Restaurant and Food Service Blog

“Restaurants offer escape from economic woes” from the Nation’s Restaurant News.  According to Bob Derrington, a securities analyst at Morgan Keegan & Co, he sees a silver lining for the terrible economic downturn. In addition The Nation’s Restaurant News reported that many trends in QSR and casual dining are showing positive growth indications from the last quarter. Maybe not is all so bad after all.

Regardless what analysts may be predicting, there are a huge number of top executives and professionals out on the market or really great ones who are taking a serious look at what the market is like. I still suspect that will a Dow that is taking a beating and looking like it may hit 6000, we still have a long haul to go before any of this is going to get better

NexCen Brands Inc., the licensing and franchising company that sank 77 percent yesterday after saying it may have a cash “shortfall,” said it can’t rule out bankruptcy as it considers its options.

“As noted in our SEC filing yesterday, the company believes there is substantial doubt about our ability to continue as a going concern,” the company said today in a statement e-mailed to Bloomberg News.

This company was on a tear with purchasing several restaurant brands such as Maggie Moo’s, Marble Slab and Great American Cookie. Now look. They stock has plummeted and there is talk of the company filing Chapter 11. They just appointed a new CFO in March and it is tanking hard.

This may be one of the first of many casualties in the restaurant industry for 2008. It is not surprising that rapid development like Nexcen in today’s current economy was going to eventually catch up. From shoes to fashion to pretzels and ice cream, I think that D’Loren’s strategy of diversifying is not the answer here.

I would be interested to see if Iconix, a smaller but similar model to Nexcen will follow suit.

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Darden just disclosed 3rd quarter earnings (See press release on RestaurantNewsResource.com)  With a lot of positive comp sales growth in almost all of their brands, I wonder if the restaurant behemoth is looking to make a turn for the better. As most of the causal dining sector has been going over the past couple of years, the segment is due for a better run.  However, with transportation and commodity costs still running high, I question if this is only temporary.In addition, much of the positive earnings that Darden is showing can probably be attributed to the sale of Smokey Bones in December of last year.  The the looming economic slow down and financial crisis on Wall Street makes for great fodder for the restaurant industry.

Technomic, the restaurant consultancy group, released its annual reporting of the top restaurant chains in the US. Technomic’s data shows a current slow down in restaurant sales in 2007 relative to 2006.The quick causal and limited service concepts continue to do well. But was interesting to see is that even among the good segments, there are still losers. This will ultimately be the demise of poorly run concepts.More importantly, what I think this will do is make the restaurant industry stronger. The industry is due for some contraction and with any cycle it is necessary to weed out the players from the dogs. Look at Brinker for example. They recently let go a bunch of talent. But in my mind it was probably necessary. What has Brinker done lately. The brand was once known as great breeding ground for tomorrow’s talent. If you had a Brinker background and were half decent, you would go far in this industry.But look at Brinker now. Just about everything they have had a hand in is terrible. Romano’s is in the toilet. Chili’s has seen better days. And Maggiano’s is fluttering about. Perhaps it is the casual segment since it has really taken it on the chin over the past couple of years. But what I think that the casual dining segment needs to learn is that most American’s today want quality and value. That is probably why the quick casual (Panera and Chick-fil-A) and limited service (Starbucks) are still doing well.read more | digg story

Last month I delivered my 2008 Predictions for the Restaurant Industry. I want to share that piece with my readers. Please let me know your thoughts.This is the first annual Predictions for the Restaurant Industry presented by Orrick Nepomuceno, CPC. 2008 will prove to be a tough time for the US economy that will have a huge impact on the state of the Restaurant Industry.

1. Sluggish Sales Growth Will Continue For 2008. The restaurant industry overall will see very conservative growth across all segments (casual, quick casual, quick service and fine dining). According to NRA estimations, the industry will see only a 0.9% sales growth for 2008. Although more Americans are spending a higher percentage of their disposable income allocated for food then ever before, most households will be less likely to eat out several times a week. Most likely, they will eat at home and save instead. Even if the President’s economic stimulus package does pass and Americans see a few extra spending dollars, most economists believe that most households are barely making ends meet. Bottom Line: Americans will have more disposable income in their wallets, but will probably consider saving instead of spending.
2. Increased Energy And Wholesale Food Costs Will Have A Negative Effect. With the price fluctuations in crude oil, lower and mid level-income households will feel a tighter pinch on spending disposable income on dining out as they will be inevitably hit hard with increased gasoline prices. Studies have shown a direct correlation to slumping restaurant sales and the increase in gasoline prices. Additionally, 2007 saw a nearly 8% increase in wholesale products. Much of this cost was eventually passed on to the consumer in higher menu prices. Most estimations see wholesale food costs to remain high for 2008 as well. Bottom Line: Households will get a double hit with transportation and dining expenses.
3. Technology Will Continue To Advance Even More Rapidly Than In Previous Years. Companies will look to the Internet for connecting with customers in more ways than before. Traditional print and television mediums will drive consumers to websites for offerings and coupons. Online ordering will become more robust as mobile handheld devices such as the iPhone have web browsing capabilities similar to their desktop versions. Also, a “Facebook” and “MySpace” type of social networking will become more prevalent with company sites where consumers can create online profiles. Bottom Line: The restaurant industry has a long way to go before it catches up with other industries in terms of technology.
4. Recruitment And Retention Will Be Of A Lesser Concern. The restaurant industry has always been a labor-intensive industry with recruitment and retention being typically the biggest concern among most hiring managers. But for 2008, according to NRA predictions, the industry will see a relatively small increase (0.9%) in the employment growth rate. Coupled with a slowing economy, job creation will be less than in 2007. Thus, with less demand for employees in 2008, many hiring authorities may substitute their concern for human resources to other cost cutting measures. Bottom Line: Many operators’ concerns will be moving towards cost reduction in order to stay competitive.
5. Bullish On Coffee Bars. One segment, although relatively small, the Snack & Non-Alcoholic Beverage Bars (Coffee and Dessert bars) will see higher than normal growth compared to other segments. In 2007, coffee bar sales outpaced beyond the rest of the crowd. Bottom Line: Companies will look to find niche segments where there is little or no saturation.
6. Global Cuisine. At a recent conference of Executive Chefs across America, most commented on smaller sized portions and introduction of ingredients from different parts of the world. Ethnic flavors found roots in the US with inspiration from Latin America, the Mediterranean, the Middle East and Southeast Asia. Many chefs also commented on utilizing more local produce, sustainable seafood and grass fed beef and poultry. Bottom Line: American diners are becoming more savvy and demanding more exotic flavors when they go out.
7. Fat Is Not In. Americans are demanding healthier foods as we wage the war on fat. Look for menu offerings at current concepts to reflect this trend, but also expect new totally concepts to emerge and fully embrace a menu offering with healthier choices – a la Seasons 52. With obesity in America on the verge of becoming an epidemic and local municipalities looking to stiff arm the industry into removing trans-fats and other harmful foods, the restaurant industry as a whole needs to get ahead of the curve and take a stand on obesity. Bottom Line: Expect the Federal Government, not local municipalities, to continue campaigns to reduce the consumption of trans-fats.