Restaurant Sales Growth Rebounds
Posting best month since March. How did the restaurant industry perform in August 2022? Restaurant sales and traffic growth rebounded last month thanks in large part to an increase in consumer confidence. The Consumer Confidence Index reported an uptick in August, following three consecutive monthly declines. A drop in gas prices combined with a more positive short-term outlook for income, business, and the labor market were all contributing factors. The improvement in confidence may also support overall spending habits in the near future. However, confidence will be offset by additional rate hikes and inflation (even with easing). All growth numbers are year-over-year unless specified. Best and worst performing region, segment and cuisine is based on same-store sales growth. Restaurant same-store sales growth was +5.3% for August — the strongest same-store sales growth since March and a significant increase of 4.6 percentage points over July 2022’s growth rate. Black Box Intelligence has been reporting a consistent decline in same-store sales growth, culminating in July with sales only growing by +0.7% — the lowest in over a year. To further put this month’s rebound into context, March 2022 posted stronger year-over-year sales and traffic growth numbers because the industry was still lapping over months that were impacted by the pandemic.
Robots Are Here
And they are making you fries. At the end of July, a Jack in the Box in Chula Vista, Calif., got a new employee. He stood there for a couple of weeks while other workers swirled around him, jockeying between flat top and fryer, filling up paper sleeves with the tacos that the fast-food brand sells every year by the hundred million. And then, having learned the ropes, he began to work, focusing exclusively on the fry station, dropping baskets of seasoned curly fries and stuffed jalapeños into vats of oil, eagle-eyeing when they were perfectly golden. He doesn’t take breaks, never shirks when the boss isn’t looking, won’t call out sick or lean heavy on the company health insurance. But that doesn’t mean he comes cheap. Flippy the Robot cost $50 million to develop, and cost Jack in the Box about $5,000 for installation and $3,500 per month for rental. Restaurants have toyed with robotics for years, cropping up as early as 1983 when Two Panda Deli in Pasadena, Calif., used robots to schlep Chinese food from the kitchen to customers. There have been sushi-rolling robots and coffee-brewing robots and tiny drone “iTray” waiters: Often they are consumer-facing, a form of customer entertainment and “value added” to set a brand apart. But now — with restaurants facing a protracted labor shortage and robotic technology becoming both better and cheaper — restaurant brands are doing new math. How long before an initial technology investment pays off? How long will it take to train human employees to work alongside robot co-workers? And ultimately, how many restaurant jobs will be permanently commandeered by robots?
Fall Into A New Menu
Profitably. So, if the kids are back to school, and football stadiums are filling up all weekend… what bar time is it??? It’s time to start thinking about implementing your seasonal menu change. Just like the NFL teams are trying out different combinations of players, determining who is going to excel and lead the team to victory, your fall menu deserves the same sort of detailed analysis to make sure you’re maximizing profits while engaging your bartenders and delighting guests. There’s so much to consider if you want to get it right like COGs, bar style, location, labor costs and more. And your location, or the kind of bar you run – freestanding, or part of a restaurant or hotel program- impacts your menu decisions as well. Jason Swaringen, Director of Director of Bars and Beverage at Hyatt Centric Buckhead Atlanta notes how Spaceman – the hotel’s 15th floor indoor-outdoor rooftop lounge and bar – reaps the benefit of working hand in hand with the back of house, “Whenever possible, I like to work closely with the kitchen team; I always strive to have our cocktail menu compliment the flavor profiles reflected in the food. Having our cocktails structured based on the food menu also allows us to cross utilize components and maximize our potential to repurpose any biproducts from either department.”
The Limitation of Indemnity Clauses
BEWARE. Indemnity clauses appear in nearly all commercial contracts including agreements between catering companies, hotels and restaurants and staffing agencies who provide workers for events. They are an essential risk allocation tool between parties. Indemnity clauses may allow a party to protect itself from damages and lawsuits. Generally, New York courts enforce the parties’ clear language in a contract. That is, except those agreements that implicate employees’ wages and gratuities, if related to indemnification obligations. Two recent judicial decisions illustrate that hospitality employers cannot rely upon contracts with indemnification provisions alone, to shift liability, or to define a work relationship. In one decision, a New York appellate court voided an indemnification clause in a contract shifting liability for wages and gratuities from a catering company to a staffing agency. The issue arose in the context of a plaintiffs’ class action lawsuit alleging misappropriation of gratuities. The staffing agency had agreed to indemnify the caterer “for any claims for violation of federal and state wage and hour laws, including overtime,” and the defendant catering company filed a third-party complaint seeking indemnification based upon that agreement. The staffing agency moved to dismiss the third -party complaint, which the trial court granted. The defendant appealed the decision to the Appellate Division.
Taking on Goliath
How video marketing is leveling the playing field for independent restaurants. For too long, independent restaurants have struggled to compete with major chains because of their limited time and money. Single-location restaurants face the same challenges confronting all small business owners. How do I attract new customers, manage my costs and differentiate my establishment from the competition? Opening a neighborhood bistro is usually a labor of love rather than a hard-nosed business decision. Motives like a vision for a unique dining experience, the potential of a charming space or respect for food often drive the decision to start a venue of one’s own. Marketing strategies and tactics can sometimes be an afterthought. Once they open, restaurateurs tend to feel pulled in multiple directions. Daily problem solving drags them into reactive mode, keeping them from looking ahead. As a result, entrepreneurs often find themselves having to spend more time working in the business than on the business. As self-made billionaire Jeff Bezos says, “If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.” When successful entrepreneurs hear praise from satisfied customers, they learn to build their business by replying “tell your friends.” You simply can’t buy that kind of promotion.
