Fighting it Out in the Trenches

Michael Sanson

In this current issue, you'll find a report on the state of the restaurant industry (page 41). It's something we do every year to gauge how you and industry experts believe the year ahead will turn out. The good news is that the National Restaurant Association is predicting a 16th consecutive year of real growth.

The other good news is that despite growing competition, there are plenty of customers out there. Some of you are laughing at that last statement. But the truth of the matter is this: Restaurants are now a way of life; as necessary as gasoline in a car. So, if you're not attracting customers, don't blame the universe, blame yourself. You're getting out-hustled, outsmarted by your competition.

Of course, catering to customers is no easy chore. What a fickle bunch they are. Tastes change; trends move them in other directions; they get bored. You don't want to end up being a restaurant that doesn't shave, gets a potbelly and forgets anniversaries. Who wouldn't leave you? Check out the state of the industry feature; you'll find several lists of trends pundits believe will be hot this year. I'm betting there are at least two or three that can help put a little spark back in your romance with customers.

And then there are some real tough issues to deal with, not the least of which is an inevitable hike in the minimum wage. When profit margins are as thin as yours, an increase in labor costs can be brutal. A recent editorial I wrote about the minimum wage hike ignited a big response from readers. You'll find their comments on the Letters pages (8 and 10).

You may also find some minimum wage relief on pages 28 and 29. Senior editor Bob Krummert reports that if you must raise prices—and many of you will— there are two schools of thought on how to do that. What's more important with a menu price of let's say $10.99? Is it the dollar amount or the cents amount? Read Krummert's piece.

In the state of the industry story, restaurant analyst Bob Derrington points out that the price of corn is at a 10-year high. That will likely lead to an increase in the cost of beef, pork and chicken—products from critters that all feed on corn. It's a house of cards that you can't control. You can only react, and price increases may again be inevitable.

How much of a price increase will the market bear? That depends on a lot of things, including how your competitors react. If you raise prices beyond theirs, you better be able to demonstrate the value behind those increases. It gets real simple when you serve a cheeseburger and they serve a cheeseburger. May the best cheeseburger command the highest price.

In the state of the industry piece, New York City consultant Clark Wolf urges you to keep your eye on costs and other business issues, but never forget that it all boils down to the food. He specifically points to the growing trend for people to want to eat more healthfully, at least some of the time. You ignore this trend at your own peril, he says.

I agree, but I know of way more people who don't go back to a restaurant because of poor service. And that's what's so tough about this business. You have to cover all the bases. But if you cover the food and service angles, 2007 should treat you well.