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Subway Says Breakfast a Success

Four months after debuting its breakfast menu, expansion plans are set

Elissa Elan reports in Nation’s Restaurant News that after serving breakfast for four months, Subway said the daypart has increased sales systemwide and exceeded expectations, leading the sandwich chain to expand the early-morning menu with limited-time offers and explore the service of more coffee or espresso-based beverages.

In an interview with Nation’s Restaurant News, Larry Varvella, Subway’s research and development project leader, said the chain’s foray into breakfast — a daypart filled with heavyweights McDonald’s and Dunkin’ Donuts — was a success for the brand and its franchisees.

“We’re very excited that our initial results show it is outperforming even our original expectations,” Varvella said. “Those original expectations were based on our franchise owners breaking even at the least. Of course we fully realized that to be a major player [at breakfast] we needed a long-term commitment. We figured that would be a three-to-six-month period. The last thing we wanted was for our owners not to be profitable.”

The Milford, Conn.-based quick-serve sandwich chain introduced its breakfast program April 5 to more than 25,000 Subway restaurants across North America. The menu features egg and cheese sandwiches served on whole-wheat English muffins, flatbreads or Subway’s traditional 6-inch and foot-long hoagie breads at a prices ranging between $1.75 and $2.25 for the English muffin melts, $2 to $3.50 for the 6-inch hoagies or flatbread sandwiches, and $4 to $6 for the foot-long variety.

The chain entered breakfast as more research highlighted the daypart’s growth potential and popularity with consumers. According to a study conducted by market research firm Mintel Research earlier this year, the breakfast foodservice market is expected to grow 13 percent through 2014. In addition, two of the fastest-growing menu items at quick-serve restaurant chains are specialty coffees and breakfast sandwiches, according to NPD Group, a marketing research firm based in Chicago.

More sandwiches are on the way, Varvella said, although he would not disclose what was in test or when new items would debut.

“We are definitely looking at introducing new items through limited time offers,” he said. “We fully believe that new products are one of the life-bloods of a restaurant chain. We want to keep [the program] new and exciting, and have a lot of items in the pipeline.”

He added that Subway also is exploring the possibility of expanding its beverage line to include espresso-based and flavored coffee drinks.

“Coffee has been a very strong part of our program,” Varvella said. “We’re looking at expanding with Seattle’s Best above and beyond standard drip coffee.”

Though Varvella would not disclose sales for the breakfast program, he indicated there are several barometers that have determined its success, including the acceptance by Subway franchisees.

“The franchisees are happy and the customers are buying the product,” he said. “In the past the menu mix was higher in non-breakfast items, but now we’re seeing equal amounts [in sales] of about 50 percent breakfast and non-breakfast, which, again, is ahead of projections.”

Varvella noted that the two best-selling breakfast items include the egg white western melt and the double bacon and cheese omelet. Latest promotions have highlighted the steak, egg and cheese sandwiches.

Read more at: Nation’s Restaurant News

Tim Hortons Sells Interest in Bakery to Partner

Sunny Freeman reports in The Canadian Press that Tim Hortons announced Thursday morning it is selling its 50 per cent interest in Maidstone Bakeries of Brantford, Ont. to joint venture partner Aryzta AG for $475 million after the Swiss company invoked a contract provision forcing Tims to buy or sell the stake.

The iconic fast food company, headquartered in Oakville, Ont., will return the $475 million that it will receive from the sale to shareholders, though the company is not yet sure how, its CFO Cynthia Devine said in an interview Thursday.

“We really just finalized it with our partners yesterday… and we’ll review various alternatives to return value to our shareholders,” she said.

President and chief executive Don Schroeder said the decision to sell the stake came after realizing the bakery was of “much greater economic value” to Aryzta, which provides specialty baked goods to restaurants around the world.

“Because of the international nature of this relationship, the value that we put on the facility was greatly different than what our partner Aryzta was able to put on it,” he said.

Brian Yarbrough, a retail analyst at Edward Jones said the company will likely do a share buyback, raise its general dividend, or issue a special dividend.

“That’s a pretty big announcement because if they buy back a bunch of stock that’s accretive, if they pay a big one time shareholder dividend, that’s nice for shareholders,” he said.

Tim Hortons shares rose steadily by seven per cent or $2.48 to $37.92 Thursday on the Toronto Stock Exchange. That was the highest the stock has traded at since January 2008.

Devine noted that the company is flush with cash and doesn’t need to use money from the Maidstone sale to fund planned international expansion.

The company has said it would publicly announce its next steps in the second half of this year after updating its board of directors on the strategy in June. Those discussions will continue at a meeting in November, Schroeder said.

