To Our Loyal Followers,
Here it is the beginning of March, can Spring weather be on the horizon? I watched the first televised Cubs /Sox game so as baseball has its’ Spring training, I would like to share a few Spring Training tips with you that I recently read; authored, by Brandon Stanley. Brandon is a noted journalist who focuses on Career Development and HR-management. I hope these tips will get you ready for the next time you have to utilize your employee selection skills. (Of course using the major league ready American Recruiters Team for getting qualified candidates is the first step), these tips will assist you in making the best selection. Here are just a few: Mind Your First Impressions, your intuition may not always be the best; however, trust yourself that the first impression as to whether this is the right person for the position is powerful. Give Employees a Test Drive, Starbucks (and others) have developed a virtual application to see if candidates can really do the job. If you ask “can you do the job” 99.9% of candidates will respond “Of Course”. A test drive is a great idea to try. My final tip: Look Beneath the Surface, knowing what the candidate does away from the job will help assess their fitting into your culture which is critical for success. As you prepare for the regular season, enjoy the latest edition of American Recruiters Global Foodservice News. It always hits it out of the park!!
National Restaurant Association Announces 2018 Kitchen Innovations Awards
The National Restaurant Association announced the recipients of the 2018 Kitchen Innovations (KI) Awards, honoring progressive equipment that increases efficiencies and productivity for back-of-the-house operations and benefits restaurant operators. Each recipient and their product will be showcased in the interactive Kitchen Innovations Showroom at the 2018 National Restaurant Association Restaurant, Hotel-Motel Show, to be held May 19-22 in Chicago at McCormick Place. “The KI Award recipients are innovators in back-of-house operations and work tirelessly to improve the challenges faced by restaurant operators,” says Dickie Brennan, Convention Chair for NRA Show 2018 and owner/managing partner of Dickie Brennan & Company, whose restaurant group includes Tableau, Palace Café, Dickie Brennan’s Steakhouse, and Bourbon House. “For fourteen years, the industry has admired KI Award recipients and their contribution to making our foodservice industry even better.”
The 2018 KI Award recipients reflect the trends and topics most important to foodservice operators today. The 22 selected innovations address operator concerns from labor, energy and water efficiency to food safety, sanitation, cross-functionality and space-saving. New software and new materials continue to make new solutions possible. The 2018 Kitchen Innovations Award recipients are:
Air Oasis. Bi-Polar Ice BPi200
Unlike ice sanitizing technologies that use UV light or other sources that create ozone, which can be hazardous to health, the patent-pending BPi200 uses a small electrical housing and carbon-fiber brushes to release airborne positive hydrogen and negative oxygen ions throughout the ice machine without creating ozone. The compact unit greatly reduces mold, yeast, bacteria, viruses and other pathogens, enhancing sanitation and extending service cycles.
Alto-Shaam, Inc., in conjunction with Appliance Innovation. Vector F Series Multi-Cook Oven
Last year the electric H Series introduced multiple cooking chambers independently controlled for temperature, fan speed and time, allowing simultaneous cooking of dissimilar menu items as well as patented Structured Air Technology high-velocity, focused heat for faster cooking. The new F Series builds on that with larger chambers to accept full size sheet or hotel pans AND a new, patent-pending innovation that adds the flexibility to combine two cooking chambers into one for larger items without disrupting the structured airflow design.
Antunes. GST-1H Flatbread-Toaster
The new Flatbread-Toaster brings innovative capabilities to the flatbread-pita-tortilla category with wide-mouth loading and dual platens located inside dual conveyor belts to heat a variety of products consistently—up to 200°F—providing quicker throughput. For example, it heats uncooked flour tortillas to 160°F in seconds. The integrated landing zone is heated, too.
Astra Shunsuke. Peeling Machine
Fresh from Japan, this new machine automates labor-intensive fruit and vegetable peeling. Programmable for apples, kiwis, oranges, potatoes and more—nine different fruits and vegetables in all (and suitable for similarly sized items)—the unit allows different thicknesses of peeling. Comes in two sizes for smaller and larger operations.
Bizerba North America. GSP H & HD Illuminated Safety Slicers, Manual, Semi-Automatic and Fully-Automatic Operation
This slicer line, introduced to foodservice a little over a year ago, caught the judges’ eyes with its big emphasis on safety. These illuminated slicers use color-coded lights to indicate the machine’s status—solid green is safe mode, with blade removed, etc., for safe cleaning. Flashing red is for pre-run, and solid red indicates blade is spinning and ready to slice.
