We look forward to seeing so many of you Friday, May 19th at DMA's Party
at the Post Office to kick off the 2023 Restaurant Show in Chicago! More than
500 people have RSVP'd for this outdoor event already and we'll likely hit
capacity soon. You don't want to miss this...Chain Operators can still sign up today!
Thank you to our supplier Partners and event Sponsors for making this such
a great experience as well! Your support not only enhances this event, but
also makes the monthly newsletter more engaging. We are so grateful to collaborate
with each of you! Explore product videos and promotions on DMA's website
highlighting many of the items you'll see (and taste) at this year's event.
Be Ready for GA4
Google's Universal Analytics is sunsetting in less than two months and it's
time to get movin' on implementing Google Analytics 4! If you can say "yes"
to one of the three points below, you should probably be feeling a bit worried
about Google's sunset of Universal Analytics:
1. You haven't migrated to GA4 yet.
2. You're considering letting Google migrate to GA4 for
3. You've been led to believe GA4 is anything but a necessary
evolution in how to track your users' journey on today's modern web.
Regardless of where you're at with GA4, we're here to help with a live webinar
hosted by BFO CEO & Co-Founder Steve Krull and our Associate Director
of Analytics, Maggie Sauer. We can't wait to showcase this amazing tool for
The State of the Restaurant Industry
On March 29, The Food Institute hosted a webinar with some of the
most dynamic operators in the QSR space today. Hosted by Lazard's managing
director John Goldasich, the panel included Kim Malek, founder and CEO of
Salt & Straw; Aaron Noveshen, founder and CEO of The Culinary
Edge and Starbird Chicken; and Riley Lagesen, chair of Greenberg
Traurig's Global Restaurant Industry Group.
They covered many topics with prime examples of what works in the industry
today and what doesn't, including (but not limited to) labor and supply chain
challenges, finding good real estate, an update on the California FAST Act
and Prop 22, as well as the modern consumer and what makes their businesses
and employees happy and successful.
"The national landscape is as diverse as ever and continues to evolve,"
"The pandemic turned the industry on its head. When would you see so
many employees not return to work? The pandemic changed the way restaurants
engaged the workforce, incentivizing them to stick around. Also, how do operators
money against COVID and a political and regulatory landscape? Coupled with
rising wages, interest rates, and benefits coupled with inflation and layoffs,
many restaurants are still doing well all over the country. There's a healthy
amount of development and cautious optimism despite pressure and challenges."
From there, the panelists dove into several topics; select excerpts are summarized
Goldasich noted that 75% of operators see labor costs increasing in 2023
amid the ongoing foodservice worker shortage, the changing workscape of recruitment
and retention, and perpetual cost increases from a world teetering on recession.
How have the guests responded?
Kim Malek – To say it's been fascinating on this front is putting it lightly.
[Salt & Straw] has been fortunate to be fully staffed. From a culture
perspective, we're cashing in our chips. It's a fun job in a good environment
and people like that. There's lots of open communication – I'm missing our
monthly company-wide town hall as we speak.
We're doubling down and investing in online training systems that people
can do on their phones, TikTok-style. We're trying to stay competitive from
a pay perspective. We manufacture our own ice cream and that's been harder
on the manufacturing side and the competition is unbelievable. We've had to
get creative with scheduling, flexibility, and training a culture that people
don't see in other places. We've added additional languages to training programs
and focused on folks in non-seeing/non-hearing environments, and we're looking
for folks for first-time employment or who are re-entering the workforce.
We need a work environment that supports people; I'm excited to do that.
Aaron Noveshen – Starbird has a similar philosophy. How do you be an employer
of choice? It's a conscious effort – it's not "if you build it, they
will come." We have to pay our managers well in the San Francisco Bay
We feature a bonus structure with no limited upside that we call superbonuses.
If people achieve and exceed their budget, they take a share of every extra
dollar they make. There's an entrepreneurial spirit and everyone receives
tips no matter their role. Sales cures all ills!
Starbird was also voted one of the best places to work in America. We always
battle food costs; we rarely battle labor costs.