“Because the playing field is littered with companies that rushed in and did the wrong thing, we are taking our time we’re doing the appropriate research, so that when we finally make a decision in any regard it will be the right one,” he said.

Schroeder noted that Tims still has supply agreements for donoughts and Timbits to be produced at the Brantford, Ont., bakery until at least early 2016.

“Given the fact that we have an extremely good supply agreement that was negotiated a number of years ago that clearly provides appropriate protection for our store owners in terms of pricing and source of quality supply,” Schroeder said.

He added that nothing will change operationally at the facility, where employees have been “virtually part of the Tim Hortons family,” since the facility opened in 2002.

“We see no reason why we won’t be able to work with them in the same way for years to come.”

Maidstone currently operates at only 55 per cent of its capacity as Tim Hortons is its sole customer. But Aryzta said Thursday it is looking to expand capacity at the bakery and pursue agreements with other restaurants.

“Arytza will be in a position to market Maidstone’s spare capacity across all its customer channels …This increased capacity utilization will unlock value for Aryzta from its investments in Maidstone,” it said in a statement.

Read More at: The Canadian Press

Folgers Supermarket Sales Tops all Others

Number of the day 3 to 1

The San Francisco Chronicle reports that according to Bloomberg Business that’s how much of a lead Folgers still has on Starbucks when it comes to sales in supermarkets and other mass retailers. While coffeehouses and flavored lattes have fueled the gourmet trend, stalwarts including Folgers and Maxwell House still dominate in the kitchen, according to research firm SymphonyIRI Group. The bad news? As the world emerges from recession, the number of people making coffee at home is likely to fall, analysts say.

Read more: San Francisco Chronicle

Starbucks’ Instant Coffee Sales Reach $100 million

Melissa Allison repotrts in the Seattle Times that Starbucks does not often disclose sales of individual products. It only recently began saying that Frappuccino is a $2 billion-a-year product.

But the coffee company is excited enough about reaching $100 million in sales of its instant coffee Via, which officially launched last September. It had been tested in Seattle and Chicago since February 2009.

It took Frappuccinos about three years to reach that level of sales, CEO Howard Schultz said in a release.

A survey showed that 55 percent of Via customers drink it at home, 25 percent at work, and 20 percent “while on the go.”

Via is sold at 12,000 Starbucks locations in the U.S. and 37,000 other stores including food, drug and mass merchandise stores like Target. It’s also available in Canada, Japan and the U.K.

Subway says Breakfast a Success

Four months after debuting its breakfast menu, expansion plans are set

Elissa Elan reports in Nation’s Restaurant News that after serving breakfast for four months, Subway said the daypart has increased sales systemwide and exceeded expectations, leading the sandwich chain to expand the early-morning menu with limited-time offers and explore the service of more coffee or espresso-based beverages.

In an interview with Nation’s Restaurant News, Larry Varvella, Subway’s research and development project leader, said the chain’s foray into breakfast — a daypart filled with heavyweights McDonald’s and Dunkin’ Donuts — was a success for the brand and its franchisees.

“We’re very excited that our initial results show it is outperforming even our original expectations,” Varvella said. “Those original expectations were based on our franchise owners breaking even at the least. Of course we fully realized that to be a major player [at breakfast] we needed a long-term commitment. We figured that would be a three-to-six-month period. The last thing we wanted was for our owners not to be profitable.”

The Milford, Conn.-based quick-serve sandwich chain introduced its breakfast program April 5 to more than 25,000 Subway restaurants across North America. The menu features egg and cheese sandwiches served on whole-wheat English muffins, flatbreads or Subway’s traditional 6-inch and foot-long hoagie breads at a prices ranging between $1.75 and $2.25 for the English muffin melts, $2 to $3.50 for the 6-inch hoagies or flatbread sandwiches, and $4 to $6 for the foot-long variety.

The chain entered breakfast as more research highlighted the daypart’s growth potential and popularity with consumers. According to a study conducted by market research firm Mintel Research earlier this year, the breakfast foodservice market is expected to grow 13 percent through 2014. In addition, two of the fastest-growing menu items at quick-serve restaurant chains are specialty coffees and breakfast sandwiches, according to NPD Group, a marketing research firm based in Chicago.

More sandwiches are on the way, Varvella said, although he would not disclose what was in test or when new items would debut.

“We are definitely looking at introducing new items through limited time offers,” he said. “We fully believe that new products are one of the life-bloods of a restaurant chain. We want to keep [the program] new and exciting, and have a lot of items in the pipeline.”

