Reasoned growth is the recession’s lasting lesson, according to a group of award-winning restaurant operators at this year’s Multi-Unit Foodservice Operators conference.
During the gathering’s “Award Winning CEO Panel,” which was sponsored by American Express, honorees talked about the importance of focus and differentiation. Among the Golden Chain Award winners were J. Patrick Doyle, chief executive of Domino’s Pizza; Don Fox, chief executive of Firehouse of America; Steele Platt, founder and chairman of Yard House; and Steve Romaniello, chairman of Focus Brands. Winning panelists also included Ron Shaich, executive chairman of Panera Bread and Pioneer Award honoree; and Phil Hickey, chairman of O’Charley’s and the Norman Award honoree.
EARLIER: More on-the-scene reports from MUFSO
Shaich, who started with one restaurant that he volleyed into two successful bakery-cafe chains, including the now-1,500-unit Panera brand, urged attendees to “avoid the seduction of growth.”
He advised: “Growth is what seems to be the end for so many people, but growth is a byproduct. 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,” he continued. “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 added: “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.”
In addition, he urged operators not to let early success and popularity fuel expansion plans too quickly.
“It’s easy to become intoxicated by people telling you how beautiful you are,” he said.
Platt of Yard House urged attendees to know who their guests are and to put systems into place to serve them.
“Systems are the things that allow you to grow,” he said.
Shaich, while admitting that it was a contrarian view, added that the downside of growth is becoming too widespread and available.
“Ubiquity breeds contempt,” Shaich said. “Size and scale are bad — not good — in a people business. We’re 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 sit down every quarter and 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.”
The members of the CEO panel also cautioned that coming health-care-reform requirements might put a brake on growth plans.
Shaich was an outlier among the CEO panelists in his support of the health-care-reform 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, 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.”
However, Hickey said the health-care-reform requirements on small businesses would be “devastating.”
Doyle of Domino’s said, “We need to deliver health care more efficiently,” and that the reform, with many provisions going into effect in 2014, has introduced uncertainty. Costs are likely to be $10,000 to $15,000 per unit in the Domino’s chain, at stores that average $650,000 to $700,000 in sales per unit, Doyle said.
Romaniello of Focus Brands added that the requirements definitely would 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,” Romaniello said. “It’s going to put enormous pressure on some of our operators. 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 will go up, and the strongest restaurant chains will “innovate and adjust” to survive.
Fox of Firehouse said his chain is preparing for provisions that will go into effect in the next several years.
“We have, … especially in the franchise community, to [proactively] 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.
Each of the CEO panelists was asked about where the restaurant industry would be in five to 10 years. Their answers included:
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 where 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.”
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.”
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.”
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 ronald.ruggless@penton.com.
Follow him on Twitter at @RonRuggless.
