Restaurants

Bakers Square Finds Renewed Growth Path

Restaurant Management - 8 hours 39 min ago
Bakers Square Finds Renewed Growth Path ben Wed, 05/18/2022 - 08:26

The 53-year-old breakfast, lunch, and dinner concept is planning to triple in size in 2022. 

May 18, 2022

Famous Dave’s parent BBQ Holdings, which is changing its name to Famous Hospitality due to all of its recent acquisitions—operates nearly a dozen brands, but none are experiencing more growth this year than Bakers Square. And it’s not particularly close.

The 53-year-old chain finished Q1 with 18 locations, and BBQ Holdings expects that total to be 55 by the end of the year. All of the expansion will come as a virtual brand inside another restaurant.

In Q1, Bakers Square operated as a ghost concept inside three corporate and four franchised Famous Dave’s locations. At the conclusion of 2022, the company is projecting 20 Bakers Square virtual brand locations inside company-run stores and 24 in franchised outlets, to go along with 11 brick-and-mortar units.

The strategy is years in the making for CEO Jeff Crivello, who told FSR he’s admired Bakers Square for more than 30 years. Prior to COVID, he put a presentation together for his board of directors in hopes of acquiring the chain. The timing wasn’t right at that moment, nor was it in early 2020 when the parent of Bakers Square filed bankruptcy.

Crivello finally found the opportunity last year, leading BBQ Holdings to buy Bakers Square and Village Inn for $13.5 million. The brand’s brick-and-mortar and virtual brand locations are all based in the Midwest.

“You hear Famous Dave’s and it’s synonymous with ribs. You hear Bakers Square and it's synonymous with pies,” The CEO told FSR in July 2021. “So there's some proprietary aspect that instantly you think about when you hear the brand name.”

The casual-dining chain, which sells only pies out of Famous Dave's kitchens, is still recovering from COVID’s impact. In Q1, same-store sales lifted 17 percent year-over-year, but declined 12.5 percent against 2020 and decreased 17.7 percent versus 2019.

Overall, BBQ Holdings operates 315 locations across Famous Dave’s, Village Inn, Granite City, Real Urban BBQ, Clark Crew BBQ, Tahoe Joe’s, Barrio Queen, Fox & Hound Bar + Grill, and Craft Republic Bar & Grill.

Going forward, the primary goal of Bakers Square will be to fill latent capacity in Famous Dave’s restaurants, as BBQ Holdings believes the chain’s 6,500-square-foot stores were meant to execute higher AUV than $2.9 million. The casual-dining brand’s other ghost concept is $5 Burger, which is estimated to have 25 percent flow through.

READ MORE: Famous Dave's Unites Breakfast and Barbecue in Latest Acquisition

In addition to virtual brands, the barbecue chain is exploring dual-concept locations with Tahoe Joe’s steakhouse, a growth channel it’s already implemented in Colorado Springs with Texas T-Bone Steakhouse and with Cowboy Jack's steakhouse in Woodbury, Minnesota. The format is expected to add $800,000 in revenue and $200,000 in EBITDA.

And that’s just for the full-service business. Famous Dave’s opened two line-service restaurants in Las Vegas and Coon Rapids, Minnesota, in 2021, and debuted a third in Grand Forks, North Dakota in April. The first drive-thru unit opened in South Salt Lake, Utah in March, and another is planned for Avondale, Arizona, by Q2 2023.

Famous Dave’s operates 144 stores, including 104 franchises and 40 corporate outlets. Of that total, 27 are ghost kitchens. The barbecue brand’s company-owned restaurants saw same-store sales lift 7.9 percent year-over-year, 22.6 percent versus 2020, and 12.6 percent compared to 2019. Looking at the same set of years, the franchise-operated footprint increased 8.6 percent, 21.3 percent, and 5.6 percent.

Bakers Square’s sister concept, Village Inn, is undergoing a brand refresh involving a handful of higher-end choices that complement pie flavors, while keeping value for core customers. The first prototype should open in Q3 in Omaha, Nebraska. Village Inn has 125 restaurants, 82 percent of which are franchised. Same-store sales at franchise-led units grew 19.9 percent year-over-year. Data was not available for comparisons against 2020 or 2019.

BBQ Holdings also opened a Village Inn/Granite City dual concept in March. Granite City is designed for $6 million in AUV, but it was earning just $3.9 million before COVID. The partnership with Village Inn is expected to add $750,000 in revenue and $225,000 in EBITDA.

All of BBQ Holdings’ acquisitions have been completed within the past two years, starting with Granite City in March 2020 and as recently as Barrio Queen in April. The company may not be done yet either. It continues to seek restaurants with the following qualities: legacy brands that have stood the test of time, franchise systems with growth potential, potential CPG in retail, expertise in digital marketing, and accretive purchases (3-5x EBITDA) that fold into current infrastructure.

“The beginning of 2022 marked another successful quarter executing on our three core growth initiatives which include filling latent capacity of our current restaurants, organic unit growth, and building a diversified portfolio of food and beverage brands via accretive M&A,” Crivello said in a statement. “ … Despite a challenging inflationary environment, and acknowledge continued headwinds, we continue to deliver consistent results, and look forward to a successful 2022.”

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Categories: Restaurants

Becoming a Mentor to Women in the Restaurant Industry

Restaurant Management - Tue, 05/17/2022 - 18:35
Becoming a Mentor to Women in the Restaurant Industry ben Tue, 05/17/2022 - 18:35

The right mentorship goes beyond emotional support and advice.

May 17, 2022

There are countless articles published talking about the importance and value of mentorship, and we recently saw many of these voices during Women’s History Month in March. Many of these articles strike home at the essence and reasons why mentorship is especially critical for professional women in the workforce.             

However, for professional women in a male-dominated industry such as restaurants, these articles go beyond simple inspiration. They can be the difference of a short-lived career, or that of an enduring one where you can truly leave a lasting impression on not only women—but the industry as a whole.      

I immigrated to the U.S. when I was 10 years old from the Czech Republic, not knowing a word of English. I worked two jobs in high school to help my mother make ends meet and worked three jobs while attending college full time on an academic scholarship. I spent a lot of time in the restaurant industry, working on the weekends and holidays, envious of guests on the other side of the table. It’s true, my sheer determination led me to where I am now, being a wife, mother and gaining knowledge and experience from many male-dominated industries. But along the way it has been clear to me the importance of finding opportunities to help other women advance.       

How mentors can support professional growth      

According to a recent survey, 56 percent of American workers have had a professional mentor, while 76 percent believe that mentorship is important. Previously working in male-dominated industries including construction and motorcycle equipment, I am passionate about helping other women as they pursue careers in restaurant operations. I have experienced the difference hard work and women can make, not only through mentoring to other women, but also by bridging the gap with men in the restaurant industry to help them understand gender differences as well as varying values women can offer their companies.      

At the start of my career, I felt the right thing to do was to become “one of the guys," understanding the language and learning their way of communicating with one another. I was passionate about my work and projects, intensely focused on client service, and was certainly growing confidence within the industries I worked. But along this journey I began to grow more confidence and I realized the importance of stepping outside this mold and understanding the distinct differences between men and women—particularly in the areas of communication. For me, I was fortunate to work in a company environment where these diverse voices were encouraged—even within a male-dominated industry.      

Other women are not so lucky. Many do not have the fortune I’ve had with supportive senior management. This is where mentorship becomes so critically important.          

I know this because I’ve seen it first-hand, through my involvement with restaurant associations and organizations where I’ve had the luxury of meeting hundreds of other professional women. Learning from these women has been instrumental in furthering my own professional career, as well as shaping the type of mentor I’ve now become to other professional women—of all career levels—inside my own very organization. I’ve also made it a priority to focus on nominating women colleagues for industry awards and speaking engagements inside my organization so they can shine under their own spotlight, and it was also important that I encourage them to attend the Women’s Forums from various associations for additional growth opportunities.        

It's ok to not be ‘just one of the guys’      

I wanted to become a strong female mentor who could demonstrate to others how to be successful without having to just be one of the guys. It has been important to be strong and show how to make it okay to be female, even feminine, in the industry and serve as a leading example to others.        

It is important for women to mentor other women, provide opportunities and lift each other up. The professional direction women receive from other women is essential. Consider the things female professionals need to be successful. Outside of professional talent and hard work, sometimes women need support from others to champion their ideas and goals, which studies continue to show, may not always receive the same amount of direction and prioritization as those of male colleagues.      

The right mentorship goes beyond emotional support and advice. It can be imperative in helping growing female leaders understand and successfully navigate the political minefields that every organization encounters, male dominated or otherwise.       

Best practices for finding mentors      

Finding mentors can be challenging for professional women, particularly younger women. Mentors, like portfolios, should be very diversified. You should seek mentors with similar interests, and with dissimilar interests. Mentorship should not just be a popularity club. You should seek mentors of various age groups, as long as they have sincere wisdom to share. You should also choose mentors who can support you in difficult times, but also challenge you and push you to be even better than you ever expect to be. Mentors are special people who have the ability to see potential, and help you reach that potential even when there are difficult situations to navigate.      

With this insight, professional women of all ages can have a better understanding of what to look for in a mentor, and how to grow their professional relationship to achieve great potential—in restaurants or any other industry.      

Katerina Jones is Vice President, Marketing and Business Development at Fleet Advantage, a leading innovator in truck fleet business analytics, equipment financing and life cycle cost management. For more information visit www.FleetAdvantage.com.  

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Categories: Restaurants

Chili's, Maggiano's CEO Wyman Roberts to Retire

Restaurant Management - Tue, 05/17/2022 - 08:22
Chili's, Maggiano's CEO Wyman Roberts to Retire ben Tue, 05/17/2022 - 08:22

The executive led the company for nearly 10 years, and launched one of the industry's largest virtual brands during the pandemic. 

May 17, 2022

Brinker International CEO Wyman Roberts will retire next month, after nearly 17 years with the company. 

He will be replaced by industry veteran Kevin Hochman, who is leaving his post as KFC U.S.'s president and chief concept officer. Roberts will serve in an advisory role for 12 months. 

He's worked as president and CEO of Brinker since 2013 and in various other roles—president of Chili's, CMO of Brinker, president of Maggiano's—since August 2005. 

Under Roberts, Chili's adjusted to COVID's curveball by launching virtual brand It's Just Wings in more than 1,000 locations nationwide simultaneously—the single-largest roll out of a virtual brand to-date. The chain's off-premises channel remains more than 200 percent above pre-pandemic comparisons, thanks to its growing delivery business. The casual-dining giant's same-store sales increased 10.3 percent year-over-year in Q3, and average weekly sales per restaurant was $58,700, which surpasses 2019 figures. 

Roberts also oversaw the introduction of a new Team Service Evolution labor model and the testing of a robotic waiter to improve efficiency in the front of house. 

"Since starting with Brinker 17 years ago, I have been inspired by the passion for making Guests feel special that our ChiliHeads, Maggiano's Teammates and BrinkerHeads bring to our restaurants every single day," Roberts said in a statement. "It has been a privilege to lead and be a part of this great company. I am impressed with Kevin's character and leadership skills, and I look forward to seeing him take our company to the next level of success as we make this transition."

Hochman joined Yum! Brands in January 2014 as CMO of KFC U.S. He served in that role until 2017, when he was appointed president and chief concept officer. From December 2019 to January 2022, he concurrently worked as president of Pizza Hut U.S. Prior to Yum!, Hochman spent more than 18 years at Procter & Gamble in various brand management and marketing roles. 

"I am honored to be appointed Brinker's President and CEO and appreciate the support of Wyman and the Board," Hochman said in a statement. "I've been very impressed with our operations and technology and see huge potential for growing our iconic Chili's and Maggiano's brands. Brinker's mission is about making people feel special, and that's something I've tried to do throughout my career. I look forward to working with our Brinker team to accelerate growth by creating lasting and more frequent connections with our Guests and Team Members."

KFC has seen eight straight years of positive same-store sales, a streak that began when Hochman joined the company in 2014. In 2021, U.S. comps climbed 13 percent on a two-year basis, and digital sales skyrocketed 70 percent year-over-year, fueled by delivery and a recently launched e-commerce platform. The chicken chain also opened a net of four domestic units last year, which marked the chain's first year of positive unit development in 17 years. KFC is expected to see net unit growth again in 2022, with 25 percent of the pipeline being Next-Gen restaurants

Hochman was responsible for the “Re-Colonelization” plan that infused life into the brand, as opposed to shaking things up and starting over. The company invested 100,000 hours of training on “colonel standards” and brought KFC’s quality back to the level people remembered.

At the same time, Hochman guided Pizza Hut through its transition into a primarily delivery/takeout business, meaning a significant makeover of the domestic footprint. The chain's U.S. business closed a net of 13 units in 2021, a stark improvement from the net of 745 closures in 2020—proof that the transformation is near completion. U.S. comps grew 9 percent in 2021 on a two-year stack. 

"After an extended search for a successor, the Board is pleased to have Kevin serve as Brinker's next CEO," Joe DePinto, chairman of Brinker's board, said in a statement. "Kevin is a talented leader and innovative thinker with strategic vision, passion and a successful track record of building brands. We are confident he will create shareholder value and maintain the company's culture as we work to bring Chili's, Maggiano's and our virtual brands to even more Guests."

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Categories: Restaurants

The Dinner and a Movie Occasion is Back at Applebee’s

Restaurant Management - Mon, 05/16/2022 - 12:17
The Dinner and a Movie Occasion is Back at Applebee’s danny Mon, 05/16/2022 - 12:17

The casual brand is teaming with Top Gun: Maverick as it continues to welcome guests back.

May 16, 2022

Applebee’s posted its fifth consecutive quarter of positive momentum to get 2021 started, with same-store sales climbing 14.3 percent, year-over-year. In fact, March, at average weekly sales of $57,600, marked the casual chain’s best-performing month since it entered the Dine Brands’ (formerly known as DineEquity) family in 2007. That annualized AUV of $3 million was well ahead of 2019’s $2.43 million.

The culprit is a familiar story at this turn of the COVID tale. Business outside Applebee’s four walls amounted to $1.2 billion last year and mixed 28 percent of sales in Q1 2022. In 2019, off-premises figured roughly 10–15 percent.