He added that Subway also is exploring the possibility of expanding its beverage line to include espresso-based and flavored coffee drinks.

“Coffee has been a very strong part of our program,” Varvella said. “We’re looking at expanding with Seattle’s Best above and beyond standard drip coffee.”

Though Varvella would not disclose sales for the breakfast program, he indicated there are several barometers that have determined its success, including the acceptance by Subway franchisees.

“The franchisees are happy and the customers are buying the product,” he said. “In the past the menu mix was higher in non-breakfast items, but now we’re seeing equal amounts [in sales] of about 50 percent breakfast and non-breakfast, which, again, is ahead of projections.”

Varvella noted that the two best-selling breakfast items include the egg white western melt and the double bacon and cheese omelet. Latest promotions have highlighted the steak, egg and cheese sandwiches.

Alan Warmund, president of Subway Development of Washington, the McLean, Va.-based area developer of 1,100 franchised units in the mid-Atlantic region, said many franchisees are upbeat about the breakfast program’s success.

“It is doing much better than expected from ground zero,” Warmund said. “The results have been extremely encouraging; overall in our territory, the owners are happy and sales are growing.”

Warmund agreed with Varella’s assessment of a 50-50 split between breakfast and non-breakfast item sales, mainly because the chain’s full menu is now available from 7 a.m. onward, depending on location.

“We’re selling a lot of standard items along with breakfast items,” he said. “We’re really offering a full menu from 7 a.m. on. Why wait in line at lunch if you’re already there in the morning? I think it’s great. We don’t care what we sell; we just know we’re selling more.”

Warmund expressed skepticism over the possibility of Subway growing its coffee program, however. He said the equipment would be too expensive to implement systemwide. He noted that the needed equipment could cost between $10,000 and $15,000.

Subway now operates or franchises more than 29,000 locations in 86 countries.

Read more: Nation’s Restaurant News

McDonald’s Cancels Free Smoothie Samples

Mark Brandau reports in Nation’s Restaurant News that McDonald’s canceled its plans to hand out free samples of its new Real Fruit Smoothies, saying the drinks already were selling well enough and there was no need to worry operators that supplies wouldn’t last.

McDonald’s launched the smoothies July 13 and planned to hand out samples this week, July 22-24. The Oak Brook, Ill.-based company, which operates and franchises more than 14,000 restaurants in the United States, said it was considering whether to reschedule the promotion.

“The McCafe Real Fruit Smoothies are an absolute hit with our customers, and we’re experiencing unprecedented demand for this delicious new choice on our menu,” said Neil Golden, chief marketing officer for McDonald’s USA. “Due to the overwhelming popularity and to ensure continued supply to meet our customers’ needs, we will not be executing the national in-restaurant sampling event … as previously communicated. However, all other national promotional activities, including coupons, will be accepted at participating restaurants.”

The smoothies, which join McCafe Frappes as the latest introduction to McDonald’s upscale line of beverages, were unveiled at a promotional event during the Winter Olympics in Vancouver, British Columbia, earlier this year and tested in several markets before rolling out nationwide this week.

“Working with our franchisees and suppliers, we will be reviewing the potential of rescheduling the national in-restaurant smoothie sampling event for a later date,” Golden said. “We thank our customers for their business and continued support of McCafe.”

Nation’s Restaurant News

McDonald’s May Sales Up

McDonald Corporation’s (MCD: 69.16 -0.21 -0.30%) comparable sales are on the rise. Although diners are now more comfortable spending as the economy eases, but they are still seeking value menu offerings. The fast food restaurant operator has witnessed an uptrend across its domestic and international markets.

Global comparable-store sales climbed 4.8% in May 2010 compared to an increase of 5.1% in the same month last year. McDonald’s stated that system-wide sales at worldwide restaurants surged 5.5% or 6.2% in constant currencies in the month under review.

The world’s largest hamburger chain, McDonald’s, said that the new menu offerings, which include value-based drinks, Shrek-themed Chicken McNuggets and addition of Frappes to its McCafe premium coffee line-up, along with Happy Meals promotion have helped boost the U.S. comparable-store sales. McDonald’s said that the U.S. comparable sales grew 3.4% in May (versus a 2.8% increase last year for the comparable month).

McDonald’s closest competitor Burger King Holdings Inc. (BKC: 18.96 -0.06 -0.32%) also announced recently that it expects unfavorable foreign exchange rates, primarily related to the Euro and British Pound, to impact earnings for the fourth quarter of 2010 by 1 to 2 cents per share. For the full year, currency exchange translation is expected to have a neutral to a slightly negative effect on earnings.

