State of the Restaurant Economy 201
Both in dollars and in real wealth, our economy is richer than it’s ever been. If you look at retail sales, prices have been down, but the total dollar amount of retail sales up. That means there is more business and people are ready to spend and invest. And a lot more wealth is being created...
Starbuck's surpasses Subway to take the number 2 spot in "restaurant" earnings next to McDonald's (17 Billion in coffee & snacks). Essentially, Coffee and perceived "Energy" in a quick service format is what people are "eating up" these days. What will 2015 and 2016 bring the restaurant industry? A surge of IPO's, acquisitions and private-equity investments in restaurant concepts has hit Wall Street. Right now, those who bought into restaurants' IPO's in 2014 have made solid investments right now. Stock prices have risen beyond the usual pattern for new offerings. El Pollo Loco priced its July IPO at $15 per share and today, April 8, 2015 it is at $26.26. Dave & Buster's first sold stock in one year ago at $16 per share and today it's $32.63 (PLAY). The Habit Burger Grill was priced at $18 initially and today is $31.49 in a little over one year with a 45percent gain in sales between 2013 and 2014.
With the success of these new public offerings, potential investors are "hungrily" ready to eat up impending IPO's in the next year. Smashburger and Shake Shack are two in the "Burger Sector" to watch. Casual dining upstart "J. Alexander's" has filed for its initial offering based on quality food and the "dining experience." People have options all over town including staying at home, the key term "experience" is critical to understand and master! Darden sold Red Lobster. Carlson sold TGI Fridays. Burger Kind invested $11.5 billion to acquire Tim Hortons taking out basically loans to pull this off with $3 billion coming from Berkshire Hathaway.
When private equity firms are coughing up $3 billion to purchase a Coffee & Donut chain, the way I see it real money is talking "Loud and Clear" and things are looking good for restauranteurs in the next few years. Speaking of donuts, Dunkin' Donuts made it into the Top 10 grossing chains and it was virtually an obsolete entity a dozen years ago before they went into the coffee segment! Restaurants can't take customers for granted.
As the economy improves, we see an acceleration driven by changing consumer lifestlyes as well as a technological platform that can't be ignored. Did you know kids download the majority of apps and it is usually on Mom's phone? Healthy "whole food" options are in for mom, dad and on the childrens menus! "To Go" food programs are increasing at traditional "sit down" casual concepts. Menu innovation seems to be a winning formula throughout the industry. McDonald's has partnered with Haas Avocado!
The best growth is going to be found where operations "marry format" to guest demand. Capitalize on today’s 24-7 snacking ethos with product and daypart expansion building market share! "Appi Hour" from 2-5pm and 10pm-1am providing perceived value to guests and also offering culinary teams an opportunity to get creative or to simply test new items on a weekly or daily basis in some cases. Affording "creativity" on feature items can also be great for food cost! Don't just "try" this, do it. Do it well. Tell people about this and be proud.
Even in a seemingly good economy, people are working harder than ever and "value" is important to the consumer. Further, your culinary team loves to showcase items both on and off the traditional menu. Yes, it's an old concept but many restauraters just go through the motions here. Whatever is worth doing at all is worth doing with great energy and consistent effort! I know this might crush the soul of hard working service staff, but GOOD coffee and creative esspresso options are a must! Some large restaurant groups have dedicated barista's in service wells to support the floor but you have to insist in quality with high standards for sanitation here. Champagne & Sparkling Wine? It's flying off the shelves at grocery stores and boutiques up almost 5 percent in growth as compared to wine sales, some big chains have unique champagne cocktails and so should you. Personally I bring in Acai, Pomegranate and other healthy antioxidant dense natural juices because I think the Mimosa lacks creativity and is boring. Muddling fresh herbs with champagne cocktails is "in" for sure right now too! Simple? Your guests are more savvy now more than ever before with satellite television programming picking apart restaurants, chefs and start-ups. The Foodie culture is huge and in many casespeople can "chef up" food at home as good if not better than in restaurants. This is something everyone has to remember when they analyze quality, service and hospitality as one living breathing reality.
People are coming for the "experience" more so than "good food" and "good service." Social needs require you to coach staff more for "hospitality" than anything else!
My suggestion? Get "better" not bigger.
Right now, more than ever is the time for quality control, education and self-evaluation. Develop great people. Send key staff members for industry related certifications. Provide incentive programs in exchange for creative ideas. Use human capital because YOUR people are smart! In a point & click reality things can move backwards pretty fast...but business can also double or triple with the correct manicured approach!
The next few years are looking good! Yours in Success, Peter D. Bouloukos