Never before has innovation been as essential to running a successful quick-serve restaurant concept.
During what has turned out to be the most daunting recession in our nation’s history, innovation has been the driving force for the concepts that are beating the odds.
Often, the inspiration for innovation comes from the top, and that certainly holds true for the following leaders, who were selected from a wide-ranging list of successful operators.
These chain executives are making a tremendous difference in the quick-service industry, both inside and outside of their own brands.
They inspire their thousands of employees to improve products, services, or operations, and, as a result, are making a difference in their customers’ lives.
Though many operators have picked up the innovator baton since the recession began back in 2007, these industry stalwarts have made innovation a priority for years. And they wouldn’t have it any other way.
David Novak has been blazing innovative trails for more than 25 years.
Now that journey has him taking on the world.
As chairman and CEO of Yum! Brands Inc., parent of such brands as Taco Bell, KFC, and Pizza Hut, Novak says his company’s mission is to be “The Defining Global Company that Feeds the World.”
“I view our 37,000 restaurants—in 100 countries—as laboratories where we can experiment, learn, and share best practices on a global scale,” he says.
“Our scale is an advantage in so many ways. In just three years, our World Hunger Relief effort has generated massive awareness, volunteerism, and funds for the United Nations World Food Programme (WFP) and other hunger relief organizations saving millions of lives.” To date the initiative has raised $60 million for WFP.
That’s a tall order for a marketing major from the University of Missouri.
During his 20-year tenure with the company, including 10 as its chief, Novak has more firsts than even he can count. But much of his success is rooted in his ability to inspire his team members to bring their A-game.
“In our culture, we believe that everyone can make a difference regardless of where they are or what function they work for. Some of our greatest innovations come from our franchisees,” Novak says.
“My constant challenge to everyone is to ask, ‘What can I do now to get breakthrough results in my piece of Yum?’”
Among the hundreds of innovations during Novak’s run is the iCHING internal business network, which allows employees worldwide to collaborate and share best practices; the Achieving Breakthrough Results high-impact leadership training; an aggressive international expansion program; and such popular menu roll outs as the Kentucky Grilled Chicken product line.
“Building knowhow is one of our How We Win Together principles that defines our culture,” he says. “It’s a key to innovation.”
“Breakthroughs come when we get people with knowledge thinking creatively. I also like to practice ‘pattern thinking’: the ability to make connections, pick up on consumer insights or trends, and apply what’s going on in the world to our business.”
And that business has been moving full steam ahead. Last year marked the ninth consecutive year that Yum opened more than 1,000 restaurants outside the U.S.
The company is ranked No. 239 on the Fortune 500 list, with revenues of nearly $11 billion in 2009.
And that’s the kind of innovation every stakeholder likes to see.
Jeff Harvey inhabits a world where innovation is the rule, not the exception.
Charged with bringing profitability and long-term growth strategies to Burgerville, the 39-unit gourmet burger chain based in Vancouver, Washington, the affable CEO has brought several innovations to the chain since joining the company in 2004. Though it already had a solid reputation for embracing sustainable values, under Harvey’s leadership it continues to push that envelope by increasing its base of local suppliers and offering more seasonal items.
Since its inception in 1961, the company has always maintained a commitment to fresh, local, and sustainable offerings through partnerships with local businesses, farms, and producers. It is a process the CEO wholeheartedly embraces and continues to grow.
In 2009 he introduced beer and wine, as well as monthly specials inspired by a fresh, seasonal ingredient.
Harvey also opened up the drive thrus to bicycles and introduced a mobile food truck, the Nomad.
“The Nomad food truck came from seeing a lot of well-trained chefs opening up their own food carts,” Harvey says. “I was struck by the vision of opportunity they saw, and it started me thinking about what street food meant to the rest of the world. I saw a huge loyalty among the patrons.”
Harvey also introduced a pilot program that lets customers know the nutritional value of their order when they receive the receipt.
In addition to overseeing the chain’s many food-related innovations, Harvey has been responsible for “greening” Burgerville’s restaurants, making them more energy efficient to operate.
Converting used trans fat–free cooking oil into biodiesel fuel, expanding its leadership development training, implementing recycling and composting programs, creating an affordable employee health care program, and encouraging the company-wide use of wind power are just some of the initiatives that have left competitors scratching their heads.