A Pandemic Within a Pandemic
Drug and alcohol abuse soars with COVID-19. The pandemic led to mass layoffs, isolation and poor mental health. It became a perfect environment for drug and alcohol abuse. In the late winter of 2020, as COVID-19 spread across the country like wildfire, governments shut down broad swaths of the economy and told people to stay home, all in the hope of preventing the kind of social environment in which viruses can thrive. In the process, however, it created the perfect environment for a pandemic of another sort: Drug and alcohol abuse. Cooped up in their homes, out of work, facing potential financial ruin without the support of family and friends and perhaps suffering from bouts of anxiety or depression, Americans turned to drugs and alcohol in shocking numbers. Drug overdose deaths topped 100,000 last year for the first time ever, with record overdose deaths each of the past two years, according to the U.S. Centers for Disease Control and Prevention. Mortality rates from alcohol use disorder were 25% higher than projected in 2020 and 22% higher in 2021. Alcohol abuse among those who used before the pandemic increased 23% since the pandemic, while drug use increased 16%, according to researchers at the University of Texas. People in self-isolation said they consumed 26% more drugs or alcohol than they normally would to cope with the pandemic.
Restaurants Bear the Brunt
Of rising supplier costs. As inflation rises across all links of the supply chain, restaurants are challenged to contend with ever-rising costs for ingredients and supplies. Research from PYMNTS’ study PYMNTS study “Main Street Health Q3 2022: SMBs Battle Inflation,” which draws from a July survey of 533 U.S. businesses, finds that the clear majority, 62%, of businesses in the hotels, restaurants and entertainment sector have experienced rising costs from suppliers. Research from PYMNTS’ study PYMNTS study “Main Street Health Q3 2022: SMBs Battle Inflation,” which draws from a July survey of 533 U.S. businesses, finds that the clear majority, 62%, of businesses in the hotels, restaurants and entertainment sector have experienced rising costs from suppliers. Inside the September Survey:
- 25%: Share of predominantly online sellers that have increased their profit margins this year
- 73%: Share of retail businesses that say they have experienced price increases
- 46%: Share of SMBs surveyed that increased employees’ hourly rate or wages
Top Cocktail and Wine Trends
Top cocktail insights. Southern Glazer’s Wine & Spirits unveiled the results of its 2022 Liquid Insights Tour, a coast-to-coast educational initiative designed to explore and identify the latest trends in cocktails and wine. The tour kicked off in Houston in February, and included stops in Kansas City, New York, Las Vegas, Chicago and Los Angeles. Over the course of 111 days, Brian Masilionis, Director, On-Premise Commercial Strategy & National Accounts for Southern Glazer’s, led a team of its industry-leading mixologists to sample more than 400 drinks in 83 restaurants, bars and hotels, compiling their insights to discover emerging cocktail and wine trends across the U.S. Bartenders were mixing spirits not commonly used together to create new and interesting cocktail flavor profiles such as Scotch and corn liqueur, rum and cognac, and gin and mezcal. The team found many cocktails that were made using an innovative variety of methods or modifiers to balance the drink or add layers of flavor. These included the use of acids; sugars and syrups; salt; herbs and spices; coffee and tea; and the use of fats beyond animal fats. Adding ice or heat, like with stamped ice or smoked ice, was also common.
Did You Know?
Three considerations when placing art in your restaurant. The most important part of any great restaurant is the food, but food always tastes better when it is attached to a great ambiance. One of the best ways to add some color and life to your restaurant is to install some art fixtures in your dining space. Doing so can help restaurant owners craft a unique space with a hand-crafted piece of art. However, installing custom art pieces is not a simple task and a lot of thought and planning should go into the process before commissioning an artist to complete the piece. As a glass artist with over 30 years of experience, I have created many unique art pieces for beautiful restaurant spaces, so I know what restaurant owners need to do to ensure the art they commission works for the space. Here are a few things to consider when working with an artist on restaurant artwork.
Employee Tip
We have met the enemy … and he is Us’. “There’s no such thing as a bad boy.” If you love old movies, you’ll recognize that quote from Boy’s Town, the 1938 classic about Father Flanagan’s work with underprivileged boys. Well, if Father Flanagan worked in the hospitality industry today, he might be saying, “there’s no such thing as a bad server” (or bartender or busser, etc.). I agree with that statement, which raises the question: if there’s no such thing as a bad server, why is restaurant service so terrible? The answer: we are own worst enemies. Every service failure we see today is absolutely preventable. The problem isn’t servers so much as managers and owners. This year, I’ve spent more than 100 nights in 18 different cities. I eat in dozens of restaurants across the country every month. And yes, service is the worst it’s ever been. The issues are universal. Let’s touch on a few—and then how to fix them.
Bielat Santore & Company – Restaurant Industry Alert
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