Shop Talk

Root beer, roast beef, fish & chips: Who’s buying?

There’s a new batch of quick-service restaurants on the block – Arby’s, A&W and Long John Silver’s – and according to YouGov BrandIndex, A&W is the most popular of the three.

A&W, founded in 1919 and known for its root beer, had the trio’s highest satisfaction rates, said YouGov BrandIndex, which does daily consumer perception research on brands. 

A&W and Arby’s had higher satisfaction scores than an average of about two dozen fast-food chains, while Long John Silver’s fared worse. (See graphic below)

“A&W and Arby’s have a core group of supporters and satisfied customers,” said Ted Marzilli, global managing director for YouGov BrandIndex. “If I’m a buyer, that’s a strength.”

Marzilli predicted that all three brands would find buyers, although prices and other terms likely would differ.

He said A&W and Arby’s could be reinvigorated by buyers who focused on their strengths, while Long John Silver’s is more of a turnaround story.

Another big question is whether any of the chains will snag a valuation as rich as the one attached to Burger King’s $3.3 billion sale to 3G Capital last year.  The $24 per share sale price represented a 46 percent premium to Burger King’s price before news of the negotiations emerged.

Check Out Line: Burger King goes for a pricey $3.26 billion

Check out Burger King agreeing to be bought for $3.26 billion.

Burger King is letting itself be bought out by the relatively unknown New York-based private equity firm, 3G Capital, for $3.26 billion, or $24 per share, net of debt.

That is a Whopper (sorry, we couldn’t resist) of a premium – 46 percent – over Burger King’s stock price earlier this week, before all this buyout chatter started.

The price did indeed strike some analysts as rich, considering how poorly Burger King has done compared to “Golden Archrival” McDonald’s in recent years.

Stifel Nicolaus’ Steve West said on Wednesday $23 would be enough for shareholders and Burger King’s current private equity owners, TPG Capital, Goldman Sachs Capital Partners and Bain Capital Investors. And Deutsche Bank’s Jason West said a price as low as $19 or $20 could make sense.

Apparently 3G sees a lot of potential in Burger King. The chain — whose diners are disproportionately young and male, i.e. most vulnerable to unemployment — has fallen far behind McDonald’s. Analysts agree going private will give Burger King time and room to do what it needs to narrow the gap with McDonald’s: fix up its old restaurants and upgrade its technology.

The deal is set to close by the end of 2010, though in theory Burger King could solicit higher bids until Oct. 12

Why Carl’s Jr is happier in L.A.

Here’s another reason to love L.A.

The city’s downtown business district is home to the only Carl’s Jr restaurants that serve beer.

“We market to the young, hungry male. He’s also thirsty,” said Julie McLean, a spokeswoman for the chain, which has used controversial celebrities like Paris Hilton to push its generously-portioned, indulgent hamburgers.

Jennifer McGrath, the marketing manager whose region includes the three beer-serving L.A. restaurants, said happy hour specials have boosted business at those restaurants.

The company said the restaurants inherited their liquor licenses from previous tenants and that the chain has no plans to add beer at its other outlets.

“We don’t plan on adding alcohol sales to any locations at this time,” McGrath said.

Full-service hamburger chains like Red Robin and regional operators like Counter and Smashburger offer beer and wine, but big boys like McDonald’s, Burger King, Wendy’s, In-N-Out and Five Guys do not.

Check Out Line: Weak euro to take bite out of McDonald’s too

Check out the weak euro’s latest victim.

McDonald’s reported better-than-expected global sales in May at stores open at least 13 months, but warned that full-year profits would be hit by unfavorable currency exchange rates, specifically calling out the euro.

 The No. 1 hamburger chain gets about one quarter of its operating income from the euro zone, and that region will result in foreign exchange rates hurting the full-year profit instead of being slightly positive as it previously forecast. However, the company said that issue would not affect second-quarter results and the European stores posted far stronger-than-expected May sales, so the real impact of the weak euro is still to come.

It’s been a mixed bag of late for McDonald’s, which recently recalled at least 13.4 million “Shrek”-themed drinking glasses in the United States and Canada due to the presence of toxic metal cadmium in the designs.

Euro worries don’t just apply to McDonald’s. Rival Burger King on Monday warned that unfavorable exchange rates, primarily related to the euro, would reduce the profit in the current quarter by 1 to 2 cents a share.

The euro hovered near a four-year low against the dollar on concerns over a widening European debt crisis that has struck financial markets.

Also in the basket:

Check Out Line: A smorgasbord of consumer earnings to parse

Check out the smorgasbord of quarterly earnings in the consumer sector.

Among the many companies to report earnings on Thursday were P&G, Burger King, OfficeMax, Colgate,  Fortune Brands, Bunge, Kellogg, Safeway and Mead Johnson. As usual, there was something for investors of all stripes.

P&G, for example, posted a better-than-expected profit, helped by its biggest volume gain in more than four years. That would please the optimists.

