once one considers the evidence.
It’s not just the size and scope of institutional feeders like Aramark, Marriott, Sodexho and others. It’s that they have always had to be everything to everyone, competing as they do in nearly every foodservice segment.
With client rosters that include B&I, schools, colleges, hospitals, nursing homes, prisons, airports, the military, churches and more – and accounts that include everything from fast food to fast casual, casual, fine dining, vending, mess halls and more – institutional feeders are pressed to find solutions for issues like design, food safety, technology, service, training, merchandising and more.
Bottom line: they drive a lot of the innovation that drives the entire industry.
“I agree – absolutely,” says Mike Dunn, Director for Food Safety and Quality Assurance for Sodexho. “We buy into a lot of innovative things.”
Perhaps most representative of the way Sodexho pushes the envelope is its cutting-edge food safety-auditing program. Management realized, as Dunn explains, that the food safety and HACCP programs that have been implemented “were all fine and good, but we had to have a way to check and balance those.”
The company has contracted with NSF International in Ann Arbor, MI, USA, for auditing services. “We’ve trained their auditors on our specific food safety and health standards. We now have about 30 auditors from NSF who go around the country conducting audits at 3,500 of our units annually.”
The NSF auditors work with wireless handheld units. They upload information to a database management system, allowing management to see results in real time through its web-based programs. “If our vice presidents or even district managers need information that is specific to their areas in food safety and health, we can give it to them within two minutes. This is real time fast data. It is very cool.”
Adds Sodexho spokesperson Stacy Bowman-Hade, foodservice contractors “have the ability to touch so many points in a person’s life. The range of the customers we serve is so broad that we really can be the innovators for the rest of the market in driving the customer experience.”
One of the drivers of innovation at her firm, she says, has been Sodexho University, which she describes as a “clearinghouse for all of our companies to development opportunities, to run certification programs and corporate training programs.” The university is “where we get our employees the training they need. The way that we get them engrained in the culture of Sodexho.”
This bringing together of various types of expertise has led to a variety of strong retail brands from Sodexho, including Jazzman’s Café, a fast casual coffee house concept with sandwiches and salads. Says Bowman-Hade, one of the hallmarks of institutional innovation has been flexibility – the ability “to maintain the standards of your brand, but to be flexible in where you can operate it. That’s how we end up on a Marine Corp. base with our Sky Ranch Grill program, for example, and have the same Sky Ranch Grill of the University Massachusetts-Boston. They work because of the flexibility that we build into the program, as does Jazzman’s Café.”
Innovation Center
“I think it’s fair to say that innovation certainly can emanate from us,” agrees Susan Weller, Director of Creative Services for Compass. “I think that in our case, the benefit we have is that we’re one of the few (contract companies) that has actual restaurants within our world. The Levy Restaurants, Restaurant Associates, the Patina Group all have fabulously popular and on-the-cutting-edge outlets with chefs attached to them. I think that helps us a lot. We’re able to, as a result of that, draw upon them and their expertise as we continue to develop and innovate.”
In fact, this May the company will debut an Innovation Center in Chicago, adjacent to Café Spiaggia, which “will actually draw upon several of those kinds of thought processes,” Weller reports. She calls it “the sort of place where we can continually attempt to meet the needs of our customers. By that I mean stay ahead of them, of course. We have 13 sectors, each of which has different demographics and needs. The beauty of this place is that we can bring all those resources to one spot and bring all these great heads together to develop concepts that work. That way, when they get to the field all of our manual writers, chefs, architects and foodservice planners are on the same page.”
Another Compass innovation is the brand new Zona Mexicana concept, which Weller envisions as being inserted into marketplace concepts. “What’s innovative is that it will have a great appeal for all the big three right now: flavor profile, health needs and wellness, and the need for handheld, easy-to-consume, easy portability.”
Lifestyle Innovation
In 2003, the Aramark groups formerly known as Culinary Solutions, Design Solutions and Retail Management were reorganized to create a single department, called Aramark Innovative Dining Solutions. The changes were the result of a strategic planning process in which over 900 field operators were interviewed to better understand their needs and develop plans to support their efforts more effectively.
The department enables Aramark to better serve the needs of each client partner. Cross-functional teams oversee the strategic, culinary, design and merchandising developments of Business Services, Campus Services, Schools Support Services, Sports and Entertainment, Healthcare Management Services, Refreshment Services, and other clients. The integrated approach allows Aramark to group work into a three phase process – discovery, development and delivery – that delivers what is calls ‘holistic’ dining solutions.
Two of Aramark’s newest brands that illustrate innovation are The 12-Spot and UBU Lounge. The new research-based concepts cater to the needs and preferences of middle and high school students. These brands were developed in part through comprehensive focus group research with middle school students and the contract feeder’s proprietary High School DiningStyles research.
Aramark learned that tweens (grades 6-8) and teens (grades 9-12) are “highly sophisticated and savvy.” They want a cafeteria that resembles quick-serve and fast casual dining restaurants they are accustomed to, in terms of food variety, flavor complexity, and meal presentation.
