Sales

by David Klemt David Klemt No Comments

Datassential’s State of the Operator 2022

Datassential’s State of the Operator 2022

by David Klemt

Guests sitting at the bar inside a restaurant

The latest addition to the Datassential FoodBytes research series shares insights into the top three challenges most—if not all—operators are facing.

Now, some of what the report reveals paints a bleak picture. Inflation, the labor shortage, and supply chain issues persist even past the midway point of 2022.

However, operators are a tenacious and innovative group of business owners. Of course, that tenacity seems to manifest in people thinking this industry can weather any storm. That perception can come at operators’ detriment. Exhibit A: The Inflation Reduction Act of 2022 not including replenishing of the RRF. But, I digress.

“The State of the Operator & the Road Ahead,” which you can download here, is helpful and informative. As you may be aware, we’re fans of Datassential and their FoodBytes reports. In fact, you can find our synopses of FoodBytes reports here and here.

Below are some key points that operators should be aware for consideration. I strongly urge you to download this free report today.

Operator Outlook

First, let’s take a look at traffic. As Datassential points out, some hospitality business segments are performing better than others currently.

In large part, this is due to two factors: People working from home, and people returning to travel. So, operators who rely heavily on commuters and in-person workers are struggling. On the other hand, operators inside or around hotels are, per Datassential, performing the strongest at the moment.

Interestingly, though, nearly half of operators (47 percent) are seeing an increase in traffic in comparison to pre-Covid levels. Fourteen percent of operators are reporting no change in traffic. Unfortunately, traffic is lower for 39 percent of operators.

Next, sales. In comparison to pre-Covid times, more than half (51 percent) of operators report an increase. Again, 14 percent of operators are experiencing no change. But 35 percent of operators are experiencing a decrease in sales.

Finally, profit margins. Half of operators may be seeing increases in traffic in sales, but profit margins are taking a hit. On average, the industry’s profit margin is now hovering at 13 percent. That’s an eight-percent drop in comparison to pre-Covid levels.

Segment Performance

The findings regarding profit margins are likely to be the most alarming to operators. Historically, our industry has operated on razor-thin margins for decades. Dropping from an average of 21 percent to 13 is concerning.

However, context is important. The segments seeing the lowest profit margins in 2022 are: Business & Industry (B&I), Healthcare, and Colleges & Universities (C&U). Again, remote work (and learning) are largely responsible for those particular segments watching their profit margins tumble.

The strongest performers are: Quick-Service Restaurants (QSR) at 17 percent; Fast Casual at 15 percent); and Midscale, Casual Dining, and Fine Dining, each at 13 percent. Lodging is just below the current average at 12 percent.

Operator Adaptation

Inflation, rising food costs, supply chain issues, labor shortages… Operators are finding ways to cope, and in some situation, thrive.

Unsurprisingly, the vast majority of operators are increasing menu prices. In the past 12 months, 77 percent of operators have raised menu prices at least once.

These increases range from one percent a staggering 30 percent. However, the majority have kept these increases to one to ten percent. Most (31 percent) have implemented increases of no more than five percent. Just one percent of operators boosted prices between 25 to 30 percent.

Of course, raising prices isn’t the only strategy operators have at their disposal. Forty percent of operators are streamlining their menu, reducing the sizes of their menus. However, it’s wise for operators to review their menus at least every three months to eliminate poor performers.

Other strategies include focusing on value for guests (27 percent); utilizing LTOs and launching new menu items (26 percent); eliminating a specific daypart or portion of the menu (25 percent); and making portion sizes small, or “shrinkflation” (18 percent).

There’s much more revealed in Datassential’s latest FoodBytes report. Download your copy today.

Image: Luca Bravo on Unsplash

by David Klemt David Klemt No Comments

Canadian Trends 2022: Technomic

Canadian Trends 2022: Technomic

by David Klemt

Yellow neon "butter" sign and scaffolding

Curious about what to expect in 2022 as a Canadian restaurant, bar or hotel operator?

Technomic has some predictions for next year.

Reviewing their “Canadian Trends: Looking Ahead to 2022” report, creativity and streamlining will be keys to success.

Let’s jump in!

Butter

Yes, this is why I chose the image above. Technomic is very specifically identifying butter as an important 2022 F&B trend.

And no, they don’t appear to be predicting the popularity a particularly rare or esoteric butter. The industry intelligence firm means butter will prove important in 2022.

