FER’s 20th, Operator Labor Costs, Automation, And Other Post-NRA Musings

The most interesting thing I heard someone say during the recently concluded National Restaurant Association Show came from Hubertus Muehlhaeuser, the CEO of newly independent Manitowoc Foodservice, “Rising foodservice labor costs are a gift from the gods to the equipment industry,” he told a group of financial analysts at breakfast during the show on May 23.

It was a very busy NRA for us, even busier than usual. We celebrated our 20^th anniversary with a party that included our friend and founding partner Ken Gill and our new owners at WAI; hosted a “retirement” dinner for our friend Roy Hook from Wendy’s; and spent every minute we could on the show floor, talking with customers and readers. Our take-away? There’s a lot going on in foodservice, especially in the realm of equipment communication and automation.

But first let me refer you to an article I read during the show. Jonathan Maze, who writes on financial and related matters for Nation’s Restaurant News, had a very interesting interview with Hudson Riehle, senior v.p. of the Research and Knowledge Group, at NRA. (Read it here.)  

As we’ve been reporting for some time, labor is the key issue for operators these days. Riehle gave Maze the numbers, stating that hourly restaurant wages have increased 3.9% so far this year. In comparison, private sector wages have risen 2.2% during the same period. And foodservice industry wages also were up 3.3% in 2015 and 3.2% the year before. Riehle said some of this is a result of the drive to raise the minimum wage. But market forces also are pushing up labor costs, with restaurants adding 320,000 jobs during the past 12 months, a 3.5% growth rate compared to national job growth of 2%. Finding people is getting tougher.

As Maze wrote, “The rising…labor costs are shining a big light on the restaurant industry’s typically high labor costs.” And he cites some numbers I don’t think I’ve ever seen before: On average, a restaurant employee generates $56,000 in revenue, a grocery store worker $226,000, and a gas station attendant $478,000. 

Restaurateurs have responded in part by raising menu prices. Menu prices have jumped 2.7% in the past year, compared to a 0.4% decline in grocery store prices. Menu-price gains have consistently outpaced those of food retailers for two years. That’s not a good thing, as such a differential has, in the past, led to consumer switching.

So, said Riehle, the issue is obviously productivity. And he added that labor productivity in foodservice has actually fallen slightly during the past 10 years.

The way equipment manufacturers are responding is through equipment communication and automation. Even a quick stroll through the halls at NRA made this clear. The Kitchen Innovations pavilion was full of equipment demonstrating both trends.

Let’s talk communication first. It’s been more than 15 years since NAFEM and an elite group of chain equipment specialists began the process the led to the so-called NAFEM Data Protocol, an open communication standard they all hoped would let foodservice equipment communicate for performance, menu changes and preventive maintenance.

But this NRA Show demonstrated that linked equipment is finally, truly happening. Cloud computing, wi-fi and ZigBee radio frequency technologies are what has made this possible and such technologies were on display in many booths at the show. One clear example was at the Grindmaster-Cecilware booth, where post-mix coffee dispensing equipment was using Kitchen Brains communications devices to link to the cloud.

Automation of all sorts was also featured at equipment company booths. As several smart equipment engineers and R&D folks told us, automation takes multiple forms, from advanced electronic controls, to automated fryer filtration to conveyor equipment and even the robotic fry station featured at the Middleby Corp. booth. Think abut it: Even a manual tomato slicer is a form of automation, a way to increase both consistency and output with less labor.

These trends aren’t going away. In fact, as Muehlhaeuser and many others told us at NRA, the are a huge opportunity for everyone on the capital goods side of foodservice.  

Cheers,

Robin Ashton

Publisher