With the economic climate slowly starting to rebound, here is a look at what steps foodservice operators should take to ensure their businesses are ready to take advantage of the improved business conditions.
By most accounts, the operating environment for foodservice is slowly but certainly starting to get better. The National Restaurant Association projects that the foodservice operator community will experience real growth of 1.1 percent in 2011. Although slightly more modest in its projection, Chicago-based foodservice market research firm Technomic still predicts the foodservice industry will experience 0.7 percent in real growth this year.
"Business is very much improving across the U.S. and across the world," says Chip Evans, president of The Evans Group, a Florida-based business consultancy. "There are more free dollars available and that is helping with consumer confidence. They are starting to see the economy improve and that the jobs will come back."
Despite these optimistic outlooks, it is highly doubtful that consumers will come back to eating and drinking establishments in droves. Rather, it is more likely that value-conscious customers will increase their restaurant visits and spending on a gradual basis. "It will start slow and grow more quickly, at least as I see it," Evans says. "We are starting to see people build or design new concepts or even remodel existing locations. When you see chains remodel 15 to 20 units at a time, that's a good sign."
Since it took the industry a few years to hit bottom and begin its rebound, it will also take some time to recoup some of the business lost to the recession. "You don't make up for losses and shortfalls quickly," concedes consultant Karen Malody, principal at Culinary Options. "There is a tendency to start spending in a more free-flowing manner once you see some improvement. Even though it feels so much better right now, the truth of the matter is that recovery takes a while. So we have to resist the temptation to fall back on sloppy habits. Bottom line: I don't think there is anything miraculous or different we can do just because things are improving."
That's why Malody feels most foodservice business leaders would be wise to heed the lessons they learned during the economic slump. "In part, the recession was an odd gift because it allowed a lot of operators to look deep into their businesses to see where they were losing or wasting money," she says. "In those situations you look at the way you order and store inventory, and assess the amount of labor you really need. You look more closely at how you maintain your equipment to avoid crazy repair bills. So, one of the things operators should do is stick to what they have been doing."
As a result of these belt-tightening efforts, some operators have emerged from the recession with a little more business savvy than they previously had. "A number of operators have reduced labor in the front and back of the house, without harming the way they interact with their guests," Malody says. "Don't use the fact that things are improving to get sloppy again. There is a tendency to do that, even in our personal lives. Those operators who have been able to view this very challenging time as a learning opportunity to employ new best practices will be the ones who will benefit even further when things start to come back. Hopefully we've all learned something as a result of having to be very careful and that will take us into the future in a more fiscally conservative or responsible manner."
Still, that does not mean that foodservice operators should sit idly by waiting for things to improve. "I think it is time to take a complete assessment of what is or is not working. This covers everything from the equipment to the menu to the staff competencies to the vendors supporting the operation," says foodservice consultant Georgie Shockey, a principal at Ruck-Shockey Associates. "Don't go back to the way things were done — innovate forward."
The complex and interdependent nature of most foodservice operations makes deciding where to begin the process of improving the business easier said than done. "Operators will need to clearly define their needs and prioritize them for maximum outcomes such as increased throughput at peak meal periods or reducing labor by hours/week," Shockey says. "So if the front of the house needs a facelift or a complete redo, then get that business plan done and in front of the boss."
In assembling such a plan, it would be wise to include one specific element: a positive return on investment. "Excessive spending without a true ROI will not be supported," Shockey says. "I would hope that the operator learned how to do more with less as I think this will be an imprinted mentality with customers as well as bosses."
Similarly, Evans offers a rather straightforward approach. "Start from the back and work your way forward. Begin with water and energy savings because they will come back to you the fastest," he says. "These investments will come back to them financially first as business grows. Then I would go with food safety, followed by the front of the house and, finally, the food."
Back of the House, Front of the Line
In the back of the house, look at the older items and develop a schedule or plan for replacing them, Malody advises. "In the European kitchens there is incredible care and maintenance for the equipment," she says. "In contrast, we are very abusive of our equipment here in the U.S. As a result, the shelf life on equipment is not as long as it should be."
Probably the easiest way to start is by reviewing the foodservice operation's equipment maintenance plan. "To save money, some operators did not spend anything during the recession. They need to get back on their maintenance schedules," Malody points out.
When assessing a foodservice operation's equipment package, consider the usage of each item and whether replacing it with a newer model would generate energy savings. Some older items may perform as well as newer units, which means updating those pieces of equipment may not be as much of a priority in comparison to other items where the newer units are more efficient in terms of energy consumption. Some specific product areas to consider would be exhaust hoods, refrigeration and ice machines, Evans adds.
As a result of a number of foodservice operations having shut their lights for good over the past few years, there seems to be a glut of used equipment on the market. From a price standpoint, purchasing used equipment might be an attractive option to most penny-pinching operators, but Evans offers a word of caution. "I believe used equipment is the wrong thing to buy right now," he says. "You don't know what you are buying. Chances are you are buying something old that is not energy efficient or as safety oriented as new items. The time to buy used is when the market is at an all-time high. Prices with manufacturers have never been as competitive as they are right now."
