Science of the Churrascaria

If you’ve visited Chicago recently, you may have bumped into the burgeoning churrascaria movement—where at last count four of these Brazilian-style steakhouses manage to thrive within a five-block radius. They’ve splashed themselves over cities and suburbs alike, beckoning diners with an all-you-can-eat concept far removed from the buffet chains and those sometimes frightening strip mall Chinese joints. If you haven’t been, the different churrascarias are remarkably similar. $50 gets you dinner, which includes an over-the-top salad bar (think prosciutto, hearts of palm, smoked salmon, and artichoke hearts—not cottage cheese with pineapple chunks) and at least a dozen varieties of steak, chicken, lamb and pork—all brought to your table on giant skewers and sliced to order by servers dressed in gaucho garb. Cheese bread is brought to your table first (irresistible, but the centerpiece of a fill-you-up-early-fast-and-often consumption strategy on the part of the house). Dinners are accompanied by equally rich whipped potatoes and plantains. Patrons can select the salad-bar only, generally about half the price. But nobody goes for this option (it’s less than two percent of all diners, which may seem low, but since the show is all about the meat, not a complete surprise).

For what are higher-end restaurants, it’s an amazing formula to behold, and works on a broad volume of business. Where you might think the table of 10 college-aged guys would eat the place out of house and home since there is no end to the high-cost food offerings as long as you continue to want more, such a table doesn’t cause a ripple. In fact, restaurant managers and chain executives of these places never look at the behavior of individual tables—they’re looking at the 2,000-odd covers per week per store. They want to make sure 32.5% of guests order dessert (who are these people?), that the average tab per head stays constant at $67.50, and that there’s no variability across days and weeks when it comes to per capita meat consumption (2.25 pounds per). In fact, they’re quite happy to seat “we’re-going-to- stuff-our-faces-and-get-our-money’s-worth” revelers since, in the end, they’re outweighed by lots of customers (especially women) with dramatically less robust appetites—especially after a few helpings of cheese bread and mashed potatoes.

Volumetric understanding of real customer behaviors in situ is the secret to any business. Much can come from the hands-on experience of retailers, store operators and restaurant execs who discern important patterns and lessons over time. One way we’ve been able to help them drive business to greater success is to be their eyes and ears across multiple locations, days, day parts, and weeks, with video and audio enabled behavioral analytics—giving them deeper looks and insights into the bricks-and-mortar realities of their stores. There’s no doubt a reality-driven behavioral segmentation study of customers on premise is a meaty treat—no matter what business you’re in.

Will McDonald’s drink Starbucks’ latte?

Is it any surprise McDonald’s has brewed itself boldly into the coffee business? The McDonald’s menu has evolved dramatically since its founding days in the 1950s, back when it was a simple spot to get a burger, fries and a drink. The company has adapted to shifting consumer tastes, wants, and demands, and has become a major player at breakfast, in chicken, in snacks, salads, and more. There have been a few flops along the way, but in the last six years, McDonald’s menu innovations, better service, and improved atmospherics, have pulled in new customers and boosted profits. Now, thanks largely to Starbucks, Americans now crave fancy coffee drinks, and want them for breakfast, in the afternoon, and even after dinner. It’s no surprise McDonald’s is seeking to capture all these newly evolved coffee cravers.

McDonald’s mochas, lattes, and cappuccinos have gotten positive buzz; even people who prefer Starbucks have given the McDonald’s drinks pretty high marks. And coffee drinkers who get their caffeine fix at McD’s can pocket the savings over the same drink at Starbucks. In recessionary times, that’s a powerful advantage. One survey found that 60% of consumers will trade to McDonald’s if the coffee drinks are cheaper and made faster. There’s also the convenience factor – you can grab a latte while picking up a happy meal for your kids, in a part of town Starbucks hasn’t yet hit, or on a road trip. Starbucks is fighting back against the McCafe invasion with an ad campaign focusing on quality adherence; they’re also experimenting with a breakfast value menu and one dollar coffee. However, we’re betting plenty of consumers will choose McDonald’s premium coffee along with its iconic food offerings over coffee at Starbucks accompanied by its made-off-premise bakery items and microwaved sandwiches.

On the day premium coffee at McDonald's debuted, my wife’s comment after taking her first sip: "Starbucks is in trouble."

Success beyond accidents of the marketplace

Ron writes: It might be easy to dismiss McDonald’s strong sales performance as nothing more than the result of a heightened consumer desire for inexpensive food during tough economic times. But having worked with the company for more than a dozen years on a number of advanced analytic projects covering operations, marketing and HR, I know this is only one of a host of even more salient factors contributing to the very positive numbers coming out of McDonald’s. A recent story in the New York Times explains how the company has won over skeptical customers with its thorough, nearly obsessive effort to get things right. Here are a few of the key ingredients that have contributed to McDonald’s supersized success, even as the economy and the rest of the restaurant industry have struggled.

A clear, customer-focused goal: McDonald’s has single-mindedly united its people behind “Plan to Win,” an internal playbook that encourages employees to “focus on quality, service and restaurant experience rather than simply providing the cheapest, most convenient option to customers.”

Adjustments based on brutal facts: McDonald’s discovered that customers were becoming more interested in dining early or late, so stores were opened earlier and stayed open later. Executives “pored over data to determine what consumers were eating and drinking and where McDonald’s could expand to capitalize on changing trends.” McDonald’s transformed beverages from an afterthought to a central offering, resulting in higher sales and plaudits for its coffee quality.

Grounded, open leadership: McDonald’s selects leaders who have restaurant experience, not merely academic credentials. Jim Skinner, McDonald’s CEO, never graduated from college but rose steadily through McDonald’s ranks. He’s comfortable mingling with everyone from coworkers to restaurant staff. According to John W. Rogers Jr., a McDonald’s board member, Skinner has “created an environment where these guys have been allowed to shine.”

Patience: Some changes at McDonald’s took time to implement, such as rebuilding restaurants, improving employee training, and reconfiguring the drive-through. Luring skeptical customers back to the restaurant took years, not months. As McDonald’s president, Ralph Alvarez says, “The lesson there is, be patient.”