Grocers give restaurants competition

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.

It’s over! The first quarter of 2013, that is — and it was not an easy one.

Difficulties in the quarter included reinstatement of payroll taxes, delayed tax refunds, and more gloom for the U.S. economy caused by the sequester and high gasoline prices. New Year’s Eve helped in the beginning, but an early Easter hurt in the end. And we had worse weather by far compared to 2012’s mild winter, which created the most difficult rollover of this year.

The Restaurant Industry Snapshot from Black Box Intelligence for March showed a 0.5-percent lift in same-store sales and a 2-percent drop in traffic. The quarter that seemed it would never end showed a 1.3-percent decline in same-store sales and a 3.7-percent decrease in traffic — the worst quarter since the second quarter of 2010. Ouch.

So that is the news, but what about the commentary?

I would like to share some thoughts from the recent UCLA Restaurant Conference in Los Angeles. It was a very good conference that presented some great speakers and content. Greg Creed, CEO of Taco Bell, brilliantly delivered the keynote, sharing a very transparent view of the company's bold vision for the future.

Tim Ryan, the CEO of the Culinary Institute of America, received the innovator of the year award, followed by an informative view of our industry from his insightful vantage point. I gained valuable insights and visited with many great people in our industry.

However, the conference opened with a grocer, not a restaurateur: Walter Robb, co-CEO of Whole Foods. I had heard him last October at the Conscious Capitalism Summit. Walter is a great leader of a wonderful company. This time, his remarks gave an interesting perspective that no one commented on all day. I love Whole Foods as a consumer, but listening to Walter as a person that has made and continues to make my living in the restaurant industry, he scared the heck out of me.

As I mentioned last month, we have an oversupply of restaurants in our industry that has created a market-share battle for you and your competitors. Someone opens; someone closes. Someone innovates and sales go up at the cost of someone else who didn’t innovate — and then their sales go down. You see product proliferation in many brands to include QSR and constant efforts to broaden the possibilities to gain more share of dining out.

This represents the customary line of sight and strategy in a market share battle, but what about your flanks? This is where a formidable competitor is chipping away at our dine-out dollars, the dollars that lead to positive same-store sales.

So here are a few observations about Walter’s presentation: Whole Foods is constantly innovating. It may be in product category choices, product improvement or totally new products. They especially like their ability to innovate in pre-prepared products. Listening to their customers and employees, especially at the local level, drives that innovation. They incorporate great flexibility of regional choices according to local product and local flavor profiles.
    
They have aggressive growth plans. If they aren’t in your neighborhood, they will be, and of course they are not the only upscale grocers we have to compete against. They have amazing talent committed by the attraction of their principles and purpose.

Walter had two local store associates speak to the audience. Their tenure was seven years and 10 years respectively. With tears in their eyes they discussed how they love working for Whole Foods because it is a team environment, purpose beyond profit, good wages, paid health insurance, paid time off for community service and a career with opportunities.

You may be saying, "So what? They are in the grocery business." Actually, they are in the food business, like us.

The company happens to sell most of its product for home consumption, but Whole Foods and its competitors are after our customers and employees. The incentive is their margins are higher when they sell prepared food in competition with restaurants.

So to me the lesson is simple. We can’t take any competitor for granted, and we have to watch our flanks. As the saying goes, we better “hold them close.”

Good luck in the second quarter, and buy groceries, not meals, at your local grocery store.

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, he 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 serving as a board director for Famous Dave’s a public company, SplickIt a mobile technology company,  Phasenext Hospitality a non traditional operator/franchisee and Share Our Strength a leading non profit.  Previously, Doolin served as CEO of Carlson Restaurants Worldwide and TGI Friday’s, Buca, Inc and La Madeleine.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from 172  DMAs from 100+ distinct restaurant brands and approximately 15,000+ restaurants that are clients of Black Box Intelligence. Currently, data is reported in four distinct segments: casual dining, upscale/fine-dining, fast casual, and family dining. Black Box Intelligence is a sister company to People Report, which tracks one million restaurant employees on workforce analytics. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, which is a monthly household survey of more than 2,500 consumers. Consumer Edge Insights is a marketing partner with Black Box Intelligence and People Report.