In large part, Technomic is pointing to comfort food as a driver for butter.

Generally, the firm points to how versatile butter is in the kitchen. Browned and herb-infused butters, says Technomic, will find its way into cocktails.

Flavor and texture will play an important role, extending the butter prediction into buttery foods territory. For example, Technomic predicts butterscotch, buttermilk and ghee will see a boost in usage and demand.

Additionally, the plant-based movement will help nut butters grow more popular. In fact, Technomic says nut butters will find their ways onto burgers and into cocktails.

Interestingly, the firm’s butter prediction gives operators two larger trends to watch: comfort food and plant-based.

Cross-utilization

You don’t need me to tell you that North America—and the rest of the world—is facing supply chain issues.

I know you’re exhausted from just the past nearly two years of constant adaptation and pivoting. In 2022, you’ll have to continue with your creative problem solving.

The supply chain challenge (there’s an understatement) requires creativity in several areas. This includes the kitchen and menu.

Technomic suggests that one path forward through supply chain problems involves ingredient preparations:

  • Pickling
  • Candying
  • Salt-baking

The firm says these creative takes on ingredients operators already have will extend product life; add new flavors to dishes; and deliver new textures. Those last two offer guests new experiences.

In addition, getting creative with the ingredients you may be able to get more readily will help streamline and update 2022 menus. However, revising your menu will require careful consideration of your supply chain and cross-utilization, with a heavy helping of creative prep.

Running Lean

Smaller footprints. Shrunken staff. Streamlined menus. Smaller, shrunken, streamlined, optimized, leaner…

Call the process whatever you want, Technomic is predicting that operators will need to “optimize” (read: make smaller) their businesses.

Of course, there isn’t a one-size-fits-all solution. We’ve read and heard predictions since last year about what will need to shrink moving forward.

While some recent news reports say that ghost kitchens are out, Technomic seems to think that’s not the case. Technomic suggests ghost kitchens will remain viable for operators who want to expand without investing in real estate.

Additionally, Technomic’s report suggests something that should come as no surprise. In short, if it works for a brand or location, smaller may be better and here to stay.

Growth

Now, this is the most promising of Technomic’s predictions: Growth.

Per the firm, the foodservice industry in Canada was down 29 percent in Q1 of 2021. Pre-pandemic, sales reached $95 billion. That represents a loss of nearly $30 billion.

However, there’s reason to be optimistic in 2022, according to Technomic.

The firm expects growth of 21 percent in 2022 over 2021, or sales of $74.8 billion. Should this prediction prove accurate, 2022 would close just three percent under pre-pandemic sales.

Technomic identifies full-service as the foodservice segment to experience the most growth next year at 26.2 percent. In comparison, the firm predicts limited-service to grow 7.3 percent.

Next year won’t be easy. 2022 won’t be a magical return to normalcy. But there is room for optimism if Technomic’s predictions are correct.

Image: Jon Tyson on Unsplash

by David Klemt David Klemt No Comments

Sales Jump Shows Guests Will Pay More

Chipotle Sales Jump Shows Guests Will Pay More

by David Klemt

Close up of calculator buttons

Chipotle’s latest earnings report may show that guests are willing to pay more at their favorite restaurants.

In Q3, the fast-casual giant’s net sales grew by nearly 22 percent. Per reports, same-store sales rose by just over 15 percent.

Is it possible that Chipotle’s earnings—which exceeded Wall Street estimates—indicate that guests will tolerate price hikes?

Rising Costs

No, it’s not a “hot take” to state the obvious: Everything is more expensive.

All operators and managers are aware that costs are rising across the board. Beef, chicken wings, cooking oils… Prices are increasing and the trend is expected to continue.

Not that any of us need a real-world example, but Chef Brian Duffy shared on episode 53 of the Bar Hacks episode that he now has to price a pound of chicken wings at $13.

One reason that Chipotle made the choice to raise prices comes down to rising beef prices. Another is increased freight costs.

As every armchair economist knows, when a business’ costs rise that increase falls on its customers.

The reason is fairly simple: If prices remain the same while costs rise, the situation becomes untenable, the business doesn’t generate enough revenue, and doors close.

So, Chipotle’s decision was simple. The fast-casual chain announced in June that menu prices would increase by about four percent to defray rising costs.

Rising Wages

Chipotle’s June announcement followed one the company made in May.