Harvey, whose background is in electrical engineering, is a self-described “information hound” and a “a lifelong student of transformation.”
“We’ve all had experience with incremental change, but transformational change is something very different. At Burgerville we believe your best strategy is an innovative strategy.”
It’s a safe bet that Harvey already is working on the next chapter in Burgerville’s “transformational change.” And if you’re wondering where his next innovation might come from, wonder no more.
“I am really intrigued these days with packaging, and I have been paying close attention to delivery models, or how you get the food to the guests.”
A true entrepreneur since the age of 17, Fred DeLuca doesn’t shy away from innovation.
As cofounder and president of Milford, Connecticut–based Subway, DeLuca isn’t afraid to take risks or listen to the advice of others.
“The owners of our 32,000 stores share a tremendous entrepreneurial spirit, so innovation comes naturally to them,” DeLuca says. “So we’ve built local option capability into the Subway system. That allows many different owners the ability to experiment simultaneously.”
And many of those experiments have hit pay dirt.
“The ideas are constantly flowing, and some of them have had lasting effects for the entire chain,” he says. “For instance, Subway’s ‘$5 Footlong’ campaign was started by a franchisee, and within a year it became a national promotion.”
Since 1965, Subway has had a healthier menu than many other quick-serve operations. Through the years DeLuca further established that healthy halo with marketing efforts such as the Jared Fogle commercials, which touted Fogle’s 245-pound weight loss from eating a six-inch Subway sandwich at every meal.
This year’s tie-in with the Biggest Loser television show further solidifies the sandwich chain’s marriage with a healthful image. The chain is paying $1,000 for every pound contestant Shay Sorrells loses.
Now with more than 32,400 stores in 91 countries, Subway continues to roll out new initiatives to keep up with a demanding marketplace.
A Buffalo Chicken submarine sandwich, with only seven grams of fat, was introduced last year, as well as the company’s new mobile site, which has a restaurant locator with a map function.
The brand also joined Energy Star, which is a joint program of the U.S. Environmental Protection Agency and U.S. Department of Energy, encouraging businesses and homes to conserve energy. To that end, Subway relocated several distribution centers next to vendor manufacturers, switched to energy-saving light bulbs, and made its napkins from 100 percent recycled materials.
The innovations keep coming from inside the franchisee community, and DeLuca couldn’t be more proud.
“A franchisee developed one of our newest and most unique stores, which is now about 100 feet in the air in the Freedom Tower construction site at the World Trade Center,” DeLuca says. “That store moves 15 feet higher every few weeks as the steelwork is put in place. That innovation keeps the food close to the construction workers as the building is built, saving time and money.
“Another store was built in a church in Buffalo, where the pastor uses the store to provide job training for local youngsters.”
In Sue Morelli’s world, extensive customer research is the catalyst for all innovation.
Morelli, president and CEO of Boston-based Au Bon Pain since 2005, has systematically put her stamp on the bakery café by paying close attention to others.
“We do a lot of guest research and, in fact, just finished with a pretty major focus group of more than 50 hours with our heavy users,” Morelli says.
During her presidency, Au Bon Pain introduced a new product line called Portions, which features a selection of 14 dishes made fresh daily, packaged individually. Each one is 200 calories or less. The Portions line focuses on vegetables and proteins as the main ingredients, retailing for $2.99 (without meat) or $3.49 (with meat).
“Innovation is a great word, and it’s complex,” Morelli says. “It has a lot of components: consumer trends, culinary savvy, and talent. And at the end of the day it has to be grounded by product profitability, the economics have to make sense.”
According to Morelli, another area heavily impacted by research is speed of service. Au Bon Pain recently underwent a major remodeling program, introducing a design that allows customers to serve themselves.
As a result of the recession, Morelli says consumers are doing more with less. In an effort to capitalize on the new reality, she is pushing the chain to offer “better basic foods that are affordable, fresh, and nutritious and served with speed and warmth.”
The 240-unit Au Bon Pain, which means place of good bread, is poised to grow both domestically and internationally.
“We keep a close watch on all the competitors, from fine dining to quick service,” she says. “Our executive chef, Tommy John, has the power to drive the concept. He has an extraordinary pulse on the consumer palate.”
