Tag Archives: Restaurant Labor

THE RESTAURANT INDUSTRY – THE LATEST RE: PRICE/VALUE, DELIVERY, & LABOR!!

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THE RESTAURANT INDUSTRY – THE LATEST RE: PRICE/VALUE, DELIVERY, & LABOR !!

PRICE/VALUE

Every time we have a quarter pounder with cheese, greatly improved after the change to fresh beef, we appreciate the value (for the price) that McDonald’s provides. Whether it’s just the sandwich (plus any drink, including coffee, for $1) or a combo meal, it is pretty tough on the competition, QSR, fast casual, or full service. The latest wrinkle: the second sandwich (of anything on the menu) only costs $1.00.  I paid a total of just under $10.00, including NY tax, for two quarter pounders with cheese and two cups of coffee. The franchisees don’t love it because the profit margin squeeze can offset the traffic increase, but, no pun intended, “that’s life in the fast lane”. The effect of what we’ll call this extreme value proposition, goes beyond just the QSR burger purveyors. If I’ve got a family of four to feed, I can do it at McDonald’s for about $20.00, including tax, with no tip, with predictably reliable service. I may or may not get all that at the various QSR choices for the same price. If I want to go all the way upscale, I can have a good meal, and a dining “experience” at Olive Garden or BJ’s, but that will cost me closer to $50.00 at a minimum with tax and tip, and that $30.00 or more  incremental expense is meaningful to me. My family has to eat every day, and the expense adds up. So…..the competitive situation for operators is not getting any easier.

DELIVERY

We hear that hardly any of the major restaurant chains are currently aggressively advertising delivery options. Aside from the pizza chains who have always provided delivery, McDonald’s, Chipotle, and Wingstop seem to be the most prominent chains that are currently pushing delivery. McDonald’s has the operating scale and the marketing dollars to do about anything they set their mind to. They can also afford to adjust their direction if that’s what the situation calls for.  Wingstop, with most of their sales consumed outside their four walls and selling a product that travels especially well, is appropriately extending every effort to build an in-house fulfillment system, at the same time learning from their use of third party delivery agents. Chipotle, with their second “make line” has become uniquely well situated to build their mobile app, pickup, and delivery capability. It seems like many restaurant companies, after living through the effect on profit margins, may be stepping back to let the dust settle. While some public companies have talked about a large portion of delivery sales being incremental, we’ve expressed our doubts. It seems pretty obvious to us that if a family consumes a meal delivered from a particular restaurant tonight, they are very unlikely to dine at that restaurant in the next few days, certainly not tomorrow night. It seems to us that most multi-unit operators, franchised or not, would probably be well served to do what they can to provide delivery in house. It’s something of a different business, to be sure, but The Brand must be protected, hopefully with the profit margin and return on investment maintained.

LABOR

The crisis continues. It is not getting any easier to hire qualified help, and the price of that help continues upward. In addition to increased fringe benefits, companies are providing increasing flexible hourly schedules. We heard today that “next day pay” is being provided by one creative company, whereby half of what you earned will be paid tomorrow, in cash we suppose. If this proves to be a meaningful appeal to hourly workers, it would indicate to us how little discretionary cash people have in “the strongest economy of all time”. Call it anecdotal, but it doesn’t seem to us that the labor expense line, as a percentage of sales, is coming down any time soon.

Roger Lipton

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GENE LEE, CEO of DARDEN (DRI): “IT’S A WAR FOR TALENT – HERE’S A “TIP”

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Gene Lee, CEO of Darden: “It’s a War for Talent” – HERE’s A TIP !!

We wrote last week about Gene Lee’s tutorial, within Darden’s quarterly conference call, regarding successful management of casual dining restaurants, including his comments relative to the “War for Talent”.

We attended the heavily attended MUFSO (Multi-Unit Food Service) Conference in Dallas earlier this week, and found the CEO Panel (from Del Taco, Longhorn Steakhouse, Red Robin, Smoothie King and Arby’s/Buffalo Wild Wings/Sonic) most interesting.

Most of the discussion was pertinent, but, honestly, predictable. In our four decades following the restaurant industry, attending hundreds of conferences and listening to what must be thousands of conference calls, that shouldn’t be too surprising. However, Todd Burrow’s, President of the very well run Longhorn Steakhouse (within Darden Restaurants) provided an interesting viewpoint relative to the hiring of store level talent. He didn’t say whether he was referring to “crew” or “management”, but the following thoughts would no doubt apply to both categories.

Todd wants to make the first day of employment at Longhorn “the best day of their life”. Higher management meets and greets the new arrival, and provides an enthusiastic orientation in terms of how pleased Longhorn is to have them, the great opportunities that lie ahead, etc.etc. No doubt there are specific training aspects to the first day, as well as paperwork to be done, but Todd stressed the emotional commitment of the company to the new recruit, really “selling it”. There wasn’t a great deal more detail provided, but you get the message, and I have not heard it put this way before. Naturally, this will only carry the company and the new employee so far, but at least the relationship starts with some “romance”. As they say “you only get one chance to make a first impression”.

I honestly don’t remember whether Todd discussed the “last day” of employment. As an ex-operator (a long time ago), I would like to insert a few thoughts in that regard, which could be almost as important in terms of the corporate culture.

Later in the day after the presentation, I ran into a human resource consultant that concentrates on building the corporate culture that all restaurants aspire to, and I asked him why the last day is important, and what he would include. He responded that, among other things, he would do an exit interview, obviously to determine the pluses and minuses in the mind of the departing employee. There were a few other less important suggestions but what wasn’t cited, and what I would like to add, is the following:

Treat the departing employee with as much respect and encouragement for his or her future, as you can possibly muster, perhaps even a bit more than you feel is deserved. The reason is: your remaining employees are paying attention. If your attitude toward the departing associate is “he was never that important”, “we will do fine without him (or her)”, “we’ll find someone better”, etc.etc., those remaining will get the impression that they are just a “disposable” commodity in your mind, to be used temporarily in your own interest. They will obviously be less committed to their future with your company and inclined to move along at the first opportunity to someplace that will (at least potentially) appreciate them more. Secondarily, if the employee did at least a reasonable job for you, they could come back at some point, and perhaps make an even better contribution in the future. So your departing message, under most circumstances, and it takes very little time or effort to do this is: “You did a fine job, gave it your best effort, we are a better company because of you, we wish you the best, if there is anything we can do to help you in the future don’t hesitate to ask, if things don’t work out in the new place we are still here, etc.etc.”

Costs you nothing. It’s the right thing to do. Will send an important message to remaining associates, and will pay big dividends over time.

Roger Lipton Continue reading GENE LEE, CEO of DARDEN (DRI): “IT’S A WAR FOR TALENT – HERE’S A “TIP”

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