 Read More at: Daily Markets

Coffee Chains Find Home-brewed Success in Michigan

Jennifer Youssef  writes in  The Detroit News that  there may be fewer Starbucks in Michigan these days, but locally owned coffee chains are slinging more espressos and cappuccinos than ever.

East Lansing-based Biggby Coffee reported its best year in 2009, with revenue topping $40 million, even as food and beverage retailers across the state reeled from a 4 percent drop in sales. Biggby recently opened new stores in Birmingham and Ann Arbor and has eight more in development.

Although a Coffee Beanery franchise closed in Southfield two years ago, the Flushing-based company opened 12 stores last year, including one in Miami and three at Detroit Metropolitan Airport, and more are in the works.

And Ann Arbor-based Bearclaw Coffee Co. has 12 new stores in development and recently opened a mobile unit in Radcliff, Ky.

The growth comes as national chains such as Starbucks are retracting in Michigan and nationwide. Starbucks closed 18 stores in the Great Lakes State last year. Caribou Coffee shuttered three stores in the state the year before.

While the recession has hurt some national chains, the coffee market overall has exploded, said Ric Rhinehart, executive director of the Specialty Coffee Association of America. The U.S. retail coffee market generates $32 billion a year and is poised for growth as the economy improves, he said.

Michigan’s years-long recession has helped local chains, experts say.

Locally based businesses have learned how to remain viable in a tough economy, and they better understand their customer base and can adapt to their needs. They’ve also benefited from the growing buy-local campaigns, with more residents patronizing locally owned businesses.

The ability of these companies to be successful in a bad economy speaks volumes about their business acumen, said Andy Deloney, a spokesman for the Michigan Restaurant Association.

“They’ve been running lean and mean for years,” Deloney said. “They know what it’s like to be in the trenches.”

And their success bodes well for other coffee entrepreneurs.

Detroiter Dona Davis opened her first coffee shop, Pointe Java, in Eastpointe last month and hopes to be as prosperous as her Michigan counterparts.

“It gives me hope to keep moving on,” said Davis, who managed coffee shops for 12 years before venturing on her own. “It makes me think that if they can do it, so can I. It’s just a matter of time.”

From The Detroit News: http://www.detnews.com/article/20100513/BIZ/5130368/1001#ixzz0oktiTJEF

Seattle’s Best Looks for Franchise Chains

Blue MauMau reports that Seattle’s Best Coffee unveiled a new logo and brand strategy on May 11 in an effort to reinvent itself. Part of Starbucks Corporation (NASDAQ: SBUX), the company wants to explode its brand onto the retail scene through high-profile franchise chains and retailers, expanding from 3,000 points of distribution to more than 30,000 by September.

“We are setting out to turn the traditional coffee model on its head with innovative new approaches in every phase of our business – partnerships, retail, and packaged goods – and taking our premium coffee to the places our customers go in their everyday lives,” said Michelle Gass, president of Seattle’s Best Coffee.

Seattle’s Best Coffee will be offered at all Burger King’s 7,250 restaurants in the United States by September. Jenny McCabe, director of communications for Seattle’s Best, says the coffee company chose Burger King as an outlet because the chain helped raise the profile of their beverage, making it more accessible than ever before. “For the September rollout, Burger King will only carry Seattle’s Best Coffee,” says McCabe. She adds, “Consumers will have the option to add vanilla, mocha flavors or whipped toppings. The new coffee will be 100% Arabica beans.”

In April, the Subway sandwich chain rolled out a breakfast menu in more than 23,000 of its U.S. stores that featured Seattle’s Best. These new relationships join Seattle’s Best Coffee’s growing roster of partners, which includes non-franchising retailers like Borders bookstores and AMC Theatres, among others.

“Our new brand identity was inspired by the history of the Seattle’s Best Coffee culture, one of optimism and fun,” said Gass.  “The new brand direction will bring a simplified approach to the coffee category in all the ways it will touch the customer.”

The Seattle’s Best Coffee logo’s reinterpretation maintains the brand’s historic association with its name and the color red while assembling a number of universal coffee symbols, such as a drop and a cup, in an unexpected way. The new logo was designed by Creature, an independent brand and advertising agency based in Seattle.

“Our ambitions for the new Seattle’s Best Coffee brand are as significant as our aspirations to become a multi-billion dollar business, and we designed the new logo to one day become a universally recognized and reassuring symbol for great tasting coffee everywhere,” said Gass.

McCabe adds that key franchise and retail brands will help them accomplish this. “The company is currently looking at a diverse roster of partners to ensure that it is truly making great coffee accessible everywhere,” she says.

Read mote at: Blue MauMau

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