Operations | KRG Hospitality

January 13, 2023by David Klemt David Klemt No Comments

We Ask ChatGPT About Robots and AI

We Ask ChatGPT About Robots and AI in Restaurants

by David Klemt

Earlier this week we had “a conversation” with ChatGPT, the now (in)famous chatbot from artificial intelligence research and development company OpenAI.

For my first time interacting with this type of tool, I keep things simple. I attempt to phrase my questions correctly, focusing on the topic of AI and robots in hospitality.

Initially, I receive a response that probably isn’t much of a surprise. But as you’ll see, the chatbot highlights an item or two that aren’t always top of mind with this topic.

Below you’ll find ChatGPT’s responses to one request and two questions.

Please write 400 to 500 words about robots and artificial intelligence working in restaurants, from the perspective of robots and AI.

“Robots and artificial intelligence (AI) are becoming increasingly prevalent in the restaurant industry. This is in part due to the many benefits that these technologies can offer, such as increased efficiency, improved safety, and reduced labor costs. However, it is also important to consider the perspective of the robots and AI systems themselves, and how they are integrated into the restaurant workforce.

One of the main ways that robots and AI are used in restaurants is through automation of tasks that would otherwise be performed by human workers. For example, robots can be programmed to cook food, mix drinks, and serve customers. This can help to improve the efficiency of the restaurant, as robots are able to work faster and more accurately than humans. Additionally, robots can be designed to perform tasks that are dangerous or difficult for humans, such as handling hot oil or sharp knives. This can help to improve safety in the kitchen and other areas of the restaurant.

However, the use of robots and AI in restaurants also raises some important ethical and social issues. Some people may worry that robots will take jobs away from human workers, especially in an industry that already has high turnover rates. Additionally, there may be concerns about the social and emotional impact of having robots as a major presence in the workplace. For example, some people may find it uncomfortable or strange to interact with robots in a social setting, such as a restaurant.

The robots and AI perspective, they are programed to perform their task efficiently without any error. They don’t have any emotions or preferences hence they are not impacted by the same issues that human employees may face like fatigue, stress or burnout. They can work in any environment without needing breaks or vacation days, this can help reduce labor costs, as restaurants can operate with fewer employees. However, it also means that human workers may need to be trained in new skills that allow them to work alongside robots and AI systems.

In conclusion, the integration of robots and AI in the restaurant industry can provide many benefits, including increased efficiency and improved safety. However, it is important to consider the ethical and social implications of these technologies, and to ensure that they are implemented in a way that benefits both the restaurant and its employees. With proper planning and training, robots and AI can be an [sic] valuable asset to restaurant workforce.”

Can you explain to me, in 300 to 400 words, what the ethical implications are for restaurant, bar, and hotel operators using artificial intelligence and robots to complete tasks?

For the most part, ChatGPT repeats talking points from our first interaction. This is likely due to the phrasing of my question. Also, this chatbot is still in its “infancy.”

However, ChatGPT brings up a few new points, and expands on others.

“The use of artificial intelligence (AI) and robots in restaurants, bars, and hotels raises a number of ethical implications that should be considered by operators. One of the main concerns is the potential for these technologies to displace human workers. In an industry that already has high turnover rates and relatively low wages, the use of robots and AI could make it even more difficult for human workers to find and keep jobs. This could lead to increased unemployment, reduced income and work-life imbalance among the impacted employees.

Another ethical concern is the impact that these technologies may have on the customer experience. For example, some customers may find it unsettling or uncomfortable to interact with robots in a social setting, such as a restaurant or hotel. Additionally, customers may feel that the use of robots and AI detracts from the human element of the service experience, and could harm the overall reputation of the business. There may also be concerns about how the data collected by these systems is used and protected, raising question about data privacy and security.

Additionally, some concerns about the way these AI and robots are designed and how they make their decisions, there could be potential for bias, especially when the systems are provided with data that is not representative of the whole population. This could lead to unfair treatment of customers, employees and other stakeholders.

There are also concerns about how the maintenance and repair of these technologies are managed and who is responsible for any accidents or malfunctions that may occur. This is particularly important for safety critical tasks, such as cooking or cleaning. Operators need to ensure that the AI and robots are designed and maintained to the highest standards to prevent any harm to employees or customers.”

Are there risks that human designers and engineers will introduce bias to customer-facing artificial intelligence and robots?

Since ChatGPT mentions bias in response to my first question, I run with that train of thought.

Below is what the chatbot has to say about that topic as it relates to AI and robots.

“Yes, there is a risk that human designers and engineers may introduce bias into customer-facing artificial intelligence (AI) and robots. This can happen in a number of ways, including:

Data bias: If the AI system is trained on a dataset that is not representative of the population it will be serving, it may make decisions or predictions that are biased towards certain groups of people. For example, if an AI system used in a hotel is trained on data from primarily white and wealthy guests, it may have difficulty understanding and serving guests from other backgrounds.
Algorithm bias: The way an AI system is designed and the algorithms it uses can also introduce bias. For example, if an algorithm is designed to prioritize certain inputs over others, it may make decisions that are biased towards certain groups of people.
Human bias: Human bias can be introduced into AI systems through the decisions made by designers and engineers about what the system should do, how it should work and how it should interact with people. For example, if a designer and engineers decide that the robot should be more polite to older customers, it may be less polite to younger customers, or if the system is designed to recognize only certain languages, it may not be able to understand and serve customers who speak other languages.

