By Joshua Korn
Appetizers:
Implementation of the 2010 Affordable Care Act passionately known as “Obamacare” could be one of the greatest challenges restaurant operators will ever face. The ACA will put significant cost and administrative pressures on employers as they prepare for massive changes in the health insurance system, including complex new reporting rules and penalties for so-called “large employers” who fail to offer full-time employees and their dependents the opportunity to enroll in affordable, minimum-value health plans starting in 2015. Restaurants are likely to feel the law’s impact more than many other businesses because they are labor-intensive, with low profit margins and millions of employees working flexible schedules.
Entrees:
2014 brings a new era in restaurant profitability, sustainability and controversy since Bills have been introduced in the House and Senate to dramatically increase the federal minimum wage. The Fair Minimum Wage Act of 2013 (S. 460, by Sen. Tom Harkin, and H.R. 1010, by Rep. George Miller) would increase the federal minimum wage from the current $7.25 to $10.10 over two years and three months—a nearly 40 percent increase—and automatically index the wage to inflation each year thereafter, regardless of economic conditions. The legislation also calls for increasing the minimum cash wage for tipped employees until it reaches 70 percent of the federal minimum wage. This means the minimum cash wage for tipped employees would triple, in stages, to $7.07 according to the national restaurant association.
Desserts:
Restaurants and food manufacturers who market food or beverage items as “gluten free,” must meet all requirements of a new, regulatory definition of that term, the U.S. Food and Drug Administration said in a final rule issued August 3, 2013. According to the FDA’s final rule, which was published in the Federal Register Aug. 5 2013, restaurants serving food or beverages termed “gluten-free,” “free of gluten,” “without gluten” or “no gluten,” are making a food-labeling claim that should be consistent with the new regulatory definition for gluten-free.
The new federal definition, effective September 4, 2013 with a compliance date of August 5, 2014, would standardize the meaning of “gluten-free” claims across the food industry, the FDA said. In order to use the term “gluten-free” on labels, the food items must meet all of the requirements of the definition, including that they must contain less than 20 parts per million of gluten.
The FDA has broad discretion over food labels and since 1993 has held restaurants to certain standards if they make nutrient-content or health claims about menu items, such as “fat free” or “low cholesterol.” The agency has now added “gluten-free” to the list of FDA-regulated claims. In guidance accompanying the new “gluten-free” definition suggested that “any use of an FDA-defined food labeling claim … on restaurant menus should be consistent with the respective definitions.”
Silver Linings Playbook:
Okay now breathe, it’s not all doom and gloom. Turn adversity into advantage. You are in a unique position with an opportunity to re-evaluate your business plan and fire up your teams! Develop new innovations that are more efficient and drive more value. Create long lasting brand recognition and brand awareness by providing new products and services to your current clientele and gain sales with new clientele ultimately increasing your revenue and maximizing your profitability! The bottom line is that change happens and you need to evolve and adapt to these conditions which are primarily out of your control. So here’s where innovation and entrepreneurship are essential.
You may be thinking “sure easier said than done.” Well here’s some thought inspiring questions to get you motivated. Whether you are a seasoned veteran or first starting your business think about what reasons led you to opening your business in the first place. Were you nimble and flexible? Were you able to adapt and move when the proverbial cheese moved? What’s to stop you now?
All the answers to these new challenges start and end with your menu. So get back to the drawing board and look at what your serving, how much your serving, how many laborers do you need to produce it, are they full time or part time? Can you leverage cost of goods? Can you join a buying group? When’s the last time you had a price increase? When’s the last time you looked at your asset base needed to create your menu. Are you depreciating or expensing those assets? Are you taking advantage of the new 15 year depreciation schedules? All these strategies can change your cash flow and add value.
I encourage you to seize your opportunity by taking control and capitalizing on your menu development in 2014. Implement a cost structure and product mix that will enable you to get ahead of some the challenges you are going to encounter in the New Year as Obamacare, Increasing Labor Rates and of course the Gluten Free phenomena take effect.
If you still have questions or need help navigating through these new challenges please feel free to reach out us make sure you are optimized for performance excellence!