Evo, Inc. MultiZone Plancha
Evo takes cooking-zone temperature control to the next level: Unlike anything else in the griddle or plancha category, the MultiZoneTM features three independent cooking zones, each separated with IsoBar technology. IsoBar is a recirculating fluid thermal barrier that effectively mitigates temperature carryover between zones for precise and variable temperature control across a continuous cooking surface.
FLAT Tech Inc. FLAT Equalizers
Wobbly tables plague the industry. Unlike other solutions, Equalizers replace a table’s existing screw-in feet with an adjusting, hydraulic compression and spring system; they also feature an ingenious locking mechanism (with patents pending) to create a rock-solid stance without any springiness. A rounded design allows for non-snag movement across floors and carpets. Easy to set and reset, too, for quickly aligning tables.
Garland, A Welbilt Brand. Instinct Induction Countertop Line
Instinct is the first multi-sensor induction countertop line to incorporate cook and hold functions under one unit, measuring temperatures across the entire surface for increased accuracy. Duel-zone Instinct can adjust frequency on each cook zone to match pan requirements, adjusting for elements like ferrous content and pan quality; boosting performance and mitigating against temperature overshoots. A plug and play system with universal voltages.
Genius Pan, LLC. Genius Pan
How much time do operators spend freshening customer-visible prep lines and salad bars? The Genius Pan uses an ingenious, patented threaded system that allows the bottom of the pan to adjust up or down in the well, keeping everything looking fresh, topped off and inviting, cutting waste and saving labor.
Hoshizaki America. KMEdge Ice Machine Series
Finally, an inventive redesign of the icemaker evaporator. The KMEdge utilizes a one-piece, dual-sided stainless-steel evaporator that envelops the oval-shaped copper heating/cooling tubing, optimizing surface contact area for optimizing energy efficiency. The result is harder, clearer ice, higher ice production in fewer cycles, longer product life and greater reliability.
Markov. Level RF Oven
Say hello to the next wave—radio frequency cooking. Building on autonomous-vehicles technologies, the ventless Level RF Oven “learns” to recognize food items and direct RF energy to cook them to prescribed standards for internal temperature, surface doneness, etc. And there’s more: The Level can identify multiple dissimilar foods and cook each, simultaneously, to its own standards, to finish at the same time.
Marra Forni. Electric Brick Oven with Open Mouth
This powerful electric brick oven, while not the only Italian brick oven on the market, creates a new category for itself with cooking temps up to 1000°F with an open mouth. Efficiency and heat retention come from Sorrento refractory brick walls AND deck that retain the heat, a low dome and balanced heat from all directions. Cooks a pizza in 45 seconds—up to 200 per hour.
Marra Forni. Rotator Deck Brick Oven with Double Mouth Opening
This first pass-through, rotating-deck oven uses two forced-air burners totaling just 84KBtu/hour to produce pizzas from both directions in under 90 seconds. Controls regulate heat, rotation speed from 0 to 180 secs, even separate temperatures for each side if so desired. An air screen keeps the heat in.
Multiplex, A Welbilt Brand. FreshBlender
What’s better than the boom in smoothies, shakes and frappes? A self-serve system that lets customers create their own in less than two minutes. In just a 20” x 39” footprint, the FreshBlender™ integrates refrigeration, ice making, blending, dispensing and digital controls for hundreds of self-served drinks per day. Realistic payback in well under a year.
Omni-Rinse. Integrated Rinsing System
This innovative warm-water rinse station for barware tins, jiggers and tools incorporates rinsing as a step within the drink-making process, saving time and eliminating the chronic problem of backlogged, unrinsed tools. The rinse process is hands-free and uses no electricity. The station mounts to a speed rack, wall or under bar.
Prince Castle. Modular Holding Bin
True modularity is easier said than done, but Prince Castle has done it with its Modular Holding Bins. This holding innovation features a master base, allowing the system to expand horizontally and vertically, distributing power and communications to set and maintain desired serving temperatures. Stack, add, subtract and move them to suit. Build exactly the configurations needed. Amazing versatility.
