Greetings!
This month, our hearts and prayers go out to the people of Japan and the trials they are continuing to endure. It’s hard not to imagine the devastation that would ensue if a catastrophe like that happened here on our shores.
As the industry has shown so many times before—most recently in the wake of 9/11 and Hurricane Katrina—restaurants can play a major role in bringing people together, helping to feed disaster workers and raise money.
Read below for more information, and remember that at the end of the day all we really have is our family, friends and community to help us.
To your success,
Dean and Danny
The Rising Cost of Food and What to Do About It
Most restaurateurs are very aware of the cost increases for key food commodities over the past nine months and are reminded of it with every delivery received at the back door. As demand is clearly exceeding supply, unprecedented price increases for seafood, meat, poultry, grains, coffee, etc., are driving food inflation.
Seafood prices are being driven by the following:
- Conservation efforts
- Poor weather
- Ecological issues
- Economic recoveries, especially in Asia
- Farming issues, including rising feed prices and disease in the Chilean salmon industry
Beef and pork have seen rapid increases since mid-2010 which have been ignited by the volatile grain markets but primarily the corn market. The historic highs seen for live cattle futures on March 11, 2011, is a reminder that this market borders on being out of control. While the poor corn harvest acted as the catalyst, there is no shortage of additional contributing factors:
- Lowest U.S. cattle inventories in half a century
- Sharp increases in foreign demand for U.S. pork and beef spurred by recovering economic conditions in Asia• Improving domestic economy
- Increased federal mandatory corn allocation to ethanol production
- Market speculation
- Political change and unrest in the Middle East, driving oil and gas prices
As the severity of the devastation from the 9.0 earthquake off the coast of Japan evolves, it will likely play a significant role in U.S. exports to Japan—one of the largest importers of both beef and pork and an important trading partner in general. While the Japanese economy will take a large hit initially there will be significant economic activity required to restore Japan’s infrastructure and economy. What exactly will happen and when will evolve over time, but the priority now is for the Japanese people to deal with the humanitarian issues facing them daily.
According to Len Steiner of Steiner Consulting Group in Manchester NH, the balance of 2011 will offer more of the same in terms of higher meat prices especially for pork and beef. Steiner estimates prices increases for 2011 to be:
- 20% for live cattle
- 25% for hogs
- 10% for whole bird turkeys
- 3% for chicken/broilers
Steiner feels these markets may take some time to stabilize. For example, he does not see significant rebuilding of the U.S. cattle herd to begin any sooner than 2012. While the markets will be unable to sustain peak prices it is unlikely that we will return to pre-2008 price levels for beef and pork.
The market news for commodity foods is certainly not favorable or encouraging, but there are strategies and responses available to restaurateurs to limit the impact and neutralize in part the effects of these impending price increases.
- Menu price increases are always a part of the response to food inflation, but restaurateurs must remember they walk a fine line with their guests—ask any restaurateur how menu price increases impact customer traffic.
- There should be an ongoing relationship with your key suppliers. Make a clear effort to develop a healthy business partnership. You and your suppliers do have many common interests.
- Challenge all price increases from your suppliers.
- Remember and remind suppliers that commodity/raw ingredient cost increases in grains, livestock, coffee beans, etc., can make up as little as 20-35% of the final cost of the baked bread, steak, or ground coffee served in your restaurant. Don’t allow market price increases to increase the margins of your suppliers.
- If you are in a position to negotiate fixed price agreements you should explore this option.
- If your operation is unable to enter into direct food contracts, speak to your suppliers and ask them to cover you under their agreements. This can and should be a benefit of developing a strong business partnership.
- Monitor freight charges.
- Speak to your distributor and review your delivery frequency to see if you can reduce one delivery per week.
- Adjust portion sizes by reducing protein and increasing vegetables and grains where possible.
- Chicken will be far less impacted by cost increases compared to other meat and poultry products, so expand menu placement of it.
- Explore alternative beef and pork cuts.
- Revisit cost-control measures such as receiving practices, net weights, conservation and recycling measures, audit invoices, etc.
- Tap into your human resources and energize your employees by forming a “Kitchen” or “Culinary” task force. Business owners and employees do have many common interests, and success is clearly one of them.
Restaurants that have a heavy focus on pork, beef, and seafood will be most affected by recent and projected food inflation. There is, however, no escape: All restaurant types will feel the impact of food inflation to some degree over the balance of 2011. The restaurant industry is just beginning to emerge from the worst recession in 70 years and now is faced with the most volatile, rapid, and severe food inflation ever. But the industry battled and survived the worst of the recession and most will find ways to remain profitable and survive the “food inflationary wars” of 2011.
More Hot Concepts to Watch
Last month when we released our 2011 guide of what’s hot in the quick casual market, we promised a follow-up on some next-wave concepts that have attracted our attention—either because of proven success, an engaging idea or even a promising relaunch of an established or older company—but didn’t make it into the first round. We’ll also look at other new concepts in future issues of this newsletter.
If you want to see the original report, go to our Facebook page and “like” us.
Blue Bottle Coffee Co.
Year Founded: 2002
Number of Units: 7
http://www.bluebottlecoffee.net
Starting with a pushcart location dispensing espresso at the Berkeley Farmers’ Market, Blue Bottle Coffee has grown to become a powerhouse brand in the realm of organic coffee micro-roasters, specializing in superpremium-quality single-origin and espresso and brewed coffee blends, as well as proprietary house blends for such restaurants as Chez Panisse. A new production facility, opened in 2009, houses a coffee bar, roaster, cupping room and kitchen, which produces coffee-friendly baked goods and other “treats.” Known for selling beans within 48 hours of roasting and making each cup of coffee by hand, Blue Bottle is also ramping up its food menu with such interesting, market-specific offerings as Biscotti Pizzetta and Popeyes (grilled bread with a fried egg in the middle). The company is branching out in New York City soon, which should strengthen its position even more.
