It is no secret – 2016 was not an easy year in our business! But on January 1, we turned the page and started “fresh”. I learned a lot in the past few months from people I respect and want to share a few thoughts as you kickoff 2017:
What’s Going On?
TDn2K – the keepers of Black Box, White Box and People Report – dove into data for a sampling of their chains, to try and identify what separates winning brands from losing brands. I thought they had some keen insights, which they shared at MUFSO: 
Top performing chains, as measured by same store sales, had lower overall guest checks and higher value ratings. They also had lower turnover and better Net Promoter scores using YELP and Google. Finally, winners showed stronger scores in the beverage category.
Lower performers had weaker value scores, higher turnover, leading to lower scores on service and lower ambiance metrics (which can be tied to remodels).
At November’s Restaurant Finance Conference, David Palmer, Managing Director at RBC Capital Markets provided additional research that helps us answer the question: “What’s Going On?” Palmer focused on QSR’s which represent nearly 4 out of 5 restaurant visits (Source: NPD Group/CREST). Among his findings:
Quality Ingredients is now the #1 driver of purchase intent – outpacing Affordability and Taste
Unfortunately, consumer perception on this metric have declined over the past 24 months within QSRs overall; not surprisingly, the gap has widened with Fast Casual
Higher food cost concepts are showing superior same store sales growth rates
Net, net: Palmer feels overall quality is too low, and prices are too high. (In my opinion, the value is simply not there.) “While having a compelling LTO or differentiated advertising campaign can drive short-term demand, having a reputation for serving high-quality ingredients is a more reliable indicator of long-term success.” He cites In ‘n Out, Chick-Fil-A and Culver’s as successes, all which outpace the fast food group by a significant margin.
All of us hope to see improvement in disposable personal income in 2017, but as an industry, we need to raise the bar on what we deliver to our guests. There is more competition for away-from-home meal options than ever before (including better C-store / Grocery options). With these insights – we need to work smarter in 2017.
Winning is Doable.…Even in a Challenging Market
There have been a lot of success stories in 2016, and I wanted to point out a few:
McDonald’s has shown a lot of imagination in its concept. All-day breakfast, re-thinking the Big Mac (one of its “sacred cows” ) and most recently, plans to rollout kiosk ordering and table service at its >14,000+ U.S. restaurants
Red Robin halted its Fast Casual initiative and is advancing its pursuit of off-premise, including Delivery and Online Ordering
Chipotle moved out of Asian and into Burgers, agreed it should improve its Board of Directors– then did it
Wendy’s rethought its Value strategy and hit a homerun with its 4 Under $4 bundling
Panera continues its 2.0 Technology rollout and now is aggressively moving on Delivery – expecting to be in over 300 of its 2000 units by yearend
And then there are the quiet success stories like Wingstop, Firehouse Subs and Texas Roadhouse who have solid concepts that consumers love, along with strong, consistent execution
If these major brands can win, you can too. Status quo today will not work, with the ever-evolving consumer trends and expectations. Identifying what to keep and what to change – this is where I can help you succeed.
Successful Multi-Unit Independent Operators Offer Advice to Chain Restaurants
At the Restaurant Finance Conference, I listened to a panel of CEOs of successful multi-unit independent restaurant concepts and I posed the question, “What one piece of advice would you give chain restaurants?” Here’s what they said:
“You must be able to make changes quickly. Today, as independents, we can change literally overnight.” ~ Peter Merriman, Merrimans Restaurants (HI)
“Embrace innovation today – in every area of your business.” ~ Mike Simms, Simms Restaurant Group (CA)
“Hug your employees and your customers.” ~Rob Wilder, Think Food Group (DC)
Wilder added that his partner, the famous Chef Jose Andres, often quotes Winston Churchill, who said:
“Move from failure to failure with unbridled enthusiasm!”
What Areas Are Hot?
According to Larry Reinstein, whose firm LJR Ventures provides profitable, executable solutions to private equity and restaurant company owners/operators, he sees the hot areas as BBQ, Tacos, Coffee, Poke/Sushi, Mediterranean and Healthy. He highlights these relatively new brands, as “ones to watch”… and in my words, “ones to try!” Who’s in?
Growth Partners – Now on Facebook
On Facebook? Join in on the conversation there on our new Growth Partners Facebook page!
In closing, every year, (quarter, month and day) gives us the opportunity to move onward and upward. I hope it’s a great year for you.
