McD tests call center, order

4 • October 6, 2003
NATION’S RESTAURANT NEWS
NEWS
Dunkin’ Donuts operator wins
‘unprecedented’ tax-based
contract termination lawsuit
By Richard Martin
BOSTON — In a case said to be
unprecedented in the annals of
franchising litigation, a federal
court jury here returned notguilty verdicts on some four
dozen counts of criminal tax
fraud and tax evasion alleged by
Dunkin’ Donuts Inc. against a
seven-unit franchisee.
Miami attorney Robert
Zarco, whose firm represented
from the chain by showing a
breach of his contract’s obey-alllaws provision.
However, Fallah, whose
doughnut shops are in Fort
Lauderdale, Fla., never had been
investigated, charged, prosecuted or convicted of tax violations
or any other crime by federal or
state authorities, his attorney
asserted. Zarco said the court
Hanging on the telephone: McD
tests call center, order upgrades
By Amy Garber
OAK BROOK, ILL. — McDonald’s
Corp., as it strives to create a more
modern image with the U.S. debut
of its first-ever global ad campaign, also is experimenting with
high-tech customer service
improvements.
The fast-food giant, rebounding from sales declines that
stemmed in part from poor service, is eyeing upgrades to the
order process with a centralized
phone center. The center, which
dramatically would alter
McDonald’s service systemwide
by allowing customers to order
from their tables, captured the
company’s attention only months
after it expanded a test of automated order kiosks.
Meanwhile, stepped-up monitoring under the U.S. restaurantgrading program, which officials
insist has sped up service, also has
renewed concerns of smaller franchisees that they will be forced out
of the system.
Last month during a Banc of
America Securities conference,
Charlie Bell, president of
McDonald’s Corp., told Wall
Street analysts that “more operators had left the system in the past
12 months than had exited in the
previous five years.” Bell, who also
is McDonald’s chief operating
officer and is considered a likely
successor to chief executive Jim
Cantalupo, did not provide details.
His remark came in response to a
question regarding whether
McDonald’s restaurant-grading
process gave the company a way
to enforce its standards.
Following the conference company spokesman Bill Whitman
said Bell’s statement reflected
global circumstances, and the
number of domestic franchisees
leaving the system had remained
constant over the last five years.
However, Dick Adams, a San
Diego-based franchisee consultant who works with McDonald’s
operators, said about 100 U.S.
franchisees with two or three
stores left the chain in the first
quarter of this year “due to low
sales volumes and negative cash
(See HANGING, page 6)
PHOTO: SCOTT WINDUS
Ronald McDonald and rap group the Clipse help launch McDonald’s “i’m lovin’ it” campaign.
New spots will feature vocals from the rap group. The U.S. brand campaign is part of the chain’s
first-ever global, multidimensional marketing effort.
Pictured during the MUFSO 2003 litigation session are, from
left, panelists Robert Zarco,; Darden counsel Sally Blackmun
and Morrison Management general counsel John Fountain.
Dunkin’ Donuts franchisee
Manoochi Fallah Moghaddam
and his partners, said the case
was the first jury trial on record
in which a private company had
attempted to act as a kind of surrogate federal prosecutor in a
case of purported tax evasion.
Dunkin’ Donuts, the Randolph, Mass.-based franchisor
arm of Allied Domecq Quick
Service Restaurants, made the
allegations in an effort to oust
Fallah and his co-defendants
had observed that the lawsuit
against Fallah had “appeared” to
be a case of selective prosecution, and he was looking into
whether that could give rise to
new litigation by the franchisee
against the company.
“It is clear that this decision
will be much more costly to
Dunkin’ Donuts than if they had
taken any of the several opportunities to settle that were offered
to them before and during the
(See DUNKIN’, page 55)
Minneapolis sees growth despite roller-coaster economy
By Carolyn Walkup
MINNEAPOLIS — While restaurants in many urban areas continue to suffer from a volatile
economy, this Minnesota city is
experiencing a flurry of independent-restaurant openings.
Minneapolis is seeing growth
in residential real estate, consumer spending, manufacturing
and agriculture, according to the
Federal Reserve’s “beige book.”
The city’s 4-percent population
J.P. Samuelson takes
a break in the bar of
his new restaurant,
JP’s American Bistro.
growth from 1990 to 2000, to
383,000 residents, combined with
a young median age of 31, bodes
well for restaurants.
“There is a lot of stuff going on;
you will see more changes in the
next five years than in the last 15,”
predicted J.P. Samuelson, chefpartner of JP’s American Bistro,
which opened last April. Despite
the high-profile closings of such
restaurants as Aquavit and Un
Deux Trois earlier this year, newcomers report enthusiastic receptions from the dining-out public.
In a market sometimes stereotyped as one limited to meat-andpotatoes menus, the new group of
CAROLYN WALKUP
http://www.nrn.com
restaurateurs is showing that local
diners enjoy the full-flavored
foods of Latin America, the Caribbean and the Mediterranean.
Even restaurants specializing in
American cuisine now show influences from distant cultures.
