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Archive | Restaurant Trends and News

Keep up to date on restaurant and food service industry news and trends, from serious analysis to more lighthearted fare.

Should You Cut Costs In Payroll?

Should You Cut Costs In Payroll?My recent post, “Missouri Legislature Debates Wage Cuts For Servers” sparked some debate about cutting payroll expenses in your restaurant.  Finding places to cut expenses as revenue falls is never an easy endeavor.  And since labor is almost definitely your number one expense, it’s easy to look there first when considering ways to save money.

There may definitely be some places where labor costs can be reduced, such as cutting back employee hours or eliminating underperforming staff.  All businesses look to their human resources department for cost cuts in tough times.  But be careful here, because cutting labor is a task best left to a scalpel rather than an axe.

That’s because the one thing you need now more than anything else is good customer service.  Actually, you need stellar customer service.  When consumers start cutting back, their expectations of service go up, and the only way to get them to spend at all is to take care of them in every way possible.

Your staff is the best tool you have to make sure every hungry customer that walks through your doors leaves satisfied and full.  If you start cutting back on staff to save money, you could start hurting your chances at increasing future revenue.  Overall morale goes down when people are let go because of hard times rather than performance.  And no matter what, customer service will suffer when you lose experienced staff.

Now is the time to focus on fulfilling the needs of your customers even better than before.  If some staff have been a drag on your operation, by all means cut them now.  But look for other ways to reduce costs before you start cutting quality staff.  Your best customers will appreciate the attention, and hopefully maintain their regular visits to your restaurant.  And new customers will be blown away by your commitment to quality service and hopefully come back, even if times are hard.

While Circuit City isn’t in the food service industry, a lesson can be drawn from their experience.  When sales started declining, Circuit City decided to cut staff as a way to reduce costs and boost profits.  It worked for a while.  But then customers stopped coming in altogether.  Circuit City’s rival Best Buy refused to cut back on customer service, and soon customers were flocking to their stores, not because Best Buy’s prices are better or because they have a better selection, but because Best Buy staff were always there to help.

Circuit City has since declared bankruptcy.  Best Buy may not be breaking any profit records, but they’re still in business, and their customers are happy.  Things could be a lot worse.

What do you think about this issue?  Leave a comment below!

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LEAN Act Gaining Popularity In Congress

The Labeling Education and Nutrition, or LEAN Act, is gaining sponsors and votes in the United States congress.  The legislation would create a national standard for labeling menu items across the entire food service industry.  Consumers overwhelmingly support menu labeling, with some polls showing a 75% majority in favor of nutrition information on menus.

The National Restaurant Association (NRA) and its offshoot, the Coalition For Responsible Nutrition Information (CRNI), support the LEAN Act and are lobbying congress for its passage.  As more and more municipalities and states have passed menu labeling laws, restaurateurs, and especially national chains, have recognized the need for a national standard that will eliminate the growing patchwork of local laws.

The biggest issue many restaurants have with menu labeling is the complicated and sometimes expensive process of analyzing the nutritional values of menu items.  Each ingredient must be separately assessed for its nutritional value, and even slight variations in portions can alter the numbers.

Traditionally, ingredients were analyzed in a laboratory, which usually translated into a lot of time and money to get each ingredient’s nutrition information.  Recently, some companies, like MenuCalc, have compiled databases of ingredient nutrition information from USDA labs, eliminating the need for expensive laboratory testing.

No matter what, menu labeling is coming, and restaurants are going to have to deal with that reality.  A vote on the LEAN Act is expected during this session of congress, and we could see a national standard for menu labeling by as early as next year.

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Missouri Legislature Debates Wage Cuts For Servers

In 2006, voters in the state of Missouri overwhelmingly passed Proposition B, an initiative that mandated a minimum wage increase for hourly workers.  Prop B passed with a 75% majority, and after some debate, Missouri decided that workers who receive an hourly wage plus tips were eligible for the pay increase.

