This is part of NRN’s special coverage of the 2011 Multi-Unit Foodservice Operator conference, or MUFSO. The conference is taking place Sept. 25-27 at the Gaylord Texan in Grapevine, Texas. Follow all coverage on NRN’s ‘At the Show’ section, check out NRN blogs, Reporter’s Notebook, and Tweet with us using #MUFSO.
After several years of recession-fueled retrenchment, MUFSO attendees were focused on the future and a return to growth as they posed questions to top chief executives in the industry Tuesday at MUFSO.
The answers did not disappoint, as NRN award winners covered expansion strategies -- and pitfalls to avoid -- as well as hot-button issues like health care reform.
Panelists for one of the final sessions at the conference, and typically the most popular, included Golden Chain award winners J. Patrick Doyle, Domino’s chief executive; Don Fox, Firehouse of America chief executive; Steele Platt, The Yard House founder and chairman; and Steve Romaniello, Focus Brands chairman, as well as Ron Shaich, Panera Bread executive chairman and Pioneer Award honoree; and Phil Hickey, O’Charley’s chairman and Norman Award honoree. The panel discussion was sponsored by American Express.
Grow with caution
Shaich, who grew Panera into a 1,500-unit brand, urged attendees to “avoid the seduction of growth.”
“Growth is what seems to be the end for so many people, but growth is a byproduct,” Shaich said. “It’s the byproduct of having something of quality, an individual store that actually works.
“And if you stay focused on that, the growth will come as the outcome. If you get too enamored of growth for its own sake, you actually will never get the kind of growth that you want.”
Hickey of O’Charley’s said, “Speed kills, or it can.”
“If you look at the brands that have stood the test of time, they’re those that have been nurtured and held fast and pulled back on growth when there is not the funding,” Hickey said.
In addition, he told operators not to let early success and notoriety fuel expansion too quickly.
“It’s easy to become intoxicated by people telling you how beautiful you are,” he said.
Platt of The Yard House recommended that attendees know who their guests are, and to put systems in place to serve them.
Shaich noted an unexpected downside of growth: becoming too widespread and available.
Continued from page 1
“Ubiquity breeds contempt,” he said. “Size and scale are bad, not good, in a people business. Size and scale are valuable for optimizing the P&L, but they actually make it harder to do what drives economic value in this business, which is differentiation.”
Shaich said Panera executives meet every quarter to look three years ahead.
“I make sure we have enough unit growth in the pipeline to continue to feed our machine,” he said. “At one time, I thought Panera would be 750 stores, and then I thought it would be 1,500. And we’re still in the early inning, so we’ll see how it plays out.”
Health care reform’s effect on business
The executives warned that impending healthcare reform might slow growth plans.
Doyle said health care reform costs are likely to run $10,000 to $15,000 per unit at Domino’s, for stores that average $650,000 to $700,000 in sales per unit.
Romaniello said the requirements would “definitely” be a financial burden.
“There’s no doubt in my mind in looking at the numbers that it’s going to be very difficult for many of our operators, in what is a low-margin business, to incur the additional costs that are going to be associated with this. It’s going to put enormous pressure on some of our operators,” Romaniello said. “If things don’t change, they are going to have to find ways to squeeze more profit out of their business to offset these incremental costs.”
Platt said he expects prices to rise, and that the strongest restaurant chains will “innovate and adjust” to survive.
Fox said Firehouse Subs is preparing now for provisions that will begin taking effect in 2014.
“We have to do as much proactively on our income statements, especially in the franchise community, to adjust the financial model as much as we can in the concept without compromising things to give us as much of a cushion in advance as possible before 2014,” Fox said.
Continued from page 2
Shaich, however, said he supports the legislation.
“My view is, first, it is fundamentally the right thing to do in our society,” he said. “It will be something that better operators will figure out how to react to it, but it will become part of the competitive landscape. Ultimately, what I try to focus on, and what Panera focuses on, is what we can do to become a better competitive alternative, as opposed to those things that are outside our control.”
Here’s where the panelists see the restaurant industry in the next five to 10 years:
Hickey: “The strong will survive. People are still going to go out to eat. Relevant, exciting brands will continue to excel.”
Shaich: “I think the world will continue to see niches develop. You’ll have a couple of mainstream players like McDonald’s that are in the distribution business that are basically trying to cover all niches. And the real power is who can find defendable niches were they can dominate … Those will be the long-term survivors.”
Romaniello: “The future is bright. More and more people will continue to eat out and seek new and exciting experiences. I think people will look to restaurants to fill certain needs … At the end of the day, I think what we do as an industry for people and the services we provide has an ever-increasing important place in our society.”
Fox: “The niche segment is where it’s going to be at for the next five to 10 years. The great thing about this is the more that everyone excels in those niches, and even with the major brands and the better they do, the better it is for all of us.”
Platt: “Innovation in the industry is going to be key. Freshness, quality and execution are paramount. I think there are going to be five times as many food trucks out there. You are going to see a shift from restaurants that do a lot to specialized restaurants that might just focus on one or two things that are great.”
Doyle: “The industry is going to change dramatically for the better over the course of the next 10 years. I spend most of my time worrying about where Domino’s place is going to be in that, but 20 years ago there were restaurants and restaurant chains that simply weren’t very good at what they did. And if you aren’t trying to figure out how you are going to be dramatically better 10 years from now than you are today, you aren’t going to be around. The level of execution and experience that is demanded by consumers today is dramatically higher than it was a couple of decades ago, and that pace of change is only going to continue.”
Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless