Enter the e-waiter!

Restaurants in Europe, the United States and Japan are testing technology to let diners order their food direct from a screen at their table instead of depending on a fellow human being to note their choice -- sometimes grumpily or erroneously.

This may work for only a limited few concepts where ambiance and personality are of no importance as much as speed of service and availability. I have visited a few places such as Sheetz gas station where they offer many gourmet items off their hot line and you order from a touch screen. It works there, but if I am going to go out with family and friends for a good meal, part of the experience of going out is the theatre that a good waiter can provide. Have a great waiter and you will have the time of your life. Have a terrible one; and you have stories to share with friends and family. Either way, I would rather take my chances with the human being thana boring touch screen computer. I almost always know what I will get that the LED screen of death.

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Technomic Top 500 Annual Report Shows Slowdown in Chain Rest

Technomic, the restaurant consultancy group, released its annual reporting of the top restaurant chains in the US. Technomic's data shows a current slow down in restaurant sales in 2007 relative to 2006.

The quick causal and limited service concepts continue to do well. But was interesting to see is that even among the good segments, there are still losers. This will ultimately be the demise of poorly run concepts.

More importantly, what I think this will do is make the restaurant industry stronger. The industry is due for some contraction and with any cycle it is necessary to weed out the players from the dogs. Look at Brinker for example. They recently let go a bunch of talent. But in my mind it was probably necessary. What has Brinker done lately. The brand was once known as great breeding ground for tomorrow's talent. If you had a Brinker background and were half decent, you would go far in this industry.

But look at Brinker now. Just about everything they have had a hand in is terrible. Romano's is in the toilet. Chili's has seen better days. And Maggiano's is fluttering about. Perhaps it is the casual segment since it has really taken it on the chin over the past couple of years. But what I think that the casual dining segment needs to learn is that most American's today want quality and value. That is probably why the quick casual (Panera and Chick-fil-A) and limited service (Starbucks) are still doing well.

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2008 Predictions For The Restaurant Industry

Last month I delivered my 2008 Predictions for the Restaurant Industry. I want to share that piece with my readers. Please let me know your thoughts.

This is the first annual Predictions for the Restaurant Industry presented by Orrick Nepomuceno, CPC. 2008 will prove to be a tough time for the US economy that will have a huge impact on the state of the Restaurant Industry.

