Toque of the Town: Applebee's Speedy Delivery

Kurt Hankins shortens the development cycle at Applebee’s to quickly deliver bolder, more upscale fare.

By Monica Rogers, Contributing Editor -- Chain Leader, 7/1/2006

Kurt Hankins doesn’t obsess about the new culinary center Applebee’s is building him. But he does think about it a lot. “Everyday,” says Hankins, senior vice president of menu development and innovation for the 1,846-unit chain. “Especially when we’ve got about 25 people squeezed in our current space trying to get some new product out the door.”

Not that a spiffy new test kitchen is the be-all and end-all—it’s just there’s an awful lot riding on the new dishes Hankins and his recently expanded 18-person team are speeding to market at an unprecedented rate. Any bells and whistles to help them will be appreciated.

Hoping to rebuild traffic counts, which have been down 5 percent since mid-2005, the chain has pinned its hopes on the bolder, more contemporary dishes its guests say they want. Applebee’s believes cranking out lots of these dishes at a rapid pace can win back lapsed users and attract higher-income customers.

Newness Sevenfold
Hankins just hired four new chefs to bring fresh insights and muscle to the menu process and shave months off its development cycle. The team has fused limited-time offers into core menus, instead of handing out menu inserts. Guests will see seven menus in 2006, instead of the usual two. Each will feature a different assortment of food photos at the front—some old favorites, some new dishes.

With each menu introduction, the most successful items from the previous menu move to the core. “This means guests will be able to continue to order the new dishes they like on repeat visits, instead of seeing those dishes go away, as is usually the case with limited-time-offer promotions,” Hankins says.

Three menus have already appeared this year: a January repeat of Applebee’s popular Three-Course Combos, a February Shrimp Sensations menu, and in April, Steakhouse Inspirations.

Hankins says Steakhouse Inspirations foreshadows the sorts of things he plans through 2007. Capitalizing on Mother’s and Father’s Day and graduation celebrations with indulgences such as the House Sirloin & Lump Crab Cakes entree, $13.99, Steakhouse Inspirations included five new items. Of these, two best sellers moved to the core in June. The $7.99 Bistro Sirloin Sandwich, spice-rubbed grilled sirloin sliced thin and piled on a rosemary ciabatta roll with grilled red onions and a side of roasted garlic-Asiago cheese sauce and fries, moved to the Sandwiches, Rollups & Burgers section. And the Roasted Garlic and Asiago Chicken, $9.99, Italian-seasoned chicken breast grilled and topped with roasted garlic, fresh tomatoes, basil and roasted garlic-Asiago cheese sauce and served with a side of garlic mashed potatoes, seasonal veggies and toasted side bread, is now on the Hot off the Grill section.

“This means every time a guest comes in here, they’re seeing new news,” says Hankins, who has changed virtually all of Applebee’s menu items in the five years he’s been on board as head development chef.

Born into a family of “excellent cooks,” Hankins started his own food experiments when he was a little boy. After getting a bachelor’s degree in business and marketing from the University of Kentucky, Hankins went on to culinary training at both the Culinary Institute of America at Greystone and Johnson & Wales Culinary Institute. He spent 10 years in operations and later menu development at Chi-Chi’s and 11 years at Red Lobster. Hankins joined Applebee’s in 2001 because of “Applebee’s variety,” he says. “I loved the brand, the value aspect and the fact that I could work on everything from Southwestern American to Asian, bringing affordable dishes to a new level of excellence for mainstream America.”

Food Quality Foremost
To get guests in to try what’s new, Applebee’s shines the spotlight on the food, rather than hammering simply on the value. To appeal to both lapsed users and potential new ones, the company’s new TV spots and menus feature large color images of dishes such as the April-launched House Sirloin and Lump Crab Cakes, $13.99, and Quesadilla Burger, $7.49, Southwest-seasoned Angus beef topped with melted cheeses, bacon bits, tomatoes, red onion and jalapeños and tucked into grilled flour tortillas with melted pepper-Jack cheese, pico de gallo, Mexi-ranch dressing and shredded lettuce. Though he can’t give figures, Hankins says the photos are successfully prompting first-time trials.