Still, the market may change sooner rather than later, so it is important to foodservice operators to be prepared by planning ahead. "I don't think we are going to see pricing dip any further and the deals to move equipment out of inventory are a thing of the past," Shockey says. "More manufacturers are producing to a need versus an inventory. I would recommend that, if there are replacements needed, this is the year to be buying or at least locking in pricing as best you can for a project. Prices are likely going to rise this year because commodities and metals have gone up and, I think, will continue to rise. This means equipment cost will go up as well."
Because purchasing new equipment can be costly, Malody suggests establishing a fund specifically for these expenditures. "Be proactive about it and not have it be a surprise one day when the piece of equipment is no longer working," she says.
When preparing to buy foodservice equipment, Shockey recommends looking at the purchase as an investment instead of a quick fix. "Hardwire the systems and processes so that the outcomes are sustainable and they produce good results," she says. "Take out the fluff that is not producing a measurable benefit to the customer or the operation."
For foodservice equipment and supplies dealers, the good news is that the emerging generation of operator customers seems to have a keen appreciation for the payback that being more environmentally friendly can generate. "We have younger clientele, and they are into energy audits, recycling and safety," Evans says. "They expect this, and they are the new customer. But you have to go in with numbers — approach them with the facts by saying 'If you buy this product you will save this much over the long haul.' Show them the ROI and make it very simple. It's not as hard a sell as it once was," Evans says.
And this awareness seems to be gaining prominence among consumers, too. "Look at Chipotle. They advertise how environmentally friendly they are throughout their store. They show the consumers they are energy efficient and proud of it," Evans says. "More people will go to a place like Chipotle because of the use of local food, the fact that they recycle and their green message."
To help offset the growing operator interest in used equipment, foodservice equipment and supplies dealers need to become more proactive in their sales approaches and become their customers' eyes and ears when it comes to identifying new products. "People need to be shown what new products are out there and what concepts are out there," Evans says.
As they adopt a more proactive approach, foodservice equipment and supplies dealers would be wise to realize that they have more in common with their operator customers than they realize. "Dealers are not delivering a product. They are delivering an experience," Evans says. "The moving of the boxes is the second part of the experience. The first part is getting them ready to receive the boxes."
Fashioning a Fashionable Front of the House
When exploring what changes to make in the front of the house, take a look at everything from signage to the tabletop and all points of customer interaction in between, with an eye toward freshening up the foodservice operation and engaging the consumer. "The restaurant industry has grown bored, tired and old," Evans says. "So many chains have looked the same way for the past 25 years. Make a change so the customer sees something new. Eating out is really an experience. So the experience starts both visually and kinetically when they enter the restaurant."
Known by many as the most important three feet in the house, the tabletop represents foodservice operators' initial opportunity to shape the customers' expectations as to what comes next. "When I spend $40 for dinner for two people and the fork bends, I would wonder about that operator," Evans says. "China and glassware are made to break when they get old, so change patterns. I think most of the consumers are tired of plain white china."
Now is also a good time to examine menu composition. "The menu is core to what all operations do. A complete remake may not be practical or necessary," Shockey says. "A hard look at what sells and the cost of those items and their bottom-line contribution should be done. Customer eating habits and dining trends have likely changed. Does the foodservice operator know what the customer is wanting and ordering? Understand where the data points on a micro and macro level. Are lunch customers ordering healthier items while the dinner crowd is sticking with the 20-oz. steak? Can your kitchen optimize its footprint and menu and margins for that kind of diversity?"
Along those lines, Evans adds, "I would look at what menu items do not sell and fire them if they are not moving. Or I would find out why they are not moving."
And then it is time to address capacity. In response to lower customer demand, many foodservice operators reduced staffing levels and may have even altered food quality. It's time to reassess these areas. "Can your staff continue to execute at the same level now that volumes might be picking up? Can they handle peak loads and volumes?" Shockey asks. "If not, it may be time to adjust offerings, how things are produced and/or finished. Can you find components and speed-scratch items that will take the burden off the production staff?"
From Evans' perspective, the decline in the food quality and service levels in recent years has been pretty obvious. "Customer service has gone down because there simply are fewer people to provide it," he says. "The cost has been cut in the food, and you can see it when you eat the product. You can feel it in the china, flatware and silverware. You can see the age of some operations."
Also, foodservice operators should not forget to monitor the competition to find out what they are doing well. "If you see a full parking lot, go in and eat. There is a reason that parking lot is full. They are doing something right," Evans says. And this applies to dealers, too. "Even if it is not a dealer's customer, eat there anyway and take the ideas to your customer."
Foodservice operators should also take the time to listen to what their customers want. "I would ask my customers what they like. I am not sure we do enough of that. Ask the customers what they think is your best product," Evans says. "Hamburgers might sell the most, but meatloaf might be an operator's best product."