Meanwhile, Applebee’s dine-in hit 90 percent of pre-pandemic results—a number that should only rise as late-night business picks up and older consumers return to restaurants.

Although dine-in will naturally pull off-premises mix back a bit, it’s unlikely to ever slide to previous norms. Close to 30 percent of Applebee’s off-premises in Q1 split evenly between carside pickup and delivery. And 70 percent of carside orders flowed via digital—a process that includes online platforms and a call center that’s used by more than half of Applebee’s system. The chain wants to reach 100 percent digital ordering by year-end 2022 (full call-out center rollout included). Guests who tap online ordering platforms or use the call center are generating higher checks than those who dial up.

Also, Applebee’s is in the process of finishing 2022 with 15 drive-thru pickup windows.

So the one-two opportunity at hand is one Applebee’s is actively courting; taking opened digital accessibility and leveraging a new audience into more off-premises business; while also leaning its dine-in DNA.

This reality hasn’t been lost on marketing. On Monday, the company announced an activation with Paramount Pictures film “Top Gun: Maverick,” which opens in theaters May 27.

For the next four weeks, Applebee’s will give customers a free Fandango movie ticket when they spend $25 or more in one transaction at Applebee’s (two if they spend $50-plus). And the offer extends to guests eating in-store as well as ordering to-go or delivery through Applebee’s website or mobile app.

FSR caught up with CMO Joel Yashinsky to discuss the campaign, what customers should expect to see, and how the message fits into a broader movement taking place at Applebee’s as the summer approaches.

Let’s start with the inspiration behind the collaboration. Why was Top Gun a fit?

It is a summer blockbuster that is meant to be seen in the theater, and we believe with everything taking place in the world today and getting a better handle on the pandemic, the timing is ideal. We found last year, when we started to come out of some of the surges of the pandemic, there was a deep desire to go to restaurants, and to come back to restaurants and have that restaurant experience

Applebee's/Top Gun: Maverick

Applebee’s has always been about dinner and a movie, or date night and a movie. This is really the ultimate type of combination for us in terms of working with Paramount; working with Tom Cruise and the Top Gun franchise in this sequel. Having the chance to see it, it’s phenomenal. We think it’s going to be a blockbuster hit for the summer and our ability to tie in and provide people with the chance to get a free ticket, or two, with a visit to Applebee’s is something we’re really excited to provide for our guests. We think it’s a natural combination for how our guests tend to combine dinner and a movie at Applebee’s.

Talk about the extension of the promotion to to-go and delivery, and how Applebee’s connected those pieces.

Our business model has shifted with the impact from the pandemic in a way that we now value our off-premises guest just as much as our guest who wants to come in and enjoy the restaurant experience. While we continue to get back toward the levels of the pre-pandemic in our restaurants, we have grown our off-premises business in a significant manner.

So making sure that we can provide the value and the engagement with Applebee’s—a program like this is natural for us to be able to provide it both in our restaurants and to-go and through delivery. We’re excited that all of our guests can have a great opportunity to go see the movie and help us let them connect that opportunity for them. We’re making it possible for folks using our restaurants however they see fit. That’s something we want to make sure we continue to do moving forward.

Walk us through some of the elements of the campaign.

It’s a full engagement. It’s really that restaurant experience from when you walk up to the restaurant in the parking lot and you see the window clings that will tell the story about the movie and the offer in our restaurants. Then, walking in the restaurants and seeing the larger-than-life-size standee of Tom in full gear and people having the opportunity to take pictures with him, and have some fun engaging in a way that we saw when we worked with Dwayne (The Rock) Johnson last summer. That’s something our guests enjoy doing. We also have coasters and menu inserts that provide some QR codes where you can do movie trivia and learn more about the movie and see trailers.

We’ve made the whole experience holistic in terms of being able to connect to Top Gun. We have a QR code where people can generate their own call sign. There’s a lot of fun activities that are tied to the movie that will be available in restaurants that we’re excited to provide and bring the whole summer blockbuster feel to Applebee’s in a way that’s going to be a lot of fun for our guests.

It feels as though Applebee’s has really tried to get into the pop culture conversation in recent years. Of course, we all know about the “date night” song from Walker Hayes. From your broader perspective as CMO, how are consumers relating Applebee’s to their lives again?

It’s a great question, and it’s an important insight. We do consider ourselves an American brand that is in touch with what is taking place in today’s world and what guests are looking for. They’re looking for that escape. They’re looking for that opportunity to get back to normal. I think we’ve been a part of that. When the pandemic struck, we were really focused on the operations and cleanliness and off-premises business and being able to connect with guests that way. We evolved that to getting back to that restaurant experience, making people feel comfortable with all the cleanliness aspects, and QR code menus. Then, bringing people back out and helping them feel comfortable again; bringing that realization of a restaurant experience to life.

And then we had Walker Hayes and being a part of what people were looking for in terms of something fun; and escape from everything that had been going on and continuing to do that with Dwayne Johnson and our partnership with his Teremana tequila. With Top Gun coming out this year, we’ve tried to stay in-step with what America is looking for. That’s what we’re going to continue to do, paced at the right pace based on everything that’s going on in the world today.

That’s important to us, and something we try to make sure we’re connected to in understanding what guests are looking for—at the right level and at the right pace. That’s why we really think the tie-in to this movie makes so much sense because we do believe this is going to be the movie that brings people back to the theaters in a big way. It’s a theatrical experience. You want to see the jet engines and see the amazing footage of the jets they have in this movie. You want to see it on the big screen and hear it with Dolby sound. You want to feel that in your soul after you’ve enjoyed a great meal or before you go for a late-night drink at Applebee’s.

How does this campaign dovetail with some other Applebee’s spots earlier in the year, like “The Regulars?” It seems like there’s an overarching idea at work of welcoming people back.

One hundred percent. Our hope is that whether they’re teenagers or people who have just had a baby and are looking for a night out and want to go to Applebee’s and a movie, they can come enjoy a great meal at Applebee’s and get a free ticket to Top Gun. Or whether it’s folks who are a little bit older like myself who remember going on a date to Top Gun, now taking my wife and kids to go see it. It’s tied in to what I think people are looking for this summer—and that’s what we’re excited about.

We think it’s a perfect combination, to be working with a blockbuster movie like Top Gun: Maverick and bringing that to our guests who are looking for that additional connection and escape from the everyday part of life in a way that’s fun and enjoyable. That’s what we try to do with each and every thing on our marketing plan.

We just are really thrilled about that momentum we built from last summer with our “Welcome Back” work to “Fancy Like” and then “The Regulars,” as you mentioned. It’s really all about what Applebee’s is there for in terms of providing their local neighborhood with that type of experience.

More generally speaking, does this kind of promotion and the idea of a dinner and movie at a casual restaurant, just point to where the consumers’ mindset might be headed as summer approaches, especially in regard to spontaneous occasions returning?

It does. What we’re hearing from guests is they want it easy, they want it natural, they want it comfortable. They want it in the way that Applebee’s provides it. And that’s what we’re ready for in terms of our brand’s place in the world today. We’re there to make life a little bit easier for everyone. We’re there to be a comfortable and easy stop on your way to go see a movie, or finishing up from a day of shopping. That is the simplicity of what we are about—doing it in a way with food that tastes great, with a cold beer, or an ice-cold drink of some sort. And then just having a nice, comfortable experience that doesn’t take a lot of thought but provides for people to have an escape that makes their day or week a little bit brighter.

Top Gun: Maverick is pure fun. The story and the characters are entertaining and whether you’ve seen the first one or not, it’s a really great summer movie. I say that with all sincerity. It’s terrific.

We’re just eager to be back in the dinner-and-movie timeframe. For what America is looking for, I think this is a natural fit that people are going to be able to enjoy a great meal at Applebee’s and a great movie with Top Gun: Maverick and we’re looking forward to bringing this alive in our restaurants in a way that is both creative and fun and engaging, and a little bit different than what people have seen in the past.

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Categories: Restaurants

When to Stop Serving Alcohol and Refuse Service

Restaurant Management - Mon, 05/16/2022 - 08:40
When to Stop Serving Alcohol and Refuse Service danny Mon, 05/16/2022 - 08:40

Safeguard your business, employees, and customers by implementing regular and recurring service training.

May 16, 2022

Restaurants and bars face unique risks and complexities. As an alcohol-serving establishment, your business can be especially vulnerable to legal challenges. It is crucial that your bartenders and staff know what signs to look for in an intoxicated person and when to stop serving patrons. For National Alcohol Awareness Month, Society Insurance has compiled some helpful tips.

Right to Refuse Service

At some point, bartenders will likely have to address a belligerent or highly intoxicated person. There are several legitimate reasons for bartenders to refuse service. For example, underage individuals, those who have over-consumed or are showing symptoms of intoxication, excessively rowdy or unruly customers, a person harassing staff or other customers, or if the establishment is at capacity.

It is important that employees are educated on the conditions that a business can not refuse service. Enforced by the Civil Rights Act of 1964, a business cannot refuse service based on: race or color, national origin or citizenship status, religion or creed, sex or sexual orientation, age, disability, pregnancy, genetic information, or veteran status. In addition, always review your state laws as some states offer additional protections that your business must be aware of and adhere to. The right to refuse service applies to certain criteria.

What to Say When Refusing Service

A server or bartender should take steps to slow down service and make sure a manager is aware of the situation. The manager should keep a close eye on the situation to decide the appropriate next steps. Consider offering food and water. Try to slow down service as much as possible by making yourself less available to patron. An intoxicated person should never get behind the wheel, impaired driving carries significant consequences.

It is important that restaurant and bar staff members are prepared to appropriately handle the situation. Don’t refuse service to a patron in front of other customers if you can help it. A manager and another member of the staff should request the person to accompany him or her off to the side to break the news. Keep it calm, state the facts and do not be accusatory or aggressive. “I think you should call it a night. We are not serving you anymore. Do you have a ride, or can I call you a car?” Instruct your bartenders and staff to not serve the person anymore.

The Consequences of Over-Serving Customers

Bartenders who serve intoxicated customers may be at risk for legal and civil charges. Many states have legislation in place that allows prosecution and civil suits of commercial establishments that service alcohol to visibly intoxicated individuals or minors.

Restaurants and bars are also at risk of litigation. Dram Shop liability laws govern commercial establishments that sell and serve alcoholic beverages to people who are intoxicated, or to minors, who go on to cause harm or death to themselves or others. Most states have some sort of dram shop law in effect.

Safeguard your business, employees, and customers by implementing regular and recurring service training, including how to deal with intoxicated patrons.

Shelby Blundell is a Society Insurance Risk Control representative. He has a master's degree from St. Louis University's School of Public Health. He has worked as a Risk Improvement Representative for Society Insurance since 2010. Shelby has been a safety and risk management resource for contractors, supermarkets, convenience stores, the hospitality industry, health care and higher education. He is a member of the American Society of Safety Professionals (ASSP) and the Insurance Loss Control Association (ILCA).

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Categories: Restaurants

Andrew Zimmern is Taking on the World

Restaurant Management - Mon, 05/16/2022 - 07:25
Andrew Zimmern is Taking on the World erica Mon, 05/16/2022 - 07:25

The chef and TV personality has traveled the globe to explore new cultures and culinary traditions. Now, he’s tackling some of the world’s stickiest issues, from the uncertain future of restaurants and ideological divides to climate change and immigration. And he’s doing it all through the lens of food.

May 2022

Andrew Zimmern has a lot on his mind. For the past 15-plus years, the chef and TV personality has ventured into new countries, culinary traditions, and cultural connections through programs like “Bizarre Foods” and “Delicious Destinations.” But more recently, Zimmern’s focus has shifted as he dives into meatier topics.

The change has also manifested in his appearance. During the pandemic, he traded in those signature round glasses for rectangular specs and also began sporting a beard. Still, Zimmern remains driven by a trademark curiosity that has guided his adventures across continents and earned him four James Beard Awards and an Emmy. In addition to this work, he’s also a published author, restaurant and hospitality group founder, consultant, and most recently, a world food ambassador.

“I seem to always be going at a higher speed limit than most. It is something that I’m just used to,” he says. “There’s such a thing as being too busy, but I am really someone who’s more comfortable with doing more than doing less.”

And perhaps because of that higher speed, Zimmern has amassed a wealth of knowledge. Even in casual conversation, he easily rattles off statistics related to inflation rates, restaurants’ share in the national GDP, and diet-related epidemics. But the chef isn’t content to just learn—he also wants to teach others.

Madeleine Hill

The state of things

That desire has been at the forefront since the earliest days of his television career, when Zimmern guided viewers to faraway places they might never visit in person. His hope was that through these virtual journeys, audiences would broaden their own world view.

“I started ‘Bizarre Foods’ because I felt 20 years ago that the world was changing, and we had some incredible social justice issues that needed to be acknowledged. I thought it would help to do a show like ‘Bizarre Foods,’ where people in Japan could see how people in Norway ate, and people in Norway could see how people in Argentina ate,” he says. “And I thought that would help promote patience, tolerance, and understanding in a world that seemed to be running short on it. That was my feeling 20 years ago, and it’s been even more confirmed now.”

Although Zimmern doesn’t outright say conditions have deteriorated over the last two decades, he does name a number of pain points that have worsened, from minimum wage and gender equity to food deserts and healthcare strain. These are all topics that have recently become more prominent in the public discourse, but Zimmern insists there’s a crucial one that’s still overlooked.

“I’ve long said that the biggest issue unaddressed in the restaurant world … the one that’s never talked about, is why aren’t we able to charge on a plate in a restaurant what it costs to put the food onto the plate?” he says, adding that fine-dining, Michelin-starred restaurants are the exception. Guests expect to pay top-dollar for meals at such establishments. Concepts on the more casual side don’t have that luxury.

“Look at restaurants in the middle. If you own a neighborhood café and you’ve charged $14.95 for the chicken plate for the last six years, your costs have gone up 300–400 percent over those six years,” he says. “But try raising that chicken dish to $21.95—which is probably more where it resides, if you want to pay your employees a living wage and offer them the perks and benefits that they would get at any other business—and your customers will practically mutiny.”

As so many operators intimately understand, two crucial forces are driving these reactions. First are the artificially low prices some restaurants—mostly fast-food chains—have peddled for decades. On this matter, Zimmern is especially blunt, calling into question processing methods, such as preserving meats through ammonia hydroxide. These practices scare consumers, he says, but only when they’re paying attention (case in point: the occasional outcry over the pink slime in beef, followed by several years of general apathy).

