Ted Turner's venture from rancher to burgermeister
is real news. Turner and George McKerrow, Jr. (Longhorn
Steakhouse) have created this small-and-getting-larger
chain of casual restaurants serving excellent beef and
bison burgers, chicken sandwiches, chili and other smartly
rendered comfort dishes.
Seven of the top executives at Ted's Montana Grill devote a portion of their day to making their concept
more eco-friendly. They do it because it's a matter of conscience, says Ted's CEO and president, George McKerrow.
If you were to use one of those online sites to calculate Ed Bazor's carbon footprint, it would likely end up on "much larger than average" end of the spectrum. He drives a 2007 Ford F-150 and commutes 70 miles roundtrip to his downtown Atlanta office. He flies quite a bit, too. His job as director of construction for Ted's Montana Grill, a chain with restaurants in eight states, requires it. The majority of bulbs in his home are CFL, but he's plugged into the same energy-wasting grid as the majority of us.
Bazor is no tree hugger, but he is a realist. And because he is a man who relies on logic to make business decisions, he's an environmentalist, too. If you were to visit one of Bazor's construction sites, you might see the men breaking down wooden pallets. He's also not above sifting for salvageable materials in a dumpster. Being discerning can reduce hauling trips from 14-15 to 5-6. And that in turn saves Ted's Montana Grill cash.
"Enough nickels and dimes add up to real money," Bazor says in explaining why he's willing to Dumpster dive and encourages others to do the same. "It doesn't cost to do simple things"
Bazor should know. As head of the 57-unit chain's Green Team, Bazor is charged with facilitating the seven-member team's search for money-saving, eco-friendly business practices. Representatives from Ted's marketing, ops, facility management, purchasing, and HR teams, plus Bazor and Ted's president and CEO, George McKerrow, make up the team. Each member spends about three to four hours a month focusing on the gradual greening of Ted's.
Yes, Ted's is fronted and funded by one of the world's most visible environmentalists, but Bazor and McKerrow maintain that founder Ted Turner's passion is just one of two reasons why the Green Team exists. The other is good business sense.
So what does the ROI in operating an environmentally conscious company look like? QSR sat down with Bazor and McKerrow to find out.
How did Ted's 'green' movement start?
MCKERROW: We started with a base: no Styrofoam, no plastic, all glass.
And what about the Green Team itself.
BAZOR: It began about two years ago. Before we actually organized it, it was just direction from George and Ted [Turner]. They told us, "Find out what we are currently spending on utilities and what we can do to reduce it." So that's kind of how we started.
Do members of the Green Team really focus on environmentally friendly initiatives every day?
MCKERROW: Well, it's built into the culture. But yes, they do take time to specifically focus on green initiatives. Ed spends a lot of time.
BAZOR: I probably spend about a third of my time, fielding multiple calls every day. I don't discount any call that comes in because, even though we get lots of calls that are really off the wall, the risk is if you don't listen to them you miss something that might offer positive things for your business.
Why have a director of construction head up the Green Team?
MCKERROW: A lot of what you do starts when you build the restaurants-materials you use, fixtures you put in, the equipment you put in, lighting, HVAC, filtration systems. Ed switched us over to bamboo floors. They are more sustainable. And he's the one who found the low-voltage dimmable light bulbs.
Those light bulbs make for an interesting story. Would you mind sharing it?
MCKERROW: The light bulbs are 8 watts instead of 60 watts, but they give off the same light as 60-watt light bulb.
When we first built Ted's Montana Grill, we used low-voltage fluorescent lighting in the heart of the house. Then I installed light fixtures that were all dimmable but had 60- or 100-watt light bulbs in them. So we didn't have any fancy halogen lighting or anything like that.
Well, the problem was, that when we wanted to find fluorescent low-volt lights to replace the [standard bulbs] in the dining room, we had to deal with the curlicues. And, the light was greenish/bluish, not very good with food. They were non-dimmable.
What we were hearing was, "You have to buy a new fixture. A new fixture will allow those curlicue light bulbs to be dimmable." Well, that was totally cost-prohibitive. We couldn't go back and retrofit all of our restaurants with all new light fixtures.
So Ed continued to work and found this company, bulbs.com, that created whatever that ballast is at the bottom of that light bulb that allows it to go into any fixture and be dimmable.