We also offer $5,000 per year for employees for education benefits. Not everyone
will work here and we want to make an investment in their futures, not just
our own bottom lines. We have great educational training and many ESL folks.
We invest in language training through mobile technology.
The FAST Act
Riley Lagesen – The Fast Act was passed in September ‘22 to potentially increase
the California state minimum wage to $22/hr. It's characterized as a fast-food
restaurant proposition, but if wages are raised in one segment it will move
into all other segments. These are significant problems and issues for operators
and employees alike; there was a motion to impose joint employer liability
between franchisor and franchisees, but that was ultimately removed.
Expect to see similar legislation in other states despite Virginia striking
it down. Unionizing a restaurant has to be on a location-by-location basis;
it usually occurs in businesses where people want to stay and want to work
Same store sales are up yet margins are down for many operators. How can
operators mitigate supply chain challenges?
Malek – Dairy was up 40% this past year; it's about halfway back and we hope
to see it move to a more reasonable place. To get ahead of that, we adjusted
pricing and are investing in efficiencies. We invested in our kitchen and
automation to increase output. We saw margins increase, which we were really
fighting for. Yes, sales kills all ills and we were living in a pretty envious
position before the pandemic without minding our Ps and Qs; today, we're managing
every line item within our stores and kitchens to make sure every decision
is approved and we try to find savings and efficiencies at every turn. We
switched suppliers, doubled down on services, and it's really paying off.
We'll be stronger operators. Sales are rebounding and prices are coming down.
I'm grateful for the diligence we've been through. On the other side, the
buildout prices of our supply chain were skyrocketing and it was terrifying;
we couldn't have opened seven new stores by June at that rate. We really fought
for every dollar to get out ahead. Interestingly, we got through it all and
we're standing and ready to go.
Noveshen – We increased some pricing but didn't want to overdo it; we don't
want to lose guests. We made up a 20% increase in food costs for sales through
everything else. We haven't lowered prices; we're promoting more tactically
but we're seeing incredible flow-through.
A new processing partner helped with growth; packaging came down in 2022,
and we re-negotiated packaging contracts and got some wins there. We shifted
to wings quickly – one of the first items to drop in price during football
season – and we're also known for salads, so we were able to promote items
like salads with less of the more promotional items and sold them anyway.
We did a promotion on truffle sandwiches and fries, charged an extra dollar,
and brought more margin dollars in that way. This buildout cost has been more
problematic than food costs. I have not seen one inch of movement in the cost
of construction coming down. We're paying 50% more for a fryer than we did
two, three years ago – there's no refuge in sight on that end. We're going
line item by line item – do we need this? Do we need custom tile in the bathroom
for a business that does 80% of business off-premise?
Noveshen – Real estate is not going down. Real estate is tough; when you're
a brand looking for quality real estate you have to hyper selective – we use
analytics and try to understand our consumers. Competition drives up price
so we don't just leap at every site we like.
Malek – We've had a similar experience. Deals aren't less expensive but there
are more available. We have to be ready to move quickly. We look at sites
and neighborhoods two and three years in advance – which block? Which side
of the street? We develop relationships with landlords so we can move with
them when we grow. It's mind-boggling how long it takes to get municipality
permits when we're ready to go. It's something important to figure out.
The restaurant business has never been easy, never for the meek or timid.
Similar to what we saw coming out of the great recession, there's a tremendous
amount of innovation and development in the restaurant space. Strongly influenced
by COVID, restaurants moved to different development options (virtual/ghost,
delivery-centric), but now the pendulum is swinging back to what's always
worked – company-owned, high-quality brick and mortar. We're seeing gravitation
back to some level of normal, but in a very different atmosphere. Everyone
has changed a little in how they view the foodservice experiment, when and
where they want to eat, and how much they'll pay for it.
In dealing with real estate, as Kim and Aaron said, it is competitive. Good
real estate always is. It's more expensive than anyone wants to pay and you
hope the results justify it. As a lawyer, you want exit provisions in your
Patience in real estate is so important in site selection. Make sound real
estate decisions; it's critical to your mental health, well-being, and happiness.
People who pick poor sites deal with it for years. It takes so much time and
resources. Making good decisions and building a good team has always worked.