Cafe Mezze Grill
Year Founded: 2006
Number of Units: 3
Cava’s mix-and-match Mediterranean menu is superbly on-trend: fresh, healthy, flavorful and totally customizable, and a quick-casual variant of a full-service Greek restaurant also called Cava. Customers pick a platform (full-size or mini pita, rice bowl, or salad), add a protein and toppings of their choice (including falafel, pork, lamb, beef or chicken and any number of vegetables such as feta, cucumbers, and cabbage salad, then flavor it up with such condiment options as cool tzatziki, hummus or spicy harissa). Extras like lentil soup, dips and chips, and warm pita round out the selection. Bowing to the current zeitgeist, meats are hormone- and anti-biotic-free; dips and spreads are all-natural; and bowls ; cups, cutlery, drink cups and napkins are all compostable. The inviting storefront digs are both industrial-sleek and warm, with plenty of reclaimed wood and common seating. There are three units in operation in the DC market, with more on the way soon, and Nation’s Restaurant News has posited that Cava has what it takes to be “the next Chipotle.”
Fazoli’s
Year Founded: 1988
Number of Units: More than 220
This quick-casual Italian chain has been around for a while but has almost completely reinvented itself in the past few years. An ambitious “extreme makeover” program, launched in 2009, has resulted in a near-complete overhaul of the Italian menu—with dozens of new items and improved flavor for long-time favorites, including entrees and sandwiches that are now cooked fresh to order—as well as service upgrades (such as meals and unlimited breadsticks being delivered to the tables). There are also plans to revamp the majority of Fazoli’s existing units to an all-new, contemporary design that uses more vibrant colors and bold, fun photos and graphics to create a more high-energy, family-friendly dining environment. Traditional plates and silverware have replaced disposables. A trio of new, smaller-footprint prototypes will help franchisees achieve a better ROI, as well as entering such nontraditional settings as airports and colleges and university. Meanwhile, a new, full-menu location has recently opened in a Walmart store, the first of several planned.
Giving Back
By Joan Lang
The unfolding recent events in Japan have brought into focus the role that restaurants can play in their own communities and the world at large. Not only is it the right thing to do, but it’s also good for business: According to Driving Traffic research from Chain Leader, 73% of restaurant chains support charitable organizations in order to increase their own customer counts.
Whether you choose to donate to charities personally or use your establishment as a larger platform for giving back is an intensely personal decision, not to mention a pragmatic one. But here are some thoughts:
1. Pick a Charity that Appeals to Your Customer Base. The Flatbread Company, which touts its natural pizzas made from local, sustainable ingredients and a community-based spirit in each of its 10 locations, hosts many locally minded benefits that appeal to its young, socially conscious and family-oriented base. In Portland, Maine, for instance, a regular program of Tuesday night events raise awareness and donate a portion of the night’s proceeds to such organizations as the Westbrook Animal Refuge League and the Cape Farm Alliance.
2. “Adopt” a Signature Charity. Being known as a supporter of a particular charity is good for business, and helps management and staff focus its energies. For ConAgra Foods, for instance, its childhood hunger. Savor Pittsburgh relies upon an alliance of local restaurants to raise money for the American Respiratory Alliance of Western Pennsylvania. Chik-fil-A sponsors Core Essentials, a “values education program” designed for grades K-5.
3. Tap into the Power of an Existing Charitable Network. That’s the premise behind nationwide organizations such as Share Our Strength and The Great American Dine Out, which allow participating restaurants to tap into a huge bank of marketing, event expertise and other resources. The 118-unit Corner Bakery chain, responding to requests from its employees, became involved with The Great American Dine Out “no kid hungry” program in 2008, with a goal to raise $100,000 during the weeklong program in 2011. In addition, the bakery-café chain has introduced its own “Stay Local” program, encouraging guests to explore and rediscover summer fun in their own neighborhoods.
4. Remember that it doesn’t have to be Money. Many organizations incent their staffs to donate time, even giving employees extra time off to participate in charitable and community events. Daffodil Restaurant, in San Francisco, encourages its staff to support, participate in and attend community events that express our company’s philosophy and global outlook, offering employees the day off to support a cause that is beneficial to the restaurant. Customers can also be incented, via scrip or coupons for food or meals when they join staff or work on their own for a sponsored charity.
5. Promote Your Activities. Naturally you will want to let the local newspaper and other community calendar organizations know about your charitable events and activities, as well as posting them proudly on your website. But social media has made it easier than ever to get your customers talking you up, via Facebook, Twitter, Groupon, You Tube and other outlets. A number of high-profile chefs has using Twitter to ask their followers to donate to the Red Cross for earthquake and tsunami relief, and daily-deal phenomenon Groupon is actively involved in fundraising efforts. There are even mobile apps like CauseWorld which allow customers to use geo-positioning technology to earn “karma points” for visiting member restaurants, and then donate those points to charities.
Tip of the Month
Okay, so you want to get involved with a charity or host a benefit event. Local organizations like sports teams and animal shelters are always appropriate beneficiaries, and you can always poll employees and customers to find out what causes and charities are important to them. But if you want to go a little bigger and get involved with state, national or international charities, you’ll want to get more information and be able to vet them. Charity Navigator is a great resource, providing a searchable database with information on thousands of causes; efficacy and performance ratings (such as what percentage of the money raised actually gets to the cause); classifications by type of charity (i.e., environment of health); and other useful tools.