Sealed Air Corporation. Cryovac FlexPrep EZ Dispensing
How much time and effort do staff members spend on BOH condiment systems? Conventional methods, from pails to paperboard containers, involve a lot of handling and wasted/lost yield. Sealed Air’s new system uses prefilled Cryovac pouches with frangible seals specially fitted to load into the operation’s dispensing equipment. Just pull the trigger. Less handling, better sanitation and better yield speed the payback.
Soda Gun Jetter LLC. Soda Gun Jetter
Tired of dealing with sticky, unsanitary syrup residue and bar flies in and around the soda guns? Soda Gun Jetter is an automated system that includes a programmable control box, holsters and dedicated tubing to flush soda gun nozzles and drip cups during off hours with pressurized water.
Structural Concepts Corporation. Foodscaping Wells
Creating attractive, unique buffet-style displays for a variety of foods and circumstances is always a challenge. Foodscaping Wells offer an imaginative modular system based on a refrigerated cabinet featuring a food well housing with multiple height-adjustable display platforms. The adjustability lets staff set food serving vessels at various heights for an eye-catching, inviting display.
Structural Concepts Corporation. Reveal Frameless Glass Food Displays
Argon gas-insulated double glass panes have been used in other products to provide a thermal barrier and reduce condensation. Reveal Frameless Glass Food Displays now bring those advantages to foodservice in attractive merchandising cases with completely frameless vertical glass for a clean, uninterrupted view.
Vitamix. Aerating Container
With emulsions, foams, whipped creams, meringues and other aerations becoming ever more popular, getting by with various chargers, whisks and mixers just isn’t enough. The Aerating Container’s specially shaped disc blade offers the solution, letting kitchen staff and bartenders fine-tune the texture of mousse, infusions and emulsions without pureeing.
Vulcan. SonicSafe Ultrasonic Scale Prevention for Steamers
Limescale is early death to generator-style steamers. Filters and treatments work but require maintenance. Vulcan applies the same Ultrasonic technology to commercial steamers proven to combat scale build-up in large industrial boilers. Ultrasonic technology breaks up limescale particulates suspended in water, continuously preventing scale from adhering to heating elements and generator walls.
An independent panel of industry experts comprised of internationally-recognized food facilities consultants, multi-unit restaurant executives and design experts select the KI Award recipients. The 2018 Kitchen Innovations judges are: Dan Bendall (Principal, FoodStrategy, Inc.); David Chislett, FCSI (Executive Principal, Ricca Design Studios); Jeff Cook (Chief Engineer, Restaurant Solutions Group, McDonald’s Corporation); Richard Eisenbarth, FCSI (President / COO, Cini-Little International); Foster F. Frable, Jr., FCSI Associate AIA (President, Clevenger Frable LaVallee); Randy Homer (Program Manager, Food & Beverage Operations Asset Management, Walt Disney Parks and Resorts); Jim Krueger, Jr., CMCE, NRAMF (Chief, Air Force Food & Beverage Policy, Procedures, Business Development & Strategic Initiatives Air Force Services Activity (AFSVA) Food & Beverage Branch); Aaron Lamotte (Senior Director, Performance Interiors, Sodexo Performance Interiors), and Steve Otto (Director, Capital Equipment Purchasing, Darden). – Source: NRA/fsr.
Tyson Foods to Launch Several New Products in 2018
Tyson Foods said that it will launch several new products this year and modernize its $1bn brands as part of its transformation into a modern food company. Speaking at the 2018 Consumer Analyst Group of New York conference, Tyson Foods president and CEO Tom Hayes and members of the company’s enterprise leadership team shared with investors that the company is delivering on its strategy and driving growth across its portfolio of protein from its chicken, beef and pork segments to prepared foods. The US food giant is particularly looking at consolidating the growth of its prepared foods segment. In May 2018, the company is set to launch a new range of frozen breakfast sandwiches, dubbedEgg’wiches, under the Jimmy Dean brand. This new range of sandwiches will not have bread but will contain egg white scrambles. Tyson Foods has scheduled the launch of a new range of snacking, salads and wraps made from all-natural meats under the Hillshire Farm. The launch of this new product in the company’s lunchmeat section will be during the spring. The US food company will also launch a new brand Green Street to meet consumers’ growing interest in ready-to-eat meals. The first launch in this brand will be protein-rich grab-and-go bowls that are completely plant-based. Tyson Foods has also entered into a partnership with Mexican spice brand Tajin. The partnership will work on new products like Tajin spiced meatballs, smoked sausage with mango and boneless chicken bites. Tyson Foods said that it is making investments in companies that are bringing in innovations in the food industry through its venture arm Tyson Ventures. Launched in December 2016 as a $150m venture capital fund, Tyson Ventures has made investments in food startups such as Beyond Meat, Memphis Meats and Tovala. Hayes said: “Tyson Foods is transforming from a company with a strong heritage in chicken to a modern food company that is challenging the industry status quo. “Consumers expect more from food companies today, and we’re up for the challenge. We’re combining our size and scale with agility to make food people want to eat. That’s driving our business and helping us deliver top-tier returns for shareholders.” – Source: Food Business Review.
