Trends and trials facing the restaurant industry
Cape Business spoke with Peter Christie, CEO and president of the Massachusetts Restaurant Association, about the state of the dining industry on the Cape and his projections for the future.
What is the growth of restaurant revenues in the state for 2006 and what is your projection for 2007? Is the future for the Cape Cod industry strong?
Using meals’ taxes as a barometer, sales increased 5.1 percent from fiscal 2005 to fiscal 2006. Inflation has a lot to do with growth. We have experienced huge energy inflation, and many consumers who refinanced mortgages have seen their rates soar. The good news is that more and more people are working. I expect to see our industry grow, but extremely slowly. I would expect real growth to be in the 1.5 percent range for fiscal 2007 (5 percent overall with a 3.5 percent consumer inflation rate).
What sectors of the restaurant industry are growing, and why?
Most recently, the quick casual segment is growing, as are quick service restaurants. The quick casual segment (Panera, Au Bon Pain, D'Angelo, etc.) has grown as consumers are willing to wait a bit longer for food that is “made especially for them” and is perceived as being “good for them.”
Which sectors are stagnant or losing customers?
In June, for the first time in many years, casual dining visits have been off. Overall traffic at chain restaurants in this segment dropped 1 percent. The bar and grill segment was up 4 percent, steak and rib was up 3 percent (mostly due to expansion) and pizza was up 2 percent. The varied menu segment, which includes most independents, was down 5 percent. This should turn around if gas prices continue to lower as they did in August.
What are the most significant trends in dining this year?
People are eating more healthful foods, and take out continues to grow. The old days of “no substitutions” is long gone as patrons like having things made their way and are willing to pay a little more to get it. If you are not offering take-out, you should be thinking about it, as busy lifestyles make it more and more appealing to many consumers.
What are the greatest opportunities for restaurant owners on Cape Cod?
The local resources on Cape Cod are bountiful. Whether you’re “fresh seafood” or “local produce,” these are attractive terms to diners. The Cape is also home to many great chefs and to culinary programs that are producing the next generation of culinary leaders. With the public’s interest in food and the culinary world, Cape Cod with its beautiful settings and natural beauty is positioned to remain a leading culinary destination for years to come.
What are the most significant challenges facing restaurants on Cape Cod?
The Cape faces the same challenges as all seasonal destinations. It is difficult to run a restaurant with only 10 weeks of business, and it takes great financial planning to do so. Rising real estate prices have made many locations, particularly those that are more seasonal, prohibitive to speculators. Areas that are less seasonal are experiencing great expansion that creates financial pressures on those businesses that already exist. Add in energy woes, the unpredictability of New England weather and a finite labor pool, and you have a challenging environment for many.
How have increased costs for energy and insurance impacted restaurants in the state?
These costs have dramatically affected the profitability of restaurants. Restaurants are not only directly affected by these prices but they are also indirectly affected as their suppliers pass on the additional costs to them. Add to that the high insurance costs, and operators are experiencing huge pressure to increase prices. However, for fear of losing customers, operators have, in most cases, given up margin to maintain market share. This year alone, according to the National Restaurant Association, menu prices have only increased 3.2 percent on average. With inflation running over 4 percent, you can see that operators are giving up margin. This can not go on much longer and I think that prices will be going up in order to begin to cover these spiraling costs.
How will the minimum wage increase affect restaurant owners?
The quick service restaurants are most affected. Most other positions in restaurants are not paying minimum wage. They will only be affected as the ripple effect of a higher starting wage puts pressure to increase wages in the next few tiers. The bottom line is that the consumer will have to end up paying for these increases.
How will the new universal health insurance law affect restaurant owners?
I think that it is too early to tell. The law was passed with a whole lot of the details to be determined. I am less threatened by the law than I once was. Everybody knows that something has to be done to curb medical inflation. I am concerned that there seems to be very few provisions in this law to do that and am not sure that the transference of fees is enough to change anything. But the good news is that we have a lot of people looking at ways to make insurance more affordable.
What is the best way for restaurant owners to attract and retain the best employees?
My good friend Chad Doe, formerly of the Ninety-Nine Restaurants, had a mantra: “Treat people right.” He applied it to his employees as well as his patrons. How do you treat an employee right? The same way that you would want to be treated. Give them respect, allow them to improve themselves both financially and professionally, be fair and listen to them. Make sure that your employees have the skills that they need to succeed in their jobs. If they are deficient in some areas, give them professional training. Compensation takes far more forms than money alone. Put yourselves in their shoes and think about what it is that would make their lives better and try to help them get it.
What are the best strategies for a restaurant to successfully market itself?
The best marketing tool is a happy customer, and the worst is one that is unhappy. You have to be able to execute at all times and to make sure that your staff is executing when you aren’t looking. If you don’t have a presence on the Internet, you are missing a huge market. It seems to me that local restaurateurs on Cape Cod would be well served to make sure that the concierges, bell men and front desk clerks of local hotels are familiar with their restaurants. Make sure that you are getting all the free press that you can for your local contributions to the community and civic groups. Lastly, work on four-wall marketing that allows you to use your existing clientele to develop new and more frequent repeat business.
Originally published in the Nov/Dec 2006 issue of Cape Business
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