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2008 Outlook: Part III
Executives largely optimistic about future prospects.

Industry executives are still infatuated with new technology, but an increased sobriety has entered the picture. The emphasis has clearly switched from capabilities to solutions, and investments in this area are becoming rigorously strategic. Executives acknowledge that franchisee capital investments are hard to come by.

Bottom-Tier Concerns

(1/low to 10/high)

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

Speaking of franchisee issues, the surprisingly low ranking here might be in part attributed to the fact that some of the respondents are not extensive franchisers and scored the matter zero. Nevertheless, it might also be true that the rigorous effort companies have been putting into franchisee acquisitions and relationships has paid some positive cultural dividends. As one observer suggests, during difficult market times it becomes apparent to healthy systems that the franchiser and franchisee are ultimately fighting on the same side.

With regard to public policy in matters such as immigration, menu labeling, corporate governance, and the like, the outlook here by now should be clear. As one executive notes: “Such things do have big significance, but it is very hard to rate them above our operating and brand building priorities.”

Value-added strategies such as dollar menus are plainly here to stay, particularly as they serve an increasingly broad downscale market impacted by a troubled economy. Nevertheless, it’s clear that the industry doesn’t like employing value strategies, as they make a questionable contribution to brand image and profitability.

The “emergency preparedness” issue scored significantly higher in the immediate aftermath of Katrina. And indeed, how does one prepare for a catastrophe?

For some big and aggressive players, international expansion is at the heart of future growth. As is indicated by the responses here, though, for many players there is still much to accomplish at home.

During difficult market times it becomes apparent to healthy systems that the franchiser and franchisee are ultimately fighting on the same side.”

The operators consulted here are actually quite optimistic about their prospects in the coming year. Asked to give an overall rating of their companies’ performance in 2007, the average grade was 7.5. Asked to give a similar performance expectation ranking to 2008, the average is 8.6.

As for whether the executives are enjoying their work, the average “fun” score was a respectable 7.2. Asked the same question two years ago, a group of executives scored their fun level at 7.6 but, interestingly, they then posted a lower business expectation score of 8.4.

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

Very special thanks also go to leading foodservice industry consultant Dennis Lombardi of WD Partners, who collaborated upon and suggested many of the insights expressed here. Check out his excellent industry blog.

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