Instead, the more lasting impact is a skewed understanding of what food—real food—costs, he says. When consumers can order a meal for $5, it can be hard to convince them to pay double or even triple the cost for better quality.

The second and perhaps more insidious dynamic is the growing number of people who are priced out of healthy food, whether at restaurants or in grocery stores.

“There’s a tremendous problem with who can afford to eat what. So if we’re telling people to eat healthy and to eat fruit and to eat fish, well, that’s more expensive. But can we afford not to, and I think the answer is we can’t afford not to; we have to change as a society,” Zimmern says. “If I’m eating healthier, I’m less of a drain on the healthcare system, on the criminal justice system, on the economic development system, on the insurance system, because I’m not using them as often.”

Multiple studies support this assessment. Most recently, a report funded by the National Heart, Lung, and Blood Institute found poor eating habits result in $50 billion in healthcare costs associated with conditions like heart disease, stroke, and type 2 diabetes. And that number doesn’t take into account other costs, such as lost wages due to illness.

Madeleine Hill

Lucky Cricket served lighter fare like the Green Buddha (pictured) and more indulgent dishes like crispy duck bao.

Redefining the restaurant

For the past two decades, Zimmern’s career has been anchored primarily in the entertainment and media spheres, not restaurants. Nevertheless, he’s acutely aware of the struggles restaurant owners, chefs, and employees face, especially as of late. In a sense, he’s been right there beside them.

Lucky Cricket, Zimmern’s casual Chinese restaurant, was forced to shutter in the early days of COVID, and it’s a closure that has since become permanent. Featuring regional cuisines from the likes of Sichuan, Shaanxi, and Hong Kong, Lucky Cricket marked the chef’s first foray back into full-service dining since the start of his TV career. He viewed the concept as a mainstream inroad to more authentic Chinese food, with the potential to expand to 200 locations across Middle America.

Located in a Minneapolis suburban mall, Lucky Cricket was beset by a number of difficulties since it opened in November 2018. Comments Zimmern made about Americanized Chinese food and P.F. Chang’s in particular drew ire from members of the Asian-American community and beyond. Less than a year into its run, Lucky Cricket closed unexpectedly for more than a month, and when it reopened, the menu had become focused on more general, Pan-Asian cuisine. Eight months after that, COVID struck.

When asked if the experience soured his appetite to open more restaurants, Zimmern is adamant.

“Absolutely not. I just would pursue it a different way. I am pro-restaurant. I am pro-dining. I am happiest when I’m feeding people in the dining room and I see their faces and I see how they react to food that’s being served,” he says.

That said, he’s also ready to embrace the new wave of dine-in experiences.

To grow both his own restaurant portfolio and a consulting business, Zimmern launched Passport Hospitality in 2015, a few years after he’d debuted AZ Canteen. Inspired by his travels to food markets around the globe, the quick serve started as a food truck at the Minnesota State Fair before morphing into a concessions business at Target Field ballpark and eventually the U.S. Bank Stadium, both in the Twin Cities.

“Concessions is a licensing business. And that’s fine for people who have several other businesses, but I personally am pursuing smaller footprints, smaller menus, smaller employees—I’m pursuing that footprint,” he says. Concessions may not be his focus, but the experience of building smaller, quicker prototypes has informed his newer concepts.

Zimmern is currently engaged in two projects with restaurateur Robert Montwaid, best known for converting the historical Gansevoort Market in New York’s Meatpacking District into a food hall. The pair are now doing the same with the Dayton’s Building in downtown Minneapolis and Chattahoochee Food Works in Atlanta; the latter opened just over a year ago and is already home to more than two dozen vendors.

“A food hall is a great example of an amalgamation of smaller businesses, each one with a small footprint and a smaller menu. And the vast majority of them are bringing 20 percent plus to the bottom line. So it’s a more sustainable business and a more sustainable opportunity,” he says.

Indeed, the future viability of restaurants is a top concern for Zimmern. Unlike some industry analysts who have decried the end of fine dining, he considers it one of the more shored-up sectors.

“Fine dining, to a certain extent, seems a little bit bulletproof. I’ve never seen so many high-end sushi bars and Japanese restaurants open in America. I think it’s a great thing, but remember they’re 20 seats, $500 a person, and I think that’s very smart,” he says. “[For] ultra-luxury restaurants at the highest tier, I think smaller footprints are the way to go.”

He also believes that on the far opposite side of the dining spectrum, specialized, budget-friendly concepts are equally resilient; he adds that these business models are already common in many other countries.

But this potential dining future exacts a heavy toll. For as much as has shifted over the past few years, Zimmern says those changes are just the tip of the iceberg.

“When you say how the last couple of years transformed what restaurants look like in America—we haven’t even begun to see the net effect of what this is going to do to that system,” he says. “I think 20 years from now, our restaurant world is going to look a lot more like a handful of high-end restaurants at the top that will still have tablecloths and look kind of like the way fancy restaurants do now. And then everything below it is going to be 15-20-30-40-seat places that specialize in rotisserie chicken and salads and bowls.”

The latter, he adds, gives operators greater control over costs, thanks to less labor, smaller spaces, fewer SKUs, and niche menus.

As for the many restaurants that fall in between the two camps, Zimmern doesn’t see them having much of a future.

“I think it’s going to be too expensive for people to open mid-level restaurants the way we currently envision them,” he says. “Ultimately, it could be more sustainable, but it’s a sad and horrific thing for the hundreds of thousands of American food businesses that may not survive it. Culture shifts aren’t without pain associated with them.”

MSNBC

‘Food touches everything’

It’s tempting to peg Zimmern as a pessimist, or at the very least, a clear-eyed skeptic. After all, he paints a rather bleak picture of the restaurant landscape. From his perspective, tragedy and pain are often the only effective incentives in altering human behavior.

But there’s a frenetic energy underlying those dire predictions that suggests he’s still ready to fight the good fight. And for as much as his words may imply resignation, his actions tell a very different story.

As he has done for much of his career, Zimmern continues to seek opportunities where he can connect with individuals, better understand different people, and share that understanding with the masses. At present, he’s pursuing these goals on a variety of fronts, including two new television series.

Striking many familiar notes from past projects, “Family Dinner” is almost like a domestic version of “Bizarre Foods.” The show debuted on Chip and Joanna Gaines’ Magnolia Network last year and has already completed two seasons. In each half-hour episode, Zimmern visits a different family to share a meal and learn how geography, regional culture, and family background influence their food experience.

The other series, “What’s Eating America,” marks a departure of sorts both in tone and subject matter but provides the perfect canvas for Zimmern to explore some of the thorniest issues plaguing the F&B sector and beyond.

“Our goal was to try to tell stories about civics and political issues through a different lens. If you see a story about immigration in a two-minute package on the nightly news where somebody behind a desk talks to a reporter at the border, that’s one way of telling that story,” he says. “What if we were to do an hour-long docuseries where one of those hours—and in fact, we devoted two to immigration—could highlight the issues of immigration through food, something that everybody touches everyday? Could we be more successful?”

In addition to immigration, the show unpacked addiction, climate change, voting rights, and healthcare in its five-episode run on MSNBC.

“What’s Eating America” had the misfortune of premiering one month before the pandemic began. The show’s Sunday night slot was quickly filled with COVID-related stories. In the wake of a tumultuous two years, plus a leadership change at the network, Zimmern’s series remains in limbo.

“‘What’s Eating America’ is perhaps the work I’ve done that I’m proudest of,” he says. “I think personally that people don’t want all news, all the time; you’ve got to give them a night that’s a break. I still think cable networks should look at Sunday night as a night to do those types of docuseries, and I hope we get to make more of them for MSNBC or for someone else.”

Beyond his television work, Zimmern is also immersing himself in a cause he’s championed for years: reducing food waste. In addition to offering home cooks tips for cutting down on their kitchen waste, the chef’s body of work has also highlighted how many cultures around the world maximize every ingredient they have.

Last December, Zimmern was named a Goodwill Ambassador for the U.N. World Food Programme, a role that exercises his ability to understand the interconnected nature of food systems, culture, and politics. In this new capacity, he’ll be taking a trip to Zambia in the spring to raise awareness around hunger.

“I’ve been doing a lot on the waste and hunger issues for the last 10 years, but hopefully we’ll be able to amplify that because it’s very important,” he says. “You can’t talk about hunger without waste and waste without hunger. They go hand in hand.”

Given the daily demands of restaurant life, few on-the-ground owners and operators have the bandwidth to toil away on loaded topics, like the interplay between employee wages, food costs, menu prices, and profitability. That’s why it’s good to have someone like Zimmern whose culinary background gives him a certain sympatico but whose unconventional career grants him the latitude to dive into the big problems.

And dive in he does. Because at the end of the day, food might just be what saves us all.

“If you make the shift in food—because it’s so big and so large—you will make a subsequent shift in other areas. You will find room in other areas. You will find time in other areas to improve lives. That’s why I think food touches everything,” he says. “You can’t talk about food and not talk about the climate crisis or immigration or healthcare or criminal justice—it just doesn’t work. It affects everything.”

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Categories: Restaurants

The Lost Cajun Acquired by Investment Firm Executive Decisions Group

Restaurant Management - Fri, 05/13/2022 - 08:52
The Lost Cajun Acquired by Investment Firm Executive Decisions Group ben Fri, 05/13/2022 - 08:52

The company owns a franchise consultancy that has 40 percent of its business in restaurants. 

May 13, 2022

The Lost Cajun, which filed bankruptcy more than a year ago, was acquired by investment firm Executive Decisions Group (EDGI). 

The deal closed April 15 and includes the chain's franchise system, a company-owned unit in Slidell, Louisiana, and The Lost Cajun Spice Company, an entity created in 2016 to coordinate the sale and distribution of goods to restaurants. The business will be operated through EDGI's newly formed subsidiary, Happy Cajun Hospitality. 

Terms of the deal weren't disclosed. 

EDGI has experience in the franchise space. It oversees Summa Franchising Consulting, which has roughly 40 percent of its business in restaurants. Robert Stidham, founder and CEO of Summa, said the company is committed to "preserving the traditional Southern hospitality culture and authentic Cajun cuisine" built in the past dozen years.  

“We recognized something special about The Lost Cajun and we’re excited to commit our time, talent and resources into growing this popular family-friendly restaurant franchise and introducing it to a new and expansive customer base over the next few years,” Stidham said in a statement. 

Raymond Griffin founded the Lost Cajun in 2010 and began franchising five years later. By 2016, the chain had nine restaurants and set a goal to open as many as 50 stores in the next five years. Two years later, 15 franchises were open, eight more were scheduled to debut, and 11 others were in the pipeline. The casual-dining chain expected to open 10 franchises per year going forward. 

The growth trajectory was significantly disrupted by COVID in 2020. The company was forced to cut salaries, and eliminate fees for "financially distressed" franchisees who closed stores or reduced operating capacity. Because of the never-ending pressures, the Lost Cajun decided to file bankruptcy in April 2021 and emerged from court proceedings in December. 

Griffin expressed optimism to FSR in February about the direction of his restaurant chain. At the time, he claimed to have seven inquiries on his desk, which gave him confidence that the restaurant could refill its pipeline with franchisees held to stricter criteria. He even took a cross-country drive to visit each location, meeting with franchisees and documenting the journey on Facebook. Above all else, his goal was to have "a handful of successful owners, a bunch of happy employees, and provide food that nobody else provides except for me."

The founder felt EDGI's relationship to Summa offered The Lost Cajun an opportunity to expand, but also preserve what made the concept authentic. Griffin will remain with Happy Cajun Hospitality as an advisor and consultant for The Lost Cajun. 

“I look forward to remaining part of the brand and watching it grow under Robert’s leadership, particularly given his proven track record in the franchise world," Griffin said in a statement. 

EDGI is also the second-largest investor in The Homecare Advocacy Network, an investor in several Thrive Healthcare franchise locations, and owner of the Orange County territory for Season 2 Consign, a luxury consignment brand. Additional EDGI and affiliated businesses include franchise consultants, developers, investors, franchisors, and franchisees.

The purchase, EDGI's first direct acquisition, brings its annualized revenue to more than $50 million per year.

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Categories: Restaurants

The Steakhouse that Lets Customers Pay with Bitcoin

Restaurant Management - Thu, 05/12/2022 - 15:24
The Steakhouse that Lets Customers Pay with Bitcoin ben Thu, 05/12/2022 - 15:24

The restaurant found a solution to avoid the cryptocurrency's volatile nature. 

May 12, 2022

Curtis Osmond, president of III Forks Prime Steakhouse, has been in the restaurant industry for more than 30 years, and he can’t remember so much attention being given to how people pay for meals.

“It's pretty remarkable to think that there's this much attention focused on the way in which people are paying, and we're excited to be at the forefront of a conversation like this,” Osmond says.

So, what’s all the buzz surrounding III Forks about?

Bitcoin.

The steakhouse’s Austin location is accepting cryptocurrency, and this isn’t a gimmick. III Forks is fully committed to offering customers alternative ways of paying for their food.

“I don't care if you come in and pay with an American Express or Visa or a Mastercard,” Osmond says. “I don't care if you come in and pay with Bitcoin or some other currency. We're taking it to another level to how you pay, and we want to make sure that it's unique to you.” 

Osmond knew the idea was worth looking into once several customers began asking for it. Additionally, several businesses related to Bitcoin opened in the market.

The company took those two trends as a sign.

“After having to say no [to customers] a couple of times, we asked ourselves ‘well why can't we take Bitcoin?’” says Brian Kelley, proprietor of the Austin restaurant. "Because people want to pay using Bitcoin. So we tried to find a way to say yes to the guests.”

READ MORE: Should Restaurants Buy Into the Crypto Craze?

Conversations surrounding Bitcoin started last year around Thanksgiving and Christmas. Osmond and Kelly wanted to complete their due diligence on the cryptocurrency; while several big-name brands have run promotions associated with the digital product, there wasn’t much precedent with restaurants accepting it as payment for menu items.

One of the major concerns is the volatile nature. There are hundreds of coins and tokens on the crypto market, and their value as it relates to the U.S. dollar can fluctuate dramatically over the course of a day.

