Restaurant and Food Service Blog

The first movements of the new year in the chain restaurant industry are beginning to show as Captain D’s announced that David Head has been promoted to Chairman and CEO of the Nashville-based seafood restaurant chain. Head had been president and COO, overseeing all aspects of the business since joining the company in 2006. This is in the wake of Nick Shepherd, Chairman and CEO of Captain D’s parent company Sagittarius Brands, departing the business in February to become President and CEO of Carrollton, TX-based Carlson Restaurants Worldwide, Inc., parent company of TGI Friday’s and Pick Up Stix. Then back to Sagittarius Brands and Del Taco, Del Taco announced that Paul J.B. Murphy III has been named the new Chairman and CEO of the Mexican quick serve chain. Murphy will take over this new role in mid-February and will report directly to the company’s Board of Directors.

With all the movement starting, it will be interesting what new changes will also take place. With Raising Canes officially moving their headquarters from Baton Rouge, LA to Plano, TX, the QSR Chicken restaurant company is looking to build expansion and attract more talent as they continue to grow. They will be another interesting player to keep a watch on for the up coming year. Todd Graves, the founder of the company will remain in Louisiana to assist with the smaller office there that will lend support to the local units there.

As we look to how 2009 will turn out in the restaurant industry, there is sure to be more changes in personnel as well as major reorganization.

Going green has gone from a catch phrase to a way of life. The concept has infiltrated almost every aspect of the everyday and businesses have smartly tuned into this, adjusting processes from the back to front end. Here, we examine a few great examples of how select companies are making this work for them, how your business can do the same, and primarily how adopting this approach will be the key to a successful recruiting and retention strategy from now into the future.

Score for the Environment

Climate Counts is a nonprofit organization developed for the sole purpose of bringing together consumer and companies in the fight against global warming. Each year, the firm announces the results of its annual Company Scorecard, a process whereby companies are rated on their greenhouse efforts and making that information applicable to consumers. Its second annual results, released in late spring of 2008, revealed that Google, Anheuser-Busch and Levi Strauss had the largest score improvement, each jumping over 20 points from the year before. Nike was ranked No. 1, while 84% of the scored companies all made improvements in their efforts.[i]

Wrapping It Up

A prominent factor of food service is packaging. From to-go cups, to portable trays, to the bags in which they are carried, all are components requiring a second look by establishments and especially the manufacturers with whom they choose to do business. A great example of a recent evaluation and complete restructuring of process and approach is that provided by Freshens, the frozen yogurt and smoothie chain. Just this past fall, the company revealed its latest sustainability initiative, the “ecotainer.” The company recognized that the billions of plastic, paper and foam cups purchased each year were not recyclable. So, they went out to bid in search of a manufacturer that could produce a fully-compostable cold cup. They found just that and have launched the first-of-its kind in the United States.

Food Service Application

Going back to the results of the Scorecard produced by Climate Counts, we find that “the Food Services sector had the lowest average (11.5 out of 100) of any of the eight sectors measured with smallest overall improvement.”[ii] And, according to an article earlier this year in USA Today, “Restaurants are the retail world’s largest energy user. Nearly 80% of the $10 billion dollars that the commercial food service sector spends annually for its energy use is lost in inefficient food cooking, holding and storage, says PG&E’s tech division.”[iii]

Imagine what could be accomplished if each establishment took this on as a personal challenge to make one significant process change in the New Year. How much of an impact could be made on our environment? It’s up to you to do just that. And not only would you be improving your world, but your business appeal would increase as well. According to research conducted by Harris Interactive, 1/3 of workers said they would accept a lower salary in exchange for working for a green company.[iv]

For ideas on conservation and a “greener” way of running your food service establishment, visit www.conserve.restaurant.org.

The day after the election, the market plummeted in what analysts surmise was in anticipation of the challenges the new administration will have to face once it takes office in January including unemployment, the war in Iraq, and the economy in general. Was it a bad sign for things to come? Probably not. Daily Markets said that “investors must have felt the after-election fall wasn’t completely justified,” as the markets railed just three days later.

So what are the realistic expectations we should have about how employment will be affected by the new administration? Here we take a look at what is being said, what promises are being made, and what is realistic given our nation’s current situation.

Unemployment

In October 2008, we reached the highest unemployment rate our nation’s seen in 14 years. There are a huge amount of catalysts that can be blamed for this occurrence, but the bottom line is that all of them together made for the perfect storm – eliminating a total of 1.2 million jobs since January 1. While the restaurant industry has yet to feel as big of an impact from these conditions, as I have said in some of my other articles, the effects, to some degree, will be felt by all before this is all over. So, let’s take a look at what the administration is saying now about the problem and what you can expect in the near future.

The Plan from the President-Elect

On Friday, November 7, just three days after his historic win, Obama met with 17 high-level economic advisors to discuss the economy, and especially the state of employment. They primarily discussed the loss of an astounding 240,000 jobs in the service sector in just the month of October. Economist for Goldman Sachs, Jan Hatzius, said, “The U.S. labor market has moved into full recession mode with payrolls dropping sharply—and more than generally expected—in October and, on revision, in September as well.” What’s more, Goldman Sachs announced that the unemployment rate could reach as high as 8.5pc by the end of 2009. 