We did a test. We put it into the restaurants. It cost us $111,000 to replace approximately 100 light bulbs per restaurant times 50 restaurants. The light bulbs have a two-year guarantee, an unconditional guarantee. They say the bulbs will last three to five years, but we have a two-year unconditional guarantee. Light bulb goes out, we send it back, they send us a new one.
In the first 12 months after we spent that $111,000, we reduced our kilowatt hours by 32,000 per restaurant on average. We lowered our utility bill by $185,000. So in the first year, we made $74,000-net gain. We have another year now that's free. If we assume we can save another $185,000, we'll save $250,000 in two years.
Those are real numbers. Yes, it took an investment on the front side, but we paid it back in a year. Anybody, any chain restaurant, any business that knows in 12 months they are going to get a 35 percent return on their investment would be foolish not to get it. And we're going to get a 200 percent return on investment over two years.
And if the light bulb company is right, and they last … let's say 80 percent of the bulbs last three years, 40 percent last four years, and 20 percent last five years, we'll continue that savings down the road because we'll never have to replace every light bulb. And the ones we replace them with get a new two-year guarantee.
Those returns are impressive, but does such an investment make sense in this economy?
MCKERROW: You can't afford not to think about it. There are real savings that can be made in certain things. Should every company do what Ted's does, which is use a paper straw instead of plastic straw at a 100 percent increase in cost (because if straws cost you half a cent, they're costing us a penny)? No. You have to look at whether there is a return on investment.
But if you can use solar panels for your hot water and save real money; change your light bulbs and save real money; recycle and get paid; sell your french fry oil to a biodiesel manufacturer, those are all net gains.You have to look at it differently.
What we're hoping long-term is the more the industry steps up and demands these products, the supply side will respond. Costs will continue to go down to where they're in balance with the nonsustainable products.
Part of that cost for many operators is the man-hours spent on sourcing. People feel like they don't even know where to start.
MCKERROW: Go to the Web site that the National Restaurant Association and Turner Foundation helped fund. That's what that Web site is also about. It's called Conserve.restaurant.org.
Without much trouble, there is a lot of information readily available in their backyards. You can look up the LEED's Web site and find out what those requirements are.
BAZOR: We've considered building a LEED-certified building. If we go back to freestanding building that would certainly be on the objectives because we're finding out you can do that with no additional cost if you plan for it. If you do your research, if you source out the products, source out the sub-contractors, we find that it's still very competitive with the regular market.
What about cost-savings in a build out?
MCKERROW: Let me give you an example. We were putting hickory wood floors in. Restaurants putting oak in would be more common for flooring. Well, bamboo looks just as good and is significantly cheaper than hickory and comparable to oak. So a restaurateur might say: "Well, I'm not saving anything, but I'm also not spending any more."
BAZOR: We're finding that, like with bamboo, a sustainable product, it costs us a bit more to install than what we were previously doing, but we have no maintenance on it. Plus, it's a green item. We helped save some trees because bamboo is a plant. Every three to five years they can reharvest that same plant.
Is there real ROI on the marketing end?
MCKERROW: We had an e-mail come through. The person wrote: "We ate at your So-and-So restaurant. We really, really loved it, but please get rid of the paper straws. It's a great marketing ploy, but we don't think we should have to suffer because of your marketing ploy."
Well, see, it's not a marketing ploy for us. It's a cultural thing that started the day we started the company, when we said we were always going to seek to understand the most sustainable and viable way for us to do business at every level.
That doesn't mean we went out and did stupid stuff that cost us tons and tons of money. Did we do a little bit more than the average person could do? Yes, we did because Ted was willing to fund it. Are we luckier than most? Yes, in that regard. But what we found over time is that we've actually now begun to find ways to save us money. The light bulbs saved us money. The solar panels we use in Florida saved us money.
Have we gone out and put solar panels across the country? No. But we had a specific deal with Florida where we were able to get a state subsidy and federal subsidy and put them onto a building that we own and save about 5 percent of our electric bill.
What is the cost difference between the cornstarch cups Ted's uses and Styrofoam?
BAZOR: Our cups cost us 12 cents a piece for the 20 ounce, 13 or 14 cents a piece for the 32 ounce. They're probably three times more expensive.
MCKERROW: That's logoed and painted. It's more expensive, but you build that into the profitability. Let's be honest: You're putting Coca-Cola or a glass of ice tea in there. Those are the highest profit items in every restaurant. So, yes, you are cutting your margin. The drink you're charging $2.50 for costs you 25 cents with the cup instead of 15 cents.
