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Operators open up to sales-driving ideas

Operators open up to sales-driving ideas

This story is part of NRN's "2011 Forecast & Trends" special report.

A new year brings new opportunities. The challenge is anticipating what lies ahead.

According to restaurant operators and industry observers, the answer is better times. While many of the challenges of 2010 will linger, prognosticators see the economic dark clouds further parting, giving way to sunnier prospects for business.

“It’s clear 2011 is shaping up to be a better year for the industry,” said Bonnie Riggs, restaurant industry analyst for research firm The NPD Group.

Most notably, the traffic declines seen at U.S. restaurants for the past two years have halted. Traffic was flat for the period from July through September, indicating a turning point, Riggs said.

In 2011, NPD predicts restaurant traffic will grow at a rate of about 1 percent per quarter, she added. “We have challenges, but the worst of it is over,” she said.

Bright spots that emerged in 2010 are expected to shine again in the new year, said Riggs. Among them, continuing growth in breakfast and snack sales, as well as a return of families with kids to restaurants.

Other opportunities include:

Focusing on health. This year a federal menu-labeling mandate will force all chains to begin posting calorie counts on menus and menu boards, and health-focused restaurant concepts are saying bring it on.

San Diego-based Daphne’s Greek Café, a fast-casual chain that was acquired out of bankruptcy last July by an investment group headed by William Trefethen, now the chain’s chief executive, will be revamped in 2011 to sharpen the concept’s focus on its healthful menu.

Boasting a Mediterranean-inspired menu that is considered heart healthy, Daphne’s began posting calories on menus before California’s menu-labeling law went into effect. The chain sees such listings as a competitive advantage over others in the fast-casual space, said Trefethen. 

Also this year, the company plans to lower sodium counts, offer a whole-wheat version of its pita bread and add more vegetarian and gluten-free menu items.

“We’re trying to provide a menu that’s across-the-board healthy, and that will be harder for some chains than others,” said Trefethen.

Officials at Dallas-based Red Mango USA believe menu labeling will reveal the frozen yogurt chain’s positioning as a better-for-you alternative, said Dan Kim, the company’s founder and chief concept officer.

The chain posts calorie counts systemwide and offers a guide with more detailed nutrition information. The positioning has helped attract franchisees looking to tap into consumers’ desires for healthful treats.

After reaching more than 100 units at the end of 2010, Kim said Red Mango is expected to more than double in size in 2011.

Finding better locations. Desirable real estate will continue to be available in 2011, according to observers.

“I’m excited because real estate is a lot more affordable,” said Joe Essa, president of Wolfgang Puck Worldwide, based in Las Vegas and Los Angeles. “Three or four years ago, it was more difficult to get great locations.”

Charles Nelson, co-owner of the Sprinkles cupcake chain, based in Los Angeles, agreed, saying his brand has been able to find “A” locations as it spreads across the country.

Sprinkles ended 2011 with seven locations, and three more are planned for 2011.

Not everyone agrees that “A” locations are easy to come by, however.

Phil Ratner, a franchisee of the Five Guys Burgers and Fries brand in Southern California, said he has been thwarted in his efforts to find triple-A locations.

“The fact is that there are a lot of B sites,” he said. “You still have to fight for triple-A locations. We’ve been willing to downgrade to a B-plus or even B, because we want to open restaurants.”

Hiring good help. Throughout the recession, climbing unemployment rates have boosted the quality of the labor pool, and many expect that to continue in 2011.

“When we open a restaurant we get 150 applications, and there might be 50 with resumes that include solid experience or even management experience, which is amazing,” Ratner said.

Dennis Lombardi, executive vice president of foodservice strategies for consulting firm WD Partners in Columbus, Ohio, noted however that the real opportunity is creating a work environment and programs that will keep those great employees as the job market improves.

Going casual. Jennifer Jasinski, chef owner of three restaurants in Denver, believes 2011 will be a year of innovation for fine-dining chefs, who will increasingly see the benefit of offering lower price points. 

Jasinski owns two high-end venues: Rioja, with an average check of about $65, and Bistro Vendôme, with an average check of about $45. In August 2010, Jasinski and business partner Beth Gruitch opened Euclid Hall, a more casual tavern with an average check that falls closer to $22 per person. The eclectic menu features fresh house-made sausages, oyster po’ boys and poutine, as well as dishes such as fried cheddar cheese curds, Buffalo-style pigs ears and brûléed bone marrow. 

Jasinski said Euclid Hall has been tremendously busy, in part because of its affordability, but also because it offers Denver diners something different.

“Creativity is the thing for 2011,” she said. “You have got to be creative with your concepts and your menu. You have to be special.”

Living local. With continued consumer interest in eating ingredients that are local and sustainable, Joseph Gillard, executive chef of the restaurant Napa Valley Grille in Los Angeles, sees an opportunity in local meat.

In 2010, Gillard launched a community-sponsored agriculture program at the restaurant that allows customers to become subscribers in a co-op supporting a local farm. Guests can receive a weekly delivery of seasonal produce, to which Gillard adds recipes and tips. This year, Gillard said he hopes to add meat, such as locally raised lamb or goat, to the offerings.

“I think demand for these kinds of products will only increase,” he said. “It’s a pretty great time to be involved in food. There’s a revolution going on out there.”

Steadying prices. Increasing food costs in 2011 have many restaurant operators thinking hard about whether to raise prices.

Lombardi of WD Partners urged operators to “resist it and let the other guy do it. Then watch the traffic come to your restaurant.”

He added, “Value is here to stay.” 

NPD’s Riggs agreed, noting that “value” in 2011 will refer to the use of fresh ingredients and great-tasting dishes at a “reasonable and affordable price — not the cheapest food,” she said.

Darren Tristano, executive vice president of market research firm Technomic, predicted that the improving stock market will “give people comfort and boost their nest eggs a bit.”

The result, especially for older and more affluent consumers, will be a willingness to dine out more often.

“It’s definitely looking brighter,” he said.

Contact Lisa Jennings at [email protected].

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