Management is convinced that the food-focused campaign will work with lower-income guests because they are food savvy enough to note that they’re not going to get dishes of this caliber at QSRs or be able to quickly and cost-effectively create such recipes at home. And they believe higher-income guests will appreciate the quality these more contemporary, upscale dishes bring to this price point. Once the ads have done their job—getting guests in for first-time trial of new foods—management hopes that product quality and value (checks average $11 in company markets) will bring them back.

Analysts such as Jeff Omohundro of Wachovia Securities, applaud the approach, saying, “It’s good to see the food more the focus.” But others such as John Glass of CIBC World Markets question whether the approach will communicate clearly enough to lapsed, lower-income users.

Lending substance to the quality equation, Hankins and team have quietly upgraded ingredients in long-standing recipes such as using spring mix for salad and Angus beef for burgers. Hankins will continue to introduce more contemporary, upscale recipes like the Roasted Garlic and Asiago Chicken.

And to ensure kitchens are executing to a high level, “We’ve refocused on basics like proper techniques for seasoning proteins on the grill to make sure flavorings are evenly sprinkled on and in the proper amount,” he says. “We’ve also reviewed the way we prep lettuce for salads to ensure that it looks fresh and stays crisp.”

Upgrading Cost Effectively
Applebee’s does not expect the move upmarket to significantly affect food or labor costs. Labor costs for first quarter ’06 held steady at 32.8 percent, and food costs moved only slightly north from the previous quarter to 26.7 percent. Beyond negotiating strength that comes from Applebee’s giant size, Hankins says, “In some cases we can trade portion for quality and still have a win-win for the guest.”

Also a help: Hankins does what he can to cross-utilize ingredients. For example, he uses the same sauce on the Asiago chicken and bistro beef. And the crab cakes are available as both an appetizer and entree with sirloin.

Given the uncertainty of gasoline prices and other macro trends, Applebee’s has been reluctant to lift menu prices significantly. After a 1 percent increase in November, menu prices increased another 1.5 percent in May. CFO Steve Lumpkin says the menu increases are “modest, given the environment and given what other people in the space are doing.”

But that’s not to say Applebee’s isn’t hoping for higher check averages. The $14 steak and crab cake dinners are a few ticks higher than Applebee’s mainstream menu favorites, which hover in the $10 range.

Drinks, Health Hold Promise
The company also expects ticket increases from its new beverage push. Featuring smoothies, juice and energy blends, and spirits-based specialties, the initiative is designed to increase beverage sales, which now figure at 20 percent of the mix, while holding tight on overall beverage costs. Drink menus in combination with “50 percent-off appetizer” hours are already driving off-hours traffic in some test markets. One example: The Strawberry Coco Frost Smoothie blends strawberry, banana and coconut purees with crushed pineapple.

Also yet to reach it’s full potential? Applebee’s Weight Watchers section. While sales of this section leveled off somewhat in 2005, accounting for only 5 percent to 8 percent of sales, Hankins quotes national studies that find three-fourths of Americans say they want to eat more healthfully. Giving them new reasons to do so at Applebee’s, in April Hankins added the Southwest Cobb Salad, $6.99, grilled chipotle chicken, shredded cheese, broccoli, diced tomatoes, shredded carrots, corn and black beans on a bed of mixed greens with cilantro-ranch dressing. Cajun Lime Tilapia, $8.49, grilled Cajun-seasoned tilapia with lime juice, black bean and corn salsa, rice pilaf, and seasonal veggie medley, also went systemwide in April.

To keep creativity flowing into the future, Hankins again speaks of the new culinary center. He’s looking forward to more elbow room, a full-sized Applebee’s kitchen line, an area for test equipment that will allow the team to play around with line design, and another to encourage ideation, inspiration and blue-sky thinking.

“We really want this to be anything but white walls and pale fluorescent lighting,” Hankins says. “Along the lines of what you see at the Culinary Institute of America’s Greystone campus. There, if a chef wants fresh herbs, he heads out to the garden with a basket to pick some. We want our idea center to be as fresh and fertile as that."