You have to stay ahead of the game; you have to pay attention.
Per guestxm.com, sales and traffic growth is plummeting after a brief bump
in January. Average guest checks are down as commodity and labor costs are
beginning to ease. The average check grew by only 6.5% year-over-year in February
– the lowest since 2021.
Checks are down as commodity and labor costs are beginning to ease. The average
check grew by only 6.5% year-over-year in February – the lowest since 2021.
Malek – The whole country is challenged with labor and staffing. Let's make
sure we're staffed. What are the team satisfaction scores? What are the customer
satisfaction stores? Not only did we hit our sales target, but what could
drive that? If there's a jump in turnover, you'll see a negative sales impact
in a month. We reformatted our bonus program and focused on the work people
are doing that we can control. The positive outcomes will follow.
Noveshen – We look at a lot of data. As long as it's accurate, it'll fly.
We look at sales every day, but we look at guest counts versus average checks;
where are sales coming from? What channels? Virtual brands/web apps/walk-in/kiosk?
We have so many different ways to order at Starbird. We look at speed-of-service,
even on an hourly basis. If something goes over 10 minutes we can identify
what went wrong.
Stability among general managers is key and critical; not every GM is going
to have a regional or district manager opportunity. We survey them on a quarterly
basis. We look at menu mix, social scores, internal monitoring scores, chicken
markets and the forecast of chicken. LTO and promotional scores we look at
daily. Catering trends, loyalty trends, and controls; we look at comps and
assess where our controls are going. We do 2% of transactions in cash; it's
required by law.
Malek – Automated inventory has saved hours per week. We're working on other
innovations in this space when it comes to product; the ice cream industry
is famous for not having any innovation on a scoop-shop level.
Noveshen – Regarding higher food costs and unprecedented rainfall and flooding
out west, it's still TBD on many of the California crops. We promote heavily
in the summertime around salads. This year we're doing a big switch and re-launching
the sandwich category; it's the most competitive part of the chicken business.
We're trying to win the sandwich category, too; when competing against the
$5 or $6 sandwich, there's no salad that cheap. We've spent the last 6 months
with new breads, new chicken, new saucing techniques, new packaging. We'll
launch new sandwiches – a little less produce-dependent – and the timing should
be good this year with the produce market. Food
The Teens Have Spoken: Chick-fil-A Remains Favorite Restaurant
Three things remain constant in life: death, taxes, and Chick-fil-A.
In Piper-Sandler's recent survey of teen spending in the U.S., the
Georgia-based restaurant chain still struts its stuff above Starbucks
and Chipotle and accounts for 13% of teens' pocket cash, according
to the report. Starbucks came close with 12% and Chipotle was a distant third
at 7%. Piper Sandler is an investment bank which conducts the semi-annual
poll of more than 5,000 American teens in 47 states.
Since the pandemic, Chick-fil-A has enjoyed quite the sales boon. The chicken
sandwich specialist enjoys almost twice as many cars in drive-thru lines than
its competitors according to QSR (5.45), followed by McDonald's (3.13) and
Wendy's (2.67). The motor queue also moves faster than its competitors, slinging
chicken at a clip of 107 seconds per vehicle, followed by McDonald's at 118
seconds and Taco Bell at 127 seconds.
And, last week, Chick-fil-A released some truly staggering numbers, approaching
almost twice the sales revenue since before the pandemic. It generated $18.814
billion in sales in 2022. Its last four years look like this:
Chick-fil-A Sales Revenue (billions)
Where Do Teens Shop? On Their Phones
Other key takeaways from the Piper Sandler report: food was the No. 1 spend
for men (24% of their wallet). Specific to food and beverage, SQ's Cash App
was the most popular peer-to-peer money transfer app with 41%, coming in just
above Venmo at 39%. Apple Pay ranked No. 1 for payment apps within the past
month (39%) followed by Cash App (25%).
More than half of American teenagers cite Amazon as their favorite e-commerce
site (57%). Forty percent of teens are at least part-time employed.
