Bob Evans, Mimi's Café Target Menu Moves

NRN.com|Nov. 16, 2011 3:50 pm EST

Bob Evans Farms Inc. has no plans to spin off Mimi's Café, its struggling casual-dining brand, company officials told securities analysts during its second-quarter earnings call Wednesday.

Mimi's is hoping for a turnaround based on menu initiatives similar to those implemented at Bob Evans' namesake family-dining chain, chief executive Steve Davis said.

"There's no deadline, but we're very rigorous about all our assets," Davis said. "We have to see improvements, and the Mimi's team has a chance to drive some improvements.

"We have lunch, dinner, the bar and carryout covered. We're going to shoot the cannons and see where it takes us," he said.

For the second quarter of fiscal 2012 ended Oct. 28, Bob Evans' net income declined to $14.1 million, or 47 cents per share, compared with $17 million, or 56 cents per share, a year earlier. The company attributed much of the decline in profitability to lower restaurant sales, as well as higher sow costs and increased marketing expenses for its packaged-foods business.

Revenue from the company's restaurant segment decreased 2.7 percent to $328.9 million from $338.1 million a year earlier. Same-store sales fell 2.4 percent at the company's restaurants, reflecting declines of 1.5 percent at Bob Evans and 4.8 percent at Mimi's Café.

EARLIER: Bob Evans, Mimi's Café focus on value, new menus

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Mimi's: All about the menu

Mimi's Café's same-store sales improved sequentially every month in the quarter, but still finished down 4.8 percent compared with a year earlier. Many of the brand's initiatives have focused on creating value and driving carryout business.

"We can't put more marketing programming out there," Davis said. "We have Café Express, Happiest Hour, Family Meals to Go, and Mimi's My Way 1-2-3, so you have to believe these programs are going to take hold. We're not launching any new programs; it's all about execution."

While Bob Evans evaluates all lines of its business every quarter, the company will watch Mimi's closely during the holidays, which is the chain's "peak season," Davis said.

He added that Mimi's value moves and Bob Evans' effort to push carryout at its namesake brand helped the company's food costs stay relatively flat in the quarter, despite commodity inflation of 5.5 percent to 6 percent. But there is no room for more value engineering on the menu at Mimi's Café or Bob Evans in the current competitive environment, he said.

"There's no pricing power out there right now," Davis said. "If you lower prices, you're going to see it in your P&L."

Chief financial officer Paul DeSantis said Mimi's would continue to invest in outfitting more restaurants with full bars, which only cost about $20,000 per restaurant in capital expenditures. The chain plans to upgrade 35 more restaurants with full bars this year, which would give 80 percent of the system a full-bar capability. The brand has increased its alcohol sales mix from 3.9 percent in the second quarter of last year to 4.5 percent of sales this quarter, DeSantis said.

"We're seeing a lift in alcohol sales [at full-bar restaurants], but even with that lift we're underperforming where we want to be," DeSantis said. "Fixing bars has a great return off the bat and positions the whole chain to better leverage opportunity in alcohol."

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Rebuilding Bob Evans

Restaurant reimagings will continue to be a focus for Bob Evans, Davis said. The chain's entire Dayton, Ohio, market has been remodeled, with restaurants looking more contemporary and including bakery and to-go areas, helping increase carryout sales.

"We're pleased to report that same-store sales in the Dayton market remain 5 percentage points higher than the rest of the system," Davis said. "We've completed 31 of 42 units in Toledo and Detroit, and the final refreshes there will be done in the third quarter."

Cincinnati is the next market to be remodeled, which will commence in the fourth quarter, and then Columbus, Ohio, which will begin reconstruction in the first quarter of fiscal 2013.

Davis said Bob Evans' hope is to hold the line on pricing this fiscal year, and that the company would look to labor efficiencies as a way to offset expected food inflation.

"I don't see any dramatic improvement in the economy, which would allow for opportunistic pricing, which is why I'll keep pushing harder on productivity," Davis said. "If you play the value game, if you take up prices, you have to do some other discounting somewhere else."

The namesake chain's menu would aim for balance between the value-focused $6 Farmhouse Deals — which also allows guests to add sides for 99 cents — and higher-price items like the $11.99 Sweet & Savory Stuffed Pork Chops.

"Almost half our guests ordering Farmhouse Deals get a 99-cent side dish," Davis said. "Our average check has increased to over $9 for six of the past eight weeks."

Carryout also was growing at a double-digit rate and represented 11 percent of sales, he added. Bob Evans aims to bring that percentage up to 20 percent of sales with promotions like Family-Size Meals and the Farmhouse Feast seasonal deal.

"Off-premise sales account for about 40 percent for the entire restaurant industry, so this is a big pie to draw from," Davis said. "These are two different need states, so if you go to a Bob Evans at 5 o'clock, people are coming in either for dine-in or carryout. It's not a tradeoff."

Columbus, Ohio-based Bob Evans Farms operates 564 namesake restaurant in 18 states and 145 Mimi's Café locations in 24 states.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN