Summer Blog, by Jim Sullivan Part 1

 The Trading Down Theory

In this economic downturn sweeping the US, there’s a prevailing belief among foodservice operators that consumers--shell-shocked over record gasoline and food prices—are eating out just as much but “trading-down” from segments. That is, if they were eating at Morton’s regularly, they’re now patronizing Ruby Tuesday’s instead, and those who were regulars at Ruby Tuesday’s are now choosing to eat at Burger King. Pursuing that belief to its logical extension, we must conclude that Burger King’s regulars are now trading down to the hot dog cart, and the hot dog cart habitués are “trading down” to…what? The local kid-run lemonade stand?  Statistics, sales, and logic do not back up the belief that Americans are patronizing restaurants just as much in Summer 2008, only at a lower price point. So are you basing your “recovery” strategy on a spooked consumer who will automatically return once gas prices drop or they become inured to their rising grocery bill? Many industry pundits would have us believe we need to merely “stay the course” for business to bounce back. That surely brings comfort to restaurant operators, but as Ryan Mathews recently said: “You must ask yourself if that comfort is derived from a reality-based sense of well-being or the artificial sense of contentment experienced when a familiar fairy tale is recited by a different voice.” I think there are much bigger issues at play. And the sooner the industry seriously addresses critical issues like 1) tenure, talent, and turnover, 2) re-defining and providing value and time-sensitive service in a time-stressed world and 3) injecting vitality, re-design, and new direction into perceived-as-tired-concept segments, the sooner we will address and solve the real issues behind our falling customer counts and define a reality-based future focused on customer needs not “business-as-usual.” Remember, the meaning of customer service changes whenever the customer changes. For insight of the Labor issue, got to our Archives (see top left side of this page) and download the free PDF white paper called The Real Truth About the Labor Challenge.

 Casual Dining in the USA: Whistling Past the Graveyard?

The numbers are alarming: the casual dining segment reports same store sales down as much as 11% or more from a year ago. Reasons cited are many, but the  truth is much more elusive. The chains themselves blame the economy, cost-of-goods-sold and cash-strapped consumers. All realistic possibilities to be sure, but assumptions based on the logic that when the economy improves, the customers will return. But there may be a bigger and more serious trend at play. Foodservice consumers, across age demographics, but especially among 18-29 year-olds, are citing both “concept fatigue” and time constraints as reasons why they’re not  patronizing the casual-theme segment with the same zest their older siblings and parents did for the last 25 years. The fact is that Gen Y consumers’ patronage at sit-down themed-restaurants is plummeting. “I just don’t like being stuck at a booth or table on some server’s timetable for an hour or more just for an average experience in tired surroundings,” says one 20 year-old college student we interviewed. Her roommate added: “My parents are patient enough to wait for an appetizer, drink, entrée, dessert and coffee over the course of an hour at a Friday’s, or Applebee’s, but I’m not.” Says another 22 year-old senior at University of Wisconsin Madison: “The portions are too big, the time investment too great and the value too low.” Ouch. We heard a similar theme pronounced among the 118 college students we interviewed at 4 geographically diverse universities in the US earlier this month  The segment is far from dead, but re-invention is necessary...menu, theme, décor, and most importantly, service design and delivery has to be re-thought, re-configured and re-deployed for the segment to have continued relevance to a new generation. (For a great resource see our new DVD The Shift: How to Plan It, Lead It, Make It Pay for insight into how to plan and execute profitable service and boost incremental sales in the challenging 2008 marketplace. Click here to learn more about the program www.sullivision.com/buy.cfm ) 

Notes from the UK

I recently had the distinct pleasure of delivering a full-day leadership workshop in London for over 200 multi-unit chain operators in the UK, Europe and Russia. The workshop was based on our international best-selling book Multi Unit Leadership: The 7 Stages of Building High-Performing Partnerships & Teams and was staged in concert with Peter Martin’s Peach Factory group. The discussion and interaction was both relevant and insightful, as unique chains continue to proliferate and grow in the UK, Europe, and Russia, where a burgeoning economy is creating a new consumer class of diners, and a booming portfolio of chain restaurant growth. American service and scalable systems are of great interest to international operators as they develop and grow strong multi-unit concepts based on bold flavors, unique recipes and customer-centric operations. One of the first things you’ll notice in UK chains is that security relative to payment is paramount. Credit card payment transactions are uniformly done tableside in front of the guest via a portable hand-held processor. No one walks away with your card, ever, and the chit is placed alongside the card. Why is the USA lagging so far behind in this arena? Where to go if you go: I had the opportunity to dine at 21 different London restaurants chains and 2 Parisian restaurants over 8 days. The food was outstanding, the service crisp (although uniformly, there was a definite lag at nearly every operation in the time between when you’re seated and the time you’re greeted.) If you’re exploring new UK chain concepts in London, I would recommend Wagamama, Giraffe, Nando’s, Brown’s, All Bar One, Yo! Sushi, Gourmet Burger Kitchen, Le Pan Quotidien, Las Iguanas, Geronimo Inns, Leon, Strada, and Ping-Pong for an interesting and fun cross-section of experiences from the chain perspective.  

Parting Shot: If your operating strategy is based on $1.50 gallon of gas, you'd better re-think your strategy tomorrow based on the $4.50 gallon of gas.

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