What Are You Doing to Survive?

Michael Sanson EDITOR-IN-CHIEF [email protected] www.restauranthospitality.com

<center>Michael Sanson<br> Editor-in-Chief<br></center>

Last month, the Feds made another big move to cut interest rates with the hope of jump-starting a stagnant economy that has consumers skittish. In fact, just about every segment of this industry is reporting a slump in sales as consumers cut back on restaurant visits.

“Whether or not the rest of the economy is in recession, the restaurant industry certainly is,” says Ron Paul, president of Technomic. Falling same-store sales at Ruby Tuesday, Applebee's, Chili's, T.G.I. Friday's and The Cheesecake Factory reinforce his point. As does the National Restaurant Association, which says nearly half of the restaurants it surveyed reported a fall of same-store sales in January, while 54 percent said customer traffic also declined in January.

Mark Buehler, c.e.o. of Lone Star Steakhouse, told U.S.A. Today that “In the lifespan of casual dining, we haven't seen economic times like this.” Lone Star recently closed 27 of its 179 stores, resulting in the loss of 1,500 jobs.

According to a national survey, 70 percent of consumers said they were visiting full-service restaurants less often because of rising gasoline prices. Half are cutting back because of utility bill increases, while others blamed mortgage and rent increases and higher credit card minimums and rates.

Customers who are visiting full-service restaurants less may be trading down to fast-casual restaurants, explains Darren Tristano of Technomic. He predicts that value menus will be on the rise as consumers look for deals.

The NPD Group, which researches dining-out patterns, reported in a recent study that people are eating more breakfast and snacks at restaurants, but fewer dinners. If that's not bad enough news for full-service, quick-service chains are bolstering both their breakfast and snack menus, while supermarkets are continually improving their ready-to-eat meal options.

Add to that rising commodity and utility prices for restaurant operators, and many have been forced to raise prices. The timing couldn't be worse. A recent survey concluded that consumers are cutting back on restaurant visits, in part, because they believe they are spending more at restaurants than they actually are. Ouch!

So, what do you do? For a start, dump low-profit menu items and replace costly ingredients with more affordable substitutes. And if you're buying imported products such as wine, cheese and olive oil, consider buying domestic. Importing ingredients against a weak dollar is not a smart way to go.

Now is a good time to engineer your menus and train your servers to direct customers to high-profit menu items. Also polish up your takeout program. And, if you can, consider offering value-driven combo meals.

That's just a few thoughts. Email me with ideas you have to either cut costs or drive customer traffic and I'll share them.