The 12 Spot is designed to reflect the habits, choices and nutritional requirements of today’s tweens. The concept features healthy new menu items as well as brightly painted walls, fun food packaging, new lighting and music, updated and creative merchandising materials and casual uniforms worn by the service team.
An example of its innovation, Aramark recently partnered with a food manufacturer to create a “Smart Pizza” for students at the Houston Independent School District in Texas. “Smart Pizzas” utilize ingredients like low-fat cheese, turkey pepperoni and soy protein to reduce sodium (as much as 22%) and fat (as much as 50%) over comparable pizzas.
Similarly, the UBU Lounge was developed to meet the specific preferences of teenagers. High school lunchrooms, in ARAMARK school districts, adopting the U.B.U. Lounge have new colors infused throughout the lunchroom, sophisticated lighting, new food packaging, and student lounge areas, complete with furniture, music, and huge graphic images of fellow teens.
The concepts have thus far been implemented in 100 locations, according to spokesperson Leanne Scott Brown.
More new concepts and procedures will certainly follow, not just from Aramark but also from institutional players in general. Their size and diversity of operations necessitate that they continue to explore all of the frontiers of foodservice – and they will.
key attributes such as convenience of locations, overall appeal to kids, menu variety and value for the money.
Leaders Fight Back
It should be no surprise that traditional burger leaders have taken careful notice of the changing winds and have responded aggressively by introducing healthier, trendier foods into their menus. Burger King rolled out its Veggie Burger and reduced-fat mayonnaise, which they say is the first of its kind offered nationally by a quick-service chain. Wendy’s created an instant success last spring with its "Garden Sensation" salads: fresh, crisp salads with interesting ingredients and delicious dressings, such as the Mandarin Chicken Salad, the Garden Salad, the BLT Chicken Salad, and the Taco Salad.
McDonald’s expanded its own menu variety with the Fruit 'n Yogurt Parfait, but most recently exhibited one-upmanship with its competitors announcing the launch of a brand new line of fresh and nutritious Premium Salads that will be served exclusively with Newman’s Own all-natural salad dressings. "Today's announcement introducing McDonald's Premium Salads and Newman's Own salad dressings demonstrates our commitment to offering customers new and compelling menu options," said Mike Roberts, President of McDonald's USA. "We invite all customers to visit McDonald's and taste these delicious, new wholesome products." McDonald's USA also announced a plan to significantly reduce trans fatty acids in its fried menu items with the introduction of an improved cooking oil in all of its 13,000 restaurants. And more changes are reportedly in the works.
A Competitive Edge
The growing push for freshness is changing fast-food menus and marketing strategies. Back in 2000, industry experts attended the Menu 2005 Summit held by Triarc Restaurant Group, franchisor of the Arby’s brand. The overriding theme of the forum was "flavor"—flavor, they predicted, was going to dominate the fast-food menu five years into the future, as consumers would become more taste-conscious, nutrition-savvy, mobile and demanding.
Fast forward to May 2001: Arby’s introduces the Market Fresh sandwich line, all made fresh-to-order with oven roasted meat, a key marketing point that the company will exploit to differentiate itself from other fast-food competition. "Market Fresh has made good on its claims of higher quality and freshness, not only becoming a permanent fixture on the Arby’s menu, but also securing the company’s position as a fast-casual alternative for customers with mature tastes," said Michael Howe, President and CEO of Triarc. The company has presently launched an advertising campaign that features an animated oven mitt in order to emphasis its core brand equity of oven roasting and reinforce the positive emotional connection that consumers have with roasting, which is also synonymous with special occasions, comfort and home cooking.
Subway: Freshness and Health
Subway has consistently promoted its reputation for serving made-to-order fresh, high-quality food that is a healthful alternative to greasy fast-food. Each shop bakes its own bread daily. With 18,263 locations in 72 countries, Subway is the second largest fast-food chain in the world, and has surpassed McDonald’s in number of locations in the United States and Canada.
In 1997, Subway introduced seven sandwiches with 6 grams of fat or less. Since consumers do not always equate healthy food with good taste, the chain later introduced the Selects line of sandwiches and gourmet sauces. In 2002, Subway added five new additions to the Selects line and also added three new varieties to its successful line of gourmet seasoned breads. The company also features commercials about Jared Fogle, a young man who lost 243 lbs. in one year by walking daily and eating nothing but Subway sandwiches for lunch and dinner.
In 2002, the chain introduced Tuscany Décor, an all-new interior and exterior revamp to enhance the brand’s positioning of healthful, fresh, great-tasting sandwiches and salads. The inspiration for the look comes from the Tuscan heritage and family background of Subway co-founder and president Fred DeLuca, and highlights the warm colors and textures of the Tuscan countryside as a more appealing and reinforcing venue to complement the fresh food selection.
Smaller Chains Reflect Changing Trends
Newcomers and smaller regional players can be valuable indicators of changing consumer tastes and industry trends. D’Angelo Sandwich Shops, a growing 216-unit franchise in the Northeastern U.S., experienced a 4.04% growth per unit in 2001. President Tom Galligan attributes the strong performance to factors including the introduction of credit card acceptability and the success of its menu offerings. "We have a number of distinctive items on our menu, but in general we’re finding that all of our freshly made sandwiches and salads and the better, more nutritious quality of our freshly grilled ingredients holds greater appeal today to customers who are seeking alternatives to burgers, fried food or pre-cooked and reheated ingredients."