Following nationwide trends regarding plant-based food, less than half of
teens are willing to try plant-based meat (42%). During spring 2021, that
number was 49%. Plant-based dairy didn't fare much better; just 40% answered
they consume it or are willing to try it. Goldfish remains the most popular
snack brand (12%), followed by Cheez-It and Lay's (10% each), and Doritos
Perhaps most telling about this year's survey is how teens are consuming
media (and the influencers and brands upon them). In the year of TikTok everything,
TikTok usership actually declined as the favorite social media platform (37%),
followed by SNAP (27%) and Instagram (23%).
For customer service interaction, the mobile phone is the preferred method
with multi-year gains via texting and SMS messaging. Top social causes are
the environment (19%), followed by racial equity (9%). Inflation was the top
concern for just 4% of survey respondents.
The top influencers were Alix Earle, Andrew Tate, and Selena Gomez. YouTube
streamer and food/bev influencer Mr. Beast ranked No. 5. Food
Restaurants Struggling to Secure Chicken Sandwich Supplies
The growing popularity of chicken sandwiches has pitted chicken producers
against restaurant chains as the latter increasingly seeks birds in the 4-pound
range, The Wall Street Journal reported.
Restaurants are finding it tougher and more expensive to secure supplies
of smaller birds, especially in the wake of the pandemic, which saw the slaughter
of small birds halved between 2005 and today, the Journal reported.
Chicken producers say it's more expensive to grow smaller birds and years
ago switched to developing 8-pound, big breasted varieties. Dan Shapiro, chief
executive of Krispy Krunchy Foods, which supplies C-stores and stadium concession
stands with chicken products, told the Journal smaller birds are needed to
satisfy consumer demand for chicken sandwiches.
The Journal reported KFC and Chick-fil-A, the two biggest chicken
chains, also prefer the smaller birds. KFC has warned franchisees about supply
pressures. The two biggest suppliers, Tyson Foods and Pilgrim's Pride, say
they're reluctant to switch facilities to small bird production despite the
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Burger King is making good on its greenhouse gas reduction commitment
and electric fleet. The fast-food chain wants to transition 100% of its
field team fleet to EVs by 2030, and it has already replaced 1/3 of its
North American fleet thus far. Burger King joins a slew of other QSRs in
the segment, reported Restaurant Business Online (March 23). Full
Fogo de Chao is dropping "Steakhouse" from its name,
which is fine – it doesn't function like one anyway. Known for meat, Fogo
features a broad menu for its 87% millennial customer base. Fogo de Chao
focuses on experience and logged nine straight years of traffic growth and
average unit volumes, reported Restaurant Business Online (March
IHOP has overhauled its menu. It cut its old menu by one third
during the pandemic and has now brought back Cinn-A-Stack pancakes due to
popular demand, reported CNBC (March 29). Full
Arby's has launched a new King's Hawaiian Sweet Heat Sandwich.
The product comes in two flavors – chicken and beef ‘n' brisket. Full
Yum Brands has a $50 million investment fund for underrepresented
franchisees of its brands. The program, Franchise Fast Start, is designed
to help qualified franchisees to become multi-unit operators and "help
level the playing field," reported Restaurant Business Online
(March 30). Full
Duck Donuts debuted a new small-format layout built for scale,
speed, and convenience. The Pennsylvania-based made-to-order donut chain
is focusing on mobile pickup and self-order kiosks to entice customers and
lower franchise fees for operators, reported Restaurant Business Online
(April 5). Full
As Chipotle Mexican Grill is poised to almost double in size,
its new responsible restaurant format will debut an all-electric design
to get away from gas, cut emissions, and operate more efficiently. The format
will debut this summer in Virginia, Florida, and Colorado, reported Restaurant
Business Online (April 11). Full
Subway announced agreements with five new multi-unit restaurant
franchisees. The five groups comprise more than 230 restaurants and are
located in Texas, Florida, Arizona, and the mid-Atlantic region, reported
Restaurant Business Online (April 17). Full
McDonald's is improving its Big Macs and classic Cheeseburgers
and the Hamburglar is returning. The chain believes a hotter sear, melted
cheese, softer buns, more sauce, and caramelized onions will drastically
improve burger quality (and sales). The Hamburglar is returning for the
launch, reported Restaurant Business Online (April 17). Full
Meanwhile, the Battle for the Arches escalates once more – McDonald's
franchisees are backing bills in legislation that would give them more control
over how they run their businesses and how they sell them after recent moves
by McDonald's to limit their operations, reported The Wall Street Journal
(April 20). Full
Executives on the Move:
Church's Texas Chicken has named Roland Gonzalez its U.S. COO.