It is important for human designers and engineers to be aware of the potential for bias in AI systems, and to take steps to minimize it. This can be done by using diverse and representative data when training the AI system, being mindful of the potential for bias in the algorithms used, and involving stakeholders from diverse backgrounds in the design and testing process. Additionally, monitoring and audit the system performance regularly, and providing ways for users to provide feedback on the performance and make adjustments accordingly.

It is important to remember that this is an ongoing process and it requires continuous monitoring and adjustment as the data and environment changes. There is also a need for more research in the field of explainable AI, which would allow human designers and engineers to understand why the AI system is making certain decisions, which can help to identify and mitigate any biases that may have been introduced.”

Takeaways

Obviously, I don’t think ChatGPT “speaks” for the machines. And I don’t think the chatbot was attempting to convince me of anything. There’s nothing overtly nefarious afoot here—this was mainly an entertaining exercise with a newsworthy tool.

That said, I’m not entirely certain how I feel about my interaction with ChatGPT. On one hand, the answers in favor of AI and robots are what one expects: efficiency, speed, consistency, cost reductions, improvements to safety.

But what about what ChatGPT says about biases, programming, representation, and human interactions with tech? To alter a phrase, “Who watches the programmers?”

Hospitality is about the human element. It’s about service and the guest experience. Personally, I don’t think the world will be in a better place if we reduce human interaction.

Dropping baskets into hot oil? Slicing and dicing? Sure, send in the robots…maybe. Reducing the human element in the name of efficiency and profits? I don’t see a benefit worth the risks.

Image: Rock’n Roll Monkey on Unsplash

January 9, 2023by David Klemt David Klemt No Comments

Minimum Wage Rises for Most of USA

Minimum Wage Rises for Most of USA

by David Klemt

More than half of the states across America are either now seeing a boost to minimum wage or plan to increase the hourly minimum by the middle of this year.

In total, minimum wage is up in 27 states. However, the rise isn’t yet in place in a handful of states, including Nevada.

Now, the federal minimum wage still has yet to go up. That rate remains at $7.25 per hour, where it has been since 2009. For the curious, if a person works 40 hours per week and is compensated at the federal minimum rate, that’s just over $15,000 per year—before taxes.

Per Motley Fool: “If we factor in inflation, [federal minimum wage] would have had to grow to $10.20 to let people buy the same amount of goods and services today [as in 2009]. In real terms, the current minimum wage has shrunk by almost 30% since it was set.”

You’ll see below that I didn’t list the increases for tipped workers. As an operator, you should already be well aware of the minimum rate your tipped workers must be paid. In all likelihood, your suite of software is already updated to the current requirements (but check yourself to be certain).

The list will provide an idea of what you’re up against. It’s difficult to recruit rock stars if you’re unable to offer wages above minimum wage, never mind at minimum wage.

Today, for most workers, the minimum isn’t going to cut it. So, when you’re looking at what you can offer, keep in mind the minimum wage for both tipped and un-tipped workers in your area.

Also, know what other operators are paying. To remain competitive, consider what else you can offer, including your values and culture.

States Increasing Minimum Wage

Below, the states with an increase to the minimum wage. Rather than organize the list by hourly rate or rate of increase, I set it up alphabetically.

Alaska: $10.85 per hour
Arizona: $13.85 per hour
California: $15.50 per hour
Colorado: $13.65 per hour
Connecticut: $15 per hour (June 1)
Delaware: $11.75 per hour
Florida: $11 per hour (September 30)
Hawaii: $12 per hour
Illinois: $13 per hour
Maine: $13.80 per hour
Maryland: $13.25 per hour
Massachusetts: $15 per hour
Michigan: $10.10 per hour (could rise further; lawsuit pending)
Minnesota: $8.63 per hour (small employer); $10.59 per hour (large employer)
Missouri: $12 per hour
Montana: $9.95 per hour
Nebraska: $10.50 per hour
Nevada: $11.25 per hour (July 1)
New Jersey: $14.13 per hour
New Mexico: $12 per hour
New York: $14.20 per hour (excluding some areas); $15 per hour for fast food workers
Ohio: $10.10 per hour
Rhode Island: $13 per hour
South Dakota: $10.80 per hour
Vermont: $13.18 per hour
Virginia: $12 per hour
Washington: $15.74 per hour

Among the states on the list above, four are lifting minimum wage to at least $15. Those states are Connecticut, Massachusetts, California, and Washington. Additionally, the minimum wage is $15 per hour in parts of New York.

Interestingly, employers in Nevada can reduce the minimum wage by one dollar if they pay qualifying health insurance. In such a case, the hourly minimum will be $10.25.

Only one of these states, Montana, will remain under $10.

Cities, Counties, Districts

As stated above, some parts of New York have a minimum wage higher than $14.20.

There are also cities, counties, and districts boosting the minimum wage.

Denver, Colorado: $17.29 per hour
Long Island, New York: $15 per hour
New York City, New York: $15 per hour
Washington, DC: $16.50 per hour
Westchester County, New York: $15 per hour

Overall, more than half the country either already increased the minimum wage or will do so later this year.

Image: Adam Nir on Unsplash

January 6, 2023by krghospitality krghospitality No Comments

Dynamic Pricing or Dynamic Menus?

Dynamic Pricing or Dynamic Menus?

by Doug Radkey

A key phrase used throughout 2022 was “the new normal.” In 2023, a key term you will likely hear a lot is “dynamic pricing.”