That challenge isn’t lost on Kelley or Osmond. In fact, one of the first questions asked was “what happens when Bitcoin drops in value?”

“That’s certainly something we talked about,” Osmond says.

To get around this issue, Osmond and Kelley found a new-age solution for a modern-day problem. Instead of depositing Bitcoin into a III Forks digital wallet (all crypto is stored in digital wallets), the brand partnered with Bitpay and the Lightning Network, allowing the restaurant to immediately convert customers’ Bitcoin into U.S. dollars.

While III Forks takes Bitcoin as payment, it never actually holds any cryptocurrency, removing its exposure from unexpected dips.  

“That's the good part from an accounting standpoint,” Osmond says.   

Inside the restaurant, the process is fairly simple. Guests inform their server at the time of checkout they would like to pay with Bitcoin, and the III Forks team presents them with a Bitpay invoice QR code to scan tableside. These transactions settle in seconds, and allow for seamless payment using the guest’s preferred crypto wallet.

“We're providing convenience, we're providing options, and we're providing security and privacy with the transactions, as well,” Kelley says. “We’re just trying to give our guests what they want.”

In addition to providing insulation from volatility, Bitpay and the Lightning Network keeps III Forks from paying credit card processing fees.

“Would a $10 million restaurant want to save $300,000 a year on credit card fees?” Osmond says rhetorically.

The Bitcoin strategy has only been in place for several weeks, but Kelley says customers are already using the option and providing “wonderful” feedback, including many who “are not your typical Bitcoin user.”

III Forks isn’t using Bitcoin as a marketing ploy, but it’s not shying away from the additional media attention either. Osmond says people are curious, and it’s leading to good conversations.

One of the reasons Osmond and Kelley invested in the new payment program is because of the customizable consumer experience, similar to online ordering, contactless delivery, or a loyalty program.

“Over the last couple of years, we’ve been forced into an environment that was new and different,” Osmond says. “It’s more important to be relational in nature than transactional. So we want to curate an experience that allows people to experience our restaurant in a unique way each and every time.”

As III Forks continues to accept Bitcoin, Osmond and Kelley will keep an eye on the program, fine-tuning it as time goes on. If it remains successful with customers, the steakhouse will consider adding the amenity to its other units in Dallas and Jacksonville.

III Forks locations will receive preference over its sister concepts under the Consolidated Restaurant Operations umbrella, which includes Cantina Laredo, El Chico, Silver Fox, Luckys Cafe, Cool River, Black Oak Grill, and Good Eats.

“We have made it our mission to take elements that are successful in some aspects of our business and then apply them in other concepts,” Osmond says. “We’re looking to glean all the positives from the test in Austin.”

Osmond doesn’t know if Bitcoin will breakout in the short-term, but he’s confident this is where the market it heading. With brands prioritizing customer experience, and technology allowing for risk-free transactions, he says the writing is on the wall.

“I think the incentive is pretty clear,” he says. “We’d much rather be the first doing this than the last.”

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Categories: Restaurants

Restaurant Revitalization Fund Approaches Final Stand

Restaurant Management - Thu, 05/12/2022 - 09:30
Restaurant Revitalization Fund Approaches Final Stand danny Thu, 05/12/2022 - 09:30

A vote is expected next week as the independent restaurant sector continues to face an uphill climb.

May 12, 2022

Dining room lockdowns, start-stop mandates, and the maze of federal aid was always going to hit independent restaurants hardest. Former National Restaurant Association CEO Tom Bene illustrated this in plain terms during initial waves: the average restaurant walked into COVID-19 with about eight weeks of cash on hand. That’s not an indictment of independents, but rather the reality of thousands of mom-and-pop businesses across America.

Ninety percent of restaurants industry-wide boast fewer than 50 employees and 70 percent identify as single-unit operators, according to the Association.

And so, asking a lean, foot-traffic-centric business to close for months on end was hard to equate. As was restocking inventory when traffic and capacity fluctuated wildly. Tech fixes (and fees) and pivots, without the leverage of a chain system, were steep and costly asks. Generally, independents have lower margins and access to less relief on rent and other fixed costs than large-scale counterparts. They also entered COVID-19 with underdeveloped off-premises business and higher levels of financial stress.

And perhaps the most critical distinction: Nearly two-thirds of independents are full service—the category naturally most reliant on four-wall traffic—versus 15 percent for chained/franchised. In all, grappling with external forces, like increasing rent, rising food costs, scarcity of ingredients, and increasing wages (up nearly 13 percent for nonsupervisory leisure and hospitality workers in April, per federal data) continues to weigh heavy.

“Small business is the backbone of our America economy,” Diana Staley, owner of Reverie Kitchen in Branford, Connecticut, says. “Ten percent of all payroll jobs in the economy are in the restaurant industry—10 percent. When the Restaurant Revitalization Fund ran out of money, 177,300 restaurants were left with no aid to struggle to compete with those who received RRF; the potential impact of these restaurants closing will affect roughly 4,432,500 million employees.”

Independent revenues dropped more than 70 percent in the final two weeks of March 2020. At least 4.5 million of the roughly six million jobs shed in the food and drink industry within opening weeks of COVID came from independents, according to the Independent Restaurant Coalition.

In 2020, independent locations declined by 8 percent, according to The NPD Group. Or 28,399 closures.

The sector still has myriad challenges ahead, but a glimmer of hope as Congress is expected to vote on further aid next week—a $48 billion bill that would fully fund the Restaurant Revitalization Fund. It should take place Monday or Tuesday, according to recent reports. The bill, introduced by Sens. Ben Cardin (D-MD) and Roger Wicker (R-MS), includes $40 billion for RRF replenishment and $8 billion in support for other industries impacted by the pandemic. It needs 10 Republican votes to pass. “… right now we’re not sure if those votes are there,” an Association spokesperson said in an email.

As Staley, who says she’s had more that 40 meetings at the Senate, mentioned, aid thus far has been a mixed bag for independents, to put it lightly. “Restaurants were promised relief in the American Rescue Plan, but 67 percent of restaurants received nothing when the funds were exhausted: 278,304 restaurants applied for relief, 101,004 received assistance, and 177,300 restaurants are still waiting for that promised assistance,” she says.

“Unlike previous bailouts of other industries, restaurants, the second-largest private sector employer, were shut down, through no fault of their own, during COVID, and furthermore, our government told the American people, over and over, it was not safe to eat at restaurants,” Staley adds.

National Restaurant Association chart.

In mid-April data from the Coalition, the organization reported 86 percent of restaurants (from a 1,000-operator survey) believed a a grant would allow them to hire more staff; 77 percent said they’d be able to pay rent; 72 percent utilities; 76 percent supplier payments; and 77 percent repairs.

A LOOK BACK: It Will Take Years for the Restaurant Industry to Recover

On the reverse, 24 percent of restaurants that did not receive RRF said they were in danger of closing in as soon as three months compared to 13 percent of those who did. Forty-eight percent added they were tracking toward defaulting on a loan versus 22 percent, respectively.

“While the government has declared the pandemic over, it is not over for restaurants, who continue to struggle because they were never provided the assistance they were promised,” Staley says.

“This legislation is not another program to help restaurants; let's be clear, this is to help the restaurants who were left out when the RRF ran out of money last year,” Staley adds. “You cannot have an American Rescue Plan, a small part of which was to help restaurants, and then fail to rescue 67 percent of restaurants that applied. That is egregious, and it does not matter whether you are Democrat or Republican, you either are on the side of doing what is right, and on the side of small business who were tantamountly crushed during the pandemic, or you are not.”

Adobe Stock

Dine-in restaurant visits in Q1 of this year increased 38 percent versus a 45 percent decline a year ago.

Trends and developments

As independents await news on potential aid, the industry has begun to grow from a unit count perspective. According to NPD’s Fall 2021 ReCount restaurant census, which counts restaurants opened as of September 30, 2021, the independent field expanded by 1 percent, or 2,893 units, last year.

Independent locations are growing in seven of the nine Census regions, NPD said, and large areas like Los Angeles, Dallas-Fort Worth, and Seattle-Tacoma.

Another evolving development is independents who purchase enough volume to order from broadline foodservice distributors hiked spending and orders. Independents increased cases of food and supplies ordered from leading vendors by 27 percent in the 12 months ending March 2022 compared to the same period a year ago, NPD reported. That’s 5 percent above the pre-pandemic level in the period ending March 2020.

Dollars shipped from broadline distributors to independents also rose 47 percent in the calendar ending March 2022, year-over-year—a 25 percent jump versus the pre-virus figure in the 12 months end March 2020.

On the ground level, consumer online and physical visits to independents increased by 12 percent in the 12 months ending March compared to the same period a year ago and are now 7 percent below pre-pandemic in the 12 months closing March 2019. 

In the same period, visits to independent full-service restaurants, which in NPD’s definition mix 63 percent of the category, upped 19 percent versus the year ending March 2021, resulting in a 14 percent decline from the year ending March 2019. Quick-service independent traffic lifted 5 percent and was 1 percent above pre-virus March 2019 marks.

"The pandemic lockdowns and restrictions were particularly tough for independent restaurant operators since they have fewer resources and capital than chains to withstand tougher times," said David Portalatin, NPD Food Industry advisor and author of Eating Patterns in America. "Some independents didn't make it, but many did, and they are thriving and contributing to the overall vibrancy of the U.S. foodservice market." 

Demand really hasn’t been the anvil, however. It’s clear consumers are returning to restaurants, independents and chain operations alike. In fact, the reality has accentuated other forces at work, like higher costs and lack of supply. Meeting demand, in other terms, has become as, if not more, difficult than trying to generate it.

And there’s a lot going on under the surface. Dine-in restaurant visits in Q1 of this year increased 38 percent versus a 45 percent decline a year ago, NPD said. Off-premises, through carryout, drive-thru, and delivery, fell 9 percent from a 24 percent gain in Q1 2021. The full-service category grew on-premises traffic by 26 percent against a year-ago drop of 34 percent. Off-premises, which continues to account for about a third of full-service visits today, remains on the downswing—it declined 24 percent to start the year over a 63 percent surge last year, per NPD.

While off-premises business has stuck well above prior levels (Texas Roadhouse is more than twice pre-COVID, even without delivery), there are distinctions forming. From February 2020 through February 2022, digital and non-digital carry-out restaurant orders declined by 2 percent, according to NPD, while delivery increased 116 percent, and drive-thru grew 20 percent. Digital ordering, which hiked 117 percent in the two years, contributed to the delivery and drive-thru growth, the company noted. Although digital carry-out orders doubled through the pandemic, these gains were offset by a double-digit decline in non-digital pickup orders that account for the bulk of pickup orders.

In the year ending February 2022, 76 percent of carry-out were non-digital orders, and these orders declined by 16 percent compared to the prior year. Non-digital drive-thru orders rose 20 percent in the same period, and non-digital delivery, which represents 25 percent of delivery orders, increased by 25 percent.

"Several factors have encouraged consumers to move away from ordering carry out. The convenience of drive-thrus, delivery, and mobile ordering, in addition to dining room closures, have influenced consumers' willingness to get out of their car, walk into a restaurant, and order to go," Portalatin said. “Convenience rules and the more convenient options will win."

So full-serves and independents have started to regain share where they historically fought for it. But those brands with resources to couple on- and off-premises business, without eroding margins beyond repair, are beating 2019 baselines. Again, it’s a conversation favoring chains with scale and collective bargaining power, either from a tech stack perspective or their ability to weather supply shortages and lifting costs.

First Watch, for example, posted Q1 same-store sales of 27.2 percent and traffic growth of 21.9 percent. On a three-year stack basis, those figures were 30.6 and 9.9 percent, respectively. Against, pre-COVID 2019, they’re 26.1 and 3.4 percent better.

In March, the chain experienced a surge in sales that boosted its restaurant-level operating margin to 19.6 percent, exceeding expectations. Dining rooms recovered to 90–92 percent of pre-COVID levels, and off-premises maintained a mix of 22 percent. It was just 6 percent back in 2019.

However, the movement back into dining rooms is clear from a broader level—Texas Roadhouse pushed $19,500 in average weekly sales in Q1. So far in Q2, it’s down to $18,000. That number was north of $21,000 last summer, yet Texas Roadhouse was taking in $126,442 on average.

The Q2 number (at $18,000 to-go) is $135,000.

Also, Texas Roadhouse’s Q1 same-store sales growth of 16 percent comprised of 7 percent traffic and average check of 9 percent. The latter got a 3 percent boost from positive mix tied to guests ordering higher-margin and priced items in-store than they were from their cars. Mainly, drinks and appetizers.

According to recent data from Revenue Management Solutions, drive-thru experienced a 13.4 percent drop in the company’s May 2022 impact report. Dine-in had the most marked increase, 2.4 percent growth, year-over-year, while takeout and delivery both ticked 0.8 percent higher.

RMS credited the drive-thru slide to Gen Z in particular, which might be due to rising costs and gas prices. Among the demographic, drive-thru frequency dipped from 91 percent in Q4 2021 to 81 percent in Q1 2022 (asking if they visited a drive-thru at least once a week).

Intent to hit the drive-thru more or “much more” in the future fell from 34 percent to 12 percent in those same windows.

Nearly 50 percent of Baby Boomers and Gen Xers said they believed they were getting less value from restaurants today. And the 40-plus crowd were managing spend primarily by ordering less, choosing less expensive items, and going to less expensive restaurants.

Unsplash/Scott Warman

The producer price index for food showed wholesale food prices 17 percent higher over this time last year.

Speaking of rising costs …

According to Bureau of Labor Statistics data released Wednesday, full-service menu prices increased 8.7 percent, year-over-year, in April. The figure was a record as prices climbed 0.9 percent from March to April. Quick-service prices ticked 7 percent in April over last year.

Prices for food away from home as a category leapt 7.2 percent. One thing that’s helped restaurants is the soaring prices are being outpaced by grocers. Food-at-home spiked 10.8 percent in April, the largest bump since November 1980.

The producer price index for food showed wholesale food prices 17 percent higher over this time last year—the loftiest in 50 years. Fresh vegetables are costing companies 82 percent more; cooking oil 46 percent; chicken 29 percent.

In FoodMaven’s latest market trends report, released May 7, the company said weeks of increases in commodity prices have begun to impact the average wholesale price, driving it up 3.06 percent.

