April 15, 2010
Peruse this magazine, or check out the stories in FER Fortnightly, and you can see an awful lot of flux in foodservice these days. It's not just simple one-problem-at-a-time turmoil, either. Everything is tied to everything else, like some big three-dimensional web pulled tight as a guitar string. Tweak it here, and things twang here, there and everywhere. Consider the intertwining. Public-moneys operators, for example, have real problems now on the revenue side. Anything that depends on sales taxes is in a jam. And schools, which lean on property taxes for about 80% of their funding, are now starting to see what happens when plummeting housing values start showing up in the assessment calculations.
On both commercial and noncommercial sides, how about food and menu pricing? A story in the March 9 Fortnightly reports wholesale food prices, after declining for more than a year, are back on the rise again. And timing's horrible for menu-price increases, so you can't make up the difference there.
Another story in that same issue says a study by The NPD Group shows restaurant evening-meal occasions dropped 10% between 2001 and '09. And get this: The decline was in every age group except 62-plus. The downturn in occasions was most pronounced in the 18-31 age group, the most frequent consumers of evening-meal foodservice. Per-capita occasions in the group dropped from 79 in '01 to 66 last year. That works out to a substantial 16% drop. (The 62-plus group's per-capita figure rose only slightly, to 49 from 48.)
Why the reductions? Might have something to do with longer-term demographic realities. All the population growth between now and '20 will be in lower-income groups, and disposable income across most categories will decline, too. At the same time, the age groups from which most restaurant managers come—the middle-years groups—will shrink even while total population grows. One by one, these problems are no big deals. But together, on both the cost and revenue sides, they start boxing you in, and they're not going away. Food costs won't likely come down as a long-term trend. You won't likely have a labor glut. And your customers will have shrinking budgets. You can't tweak this forest one tree at a time. You'll have to rethink, and maybe replant, the whole forest. Start with menu price points. They must come down if we're going to serve customers who will have shrinking pocketbooks. With food costs rising, simple price cutting won't do it. Any real solution will probably require a combination of less-expensive menu items and also smaller portions. Which clearly won't work with existing assumptions, but that's why you have to replant the whole forest. And maybe you'll need to rethink the way the food's prepared and delivered, too. Which means equipment, facilities materials, etc. It's been said before, but the fact is that equipment, kitchen productivity and facilities materials are just about your only chance to get back some of your margin. What other variables are there? It's not going to be consumers with more money. Which means it won't likely be higher tax revenues either. It won't be cheaper food prices or a ton of cheaper, better labor. It won't be cheaper energy or water. And while cheaper real estate might work for expansion, it won't help you with the locations you already have (unless you're leasing and renegotiating). No, it's going to be radically different menu targets—and you and your equipment/facilities strategies.