The company, which was founded in 1976, rolled out a new café called the Bistro in 2006 and has a wide range of real estate applications to offer. In addition, the chain was recognized for its use of touchscreen terminals that offer nutritional information to the guests.
“In our business it is just so easy to put stuff out there and test it,” Morelli says. “Patrons are looking for higher quality at the same speed they used to get quick service, and they have a real good sense of what is real quality.”
Few would deny that Howard Schultz is singularly responsible for what is best described as a coffee revolution.
As chairman and CEO of Starbucks, Schultz has taken his desire to create a company with soul and ridden the innovative waves through many highs and lows.
Schultz, who had ceased overseeing the company as CEO for eight years, was called back into service in 2008.
In Starbucks’ latest wave of innovation, he and his creative team have taken an old favorite, instant coffee, and repackaged it. And it has arrived with significant fanfare.
“We have worked for nearly 20 years to develop an instant coffee that offers customers the quality and taste they expect from fresh-brewed Starbucks coffee, and a unique and convenient way for them to enjoy it,” Schultz says. “This is a big move for us—the opportunity to reinvent a category, create new rituals, and grow our customer base is substantial.”
Since joining Starbucks in 1982 and buying it in 1987, Schultz has overseen and inspired numerous innovations, not the least of which was creating a warm atmosphere that customers want to visit time and again.
Serving the first latte in 1984 introduced many Americans to espresso beverages. In 1987, FlavorLock technology allowed Starbucks to ship freshly roasted coffee to customers far away, opening up international markets.
Then, in 1996, Starbucks moved popular beverages to grocery shelves around the world. Along the way music infused the Starbucks experience, and several noncoffee items were offered for sale.
It also can be argued that the chain created a whole new vocabulary for ordering coffee and gave customers an entire language by mastering the Starbucks menu. Tall nonfat latte, no foam, anyone?
In the foodservice industry, Starbucks distinguished itself by being one of the first companies to offer employees working at least 20 hours per week comprehensive health coverage and an employee stock-option plan.
Those moves contributed to one of the lowest turnover rates in the industry and also improved employee morale.
Through it all Starbucks continues to prosper. In the first quarter of fiscal 2010, ended December 27, 2009, Starbucks reported $2.7 billion in revenue, a 4 percent increase over the same quarter a year earlier. Store unit count now numbers more than 11,000.
Despite these many successes, Schultz continues to push his team of more than 142,000 partners forward.
“Starbucks is known around the world for not only serving great coffee, but for continually innovating and listening to our customers along the way,” says Dub Hay, Starbucks’ senior vice president of coffee and tea. “Pushing the limits of what others think will work is nothing new for Starbucks.
“We believe the market is ripe for this innovation—we will continue our journey of listening to consumer’s needs, and providing them with great-tasting solutions.”
Stan Sheetz may straddle the fence between convenience stores and foodservice, but when it comes to innovation, he is strictly out in front.
The CEO and president of the privately held Sheetz Inc. makes it his business to stay one step ahead of his one million customers each day.
“I think innovation should be driven by the customer and what they need,” Sheetz says. “Secondly, it should be driven by what we as a company need to efficiently serve the customer. That’s where the genesis of our technology has come from.”
Based in Altoona, Pennsylvania, Sheetz operates 368 stores in six states and maintains annual revenues north of $4.4 billion.
In 1994, Sheetz wondered if his technology vendor could develop touchscreen software that would allow the customer to select made-to-order menu items that were illustrated with pictures.
“Within a month we had a working prototype, and after we installed the first touchscreen our volume went up 12 percent immediately,” he says. Some of this bump in sales Sheetz attributes to customers who couldn’t read or write.
Sheetz also was one of the first retailers to offer pay-at-the-pump gas, an innovation that has been widely imitated. More recently, Sheetz launched a state-of-the-art, $46 million, 140,000-square-foot Sheetz Bros. Kitchen that delivers fresh, ready-to-eat products to all of the company’s stores.
“This really lets us control waste, and every store gets a delivery every single day of the year, including Christmas,” Sheetz says.
“From the standpoint of efficiency, this system allows us to automatically reorder those food products.” Consequently, Sheetz says, the company’s instock percentage is 99.97.
Another recent change is the introduction of frequent-buyer cards, which supply the company with the buying habits of their customers.
