NEWS4 • October 6, 2003 NATION’S RESTAURANT NEWS

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Hanging on the telephone: McDtests call center, order upgradesOAK BROOK, ILL. — McDonald’sCorp.,as it strives to create a moremodern image with the U.S.debutof its first-ever global ad cam-paign, also is experimenting withhigh-tech customer serviceimprovements.

The fast-food giant, rebound-ing from sales declines thatstemmed in part from poor ser-vice, is eyeing upgrades to theorder process with a centralizedphone center. The center, whichdramatically would alterMcDonald’s service systemwideby allowing customers to orderfrom their tables, captured thecompany’s attention only monthsafter it expanded a test of auto-mated order kiosks.

Meanwhile, stepped-up moni-toring under the U.S. restaurant-grading program, which officialsinsist has sped up service, also hasrenewed concerns of smaller fran-chisees that they will be forced outof the system.

Last month during a Banc ofAmerica Securities conference,Charlie Bell, president ofMcDonald’s Corp., told WallStreet analysts that “more opera-tors had left the system in the past12 months than had exited in theprevious five years.”Bell,who alsois McDonald’s chief operatingofficer and is considered a likelysuccessor to chief executive JimCantalupo,did not provide details.His remark came in response to a

question regarding whetherMcDonald’s restaurant-gradingprocess gave the company a wayto enforce its standards.

Following the conference com-pany spokesman Bill Whitmansaid Bell’s statement reflectedglobal circumstances, and thenumber of domestic franchiseesleaving the system had remainedconstant over the last five years.

However, Dick Adams, a SanDiego-based franchisee consul-tant who works with McDonald’soperators, said about 100 U.S.franchisees with two or threestores left the chain in the firstquarter of this year “due to lowsales volumes and negative cash

Dunkin’ Donuts operator wins‘unprecedented’ tax-basedcontract termination lawsuit

MINNEAPOLIS — While restau-rants in many urban areas con-tinue to suffer from a volatileeconomy, this Minnesota city isexperiencing a flurry of indepen-dent-restaurant openings.

Minneapolis is seeing growthin residential real estate, con-sumer spending, manufacturingand agriculture, according to theFederal Reserve’s “beige book.”The city’s 4-percent population

growth from 1990 to 2000, to383,000 residents, combined witha young median age of 31, bodeswell for restaurants.

“There is a lot of stuff going on;you will see more changes in thenext five years than in the last 15,”predicted J.P. Samuelson, chef-partner of JP’s American Bistro,which opened last April. Despitethe high-profile closings of suchrestaurants as Aquavit and UnDeux Trois earlier this year, new-comers report enthusiastic recep-tions from the dining-out public.

In a market sometimes stereo-typed as one limited to meat-and-potatoes menus, the new group of

restaurateurs is showing that localdiners enjoy the full-flavoredfoods of Latin America, the Carib-bean and the Mediterranean.Even restaurants specializing inAmerican cuisine now show influ-ences from distant cultures.

In addition to JP’s, whichdraws from such regions as theMediterranean and Asia for itscontemporary American menu,other newcomers that haveopened recently near downtownare Babalu, described as Latin-Caribbean; Café Lurcat, a “newAmerican” concept; Solera,which features Spanish cuisine;and Tiburon, known for Carib-

bean flavors.Another Caribbeanrestaurant, the Pickled Parrot,which has two suburban units, ispreparing to open a third restau-rant downtown. And the SouthAmerican-Caribbean-inspiredMojito opened in nearby St.Louis Park.

All of those startups havesome things in common besidestheir leanings toward full-fla-vored ethnic cuisines. Almost allof them have check averagesbetween $33 and $40, strive tocreate an upscale-casual atmos-phere and stay open late. Someoffer live music at times.

BOSTON — In a case said to beunprecedented in the annals offranchising litigation, a federalcourt jury here returned not-guilty verdicts on some fourdozen counts of criminal taxfraud and tax evasion alleged byDunkin’ Donuts Inc. against aseven-unit franchisee.

Miami attorney RobertZarco, whose firm represented

Dunkin’ Donuts franchiseeManoochi Fallah Moghaddamand his partners, said the casewas the first jury trial on recordin which a private company hadattempted to act as a kind of sur-rogate federal prosecutor in acase of purported tax evasion.

Dunkin’ Donuts, the Ran-dolph, Mass.-based franchisorarm of Allied Domecq QuickService Restaurants, made theallegations in an effort to oustFallah and his co-defendants

from the chain by showing abreach of his contract’s obey-all-laws provision.

However, Fallah, whosedoughnut shops are in FortLauderdale, Fla., never had beeninvestigated, charged, prosecut-ed or convicted of tax violationsor any other crime by federal orstate authorities, his attorneyasserted. Zarco said the court

had observed that the lawsuitagainst Fallah had “appeared” tobe a case of selective prosecu-tion, and he was looking intowhether that could give rise tonew litigation by the franchiseeagainst the company.