Middleby Acquires Hinds-Bock Corporation
The Middleby Corporation announced the acquisition of Hinds-Bock Corporation. The company is a leading manufacturer of solutions for filling and depositing bakery and food product, an integral part of the industrial baking and food processing line. The company is based in Bothell, Washington and has approximately $15 million in annual revenues. “For decades, Hinds-Bock has been a leader in filling and depositing technologies serving industrial baking, food processing and other specialty areas. This acquisition allows Middleby to offer a customized and complete integrated solution for their high volume baking and processing needs,” said Selim Bassoul, Chairman and CEO of The Middleby Corporation. “Hinds-Bock technology will highly complement the existing bakery and processing systems of our current brands. We can now offer our customers more with one supplier.” Hinds-Bock is a top manufacturer of standard and custom depositing machines and fully automated lines for the baking industry for depositing batters such as muffin, cupcake and cake, depositing fruit pie fillings, mini cake lines, icing equipment and dry toppings such as streusel and nuts. Food factories also rely on Hinds-Bock for liquid bottle filling, high speed meal filling systems, value added protein applications and expertise in the integration of standard and custom filling machines for vertical and horizontal form fill seal applications. – Source: The Middleby Corporation.
Welbilt Announces Agreement to Acquire Crem International
Welbilt announces agreement to acquire Crem Internations which provides entry into hot beverage market via professional coffee machines, one of the fastest growing categories within the global beverage market. Adds highly complementary product portfolio enhancing Welbilt’s position as full-line supplier with attractive cross-selling opportunities. Supports Welbilt’s strategy to further drive growth outside the U.S., while also strengthening U.S. offering. Expected to be accretive to earnings beginning later in 2018 and beyond. Acquisition is expected to close early in the second quarter of 2018. Welbilt, Inc., a leading global provider of commercial foodservice equipment, announced that it has entered into a definitive agreement to acquire 100 percent of the shares of Avaj International Holding AB (“Crem® International” or “Crem”), which is majority owned by private equity firms Priveq Investment Fund IV L.P. and SEB Venture Capital, for total consideration of approximately SEK 1,800 million, or approximately $224 million USD equivalent.
The acquisition will be funded through cash on hand and existing credit lines and is expected to close in the second quarter of 2018, subject to certain closing conditions. Crem International is a global leading manufacturer of professional coffee machines with more than 50 years of experience in the market and sales in more than 80 countries. Crem is headquartered in Solna, Sweden, and has three manufacturing sites in Åmotfors, Sweden, Gandia, Spain, and Shanghai, China. These plants are supported by three R&D centers and six sales offices. Crem develops, manufactures and markets coffee machines under three brands: Coffee Queen®, Expobar® and Spengler for use in offices, restaurants, cafes and coffee shops, catering and convenience stores. Crem offers the broadest range of professional coffee machines, including manual and automatic espresso and filter coffee machines as well as instant, liquid, freestanding and other machines. In 2017, Crem International generated sales of approximately SEK 767 million, or approximately $90 million USD equivalent. The acquisition is expected to be accretive to earnings beginning later in 2018 and beyond, with run-rate synergies expected to grow to approximately $10 million by 2020. “The acquisition of Crem International is the first step in realizing our ambition to complement our organic growth strategy with select bolt-on acquisitions,” stated Hubertus Muehlhaeuser, Welbilt’s President and CEO. “Crem expands our full-line of commercial foodservice equipment coverage by adding the fast-growing hot coffee category to our portfolio, which gives Welbilt the broadest portfolio of hot and cold beverage equipment of any company in the market.