Simultaneously, foodservice operators should look at the selling prices of individual menu items. "When doing this, foodservice operators need to be sensitive to the fact that there is still a lot of anxiety out there. It's not over," Malody says. "Consumers will continue to pay special attention to their own price/value ratio."
Indeed, a study by Technomic shows that even as consumers are expected to loosen their purse strings in 2011, finding a good value is still of the utmost importance. "Consumers have become very adept at getting the maximum value from each dining experience," says Darren Tristano, Technomic's executive vice president. "Operators should avoid getting caught in the middle. Your value statement needs to be loud and clear so the customer knows what you are offering and why they should come to you." Surveyed consumers said traditional casual offerings are too similar across brands, and that upscale casual chains do not offer a dining experience that justifies their higher prices, he added.
As a result of the value-conscious consumer mindset, Malody encourages operators to keep prices down, manage their inventories, work with vendors to purchase at the best possible rates and look for opportunities to engage the customers. "Perhaps you can look at ways to offer customers better deals as a result of your better purchasing or management habits," she says. "Or look for clever ways to celebrate the fact that we can take a breath now. But this still needs to give the customer a deal."
Next, Evans suggests looking for opportunities to eliminate waste in all aspects of the business. Is it possible to do more with less? "The biggest opportunity is in workflow," he says. "If someone walks 37 steps to do something, can we get them to do it in three steps? The best-designed kitchens move their people the least."
Sometimes, introducing real change might require close examination of each employee's work content and how he or she actually goes about executing his or her role. "If someone is thawing a five-pound block of shrimp under running water, they don't have a connection to what their actions are doing," Malody says.
The good news is that it appears as if the notion of enhancing efficiency is one that most operators are ready to embrace. "Before the business slowdown, operators were moving toward multitasking staff as well as multitasking equipment," Shockey says. "I think that is even more of an emphasis and direction today. Smaller footprints of space and less staff resources are driving to simplified production steps, and foodservice operators need to look for what products and equipment can support 'simple.' In doing so, operators need to look at how they can use the equipment over many shifts versus just the one main daypart to maximize the space and the resources."
Foodservice operators are very interested in anything that supports and enhances food safety practices, including safe food handling and temperature control, and healthier production processes, those that preserve freshness and/or reduce fat and calories, Shockey says.
Changes to process should enhance food quality and the consistency of execution, Evans says. "Do your customers feel like they just paid for dinner, or did they have a marvelous experience?" he asks.
How to Move Forward
From a tactical perspective, make developing a postrecession game plan an easy process. "Write up a two-page plan, and when you finish the first step, go to the second one," Evans says. Divide each area into four or five steps and attach a deadline to each one. "Don't try to do more than four or five things at once. The key to business is execution. The businesses that execute to plan are the ones that are successful. The ones that don't execute to plan are not successful."
Shockey suggests developing a master plan for the operational and physical aspects of the business. "Understand how these plans can be implemented over a few months or years, depending on the complexity," she says. "That way the road map is clear, and the value can be demonstrated at time or quality markers [events]."
While the tactics are important, don't forget that they need to support a bigger picture for the foodservice operation. And in light of the challenging business climate of the past few years, it is time for some operators to readjust their approaches to running their organizations. "When times get rough, as they have been, operators go back to work in their businesses and forget to work on their businesses," Malody says. "So they fall into a trap of panic and bring everyone with them."
Instead of sharing a sense of panic with the operation's team and managing the business on a day-to-day or even shift-to-shift basis, a broader approach might prove beneficial. Malody suggests letting employees know the challenges the business faces and enlisting the staff's help, both physically and intellectually, in resolving the issues facing the organization. "Get your team behind you because it makes everyone feel like they are part of the solution," she says. "It takes time and effort to identify these steps, but they do pay off dramatically. If you can show them an improvement in your utility bills based on conservation efforts, that is powerful. Use every opportunity to celebrate measurable victories. The customers will notice that, too. Most people would approach this from a more tactical viewpoint. But sometimes the heartfelt, big picture aspect does not get discussed enough in this industry."
In the day-to-day grind of serving customers, this people-inclusive approach is easily overlooked. "I just don't feel enough operators really receive enough coaching and mentoring around culture, vision and creation of true team spirit," Malody says. "If you don't know what kind of culture you want to create, it will create itself. And then what have you got? A beautiful kitchen and a lot of money spent on a startup. But this alone will not sustain a business, and guests can smell it a mile away. Establishing a culture is very important, and yet it seems to be miles away from what they are thinking about. Dollars and cents are gained and lost based on the culture and spirit of the people working in the place. And it does not always cost a lot to invest in the people."
Foodservice operators who listen closely to their customers are the ones most likely to emerge stronger and more vibrant from this past recessionary period. As the Technomic and NRA data point out, it all comes down to value. "The operators who made it through this probably are the ones who have stuck to their vision," Malody says. "In down times, people go off vision and forget who they are. That can mean death to an operation. Get back to your core value statements and mission. If you have stepped aside from them, go back and re-establish them, highlighting why you exist and what you can do for your customers.