With this, Obama has said that the current state of economy is an urgent reminder of the need for swift action. In his first news conference on the afternoon of November 7, Obama said, “Immediately after I become president I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity.” To do so, Richard DeKaser, chief economist for American regional bank National City said, “This is going to increase the urgency for another stimulus package to staunch the slide.”

Expectations?

With all this said, what should your realistic expectations be about the job market? In my mind’s eye I see us with a difficult road ahead. I think it is going to get worse before it gets better, as predicted also by Goldman Sachs. When a movement such as a major bailout occurs, it takes a while for the domino effect to make its way around, so we need to be patient, as consistently reminded by the White House. There is relief in sight, but recovery from something like this takes time. My best advice is to stay informed and to formulate a back-up plan for your career. Don’t wait for the chips to fall – anticipate them before they do and be prepared with other options.

Restaurants here in the Triangle area are also feeling the pains from the financial meltdown. Sue Stock, staff writer for the Raleigh News & Observer, points out that for many restauranteurs here in the Triangle – flat is the new positive. Most hope to just break even this year and have tried several things to attract diners to their restaurants such as cheaper items, BOGOs and even opening up on holidays that they typically would not in the past.

But what I think that many restaurants are forgetting is that everyone is looking for value. In our household, I can admit to now buying only items that are on sale or with a coupon. In the past, I would scoff at the idea and could not think of wasting my time. But now that times are a bit leaner and we are all making every dollar stretch a bit more, all sectors of the industry need to get back to basics.

Simply gimmickery such as BOGOs or slash and burn sales may only bring the one time diner into the restaurant. but it will not retain them as long term customers.

I am witness to it.

After cutting out coupons from the Sunday paper, I thought that taking the kids out to lunch at Quizno’s was a good choice since there were 8 coupons to pick from. I could certainly take my two children and myself out and eat relatively cheap before we went out to run errands. We each had a sandwich with chips and a drink and after the coupon, I paid under $14. Not bad for a quick, cheap meal.

But I probably will not go back to Quizno’s anytime soon. It was not because of the meal. Overall, I got what I expected. It was the service. No one behind the counter engaged us. The help looked like they did not want to be there and with only one other person ahead of us, it took almost 5 minutes before our order was taken – very slow by many QSR standards, especially with a solo diner ahead of us.

If restauranteurs can do the ordinary things extra-ordinarily well, I think many will get out of 2009 with only a few bumps and bruises. But get away from delivering great service and operations, the core of the business will wither away

Lane Cardwell from the Chain Leader had a great post the other day about the great parallels in sales between the restaurant and retail industries this Christmas season. He used data that was just released by the Thomas Weisel Partners’ 2008 Post-Holiday Sales Report and 2009 Outlook.

Overall, customers are looking for great value and cutting back on all spending. A lot of this was witnessed with the huge sales towards the end of the year to attract customers. But what will bring the customers coming back is having solid service and a relevant concept with a value. The buy a dinner get a free dessert will not work, but rather buy one dinner, get one free.

It is a different set of rules. The companies that can understand the pains of their customers the most and make their concept adhere to the constraints of the average household will win in the end.

When you think about globalization and how it affects the food industry, there are probably two immediate impacts that come to mind—the outsourcing of jobs to cheaper labor and the need for enhanced communications options for those with English as a Second Language or who do not speak English at all. But globalization affects the industry in a much bigger way. And even the small, local shops are being influenced, possibly without even knowing it, by trends that have evolved through globalization.

In 2007, Mr. Mats Östblom, Independent Operator Representative for the IH&RA Board of Directors made a presentation to the Chinese Food Festival in Qingdao, China titled “Trends in the Global Restaurant Industry. Following are the ten food services trends he says are being seen on a worldwide basis.

Quick-fix Prepared Foods—With an increased focus on family and quality time doing less menial tasks, consumers are demanding meals that will allow them to spend the least amount of time in food preparation.

Drive-and Go Take Out Foods—People worldwide are moving at a faster pace and are demanding their food be prepared in a way that complements this lifestyle. Additionally, a large portion of the population has evolved way from the typical 3 meals a day toward the 5 to 7 smaller “snacks” instead. Consumers want portable, on-demand items that are conducive.

Inherently Healthy Foods—These are the items that have a positive pharmaceutical benefit that goes beyond basic nutrition. This includes oatmeal, whole-grain breads, cranberry juice, nuts, etc. which offer consumers added benefits such as anti-oxidants, omega 3, and cholesterol-lowering ingredients.

Fancy Premium Gourmet Foods—Have you noticed that the local burger joint has begun advertising a fresh fish option? This is in line with the trend that consumers want to see more gourmet options from their everyday favorite places to eat.

