CHICAGO National Restaurant Association trade show here served up a thoroughly mixed bag of prescriptions for surmounting the economic hardships facing foodservice businesses. —Attendees and hosts of the 2008
Depending on who was doing the talking during scores of speeches, panel presentations, receptions, banquets and executive mixers around town, restaurateurs were told they either: —Attendees and hosts of the 2008
Should resist alienating customers and not raise menu prices even if that “hurt a little bit,” or shouldn’t fear taking price hikes needed to counter food inflation. —Attendees and hosts of the 2008 Must feature bargain-priced options to lure recession-wary consumers, or proffer only legacy menus to avoid cheapening their brand’s image. —Attendees and hosts of the 2008 Ought to condemn Congress’ pork-laden farm bill because special interests will reap billions instead of bushels at a time of commodity shortages, or should welcome provisions of the legislation that might mitigate soaring food costs. —Attendees and hosts of the 2008
Such widely diverging views about challenges confronting food-service were voiced here May 17-20 as operators, suppliers, culinarians, business analysts, industry officials and presidential candidate John McCain traded often conflicting outlooks at the NRA’s annual extravaganza. —Attendees and hosts of the 2008
Though strategic disagreements abounded during the mass gathering of restaurateurs and vendors, nearly all attendees concurred that the prevailing sales and cost climate is turbulent, complicated and, for many, punishing. —Attendees and hosts of the 2008
While the industry’s enduring vitality still could be seen in the flocking to Chicago of some 71,500 attendees from 115 countries, the NRA’s Restaurant, Hotel-Motel Show itself provided a barometer of the economic tribulations besetting foodservice. The vast McCormick Place convention center buzzed with talk of steep downsizings this year by some chains’ contingents of attendees, and much was made of the conspicuous absences of several usually prominent food vendor-exhibitors. —Attendees and hosts of the 2008
NRA officials at the outset of the show heard a report that preregistration was down 4.2 percent from last year to 41,593 attendees. The final figure was down almost 3.5 percent from last year’s tally of nearly 74,000 attendees, though the NRA said that more than 2,200 exhibitors at this year’s event represented a sell-out of show space for a third straight year. —Attendees and hosts of the 2008
Similarly, the throngs of leaders and achievers at numerous awards galas and Champagne receptions across the city reflected a buoyant spirit that contrasted markedly with some attendees’ glum assessments of business. —Attendees and hosts of the 2008
While awaiting McDonald’s chief executive Jim Skinner’s keynote address, NRA Educational Foundation director Carmen Vacalebre remarked that his five upscale restaurants in Connecticut had seen their targeted clientele shrink from 20 percent to 18 percent of the local population through attrition among residents able to afford his $55 average tabs. —Attendees and hosts of the 2008
To counter sales that have fallen 4 percent this year, his Carmen Anthony Restaurant Group is offering some smaller-portion options at lower prices, yet Vacalebre observed that operators “can’t be afraid to raise prices,” just as most businesses affected by inflation are doing. —Attendees and hosts of the 2008
However, McDonald’s Skinner cited his chain’s dollar-menu strategy and urged his assembled peers to heed the issue of “affordability—that’s the most important thing.” —Attendees and hosts of the 2008
Skinner, empathizing with full-service operators who’ve been hardest hit by consumers’ trading down to quick-service alternatives like McDonald’s, recommended that those chains find ways to hold the line on pricing. —Attendees and hosts of the 2008
“If I were in the casual-dining business I would make sure I had an affordable menu, even if it had to hurt a little bit,” Skinner said. “That’s where I would spend my time, particularly today.” —Attendees and hosts of the 2008
But McDonald’s leader acknowledged the mounting commodity factors that are prodding food inflation while causing worldwide strife over shortages of staple foodstuffs. —Attendees and hosts of the 2008
“It’s no doubt an immediate crisis and possibly a sign of a larger trend,” Skinner said. —Attendees and hosts of the 2008
He underscored that “all of us are facing rising commodity costs and an unsteady economy, but we have to be innovative” to overcome such other pressures as higher minimum wages, new health care mandates and the unresolved immigration issue. —Attendees and hosts of the 2008
Chain officials at the show’s annual Restaurant Executive Breakfast also weighed price hikes and service cuts as possible tactics for offsetting food inflation. However, in trying to maintain margins by improving operating efficiencies, one should “never do anything” that directly affects customers, advised Jon Luther, chairman and chief executive of Dunkin’ Brands Inc. —Attendees and hosts of the 2008
Douglas Brooks, president and chief executive of Brinker International Inc., said he would never raise prices to make Wall Street happy, but instead focuses on delivering value by managing costs. —Attendees and hosts of the 2008
In an economic downturn, restaurants have to be satisfied with “a little less” profit to maintain market share, said former NRA chairman Ted Balestreri, co-owner of the Monterey, Calif., landmark Sardine Factory restaurant. —Attendees and hosts of the 2008