It's like the grease extraction. We're working a deal now where they're going to give us one of those vacuum systems where we just put the grease in there and they come haul it off-and pay us for it.
I understand the small guy, but, particularly if you're a franchisee, there can be a co-op built up. The company goes to the manufacturer of cornstarch cups, paper straws, recyclable to-go materials and says, "We're going to buy this systemwide," and negotiates a good price.
Yeah, if you own three Subways and go out and try to buy those materials just for your needs, you're going to pay through the nose for them. But if Subway with 30,000 stores negotiated a deal directly with the manufacturer and then made it available and required, you'd find that the price is very, very competitive.
Those types of negotiations make sense when it comes to lighting and floors, but why would Subway make that effort for cups? Paper cups work fine and are already cheap.
MCKERROW: If a company doesn't feel a responsibility to help future generations and the environment with cleaner air, cleaner water, and less garbage then none of this makes any sense. That has to be the foundation of your reason behind it. You have to be worried about sustainability and the future health of the planet first in order to be willing to look at these alternatives. Because sometimes it takes a lot of work just to find them, and oftentimes it takes a little bit of money.
But what I maintain is our costs to operate our business are competitive because we price everything to cover the fact that we spend a little more on certain things that we think are important.
If you don't have that conscience, then, yeah, go out and buy the cheapest, most readily available products on the marketplace. But buying energy-efficient equipment saves you money over the life of the equipment. Buying these light bulbs gave us a real return on investment. We made a quarter of a million dollars in profit. So maybe that offsets that we spent more on paper straws.
BAZOR: At the very least, it kept up with the increases in the cost of electricity. You might not realize the money savings, but you didn't get the increase. If we can just keep with inflation, we're doing great.
MCKERROW: I don't care who you are: We're talking pennies here. You can always say it costs more, but there is a hidden part. The consumer more and more is wanting to purchase goods and services from a company with a conscious that's making an effort.
Yes, some of its marketing. The consumer buys what's hip, what's in, what's now. If you can drive business into your retail business because you have a conscience about sustainability and recyclable materials and you do the right thing for the environment, then that's fine. If you can say, "We're not going to serve bottled water; we're going to have filtered water in our restaurants," (and yes, filters cost a lot of money), you're doing the right thing. And if that enhances your reputation as a company as a place of choice for people to spend their money, then why wouldn't you do that? Is it all bad to say it's helping me drive my business? I don't think so.
McDonald's went off the Styrofoam to cardboard containers years ago, and it cost more money. Styrofoam is cheaper for them, but they knew it was the right thing to do. It's a conscienceness.
Without that conscienceness, you could always say it's not worth the time, money, and energy. But I say we have to change that by talking about things you can really do. If nothing else, why wouldn't you change your light bulbs? Why wouldn't everybody in the United States?
Around here we turn off the lights everywhere. We work in the dark. It's a matter of conscienceness.
But how do we make it financially feasible in the short-term?
MCKERROW: You have to have an open mind and a willingness to explore. You also have to have a willingness to take some risks. And you have to do some work. If you are willing to do those things, there is a way to find in your unique situation a way for it not to be cost-prohibitive.
In reality, the net gain to us is that we cover an awful lot of our excess costs that we spend on Spudware and to-go cups by energy savings, cost-to-build savings, electrical savings. If you put it all into a bucket, you're not really off balance with what the net costs to the company is. And the consumer is willing to pay a certain price for this.
The last piece is this: The fundamental laws of economics have got to take hold. Supply and demand. Organic food will become less and less expensive to the consumer, the more that consumers ask for it. It's being grown on little five-acre, family-owned farms because they are the only people willing to take the risk. That's why we don't have proper pricing. If major producers become organic producers, the cost will come down for consumers and more consumers will buy it.
In which areas can Ted's green program use strengthening?
BAZOR: There are two areas, and I'm in the middle of working on one right now-chemicals. They go right into the waste water. It costs more to clean that water because of all the chemicals. We don't know all the damage that's happening to the ground because of what we're soaking into it and the rivers. And we haven't done anything about waste. We haven't really tackled that.
I'm involved with a group here in town called the Green Foodservice Alliance. One of our initiatives is zero waste for downtown Atlanta. Our objective in the [downtown Atlanta] restaurant is to get rid of all the waste.
That isn't going to cost us initial money, but it's going to save us on hauling fees, the Dumpsters themselves, the clean-up surrounding the Dumpsters.
Have you found value in Ted's membership in groups such as Green Foodservice Alliance?