“It is clear that this decisionwill be much more costly toDunkin’ Donuts than if they hadtaken any of the several opportu-nities to settle that were offeredto them before and during the

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’sfirst-ever global, multidimensional marketing effort.

Pictured during the MUFSO 2003 litigation session are, fromleft, panelists Robert Zarco,; Darden counsel Sally Blackmunand Morrison Management general counsel John Fountain.

J.P. Samuelson takes a break in the bar of his new restaurant, JP’s American Bistro.

Minneapolis sees growth despite roller-coaster economy

By Amy Garber

By Richard Martin

By Carolyn Walkup

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(See HANGING, page 6) (See DUNKIN’, page 55)

(See MINNEAPOLIS, page 58)CAROLYN WALKUP

NEWS6 • October 6, 2003 NATION’S RESTAURANT NEWS

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Mimi’s Cafe’s Bendel honored as Operator of the YearATLANTA — Russ Bendel was noton the dais of honorees when hisname was called to receive the cov-eted Operator of the Year Award atthe 2003 Multi-Unit FoodserviceOperators Conference.

An ear infection that triggered about of vertigo sent him to the hos-pital for a series of tests — and aconfirmation of a clean bill of health— and then to his room at the HyattRegency Hotel here.

Meanwhile, MUFSO’s galaawards banquet in the hotel’s ball-room proceeded to honor Bendel,president of the 73-unit Mimi’sCafe upscale family chain, and sixother Golden Chain Awardachievers.

Despite Bendel’s absence fromthe festivities, his joy was undimin-ished upon learning that the indus-try had taken note of a careermarked by high accomplishment,dedication, and the admiration ofcountless friends and peers.

Since the former franchisee ofOutback Steakhouse and presidentof its Roy’s fine-dining division wasrecruited by Mimi’s Cafe founderand chief executive Tom Simms tojoin the Tustin, Calif., company twoyears ago,Bendel has helped propelthe chain’s 20-percent annualgrowth rate. Mimi’s Cafe had esti-mated sales of $200 million andaverage-restaurant volumes ofnearly $3.3 million last year.

Bendel also has overseenthe expansion of the concept— a family-oriented, French-farmhouse-theme format thathas evolved into a casual-dining contender — to itsdebut on the East Coast, inFlorida, marking the chain’sspread to nine states.At leastfive more locations areexpected to open by year-end.

The morning after theOperator of the Year honorwas bestowed in absentia,Bendel said winning theaward exceeded his wildestdreams.But he added that thetrophy reflects his accom-plishments as much as it doesthose of countless employeesand managers who assisted inshaping his career.

“It was incredible just to benominated,”he said,“let aloneto win amid all of the otherworthy recipients.”

Fred LeFranc,president ofRuby Restaurant Group, parent ofthe Ruby’s Diner chain, acceptedthe award for his friend of nearlytwo decades and gave an audienceof well-wishers an update onBendel’s improved condition.

Earlier in the ceremoniesLeFranc, who said he had metBendel at a MUFSO conferencein 1984, also accepted his GoldenChain Award.The other recipients

— from whom the Operator ofthe Year was chosen by a mail-invote of Nation’s RestaurantNews’ readers — were chiefexecutives Doug Brooks ofBrinker International, GregoryBurns of O’Charley’s, KerryKramp of Buffets Inc. and SallySmith of Buffalo Wild Wings andpresident John Zillmer ofAramark’s Food and Support

Services division.LeFranc later described

the scene in which he present-ed the awards to Bendel in hishotel room while he recuper-ated in bed.

“Both my wife and I wentupstairs to his room and toldhim, ‘We have some goodnews for you,’ ” LeFranc said.“First, we gave him theGolden Chain Award, but Ikept my hands behind myback and told him there wasmore good news.That’s whenI gave him the operatoraward. You could see howexcited he was. His wife, Judy,started to cry.”

Asked to name Bendel’smost enduring trait, LeFrancsaid,“enthusiasm.”

“We’re talking about aguy who is maybe six-four,280pounds,and he sweeps you offyour feet when he is excited,”LeFranc said.

Bendel, who has been workingin the foodservice industry since hewas 15, has had one of the morediversified careers in the business,working for and with several distin-guished companies and fellow exec-utives.

Bendel, a graduate of FloridaInternational University, hasworked with multiple brands,whichhas resulted in his living in various

parts of the nation. One of his firstjobs was as a unit manager at theCopper Door in Rockville,Md.,justafter he was married.

Later he landed a position atMarriott Corp., where he stayedfor 12 years, during which he wasinvolved in the hotel company’sseries of mergers and acquisitions.During his Marriott tenure heworked with some of the indus-try’s current crop of advancingexecutives.

In addition to LeFranc, othercolleagues included Mike Hislop,currently chief executive of IlFornaio;Dick Rivera,co-chairmanof Darden Restaurants;Fred Hipp,the former California PizzaKitchen and current Houlihan’spresident; and Anwar Soliman,chief executive of SpectrumRestaurant Group.

