Summer Doldrums

Sad to note that the industry has fallen into a dip in the road. Looking at rolling 4-week average SSS, we have been about .5% negative to 1.4% SSS negative each week since the middle of May. Interestingly, check has moved lower since early June. About half of the brands in the sample are consistently negative. Virtually all of these were down 5% or more. CAVA, Yard House, Jersey Mikes, Longhorn, Shake Shack, Panda Express, and Culvers were all nicely positive. Burger King continues to be up mid-single digits, while McDonalds was down single digits every week.

Via a field visit yesterday, I noted that the new McDonald’s Arch Deluxe was off the menu, said to be because of a sauce problem. [This is odd as BBQ or Honey Mustard could do.]

Popeyes, Wendys and Hardees were down 12% or more. Hardee’s franchisee Superior Star with 59 units filed Chapter 11 this week.

What to make of all this?

The restaurant business continues to be very dynamic with new players and issues all the time. We have IPOs coming [Inspire and Jersey Mike’s], and IPOs hoped for. At most every new brand, talk of developing hundreds or a few thousand new units. In my view. Much of this is driven by franchise fascination. The burger brands, except for Burger King now, are losing market share. Too many units for sure. Too much discounting also. Look at the series of positive new news items coming out of Burger King which has been seen to work.

Casual dining has dropped some units and improved food quality. There is little talk of portioning size decreases now. There is work and investment occurring to fix some brands [Think of Maggiano’s] All in all, there is not the C Level turnover, and not the discounting and debt crises that are seen in the QSR.  

International JVs can be seen as a form of restaurant outsourcing and Ruth’s Chris, which still does have a solid franchisee base. Otherwise, there is little active franchising going on. Chipotle might consider franchising outside of the US as it grows.

Tip: Levered v. Unlevered Unit Profit?

I heard a discussion between three senior restaurant operations district management last week talking about brands of restaurant new site they had underway in their company’s new projects hopper.

One said they were overwhelmed with all the numbers the company was tracking and were a part of the investment wrap package.  The other said they didn’t understand why both levered and unlevered ROI needed to be examined.  

A: Levered has the cost of debt included. Unlevered means no interest and cost of repaying the debt is included. Unlevered is sometimes used because debt information isn’t available yet.

If this is you in this situation, do everything you can to make your recommendation clear that the ROI is without debt payments. Since 2022, debt is vital to getting the cost and ROI (levered) right.   

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Continuing our discussion of human resource management, our HR and training expert friend Mac Brand has written some great tips on assessing tenure v, talent in making people decisions. The rest of this article can be seen on Mac’s Linked In page. Search: Mac Brand

Tenure vs. Talent

How much experience you have matters, but how dependable and effective you are matters more

One common mistake in business today (baby boomers are infamous for this) is overreliance on “experience” rather than on skills and capabilities.

Too many leaders in business, healthcare, academia, politics, professional sports, and others hang on for too long. Scores of geopolitical and economic issues negatively affecting billions of lives today can be reverse engineered to this issue.

A quick look around the world, certainly, the USA, confirms this reality. Too many politicians (specifically) don’t know when to step away. Those around them are reluctant to give up their power and perks. Sound familiar?

This phenomenon is evident all around us. It could be the old-school manager, your employer, the tech executive, health insurance leader, professional sports team owner, finance executive, hospital administrator, or elected official. The patterns are clear.

The issue is that tenure or “experience” is the primary metric. Somehow, being skilled and accomplished in their profession gets directly correlated to tenure. Not true. The fundamental set of traits and behaviors for career-long competency includes being a lifelong learner. Experience is certainly essential, but experience alone is NOT necessarily the primary metric of competence, reliability, or being good to work with. Ongoing learning, training, and development, combined with someone’s experience, comprise the essential ingredients. One mantra is the combination of training, talent, and time on task.

It’s now commonly accepted that when you quit working on your own game, you begin to lose your edge. More on that later. We’ve all worked with “experienced” people who haven’t kept up or are average at best.

Are they lifelong learners, or is it admitting they might have something new to learn, an emotional roller coaster ride?

The key question is this. Does the individual embrace lifelong learning as part of who they are, how they live, or is it an occasional, special event? Life-long learning is a lifestyle, not a special project. In today’s world, someone who describes themselves as “open-minded” or “open to new learning” has lost touch. Those are the remarks of someone who has not kept up.

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About the author: John A Gordon MAFF is a long-time restaurant industry analyst and advisor. He has 45 plus years in restaurant operations, corporate staff experience and 25 years in his own management consulting firm, Pacific Management Consulting Group. He works financial analysis and planning, corporate organization assessment, and complex projects such as litigation support, Call him anytime on anything difficult;/0 mobile/text 619 379 5561, jgordon@pacificmanagementconsultinggroup.com.