Made To Order

If a rancher ran a restaurant, it might look eerily similar to The Machine Shed, a growing chain of Midwestern casual, home-style restaurants where there's no such thing as wannabe mashed potatoes or make-believe whipped cream. Instead, the food here is 100% genuine. It's tasty enough to make Grandma smile and abundant enough to pop Goliath's buttons. All served at bargain prices by folks who seem

If a rancher ran a restaurant, it might look eerily similar to The Machine Shed, a growing chain of Midwestern casual, home-style restaurants where there's no such thing as wannabe mashed potatoes or make-believe whipped cream.

Instead, the food here is 100% genuine. It's tasty enough to make Grandma smile and abundant enough to pop Goliath's buttons. All served at bargain prices by folks who seem like family.

"We're convinced everyone wins when we provide the customer with a better product," says Carmen Darland, vice president of marketing for Heart of America Restaurants and Inns (HOARI). HOARI owns The Machine Shed, other restaurants and hotels; 22 properties in all that serve 12,000 dining customers each day.

A commitment to giving customers quality has helped The Machine Shed grow from a 100-seat coffee shop in Davenport, IA, to a string of six restaurants - and more on the way. Moreover, the restaurant boasts an unheard of 90% repeat customer rate.

Plus, this chain has always focused on forging a strong tie between its customers and the producers who engineer the raw material for their fare.

"We've always been dedicated to the American farmer. That's what we're all about," explains Tony Shepard, chief operating executive of The Machine Shed in Des Moines. It's the largest volume restaurant in the HOARI chain and in Iowa - serving about 2,500 people every day.

That's not lip service, either. They wear their hearts on their promotional sleeve with, "A Restaurant Honoring the American Farmer," as part of their logo.

Actually, Darland explains the restaurant's producer focus has always been as much about the business plan as promotion. She says, "The original idea was to showcase the Iowa farmer, then it grew into honoring the American farmer. It was an opportunity to showcase what's here."

The Producer Connection
Early on, The Machine Shed carved out a niche with pork - including the Iowa chop, which looks more like a small roast and eats like butter - and still relies on it as a drawing card. Nonetheless, HOARI wanted to develop a direct relationship with beef producers with the intention of making their steaks a one-of-a-kind eating experience.

Beef is always the top seller in our restaurants, Shepard explains. He adds, beef is a way restaurants can define themselves and differentiate their product from the competition.

But moving away from standard supply channels for a more consistent product is a spooky proposition.

"You're going after the highest quality but you have to make sure the supply of product and the producer will be there," says Kevin Rinehart, executive chef at The Machine Shed in Des Moines.

Enter Dave Nichols and Nichols Farms of Bridgewater, IA, with a branded beef product crafted from his own genetics and a cooperative game plan to benefit everyone involved, from the producer to the consumer.

"This is a total quality management system where everybody is held accountable," says Nichols, explaining the supply partnership that began between The Machine Shed and Nichols' customers last fall.

Throwing a broad loop, the program works like this:

  • To be eligible for the branded beef program, cattle must be at least half Angus and either sired by Nichols bulls or out of Nichols females; a growing number of calves are entering the system via two Nichols genetic source feeder calf sales held each year. All qualifying cattle are calf-feds serving up at least a Choice Yield Grade 3.5 carcass weighing 750-800 lbs.
  • IBP harvests the cattle, then markets qualified carcasses to a distributor, which sells directly to HOARI.
  • Cattle feeders receive $2.50/cwt. premium for carcasses, plus the premiums of IBP's real-time value grid at the time. In turn, cattle feeders procuring calves for the program have been paying more than the average market to get them. Carcasses that don't qualify for the brand still get the IBP premiums. Nichols handles all of the procurement and scheduling.
  • All product entering the Nichols brand is aged a minimum of 21 days. All told, there are about six weeks between cattle procurement and restaurant availability. Every step of the way, these cattle are tracked with electronic (EID) or hanging (visual) tags.
  • "We're setting up a system so that it really is farm to fork," says Nichols. But, he points out, "Our goal is to work within the existing infrastructure and systems to be as efficient as we can to develop the product for the lowest cost possible."

    Consumers Like The Taste
    "We had always used a Choice product off the shelf, but it was amazing the difference," says Shepard. "There's no doubt that consumer response has been favorable. They talk about the flavor and the tenderness and tell us it's the best steak they ever had."

    "We'd been looking for a way we could guarantee the quality of our beef product and know how it was raised," says Shepard. It's not like they were getting complaints about the Choice product they served, but inconsistencies in areas like plate yield and seam fat were frustrating to an organization aiming to serve nothing but the best.

    Of course, Nichols recognizes that consumer satisfaction has to do with preparation and service, too.

    "It's not one thing that makes it better," he explains. "It's all of those little 5% things stacked on top of each other, from the waiter carrying the steak out to the table, to the guy making the breeding decision."

    And, that translates into more sales, while fine-tuning this select-supplier relationship over time should also drive down unit cost.

    "We've been able to provide a better product, but it has to be economic and it has to make economic sense for us to do it," says Darland.

    So far, Nichols Beef is exclusive at The Machine Sheds in Davenport and Des Moines. But Darland says, "Our current strategic plan is for Nichols Beef to evolve into all of our restaurants." That would mean more than a load of cattle every week of the year.

    "We hope we can get their cost per serving to or close to commodity price," explains Nichols. "We're not trying to figure out a way for them to charge $30 per plate." Or a need to.

    After all, Shepard says, "Our goal is to have the same price as the guy down the street but to have twice the quality of the product."

    "This is a dream come true from the standpoint that we are giving cattle producers, regardless of size, the chance to be part of a value-added system. If a guy does things right, he's entitled to a higher price for the cattle, and we're proving he can get it," says Nichols.

    Since the program began, Nichols explains, average per-head premiums have ranged between $20 and $70. And, producers like Bruce Steele of Fontanelle, IA, appreciate it.

    "It's a little closer to the consumer than the grocery store, and we're being rewarded for it," says Steele. He grows calves, buys calves and feeds cattle for the program. Steele estimates cattle he sends from the feedlot to the Machine Shed are chalking up $30-$35/head premium on the average.

    Plus, Steele likes the notion of being tied closer to consumer likes and dislikes. He explains, "It's a good way to get a quality product out to the dinner table, and this is a way of showing the public what we have to offer."

    Incidentally, Nichols says, "Lots of producers are focusing on retail markets today, but the fastest growing segment of the market is foodservice." Estimates peg foodservice sales of beef as half of all beef sales in short order.

    "I think it's just an example of what can happen, what good people can do when they have a goal and decide up front they don't want to rip each other off," says Nichols.

    Really, as complicated as such an enterprise's logistics may be, the idea behind it is as simple and appealing as real apple pie. Shepard explains, "There's room for everyone to make more money along the way when we can give consumers a value-added product without charging them more money."

    For more information, visit, call 515/369-2829 or e-mail [email protected].