Outlook 2009: Southeast

Restaurateurs in the Southeast say streamlining operations to control costs, implementing innovative marketing strategies to spur sales and ramping up the service quotient to keep customers coming back are the keys to success during the current financial crisis.

For Golden Corral, the 486-unit buffet chain based in Raleigh, N.C., operating more efficiently has been a saving grace for the company, says Bob McDevitt, senior vice president of franchising.

“Believe it or not, we have confidence when we look at 2009,” McDevitt says. “We think it will be a very tough year, but we’re focusing on the basics and are well positioned for the economic environment we’re facing. Everyone in the industry is apprehensive, but we’ve gotten a break on commodities; the dire forecasts of the last months are not happening, so we’ve got a modicum of confidence.”

Indeed, most recently commodity prices have come down from escalated highs of last year, offering some operators welcome relief in 2009. At Golden Corral, which tallied sales of $1.6 billion last year, McDevitt adds that menu changes that focus on lower-priced food products can help to both contain costs and to excite the consumer with new offerings.

“One of the really big advantages we have in the buffet environment is we can emphasize lower-cost products,” McDevitt says. “One of our most popular products is pot roast, so we’ve introduced a pork pot roast… We have other products in the wings that provide increased variety at a lower cost…for example, two or three different cuts of less-expensive beef we can use for our roast beef.”

McDevitt says that the switch to different cuts of meat will ultimately save the chain “millions of dollars” systemwide and that “customers will love it” because of the “way it looks and tastes.”

It is part of Golden Corral’s plan to offer guests the most value for their money through better food quality, restaurant environment and staff hospitality.

ECONOMIC INDICATORS, PROJECTED PERCENTAGE GROWTH RATES, 2008 TO 2009

“It’s about getting back to basics and executing really well,” he says, “making sure hot food is hot and cold food is cold… I want [customers] to come out feeling like they had a great meal at a great value and [received] great hospitality, too.”

A focus on the consumer also is paramount at J. Christopher’s as the casual-dining chain battles against another year of tough economic factors. The Atlanta-based, 20-unit chain is focusing on the breakfast daypart because, according to J. Christopher’s president Dick Holbrook, the morning meal appears to be experiencing the most consumer growth.

“Certainly as you look at the strategic reports being written, breakfast has had more significant growth than the other day parts,” Holbrook says. “From a consumer standpoint, strategists think the eating out trend will continue and that people will look to eat out more often at breakfast.”

Holbrook says that in anticipation of this expected growth, his chain has undertaken a winter promotion that offers comfort-food items, including a breakfast strada, which he says is a cross between a quiche and French toast with filling.

J. Christopher’s also is exploring limited expansion with plans to franchise a handful of locations this year with experienced operators.

SOUTHEAST 2009 STATE-BY-STATE SALES FORECAST

“Lenders will look at [experienced operators] much differently in this economy than they would franchisees that are looking to get into the restaurant business for the first time,” he says. “This is a good time to develop new restaurants, take advantage of lower lease rates.”

Some upscale operators, like Buckhead Life Restaurant Group, the Atlanta-based operator of Pricci, Nava, Chops, Kyma and Pano’s & Paul’s, also are attempting to drive traffic through value-centric offerings, like dining out discounts when patrons purchase gift cards.

“The key for us is to be value-driven,” says Paul Baldasaro, Buckhead Life’s chief operating officer. “With our gift card we have presented a promotion that offers 20 percent added value on it.”

The promotion, which began in November and was scheduled to end this month, has been extended through April, he adds.

Baldasaro also says the company has streamlined its purchasing practices to cut down on both costs and waste.

“We’ve put more of a focus on our daily purchasing and are being more diligent,” he says. “Because our purchasing style has changed we look heavily at the turnover ratio of our product. There’s not a lot of product on hand… We’re much more strategic in our daily purchases in that we’re maximizing the day.”