The pessimists, however, had their news to focus on as the world’s largest household products company, known for its Tide detergent (pictured), also forecast results for the current quarter below Wall Street’s expectations. Go figure.

Burger King reported a smaller profit, blaming severe winter storms during the period for weaker sales in North America, and the CEO said warned that high levels of unemployment and underemployment remained the biggest headwind.

Agricultural processor Bunge posted a weaker-than-expected profit and cut its full-year outlook. OfficeMax, the No. 3 U.S. offices supplies retailer, posted a higher profit as it gained market share and kept a tight lid on costs.

Meanwhile, Fortune Brands, known for alcohol, home products like Moen faucets and golf gear, affirmed its outlook from Tuesday in reporting its stronger profit and said it saw consumers “getting more active,” including stronger-than-expected remodeling activity in the housing sector.

Check Out Line: Snow’s impact in the eye of beholder

Check out the the bad and the good of the severe weather last month.

In the bad camp are restaurant chains Ruby Tuesday and Burger King, which both blamed the bad weather for keeping diners away.

Squarely in the good camp was sporting goods retailer Dick’s Sporting Goods, which posted a better-than-expected quarterly profit on strong demand for cold weather gear.

Last week, U.S. retailers posted their best monthly sales performance in February since just before the recession started in 2007 as fewer discounts helped them weather record-setting snow.

Also in the basket:

Kroger profit shrinks, but beats Wall Street

Duane Reade quarterly net loss widens

Check Out Line: Twilight’s return to a burger near you

Check out Burger King’s bite from the vampire.

The hamburger chain said it will sponsor the third Twilight movie — The Twilight Saga: Eclipse - after the success it saw with its tie-in to the second one, The Twilight Saga: New Moon.

Burger King said fans can expect more exclusive access but was quiet about details.  Last time around, Twihards got goodies such as Bella, Edward and Jacob-themed gift cards and New Moon water bottles.

Here’s what we’d like to know — which Burger King announcement from this week will garner more attention?  The latest hype surrounding Twilight or that a broiler that changes the way items are cooked and is more energy efficient is now being used across the United States?

Also in the basket:

Home Depot profit beats Street

Sears profit more than doubles even as revenue slips

Check Out Line: Trading the $1 burger for the $3 latte

Check out profits rising at McDonald’s, the world’s largest hamburger chain.

But while profits rose, the results showed the chain’s U.S. business continued to lag its international operations.  U.S. same-store sales rose 1 percent in December, after two months of declines. Globally, same-store sales rose 2.3 percent for the quarter and 2.7 percent in December.

At home, McDonald’s is facing competition from fast-food chains like Taco Bell and Burger King. While McDonald’s is well known for its Dollar Menu, which features the $1 sausage burrito and $1 McDouble burger, rivals are now using low prices — like Burger King’s offer of a 1/4-pound double cheeseburger for $1 — to lure diners.

At the same time, some consumers recently have returned to more upscale chains like Panera Bread and Starbucks — leading some analysts to say that fast-food chains are now in for a period of sinking sales and rampant discounting, the likes of which hobbled pricier restaurants for much of the recession.

Also in the basket:

Kimberly-Clark profit, outlook miss Street view

Hershey rules itself out of bidding for Cadbury

Applebee’s and Nutrisystem share pitchman

Celebrities often lend their name recognition to big brands, but sometimes such advertising can be downright confusing.

Take the companies ESPN anchor Chris Berman is pitching these days: Applebee’s restaurants and weight loss center Nutrisystem. 

Restaurant meals often have more calories than we expect, so we were surprised to see Berman add Applebee’s commercials to his repertoire. 

In his ads for the weight-loss company, Berman brags about all the weight he’s lost (41 LBS) on Nutrisystem’s calorie and portion-controlled meal plans.

Equally incongrous is blues legend B.B. King’s history as a pitchman. 

King, who has type 2 diabetes, has helped advertise a  LifeSpan blood glucose meter. 

But the music icon also has loaned his name to blues clubs and according to the Internet Movie Database he has been a pitchman for fast-food chains Burger King, Wendy’s and McDonald’s. 

Check Out Line: Global downturn – burger division

Check out the slumping global economy for burgers.   Burger King said it had an unexpected slowdown in traffic in March, which cut into the margins at the company’s restaurants.   The biggest culprits were Germany, the company’s second-largest market, and Mexico, the only market in Latin America where the company owns restaurants.   Burger King is attacking the traffic decline with “value” menus. In Germany, it is offering “King Deals,” which are “value-priced” combo meals. It has also relaunched the 99 euro value menu and is also opening more during breakfast.   In Mexico, the company is promoting its “Come Como Rey” (Eat Like a King) value menu. Apparently in Mexico, kings eat Whopper Jr.’s. (Or is that Whoppers Jr.?)   The company said it is seeing some improvement in April.    Also in the basket:   Wal-Mart CEO doesn’t see quick end to the recession   Consumers prices fall as energy demand slumps    Apparel firms partner with Yankee stadium (WWD, subscription required)

(Photo: Reuters)