A Deeper Dive

Restaurants are in a stronger financial position now than they were before the pandemic. This week’s episode of A Deeper Dive features Michael Swanson, an agricultural economist and consultant for Wells Fargo. Swanson has been on the podcast before and talks about the current and future state of food costs. Commodity price inflation hammered the industry last year. Those costs have started to ease already and Swanson talks about what to expect come 2023. We also talk about the state of the industry after the pandemic. Restaurants that survived the pandemic are in better shape. Profits actually soared in 2021, thanks to the combination of government assistance and improving sales. And though margins were squeezed in 2022 because of inflation, it still puts the industry in a better position heading into a potential recession. In addition, Swanson talks about why consumers remain reluctant to cut much from their food spending in a downturn.

Is tipping out of hand at fast-food restaurants? This week’s episode of A Deeper Dive I speak features Robert Byrne, director of consumer and industry insights with our sister company Technomic, who talks about convenience, value and tipping. Byrne oversees consumer surveys with Technomic talks extensively about consumers’ views on a host of issues related to restaurants. He discusses why consumers use restaurants, including why convenience is so important to consumers and what they think about when it comes to value right now. He also talks a lot about tipping. More counter service restaurants have been adding tipping as an option but have also run into at least some consumer resistance when they do. Are QSRs asking for too much when they suggest a tip? Is that a risk to their relationship with consumers. Byrne discusses these and all other issues.

Why do companies franchise their business? This week’s episode of the Restaurant Business podcast A Deeper Dive features Gary Occhiogrosso the founder of Franchise Growth Solutions, who talks about the opportunities and challenges involved in franchising. Occhiogrosso has been involved in the business for a long time and we talk about his history, first as a franchisee and later as the founder of a franchise development and sales firm. Franchising remains a popular method for restaurants to expand, but not everyone can expand successfully and there are a number of potential pitfalls when chains start selling the right to operate their brand to individual investors. Occhiogrosso discusses this and what goes into taking a successful restaurant and making it a franchise. We talk about the factors that go into franchising a business. He also provides some recommendations for companies considering the option.

Did Starbucks win its labor battle? This week’s episode of the Restaurant Business podcast A Deeper Dive features a debate between myself and Peter Romeo, the editor at large of RB, on the success of Starbucks’ pushback against unions. For some time, it seemed that another Starbucks store formed a union every few hours. The push, the most successful effort to unionize a restaurant chain, contributed to massive changes at the Seattle-based coffee giant, particularly in the executive team. That push has slowed in recent months. Romeo and I debate whether that’s a sign that Starbucks has won. We also talk about a potential rail strike, which could inject yet another black swan event onto a restaurant industry that has dealt with several of them over the past three years. And we talk about the U.S. Small Business Administration’s recent decision to send out more Restaurant Revitalization Fund grants to operators.

Restaurant automation is coming rapidly. But how much of an impact will it have? This week’s episode of the Restaurant Business podcast A Deeper Dive features Juan Martinez, principal with the consulting firm Profitality, who talks about the growing use of automation. Martinez is a periodic guest on the podcast and he works with restaurants to improve their overall profitability. Automation has been one area that restaurants have been targeting over the past couple of years as they faced numerous challenges, including the pandemic, resulting labor shortage and now wage inflation. But there have been doubts about the true impact of automation on labor costs. Martinez talks about this, and he provides some recommendations for operators that are looking into using machines to take over some of employees tasks.

Can dine-in pizza still work? This week’s episode of the Restaurant Business podcast A Deeper Dive features a trio of executives from Mountain Mike’s Pizza: co-CEO and brand owners Chris Britt and Ed St. Geme and COO Jim Metevier. Mountain Mike’s is a California-based chain that operates about 270 locations. Britt and St. Geme bought the chain about six years ago. The trio talk about the history of the brand and its growth since Britt and St. Geme acquired the company. They talk about the impact the pandemic has had on its takeout and delivery business, which has grown strongly over the past three years. But they also talk about the pull of the chain’s dine-in business. Dine-in pizza has struggled over the years but there is some evidence that people are coming back to it, either for nostalgia reasons or to get out of the house. Brands with an entertainment element have done well and Mountain Mike’s may help prove that. We also have some interesting discussions the owners’ time as Burger King operators.

What is the future of casual dining? This week’s episode of the Restaurant Business podcast A Deeper Dive features John Cywinski, the president of the casual-dining brand Applebee’s, to discuss that very topic. Bar and grill chains like Applebee’s had generally struggled since the Great Recession. And then the pandemic forced them to figure out takeout and delivery, and many of them did. But the pandemic culled supply of dine-in restaurants and those concepts that made it through that era have seen a strong recovery in dine-in traffic as consumers unleashed pent-up demand. Applebee’s is coming off a particularly strong quarter, featuring the best three-year same-store sales in its history. Cywinski talks about all of that. He discusses the future of takeout in the full-service space and where takeout and delivery stand with the company. He also talks about the company’s franchising strategy and how it affects the management of the chain. And Cywinski talks about the status of Applebee’s virtual brands.

Does the fast-casual sector exist? In this week’s episode of a Deeper Dive I’m joined by my colleague Lisa Jennings to talk about the blurring of the lines in the restaurant industry—particularly between fast-casual and quick-service restaurants. The fast-casual sector represented a group of higher-end limited-service concepts and until the pandemic largely dominated industry growth over the past two decades. But since the pandemic, a lot more of these chains have added drive-thrus, such as Shake Shack, Sweetgreen and Chipotle. And a lot more quick-service chains like Chick-fil-A have raised their prices to match what is often seen at traditional fast-casuals. Add it all up and the two sectors look so much alike it makes sense to wonder whether we should do away with that differentiation altogether. Meanwhile, Lisa and I also talk about recent earnings results from McDonald’s and Chipotle. McDonald’s is gaining low-income diners. Chipotle is losing them. We wonder whether the two industry giants are trading them with one another.

Amusements have been, quite literally, a game-changer for Cicis. This week’s episode of the Restaurant Business podcast A Deeper Dive features Jeff Hetsel, the president of the 300-unit pizza buffet chain. Cicis has had a strong performance coming out of the pandemic, with sales up 14.5% last year, according to Technomic. One of the big reasons is video games. The company has been convincing operators to expand their game rooms from the eight games they used to have to much larger rooms with prizes and token cards. That has been a major sales boost for the company. Hetsel talks about just how much of a sales lift video games can have for an individual operator. What’s more, that sales lift is far more profitable than the sale of pizzas. Hetsel touches on other topics, including other drivers behind the company’s sales increase.

How can restaurants avoid becoming a political football? This week’s episode of the Restaurant Business podcast A Deeper Dive features Joe Kefauver, the managing partner with public affairs firm Align Public Strategies and cohost of the RB-hosted Working Lunch podcast. Kefauver discusses a variety of topics, including a backlash against corporate ESG strategies. ESG stands for environmental, social and governance. Many corporations believe that having a strong ESG framework can create shareholder value over time because it can improve their reputation. But there’s been something of a backlash by conservative groups over these policies. He talks about this trend and how companies can avoid it, if they even can. He also talks about the Fast Act in California and efforts by restaurant chains to get that act in front of voters in the state, and why this topic is so important. And he discusses unions and why there hasn’t been many efforts to unionize companies outside of the coffee giant Starbucks.