Times have changed since 2006, to say the least.  The economic downturn has hit Missouri’s restaurant industry hard, and now the state’s restaurant association is backing a Republican bill to cap hourly wages for tip earners at $3.52, half the hourly minimum wage of $7.05.  A compromise amendment would cap the minimum wage after a planned increase this summer.

Neither servers nor restaurant owners are happy with the bill.  Servers say the cap is tantamount to a wage cut, something they can ill afford in a down economy.  And restaurant owners say their payroll expenses have skyrocketed since 2006, something they can ill afford in a down economy.

Interestingly, the catch in this whole debate is who would actually be affected by the passage of the bill. 

The average server earns $10 – $15 an hour in tips, which means most if not all of their hourly wage goes to taxes, regardless of whether their wage is capped or is raised slightly.  And this bill would not change a Prop B clause that requires restaurant owners to pay their servers the $7.05 minimum wage if they don’t make at least that in a given week.

So servers who claim they’re taking a pay cut aren’t really getting hit that hard since the vast majority of what they make is in tips.  And they’re guaranteed a minimum wage if tips aren’t sufficient.

At the same time, restaurant owners who claim they can’t afford the current wage are not going to get the wage cut they were looking for.  At best, wages will be capped at their current levels, which does nothing to help restaurateurs who blame the current wages and the recession for their problems.

That means Missouri restaurant owners are going to have to look elsewhere to cut costs and increase revenues.  And in the end, looking to cut costs in staff first is probably not the best option on the table.  After all, wait and kitchen staff are what make every restaurant tick, and in the long run, well paid staff means better sales and reduced turnover, both of which translate into more profits.

Perhaps it’s time for restaurateurs in Missouri to look at other operational costs and see how they can streamline their business before they start putting a lot of energy, money, and time towards targeting their payroll.

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The Pizza Vending Machine

The Pizza Vending Machine

The Pizza Vending Machine

Italian Claudio Torghele has developed a pizza vending machine, complete with dough, sauce, and toppings, all in less than three minutes.  The machine, called “Let’s Pizza,” will knead the dough, spread the sauce, and give you a choice of toppings, including bacon, ham, cheese and tomato, and vegetable.  Customers can watch their pizza being prepared through a window, and the average cost is about 4 euros or 5 dollars.

Torghele hopes to make the pizza vending machine available throughout Europe and North America.  The machine has already done very well in test markets and its novelty always seems to draw crowds of onlookers, which bodes very well for sales, especially as people begin to look for more affordable options in a down economy.

Not everyone is so enthusiastic, however.  Traditional pizzeria owners in Italy have criticized the pizza machine as a cheap gimmick that sacrifices taste and quality.  Torghele responds that sometimes people are looking for value, convenience, and fast delivery over top quality.

The verdict on the pizza machine will be passed in the streets, and so far, it appears the average consumer loves being able to watch a great little pizza prepared fresh by a machine quickly and affordably.

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Gordon Ramsay: The Restaurant Black Widow

Celebrity chef Gordon Ramsay’sshow Ramsay’s Kitchen Nightmares USA has been a huge hit, garnering thousands of American viewers and elevating the chef’s celebrity even further.

Unfortunately, the restaurants he’s supposed to be helping are dropping like flies in the wake of his black widow touch.  The show’s premise is to bring Ramsay’s expertise and creativity into a struggling restaurant and turn the place around.

But it was revealed recently that over half the restaurants that have appeared on the show have since gone out of business.

Some owners and managers complain that Ramsay’s management style, which includes making everything fresh every day and using high-end product and ingredients, created a standard too expensive to maintain in a down economy coupled with rising food costs.

Other victims of the show are less diplomatic, calling Ramsay a jerk who thinks he can impose his lofty standards on any restaurant.  Some are even suspicious it doesn’t really matter to him whether a restaurant on the show makes it or not, as long as ratings remain high, which they have through multiple seasons in the U.S. and the U.K.

Perhaps the most important lesson to take away from the Ramsay “kiss of death” is that every restaurant is different, and managers and owners have to account for the many divergent factors that make up the success of any establishment.

