Outline of “The Perfect Storm – How To Navigate It” speech I gave at the Pinnacle Summit 2008 in Grapevine, Texas.
By Dean Dirks
- THE PERFECT STORM
Soft U.S. economy.
Elastic retail prices.
High food costs.
Escalating labor costs.
Decreasing labor pool.
High turnover.
Increasing credit card costs.
Increased energy costs. - QSR/Fast Casual Stock Values vs. 2007
Jack in the Box (-18%)
Wendy’s (-23%)
Denny’s (-29)
Domino’s Pizza (-58%)
Panera Bread (-12%)
Ruby Tuesday (-68%) - DETIORATING SALES
McDonald’s same store sales down- first time in 56 months.
Starbucks- closing 100 stores in 2008 .
Taco Bell, Pizza Hut & KFC- 5% below projected earnings.
Domino’s same store sales down 1.6%
Average QSR same store sales were flat for Q1 vs. last year’s 3.7% growth.
Quiznos and Krispie Kreme experiencing closure rates of 8-10% - PRICE ELASTICITY
QSR prices are elastic, chains are discounting to grow sales.
While food and labor have increased, the average QSR has only raised prices 4-7%.
McDonald’s, Burger King, Wendy’s discounted menu.
Subway $5.00 sub promotion. - QSR PLAN TO SURVIVE
Enhance customer service.
Upgrade accuracy.
Increase speed of service.
Attack new markets, coffee, breakfast & espresso.
Technology to reduce labor & improve quality. - POINT OF SALE
80% of QSR customers are frustrated by the speed of service.
Kiosks will increase speed of service with accuracy.
70% of QSR customers stated that rude employees are the #1 reason for not returning.
Kiosks will eliminate this issue - POINT OF SALE
80% of QSR customers stated that inaccurate orders will cause them not to return.
Kiosks will increase order accuracy.
70% of QSR customers will not come back due to drive through accuracy.
Drive thru touch screens will increase order accuracy. - KIOSK SALES GROWTH
1 out of 3 associates will try to suggestive sell.
“Would you like to add a combo meal for just 99 cents more? ”30% more success than“Would you like a combo meal?”
Kiosks scripted for suggestive selling to advance. - TECHNOLOGY POINT OF SALE
E-Menu boards can be updated in real time, enabling managers to highlight specials or make changes
E-Menus that a will allow guests to place their orders, play a variety of video games and pay their tabs at the table. - RISING FOOD COSTS
Food prices rose 7.6 percent in 2007, the biggest price increase in 27 years.
Corn price is $5.56 vs. $3.34 last year
Wheat price is $10.38 vs. $5.80 last year
Flour increased (93%), cheese (25%) and eggs (35%) in 2007.
Food cost increases are a long term problem.
Australian drought and Ethanol - IDEAL COST OF SALES
Recipe built, linked to raw goods.
Raw product costs entered and change the recipe costs.
Items sold per wk multiplied by the recipe cost (100 burritos X .40)
Total item costs divided/income.
Ideal food cost based- sales mix.
Variance to the ideal cost of sales. - REDUCE FOOD COSTS
Weekly inventories-daily protein.
Smaller portions- lowered pricing.
Menu changes-replace bacon w/ham to reduce a recipe cost
Promos on low food cost items.
Low cost coffee, fountain sales.
Category manage raw products. - RISING LABOR COSTS
Federal minimum wage will increase from $5.15 to $7.25 an hour over the next two years.
Current US average minimum wage is $6.27
Washington-7.93 minimum wage
Oregon- 7.80 minimum wage - TECHNOLOGY LABOR MANAGEMENT
Schedules- customer counts/ 15 minutes- sales/labor hour
Labor tracked in real time, managers can at any time check labor costs via internet
E-mail alerts -employees are close to overtime or real labor is exceeding scheduled labor. - TECHNOLOGY ELIMINATE STAFFING
3,200 of McDonald’s units have automated beverage systems linked to the cash register. Drops the cup, fills it with ice, soda and conveys it to the drive-through.
Wendy’s in 2007 rolled out grills with flippers that cook a burger on both sides simultaneously.
McDonald’s is testing an automated french fry machine. - TECHNOLOGY ELIMINATE STAFFING
Automated grill- will transport food from an attached freezer to the grill.
U.of Wisconsin developed a robot that slaps the bun on a finished burger and will assemble three burgers per minute.
Self-cleaning fryers & broilers. - ENERGY COSTS
Restaurants spend on average 3 to 5 percent of their total operating costs on energy costs.
QSR’s are building much smaller foot prints and engineering kitchens for efficiency. - SUMMARY
The QSR industry is under a great deal of pressure.
QSR’s have targeted the c-store market in terms of coffee, drinks and breakfast.
Our industry must strive for the same standards and efficiencies as QSRs to succeed.