What is dynamic pricing? It can get quite complex, but the global consulting company, McKinsey, defines dynamic pricing as “the (fully or partially) automated adjustment of prices.”

The term is not entirely new to hospitality. Hotels and the overall travel industry have used modules of the pricing model for years. But for restaurants and even bars, yes, it is something new.

It is also a model getting a lot of attention of late, which begs the following question: Why?

As the bar and restaurant industry recovers from the effects of the pandemic, a dynamic pricing model that optimizes revenue opportunities may seem quite attractive. After all, our industry is looking to rejuvenate its sales to pre-pandemic levels.

Essentially, a dynamic pricing model within this industry would work like this: increase prices when demand is up (peak periods), decrease prices to draw guests in when demand is down (off-peak times).

But should this be a model that disrupts the industry in 2023 and into 2024?

While I am all for a little disruption, the industry needs to tread carefully through this potential transition to dynamic pricing (or perhaps just around the phrase itself) that’s based on demand levels.

Guest Experiences

We all know (or should know) that we do not sell a product. What we sell is an experience.

If we can create a positive, memorable guest experience first and foremost, the revenue will follow.

While hotels and travel, as examples, have boasted “positive financial results” over the years through their different approaches to dynamic pricing (while still trying to focus on the end-user guest experience), independent bar and restaurant brands must be careful not to create a hostile brand perception.

Why? Because many consumers view changing prices based solely on levels of demand as being unfair.

Being unfair will certainly create a negative guest experience and/or brand perception. The hotel and airline industries have been able to navigate this perception successfully by offering alternatives. For example, different rooms and amenities or less convenient flight times at different price points. Essentially, companies in lodging and travel provide options and flexibility before customers make the choice to spend.

What about rideshare and surge pricing as another example? Many of you reading this have likely been burned by surge pricing as a consumer, which can be by definition a form of dynamic pricing.

Have you ever tried to book a rideshare during peak periods in a major market? What would normally be a $20 ride is suddenly $40 to $60 (or more) because of their dynamic pricing model.

What did I do in this situation during a recent business trip? I walked another 25 feet up to the cab staging area of the airport and got my ride for $25.

The end results? I had a negative customer experience with the rideshare company, first and foremost. Additionally, that negative experience drove me to the competition. The key here is I was given a choice.

Now let’s switch that scenario to a restaurant.

The Restaurant Scenario

You book a table at your favorite restaurant and order that incredible steak dinner you always enjoy. But instead of it being $50 like you have grown accustomed to, it is now $75 or more. How are you as a consumer going to feel about this new price just because you visited your favorite spot during a “peak period” on a Saturday night? Were you given a choice before the spend?

Of course, this can work in the opposite direction: ordering a meal during a non-peak time and getting it for a cheaper price, thereby getting a discount.

But should we be confusing our customers based on their chosen, convenient time to visit your restaurant or bar? Should you also focus on “discounting” to drive people to your business?

I have even seen recommendations for offering an increased price for peak period but using what was the previous regular price during the non-peak times, labeling the normal price a “discount.”

Should we be framing our regular priced menu options as a discount just so we can charge and make more during a peak period? Is this being fair and ethical to your loyal customers? Should we be going down this road?

With this model (and the phrase “dynamic pricing”), which is based on demand, it is very easy to see how you can quickly confuse or alienate your loyal guests. Unless the industry in its entirety migrates over to this demand-driven model, a similar scenario as outlined above can play out for you and your guests.

Without extremely strong but transparent communication systems in place (which will be a challenge in itself), it is safe to assume that they will likely visit another restaurant up the street and/or provide negative feedback because they feel your pricing model is confusing or unfair.

Dynamic Menus

The phrase that is much more simplified and will be more easily embraced by both operators and guests is “dynamic menu.”

So, what’s the difference?

While it is still by definition “the (fully or partially) automated adjustment of prices,” it is not based on demand throughout the day. Rather, pricing is based on simple supply chain and operational cost adjustments.

According to the National Restaurant Association:

95 percent of restaurants have recently had significant supply delays or shortages of key food items; and
75 percent of restaurants have had to change their menu because of supply chain issues.

With a more dynamic menu, you can adjust pricing to suit those changes accordingly, through the lens of real-time ingredient cost, labor costs, productivity levels, and even the availability of certain menu items.

This simply means that the incredible steak dinner a guest has always enjoyed at your place is perhaps now $53 instead of $50 because the price of beef went up the past week or month. This ensures that as an operator, you will have a minimal gap between your theoretical and actual food costs.

Again, this should work both ways, meaning if the price of beef has gone down, so too should the price.

This means that your guests are paying an accurate value for each item, based on your intended sales mix and contributions, without a loss in margin on your end or negative experience on the guest end.

This means that everything on your menu is “market price” or MP. Where have we seen that before…?

Market Price

We all know restaurant menus will commonly deduct a price and replace it with the term “market price” (often abbreviated to “MP”). This means the price of the menu item depends on the market price of the ingredients, and the price is available upon request. It has been used for years for seafood in particular—most notably lobsters and oysters—in many restaurants.

Therefore, this pricing model is not entirely new. So, why should it stop at just high-priced seafood?

The reason many operators would use the abbreviated MP was because they did not want to reprint menus every single day as the prices fluctuated greatly.

As we move towards digitally savvy restaurant operations, implementing integrated technology and menus, we can begin to find alternatives and ensure that we are actively pricing our menus accordingly based on the market (and overhead costs) to strengthen top- and bottom-line results.