In addition to JP’s, which
draws from such regions as the
Mediterranean and Asia for its
contemporary American menu,
other newcomers that have
opened recently near downtown
are Babalu, described as LatinCaribbean; Café Lurcat, a “new
American” concept; Solera,
which features Spanish cuisine;
and Tiburon, known for Carib-
bean flavors.Another Caribbean
restaurant, the Pickled Parrot,
which has two suburban units, is
preparing to open a third restaurant downtown. And the South
American-Caribbean-inspired
Mojito opened in nearby St.
Louis Park.
All of those startups have
some things in common besides
their leanings toward full-flavored ethnic cuisines. Almost all
of them have check averages
between $33 and $40, strive to
create an upscale-casual atmosphere and stay open late. Some
offer live music at times.
(See MINNEAPOLIS, page 58)
6 • October 6, 2003
NATION’S RESTAURANT NEWS
NEWS
Mimi’s Cafe’s Bendel honored as Operator of the Year
By Milford Prewitt
ATLANTA — Russ Bendel was not
on the dais of honorees when his
name was called to receive the coveted Operator of the Year Award at
the 2003 Multi-Unit Foodservice
Operators Conference.
An ear infection that triggered a
bout of vertigo sent him to the hospital for a series of tests — and a
confirmation of a clean bill of health
— and then to his room at the Hyatt
Regency Hotel here.
Meanwhile, MUFSO’s gala
awards banquet in the hotel’s ballroom proceeded to honor Bendel,
president of the 73-unit Mimi’s
Cafe upscale family chain, and six
other Golden Chain Award
achievers.
Despite Bendel’s absence from
the festivities, his joy was undiminished upon learning that the industry had taken note of a career
marked by high accomplishment,
dedication, and the admiration of
countless friends and peers.
Since the former franchisee of
Outback Steakhouse and president
of its Roy’s fine-dining division was
recruited by Mimi’s Cafe founder
and chief executive Tom Simms to
join the Tustin, Calif., company two
years ago,Bendel has helped propel
the chain’s 20-percent annual
growth rate. Mimi’s Cafe had estimated sales of $200 million and
average-restaurant volumes of
nearly $3.3 million last year.
Bendel also has overseen
Services division.
the expansion of the concept
LeFranc later described
— a family-oriented, Frenchthe scene in which he presentfarmhouse-theme format that
ed the awards to Bendel in his
has evolved into a casualhotel room while he recuperdining contender — to its
ated in bed.
debut on the East Coast, in
“Both my wife and I went
Florida, marking the chain’s
upstairs to his room and told
spread to nine states.At least
him, ‘We have some good
five more locations are
news for you,’ ” LeFranc said.
expected to open by year-end.
“First, we gave him the
The morning after the
Golden Chain Award, but I
Operator of the Year honor
kept my hands behind my
was bestowed in absentia,
back and told him there was
Bendel said winning the
more good news.That’s when
award exceeded his wildest
I gave him the operator
dreams.But he added that the
award. You could see how
trophy reflects his accomexcited he was. His wife, Judy,
plishments as much as it does
started to cry.”
those of countless employees
Asked to name Bendel’s
and managers who assisted in
most enduring trait, LeFranc
shaping his career.
said,“enthusiasm.”
“It was incredible just to be Russ Bendel, and his wife, Judy, with
“We’re talking about a
nominated,”he said,“let alone Bendel’s Operator of the Year trophy.
guy who is maybe six-four,280
to win amid all of the other Because of illness Bendel missed the
pounds,and he sweeps you off
awards presentation.
worthy recipients.”
your feet when he is excited,”
Fred LeFranc,president of
LeFranc said.
Ruby Restaurant Group, parent of — from whom the Operator of
Bendel, who has been working
the Ruby’s Diner chain, accepted the Year was chosen by a mail-in in the foodservice industry since he
the award for his friend of nearly vote of Nation’s Restaurant was 15, has had one of the more
two decades and gave an audience News’ readers — were chief diversified careers in the business,
of well-wishers an update on executives Doug Brooks of working for and with several distinBendel’s improved condition.
Brinker International, Gregory guished companies and fellow execEarlier in the ceremonies Burns of O’Charley’s, Kerry utives.
LeFranc, who said he had met Kramp of Buffets Inc. and Sally
Bendel, a graduate of Florida
Bendel at a MUFSO conference Smith of Buffalo Wild Wings and International University, has
in 1984, also accepted his Golden president John Zillmer of worked with multiple brands,which
Chain Award.The other recipients Aramark’s Food and Support has resulted in his living in various
parts of the nation. One of his first
jobs was as a unit manager at the
Copper Door in Rockville,Md.,just
after he was married.
Later he landed a position at
Marriott Corp., where he stayed
for 12 years, during which he was
involved in the hotel company’s
series of mergers and acquisitions.
During his Marriott tenure he
worked with some of the industry’s current crop of advancing
executives.
In addition to LeFranc, other
colleagues included Mike Hislop,
currently chief executive of Il
Fornaio;Dick Rivera,co-chairman
of Darden Restaurants;Fred Hipp,
the former California Pizza
Kitchen and current Houlihan’s
president; and Anwar Soliman,
chief executive of Spectrum
Restaurant Group.