Authentic— The push toward organic and other inherently healthy foods has never been so great. Consumers are growing not only to expect such options from their local grocer, but from food service establishments as well.

Ethnic Foods—The true sign of increased globalization is the desire for more ethnic foods right here at home. You no longer have to go to Epcot Center to find the tastes of different lands around the world – you just have to go around the corner.

Security in Foods—Not only is contamination in the spinach and tomato fields here in the U.S., but in other places from which we import food products. Globalization makes the world much smaller—increasing the ease of doing business with and importing from countries where production is cheaper. But with it comes the responsibility of safety and security for consumers’ health…a trend much more closely monitored these days.

Layering Flavors—As other cultures permeate our own, our palates change, a trend most noted in the increase in demand for more flavor including spices, oils and vinegars.

Healthier Snacks—Candy bars just aren’t cutting it any more for many. Instead, health-conscious individuals are looking for smoothies, frozen yogurt, and health bars.

Calorie-Minded & Light Products—Going out to eat no longer is taken as a “free pass” to eat whatever one wants. Consumers expect that food establishments will offer them light and/or calorie- and fat-minded choices as well.

The state of the economy has been a source of concern for many during the past year, to say the least. Almost every industry has experienced cutbacks, downsizing, and every other word that makes the average professional lose sleep at night. That is, except for the restaurant industry.

If there is one thing to be thankful for during this time, and it’s a big one, is that you have chosen to work within an industry that remains virtually unchanged by the current economic climate. In fact, according to the National Restaurant Association, the restaurant industry is one of the nation’s largest private-sector employers, with a total of 12.8 million employed today and an expectation of adding 2 million more new jobs between 2007 and 2017.

So, the question now is: Will the predictions prove true or will the restaurant industry feel the impact of economic woes? To answer this question, we need to evaluate the trends that could present the biggest challenges, a task we take on here in this outline of restaurant industry employment expectations for 2009.

Hourly vs. Salary

One of the most notable trends that has been occurring and could be on the rise as we get further into the New Year is the practice of bringing on more hourly employees. Salaried workers are locked in, so to speak, whereas hourly workers offer variability. This provides restaurant operators the ability to adjust the amount of workers and their hours according to budget as the climate fluctuates (more in peak times, less in off-peak times).

Decrease in Open Positions

In that same vein, restaurant operators are also beginning to save more money by scaling back on the amount of time employees are working by taking on more work themselves. This means either an hourly cut-back, or worse—an elimination of positions. According to the Daily News of Lower Columbia, “Restaurant owners are laying off their managers and taking on more of the work themselves in an effort to stay afloat. Some are trimming back restaurant hours. They’re also cutting staff at the front of the house.” This, of course, means tighter job markets for both hourly and salaried employees should this trend continue.

Salary Expectations

Currently, PayScale.com lists the average salaries for the following positions:

·      General Manager, Restaurant = $44,725

·      Restaurant Manager = $38,959

·      Restaurant Assistant Manager = $34,258

·      Executive Chef = $52,225

·      General Manager, Food Service = $47,232

·      Food Service Manager = $39,288

·      Kitchen Manager, Restaurant = $40,256

While salaries have been historically increasing at least a small percentage every year across the board, it is not necessarily expected to continue into 2009. According to a recent survey conducted by Outside the Lines, a wine and hospitality consulting firm, salaries are not expected to increase or decrease, but rather stagnate or rise at the rate of inflation.

Keep it Realistic

While the restaurant industry is not likely to get hit near as hard as many others, there are some real factors impacting profits. As long as healthcare, fuel, minimum wage, and food costs are up, cut-backs will be seen within the industry with a noticeable decrease in available positions. The best thing you can do is be realistic about possible influences to job security in the New Year, stay on top of the latest news, and be proactive in your career plan—be prepared now for changes in the future.

So many restaurant chains at the end of 2008 were offering low price point promotions in hopes to help boost sales. From $1 dollar menu items at the QSR chains to $99 dinners for two at steakhouse such as Morton’s, everyone was feeling the pinch from the mortgage crisis. In order to help stave off slumping sales, everyone was doing their best to attract a dwindling customer base.

Even during the post Christmas sales, you could find huge sales of nearly 75% off on retail products.  But I think that Guy Kawasaki made a great point in his recent blog posting when he noticed a lot of sales at the Stanford Shopping Center. Click here to see the pictures from blog posting.

In almost all the stores at the shopping center, huge discounts were being offered. All but one store. At that one store, there were a ton of people looking and buying. That one store was Apple Computer!

Seth Godin goes farther with his recent blog post – Change Your Price. The first line of the post is very poignant. “When a restaurant goes from a la carte to either a buffet or a prix fixe meal, it is able to find a new class of customers.” What I think the industry has in store for 2009 is something of great significance.

Although this is a very bad economy, in it is a lot of opportunity. Remember the last down economy that we saw in 2001? During that time we also saw a huge amount of innovation – the introduction of the iPod and Microsoft’s Xbox. The great restaurant leaders are going to see beyond this economic mess and turn lemons into lemonade.