The Food Scout

When Starbucks hit a same-store sales wall last fall, industry pundits and analysts launched a wave of theories and explanations as to why Starbucks deserved to be in this situation. No one was more critical of the company’s situation of course, than the company’s own chief, Howard Schultz. In the wake of its fall from Wall Street grace, Starbucks has been launching wave after wave of innovations, from advertising, to promotions, to new products and menu items (mostly publicized courtesy of the press) including a blog site that invites fans to submit ideas (more cathartic for the fans than useful to Starbucks, I would expect).

The good news for Starbucks, of course, is that it got its wake-up call early in the current economic rollercoaster ride. The rest of the food industry is just starting to get their calls this month. Jack in the Box stocks took a 10% dive yesterday after the company announced a decline in same-store sales and pressure from higher food costs. A day before that, Steak ‘n Shake announced it had slow sales in Q2, watching its shares fall by 14%. Wendy’s International recently admitted that sales were down 1% in its company owned stores, and up only 0.1 percent at its franchise stores. Further up the food chain, Bob Evans has had declining same-store sales, and O’Charley’s reported lower earnings in the Q1 vs. year ago. Many of these companies appear to be caught by surprise and have announced various planned tweaks and retoolings.

Meanwhile, there is another camp of restaurants that are launching various recession-busting innovations to keep the boat afloat in the months ahead. After a test that started last summer, McDonald’s is giving away free chicken sandwiches to premier its Southern Style menu, including a chicken biscuit and a new chicken sandwich. Taco Bell is returning to its value roots with, not a 99-cent, but 79-, 89-, and 99-cent items on its new “Why Pay More Menu” premiering today as well. Hardee’s says “Bah” to the recession, with the launch of a Prime Rib Thickburger today, which will retail for (cah-ching) $4.49, or the equivalent of 5 items from Taco Bell’s value menu. Earlier this month, Burger King announced higher sales in Q1, due to innovations it has had in its pipeline recently, including the BBQ Bacon Tendercrisp, Double Angus Burger promotion, and various global initiatives. But even this announcement did not impress Wall Street, and shares were down 20 cents that week.

So for now, it appears that those who were already jogging when the bad weather hit will finish the race faster than those who seem to have been caught flat-footed in the areas of innovation and promotion. Quitting or finishing last is not an option, so it’s time for the rest of the industry to do some stretches and pick up the pace in order to close the gap on the leading runners.