Knowledge is Power

To make a dynamic menu work, whether you’re a QSR, sports bar, casual-dining or fine-dining concept, or any other category of bar or restaurant, you need to know your target customers, provide a targeted menu, and know your numbers (the data).

Curating and engineering a menu should be a simplified process. To be honest, this should have been streamlined prior to the pandemic.

Your menu should be developed based on data, consumer sentiment, regional ingredients, regional suppliers, and local talent within the confines of the overall concept. Food and beverage programs should be developed with thought, care, speed, precision, execution, and last-but-not-least: consistent profits in mind.

Keeping menus “small” (10 to 12 or even 15 items at maximum) will be the new threshold of a successful, more profitable operation. This size of menu will allow bars and kitchens to operate more efficiently; keep inventory costs both low and controlled; control training and labor costs; and provide guests with the most flavorful and exciting items that they truly want.

Be Nimble

You also want to provide menu flexibility by continually reviewing your supply chain. Maintaining a strong personal relationship with your suppliers is imperative. You must also review your costs and inventory on a daily and weekly basis to make dynamic menus work.

To keep inventory, purchase orders, and potential waste to a minimum, it will be crucial that you to ensure your menu is small but innovative. The only way to accomplish this is through effective data management.

However, the new challenge for many independent brands is making data timely, relevant, digestible, and actionable for operators and their leadership teams. The ability to collect, interpret, and effectively react to key datapoints is going to be crucial for anyone who wants to implement a dynamic menu, and for moving forward in general.

At the end of the day, profiting from a dynamic menu is all about making decisions based on accurate cost and productivity data. Of course, there’s only one way to obtain data: embrace technology and create strategic clarity around it.

The Tech Stack

The key to successfully implementing a dynamic menu is integrating a stack of technology that provides real-time data and trend reports.

From point-of-sale software and reports to accounting software, inventory and recipe management software, and invoice management software or a suite that includes all of the above that’s integrated and working together, you can obtain real-time data to adjust your pricing based on real-time ingredient and productivity costs on a daily or weekly basis.

You want seamless movement of data from front- to back-of-house that will position you to make decisions and have a more complete picture of inventory stock levels, costs, and ordering needs, plus itemized sales, contribution margins, and productivity levels.

In Summary

While we must find ways to be innovative, potentially price-gouging our guests during peak periods and discounting during slow periods is not the way for this industry to recuperate and build loyal customers.

Building a strong brand through the creation of memorable experiences and by building connection with your community along with strategic planning, effective marketing, the elements of culture, and efficient operations, you can build sustainable revenue and profit channels.

By following a more dynamic menu approach within your operations, you can still maintain transparency with your guests with less challenging communication methods, remain a fair and well-respected brand within your community, and improve your margins by three to five percent or more with the right people and systems in place.

That sounds like a pretty good deal to me. The question here remains: Are you Team Dynamic Pricing or Team Dynamic Menus?

Image: Joe Neric on Unsplash

January 3, 2023by David Klemt David Klemt No Comments

5 Books to Read this Month: January 2023

5 Books to Read this Month: January 2023

by David Klemt

This month’s engaging and informative book selections will help you hone your culinary, beverage, and operational skills to dial in your business.

To review the book recommendations from December 2022, click here.

Let’s jump in!

The Vegan Chinese Kitchen

Today, people have certain ideas that flash before them when they hear or read “plant based.” For many, it’s a phrase that indicates a food item is an impossible meat alternative that attempts to go beyond it’s animal counterpart, hint hint.

However, plant-based also means…plants. Just plants, that’s all. The Vegan Chinese Kitchen, Chef Hannah Che’s plant-based cookbook, dives into traditional and modern Chinese vegan cuisine. Remember, plant-based doesn’t only mean “meat alternative made with plants.” Buy here.

Tea: Wine’s Sober Sibling

Have you ever considered drinking tea as an alternative to consuming wine? I know I hadn’t until I came across this book.

There are more than 70 recipes in Tea: Wine’s Sober Sibling, several of which are Dry January-friendly. Along with best practices for restaurant operators, there are also pairings, like tea and cheese, and tea and chocolate. Grab this book and consider using tea in different ways at your restaurant or bar.

Conversations Behind the Kitchen Door: 50 American Chefs Chart Today’s Food Culture

Where is the culinary world headed in 2023? Chef Emmanuel Laroche and his colleagues have some thoughts.

From Amazon: “Emmanuel’s podcast Flavors Unknown, as well as his worldwide search for new foods and flavors, are at the core of Conversations Behind the Kitchen Door. Scores of chefs offer essential insights and entertaining observations about the food scene today—information that will be of interest to new and aspiring chefs, as well as foodies and home cooks who follow trends in restaurants and recipes. Readers will walk away from Conversations Behind the Kitchen Door with a deeper understanding ofthe minds and creative practices of famous chefs, as well as a map to begin to create sensational dishes of their own.”

Pick up Conversations Behind the Kitchen Door from Amazon.

Build: An Unorthodox Guide to Making Things Worth Making

I’m willing to bet that you’ve heard of the following products: the iPod, the iPhone, and Nest thermostat. And I’m certain you realize an entire team of people was the behind the creation of those devices. Tony Fadell, the person who ran those teams is the author of Build.

You don’t have to be in tech to benefit from this book. Really, Build is about leadership, decision making, mentorship, bouncing back from failure, and more. Essentially, this helpful and informative book is “a mentor in a box.” One of the key takeaways of this book should motivate you to read it: “You don’t have to reinvent how you lead and manage.”