1. Sluggish Sales Growth Will Continue For 2008. The restaurant industry overall will see very conservative growth across all segments (casual, quick casual, quick service and fine dining). According to NRA estimations, the industry will see only a 0.9% sales growth for 2008. Although more Americans are spending a higher percentage of their disposable income allocated for food then ever before, most households will be less likely to eat out several times a week. Most likely, they will eat at home and save instead. Even if the President's economic stimulus package does pass and Americans see a few extra spending dollars, most economists believe that most households are barely making ends meet. Bottom Line: Americans will have more disposable income in their wallets, but will probably consider saving instead of spending.
2. Increased Energy And Wholesale Food Costs Will Have A Negative Effect. With the price fluctuations in crude oil, lower and mid level-income households will feel a tighter pinch on spending disposable income on dining out as they will be inevitably hit hard with increased gasoline prices. Studies have shown a direct correlation to slumping restaurant sales and the increase in gasoline prices. Additionally, 2007 saw a nearly 8% increase in wholesale products. Much of this cost was eventually passed on to the consumer in higher menu prices. Most estimations see wholesale food costs to remain high for 2008 as well. Bottom Line: Households will get a double hit with transportation and dining expenses.
3. Technology Will Continue To Advance Even More Rapidly Than In Previous Years. Companies will look to the Internet for connecting with customers in more ways than before. Traditional print and television mediums will drive consumers to websites for offerings and coupons. Online ordering will become more robust as mobile handheld devices such as the iPhone have web browsing capabilities similar to their desktop versions. Also, a “Facebook” and “MySpace” type of social networking will become more prevalent with company sites where consumers can create online profiles. Bottom Line: The restaurant industry has a long way to go before it catches up with other industries in terms of technology.
4. Recruitment And Retention Will Be Of A Lesser Concern. The restaurant industry has always been a labor-intensive industry with recruitment and retention being typically the biggest concern among most hiring managers. But for 2008, according to NRA predictions, the industry will see a relatively small increase (0.9%) in the employment growth rate. Coupled with a slowing economy, job creation will be less than in 2007. Thus, with less demand for employees in 2008, many hiring authorities may substitute their concern for human resources to other cost cutting measures. Bottom Line: Many operators' concerns will be moving towards cost reduction in order to stay competitive.
5. Bullish On Coffee Bars. One segment, although relatively small, the Snack & Non-Alcoholic Beverage Bars (Coffee and Dessert bars) will see higher than normal growth compared to other segments. In 2007, coffee bar sales outpaced beyond the rest of the crowd. Bottom Line: Companies will look to find niche segments where there is little or no saturation.
6. Global Cuisine. At a recent conference of Executive Chefs across America, most commented on smaller sized portions and introduction of ingredients from different parts of the world. Ethnic flavors found roots in the US with inspiration from Latin America, the Mediterranean, the Middle East and Southeast Asia. Many chefs also commented on utilizing more local produce, sustainable seafood and grass fed beef and poultry. Bottom Line: American diners are becoming more savvy and demanding more exotic flavors when they go out.
7. Fat Is Not In. Americans are demanding healthier foods as we wage the war on fat. Look for menu offerings at current concepts to reflect this trend, but also expect new totally concepts to emerge and fully embrace a menu offering with healthier choices - a la Seasons 52. With obesity in America on the verge of becoming an epidemic and local municipalities looking to stiff arm the industry into removing trans-fats and other harmful foods, the restaurant industry as a whole needs to get ahead of the curve and take a stand on obesity. Bottom Line: Expect the Federal Government, not local municipalities, to continue campaigns to reduce the consumption of trans-fats.
   

Black History Month - Where Are The Minority Executives

It is all too clear that the restaurant industry is a far cry from truly creating a level playing field for the top executives. Sure there are companies that certainly outperform such as YUM! Brands and Pepsico.  These companies not only talk the talk, but they definitely walk the walk as far as diverse executive talent.

But the rest of the industry can be seen as a true good old boys club. With so many of the restaurant workforce being made up of minorities, it is absolutely a disgrace that the executive suite does not reflect a broader spectrum.  Not it can be argued that diversity is nice and all, but there certainly are no definable metrics that can prove that it will really improve the bottom line. Regardless of what it may in fact bring to the bottom line, the truth is that diversity is really a good thing for all companies. This not some feel good message. This is about giving those individuals an opportunity to shine. No special favors or recommendations. But a real chance to prove that regardless of color, race, religion or sex, each and everyone of us has something to offer and bring to the table.

This uniqueness and difference is what can make every company better. As an Asian, I bring a different set of experiences from a Hispanic or African-American.  Each and every one of us can learn to respect and honor each other. That is turn will help our company become a better and more competitive brand.

Starbucks Makes Organizational Changes

In an email message to all its current employees, Howard Schultz, CEO and Chairman of Starbucks, outlined a reorganization for the coffee giant.  (See message) In the message, Schultz mentions that his return to the helm has been difficult especially with the decision to let go over 600 partners (employees).

According to one partner that I spoke to, the company has simply gotten too big too fast. But that may be oversimplifying the obvious.  Jim Donald took over as CEO a couple of years when Schultz stepped down.  Unfortunately, Donald took the approach of - If it ain't broke, don't fix it attitude.

The company did do well for a couple of years and showed great returns on Wall Street.  But the stores were losing its core values and soul. (Read Schultz's email to Jim Donald on Starbucks Gossip blog)

Over the past year, stores in the Southern California market were closed due to not meeting company expectations financially.  But much of this was probably predicated on the fact that those stores could not meet the high company sales expectations because of the self-cannibalization the company has undertaken.  Gone now are the hot sandwiches but back is a rededication to what Schultz explains is focusing on core values.  For most of the partners that I have talked to the coffee is the most important part of the Starbucks experience. Not the music, books or even the WiFi.

