Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
October 21, 2008

Economic Report:
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Manitowoc Foodservice Group
Last Chance To Sign Up For FER's 2009 E&S Market-Forecast Webinar
Technomic Forecasts Tough Couple Years For Foodservice
Blue Chip Economists Whack Macro Forecast Again
NPD Releases Annual Report On Eating Trends

Regulatory Report:
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Seattle Okays Sidewalk Cafes—Just In Time For Winter
County FOG Law Could Cost You $10K Per Day
Atlantic City Reviews Casino Smoking
Town Beats State To Punch On Latex Gloves

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In This Section:
Editorial Opinion: Hanging Onto Energy Star
Financial-Rescue Plan Includes Shorter Depreciation Schedule
Silver Lining In Credit Crisis: Maybe Cheaper Leases
BK's Whopper Bar To Debut At Universal's CityWalk
FCSI Americas Division Gains Legal Independence

This issue's Economic ReportSponsor: Manitowoc Foodservice Group
Regulatory ReportSponsor: Enodis

Industry Report Server Products

Editorial Opinion: Hanging Onto Energy Star
At press time, the world was still trying to figure out what to think about more than a trillion dollars in U.S. Federal financial rescue plans. The stock market had seesawed violently down, up, then down and up again in the span of little more than a week. Wall Street was as frayed as a cheap straw placement.

Needless to say, in this tough economic environment, everything is up for scrutiny. The federal government can't cover its new commitments without looking everywhere for things to cut from the budget.

Which means Energy Star and its foodservice-equipment program are going to be under enormous pressure again, even more so than in the past. If you want to preserve it, you're going to have to stand up and be counted. There's strength in numbers, and there's no substitute for large numbers of us jumping into the fray. A lobbyist here and there is a good start, but it's sheer numbers of inputs that will force the issue. Every single one of you will have to get into your Senators' and Congresspersons' faces. And we need the franchisees to jump in, too.

A year ago, actually the August 2007 issue, we first sounded the alarm on the threats to Energy Star. That month, we reported that the parent agency, the Environmental Protection Agency, had seen its budget shrink from $7.9 billion in '01 to $7.2 billion for '08. Adjusted for inflation, that worked out to a real decline of about 25%.

Energy Star, meanwhile, during the years '04-'06 was budgeted in the mid-$50 million range each year. Then in '07 the budget dropped to $50 million, a 9% drop before adjusting for inflation. The following year, the one just ended this past summer, the President's budget-request dropped to $44 million, but the final budget gave it $48 million.

And now? The '09 fiscal budget calls for $44 million. Factor in inflation, and in real terms that's roughly a 30% decline since '04. (That figure doesn't line up with what we got last year, but apparently the Bureau of Labor Statistics' inflation calculator has adjusted inflation estimates downward.)

Fortunately, our industry has begun moving to protect Energy Star. In September, ASTM Int'l.'s F26 Food Service Equipment Committee submitted a letter to the EPA encouraging the agency to increase the number of equipment categories covered by Energy Star. Specifically, the letter mentions Energy Star's plans for adding griddle and oven standards, and notes the delays on those plans, apparently in part for budget reasons.

The North American Association of Food Equipment Manufacturers, for its part, has stepped up too, lobbying to push the Senate Appropriations Committee to increase the Energy Star budget.

But we need more. We need overwhelming boots on the ground. We need numbers. When a single voice says something, it's easy to shrug it off as a "special interest." But when dozens, even hundreds of major companies—especially ones with well-known brands—make the phone calls and write the emails and letters, those inputs get progressively harder to ignore.

For your own energy well-being and profitability, you need to get after your representatives. Cite the numbers in this column, or cite your own utility bills. Get the word out. We need everyone—franchisors, franchisees, manufacturers, reps, dealers, servicers, consultants—to jump in here.

Brian Ward, chief editor


Section sponsored by Server Products

Financial-Rescue Plan Includes Shorter Depreciation Schedule
After weeks of bad news about the financial crises, there's finally some good news for chains with remodel and/or expansion plans. The financial rescue package recently approved by Congress includes a shortened building depreciation period for new restaurant construction or improvements.

The law allows 15-year depreciation for improvement projects this year through next, and for new construction in 2009. Present tax code unfairly treats wall-removing remodels in restaurants as new construction, meaning every time a store remodels, operators have to start the 39-year depreciation clock again. The new provision gives restaurants the same benefit that competitive businesses like c-stores and amusement parks now get.

The shorter depreciation period means significantly lower taxes, according to the National Restaurant Association. Operators who spend $100,000 to renovate or rebuild a store can get $992 in annual savings. A $2-million construction project can result in annual tax savings of $19,848.

The NRA is urging Congress to make the shortened depreciation schedule permanent because it more accurately reflects a restaurant's life. Most restaurants remodel every six to eight years, according to the NRA.

Section sponsored by Server Products

Silver Lining In Credit Crisis: Maybe Cheaper Leases
If you're in a strong cash position or still have access to credit, there may be a silver lining to the recent financial crisis. Chains in strong financial shape, such as Darden, California Pizza Kitchen and Buffalo Wild Wings have reported they're seeing prime lease spaces opening up, with more generous terms from landlords, news sources say.

The credit crisis has made it more difficult for many chains and franchisees to secure financing for new store openings and remodels, causing some to abandon development plans. That's left lease spaces open in prime developments as prospective tenants back out of deals, which has left some landlords willing to negotiate on price or incentives such as tenant improvement packages.

Chains like Darden and McDonald's that are large enough to internally generate sufficient liquidity have the funds for expansion and capital improvements. They say they're seeing greater availability of quality sites, giving them more options on lease space.

With lenders growing increasingly cautious, however, some chains hoping to trim costs by "refranchising" company-owned stores are discovering franchisees no longer have easy access to loans.

Section sponsored by Server Products

BK's Whopper Bar To Debut At Universal's CityWalk
Burger King's first new Whopper Bar, a concept announced last March, will open in Universal Orlando Resort's CityWalk, Orlando, Fla., the company announced. CityWalk is Universal Orlando Resort's 30-acre restaurant, shopping and entertainment complex.

The updated concept is "a new generation of Burger King restaurants," according to Russ Klein, president, global marketing, strategy and innovation.

The Whopper Bar has a smaller footprint than a standard BK unit, and features nothing but Whoppers with a Whopper Topper bar that lets customers customize their sandwiches. The debut unit at Universal CityWalk plans to offer special versions of the Whopper, including the Angry Whopper, Western Whopper and Ultimate Double Whopper.

The new store is expected to open next spring, the company said, not the end of this year as suggested when the concept was initially announced.

Section sponsored by Server Products

FCSI Americas Division Gains Legal Independence
Foodservice Consultants Society Int'l.'s Americas Division officially achieved its legal independence from the FCSI Worldwide governing body during a recent Board of Directors conference call.

The long-anticipated decision allows FCSI-The Americas to become its own not-for-profit corporation under the jurisdiction of the District of Columbia. As a result, FCSI-The Americas now will have its own set of by-laws and will operate independently within the FCSI Worldwide bylaws, thus allowing the Board of Trustees increased flexibility to better represent the interests of its membership.

For further questions regarding these changes, please contact Cindy Wyant, FCSI Americas Division Executive Director, at 502/583-3783.

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