Your Table Is Ready: Tales of a New York City Maître D

Author Michael Cecchi-Azzolina was the maître d’ at several of New York’s hottest restaurants for decades. Scoring reservations for some of these destinations was viewed as more important than landing a table at one of NYC’s top-tier nightclubs.

Cecchi-Azzolina tells stories of a (mostly) bygone era while also providing his take on the restaurant industry. For some, this book will be amusing and relatable. Others will find this representative of an era best left behind as we move the industry forward. Order Your Table is Ready today.

Image: Mikołaj on Unsplash

December 12, 2022by David Klemt David Klemt No Comments

Is Restaurant Revitalization Back?

Restaurant Revitalization Back on the Table?

by David Klemt

After watching the Restaurant Revitalization Fund die a slow, painful death earlier this year, three senators are trying to help the industry again.

Three Democratic senators seem to think that the RRF battle isn’t over. Senators Ben Cardin (D-MD), Sherrod Brown (D-OH), and Patty Murray (D-WA) are trying once again to help RRF applicants. As a refresher, Sen. Cardin is among the original RRF legislation authors.

Last Thursday, the senators introduced the Restaurant Revitalization Tax Credit Act. Now, before we get into the details, it appears this bill is a stop-gap of sorts. A statement from Sen. Murray suggests as much.

Per a statement from Sen. Muray, the “Restaurant Revitalization Fund left too many behind. I believe we need to replenish the Fund and will keep pressing to do so. Until that happens, bills like the Restaurant Revitalization Tax Credit Act will help keep restaurants afloat.”

It’s safe to say a significant number of operators prefer replenishment of the RRF to a tax credit. However, this could represent a step in the right direction.

The Restaurant Revitalization Tax Credit Act

For those with an interest in dissecting the bill, the text in its entirety is here.

In summary, here’s what Sens. Cardin, Brown, and Murray want to see become law: a payroll offset of $25,000. Of course, it’s not that simple—there are requirements and nuances.

First, the only eligible restaurants are RRF applicants who didn’t receive a grant. Second, the restaurant must prove:

operating losses of at least 30 percent in 2020 and 2021 in comparison to 2019; or
losses of at least 50 percent in either 2020 or 2021 in comparison to 2019.

Additionally, applicants must have been operating at least as far back as March 14, 2020. There’s also a payroll tax requirement: the applicant restaurant must have paid the taxes in at least two quarters in 2021. But wait—it doesn’t end there.

Restaurants with ten or fewer employees could offset a maximum of $25,000 in payroll taxes for the entirety of 2023. However, for every employee over ten, the refund cap drops by $2,500.

So, this bill appears to target very small operations for assistance. Assistance, we can only hope, that’s meant to help until the Senate and House replenish the RRF.

After all, Sen. Murray did say this bill—”bills like,” to be precise—is meant to “help keep restaurants afloat.”

It’s difficult to view this effort through anything but a skeptical lens given what happened earlier this year. And hope, as the saying goes, isn’t a strategy. But I suppose this bill represents a glimmer of hope that the estimated 175,000-plus RRF applicants who never received a grant may still get the help they deserve.

Image: J. Amill Santiago on Unsplash

November 23, 2022by David Klemt David Klemt No Comments

Merchants Support Credit Card Act

100s of Merchants Support Credit Card Competition Act

by David Klemt

Perhaps at least somewhat unsurprisingly, support for the Credit Card Competition Act is growing rapidly among merchants.

In fact, 1,802 merchants are making their position on the bill clear. Those hundreds of merchants drafted, signed, and sent a letter to the House and Senate.

The crux of that letter? To tell our lawmakers to support and pass the Credit Card Competition Act.

To view the letter, sent by the Merchants Payments Coalition (MPC), please click here. For the bill and its status, follow this link.

The Credit Card Competition Act: A Quick Summary

According to the MPC, credit and debit card transactions just in the US reached $3.49 trillion in 2021. Along with those transactions came $77.48 billion in merchant fees—just for Visa and MasterCard.

Why call those out those two processors in particular? Well, it’s because they’re behind about 576 million credit cards. Oh, and they also control 87 percent of the processing market.

In the span of just one decade, Visa and MasterCard swipe fees have risen 137 percent. So, it’s not surprising that merchants are supportive of the Credit Card Competition Act.

There are, indeed, restaurant and hospitality groups attached to the MPC’s letter to Congress. Taking a quick glance, Denny’s franchisees, Dutchman Hospitality Group, and Mandalay Hospitality Group are among the signees.

Obviously, this makes sense—swipe fees are among the highest costs operators face every day.

Where’s this Bill Currently?

It shouldn’t be too shocking to find that this has yet to make much progress. The bill’s sponsors, Sens. Richard Durbin (D-IL) and Richard Marshall (R-KS), introduced it in the senate at the end of July.

Three months later, October 28, an attempt was made to include the bill in the National Defense Authorization Act (NDAA). For those who are unfamiliar, the NDAA is known as a “must-pass” bill. After all, it specifies the US Department of Defense’s (DoD) budget and expenditures each year.

Along with a reported 900 other “riders,” Sens. Durbin and Marshall tried to get their bill passed within the NDAA. Unfortunately for the senators and supporters of the bill, the NDAA vote was pushed until the middle of November…which we’re now past.