Ted Balestreri, chairman and
chief executive of Monterey,Calif.based Restaurants Central —
whose fine-dining flagship, the
Sardine Factory on Monterey’s
Cannery Row,sparked that former
fish-canning district’s revival as a
major hospitality and tourism
venue — was the 2003 Pioneer of
the Year winner.
In an emotional address,
Balestreri described himself as a
“poor kid from Brooklyn who
went west” and became “the luckiest guy in the world.”
Hanging on the telephone: McD tests call center, order upgrades
(Continued from page 4)
flow.” He said many of those operators were hurt by the downturn in
the economy and McDonald’s U.S.
sales declines from last year.Adams
said the chain seems to have abandoned its longtime practice of helping financially troubled franchisees.
“They [McDonald’s company
officials] can’t have it both ways,”he
said. “They can’t go on these conference calls with the analysts and
boast about getting rid of franchisees and then deny they are in
the business of culling the herd.”
Nonetheless,the Oak Brook,Ill.based burger chain seems to be on
an upswing after reporting five consecutive months of domestic samestore sales growth.McDonald’s U.S.
president Mike Roberts said operational improvements, along with
such new products as premium salads, are driving traffic and sales. He
said McDonald’s domestic restaurants collectively are serving a million more customers a day than they
were one year ago, and he said the
brand generated in the second quarter a 3-percent increase in market
share against “key competitors.”
But with the hunt on for more
customer service advances, Roberts
recently visited a six-unit franchisee,
Steve Bigari, in Colorado Springs,
Colo.,who in June installed a phone
system with a central order center
for all of his restaurants.The tables in
all of Bigari’s outlets have phones
that allow customers to sit and place
their orders, which are electronically relayed to the kitchen from a central call center. Servers bring the
orders to the table and take payments from the customers. The
drive-thrus, which also use the call
centers, are equipped with a digital
camera that snaps an image of the
vehicle, which then is relayed to
employees who can use the picture
to match the order to the correct car.
Roberts said one major benefit
of the call center is that it improves
order accuracy, particularly at the
drive-thru. He added that the
chain plans to “expand a test of the
call center” in the first quarter of
next year that could include up to
four additional operators. In addition, McDonald’s also offers seated customers phone service at its
few McDonald’s with the Diner
Inside units.
Bigari did not return phone calls,
but a company called Exit 41 created
the technology he is using. Craig
Tengler, chief marketing officer and
co-founder of Andover,Mass.-based
Exit 41,said later this month Bigari’s
stores will accept credit cards, and
future changes include accepting
orders from customers via cell phones
as well as inside the restaurant from
wireless equipment. That option
would give employees the flexibility
of walking around the dining room
while they were taking orders.
“Part of this idea is a dramatic
paradigm shift in how customers
place orders and how they are
served,”said Tengler,who explained
that the average cost to open the call
center is about 10 percent to 20 percent more than the investment for
typical point-of-sale equipment.
Other benefits of the system, in
addition to order accuracy, include
labor efficiencies and a 15- to 17-cent
increase in the average check,
according to Tengler. He said the
increase in customer spending stems
from training the call center’s
employees to upsize meals.
Roberts was quick to point out
the advantages of employees whose
primary responsibility is taking
http://www.nrn.com
orders, which also frees up the staff
inside the restaurant to make and
deliver food. “When the crew is
focused on one job, they tend to do
it better,” he said.
A McDonald’s franchisee in
Brainerd, Minn., recently teamed
up with Bigari and installed the
necessary equipment into his
restaurant so that all orders could
be processed through the
Colorado-based call center.
“The stores are in different time
zones so they have two different
intense lunch hours,” Tengler
explained. He said the Minnesota
franchisee would pay Bigari an
unspecified transaction fee per
order. He added that operators can
share costs on the call center and
labor, particularly for late-night
hours, which Roberts indicated was
a growing daypart for McDonald’s.
In addition to centralized ordering, McDonald’s is looking to capitalize on the trend of self-servicekiosk transactions, which are
expected to surpass $900 billion
annually across all industries in
North America by 2007, according
to a study from the Franklin,Tenn.based IHL Consulting Group.
This summer McDonald’s
expanded its self-ordering-kiosk
test to eight units in Raleigh, N.C.,
and five stores in Denver.The computerized machines allow customers to place orders on a touch
screen, freeing up front-counter
employees for other tasks. Roberts
recently admitted,however,that the
technology remains “expensive,”
although he did not provide details.
Separately,
McDonald’s
unveiled five national television
commercials for the U.S. phase of
its worldwide “I’m lovin’ it” ad
campaign,and later this month,the
chain is slated to debut all-whitemeat chicken McNuggets.
FOR THE
RECORD
“Furr’s group buyers serve up
plan to expand scatter bar prototype,” Sept. 29, page 4, ran with
a photo caption that failed to
reflect the story’s reference to
the depicted Luby’s brand as
exemplifying cafeteria segment
problems through its closure of
50 restaurants this year.