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McDonald’s Redefines Health In Terms Of Sustainability

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“McDonald’s is moving toward a menu free of artificial colors, flavors and preservatives, but every product has a unique challenge, said Amy Wilcox, director of quality systems and supply chain management for McDonald’s USA. She and her colleague, Cynthia Goody, chief nutritionist for McDonald’s, explained how “clean” ingredients are a key part of the chain’s sustainability initiative during the “Sustainable Approach to the Menu” panel at Restaurant Leadership Conference.

But “we can’t use the clean label description, because everyone has a different definition,” said Wilcox. “We had to create our own definition for suppliers, operators and customers. And that involved a lot of outreach to make sure all our suppliers were on the same page.”

The chain, in fact, announced this past September that is was removing artificial preservatives from its “classic” burger lineup in the U.S. “We have a great group of suppliers,” said Chris Kempczinski, president of McDonald’s U.S., at the time. And now, the chain announced that a third of its eggs are cage-free—and it expects to source 726 million cage-free eggs this year. Right now, chicken nuggets fit the sustainability criteria, as do American cheese and burgers. As far as McDonald’s burger goes, “the pickle presented a problem,” said Wilcox. “We couldn’t find one that fit our definition, so we went forward with what we had and put an asterisk next to it on the menu. Being truthful and transparent is important to us.”

View more here.

A Restaurant Brand Creator on How to Keep People Coming Back

“Sue Chan is the founder and chief executive officer of Care of Chan, a two-year-old brand management agency that has worked with a hit list of restaurants including Alta, Cosme, Una Pizza Napoletana, and Wildair to create that all-important but so-hard-to-capture great restaurant experience. Chan was previously the brand director at Momofuku for seven years.

At her own company, Chan focuses in on everything that makes a memorable restaurant experience the type of place that customers want to keep returning to again and again. While there’s no set formula for creating that unforgettable experience, once it’s in place it can drive sales and longterm customer loyalty like no quick-hitting press coverage can. “It doesn’t matter if you’re on Bon Appetit’s top ten, you could close in a year or two,” Chan explained. “That is a real thing that happens a lot. It’s more about just caring about the actual customers who come in every single day, and focusing on that community and building that community.”

See full interview here.


Structure for Success!

Structuring your restaurant ownership is a balance of needs, wants, sweat, and cold hard cash. There is no one right formula, and rarely is the formula the same from restaurant to restaurant. In this month’s Enterprise Insight, we discuss some common options, and how to balance your narrative and numbers. Specifically, we will review entities, equity vs. profit distribution, management fees, and valuations.

Restaurants are most commonly set up as a Limited Liability Corporation. More importantly, though, is to actually set up two: one for the physical location, and one for the intangibles, such as intellectual property. The purpose of this is to balance the equity and access to the brand that an investor group has. For example, if you publish a cookbook with only one LLC—then your investors, who have equity in that LLC, are entitled to a share of those profits. This leads to our second point, equity and profit distribution.

Equity vs. Profit Distribution
The first thing to determine is the ownership interest of the involved parties and how that differs from the profit distribution. As an LLC, which most foodservices enterprises should be, the business can distribute profits differently than the equity is split. This allows an owner to retain a majority stake but pay out his or her investors with an accelerated distribution.

Accelerated returns are common, but they can handicap the enterprise if the operator is left with nothing to help fuel growth. This is part of the reason why we advise owners take a management fee.

Management Fees
As the creators and operators of a concept, owners should consider pulling a management fee from the top line, especially if the concept is or will be multi-unit. This allows owners to accomplish two things: fund the centralized back-office operations and lower his or her risk by not relying on profits for compensation.

This is particularly important for operators with a pre-existing brand or background in the space. These management fees get directed to the holding corporation that we previously discussed. Think of this as protecting the intellectual property and creating a salary for the developer.  Generally, the more an investor wants in equity and distribution, the more important a management fee is.

Determining the mix of management fees, equity, distribution, and ownership locations is always murky. Some operators say the idea is worth 33%, the work is worth 33%, and so their sweat equity is worth two thirds. Some operators base the valuation on a multiplier—usually five to six times—of the third year’s EBITDA, usually the year the restaurant hits its stride.

Ultimately, we advise that operators ask two questions: what must prove true, and what happens when? The right formula is based on your needs—what you need to see happen with the business—and your comfort with balancing risk and reward—what you do when the good and bad happen.