Specializing in marinated grilled chicken and a wide variety of fresh Mexican entrees, El Pollo Loco operates more than 300 restaurants in California, Arizona, Nevada and Texas. The menu illustrates the growing popularity of fresh ingredients and flavorful ethnic offerings that have helped push system-wide sales from US$305 million in 2000 to US$364 million in 2002. The Chicken Caesar and Chicken Fiesta salads are prepared fresh-to-order with crisp, hand-tossed lettuce topped with flame-broiled chicken breast and freshly prepared dressings.
Del Taco, a 415-unit Mexican quick-serve chain, recently announced its 13th consecutive year of same store sales growth, with average volumes exceeding the US$1 million mark, placing it ahead of competitor Taco Bell. The chain serves lard-free beans cooked from scratch for three hours, freshly grated cheddar cheese, and chicken that is grilled every hour. The units feature a festive, colorful atmosphere and have a drive thru. "We don’t prepare it until a customer orders it," explains Ron Petty, president of Del Taco.
For In-N-Out Burger, a traditional burgers and fries U.S. West Coast chain, freshness is everything. There are no microwaves or freezers; everything is made fresh to order. French fries are made on-premise with hand-diced, fresh, whole potatoes, the buns are baked using old-fashioned, slow-rising sponge dough, and the shakes are made with real ice cream. As a result, the chain has always rated on or close to the top in the annual Sandelman & Associates "Awards of Excellence" survey.
Industry analysts are closely following the continued quick-casual growth in the United States and particularly in Europe, where the specialty-sandwich segment is exploding. Some even question if the quick-casual segment can sustain present growth levels. "Performance in 2003 will tell whether fast-casual chains are here to stay or a dot.com-like phenomenon," says Harry Balzer, NPD vice president. Nor should the burger be counted out, especially in the United States where in a recent Maritz Poll survey of 819 randomly selected adults , 48% named burgers as their favorite fast-food.
Changing consumer tastes and attitudes will continue to drive the QSR industry into the future, and suppliers, as well as equipment manufacturers, must be ready to accommodate the changing needs of operators.
Recognizing Employees: A Recipe for Success
The Neighbood Marketing Institute (NMI), a leading consulting firm founded by former McDonald’s Corporation marketing executive Tom Feltenstein, conducted a five-year survey from 1997 to 2002, that features employee perspectives about the workplace in the quick-serve segment in the United States. The study revealed that a sense of family in the workplace—specifically the need for belonging and working together, for many employees within the restaurant industry—has increased since the terrorist attacks of September 11. The slowing economy seems to be keeping more employees in their current job for at least another year, with a growing number viewing their employment as a career rather than just a job. The study suggests the need for restaurant owners to take advantage of this renewed employee commitment to stay in the workplace, but not without management improving their communication skills so employees know what is happening in the company, their jobs, and how they are doing on a personal level.
Employee retention has been a perennial challenge for QSR operators, ultimately impacting the quality of customer service. Atlanta, GA, USA-based Chick-fil-A reported a 10.54% profit increase in 2002, and has not posted a loss in 35 years of operation. "Our Chick-fil-A franchisees’ commitment to continuous improvement in our customer service performance as well as their record of attracting and retaining loyal employees is a recipe for success at any time," said Dan Cathy, President and COO.
Yum! Brands reported a net income improvement of 18% in 2002, with a record 1,500 locations opened that year. The company is paying more attention to training its 750,000 employees, which they feel has paid off in improving service performance as well as lowering annual turnover rates among hourly employees. Yum Chairman and CEO David C. Novak recently discussed his company’s Customer Mania program with BusinessWeek Senior Correspondant Michael Arndt: "Within this program, we’re teaching our team members life skills. We teach you how to deal with customers. We teach you how to listen and be empathetic. And we teach you how to recover when you make a mistake, because we all make mistakes. Regardless of whether you build a career with us or you want to go off and be a doctor, these are skills you can use throughout your life." Novak added that he believed money was not the most important factor in retaining employees: "It’s employee recognition. Here’s why people stay in the business. They know what’s expected of them. They know that people care about them inside the restaurant. And they feel recognized."
Distinct preferences emerged from the teens surveyed, including:
• High school students are conscious of healthy-eating with 51 percent stating they make an effort to eat or drink something healthy every day.
• 56 percent of the high school population does not regularly use the cafeteria, averaging 1.4 times/week.
• 18 percent of the high school population skips lunch 1.4 times/week. Of this 18 percent, 63 percent strongly agree they prefer to wait until after school to eat.
• Although 15 percent of the high school population uses the cafeteria regularly, they prefer to go offsite for lunch.
• 23 percent of the high school population eats in the cafeteria 3.1 times/week. Of the 23 percent, 69 percent strongly agree that they are time-pressed, as 26 percent are in an academic club; 47 percent play on high school teams and 29 percent have part-time jobs.
