Raise the Business Meal Deduction!

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

If times aren't hard enough, the third phase of a federally mandated minimum wage hike is now in effect. It recently jumped 70 cents to $7.25. The increase comes at a time when restaurant operators are struggling during one of the most difficult economies in years. The additional payroll costs will cut into already slim profit margins. But there is some good news.

Legislation was recently introduced to increase the federal tax deduction for business meals from 50 percent to 80 percent. If approved, the higher deduction would likely drive more business meal traffic. The NRA estimates that an additional $6 billion in meal sales would follow and lead to an $18 billion increase in the overall economy. The NRA also estimates that for every additional $1 million in restaurant sales, 33 new jobs are created.

Originally, one could deduct the full price of a business meal, but in 1993 the deduction was cut in half. U.S. Representative Neil Abercrombie (D-Hawaii) should be applauded for introducing a current bill to increase the deduction to 80 percent. According to NPD Group, restaurant traffic here in the states is experiencing its steepest decline in 28 years because of high unemployment and wary consumers who are cutting back on their spending.

The Chicago-based market research firm also found that 4,000 restaurant units closed in the spring because of stagnant economic conditions. As the federal government implements all types of economic stimulus packages, it's clear that the restaurant industry could use all the help it can get to endure during these tough times. Increasing the business meal deduction would be a good start.

Meanwhile, Technomic, another Chicago-based research firm, reports that more than one-third of consumers it surveyed said they are entertaining at home more often. The good news is that many of these people who are throwing parties at home are buying restaurant food as opposed to making it themselves.

So, traffic may be down, but if you're not offering some type of catering, you're leaving dollars on the table. “Catering is one of the strongest segments of the foodservice industry and appears somewhat immune from recessionary spending cut-backs,” says Technomic.

But don't forget about ways to drive traffic to your restaurant. Technomic, for American Express, asked consumers what offers influence their dining out decisions. More than nine out of ten said a “buy one entree, get one free” offer gets their attention. Only slightly less enticing are promotions that offer a specific price point (like a $5 sandwich). More than three-quarters of full-service restaurant customers surveyed said a combo meal for a set price is appealing. Another incentive that attracts customers is a free appetizer or dessert with an entree.

Cater to them at home or lure them into your store. Let me know what ideas work for you.