Ted Balestreri, chairman andchief executive of Monterey,Calif.-based Restaurants Central —whose fine-dining flagship, theSardine Factory on Monterey’sCannery Row,sparked that formerfish-canning district’s revival as amajor hospitality and tourismvenue — was the 2003 Pioneer ofthe Year winner.

In an emotional address,Balestreri described himself as a“poor kid from Brooklyn whowent west” and became “the luck-iest guy in the world.”

Hanging on the telephone: McD tests call center, order upgradesflow.”He said many of those opera-tors were hurt by the downturn inthe economy and McDonald’s U.S.sales declines from last year.Adamssaid the chain seems to have aban-doned its longtime practice of help-ing financially troubled franchisees.

“They [McDonald’s companyofficials] can’t have it both ways,”hesaid. “They can’t go on these con-ference calls with the analysts andboast about getting rid of fran-chisees and then deny they are inthe business of culling the herd.”

Nonetheless,the Oak Brook,Ill.-based burger chain seems to be onan upswing after reporting five con-secutive months of domestic same-store sales growth.McDonald’s U.S.president Mike Roberts said opera-tional improvements, along withsuch new products as premium sal-ads, are driving traffic and sales. Hesaid McDonald’s domestic restau-rants collectively are serving a mil-lion more customers a day than theywere one year ago, and he said thebrand generated in the second quar-ter a 3-percent increase in marketshare against “key competitors.”

But with the hunt on for more

customer service advances, Robertsrecently visited a six-unit franchisee,Steve Bigari, in Colorado Springs,Colo.,who in June installed a phonesystem with a central order centerfor all of his restaurants.The tables inall of Bigari’s outlets have phonesthat allow customers to sit and placetheir orders, which are electronical-ly relayed to the kitchen from a cen-tral call center. Servers bring theorders to the table and take pay-ments from the customers. Thedrive-thrus, which also use the callcenters, are equipped with a digitalcamera that snaps an image of thevehicle, which then is relayed toemployees who can use the pictureto match the order to the correct car.

Roberts said one major benefitof the call center is that it improvesorder accuracy, particularly at thedrive-thru. He added that thechain plans to “expand a test of thecall center” in the first quarter ofnext year that could include up tofour additional operators. In addi-tion, McDonald’s also offers seat-ed customers phone service at itsfew McDonald’s with the DinerInside units.

Bigari did not return phone calls,

but a company called Exit 41 createdthe technology he is using. CraigTengler, chief marketing officer andco-founder of Andover,Mass.-basedExit 41,said later this month Bigari’sstores will accept credit cards, andfuture changes include acceptingorders from customers via cell phonesas well as inside the restaurant fromwireless equipment. That optionwould give employees the flexibilityof walking around the dining roomwhile they were taking orders.

“Part of this idea is a dramaticparadigm shift in how customersplace orders and how they areserved,”said Tengler,who explainedthat the average cost to open the callcenter is about 10 percent to 20 per-cent more than the investment fortypical point-of-sale equipment.

Other benefits of the system, inaddition to order accuracy, includelabor efficiencies and a 15- to 17-centincrease in the average check,according to Tengler. He said theincrease in customer spending stemsfrom training the call center’semployees to upsize meals.

Roberts was quick to point outthe advantages of employees whoseprimary responsibility is taking

orders, which also frees up the staffinside the restaurant to make anddeliver food. “When the crew isfocused on one job, they tend to doit better,”he said.

A McDonald’s franchisee inBrainerd, Minn., recently teamedup with Bigari and installed thenecessary equipment into hisrestaurant so that all orders couldbe processed through theColorado-based call center.

“The stores are in different timezones so they have two differentintense lunch hours,” Tenglerexplained. He said the Minnesotafranchisee would pay Bigari anunspecified transaction fee perorder. He added that operators canshare costs on the call center andlabor, particularly for late-nighthours, which Roberts indicated wasa growing daypart for McDonald’s.

In addition to centralized order-ing,McDonald’s is looking to capi-talize on the trend of self-service-kiosk transactions, which areexpected to surpass $900 billionannually across all industries inNorth America by 2007, accordingto a study from the Franklin,Tenn.-based IHL Consulting Group.

This summer McDonald’sexpanded its self-ordering-kiosktest to eight units in Raleigh, N.C.,and five stores in Denver.The com-puterized machines allow cus-tomers to place orders on a touchscreen, freeing up front-counteremployees for other tasks. Robertsrecently admitted,however,that thetechnology remains “expensive,”although he did not provide details.

Separately, McDonald’sunveiled five national televisioncommercials for the U.S. phase ofits worldwide “I’m lovin’ it” adcampaign,and later this month,thechain is slated to debut all-white-meat chicken McNuggets.

(Continued from page 4)

Russ Bendel, and his wife, Judy, withBendel’s Operator of the Year trophy.Because of illness Bendel missed theawards presentation.

“Furr’s group buyers serve upplan to expand scatter bar pro-totype,” Sept. 29, page 4, ran witha photo caption that failed toreflect the story’s reference tothe depicted Luby’s brand asexemplifying cafeteria segmentproblems through its closure of50 restaurants this year.

FOR THERECORD

By Milford Prewitt