This report is a bonus feature from the Oct. 29 issue of Nation’s Restaurant News, typically available to subscribers only. Subscribe today.
Political tension is running high throughout the industry’s bar rooms, board rooms and dining rooms as President Barack Obama and former Massachusetts Gov. Mitt Romney slug it out for the presidency in the run-up to the Nov. 6 elections.
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But many restaurant leaders are nonetheless hesitant to voice their opinions publicly in what has emerged as one of the most polarizing national elections of recent memory.
While operators know full well that such critical issues as health care, tax reform, menu labeling, food safety and labor could hang in the balance, the intense partisan feelings generated by the close contest have many biting their tongues so as not to offend customers at a time when business is still slow and communications move at the speed of light.
Former Kentucky Gov. John Y. Brown Jr. understands the reluctance of those who choose to remain guarded when it comes to presidential punditry. As president of KFC from 1964 to 1973 and governor of Kentucky from 1978 to 1981, the 77-year-old Brown is well-acquainted with the risks of sharing opinions publicly.
“When you have two candidates spending more time tearing each other down than saying what they’ll do to fix the country’s problems, … that critical climate puts the American public in a negative atmosphere,” said Brown, who was regarded favorably by many Kentuckians as an apolitical governor.
He called this election’s hyper-partisan rhetoric “shameful — like junior high school, all this arguing. I bet you could find half the population saying they’re disgusted with the whole thing.”
Alienating customers was also a very real concern for one association executive who, while declining to speak on the record, said: “If the polls we’re seeing are accurate, that it’s a 50-50 contest, speaking out against one candidate could put a company in a position to offend potentially half of all voters. That’s a risk.”
Nevertheless, some operators are speaking their minds, albeit carefully.
“Honestly, we’d really like to see the winner be one who focuses on policies that help small businesses grow,” said Mike Lassiter, chief executive of 16-unit Rising Roll Gourmet in Atlanta. “If those changes come through better tax incentives or increased [Small Business Administration] lending opportunities, that’s fine. But either way, we want it to be someone who will reinvest in America.”
And get sales trending upward again, operators said. Despite positive industry performance through May of this year, restaurant sales across multiple categories began slumping in June and are struggling to recover in some segments. That has led some operators to wonder whether the constant media focus on the election combined with an endless barrage of critical campaign ads has dampened Americans’ appetite for eating out.
Chef-restaurateur Dean Corbett suspected as much and dug out his sales records for the past 27 years to confirm his hunch.
“Every time there was a presidential election in the past, business dropped off,” said Corbett, who owns Corbett’s Restaurant and Equus & Jack’s Lounge. “This year Equus & Jack’s are holding their own, but Corbett’s [a fine-dining concept] is off more than 30 percent. It’s as if the mood among my customers has changed. Maybe it’ll change back when this mess is over.”
Scott Nordon, chief operating officer at 16-unit Posados Cafe, said a September sales drop of 2.5 percent could be due to negativity swirling around the presidential race, but he believes the sluggish economy also is a key factor.
“You get that sense that folks have a lot on their minds right now, whether it’s the election or the economy,” said Nordon, whose company is based in Tyler, Texas. “We have TVs in our restaurants, and they’re usually on sports channels. But now we get a lot of people asking, ‘Hey, could you put the news on?’ Maybe that’s why our alcohol sales are up slightly versus last year.”
Mike Kern, president and CEO of 1,200-unit Long John Silver’s, said that in a time when consumer confidence is already weak, a close election and the uncertainty that follows darkens customers’ moods. As has been the case for many quick-service operators, Long John Silver’s reported a good second quarter but a less-than-robust third quarter.
“We see a strong correlation between consumer confidence and sales, so if people aren’t feeling good about the economy or things like this election, they don’t eat out as often,” Kern said. “I don’t think people feel great about how the election process is unfolding overall. I think they question the degree of change or improvement either candidate can really make.”
Political expert Joe Kefauver agreed, saying consumers are so constantly bombarded with negative campaign ads that they can’t help but absorb that bad vibe.
“If two candidates are spending close to a billion dollars each to tell the public, ‘It’s all going to hell in a hand basket unless I win,’ I can see how that can beat people down over time,” said Kefauver, managing partner at Parquet Public Affairs, a foodservice consulting group based in Orlando, Fla. “A billion dollars — think about what Red Lobster could do with a marketing budget like that. We’d be wearing plastic bibs all the time if they could spend that on their message.”
But if many operators and industry executives are choosing to proceed cautiously with their political pronouncements, that does not mean they have not speculated on the possible results.
Stephen Caldeira, president and chief executive of the International Franchise Association, weighed several hypotheses. If Obama is re-elected, Caldeira said, any ground he gains with any new initiatives will depend largely on the makeup of Congress.
“The most likely scenario is divided government like we have today,” he said. The result, he added, would be continued uncertainty in the industry, “with, at best, slow or modest growth for new franchise-restaurant development.”
At worst, negative growth levels in restaurant franchising could return as operators begin absorbing costs associated with the Patient Protection and Affordable Care Act in 2014.
While Caldeira said he likes Obama’s vision for corporate tax reform, he remains concerned that “higher taxes on individuals and investment income will not be a prescription for growth and more people becoming restaurant-franchise owners.”
Should Romney unseat the incumbent, Caldeira believes a Republican-controlled House and the potential for a Republican- controlled Senate would give Romney a “tremendous opportunity in his first two years to craft a long-term vision for economic growth in the country.”
He predicted Romney also would address tax reform, deficit reduction and adjustments to entitlement programs such as Medicare and Social Security.
“If Romney were to be elected and put forth a vision for the next eight to 10 years, we could very well see a return to pre-recession growth rates — upwards of 5 to 6 percent — in the franchising sector,” Caldeira said.
Industry veteran Jon Luther, nonexecutive chairman of Dunkin’ Brands and chairman of Arby’s Restaurant Group, predicted an Obama re-election would see constituents insisting he deliver on 2008 campaign promises still unachieved.
“The question will be whether he can do those things in the second term, and I’m not sure he can with the current gridlock,” Luther said. “What I do know is, in business, if I hadn’t gotten the job done in 3 1/2 years as CEO, I’d better have my résumé out.”
If candidate Romney wins, Luther is optimistic presidential policy will shift more toward the pro-business right, focusing more on the economy and less on social issues. But even then he’ll be faced with managing an exceptionally unpopular Congress.
“They have a very low approval rating for a reason,” Luther said. “They’re not getting things done like they should.”
Not every industry executive is convinced that whoever is elected the next president of the United States will be able to effect any rapid and dramatic change.
Scott DeFife, executive vice president for policy and government affairs for the National Restaurant Association, suggested a bit too much has been made of the presidential race when congressional cooperation is what’s most necessary to effect significant legislative changes.
He also said the issues affecting NRA members are farther reaching than can be addressed in a single presidential race.
“People are searching for answers right now, and they sometimes think those answers are found in politics only,” DeFife said. “The issues that confront the industry are systemic issues, problems that will concern the industry well beyond any one election.”
DeFife said questions about how each candidate might address issues like health care, food safety, menu labeling and labor regulations are on everyone’s mind. But regardless of who gets the most votes Nov. 6, “you’re only talking about what can be changed at the federal level. You still have to lay on state and local issues, taxes, health inspections — even throw in a beverage ban in New York City — and you realize there are so many things to consider. Those aren’t going to be affected entirely by a single presidential race.”