The biggest increases came in produce, with fresh lettuce rising 8.93 percent; fresh bell peppers up 6.42 percent; and fresh onion 2.5 percent. Beef Strip Loin (6.28 percent); shell eggs (4.7 percent); chicken wings (0.67 percent); chicken breast (0.5 percent); fresh potatoes (0.33 percent); and pork loin (.12 percent) climbed as well.

Food, labor, and occupancy costs are historically the largest line items for restaurants, combining to account for roughly 70 cents of every dollar of sales during normal times, according to the Association. The challenge now, and why prices are going up on menus, is three categories are making up a larger share of sales than they did before the pandemic.

Per Association survey data, 91 percent of operators said their total food costs (as a percent of sales) are higher than they were prior to the outbreak. Only 3 percent said their food costs make up a smaller proportion of sales.

The Association requested Congress reinstate the tariff exclusion process and remove all tariffs that affect the food supply chain and protect secret ballot elections for workers rather than a new compulsory “card check” process.

President Joe Biden spoke on Tuesday about inflation and credited COVID alongside the Russia-Ukraine conflict for driving prices higher. “We believe that there are many ways the Administration and Congress can help restaurants—from addressing supply chain logistics with investments from the Infrastructure Investment and Jobs Act, to augmenting needed industry workforce by passing the Essential Workers for Economic Advancement Act,” Sean Kennedy, EVP for public affairs at the Association, said in a statement. “While there isn’t a single silver bullet that will bring the current economic climate under control for the restaurant industry, the Association is taking an 'all of the above' approach to legislation that could provide relief for operators.”

The U.S. Federal Reserve raised interest rate half a point last week—the largest jump in two decades—in an effort to stem inflation.

Returning to independents, the above dynamics spin a climate difficult to navigate with a team of experts, let alone as a mom-and-pop.

Staley recently called John Geanakoplos, an American economist, and the current James Tobin Professor of Economics at Yale University, to address one of the reasons critics have argued against aid—the idea new legislation would contribute to inflation. Geanakoplos, also a former U.S. Junior Open chess champion, told Staley anybody who believes that “does not understand the economy.

“This legislation enables small business to get back to work,” Staley says “It allows restaurants and hard-hit industries, who lost so much during the shutdown to get their businesses back open or fully open, to pay their landlords, fixed costs and overhead that have piled up during the pandemic, to make the necessary improvements and repairs, to recover and grow their businesses. Work that was not able to be done when the government closed their businesses, as these businesses drained their resources to stay afloat and do not have easy access to capital. This investment in small business puts people to work, creates efficiency, and strengthens the economy and the bonds of the communities they serve.”

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Categories: Restaurants

Casual-Dining Menu Prices See Record Inflation

Restaurant Management - Wed, 05/11/2022 - 14:16
Casual-Dining Menu Prices See Record Inflation ben Wed, 05/11/2022 - 14:16

Full-service menu prices saw more year-over-year inflation than quick service for the second month in a row. Prior to that, it hadn't happened since March 2020. 

 

May 11, 2022

The price of full-service meals rose 8.7 percent in April year-over-year, the segment's highest increase since 1997 when data was first collected, according to the Bureau of Labor Statistics. 

Overall, the food away from home index rose 7.2 percent, while the price of quick-service products grew 7 percent. 

April marked the second month in a row that casual-dining restaurants saw greater year-over-year inflation than quick service. Prior to that, it hadn't happened since March 2020. 

Here's how inflation has trended the past few months: 

October

  • Food away from home index: 5.3 percent
  • Quick-service menu prices: 7.1 percent
  • Full-service menu prices: 5.9 percent

November 

  • Food away from home index: 5.8 percent
  • Quick-service menu prices: 7.9 percent
  • Full-service menu prices : 6 percent

December

  • Food away from home index: 6 percent
  • Quick-service menu prices : 8 percent
  • Full-service menu prices: 6.6 percent

January

  • Food away from home index: 6.4 percent
  • Quick-service menu prices: 8 percent
  • Full-service menu prices: 7.1 percent

February

  • Food away from home index: 6.8 percent
  • Quick-service menu prices: 8 percent
  • Full-service menu prices : 7.5 percent

March 

  • Food away from home index: 6.9 percent
  • Quick service menu prices: 7.2 percent
  • Full service menu prices : 8 percent

Restaurants nationwide continue to implement price hikes as commodity and labor pressures persist.

At Chili's in particular, inflation exceeded expectations during its most recent fiscal quarter. Food and beverage costs were 180 basis points higher, driven by commodity inflation of 11 percent ,while labor was unfavorable by 100 basis points versus 2021, fueled by wage inflation of 10 percent. 

The full-service giant exited the quarter with 4.6 percent pricing, and another increase is expected this summer. The chain plans to release a new menu to reduce operational complexity and better mitigate macroeconomic pressures. 

“[The menu] has been in test,” CEO Wyman Roberts said. “We feel good about the way we’ve restructured our platforms to deliver better margins, but also to deliver us more pricing flexibility across geographies and across various menu items, especially as we’re starting to see commodity prices significantly different in various categories."

First Watch managed to avoid price increases in 2021, but it began this year with 3.5 percent pricing, and the chain believes it has room to do even more later in the year, if necessary. 

Chili's, First Watch, and a number of brands claim they haven't seen any significant impact from guests in response to the price increases. 

“There's no really one metric that's a trigger point for us,” said First Watch CEO Chris Tomasso, describing how the company balances pricing and value. “Probably every restaurant company evaluates pricing, constantly based on margin, and we certainly look at it very closely. So, as we go through the year and we look closely at what our actual experience is and where we have pricing needs or inflation that we're not offsetting, then we'll constantly take a look at it and reevaluate it. But we did have a very good first quarter, and I can just tell you that we constantly look at this.”

The likely reason customers haven't responded as strongly is because they're feeling inflation everywhere, including grocery stores. The food at home index increased 10.8 percent year-over-year, the largest 12-month increase since November 1980. Also, the index for meats, poultry, fish, and eggs grew 14.3 percent over the last year, the largest 12-month rise since the period ending May 1979.

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Categories: Restaurants

First Watch Has a Growth Plan, and it's Sticking to it

Restaurant Management - Wed, 05/11/2022 - 13:34
First Watch Has a Growth Plan, and it's Sticking to it ben Wed, 05/11/2022 - 13:34

New restaurants are achieving third-year sales levels in their first year. 

May 11, 2022

For the past few years—in the face of a historic global pandemic—First Watch has achieved a level of development that’s unmatched by most in the casual-dining industry.

In 2020, the chain opened 42 restaurants, and it followed up that performance with 31 new stores in 2021. This year, First Watch expects 38-48 locations (30-35 company-owned; eight to 13 franchises).

In Q1, the concept debuted seven units across five states and seven DMAs, including St. Louis, Miami, and Pittsburgh. Each of them are achieving annualized sales that are above AUVs of existing restaurants. At least eight outlets are projected to open in the second quarter. The long-term goal is to open 2,200 restaurants across the U.S, and the chain has filled about 20 percent of that; at the end of Q1, the brand had 441 stores (346 company-owned and 95 franchises).

The development team is seeing cost increases, but it’s nothing they haven’t been able to manage, said CEO Chris Tomasso. In terms of competition for these sites, the executive pointed toward First Watch’s longevity in core markets and relationships it’s been able to leverage.

Given those strengths, and the fact that new restaurants are achieving third-year sales in their first year, Tomasso said there’s good reason to be confident in First Watch’s upcoming growth strategy, no matter the inflation or supply chain delays. It’s also important to note that as the brand opened seven stores in the first quarter, the company maintained its average of 2.7 managers per restaurant, thereby keeping a pipeline of leaders that are ready for general manager roles at future units.

“As far as acceleration goes, again, we're sticking to what we put out there for our growth algorithm on new restaurant growth,” Tomasso said during the chain's Q1 earnings call. “And, again, just feel very optimistic about our ability to achieve that.”

READ MORE: First Watch's Restaurant Growth Doesn't Miss a Beat

First Watch’s same-store sales grew 27.2 percent year-over-year and 26.1 percent against 2019. Traffic lifted 21.9 percent versus 2021 and 3.4 percent compared to three years ago. In March, the chain experienced a surge in sales that boosted its restaurant-level operating margin to 19.6 percent, exceeding expectations. Dining rooms have recovered to 90-92 percent of pre-COVID levels, and off-premises maintained a mix of 22 percent. 

The chief executive attributed new store success to continually evolving the prototype with elements that enhance the customer experience, including a much larger, more visible patio, indoor/outdoor bars, and garage doors that open up to the outside. Tomasso said First Watch is grabbing sites at or near trade area epicenters, which is not something it was achieving 16 years ago when he first joined.

He also praised the chain’s ability to use digital marketing to build anticipation.

“I think people now are more familiar with our brand,” Tomasso said. “And so, there's an excitement level that comes to us opening in a market that maybe wasn't there 15 years ago, and I think we've earned that over all these years. And I think all those elements, not to mention our great training teams and folks that we send to the restaurants to help open them, all of those things are what is really leading to the success that we're seeing there.”

Much of the passion is coming from younger consumers, a trend that’s been in the making for several years, Tomasso said. Part of it has been fueled by First Watch’s menu innovation, like the Purple Haze juice, which was in so high demand that it was recently added as a permanent menu item. Additionally, all restaurants in the system have been remodeled to a modernized “urban farm” design.

“When you look at what our restaurants look like going forward, all of our new restaurants that we built, but even the ones that we were going back and remodeling and bringing to that same look and feel, we see an impact,” Tomasso said. “So, I just think we're broadening our appeal, and we're basically filling the pipeline with the next generation of First Watch customers because of the actions we've taken.”

First Watch

At the end of Q1, the brand had 441 stores (346 company-owned and 95 franchises).

As well as sales are progressing now, First Watch believes there’s capacity to do more, especially with its kitchen display systems. Every new company-owned restaurant opens with one installed, and the chain is continuing to incorporate the system into existing stores. More than 65 locations have the technology, up from 20 about six weeks ago. The goal is to have kitchen display systems in more than half of corporate units by the end of 2022.

The top two selling restaurants on Mother’s Day—First Watch’s biggest event of the year—each had kitchen display systems.

“The benefits where we have it in the restaurant—so we're already realizing [benefits]—are just in terms of simplifying the back of the house, operations,” CFO Mel Hope said. “And the teams just enjoy some efficiencies of having a more predictable flow of food prep and stuff and what the KDS systems are really used for in terms of helping them get things served hot and timely. So, we're already benefiting from those. But as the cohort grows, we should be able to tease out some statistics.”

First Watch began the year by taking 3.4 percent pricing after not doing so in 2021. The brand believes it has more pricing power in case another hike is necessary later in the year.

The company is seeing continued cost increases in its market basket and fuel surcharges associated with its deliveries; as a result, commodity inflation is projected to be 10-13 percent in 2022. Labor, which was at 32.3 percent in Q1, is expected to land at 34 percent by the end of the year.

“There's no really one metric that's a trigger point for us,” said Tomasso, describing how the company balances pricing and value. “Probably every restaurant company evaluates pricing, constantly based on margin, and we certainly look at it very closely. So, as we go through the year and we look closely at what our actual experience is and where we have pricing needs or inflation that we're not offsetting, then we'll constantly take a look at it and reevaluate it. But we did have a very good first quarter, and I can just tell you that we constantly look at this.”

Total revenues increased 36.1 percent to $173.1 million in Q1, versus $127.2 million last year. Adjusted EBITDA grew to $19.4 million, up from 13 million in the year-ago period.

For fiscal 2022 overall, First Watch expects same-store sales in the high-single digits, positive traffic, adjusted EBITDA between $67 million and $71 million, revenue growth of more than 15 percent, and capital expenditures of $60 million to $70 million, spent on new restaurant projects, planned remodels and new in-restaurant technology.

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Categories: Restaurants

Judge: Chef Mario Batali Cleared of Sexual Misconduct

Restaurant Management - Wed, 05/11/2022 - 08:19
Judge: Chef Mario Batali Cleared of Sexual Misconduct ben Wed, 05/11/2022 - 08:19

The former TV star was accused of inappropriately groping a woman in Boston. 

May 11, 2022

Former Food Network star Mario Batali was found not guilty of indecent assault and battery charges, stemming from an incident in Boston roughly five years ago. 

The verdict was decided by Boston Municipal Court Judge James Stanton after Batali waived his right to a jury. 

Batali was accused of kissing and groping a woman while taking a picture at a bar, the AP reported. During testimony, the alleged victim said the celebrity chef was drunk, grabbed her private areas, stuck his tongue in her ear, and invited her to his room. In response, Batali's lawyer, Anthony Fuller, labeled the woman as an untrustworthy witness and claimed she was fabricating the story for financial gain. 

The judge agreed with Fuller's contention, stating photos from that night appear to show a consensual encounter. If convicted, Batali could've faced up to 2.5 years in jail and been required to register as a sex offender.

READ MORE: Mario Batali Leaves Company Amid Sexual Misconduct Allegations

The decision comes nearly one year after Batali and Joseph Bastianich of Batali & Bastianich Hospitality were required to pay $600,000 to at least 20 former employees after allowing a hostile work environment and a “sexualized culture of misconduct and harassment” at their restaurants, which include Babbo, Lupa, and the permanently shuttered Del Posto. The company was also instructed to revise training materials and submit biannual reports to certify compliance. 

In 2017, multiple women accused Batali of inappropriate touching, including groping their breasts and buttocks. When these allegations came to light, the New York State Office of the Attorney General opened an investigation and found that Batali and Bastianich engaged in unlawful sex discrimination and retaliation, in violation of state and city human rights laws. The attorney general's office learned that between 2016 and 2019, multiple employees witnessed or personally experienced unwanted sexual advances and favoritism toward male employees. 

At the time, Batali took a leave of absence from the company and his TV show The Chew. A couple of years later, the Bastianich family bought out all of Batali's shares in the company. 

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Categories: Restaurants

Ruth's Chris Battles through Tough Beef Prices

Restaurant Management - Tue, 05/10/2022 - 10:33
Ruth's Chris Battles through Tough Beef Prices ben Tue, 05/10/2022 - 10:33

Herd sizes and droughts have worked against the brand, the CFO said. 