Blaze Pizza has ousted its culinary chef and co-founder Brad Kent
after 12 years, reported Restaurant Business Online (March 22). Full
US Foods Holding Corp. named Andrew Iacobucci as SVP, field operations
and chief commercial officer, reported The Produce News (March 30).
Don Fox, longtime CEO of Firehouse Subs, is stepping down and
COO Mike Hancock is taking over day-to-day operations, reported Restaurant
Business (March 31). Full
Dine Brands hired Susan Cannon-Foster as chief people officer,
reported Restaurant Business Online (April 3). Full
SUPPLY CHAIN NEWS
Analysts: Global Rice Shortage Likely to Last for Months
The ramifications of weather and war have resulted in a global rice shortage,
which could be among the worst in nearly a quarter century. Rice production
for 2023 appears destined for a severe shortfall.
"The world rice supply will not be completely corrected in one growing
season. It will carry over into 2024, even if the world has average rice production
this year," Tim Luginsland – Wells Fargo's Agri-Food Institute
sector manager – told The Food Institute.
The strained supply of rice is a result of the war in Ukraine as well as
weather issues in economies like China. Globally, rice production is falling
and driving up prices. CNBC reported the price of rice averaged $17.30 per
cwt year-to-date and appears likely to ease to $14.50 per cwt next year. Fitch
Solutions' commodities analyst Charles Hart told CNBC the following:
"Given that rice is the staple food commodity across multiple markets
in Asia, prices are a major determinant of food price inflation and food security,
particularly for the poorest households."
Fitch Solutions predicts the global shortfall of rice for 2022-23
is 8.7 million tonnes.
Weather & Russia Weak Havoc
Last year, farmland in large portions of China was hit by heavy rains and,
eventually, flooding. USDA also noted that Pakistan saw annual rice
production drop 31% year over year due to severe flooding. In 2023, China
– the largest rice producer in the world – is experiencing its worst drought
in roughly two decades. Drought has also hit rice-growing countries in the
U.K., France, and Germany.
Rice tends to be a vulnerable crop. In addition to tighter supply challenges,
rice became an increasingly attractive alternative following the spike in
price of other grains amid Russia's conflict with Ukraine in early 2022.
The subsequent rice substitution has driven up demand. India also banned
exports of broken rice in September, which Hart claims has been a key driver
"The Russian/Ukraine conflict continues to shift world food demand away
from wheat and corn and toward rice," Luginsland said. "The shortage
is severe and will likely last until 2024-25, when higher prices drive supply and demand back into balance.”
Hope on the Horizon?
Fitch Solutions, meanwhile, estimates that the global rice market should
return near normal in 2023-24. That could lead to rice futures falling in
year-on-year terms to below their 2022 level but remain elevated at more than
one-third above their pre-pandemic mean value, in part as inventories are
replenished after a period of extensive drawdown, CNBC reported.
Fitch Solutions projects that the prices of rice could drop almost 10% to
$15.50 per hundredweight, in 2024.
Wells Fargo and its team of national industry advisors in its Agri-Food Institute
say the impact of the global rice shortage won't be as severe in the U.S.
as overseas. Coincidentally, recent heavy snow and rain in California should
be a boon for rice production – and acreage will surge higher this year as
"So, the U.S. food industry may see slightly elevated prices for rice,
but it will certainly be available," Luginsland said. "Domestically,
we will likely see prices decrease from these high levels [in] late 2023 in
the U.S., if we have a normal growing season this summer." Food
Is Foodservice Headed for a $1 Trillion Milestone?
The foodservice industry is expected to top the $1 trillion milestone in
2023 for the first time ever. That was one of the key topics addressed at
the recent Restaurant Leadership Conference in Phoenix, reported Restaurant
Business (April 20). Full
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