The company will rebound from this.  And Schultz's return is very much a welcome one. The bigger issue will be succession. Obviously, Donald was not the right person to lead the company and have the same vision that Schultz had.  As with most companies, it is difficult to replace the founder, especially one that had so much invested in the company - emotionally and strategically. 

Just Supersize Me!

The January 2008 Conde Nast Portfolio article by Joe Keohane - Fat Profits -had a great article on the new mega burgers that are hitting the scene across the fast food industry.   From the Wendy's Baconator to the Carl Jr's $6 Burger to the Hardee's Monster Thickburger, there seems to be no end to the oversized burgers. These babies pack a serious punch with the Triple Whopper weighing in with over 80 grams of fat and most of these burgers pushing the 1200 calorie mark.  That is for one burger alone and nearly the total recommended calorie intake for most Americans.  At least by the FDA standards.

Many of the fat police have cried a foul and demanded that most fast food companies reconsider their offerings.  In the wake of the movie "Supersize Me" and the book "Fast Food Nation", these recent menu offerings seem to rub it in the faces of these do-gooders.

I for one hate to see local municipalities get involved in the battle of the bulging waist line. Many of the headlines from last year covered how local governments were trying to fight businesses and companies to not have trans-fat and other harmful items on the menu.  The City of Chicago went as far as banning Foie Gras! What will be next? And don't our leaders have more important matters to tend to?

If everyone is so concerned about the American public getting fat and the fat epidemic, then should we not really focus also on exercise? In all of this debate, I can never recall any of the fat police calling aloud that Americans need to get off the couch and away from the TV and go run a couple of miles.

In the Conde Nast article, Andrew Pudzer, CEO of CKE claims to eat as many as four or five times a week as his company's restaurants, yet he remains slim due to a running schedule.

Can the fat police go find something else to find fault with? The real problem as to why America is so fat goes beyond our food offerings in our fast food restaurants.

Wake Up And Smell The Coffee

On February 26, some 7,100 Starbucks across the US will be closed from 5:30 - 8:30 PM to retrain its employees on pulling the perfect shot of espresso and steaming milk.  (Read the Seattle Time story) Much of this can be traced to Howard Schultz's return as Chief Executive after one of the company's worst sales and quarterly returns ever.

What I find interesting is that Howard is coming back to the helm of the company of which he founded because the company needs to get back to its core values and direction. But in a Bloomberg interview from a year ago, Howard talks of the future and how the company has moved into other industries and selling various items such as books, music, etc.  (See Howard Schultz's interview)

So where will the coffee behemoth go now? They are truly the 800 pound gorilla in the room and with other concepts well on their heels such as Dunkin Brands and McDonald's, I think the company needs to seriously think about it future.  According to press releases, the company is getting rid of hot sandwiches and it will be slowing down the opening of new US stores.  It was only a matter of time before the company realized that self cannibalization was only going to hurt the company in the long run?

I believe that one aspect of the company that has hurt it over the past several years is the fully automatic espresso machines.  Several years ago, the company went away from the venerable La Marzocca manual machines to a fully automatic one. These automatic machines were to help with ensuring quality and speed of service. What I really think it did was take away the charm of the company. Howard in his book mentions how the espresso machine is the heart of the store.  By essentially taking a great machine for a lifeless automaton, Starbucks took away its core value of being true to the bean and coffee.  While many did not notice the change, the hard core fans are not happy with the change. (Read Chowhound.com posting) This almost seems to be against what Howard originally set out to accomplish when he started the company.

The Coffee segment is an interesting one.  According to some at the National Restaurant Association, some feel that this is the one that will have the most bang in 2008 and with a looming recession here in the US, I wonder is many patrons may forego that extra latte or cappuccino and maybe save a few extra bucks so they can fuel up the BMW!