Editor's note: This exclusive series to Nation’s Restaurant News provides C-level insights into the sales and traffic data from clients subscribing to Black Box Intelligence, a financial performance benchmarking company. The views expressed here do not necessarily reflect those of Nation’s Restaurant News.
Last year ended with a difficult quarter and month, as indicated by Black Box Intelligence's most recent Restaurant Industry Snapshot.
Overall, for the second straight year the restaurant industry posted positive same-store sales in 2012 at an increase of 0.5 percent, but negative traffic at a decrease of 1.7 percent. In comparison we saw a same-store sales rise by 0.7 percent and a 1.7-percent drop in traffic in 2011.
In addition, our data shows a startling fact: On average, brands are still below their 2008 average unit volumes. Data aggregated over four years shows a 5.2-percent decline in same-store sales and an 8.7-percent decline in traffic. We did note some differences in regions, though, with California rebounding toward the end of last year.
Looking ahead to 2013, the statement that comes to mind is WTF — which means, of course, "What to forecast?" I'm not in the business of forecasting, but I read what most of what the experts predict. The truth, it seems, is that nobody knows.
This may sound like more of the same from last year but with different issues. We know that health care reform is happening, who has been elected the president of the U.S., and that we missed the fiscal cliff. Now, however, we face more uncertainty about the debt ceiling and how to prepare for health care reform, which leaves restaurant customers uncertain and reactionary to the latest news.
I'm an observer, not a forecaster. That leads me to say that, unfortunately, our 2013 index will probably be another "1-percent world" in same-store sales and negative again in traffic. Tell me it isn't so!
What about individual companies? What about segments? We never comment on individual company performance, but it is interesting to observe the differences in the top quartile performance compared to the bottom quartile. In 2012, that difference was a whopping 4.6 percent in same-store sales and 4.8 percent in traffic.
The industry is engaged in a market-share battle that is won with a marketer’s mentality. The best brands are focused on micro-targeting their consumers with relevant products and services that will positively impact traffic and sales. Just cutting costs, raising prices or out-operating the competition will no longer differentiate a brand. Taking those tacks, a company that doesn't adopt technology and business intelligence that provides insight into the consumer is likely to fail.
What to forecast?
I do observe companies that are courageous and intentionally confronting the "brutal truth" about their brand, their segment, and their talent, as Jim Collins advised in the book "Built to Last." These companies are not afraid to recognize that the marketplace and workplace are changing and that they have fallen behind. With that clarity they make changes that improve performance.
Finally, as you have heard me say many times, you typically don't win a market-share battle everywhere at one time. It is won with a market-by-market approach that highlights brand relevancy and execution. Every brand has its top and bottom quartiles, just like our Black Box Intelligence and People Report products. We see our best clients measuring effectiveness of their management and marketing by comparing their best and most important markets to the competition as a "brutal truth" reality check. Try multiplying the 4.6-percent spread against the AUV, and you see there is real money in being top quartile.
Here are some thoughts about how to answer the WTF (what to forecast) question:
1. Comfort and certainty is a bygone luxury for business leaders.
2. Success is not dictated by segment or age of the brand, but by leadership, strategy, execution and capital access.
3. Marketing is much more about customer understanding and targeting than just good advertising.
4. Culture is more important than ever in a diverse workforce comprised of multiple generations, ethnicity and cultural backgrounds. The job of managing and leading is more complex than ever, but many are less prepared.
5. The best companies are adopting customer-facing and back-end technology and business intelligence faster than their competitors.
6. At some point a company has to reverse negative traffic to exist.
7. Companies that have only two strategies — cutting costs and raising prices — will fail. It's just a question of when.
8. Domestic growth will be limited for big brands but unlimited internationally.
9. The trend and not just a fad is for companies to answer the Reverend Roy Spence's challenge: It's not what you sell, it's what you stand for that will win employees and customers.
10. "How can I serve you?" may be the most important question and behavior for every leader and employee to gain the trust of our employees and guests.
If all this was simple, anyone could do it. Congratulations to the companies who made the complex appear to be simple and won in 2012.
It is a new year and the record is going to be written. Will you be top quartile in 2013? If you are, then the macro uncertainty is your friend and your competitors concern.
Good luck and enjoy the opportunity.
Wallace B. Doolin
Doolin is chairman of Thomas Doolin and Associates LLC, the holding company of People Report, the leader in human capital business intelligence for the restaurant industry and Black Box Intelligence. He is the founder of Black Box Intelligence, a state of the art business intelligence product for the restaurant industry. Additionally, serves as a trustee of the National Restaurant Association and is a past chairman of the National Restaurant Association's Education Foundation. Other current responsibilities include public company board of director service for Caribou Coffee and Famous Dave’s. Previously, Doolin served as CEO of Carlson Restaurants Worldwide and TGI Friday’s, Buca, Inc and La Madeleine.