Darden Restaurants chief executive Clarence Otis, at a buffet reception later, observed that bottom-line concerns about commodity inflation were eclipsing apprehension about the overall economic doldrums that have sent operators scrambling to devise customer incentives. —Attendees and hosts of the 2008
The bigger issue “probably is the cost pressure more than the economy,” Otis said, while acknowledging that consumers’ fiscal caution was affecting operators’ top-line prospects. —Attendees and hosts of the 2008
Across the room, IHOP Corp. chief executive Julia Stewart echoed an earlier remark by Vacalebre that the economic slump, which he called his third recession, would end just like the others. —Attendees and hosts of the 2008
“We’ll all be fine,” Stewart said while stressing that corporate commitment to customers’ concerns was imperative. —Attendees and hosts of the 2008
At another gala bash, a supply-side perspective on the economic malaise was offered by Beverly Hills, Calif.-based investment banker and strategic planner Stephen Horowitz, who has decades of experience as a foodservice distributor, manufacturer, and consultant to operators and suppliers. —Attendees and hosts of the 2008
Horowitz said the escalating truck charges levied by distributors to offset fuel inflation should prompt restaurateurs to schedule fewer deliveries or consolidate them through shifts from multiple vendors to one-stop broadline providers. The gasdependent suppliers themselves, Horowitz predicted, would be forced in greater numbers to pursue strategic mergers in order to survive the worsening energy crunch. —Attendees and hosts of the 2008
As for food commodities, the Republican Party’s presumed presidential nominee, Arizona Sen. John McCain, told a packed McCormick Place auditorium that Americans should be “disgusted” with Congress for stuffing the $307 billion farm bill with “hundreds of pages of subsidies and tax breaks served up every five years to corporate farmers.” —Attendees and hosts of the 2008
While people “struggle” to feed themselves amid commodity shortages, and with “food prices at historic highs and farm income up 56 percent,” the government nonetheless was paying for land to be left unplowed by special interests, “many of which are heavy political contributors,” McCain said in a speech that focused largely on rival Sen. Barack Obama’s qualifications. —Attendees and hosts of the 2008
“There’s only one proper response, and that’s a presidential veto,” he added, vowing that he would do as President Bush now has done, although Bush’s rejection of the farm bill one day after the NRA show ended was overridden by Congress a day later. —Attendees and hosts of the 2008
Though the National Restaurant Association did not debate McCain on the matter, it looks favorably upon the farm bill’s incentives for soybean production because of the industry’s needs for trans-fat-free oils and the 49-percent spike in the cost of fats and oils in the first quarter, said NRA director of legislative affairs Michelle Reinke. Just minutes before McCain’s address, Reinke also acknowledged that the farm bill’s lowering of tax credit incentives for corn-based ethanol and heightened stimulus for nonfood- derived ethanol were other aspects of the legislation that could ease food inflation, though those steps were “not enough.” —Attendees and hosts of the 2008
The only candidate among the top three to accept the NRA’s invitation to speak, McCain made no mention of ethanol, though he has reversed himself and now supports it as an alternative fuel while remaining opposed to all subsidies for its production. —Attendees and hosts of the 2008
Against the backdrop of restaurateurs’ widespread vilification of ethanol as a cause of food inflation, foodservice economist Malcolm Knapp later opined that “lots of hillbilly moonshiners must be really pissed off” that essentially the same corn distillate they historically have been punished for producing on the sly now is being subsidized by the government. —Attendees and hosts of the 2008
Knapp, who specializes in tracking casual-dining sales trends, observed that a shakeout of marginal operators was underway, especially among independents, though that would benefit surviving competitors. And while an operator like Darden’s Otis might focus on commodity pressures, large companies like his have used their buying clout to keep food inflation in the low single-digit range, while independents might face levels perhaps four times higher, Knapp indicated. —Attendees and hosts of the 2008
Knapp noted that operators industrywide are struggling to rejigger their menu mixes and recipes to feature less costly, alternative commodities, but added, “what do you do if you’re a steakhouse—just go out of business?” —Attendees and hosts of the 2008
For Detroit chef-restaurateur Lorraine Platman, austerity is the only way to counter the 8-percent, meat-driven spike in food costs this year at her three-unit Sweet Lorraine’s Cafe & Bar group, she explained while riding a shuttle bus from the show to her hotel. —Attendees and hosts of the 2008
Unwilling to pass any cost inflation on to wary customers amidst Detroit’s five-year economic downturn, Platman instead is resorting to working more shifts herself, scheduling staffers to start work 15 minutes later, turning off lights and air conditioning whenever possible and powering on stoves later than usual. —Attendees and hosts of the 2008
Though the 26-year veteran proprietor exemplifies the struggles of smaller operators, Platman used her NRA show visit to promote her new role as a foodservice consultant to a developer of entertainment center-bowling complexes, her chain’s twounit alliance with Marriott hotels and her upcoming expansion of Sweet Lorraine’s to Pennsylvania. —Attendees and hosts of the 2008
“You’ve got to do what you can these days,” she said. —Attendees and hosts of the 2008