“These cards allow us to monitor what our customers are buying, and how frequently they purchase it. This then lets us send them coupons for the things we think they will be interested in,” Sheetz says.
“It allows for individual customer direct marketing.”
Also on the drawing boards for Sheetz is an app for the iPhone, which would tell a customer where the nearest Sheetz location is, as well as continuing tests on drive thrus.
It appears the search for new technologies to improve the customer experience at Sheetz is here to stay, and in all likelihood, so is innovation.
It takes a lot more than hard work and intelligence to wrestle innovation from a company that is more than 50 years old and the size of McDonald’s, but Jim Skinner has done that and more during his six-year tenure as CEO.
Skinner’s winning strategy, christened Plan to Win, focused all team members’ attention on improving service, food, and ambience and not necessarily on opening new stores.
“Every function that we have is best in class,” Skinner says. “That’s what it means to be an industry leader. I’ve only had two jobs, a lieutenant in the United States Navy and McDonald’s, both extraordinary organizations, both best in class.”
Since taking over the burger giant, which now has 32,000 restaurants worldwide, Skinner has restructured the company, redesigned the restaurants, and revolutionized the menu. Aside from the addition of premium coffee offerings, McDonald’s menu also features healthier choices such as Fruit & Walnut Salads and Chicken Wraps. Skinner also earns high marks for offering better value and improved marketing.
Aside from reducing energy output and working with suppliers to establish healthier environmental operations, Skinner puts a lot of muscle behind talent management and leadership development. High-potential employees are put through a leadership institute, and diversity is an important value at the company.
“There always was a true indication that McDonald’s takes care of its people,” Skinner says. “I knew that Fred [Turner], Mike [Quinlan], and the other guys who were running the company, when they got up in the morning, they were concerned about me. We don’t take that lightly, so all of our people practice it.”
Last year, Skinner received the CEO of the Year award from Chief Executive magazine. “He has been respectful of McDonald’s legacy while engineering an inspirational strategic leadership that reinvented the industry,” says J.P. Donlon, editor in chief of the magazine.
The chain, which operates in more than 100 countries, is about 80 percent owned and operated by franchisees and recently was anointed the “best run major international company in the world” by Mad Money’s Jim Cramer.
Since Skinner took over the helm of the company in 2004, the company’s stock price has more than doubled.
“I take it personally when someone says, ‘Well, they’re the industry leaders now, but will it last?’ We don’t hear that too much anymore,” Skinner says.
Pizza Patrón emerged on the restaurant scene in 1986 with an innovative bent in its first year of operation, and a big one at that.
Founder and CEO Antonio Swad decided from the get go that Pizza Patrón would become the pizza restaurant for the Hispanic community. So much so that all store employees are required to speak both Spanish and English.
“What we have done at Patrón is very different than what other restaurant companies have done,” Swad says. “It is not often that restaurants define their own business models by ethnicity. Companies define their customer base by income or unique flavor concepts. We basically took a product that was widely consumed and brought it to the Hispanic markets.”
Since then Swad has overseen myriad innovations at Pizza Patrón, and along the way founded and sold another highly successful restaurant concept, Wingstop.
“I think he’s a genius,” says Le Madeleine’s COO, Phil Costner. “Before any of us caught wind of the huge impact of the Hispanic consumer, Antonio was forever solidifying his place.”
In 2009, while much of the industry was enduring plummeting sales, Pizza Patrón enjoyed four quarters of comp store sales gains, with the largest being an 11 percent bump.
Some of the other innovations that Swad has overseen include the premiere of the Quick Service Pizza outlet, which was the concept’s first standalone location and features three distinct points of service for customers: a drive thru with a pick-up window, a walk-up order window, and a colorful lobby.
A new interior design approach for the pizza chain was also rolled out last year after more than a year of research and market testing. The complete top-to-bottom revamp of the store finish-out was designed to transform the atmosphere into a warmer, more inviting food showcase. In addition, an online marketing platform was launched, a completely redesigned Web site, a new Latin-themed concessions design, a record-breaking “recession relief” campaign, and several new product roll outs.
The brand also replaced its original tagline with “Latin Life, Enjoy” this year.
Moving ahead, Swad is not satisfied to rest on his laurels. He’s working on new innovations to move the company forward. “We are developing a line of frozen specialty pizzas that can be sold at grocery stores in the Hispanic communities,” Swad says. “The bigger the brand, the more successful we will be.”