Of course, the US did just undergo a mid-term election cycle. So, I suppose it’s reasonable to be a bit more patient with the Senate and the progress of this bill.

Those who work in or support our industry can make their opinion of this bill known. Just follow this link to the National Restaurant Association Credit Card Competition Act portal.

Image: Clay Banks on Unsplash

October 28, 2022by David Klemt David Klemt No Comments

Credit Card Competition Act, Take Two

Credit Card Competition Act, Take Two

by David Klemt

As we approach Election Day on November 8, it’s important to keep in mind that the Credit Card Competition Act of 2022 is still in play.

In fact, reports predict that another attempt to pass the bipartisan bill will take place in November. If reports are accurate, Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) will try to include the bill in the National Defense Authorization Act (NDAA).

Now, that sentence and strategy may have you scratching your head. What, you may be asking yourself, do credit card fees have to do with defense spending?

Well, not much, truthfully. But you’re probably well aware that politicians will try to amend bills in bids to pass legislation they want. The common term for such a provision is “rider.”

It’s not difficult to understand why the Credit Card Competition Act has gone nowhere when we view Sens. Durbin and Marshall’s rider tactic.

Earlier this month, the senators attempted to include their bill within the NDAA. The reason is simple: the bill specifies the US Department of Defense’s (DoD) budget and expenditures each year. In other words, this is a “must-pass” bill.

However, Sens. Durbin and Marshall aren’t the only senators sponsoring bills. And they’re certainly not the only senators attempting to attach riders to the NDAA.

“It’s a bold strategy, Cotton.”

I will say, at least Sen. Durbin’s effort to attach the Credit Card Competition Act rider to the NDAA is somewhat related to the DoD.

You see, he and Sen. Marshall tried to tack on two amendments to push their bill through. The first amendment theorizes that veterans are being hurt by credit card fees. According to the senators, when military veterans make purchases at a military commissary, they are sometimes subjected to surcharges related to merchant interchange fees.

The second amendment brings the US Treasury Department and US Defense Department into the mix. This effort directs the departments to research just how much veterans are paying (annually, one would assume) in surcharges, and which companies these fees benefit. Then, the departments are to issue this report to Congress.

So, hey, points for attempting to make including the Credit Card Competition Act of 2022 relate to the NDAA for FY 2022. Of course, other senators are attempting to include their own riders. Should reporting prove accurate, some 900 amendments have been proposed. Supposedly, a few dozen might just make it.

This strategy didn’t work this month because the NDAA vote isn’t taking place in October. Instead, the plan is for the vote to take place sometime mid-November, when the US Senate reconvenes.

To learn more about the Credit Card Act of 2022, click here. If it’s a bill you support, let your elected officials know. Should you oppose the bill, let that be known to lawmakers as well.

Image: CardMapr.nl on Unsplash

October 26, 2022by David Klemt David Klemt No Comments

F&B in Canada: Top Menu Items

F&B in Canada: Top Menu Items

by David Klemt

Those wondering what food and beverage menu items are performing best among consumers throughout Canada need wonder no more.

And why is that? Well, Restaurants Canada has the answers, revealing the top ten food and top ten beverage items.

Further, the organization compares each item’s performance. In this instance, Restaurants Canada analyses the percentage of orders that contained each food or beverage item from January to April 2022 in comparison to 2019.

These insights (and many more) are available in Restaurants Canada’s 2022 Foodservice Facts report. In fact, you can find our reviews of several of the restaurant advocacy group’s report topics via the links below:

For your own copy of this year’s Foodservice Facts report, click here.

Top 10 Canadian Drink Menu Trends

As you’ll see below, coffee is outperforming nearly every other beverage category. Specifically, Hot coffee is at the top, while Iced or frozen coffee is ranked third.

Unsurprisingly, Carbonated soft drinks / Pop / Soda split the two coffee categories. According to Restaurants Canada, the Carbonated soft drink category can credit its performance in large part to QSRs.

Milk: 1.8% (2019) to 1.8% (2022)
Iced tea: 2.9% (2019) to 1.6% (2022)
Milkshakes / Smoothies: 2.1% (2019) to 2.0% (2022)
Fruit juice: 3.8% (2019) to 3.0% (2022)
Hot tea: 5.5% (2019) to 4.5% (2022)
Alcohol beverages: 5.1% (2019) to 5.7% (2022)
Water: 6.6% (2019) to 5.0% (2022)
Iced or frozen coffee: 5.3% (2019) to 7.5% (2022)
Carbonated soft drinks / Pop / Soda: 19.7% (2019) to 20.2% (2022)
Hot coffee: 40.9% (2019) to 41.9% (2022)

Compellingly, Alcohol beverage performance in restaurants fluctuated by age group between 2021 and 2022. Alcohol order shares in restaurants, per Restaurants Canada:

Legal drinking Age (LDA) to 34: 46% (2021) to 43% (2022)
35 to 49: 17% (2021) to 21% (2022)
50-plus: 37% (2021) to 36% (2022)

Alcohol order shares in bars, according to Restaurants Canada:

LDA to 34: 35% (2021) to 35% (2022)
35 to 49: 17% (2021) to 19% (2022)
50-plus: 49% (2021) to 47% (2022)

Overall, the 35 to 49 age group appears to be consuming less alcohol in bars and restaurants in comparison to the LDA to 34 and 50-plus cohorts.

Top 10 Canadian Food Menu Trends

As Restaurants Canada notes, the Sandwich / Sub category has grown in 2022. Interestingly, the category just below it in growth, Chicken, is partially responsible for boosting Sandwich / Sub performance.