May 10, 2022

As supply chain issues and inflationary pressures impact food costs, Ruth’s Chris Steak House is having to react accordingly, especially for beef.

To mitigate the protein’s inflation, Ruth’s bumped prices on certain products by 3.4 percent in late March, a move CFO and COO Kristy Chipman said has not negatively impacted traffic.

Multiple events are causing issues. Drought, tight forage supplies, and macroeconomic factors are forcing producers to dive deeper into their cattle herds, according to the USDA. Data shows more than 69 percent of the country was experiencing some level of drought as of late March, impacting more than 61 percent of the U.S. cattle inventory. Last year, only 35 percent was affected. Even more concerning, 19 percent of the cattle inventory was located in the worst two tiers of drought, compared to 10 percent in 2021.

“Herd size and drought conditions are things working against us,” Chipman said during the chain’s Q1 earnings call. “Heading into the summer, we think that beef prices are increasing from where they’re at today. Seasonal demand, tight production, droughts, higher transportation costs are a situation we’re keeping a good eye on, while prime grading is slightly lower as well from a year ago. So I think overall, it continues to be very difficult.”

The steakhouse entered a new forward pricing agreement with suppliers, locking itself in for approximately 20 percent of total beef volumes through mid-August. Last year at this time, Ruth’s was locked in for 70 percent.

“It's just going to be based upon the volatility of the market, our competence, and the projections that we have from the suppliers,” said Chipman, describing how the brand approaches food contracts.

READ MORE: Ruth's Chris Has Bigger Growth Dreams

Food and beverage costs in Q1 increased 445 basis points compared to 2021, driven largely by the rising cost of beef, which was up 37 percent. The total market basket increased 28 percent versus last year, reflective of continued pressure across nearly all food categories, including beverages.

Inflationary pressures aside, CEO Cheryl Henry feels good about the brand’s current state of affairs.

Same-store sales grew 41.5 percent in Q1 year-over-year and lifted 8.1 percent against 2019. The chain saw $124,700 in average weekly sales per restaurant, equal to $6.48 million in annualized AUV. The CEO attributed positive sales to the return of dine-in guests, continued success of off-premises business, and a revamped digital presence.

“Let me reiterate how please we are with a solid start to 2022,” Henry said.

Ruth’s is fueling momentum with a more than $50 million investment in new restaurants, relocations, remodels, and digital technologies. It also includes returning excess cash to shareholders through paying down debt, dividends, and share repurchases.

“We believe these actions will sustain the underlying growth and profitability of the business while creating significant value along the way,” Henry said.

Total revenues for the quarter increased 44.5 percent to $126.1 million compared to $87.3 million in 2021. Company-owned restaurants sales increased 45.4 percent to $118.7 million versus $81.6 million during the previous year.

Franchise income for Q1 was up 24.7 percent to $4.7 million, attributable to domestic franchise same-store sales growth of 23.8 percent and international franchise comp growth of 29.5 percent. Additional operating income was $2.7 million, lifting 45 percent from 2021.

With a positive start to 2022 underway, Ruth’s will look to expand its presence. The chain wants to establish a dependable pipeline of five to seven new restaurants annually. A location in Aventura, Florida, opened in March, and two more stores each are planned for the third and fourth quarters.

In addition to new openings, Ruth’s has two relocations under construction—one in Winter Park, Florida, and another in Woodland Hills, California. Henry said the relocations “reflect our new contemporary design that leverages outdoor dining spaces in larger bar areas.”

Even with increased material and construction costs and supply chain delays that have stalled construction projects industrywide, Henry believes the future pipeline is well-stocked. The brand is in the process of finalizing a lease for a unit in Albany, New York. Combined with previous lease agreements, she expects to have five units in the pipeline for 2023.

“We remain committed to returns consistent within our historical levels,” she said.

As of March 27, there were 151 Ruth’s Chris stores, including 74 company-owned restaurants, three restaurants operating under contractual agreements, and 74 franchises. 

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Categories: Restaurants

How YumCha Hit the Ground Running

Restaurant Management - Tue, 05/10/2022 - 09:07
How YumCha Hit the Ground Running erica Tue, 05/10/2022 - 09:07 May 2022 ChoLon Restaurant Concepts

Christopher Davis-Massey

Sometimes taking a break isn’t such a bad thing. At least that’s what Christopher Davis-Massey would advise his restaurant peers. Davis-Massey is the cofounder and COO of Denver-based ChoLon Restaurant Concepts, which includes two locations of modern Asian restaurant ChoLon, European-styled bistro Le Roux, and newly opened YumCha.

Last summer amid major labor challenges, Davis-Massey and his business partner, chef Lon Symensma, permanently shut down one of their restaurants, Cho77, which specialized in street food. Far from a setback, the decision helped the restaurant group spring forward with YumCha—after taking a few months to flesh out the concept and fully staff it. Just six months later, the noodle- and dumpling-centric restaurant is already thriving.

The idea

When Cho77 first opened eight years ago, it was going to be like ChoLan’s little sister. Chef Lon Symensma, my business partner, is from New York, where street food is popular. But Cho77 Street Food never really seemed to click. When we weren’t getting traction, we asked, ‘OK, is it the way we’re describing the dishes? Is it what the dishes are?’ When we looked at our PMIX, our best-sellers were noodles and dumplings.

Special assist

At the same time, we hired chef Michelle Xiao, who chef Lon had worked with for a long time in New York. She took the lead on our dumpling program. So, we’ve gotten laser-focused on these offerings. It’s still like ChoLon’s little sister, but this is much more focused on noodles and dumplings and some of the dishes are just more traditional Chinese. Since we’ve done that, it’s amazing how much busier we’ve gotten.

What’s in a name

We love the name YumCha; it’s catchy and fun. A literal translation would be, ‘let’s go have tea’ or ‘let’s go have dim sum.’ That’s what Michelle would say in her native Chinese culture. And we are going to offer dim sum brunch; we’re working on it right now.

Another reason why we liked the name is because it could stand alone anywhere, and we’d love to expand the brand. With Cho77, it made sense in Denver next to ChoLon. But what if we put one where there was no ChoLon?

Well-received

YumCha has been so well-received, and I think it’s just giving more definition to what we were trying to do all along. We really tried to push the rebranding and make it a fun, casual atmosphere. So if anything, I think it’s more approachable. I also think people are excited that we’ve reopened—and just to be out and socializing again.

Word to the wise

When we closed Cho77, we let the space sit for a good three or four months. I’m glad we did that because for all intents and purposes, it was like opening a new restaurant. It was a fresh start for the guests, for us, for the employees. So if you’re closing something and opening something new like we did, just have that pause in between.

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Categories: Restaurants

IHOP Ramps Up Expansion of Virtual Brands

Restaurant Management - Mon, 05/09/2022 - 15:35
IHOP Ramps Up Expansion of Virtual Brands ben Mon, 05/09/2022 - 15:35

The two concepts will be in roughly 1,000 locations within the next few months. 

May 9, 2022

As IHOP exits the pandemic, it remains focused on delivering multiple restaurant formats that drive significant, incremental revenue with lower capital commitments.

Last year, the breakfast chain achieved this goal through the long-awaited debut of Flip’d by IHOP, its fast-casual spinoff. The rising concept currently has two stores in Lawrence, Kansas, and New York City. The company is also testing a smaller prototype, investing in ghost kitchens, and diving further into economically priced conversions.

But in terms of scale and pace of growth, there may not be a better opportunity than expansion of virtual brands Thrilled Cheese and Super Mega Dilla. The digital-only concepts are available in 280 restaurants, up from 80 stores at the end of the first quarter. IHOP is on track to implement the virtual concepts in roughly 1,000 locations in the next several months, which is about 60 percent of the chain’s U.S. footprint.

In the first round of tests, Thrilled Cheese and Super Mega Dilla earned around $1,000 per week per restaurant.

“On our virtual brands, we're really excited about the way this has begun,” IHOP President Jay Johns said during the company’s Q1 earnings call. “It's a little soon to be able to predict what's going to happen as we expand in more and more restaurants. But we're still very bullish on the way this looks.”

Both brands were crafted in partnership with Nextbite, a company that supplies delivery-only concepts to restaurants nationwide. Thrilled Cheese and Super Mega Dilla are available through Uber Eats and DoorDash.

READ MORE: IHOP Transforms into Sophisticated Digital Company

Johns believes virtual concepts could be the key to most of IHOP’s domestic footprint returning to 24/7 operations. Sales from these brands mostly come in the evening, and those incremental dollars could give franchisees more of a reason to stay open later.

“Franchisees have to make a P&L decision on, is it worth being open overnight in a market," Johns said. " … To get [a cook] to work overnight, you may pay [$25 per hour]. … Well, if I can get a virtual brand going, now it makes much more sense to also open up the IHOP business and do both of them at once. So the more [virtual brands] we can get that out there, I think the more that will also help our overnight business.”

IHOP’s same-store sales increased 18.1 percent in Q1, driven by positive comps in all dayparts, especially late-night and breakfast. January’s comps grew 24.9 percent and February’s lifted 28 percent. March’s same-store sales increased only 7.5 percent as IHOP lapped the strongest month of Q1 2021.

“We've got opportunities, I think, across the board to continue to work on our comp sales as we move forward,” Johns said. “Breakfast has actually recovered more than any other daypart for us right now, though. So breakfast is strong. And as you think about it, that's what we're most known for. It's probably what our guests were missing the most about IHOP if they hadn't been in a long time.”

Average weekly sales in Q1 were $36,000 per week per restaurant ($1.87 million annualized AUV), up 19 percent year-over-year. The metric reached a weekly high of $41,000 ($2.13 million annualized AUV) in March, which is more than what IHOP saw in any week during the month last year.

Dine-in accounted for 75.4 percent of sales, while off-premises mixed 24.6 percent. Of the latter number, 15.3 percent was delivery and 9.3 percent was takeout. Off-premises average weekly sales per restaurant was roughly $8,900, still more than double pre-pandemic levels. The business was recently boosted by the implementation of Flybuy, a company that allows curbside customers to notify restaurants when they’re in the parking lot.

Also in Q1, IHOP rolled out its first loyalty program, International Bank of Pancakes. Customers can buy food and earn PanCoins, digital currency used to redeem exclusive rewards and prizes.

“This is a true earn-and-burn program, designed to enhance our direct relationship with our guests and ultimately drive additional visits to IHOP,” Johns said. “The program is a one-of-a-kind and first in our category.”

IHOP franchisees opened 10 stores in Q1, including eight in the U.S. The company finished the quarter with 1,661 U.S. restaurants and 95 units internationally.

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Categories: Restaurants

CEO: Texas Roadhouse Will Keep Delivering on its Promise

Restaurant Management - Mon, 05/09/2022 - 13:20
CEO: Texas Roadhouse Will Keep Delivering on its Promise danny Mon, 05/09/2022 - 13:20

As costs rise and a potential recession looms, the chain will keep serving hot steaks and a legendary experience.

May 9, 2022

Thanks to dine-in closures, the pandemic’s impact on restaurants always felt closer to a disaster event than a recession. However, today’s climate paints a different story. The annual inflation rate in the U.S. accelerated to 8.5 percent in March, the highest since December 1981. The cost of food hiked 8.8 percent, year-over-year—a rate not witnessed since May 1981. Food-away-from-home upped 6.9 percent and full-service restaurant prices rose 8 percent, outpacing quick service (7.2 percent).

Meanwhile, the Consumer Price Index for food-at-home jumped 10 percent, building on an 8.6 percent lift in February. Meats, poultry, fish, and eggs cost customers 13.7 percent more at the grocery store. Beef was 16 percent higher.

Financial services company Rabobank said disposable income, to date, has been undermined as inflation races ahead of revenue growth, which historically hits low-income households hardest. But short-term, it’s been shielded by “pent-up demand,” low unemployment, and accumulated savings. Will these dynamics hold? Rabobank isn’t so sure. Back in 2009, quick-serves outperformed when The Great Recession spread, either by increasing sales as other formats contracted, or by contracting less than the total field. Mostly, though, it was a kickback from guests trading down.

Service Management Group connected with more than 11,000 U.S. consumers to get a feel for how the economy is impacting habits. Compared to the past 12 months, one in three retail consumers predicted their financial situation would worsen in the coming year. And in response, 59 percent expected to reduce the number of times they eat out, while nearly one in three planned to increase spending on groceries.

Respondents with lower household incomes ($55,000 or less) were most likely to cut back.

Back-of-house platform MarketMan ran a 1,500-person survey on the topic as well. It found 74 percent of Americans predicted restaurants would cut portion sizes while charging the same price in a bid to save—the so-called “shrinkflation” tactic. And 66 percent figured restaurants would switch to cheaper ingredients without notifying guests.

Texas Roadhouse CEO Jerry Morgan was asked about these developments Thursday. How does he expect the consumer to navigate cost pressures and yet continue to choose Texas Roadhouse?

Morgan’s answer traced to 2008. Then, Texas Roadhouse took a stance, as it often does, contrary to what unfolded around it. The brand didn’t trim portions and instead leaned into quality and consistency, as well as deciding it was worth paying up to staff restaurants. A long-view, oasis approach to a downturn. “When we look back and discuss,” Morgan said, “how do you get through difficult times? You deliver on your promise. And I think we are committed to that.”

READ MORE: Once Again, Texas Roadhouse is Bucking Trends and Defying Odds

In the same MarketMan study, 75 percent of respondents said rising prices would lead to them sticking with restaurants they’re familiar with versus trying somewhere new.

Or to Morgan’s point, they’ll keep going to brands that don't let them down. “We are going to continue to put every portion that we have on that plate, our heaping sides, our smoking hot steaks,” he said. “And just everything that we do. We believe that's what will carry us through, because we don't know how difficult it's going to be.”

“But what we want the consumer to rely on is our ability to consistently deliver on what they want when they come in that door,” he added. “So that's really what we can live on; is just do the best that we can at what we do.”

With more recent trends, Texas Roadhouse a few weeks ago took a 3.2 percent menu price bump. Morgan said there’s been no tangible mix or traffic pushback. “That said, we know the consumer is feeling inflationary pressures, so we are closely monitoring spending patterns,” he said. “But at the end of the day, we are confident with our positioning in the market and our ability to provide unmatched value to our guest.”

