While weathering the economic storm of the past two years, foodservice operators have had to deal with a plethora of factors as they try to get their businesses back on track and plan for their futures.
While weathering the economic storm of the past two years, foodservice operators have had to deal with a plethora of factors as they try to get their businesses back on track and plan for their futures. To get a better grasp of some of the more pressing issues, FE&S caught up with Arjun Sen, president and founder of Denver-based Restaurant Marketing Group and an 18-year veteran of the restaurant-chain industry, who has served in executive roles with such concepts as Jillian's Entertainment, Papa John's, Einstein Brothers and Boston Market. Each year, Sen publishes "The Leaky Bucket," a trends report based on research that determines which brands see customers returning, which don't and why. Read on to find out his take on the current issues and building trends that will affect budget planning and spending this year and beyond.
Menu-labeling legislation has been gaining ground in a number of states and municipalities and is pending in other areas. Congress still has until early next year to finalize a revised food bill, which may include new federal laws requiring menu-labeling nationwide. With this in mind, it's no wonder restaurant chains and even independent operators are revisiting their menus, testing dishes for nutritional information, and starting to work with restaurant consultants on menu board redesigns.
"It's important to have foresight in this case, rather than just react to changes," according to Sen. "Menu-labeling laws could end up becoming a non-negotiable budget item. That means all operators need to have a plan, rather than look at it on a month-to-month basis."
Investing in energy- and water-saving equipment, says Sen, is not a fad — it's almost second-nature. More foodservice operators have looked to move away from the short term planning — one-by-one replacements and buying on the cheap — to investing in more durable, cost-saving, better-made equipment that will help save dollars in energy and replacement costs down the line.
"Having a long-term plan is the best method when it comes to budgeting for green equipment," Sen says. "I usually encourage restaurants to work on a three-step process. For example, step one may center on replacing plastic with recyclable paper products. Step two may involve replacing light bulbs with energy-saving ones. Step three may be replacing old or broken equipment with higher-efficiency investment pieces. In other words, everything doesn't have to be green by tomorrow. It's important to break it up into manageable chunks." Going green should be a part of all operators' budgets at this point, even if it means simply taking the time to research different options.
With rising health insurance premiums, budget cuts and other financial challenges, improving the efficiency of an operation can help offset further costs. Labor is a big part of that and an increasingly stringent issue. "How do we maximize labor? That's of top concern for many restaurants," Sen says. These days, advanced, programmable equipment or pieces that perform multiple functions free staff to perform other responsibilities. While multiuse equipment like combis tend to cost more money up front, their ability to perform the tasks of a part-time or even full-time employee helps save overall budget dollars in just a few years or less, freeing up the lines of spending for other needs.
Sophisticated, Social Consumers
Consumers are becoming more sophisticated in both their dining preferences and palates. They seek better-tasting, better-quality food served in more comfortable, modern environments. "Consumers will be watching operators closer than ever before," Sen says. While many restaurants and other operators used heavy discounts in the last couple years to entice consumers to dine out, these days, those "freebies" are becoming scarce. "Instead of giving out freebies, restaurants should look to reduce portion sizes as one way to cut costs," Sen says.
Using social media as a marketing tool to keep customers coming back also serves as a dollar-saving tool — it's free and easy to set up and use; and today's consumers are really dialed into this medium. "I think consumers are getting choosier about menus and other preferences because they're more involved in the online world in general," Sen says.
As with "going green," the time to get on the social media bandwagon is now — consumers demand that presence, Sen says. As far as budget implications, this means setting aside money for marketing staff, freelancers or others to spend time each day or week "advertising" on these social media platforms. Budgets these days should also account for website design upgrades and management. A modern, clean-looking, easy-to-navigate, searchable website is one of the most crucial things any modern business can have, and as such, requires its own line item on the budget breakdown.
Education, cooperation and full disclosure with all franchisees helps get everyone on board with new budget plans, required purchases and other financial decisions from the top, according to Sen. "When I look at equipment purchasing at store level I've always found [the] biggest challenge is dealing with store managers who worry whether things will affect their profitability," he says. "To overcome this issue, branding needs to be a part of the decision-making process. This helps the franchisee understand why the company is doing what they are doing." On the company side, chain execs need to make sure they can prove their changes will be effective, including the purchase of new equipment for multistore rollouts. "Is this change going to make my team members' lives easier and the customer experience better?" says Sen. "And is this my opinion, or can I really prove it?"