CHICAGO —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Noting that economic downturns are a normal part of the business cycle, the executives warned that passing on higher operating costs to customers through menu price increases or reducing employee levels to save money would lead to poor service and alienate customers. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
No matter what measures restaurants take to preserve margins, “you never do anything” that directly affects customers, said Jon Luther, chairman and chief executive of Dunkin’ Brands Inc., parent company of the Dunkin’ Donuts and Baskin-Robbins chains. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Luther doesn’t believe in offering discounts on everyday prices to build traffic, but Dunkin’ Donuts will offer a special deal to keep customers coming back to the chain. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Discounts are not part of the chain’s brand image, he said, and they harm the “emotional bond” between Dunkin’ Donuts and consumers. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
To maintain that bond, the chain is increasing its marketing, and Luther advised other operators to “power up” their own marketing efforts—if they can afford it—so consumers know their brands are alive and well. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Douglas Brooks, president and chief executive of Brinker International Inc., also advised operators to keep long-term brand image in mind when trying to control costs. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
The risk in overreacting to increases in commodity prices, either by raising menu prices or cutting back on service, is that “consumers see you differently,” he said. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Publicly traded Brinker will not raise prices just to make Wall Street happy, he added. The company’s philosophy is to focus on delivering value by managing costs. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
In an economic downturn, restaurants have to be satisfied with “a little less” short-term profit to maintain market share, said Ted Balestreri, president and chief executive of The Sardine Factory. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
He also said restaurants have to maintain quality while still providing value to customers. The Sardine Factory offers a bar menu for price-conscious diners, he said. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
On-site foodservice also faces challenges during the current economic downturn, said Lorna Donatone, president of the school services division of Sodexo Inc. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
On one hand, a school lunch “looks like a value now” to students, which means more might buy lunch at school, she said. On the other hand, parents are packing lunches for their children to save money, causing customer counts to fall in some school districts. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
The biggest challenge for Sodexo is increasing student participation in lunch programs through limited-time offers and marketing programs geared toward students, “who are savvy consumers at a much younger age,” Donatone said. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
They are loyal to the products they feel comfortable with, she said, but Sodexo has to provide the meals they want at the price points that school districts can afford. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
The districts set the lunch prices, and “we are seeing that [price] elasticity is limited.” —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Donatone has met with vendors to determine what they can change in the supply chain. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Luther suggested restaurant operators look at inventory management as a way to offset commodity-price increases, and Brooks advised reviewing how efficiently kitchen equipment is operating. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
“This may be time to invest in technology,” he said. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Balestreri said restaurants seeking new locations should remember that consumers’ “spendable dollars” are more important than the annual income of any given market. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Although the executives agreed economic downturns are part of the normal business cycle, Luther said he had “great concerns” this one will last longer and be deeper than previous ones. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
He predicted the current downturn will last 24 to 30 months and the country will face another credit crunch, gas prices will remain high, and consumer spending will contract. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Despite current economic conditions, Brooks said consumers still want to eat at restaurants because “dining out is all about being social,” and they want to eat out even if they can’t afford to. That’s why it’s important for restaurants to provide value now, he said. —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.
Speeches, soirees highlight NRA confab —Acting too drastically to improve short-term profits in the current down economy will hurt restaurants in the long term, according to executives who spoke during the 7th Annual Restaurant Executive Breakfast at the NRA Restaurant, Hotel-Motel Show.