Consumers simply haven’t been deterred from dining at Texas Roadhouse. The brand continues to surge ahead on the top-line, with Q1 same-store sales climbing 16 percent at company restaurants (20.4 percent at domestic franchises) against a year-ago lap of 18.5 percent.

Average weekly sales were $132,263, of which 14.8 percent were to-go sales. Last year, those figures were $114,201 and 22.3 percent, respectively.

For perspective, in the week leading up to COVID’s arrival, Texas Roadhouse stores generated $113,777 in average weekly sales. To-go mixed $8,741 of that. In the pandemic trough, sales fell as deep as $29,432, with $25,938 coming outside the four walls.

"What we want the consumer to rely on is our ability to consistently deliver on what they want when they come in that door,” says CEO Jerry Morgan.

So what’s happening today is easy to crunch: One, surging side of the business (to-go) remains elevated from 2019 marks at about $19,500 per week in Q1; and Texas Roadhouse’s historic anchor (dine-in) grew each month of the quarter. In April, guest counts actually surpassed 2019 levels, CFO Tonya Robinson said.

To note, Texas Roadhouse is doing this without any real delivery business as well. Q1’s comp comprised of 7 percent traffic growth and average check increase of 9 percent. The check growth factored positive mix of 3 percent driven by guests returning to restaurants. Also, customers continue to order higher-priced entrees, Robinson said.

The company’s Q1 revenue of $987.5 million was 23.3 percent ahead of last year’s $800.6 million. And Texas Roadhouse generated net income of $75.2 million, a 17.2 percent increase from $655.15 million.

Restaurant margin, as a percentage of restaurant and other sales, decreased 213 basis points to 16.4 percent thanks to commodity inflation of 17 percent (higher protein costs was the main culprit). Restaurant margin dollars climbed 9.2 percent to $161.2 million from $147.6 million in the prior year.

Wage and other inflation for Q1 came in above Texas Roadhouse’s full-year forecast of 7 percent due to lower wages that didn’t materially increase until Q2 of last year. Labor as a percentage of total sales increased 35 basis points to 32.8 percent, year-over-year, while labor dollars per store week lifted 17 percent. This increase in labor dollars per store week was powered by wage and other labor inflation of 10.5 percent and growth in hours of 7.3 percent.

The company estimates commodity cost inflation of 12–14 percent for the year.

Texas Roadhouse

Pay-at-the-table tech is coming to stores systemwide.

The present picture, and a tech rush

Q2 is off to a humming start for Texas Roadhouse, with comps in the opening five weeks up 9.3 percent versus last year, a period when dining rooms reopened in full. Average weekly sales clocked in at $135,000 (to-go of about $18,000, or 13.3 percent of total sales). Off-premises is sliding in light of dine-in, but the gap is being more than covered, Robinson said.

Delivering experience inside Texas Roadhouse has become ever-critical, however, Morgan said. First, it was a matter of welcoming guests back to an experience they missed, yet also needed to feel safe with. Now? You can add “measuring up to the extra cost” to the whiteboard..

“I would say that all of the practices that were put in of cleanliness of care and concern even partitions are still up,” he said. “I think we've still maintained a lot of those practices that ensure people are feeling comfortable about being in large groups in full areas. So I do believe a lot of those practices are helping us at this current time.”

A forerunner, potentially, of why Texas Roadhouse’s approach is working is the fact there’s been little evidence of a trade down. In Q1 guests kept ordering higher-priced entrees, as Robinson noted.

Q1 total pricing was about 6 percent; Q2 will be 7.5 percent; Q3 7.4 percent; and Q4, without any additional action, will be 4.1 percent.

There are a few back-end ways Texas Roadhouse is addressing the bigger picture, beyond holding firm to past principles. One is technology, where Morgan said the goal is to enhance guest experience while driving greater efficiencies up and down the P&L.

Some examples include “Roadhouse Pay,” a new kitchen display system, and an app the company is working on for its fast casual Jaggers, complete with loyalty.

The first initiative was announced in March when on-premises digital ordering and payments platform Ziosk entered into an agreement with Texas Roadhouse to bring its Cloud Commerce program to U.S. stores. Texas Roadhouse deploys the company’s “Ziosk Mini,” which is a portrait version of the tabletop tablet, to allow guests to pay at the table. The system can also conduct surveys and enable order entry, although Texas Roadhouse is focusing on payment.

In tests, the brand said 83 percent of dining room guests paid their check with “Roadhouse Pay,” with some stores seeing adoption rates as high as 95 percent. Of those, 47 percent were NFC transactions as guests used either tap to pay with mobile wallet or an NFC enabled credit card. More than four of five customers rated their overall experience as “excellent,” the company added.

Ziosk said guest adoption of pay-at-the-table, industrywide through COVID, has climbed 21 percent.

Robinson said the service is piloting in about 100 locations today. The goal is to cover the 500-unit plus (currently, there are 536 corporate and 63 franchised Texas Roadhouse in the U.S.) system by year’s end.

Additionally, Texas Roadhouse trialed handheld ordering technology for servers. Robinson said that’s “doing a little bit slower.” The KDS launched in one new restaurant and will implement into an existing store later in 2022.

More broadly, the notion COVID cleared barriers to tech adoption has been clear at Texas Roadhouse. Its mobile app was downloaded more than 3.7 million times since the beginning of the 2021. In turn, roughly 70 percent of the chain’s current to-go business is digital—a major help versus phones ringing throughout peak shifts.

Also, “many more” guests started to use the platform’s waitlist function, Morgan said. Robinson noted its “definitely” proven beneficial for sales. When guests show up, they know they’ll be seated within 15 or 20 minutes.

Interestingly, though, the function of Texas Roadhouse being able to suggest times led to early dining occasions picking up and the brand better filling shoulder periods. “Power hours,” or between 6 and 8 p.m., climbed, too. “Those power hours are really about execution and being able to get the folks in, the experience that they're craving, and then get them moving on down the road, I guess,” Morgan said. “But on the same token in that last night hour, maybe even extending a little bit there. But it really comes down to us executing in the power hours and then really trying to drive some folks to the earlier hours and that last hour being able to hold and get that execution piece.”

Robinson said Texas Roadhouse’s staffing levels improved throughout the quarter, although hourly turnover remains high.

“I think that's just the dynamic we're probably going to live with for a little while,” she said. “Staffing has gotten better, but the training costs, things like that, will probably stay up a little bit as we continue. We're very focused on the turnover as far as providing good training to our employees’ development, holding on to them past 90 days, which tends to sometimes be kind of the point that they leave.”

Three company restaurants and two international franchises opened in the quarter. Texas Roadhouse plans to open about 25 stores this year, and will continue targeting smaller markets where returns have been healthy in recent openings.

“Ashland, Kentucky, it's one of our highest volume stores forever in a town of 40,000 people,” Morgan said. “But they come from all over just because of that reputation. So maybe Ashland taught us 28 years ago that we could go to small towns as long as we execute and deliver on our promise of legendary food and legendary service, they will come find us.”

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Categories: Restaurants

Why Bars are Ditching Cocktail Lists for a More Personalized Experience

Restaurant Management - Mon, 05/09/2022 - 08:28
Why Bars are Ditching Cocktail Lists for a More Personalized Experience erica Mon, 05/09/2022 - 08:28

While not a widespread trend (yet), concepts are dipping their toes in this unusual operating model.

May 2022

Restaurant and bar operators are likely to invest no small amount of time in curating their beverage menus. After the selection is perfected, staff are then trained in mixing the signature libations as well as classics. But what happens when those menus are removed from the equation?

In a world where menus can now be accessed through various channels like QR codes and mobile apps, some establishments are bucking the trend and opting for a menu-less operation, with the goal of creating a personalized experience to match personalized drinks. While not a widespread trend, concepts, including those in second- and third-tier cities, are dipping their toes in this unusual operating model.

For example, Nashville, Tennessee, now boasts the second location of Attaboy, a cocktail bar that opened in New York a decade ago. The Music City outpost, which debuted in 2017, is operated by managing partner Brandon Bramhall, who spent years working at the New York location before relocating to Tennessee.

Bramhall says operating a beverage program without a menu is definitely not for the faint of heart, especially since it faces challenges the average restaurant or bar does not. But, he adds, the appeal of running a menu-free program comes from the desire to personalize and curate an experience for the guests that can’t be replicated elsewhere.

Attaboy is stringent in other ways, too. It doesn’t stock sodas or energy drinks as mixers, and vodka is nowhere to be found. Bramhall says that’s because the bar wants to serve spirits that have distinctive flavors and characteristics associated with them—not liquors that require mixers and other ingredients to build character.

“We’re not reinventing the wheel,” he says of the drinks Attaboy serves. “We’re just trying to help that wheel turn as efficiently as possible. We’re not the kind of program that is going to have nine-ingredient drinks with three unique infused syrups.”

For Bramhall, cocktails that are too complicated can take away from the customer’s experience in multiple ways. To start, he says cocktails that are overly complicated can alienate guests because such drinks use too many ingredients they may not recognize.

“A big thing for us is the simplicity and approachability of the drinks,” he says, adding that Attaboy avoids the “holier than thou” approach that can permeate the world of cocktails.

Secondly, Bramhall says drinks with too many ingredients take a long time to prepare, and that’s an issue for operations specializing in craft-made beverages. Attaboy has a cap of six people per party and only seats around five-dozen individuals at any given time. This comes out to about one staff member for every 12–15 guests; bartenders are assigned to individual parties, rather than taking the first-come, first-serve approach.

Bramhall adds that the limit of six people per party is intentionally low because ticket times at Attaboy run about two minutes per drink, and waiting more than 15 minutes for drinks is a surefire way to sour a patron’s experience.

Guest education is another important consideration in running a menu-free bar program. Bramhall says it’s not uncommon for someone to order a Jack and Coke as a default. All staff must be well-versed in explaining Attaboy’s unique service model.

“The approach is definitely gentle and patient,” he says, adding that it’s understandable people will order things they could get at most bars. “We wait for them to finish their thoughts because the last thing you want to do is jump down somebody’s throat.”

Although the Nashville cocktail bar has no required experience level, Bramhall says a passion for mixing drinks, a curiosity about the craft, and outside time spent studying spirits is paramount.

Given the knowledge and skill level required to mix on the fly, bartenders should have a working knowledge of classic cocktails, which can act as a base for other drinks. Mixologists must also be trained in the proper techniques, such as pouring and measuring. All in all, it’s a time-intensive process to train staff at Attaboy.

“It depends on the student, but I would say it averages around 60 hours, if not more,” he says. “The knowledge part goes a little further than that.”

The 60 hours is usually broken into two to three-hour sessions. Assuming six-hour shifts, that means it can take 20–30 shifts of additional training before bartenders are ready to start crafting personalized cocktails.

Like Attaboy, Seattle’s Needle & Thread runs a menu-free operation. The establishment is a speakeasy, and customers usually have to make reservations to get into the dimly lit, tightly packed space, which is hidden within its sister restaurant, Tavern Law.

The operation at Needle & Thread is similar to Attaboy; the concept lacks a menu, so bartenders should have an expansive working knowledge of classic cocktails and various liquors.

Similarities aside, the two bars do vary in certain aspects. For one, Needle & Thread will make a guest vodka soda if they request it. The bar also keeps flavor wheels at its tables, which are designed to help customers articulate the sort of drink they’re seeking.

Nathaniel Steinberg, director of operations at Needle & Thread, says getting customers to adequately describe the kind of drink they want can be a little challenging, especially if it’s the first time they’ve been to a bar without a menu to help guide their decisions.

“That’s probably the biggest struggle: getting people to accurately define flavors,” he says. “So, we keep the flavor wheel with the verbs there, and we walk people through [the process].”

Another challenge Steinberg encounters is ordering and stocking ingredients. In a bar without a set menu, knowing what and how much to keep on hand can get tricky.

To ensure the bar’s profitability, he keeps a close eye on weekly liquor costs and communicates with bartenders about specifics, like how much chartreuse can be used in a single drink, and if it’s even necessary. Another way to keep costs lower is to “make your flavor,” as Steinberg puts it, by creating flavored gins, vodkas, and simple syrups in-house.

“Fresh ingredients always taste better than the bottled ones,” he says.

Although cocktail bars like Attaboy and Needle & Thread have been more common in larger cities, both Steinberg and Bramhall believe such operations could be replicated in smaller markets. Ultimately, it all depends on the customers and how adventurous they’re willing to be.

“I think we can go anywhere,” Bramhall says. “I think you just have to know how much you can pull off in your market. You have to read what the demographic is.”

He notes that areas with professionals and families who like to eat out would probably do better than rural markets. And consumer curiosity can be further stoked by the bartenders themselves. Employees who undergo such intensive training tend to be passionate about the art of cocktails—and that enthusiasm can be contagious.

“People really love the idea of having a cocktail that’s just been created for them,” Steinberg says. “And the bartenders take even more pride in what they do because they’re not regurgitating somebody else’s idea—they’re presenting their own.”

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Categories: Restaurants

A Guide to Understanding Employee Retention Credits

Restaurant Management - Fri, 05/06/2022 - 14:32
A Guide to Understanding Employee Retention Credits ben Fri, 05/06/2022 - 14:32

Operators have missed out on millions simply because of common misunderstandings. 

May 6, 2022

The last two years have forced many beloved restaurants to shut down or drastically reduce their customer capacity and services due to federal, state, or local government-mandated closures. Washington, recognizing the hardships these establishments have faced, has passed legislation to help address the cost of these operational adjustments to COVID orders. Unfortunately, franchise owners are still not taking full advantage of the significant federal tax benefits available to them.

It is not uncommon for a franchisee to receive a six to seven figure check from the government through the Employee Retention Credit (ERC) program, assuming they’re claiming all to which they are entitled. So why are so many restaurants missing out on potentially millions of dollars? It comes down to some common misunderstandings that are easy dispelled.

ERC for Franchisees

Before the outbreak, the restaurant industry, and particularly franchise restaurants, was one of the country's largest private-sector employers. But according to a recent S&P Global analysis, the industry was among the most affected when the pandemic reached the U.S.

In the last two years, the pandemic has widely disrupted the day-to-day operations and distribution of goods and services across the entire country. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing federal incentives like the ERC to help franchisees (and other small and medium businesses) claim necessary funds to resume operations and grow.

