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2008 Outlook: Part II
The mid-tier concerns of industry leaders.

So much could be said about the industry’s insights and stratagems regarding general economic conditions, but a lengthy discussion of mortgage defaults, the stock market, and commodities inflation is for another time and place. Here, suffice it to note that the industry is well aware of the precarious tenor of the times. As one executive somberly remarked: “We have the perfect storm; food, labor and energy costs are all rising while nervousness about the economy is causing significant hesitation by consumers.”

Mid-Tier Concerns

(1/low to 10/high)

Chart showing top concerns of quick-service restaurant executives for 2008.

For industry executives, however, more than hand wringing must accompany even the most dismal of economic truths. Fortunately for quick-service it is a whole lot different selling tacos and cheeseburgers than real estate, and under any economic circumstances people will continue to get hungry every several hours throughout the day. Industry survival tactics will manifest in bifurcated upscale/downscale menu strategies, and the strong players will just endure the margin squeeze until the economic tide comes in again.

Quick-service executives have largely embraced the strategy of selling more, and more often, out of the restaurants they already have open. The industry has clearly gone bonkers over breakfast, and there is nary a daypart from snack time to late night that isn’t on someone’s drawing board. There are some detractors, though, who worry about system strain and compromising brand identity with too much twiddling and not enough of a marketing budget.

It is likely noteworthy that a fascination with new dayparts and increased hours of operation scores slightly ahead of traditional menu and product development in the minds of the executives consulted here. Of course, as one executive comments: “Keeping your menu fresh for current and prospective customers is central to a restaurant company’s existence and, given the flight to quality, constantly seeking to improve product quality without significantly impacting cost of goods is critical as well.” Still, there are plainly some companies that plan to ratchet down a Job No.1 approach to menu development, and others that are ready to emphasize that what one takes off the menu is as strategically important as what one puts on.

Few would dream of denying the importance of leadership and a strong corporate culture, but there are disturbing subtexts running through the responses. For one thing there is a general awareness that growth in a multicultural pan-generational world does not easily lend itself to a homogenization of values. But perhaps the leadership dilemma is best summed up by the respondent who noted: “Where will our leaders come from in the future? How much more productivity can we squeeze out from executives who no longer have time to think, only to do?”

We have the perfect storm; food, labor, and energy costs are all rising while nervousness about the economy is causing significant hesitation by consumers.”

Sourcing and distribution are always key issues but most of the respondents feel they have these areas under reasonable control. One noteworthy comment from the executive of a midsize chain is, “As we become larger, sourcing becomes easier and distribution harder.” Clearly this is another area where information technology has proved genuinely helpful in improving the bottom line.

If this were a survey of media types, the importance of consumer issues ranging from food safety to ecology to obesity would certainly dominate the rankings. And indeed, foodservice executives are savvy enough to understand that the culture continues to give such activist issues high-stakes prominence and that the consumer is paying ever more attention. While the industry is certainly watching and listening, however, the most apt summation might be that of the executive who comments: “Sorting through what is on the consumers’ minds versus their actual behavior is always tricky. No doubt eating better, wanting safe food, and being green are on the consumers’ minds, but figuring out how much it is effecting/changing/driving their behavior is another matter.”

The following individuals generously contributed to the insights expressed in this article. All opinions and conclusions that you find of value are theirs; those with which you don’t agree with are solely the responsibility of the author.

Jim Adams, Chipotle Mexican Grill

Kim Bartley, White Castle Management

Kathryn Blackwell, Kahala Corporation

Todd Coerver, Whataburger, Inc.

Brian Dixon, Taco John’s International

Philip Friedman, McAlister’s Corporation

Jim Greco, Bruegger’s

Brad Haley, CKE Restaurants, Inc.

Mark Hardison, El Pollo Loco

Dan Horan, Papaya King

Michael Keller, International Dairy Queen

John Pryor, Cousins Submarines, Inc.

Brad Wahl, The Krystal Company

You can read Steve Weiss’s monthly To Market column online.