Six months ago, Chipotle announced the hourly wage for their restaurant workers would increase to $15 by June.

How did the company afford to raise hourly wages, offset ingredient costs, and deal with rising freight rates? The aforementioned menu price hike.

Now, Wall Street didn’t seem to anticipate backlash toward Chipotle for increasing their prices. However, plenty of other people have said—and still say—that customers won’t support restaurants or bars that raise prices.

It appears that a significant percentage of brand-loyal customers will remain loyal and continue to support the businesses they like even through price hikes.

Is This the Way?

I’ll address a crucial detail: Chipotle is a fast-casual brand valued at close to $52 billion.

They’ve got incredible brand recognition and tremendous purchasing power. Reportedly, there are 2,857 Chipotle locations in the United States. In fact, the company announced in February of this year that it planned to open 200 more locations this year.

So, no, there’s not a direct comparison to be made between Chipotle and an independent restaurant or bar.

However, that doesn’t mean there’s no lesson to be learned here.

Chipotle was transparent about the reasons for their price hikes. The Great Resignation has shined a spotlight on wages, and Chipotle addressed that concern.

The pandemic has also unleashed havoc on supply chains. Again, Chipotle was forthcoming about the challenges the company was facing.

Moving forward, it may be wise for restaurant and bar owners to address menu price increases. There does seem to be some level of understanding among the more rational guests out there that if they support increased wages for hospitality workers; understand supply chain challenges; and know costs are up for everything, they’re going to see price hikes.

You very likely need to raise at least some of your prices. When you do so, consider telling your guests why. You may be surprised by the support you receive.

Image: fancycrave1 from Pixabay

by David Klemt David Klemt No Comments

Canadian On-premise Sales Stabilizing

Canadian On-premise Sales Stabilizing

by David Klemt

Canadian flag in downtown Toronto, Ontario, Canada

A report from Restaurants Canada and Nielsen CGA shows that on-premise sales are steadying and, in some provinces, growing.

In fact, with the exception of Alberta being slightly down, Canada’s nationwide sales velocity looks promising in comparison to 2019.

Overall, Canada’s on-premise velocity is on the rise. Let’s take a look at how the three main provinces KRG Hospitality services are performing.

Alberta

To say that Alberta is down is a tad misleading. The province’s performance is nearly on par with 2019.

In comparison to 2019, Alberta is just -1 percent below in velocity levels.

Now, in comparison to 2020, the province is +46 percent. However, 2019 is a far more accurate gauge of performance.

While being down one percent is on the surface negative, growth in Calgary and Edmonton is highly encouraging.

In the week to August 21, Calgary’s velocity rose +4 percent, while Edmonton grew +10 percent. Those two cities are responsible for overall growth in velocity in Alberta of +4 percent.

Should the upward trend continue, Alberta will match and surpass 2019 quickly.

British Columbia

Of the three key provinces in which KRG Hospitality operates, BC is the second-best performing in comparison to 2019. Against 2020, BC is the third top performer.

Per Restaurants Canada and CGA, BC velocity is up +12 percent in comparison with 2019’s sales. The province is up +33 percent when compared to 2020.

In Vancouver, velocity is flat rather than experiencing negative growth. Any negative trends, according to the Restaurants Canada and CGA report, is coming from Victoria. That city is down -6 percent.

Ontario

Of our key Canadian markets, Ontario is performing the best overall.

Compare velocity to 2020 and the province is up +48 percent. In comparison to 2019, Ontario’s velocity is up +13 percent.

One can attribute current growth to Toronto. The Ontario city’s performance in the week to August 21 is +4 percent.

Canada

According to the report, sales velocity in Canada is up +2 percent overall.

Compare the country’s overall performance against 2020 and 2019, and Canada is trending upward. The nation’s on-premise velocity is up +41 percent in comparison to 2020 and +11 percent against 2019.

Clearly, the expectation is for the country’s on-premise performance to experience further growth as consumers return to in-person dining and restrictions loosen.

However, it’s important for operators to not simply return to pre-pandemic operations. Consumer behaviors have changed and many pandemic-driven habits—delivery, for example—are now permanent.

Further, now’s the time for those considering proceeding with plans to open restaurants, bars and hotels to move forward. In fact, Travis Tober, the guest from our milestone 50th episode of Bar Hacks, believes there’s no better time than now to open a hospitality venue.

Image: Lewis Parsons on Unsplash

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