The ERC is the single-largest tax incentive program available to restaurants but when first introduced, the CARES Act did not allow a business owner to claim ERC and Paycheck Protection Program (PPP). However, at the end of 2021 this bar was lifted, and franchisees can now claim both the ERC and PPP. This hasn’t been well understood by many business owners—restaurants have been slow to realize that they can and should be looking to the ERC to help offset the costs of their disrupted operations due to a federal, state, or local COVID order.

Overcoming Disruptions

Almost every franchisee had to adapt to government mandates on COVID over the last two years; whether it was closing a location, limiting capacity, switching to delivery only, or adjusting hours, each franchisee felt the impacts of the actions they took to stay afloat.

What most franchisees don’t realize is that these responses to federal, state, or local COVID mandates (including orders from regulatory agencies)  are all activities that may qualify them for the full value of the ERC. Many businesses have been under the mistaken assumption that they had to have had a decline in revenue to qualify but that is only one qualification method. Even a restaurant with an increase in revenue could still qualify if they had to adjust—with a more than nominal toll on their business operations—to government mandates.

Franchisees are good candidates for the ERC if they had to face one or more of the following disruptions:

  • Government-mandated shutdowns (full and partial)
  • Declines in product or service output
  • Altered day-to-day operations
  • Supply chain disruptions
  • Capacity limitations

What is critical here is that even if only one of a franchisee’s locations was impacted and the others operated as normal, that franchisee could potentially claim the credit for ALL locations. 

The True Value of the ERC

As an example, a franchise owner had three restaurants in Texas with 54 employees between them. The owner claimed PPP and had no decline in revenue so assumed that they did not qualify for the ERC.

All locations, however, had capacity restrictions due to social distancing orders that had a more than nominal impact on business operations and thus all locations qualified for the ERC. The credit is delivered as a cash refund on wages paid to employees during the effected period so with 54 employees, this franchisee received a $462,000 check.

It is worth noting that even if only one of the locations faced disruptions, the result would have still been the same and all locations would have qualified. This is the piece even many franchisees familiar with the credit are missing.

Confused about claiming the ERC?

There are other confusing aspects about ERC. As the number of businesses claiming the ERC grows every day, so too does the amount of inaccurate or incomplete information that circulates around it. Many businesses have self-censored and disqualified themselves improperly due to misinformation or misunderstandings about the ERC. 

Here are a few frequent misunderstandings to keep in mind:

  • If you have initially claimed PPP, you can't claim ERC. While this was originally the case, Congress has expanded the ERC so businesses can now claim it even if they've already claimed PPP and/or had a loan forgiven.
  • Your business had to experience a full shutdown to qualify. A business can be eligible for the ERC even if it was only forced to partially cease or cut back on activities due to government mandates.
  • The ERC is only available for under-performing franchises. You may also still be eligible for the ERC, even if your company grew during the pandemic. Congress wants these businesses to claim the ERC as well, so they can contribute more money back into the economy. The incentive rewards those businesses that retained staff and still conducted their daily activities amid lockdowns, and certain expenses are still allowable for business owners that quickly transitioned to a COVID economy and managed to experience growth.

The ERC can be worth up to $26,000 per employee that remained on payroll during the impacted period. So, for franchisees that have passed on the credit or have yet to closely review it, now is the time to sharpen your pencil and look again.

Looking towards a brighter future

While experts are unsure of the long-term impact of COVID-19 on franchises, this industry has shown its tenacity by persevering with new tactics. By leveraging a powerful federal incentive like the Employee Retention Credit, businesses can get the longer-lasting financial boost they need to retain employees, hire talent, and maintain business relationships with local suppliers and partners. 

Dean Zerbe is the National Managing Director at alliantgroup and Former Senior Counsel to the U.S. Senate Finance Committee.

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Categories: Restaurants

Is Applebee's Scooping Quick-Service Market Share?

Restaurant Management - Thu, 05/05/2022 - 15:45
Is Applebee's Scooping Quick-Service Market Share? ben Thu, 05/05/2022 - 15:45

The chain's customer demographics are more in line with fast food and fast casual as opposed to casual dining. 

May 5, 2022

Applebee’s franchisees view 2022 as a meaningful market share opportunity, President John Cywinski said, and they’re not just referring to the casual-dining industry.

Because of pandemic-related changes, the chain is as close to the quick-service segment as it’s ever been. Applebee’s customer demographics—age, ethnicity, etc.—is more reminiscent of fast food and fast-casual players than its full-service peers. Gen Z, millennial, and Gen X now account for 80 percent, with millennials (34 percent) as the largest. The quick-service comparison is also true for Applebee's guest income profile, which is $75,000 per household.

Another point: In seven of the past eight months, the price of quick-service meals rose at a higher pace than full-service menu items, according to the Bureau of Labor Statistics. And Applebee’s average check is already on the lower end of the casual-dining spectrum.

Cywinski said that a decade ago, the chain wasn’t top of mind for consumers coming home from work and looking to relax. The brand marketed against that “pretty hard” in the past five years, and has now reached the desired awareness level, the executive noted. Off-premises, which resulted in $1.2 billion in 2021, mixed 28 percent in the first quarter.

“You get great packaging, you get really great food, real food—not a burger, fries, and a Pepsi in a sack from a [quick-service restaurant],” Cywinski says. “Then it travels well, and it doesn't cost all that much more. With locations across the country, if you choose to go pick it up yourself, it's likely right around the corner. If we were a 400-restaurant brand in casual dining, I'm not sure we’d have that level of convenience or relevance. But we've got 1,575 restaurants, so it's quite natural to aspire to be a top-of-mind consideration among those fast, convenient, don't-have-time-to-sit down-and-dine occasions, and we play really well.”

READ MORE: Applebee's is Thriving at a Level Not Seen in Years

Applebee’s same-store sales rose 14.3 percent in Q1 year-over-year, representing the chain’s fifth straight quarter of positive momentum. That breaks down to 17.6 percent in January, 25.1 percent in February, and 5.5 percent in March as the brand lapped stronger comps.

Given Omicron’s impact, January saw $46,800 in average weekly sales per restaurant ($2.4 million annualized AUV), but February and March jumped to $54,800 ($2.8 million AUV) and $57,600 ($3 million), respectively. In fact, March was Applebee’s best-performing month since it entered the Dine Brands family in 2007.

In the first quarter, dine-in sales mixed 72 percent and reached 90 percent of pre-pandemic volumes. Cywinski expects a continued tailwind from Applebee’s improved late-night business and the gradual return of older guests.

The chain’s 28 percent off-premises mix was split evenly between carside pickup and delivery. Roughly 70 percent of Applebee’s carside orders are digital, and that includes online platforms and a proprietary call center, which is currently used by more than half of the U.S. system.

The goal is to reach 100 percent digital ordering by the end of 2022, and that means connecting the rest of the footprint into the call center. Customers using online ordering platforms or the call center come with a higher average check as opposed to regular phone calls, Cywinski said.

“It’s really not the core competency of a restaurant team member to be picking up the phone and taking an order and transacting that order, taking a credit card and all of that,” the executive said. “And so when I get to 100 percent digital, I free those team members up to focus on in-restaurant execution, which pays meaningful dividends for us, and then they're great at that. Whereas, if you were to pick up your phone and on a Friday evening at 6:30 p.m., you may not have a great phone experience. Might be a team member who's in a rush, it might be several rings before it's picked up, it might be a bartender.”

Applebee's

After spending roughly five years closing about 300 underperforming restaurants, Applebee’s is projected to fall just short of U.S. net unit growth in 2022, but reach the mark in 2023. It plans to open six traditional locations and six ghost kitchens this year and close fewer than 15 stores—its lowest number of shutters in 10 years.

Applebee’s ended the first quarter with 1,575 U.S. restaurants.

In preparation for this rise in development, Applebee’s has spent the better part of two years developing a new prototype. Cywinski describes it as a cost-engineered, modernized store design that’s not radically different from what’s seen today—there’ll still be the classic tower, the bar will remain the centerpiece, and the square footage will be roughly the same.

A handful of recently opened restaurants feature some, but not all of the components. In these stores, guests of all ages have validated the improvements, Cywinski says. Locations with all changes should pop up toward the end of 2022, and certainly in 2023.

“We haven't compromised anything on the guest front in terms of design, décor, size,” the brand president says. “We've just optimized a few areas back of house, kitchen, front of house, dining room—just some measures that some really smart designers and architects helped us with to make this even more efficient, and that's probably the word I would use. It's a more efficient prototype. It looks great for the guest. It'll just operate even more efficiently for our franchise partners.”

READ MORE: Applebee’s Meets the ‘Reinvention of the Guest Experience’ Head On

Cywinski hopes a good portion of Applebee’s future growth will include drive-thru pickup windows, in lieu of carside pickup. There are four converted locations in Arkansas, Texas, South Carolina, and Virginia. The new asset, which costs roughly $100,000 to $250,000 depending on market, allows stores to offer off-premises later into the night and protects employees from unfavorable weather. There should be 15 drive-thru pickup windows built by the end of the fiscal year. 

The Applebee’s executive isn’t sure how many conversions would be possible among the nearly 1,600-unit footprint, but he prefers it be at least half, if municipalities allow for it. He’d also love for new prototypes to have the drive-thru window, too.

“If 5 percent of my business was off-premise, I don't think I’d have a keen interest in doing this,” Cywinski says. “With 28 percent of my business being off-premise and then that's a $1.2 billion brand in effect. That's larger than some of my smaller competitors in total. It's meaningful, and we're not just in the off-premise business to compete. We're in it to win, and we want to really provide a great experience for our guests. So the easier we can make it for our guests and our team members, the better, and that's our mission.”

This is Cywinski’s second stint at Applebee’s. For five years in the early 2000s, he worked as chief marketing officer, and at that time, he said the company was building 100 restaurants per year and comp sales were “off the charts.” Many, including himself, refer to those times as the glory years.

With a fully optimized portfolio and customers eager to dine out, Cywinski is confident that Applebee’s has recaptured that magic.

“We're very bullish on the future,” he says. The brand couldn't be better-positioned, and I'm excited for what that means for our franchise partners.”

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Categories: Restaurants

What Exclusion Looks Like : Modern Day Struggles of a Food Allergy Parent

Restaurant Management - Thu, 05/05/2022 - 09:06
What Exclusion Looks Like : Modern Day Struggles of a Food Allergy Parent danny Thu, 05/05/2022 - 09:06

The issue for food-allergic individuals and restaurants alike, and how to solve it.

May 5, 2022

The image above is just one example of how individuals impacted by food allergies find themselves sans compass. I see the names of the different flavors, but how do I know which ones include the allergens my son needs to avoid?

I can make an educated guess that “Gotta Have Nutella” has tree nuts, but in the world of food allergies one never assumes. Since 40 percent of children with food allergies are allergic to more than one of the allergens within the top 9, guests impacted by food allergies are typically looking to rule out not just one allergen from menu items, but potentially two, three, or four different allergens.

The last time I tried treating my food-allergic son to a scoop of gelato, the manager who I asked which flavors didn’t have peanuts, told us in a manner described as nothing less than abrasive, that we should assume that “every single flavor has cross-contamination with peanut.”

Now, I certainly understand, and fully appreciate someone who is trying to be overly cautious when it comes to food allergies, but I also could have gone without the blatant cross-contamination warning because to be honest, it ended up being a total buzzkill to what was supposed to be a fun moment for my son and me.

I know my son, and I am familiar with the severity of his allergies enough to know when we can still have things that otherwise forewarn of cross-contamination. In our case, we need to avoid peanuts that are listed as an intentional ingredient. And here I go explaining myself all over again, when really, I shouldn’t have to!

What would have been ideal is if we didn’t even have to bother the manager about which flavors contained said allergens. It’s not like the ingredients are changing from one day to the next, what would be so hard about just listing which of the top nine allergens are contained in each flavor? They don’t even need to write the word “wheat” they could just use a cute little wheat symbol, or milk, or peanuts, you get the idea. This way, guests can quickly and easily identify which items to avoid, or in the case of a restaurant menu, potentially alter.

Imagine how much time-savings it would mean for a paid employee or manager (especially amid a nationwide staffing shortage), by not having to personally answer questions that can be answered with something as simple as a symbol. And of course, a warning about the potential for cross-contamination can easily be addressed with a sign at the bottom of the menu or case so that individuals impacted by a severe food allergy will be able to make an informed decision as to whether “all those cross-contaminated flavors with peanut” are worth the risk or not.

Dining Out with Food Allergies

Non-definitive answers are not just a problem for guests who are forced to decide whether to take a gamble with their health and safety however, it’s also a problem for the restaurant who faces the risk of accidental allergen exposure, or potentially even an ADA violation if information or accommodations fail to be made.

It’s a simple question when you pare it down: “What is in the menu item you serve here?” Yet between the vague menu descriptions, lack of information that servers, and even managers have access to, questions often go unanswered.

If you’re a food allergy parent, you know the struggle. Our dining-out experience consists of interviewing the server, manager, or owner and then fact-checking it all until we feel like we have enough assurance that we can make our order with confidence. And let’s face it, by then the appeal of eating out has left us exhausted and bitter about how ridiculous the whole ordeal is.

Fortunately, there are a few restaurants out there who are starting to get it and are trying to tailor to “people like us.”

Whether it’s by offering an allergen menu like this one from Short Stack Eatery (Madison, Wis.) which provides immediate ingredient transparency for menu items containing any of the top 9 allergens; or by employing the use of apps such as OneDine which national chains like bartaco currently use to enable guests to directly inform the kitchen of which specific allergens they need to avoid; or just concepts that are based on the premise of allergy-friendly, like Frío Gelato (Chicago).

As a food allergy parent, I am grateful to see that there are some restaurants out there that are setting an example of inclusion for others to follow. The food allergy community at large can only hope that it is just a matter of time until other restaurants start to follow suit. 

As both a marketer and food allergy parent, Katie Moreno has been navigating her way through the chaos and confusion of food allergies for the past seven years. She believes restaurants have the potential to convert people impacted by food allergies from one-time visitors into some of their most loyal customers, but restaurants need to win them over first. She currently resides in Madison, Wisconsin. Find more stories from Katie on Medium: https://medium.com/@katielynnmoreno

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Categories: Restaurants

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