As far as entrees or “main attractions,” the Burger category remains at the top, beating out Breakfast, Sandwich / Sub, Chicken, and Pizza menu items.

Cake / Squares / Muffins: 3.7% (2019) to 3.3% (2022)
Salad: 4.3% (2019) to 3.8% (2022)
Donuts / Beignets: 3.0% (2019) to 3.8% (2022)
Breads: 4.3% (2019) to 3.4% (2022)
Pizza / Panzerotti / Calzone: 4.1% (2019) to 4.3% (2022)
Chicken: 7.6% (2019) to 8.5% (2022)
Sandwich / Sub: 8.0% (2019) to 8.5% (2022)
Breakfast: 10.8% (2019) to 11.4% (2022)
Burger: 9.0% (2019) to 10.9% (2022)
French fries / Potato / Sweet potato / Onion rings: 15.0% (2019) to 16.1% (2022)

Image: Nathan Dumlao on Unsplash

October 19, 2022by David Klemt David Klemt No Comments

Go Clean this International G&T Day

Go Clean this International G&T Day

by David Klemt

Today we raise a glass to a centuries-old spirit and a classic cocktail that historians can trace back to at least the mid-1800s.

In other words, happy International Gin & Tonic Day!

Now, I’m willing to go out on a limb and say that you and your bar team probably have your G&T builds down. It’s one of—if not the—most well-known highballs in existence.

So, no, I’m not going to write an article about how to make a G&T. It’s elegant, it’s simple, and bar professionals shouldn’t be behind the stick if they can’t make at least a decent one.

Instead, I want to introduce you to a non-alcohol spirits brand you should know: CleanCo. As an alcohol-free brand, CleanCo is ideal for Sober October and beyond.

If you already know CleanCo, cheers! But if this is you’re first time getting to know the brand, here’s what you need to know.

About CleanCo

Spencer Matthews founded CleanCo in 2018. At just a few years old, this isn’t a brand-new company.

However, anyone who knows the beverage industry knows it takes time for young brands to fight through the noise and be heard. Suffice to say, CleanCo is making themselves known in 2022.

Before starting the alcohol alternative brand, Matthews “lived in a cycle of drinking excessively for most” of his twenties. In fact, under the About section on the CleanCo website, Matthews states he sought out jobs that encouraged his hard-drinking lifestyle. That changed before the arrival of his first child. Matthews decided to “go clean” and says it changed his life.

However, Matthews doesn’t expect others to abstain from alcohol consumption completely. That is, of course, a personal choice. Rather, Matthews seeks to provide an alternative that people will actually want to drink.

Whether a guest is choosing to not consume alcohol for a round, an evening, a week, a month, or for the foreseeable future, CleanCo’s mission is to help deliver a seamless drinking experience without the alcohol.

Along with Clean G, CleanCo’s gin alternative, the brand offers rum, vodka, and tequila expressions that are 0.5-percent ABV or lower.

Clean G&T

Just like the original classic this non-alcohol-cocktail mimics, the Clean G&T is simple to make.

In fact, the ratio of Clean G gin alternative to tonic is same as its full-alcohol counterpart.

2 oz. Clean G
4 oz. Tonic
Two lime slices or wheels to garnish

To build, add Clean G and tonic to a tall glass. Next, add ice along with one lime slice or wheel to layer the garnish throughout the length of the drink. Finally, place the other lime slice or wheel on top, and serve.

Image: CleanCo

People toasting with Dunkin' Donuts cups

October 14, 2022by David Klemt David Klemt No Comments

Restaurant Rewards Making Headlines

Restaurant Rewards Making Headlines

by David Klemt

Loyalty programs are making waves and grabbing headlines but not all of the news is good, according to consumers.

Dunkin’, Chipotle, Taco Bell, and Starbucks are among the restaurants whose programs are receiving attention.

Now, there are still those who cling to the idea that all publicity is good. Personally, I’ve found that idiom to be outdated. In fact, I’ve believed that phrase to be false for several years.

Instead, when it comes to publicity, I find this quote from Warren Buffet to be far more accurate: “It takes 20 years to build a reputation and five minutes to ruin it.”

It’s important for operators—for all entrepreneurs, really—to protect their brand’s reputation. At the end of the day, long-term success depends on the reputation one builds. And make no mistake, that reputation is made—or broken—every day, with every interaction.

So, what does all of that have to do with loyalty or rewards programs? It’s simple—such programs aren’t just about revenue. A loyalty program, when executed well, is a branding tool that boosts engagement, recognition, and perception.

When a loyalty or rewards program is executed poorly it doesn’t just mean low membership numbers. A brand’s reputation can take a severe hit if loyal consumers cry foul.

Let’s take a look at some brands that have made headlines the past couple of weeks.

Taco Bell

This rewards program, the Taco Lover’s Pass, is a bit of an anomaly in the loyalty space.

It was first launched in Arizona in September 2021. Depending on the location, the pass cost either $5 or $10. In exchange, people could get a free taco a day for 30 consecutive days, and they could choose from seven tacos.

Back in January of this year, Taco Bell brought back the Taco Lover’s Pass. This time, the program was available throughout the US, and it cost $10. Again, those who snagged a pass through the chain’s app could get a free taco each day for 30 consecutive days.

And just two weeks ago, Taco Bell made the Taco Lover’s Pass available again. This time, people had one day to download the app (if they didn’t have it already) and grab the pass.

