Predictions and Warnings
If you're a regular reader, you know me as an optimist, maybe even a naive one. But not today. I don't see good times in the near future for restaurant chains and their partners.
By Mary Boltz Chapman, Editor-in-Chief -- Chain Leader, 12/1/2008
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Allow me to add my own predictions. I've been accused of wearing rose-colored glasses when I look at chain restaurants. But these days I don't see much to be optimistic about.
Thinning the HerdMore restaurant companies will file for bankruptcy and close altogether. Just as Mother Nature sends lightning to spark fires that regenerate dense forests, the macro-economic pressure will thin our oversaturated market. There are too many chains that don't have compelling points of differentiation. Customers can get a decent Buffalo chicken sandwich or good portion of teriyaki-glazed salmon at a variety of price points, locations and levels of service. If your concept can't really convey what makes yours worth coming in for, you might be in trouble.
The labor market might be good now, but it's not going to last. Our friends at People Report have been warning the industry for a long time that the numbers just don't add up: There won't be enough workers for the positions we need to fill. On top of that, health-care and education are aggressively pursuing the same workers, especially those who might make good general managers, and the situation looks even more bleak.
Finally, I like President-elect Barack Obama's ideas about community work and inspiring young people to serve, but do you think those service-oriented people are going to choose restaurant jobs, however noble they are, over teaching or health-care positions? We have a tough sell.
Legislation LoomsSpeaking of Obama, I'm concerned with the unions' growing influence thanks to his support. Remember the good old days, when you could avoid organized labor by treating your employees well? Those days might be past as card check makes it easier for a union to get into your organization.
I expect other legislation to keep the industry on its toes. Once municipalities see nutrition labeling work in New York, they will get in line to pass similar laws. Add a layer of complexity if your concept offers customization, which consumers demand even more than nutrition information.
Just when you need them most, your suppliers are offering fewer incentives and traffic builders. They're hurting, too. And just like you, they need to justify every expense and focus on their best and most profitable customers (who aren't necessarily the same customers). Chains that will win are those whose suppliers are considered partners. One of the worst things you can do is put yourself into an adversarial position against them.
I want to soon return to my optimistic viewpoint. I'll start by hoping things aren't going to be this dreary.
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