Of course, the ideal situation is to be able to attain Ramsay-style high standards and still make a profit, but any restaurateur will tell you that the situation on the ground is hardly ever ideal.  Instead, being highly adaptive, creative, and flexible are the traits that will eventually spell success in the food service industry.

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Social Media Marketing’s Dark Side

Plenty of national food service companies have been eager to wade into the social media world as a way to engage and recruit customers.  Dunkin’ Donuts has tens of thousands of friends on Facebook.  Other restaurants, large and small, have pumped up their online presence in recent years and the internet has become a very important medium for advertising.

But social media also has a dark side, because once you throw your brand out into cyberspace, anyone can praise it.  Anyone can also tear you down.

Take the Jack-In-The-Box example.

The national chain ran a Super Bowl ad this year in which their long-time mascot, Jack, was hit by a bus.  Jack-In-The-Box followed the ad up with a social media marketing campaign that allowed users to post get well cards for Jack.  The chain leveraged several social outlets, including YouTube, Twitter, Facebook, and Flickr.  Thousands of people responded, and a good portion were great for brand-building.

However, a significant percentage were vulgar, brand-bashing, and downright offensive.  In the “old days” (read: anything more than 3 years ago) relinquishing power over what could be said publicly about a brand was pure marketing sacrilege.

But progressive marketers these days have recognized a couple key sea changes, especially as the Millennium Generation gains buying power.

First, people 30 years old and younger in this country have been bombarded with advertising since birth.  They know when they are being pitched and they are likely to be skeptical.  Second, anything that lacks authenticity is Dead On Arrival, and a waste of marketing dollars.

Hence Jack-In-The Box’s willingness to let consumers drive their campaign, even if it meant allowing Jack to get beat up in the process.  In the end, the ultimate authenticity is a surrender of control over a brand.  The most authentic marketing is word-of-mouth, and in an era of unprecedented connectivity, word-of-mouth can travel at lightning speed.

Campaigns like the “Get Well Jack” one are ways to harness the powerful, if unpredictable, world of electronic communication.  Just be ready to experience the dark side of social media marketing, where brands are passed through the ringer by anonymous pranksters.  Luckily, most brands come out the other end bruised but truly “authentic.”

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Waitress Steals Credit Card Info For Small Fee

Waitress Steals Credit Card Info For Small FeeA waitress at Bubba Gump’s restaurant in the French Quarter of New Orleans was arrested recently and charged with possession of fraudulent documents and credit card skimming.

Jaleesa Jimerson reportedly used a skimming device to record the credit card information of up to 50 Bubba Gump customers.  The device was given to her by a man and a woman who also paid Jimerson $220 for her services.

When police showed up at Bubba Gump’s with a warrant, Jimerson excused herself and tried to hide the skimming device in the bathroom.  Police soon found it and arrested the waitress.  She received 108 counts for each card she skimmed, making for a massive indictment.

The judge in the case, Gerard Hansen, set a $5,000 bond for each count, and since there were so many counts, it soon added up to $1,080,000.  Jamison remained jailed after the hearing since apparently the pay isn’t so good in credit card skimming.

There was no word if any money was stolen using the swiped card info.  Jimerson still awaits sentencing.

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The Golden Gate Restaurant Association Denied By Supreme Court

The Golden Gate Restaurant Association Denied By Supreme CourtThe Golden Gate Restaurant Association (GGRA) petitioned the Supreme Court recently to prevent the city of San Francisco from enacting legislation that would require employers to pay a fee to provide health coverage for their workers.

On Monday, the Supreme Court refused a temporary stay on the San Francisco legislation.  All businesses in the city with 20 or more employees would have to meet the new requirements.

The law in San Francisco was originally passed in 2006, but has since been held up by a successful court challenge by the GGRA.  A federal appeals court decided the law could be enacted temporarily last year, and now the GGRA is appealing to the U.S. Supreme Court for an emergency injunction to prevent the law from going into effect this year.

Similar legislation in New Jersey and Maryland were struck down by other Federal appeals courts, setting up a conflict in the lower courts that usually means the Supreme Court will weigh in.