BAZOR: I go to these meetings and there are ideas being thrown around all the time. Sometimes they don't stick, but the things that do, that make sense, we're jumping on those.
We can make some positive impact without any additional cost.
You mentioned fielding phone calls. How did you get the message out to the supplier community that Ted's is interested in eco-friendly products?
BAZOR: George and Ted have done a wonderful job of going around the country and encouraging awareness.
MCKERROW: Here is the CNN version: Ted has an audience; when he speaks, people listen. He's been an environmentalist forever. We did the restaurant, and, for the first four or five years, nobody gave a hoot about the fact that we were doing a lot of things. We opened with wooden stir sticks, paper straws, recycled materials, to-go containers that were aluminum. No Styrofoam, no plastic. We bought energy-efficient equipment.
Then also what happened is I sit on the NRA board. I sat down with one of the directors, and I said, "There needs to be a green movement in the restaurant industry. If you started some green initiatives, you could go to environmental foundations and get some funding which could then create a support system, a knowledge-based system, sort of like ServSafe."
I hooked them together with the Turner Foundation. They made the case that if the restaurant industry was to become sustainable and conscience and use better environmental practices it fell within the Turner Foundation's mission. So Turner funded it.
That first year they did research. The second year they launched the Web site. And this year they are giving a third grant, which will undertake getting the word out to entrepreneurs and independents.
We need to know how to educate people. That's the biggest problem. It takes a lot of time, energy, and money. But we're fortunate. Ed's into it. He likes it. He's good at it.
Does every idea work? No. The guy who brought the thing that was going to take our waste and turn it into synthetic dirt was pretty impractical. So, Ed kicks a lot of tires before he finds a great idea. He found the light bulbs. And it took a long time.
What about sourcing from an ingredient perspective? How much attention is paid to that?
MCKERROW: It's impossible right now to buy locally.
In Georgia, if you're a fine-dining, white tablecloth restaurant, and you say, "Well it's winter vegetable time so we have acorn squash, rutabaga, and kale." That's OK because that's a chef-driven restaurant.
But if you come to Ted's and we go, "We don't have any tomato to give you on your hamburger because it's not in season in Georgia," that's not going to work.
But could we cause produce companies to start thinking about localizing the growing through old-fashioned greenhouses like there used to be when Georgia had year-round supplies? I know a guy who is putting 40 acres worth of greenhouses up to do just that.
Then, all of a sudden, you start to change the supply chain to where the stuff you need is closer to you. So we're not bringing tomatoes from Mexico or Florida or California in the winter. We're actually growing them in Ohio still, but in a greenhouse.
Lots of things we're going to do are about going back.
BAZOR: We're not reinventing things.
MCKERROW: The average foodstuff travels 1,500 miles to get to the retail shelf. Ted and I had a meeting with the governor of New York. He was talking about how they're really starting to think about ways to incentivize people to buy products only from New York. They want to cut transportation from 1,500 miles to 500 miles. That's less trucks that tear up our roads. Less pollution. More local jobs.
We have to start thinking more locally in everything we do. There's a practicality behind that, too. If you don't think about, talk about, start a broader conversation about it, nothing changes.
And what is Ted's Montana Grill doing to encourage that conversation?
MCKERROW: We took Ted around the country, at his expense, just to start the conversation. And we've started a big conversation. Atlanta, D.C., New York, Philadelphia, Boston. That started a national conversation about this subject.
All great ideas start with conversations and forward thinking. There is lots of trial and error and costs associated with it. But eventually the laws of economics, supply and demand, take over. The more we demand, the more we are going to see things change.
BAZOR: I share information all the time with local restaurants. We're willing to pay the dollars to invest in researching products and finding better ways to do things. I am willing to share that with the guy who doesn't have the money to do that, who doesn't have an Ed Bazor who can spend a third of his time searching for products and testing things.
I sit on these committees, and that's what I do. We're helping the local guys, the guy who owns three delis downtown. We're helping him figure out how he can better manage his business.
It's real easy when you don't have a lot of resources to say, "I can't really do anything." But I'm finding more and more that there are a lot of resources out there. People who have already done the work, who already have products in place.
You don't have to trash everything you've been doing and start over. Nobody can really do that. We can't do that. We decided not to go and replace all our equipment because a new piece comes out that has a better ENERGY STAR rating. But when we need to replace equipment, we consider the new piece. Those are little things people can do that over the long haul will mean real savings.