In less than three years as president of Popeyes Louisiana Kitchen, Cheryl Bachelder has introduced innovations in virtually every aspect of the chain’s operations, and she’s only just begun.
“Our first step was to freshen our face to the customer with a spanking new name for ourselves: Popeyes Louisiana Kitchen," Bachelder says. “The name captures the essence of who we are.” New brand graphics featuring “dancing letters” also were introduced when the name was adopted.
In 2009, Popeyes outperformed both the chicken quick-serve category and the quick-service segment as a whole with a sales increase. In contrast, the quick-service category was down 1.1 percent, while chicken chains were down 5.4 percent.
In her first months on the job, Bachelder and her veteran executive team took a long, hard look at the brand and faced what she likes to call “the brutal reality.”
“At the outset of 2008, Popeyes was faced with some very bleak statistics that were impossible to ignore, the worst of which was seven consecutive years of guest traffic declines,” Bachelder says. “In addition, our speed of service was ranked at the bottom of a major quick-service study.”
In an effort to speed up service, headsets and timers were installed in every restaurant, and to improve location choices the chain instituted new, state-of-the art real estate site modeling tools. Popeyes also made the bold move to consolidate seven regional advertising agencies and found a lot of cost savings when it signed with a single company.
In addition, the Atlanta-based chain, which has more than 1,900 units in 44 states and 27 countries, also introduced Annie, a fictional Popeyes chef who serves as the brand’s ambassador.
On the culinary front there have been several innovative moves, including the roll out of three menu platforms—Popeyes Big Easys, the Louisiana Travelers, and Popeyes Big Deals. Bachelder also engineered the launch of the Bonafide brand, which showcases its bone-in chicken, which is freshly prepared and marinated for 12 hours in Louisiana seasonings, then hand-battered.
And as Bachelder is proud to point out, one of the innovations that is moving the needle significantly is the Guest Experience Monitor, which allows guests to use their phones and participate
in an interactive survey while the experience is fresh.
“By listening to our guests and making the needed improvements, we raised our ‘delighted’ ratings from consumers by 17 percentage points in 2009,” Bachelder says.
Blessed with the spirit of an entrepreneur, the passion of an artist, and the attention to detail that can only come from a place of real confidence, Chipotle Mexican Grill’s founder, CEO, and chairman, Steve Ells, can innovate with the best of them.
Since launching the fast-casual concept in 1983, Ells has gone from one 850-square-foot Denver unit to changing the way America eats, one burrito at a time.
As a Culinary Institute of America graduate, Ells knows food and all its complexities, but that doesn’t stop him from keeping the menu simple, and the food as natural as possible. Chipotle’s Food With Integrity mission guides every purchase.
“We have visited farms with the leadership teams, restaurant managers, and area managers,” Ells says in a 2005 interview with QSR. “It’s a matter of getting out there and sharing the stories about Food With Integrity, and why it’s important, not only for the Chipotle brand, but also for animal husbandry, the environment, and ultimately, for great-tasting food.”
Over the years, Ells has been consistently recognized as a restaurant operator who doesn’t necessarily do things as they have been done before. Now boasting revenues approaching $1.5 billion, more than 900 units, and 24,000 employees, Chipotle continues to innovate and surprise.
In 2009 the chain began testing a low-roller menu, which offers smaller portions and prices, as well as a children’s menu. Likewise, Chipotle introduced the vegan Garden Blend burrito, containing a marinated meat alternative that is plant-based.
Paying close attention to the environment is also a mission at Chipotle and on display at the green restaurant in Gurnee, Illinois. The simply designed restaurant features an onsite wind turbine, among other energy-saving features.
“The atmosphere says something about the brand beyond just decoration. It’s architectural in nature. In our case, it uses very simple materials like plywood, concrete, and steel. Through architecture and good design you elevate these materials to something extraordinary,” Ells says.
Ells’ creative bent contributes heavily to the myriad innovations at Chipotle, but his attention to detail is equally a factor.
“Perhaps it’s because we’ve stayed focused on this simple operations system that we’ve been able to continually refine and improve details along the way,” Ells says.
“Our dedication to making the small details better, and some of the not-so-small details like where food comes from, have contributed to Chipotle’s success.”
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