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I don’t know about you, but 2013 was a confusing year in our business. We had record gains by public restaurant company stocks during one of the most challenging years of sales and traffic (Black Box Intelligence -.01% & -2.1% respectively). Aren’t we in the fifth year of what is typically an eighteen to thirty six month recovery? And the weather gods are punishing us, as it seems more frequent disruptions and on the weekends to boot! Unemployment is still high, and our People Report data says you are experiencing more difficulty in filling jobs with qualified employees and turnover is moving up.
Additionally, the industry continues to evolve in ways that are more systemic. Our industry and many brands are in the commodity business. Ownership has evolved from engaged founders to professional investors. Our customers move from brand to brand and segment to segment easily making loyalty daunting. Value is far more complex than menu pricing and promotion. Our workforce is maturing with evolving needs of their own, pressuring some to want a bigger share of the pie.
What remains consistent in our industry?
It is still a big market with millions of transactions daily generating cash flow. Irrespective of the ownership model great leaders are able to walk the line of short-term earnings and long-term brand health. Innovation in product, technology and concepts continues to fuel growth. Value is more about the experience delivered or destroyed by the employees than the price. We may not always be the best employer, but few industries provide the opportunity to progress and even own your own business.
So how will all of this impact 2014?
As I have written before, there is no silver industry bullet except an unexpected growth rate in disposable income in this country. I don’t know an economist, even the most optimistic, who sees that on the horizon. At People Report and Black Box Intelligence we are focused on top quartile performance on a market (DMA) basis. We are not economists; we are performance management researchers, utilizing deep benchmarked data, observations and restaurant experience. We observe what the best performing companies do about what they can control!
In 2014, in the absence of the silver bullet that benefits us all, what can we humbly suggest?
Competition is more than your direct segment: Consumers easily trade from brands and segments based on convenience and choice determined by the occasion. We see the top quartile companies focus their resources on occasions in the market share battle.
The market share battle is won market by market to ultimately win regionally or nationally: Market competition is determined by local and regional competitors as well as national chain operators. The share game is unique within the individual market.
The best performing markets in a brand may still be under performing the marketplace: We find the unit performance comparison against the market competition is the key to knowing real performance management.
Pay doesn’t always correlate to performance, but turnover does: We see this pretty clearly in individual market data. Inspired leadership and engaged employees make a difference in sales growth and market share gains.
Capital investment in productivity and customer facing technology will continue to separate winners and losers: A company constrained by capital or ideas will not be able to effectively compete on a multiple unit, multiple market level.
Culture still drives performance: The restaurant business is a team sport. It requires a group of positive people that desire to deliver product and service in an exceptional way better than the competition. The culture that values the individual through fairness, openness and purpose gets and retains the best employees.
So it’s another new year of facing the challenges of government, weather, investor and worker activism that will persist. Another year of oversupply pressuring sales, traffic and profitability. But we are in the restaurant business and that means our DNA is different. Our DNA is optimistic, confident and competitive.
I see the opportunity greater than the threats for the leaders with a vision of how to do things differently in a changed commodity world. 2014 will be a good growth year for the market share winners at the cost of the market share losers.
It’s not like school where everyone gets an award.