The mood was upbeat at the recently concluded MUFSO conference in Dallas this week, and for good reason. The restaurant industry continues to grow, building units and adding employees. Sales are up. Costs are coming down, which has improved profits and increased the value of those companies.
But the industry is also changing as consumer demands evolve, and that poses a challenge for restaurant owners in the coming years. So, too, does a variety of issues, both market- and government-related, all of which could influence how the industry fares in the coming years.
At MUFSO, some of the industry’s top executives and experts discussed these challenges, providing an outlook for restaurant owners, as well as tips on how to best address them. These speakers gave us a picture of the industry as it stands now, and how operators can change with an evolving consumer base.
Here are 10 things they taught us this week.
Millennials are changing everything.
Stop us if you’ve heard this one, but the younger generation is huge, and it’s making a big difference in the restaurant space. The generation now represents the largest market. Millennials are demanding more unique experiences. They’re demanding more technology. They want restaurants to have a sense of purpose and to do more than just serve burgers or burritos. And they want it their way. “The consumer has spoken,” said Denny’s Corp. CEO and Golden Chain winner John Miller. “They want more control.”
Consumers are looking for something new.
A simple look at the Hot Concepts winners shows how consumers have expanded tastes, particularly on the spice side of things. That all relates back to the Millennial generation. “They’re seeking culinary adventure, and food is almost an expression of creativity,” said Brett Schulman, CEO of Hot Concepts winner Cava Grill. Investors know this, and are putting their money into those different concepts, too. “We’ve cycled through the better-burger phase,” said Barron Fletcher, managing partner of the private-equity firm Riata Capital Group.
But you can teach old dogs new tricks
That doesn’t mean consumers won’t return to old favorites, either. On the stage at MUFSO were the CEOs of numerous legacy chains that have found recent success. Julia Stewart, CEO of DineEquity Inc. — operator of IHOP and Applebee’s — won the Operator of the Year award. Golden Chain winners included Denny’s CEO John Miller and International Dairy Queen Inc. CEO John Gainor. And the Norman Award winner was Cheryl Bachelder, who in 2007 took a down-and-out chain called Popeyes Louisiana Kitchen and made it into one of the hottest chicken concepts in the country.
Labor costs are going to be trouble
The hourly minimum wage is rising in numerous states. Cities like Seattle and Los Angeles are increasing their minimum wages to $15. New York State will soon require quick-service restaurants to start increasing their wages to $15. But perhaps the biggest immediate threat to the labor line is a shortage. After years of hiring workers at a rapid pace, the restaurant industry is suddenly finding itself struggling to hire good talent. Joni Thomas Doolin, CEO of TDn2K, warned that there would be “significant labor shortages by the middle of next year.”
But franchisors will be limited in how they can deal with it
Eric Ersher, CEO of Zoup! Fresh Soup Company, said his chain’s franchisees are increasingly concerned about labor costs. Many other franchisors have indicated the same thing. Yet franchisors may not be able to do anything about it. Efforts by the National Labor Relations Board to redefine the nature of employment could keep franchisors from providing that advice. While much uncertainty remains about the potential impact of the effort, Franklin Coley, partner at Align Public Strategies, suggested that franchisors might have to hold off on any potential advice on the labor front, lest they be liable on a joint employer action.
The industry doesn’t promote its benefits enough
The restaurant industry has been coming under fire for salary levels, scheduling issues and other practices. Yet it doesn’t get credit for the good things it does for young people. “We’re experts at developing young people and giving them skills,” said Karim Webb, a Los Angeles-based Buffalo Wild Wings franchisee. “We should be subsidized, not penalized.” It’s a story the industry should tell more, he said. “We leave meat on the bone by not telling our story,” Webb said. “We don’t focus on how well we’re developing people.”
Passion, technology and giving back
The restaurant industry is easy and difficult
The restaurant industry is not all that complex. “We make great food and get it in people’s mouths,” said Rich Melman, founder of Lettuce Entertain You Enterprises Inc. “That sort of is the essence of the restaurant business.” In addition, defining the restaurant industry’s problem is just as simple. “The one problem in the restaurant business is having enough customers,” Melman said. “You can talk about food costs, minimum wage, labor and all of these things. To me, they can be worked out relatively quickly when you have enough customers.” But that doesn’t mean the business is easy. “Being a Wall Street president, I thought that was hard,” said Altamarea Group CEO Ahmass Fakahany, a former president at Merrill Lynch. “This business is a hard business.”
So passion is a necessity
Success in the industry requires passion, Fakahany said. Indeed, Gene Simmons — Kiss band member and co-owner of the restaurant chain Rock & Brews — implored attendees to wake up every morning passionate about what they do. And he likened the restaurant business to a rock concert. “When we’re up on stage, we’re not just playing songs you like,” he said. “We’re giving them an experience. Once they walk into your restaurant, you’re on. Don’t just give them food; give them an experience.”
As is technology
Not even considering demands of younger consumers, technology is an absolute must. Restaurants have to take advantage of increasingly available technology, both through smartphones, touch screens and back-of-house technology. They have to tap into big data to give them more information about what their customers want. “Technology is a tool for us,” said Panda Restaurant Group Inc. CEO and Golden Chain winner Peggy Cherng.”It’s a tool for us to improve efficiency. It’s a tool for us to connect with our associates and connect with our guests. It’s a platform that enables us to do better.”
And giving back
Restaurant chains can’t just sell food. They have to become part of their communities. The CEOs that won Golden Chain awards all noted the importance of giving back. Amanda Hite, CEO BTC Revolutions, a social media and marketing firm, said doing so is just good business. Employees want to feel good about the business for which they work, and consumers spend money at businesses they feel good about.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze
The MUFSO Premier sponsor is The Coca Cola Company.
Presenting sponsors are: Dinova, Fishbowl, The Beef Checkoff and The Coca Cola Company
Keynotes/general sessions are presented by: Avocados from Mexico, e*Restaurant from Altametrics and the Texas Restaurant Association.
Pillar sponsors include: Heinz Soups, Sweet Street Desserts and Tyson Foodservice (Culinary); Ventura Foods (Entrepreneur); Smithfield Farmland Foodservice Group (Ideas); and Paytronix (Marketing).
The Monday night awards reception and awards presentation are sponsored by: Avocados from Mexico.
Coca Cola presents the Shake, Sparkle & Stir event, and Texas Pete® are sponsoring the MUFSO Kitchen Hero Cook Off, benefiting Share Our Strength’s No Kid Hungry Campaign.
Hot Concept/Best Concepts Celebration is sponsored by e*Restaurant from Altametrics.
MUFSO Breakfast sponsors are Community Coffee, Ole Mexican Foods and TABASCO®.
MUFSO Room Key is sponsored by Arby’s; Badge Holder Necklace is sponsored by Service Management Group.
Welcome Package is sponsored by Whirley-DrinkWorks!
Refreshment breaks are sponsored by Emmi Roth USA, Royal Cup Coffee, Saputo Cheese USA and Wrigley Foodservice.