However, it is also noted that the Court does not like to get involved in current national policy issues, and the Obama administration’s lofty health care goals for this year could prevent the Supreme Court from weighing in on the San Francisco petition.

The $1.17 to $1.76 per hour per employee healthcare fee has been decried by business owners in the Bay Area as putting an undue burden on business.  Business owners also claim the law violates a federal act that prevents local government from enacting separate pension and benefit plans from national ones.

San Francisco lawmakers counter that healthcare for the city is a necessary, progressive service that benefits everyone.  They also say the hourly fee can be applied in multiple ways, including towards a company’s health premiums, the city’s Healthy San Francisco program, or employee health accounts.

The question of how universal health coverage will affect business in the United States is only now heating up as progressive policies are being considered at all levels of government in the U.S.

Will universal health care wreck business and entrepreneurship?  Or will it create a progressive, egalitarian society for the 21st century?  Somewhere in between?  Weigh in with your opinion below!

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No Lemonade? Call 911!

No Lemonade?  Call 911!

A matter of life and death: lemonade availability.

A Boynton Beach, Florida man experienced a terrible emergency recently: the local Burger King was out of lemonade.

66-year-old Jean Fortune was ordering food at a Burger King location in Boynton Beach when he was told that there was no more lemonade at the restaurant.  A distraught Fortune called 911 and complained about the lack of beverages.

Local police were not very sympathetic.  They cited Fortune for misusing emergency services, resulting in a mandatory court appearance.

No word on whether EMTs were able to revive the lemonade supply at Burger King.

No Lemonade?  Call 911!

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The Economics Of Free

The Economics Of Free

Should everything be free in the new economy???

Google has profoundly affected the way business is done the world over.  Besides becoming a frequently used verb (meaning “to search”) in multiple languages, the internet search and advertising giant became an international success on a business model that has never been attempted before.

Google offers its primary service, internet search, for free.  Ten years ago, when Google started, offering anything for free was unheard of, unless you were hocking towels on an infomercial.  Google’s success has shown that such a business model is not only viable, it’s the wave of the future.

While restaurateurs probably won’t start giving away their entire menu for free anytime soon, new economic realities have forced some innovative approaches to luring customers back to the food service industry, and free has played a huge role.

Denny’s kicked off the new approach to restaurant marketing with a Super Bowl ad announcing that Grand Slams would be free for one full day after the big game.  The success of that promotion has encouraged other chains to get in on the act, including Quizno’s, who recently wrapped up a million sub giveaway through a specially created site called millionsubs.com.

A café owner in Ohio even removed prices from his menu and allows customers to pay what they want for the coffee and breakfast items he serves.  Sales and customer visits have shot up as a result.  The practice of pay-what-you-want was invented in Europe, and has become even more popular since the economy started going south.

Of course, it may not work so well if a guest can rack up a few hundred dollars worth of entrees and bottles of wine.

And there are hundreds of more examples of restaurants finding the benefits of giving something away for free.  In a larger sense, however, the advent of giving away products and services for free has become rooted in consumer culture, and once consumers get something for free, they’ll want other things for free in the future.

But the economics of free also make sense, even if they seem a little counter-intuitive at first.

First of all, your customer appreciates the gift, and if they get one thing for free, they are more likely to buy other things from you, either in the future or at the same time they redeem their free item.

Secondly, nothing should ever be free.  If your customer doesn’t pay money for the thing they get for free from you, then they should either be counted on to buy something else either directly or indirectly from the free thing or you should get something from them, like an email address or a survey.

In an information age, collecting data about your customers has become vitally important to the success of any company.  Giving something away for free is one of the cheapest ways to get the information you’re looking for.

Finally, giving something away for free is a great way to create buzz around your brand.  The free publicity chains like Denny’s and Quizno’s have gotten out of their free food promos has more than made up for the cost of the giveaways.

The economics of free are the economics of the future, and the business you can generate from giving away something for free can far outweigh the cost.  And making more money than you spend isn’t anything new: it just makes good old-fashioned business sense.

The Economics Of Free

Giving things away for free can mean more sales and customer loyalty.

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