Time will tell if Taco Bell will eventually make this wildly popular program permanent. For now, this occasional reward program seems to be serving the chain just fine, and their loyal guests don’t seem to be angry that the Taco Lover’s Pass, thus far, appears fleetingly.

Starbucks

Another interesting approach to loyalty sees Starbucks partnering with Delta Airlines.

As of yesterday, members of Starbucks Rewards and Delta SkyMiles can link the programs together. Members of the former can receive double stars on days on which they’re flying Delta (at participating locations). For the latter, members will earn one mile for every dollar they spend at Starbucks.

Essentially, linking the two accounts ensures that members earn points across both programs for a single purchase. Not a bad move—it should be an effective way to boost loyalty for both companies.

Chipotle

Ah, Chipotle. It’s safe to say this brand has experienced plenty of ups and downs over the past several years.

But credit where credit is due: It seems that the chain manages to come back from each scandal or mistake. And that’s what’s so frustrating—they wouldn’t have to correct missteps if they took care to avoid making them in the first place.

So, why are people upset with Chipotle now? The backlash concerns the restaurant chain’s Chipotle Rewards program.

When someone signs up the program, they can redeem a nice perk immediately: free chips and guacamole. On their birthday, they have access to another perk. In general, the biggest benefit is earning up to 10 points for every dollar spent at Chipotle.

The points a member earns are redeemable in multiple ways: free menu items, a charitable donation, or merchandise. Seems very straightforward, right?

Well, Chipotle updated their rewards program, and it’s not an upgrade. In response to inflation, Chipotle has increased prices, just as innumerable restaurants have also done.

However, the chain updated Chipotle Rewards so that members must spend more to get their free entree reward. Members must now spend an additional $20-plus to get their reward, and they’re understandably unhappy.

It should go without saying but a rewards program is for increasing visits or orders per member. With people declaring they’re “done” with Chipotle, the brand’s update is driving down visits and potentially harming their reputation.

Dunkin’

Things in the reward and reputation space may be worse for Dunkin’ than any other restaurant brand at the moment.

The chain first launched its DD Perks loyalty program eight years ago. Last week, Dunkin’ “reworked” loyalty, launching Dunkin’ Rewards.

Unfortunately, according to several reports, social media, and Reddit, the new program deflated the value of members’ points. From what I’ve seen members must now earn more than double the points they needed to prior to the Dunkin’ Rewards rollout for a gratis beverage.

Oh, and free drinks on a member’s birthday? The new program eliminates that perk. As is often the case on social media, some people are seething.

However, a statement from Scott Murphy, the president of Dunkin’, suggests that people are perhaps misunderstanding or misrepresenting the new program.

“Dunkin’ loyalists told us they wanted the ability to redeem for more than just beverages and we listened,” Murphy said to The Washington Post. “They also wanted to bundle points for larger orders, which we accomplished. And they told us they wanted to be recognized for their loyalty, which they can now achieve through Boosted Status and earn points even faster when they come to Dunkin’ more often.”

In short, Dunkin’ Rewards is built to allow members to redeem points for a wider array of menu items, including meals. For now, however, it seems the knee-jerk reaction is that many members feel the points they earned prior to the new program’s launch are devalued. And they’re furious, with some calling for a boycott.

Obviously, a boycott is the opposite effect one wants from their loyalty program.

Loyalty is a Tightrope Act

If there’s one takeaway here, it’s that rewarding guests for their loyalty isn’t as simple as offering points for dollars.

Perhaps it should be simple, and maybe it was was that simple a while back. But now, operators must be far more cautious when designing a loyalty program.

I’ll continue to dislike offering discounts for most brands. In my opinion, once a guest becomes accustomed to receiving a discount regularly, that discount becomes the standard price. That’s not good for most operators.

It may seem counterintuitive, but I’d rather see loyalty program members receive a free item than discounts. At least they’ve paid full price to earn that perk.

Another issue, however, is making changes to loyalty programs. Operators are facing incredible strain when it comes to costs, and this industry’s margins are already razor thin. It appears that some brands aren’t just increasing costs, they’re also increasing the points it takes to earn loyalty perks.

That may make sense on paper but program members are showing that they don’t take kindly to this type of change.

Slow Down

Look at loyalty programs through the eyes of consumers, not just the eyes of an accountant.

When the costs of living rise and a person’s dollars don’t go as far as they did before, they tend to cut back or eliminate expenditures. Commonly, restaurant visits are among the first things suffer. Loyalty programs can offer guests a way to stretch their dollars—there’s an attractive perk around the bend that allows them to justify continual visits.

If a brand devalues a loyalty program member’s points or requires them to spend more to earn the same benefits, why would they be happy? Why would they remain loyalty? As far as they’re concerned, their incentive to do so no longer exists. The perceived value is no longer there.

Before an operator launches or “revisits” a loyalty program, they need to slow down and analyze it from every angle. These programs are a delicate balancing act, demanding they make sense for both the bottom line and the guests.

If an operator hasn’t yet implemented a loyalty program, perhaps they should hold off until costs become more reasonable. With inflation affecting costs and therefore prices, the wisest move may be to take the time to really dial in the program, prepare the necessary assets, and implement when it won’t impact revenue negatively.

On the flip side, operators considering making significant changes to their loyalty programs need to take the time to strategize before implementation. A misstep, even if it’s a misunderstanding from the member side, can do irreparable harm.

Image: Isabella and Zsa Fischer on Unsplash