Crem is very strong in Europe and Asia, supporting our strategic objective of expanding our presence in these two important regions. We foresee significant cross-selling opportunities between Crem’s and Welbilt’s respective customer bases in those regions, and see further opportunity to bring Crem to Welbilt’s customer base in the U.S. and include it as a core offering in our fitkitchenSMsystem solutions.” “We welcome Crem International’s employees into the Welbilt family. We see substantial opportunities going forward in creating a joint team supported by shared company values and a spirit of innovation,” concluded Muehlhaeuser. Sebastian Lindstroem, CEO of Crem International noted, “We at Crem International are delighted to join forces with Welbilt. Jointly with our shareholders we have built Crem into one of the global leaders in professional coffee machines with a unique breadth of technology and solutions with a highly innovative and competitive product portfolio. Within Welbilt’s strong family of brands and products, we will be able to further expand the reach of our product portfolio through improved market access and our current customers will benefit from Welbilt’s expertise in new product development and manufacturing process improvement.” The previous majority shareholders, Priveq Investment Fund IV L.P. and SEB Venture Capital, welcome the arrival of Welbilt as new owner and strategic partner for Crem International. Karl-Johan Willén, partner at Priveq Advisory AB, acting in its capacity as Adviser to Priveq G.P. IV Ltd, being the general partner to Priveq Investment Fund IV L.P., said, “We are convinced we have found the best partner in Welbilt for the entrepreneurial future of Crem International. Welbilt has substantial access and experience in relevant markets and maximizes Crem’s potential for future success.” – Source: Welbilt.
The Cheesecake Factory Prepares to Launch Fast Casual Spinoff
More than a year after the company hinted at a limited-service spinoff, The Cheesecake Factory is making good on its word with plans to open a pilot fast casual later this year. The news came amid the casual-dining chain’s fourth-quarter earnings report Wednesday, February 21. As CEO and chairman of the board David Overton pointed out, the final quarter of fiscal 2017 showed signs that sales were beginning to stabilize. Although profit, revenue, and earnings per share declined from the same quarter the previous year, key metrics either met or surpassed analysts’ estimates. Earnings per share decreased from $0.53 to $0.67 in the fourth quarter of 2016, but the former did match industry forecasts. Revenue was expected to post at $567 million but instead grew to $571.8 million, and same-store sales, which were predicted to slip 1 percent, dipped 0.9 percent. The notable portion of the investor call resided not in the numbers, but rather in Cheesecake Factory’s plans for the quarter and year ahead, including a new, limited-service iteration.
In December 2016, the company reported it was internally developing a fast-casual concept, but any hype around the announcement quickly subsided. Now it appears the project is well underway; the company is finalizing lease negotiations for a space in Los Angeles and is projected to launch later this year. The yet-unnamed fast casual will, with any luck, not be a one-off store. Overton estimated it would only take six months to monitor the new concept and ensure its profitability. “Then we would look for another site once we feel really good about it and make sure that we’ve done all the right things operationally,” Overton said. “We’re excited. We’re working on a little bit everyday, and we’ll see where it goes.” Cheesecake Factory has proven its mettle in ideating and creating new concepts beyond its flagship namesake, namely through sister brands Rock Sugar and Grand Lux Café. The former opened its second location during the last quarter, while the company plans to add another Grand Lux Café to the system in 2018. The brand has yet to venture beyond the full-service format and consumer-packaged goods, so fast casual would mark a new chapter in diversifying its portfolio. One update playing to Cheesecake Factory’s favor is its thriving off-premises business—often an essential feature in limited service. Takeout grew to 12 percent of total sales in 2017 with 90 percent of locations offering delivery services by third-party provider. Online ordering will also play a crucial role in growing that side of the business, and the brand expects all domestic locations to offer this capability by the end of March. “We believe delivery is a driver of the total off-premise sales. If you go back and look at 2016 there were about 11 percent, 2017 it moved up to 12 percent, and even north of that in the fourth quarter of last year. So we do believe that a portion of that is being driven by the delivery business,” said brand president David Gordon. “It’s the beginning of this delivery journey, and we’re going to continue to execute at the highest level because we know it’s where the guest demand is.” In the year ahead, Cheesecake Factory will celebrate its 40th anniversary. The company also stands to benefit from the recently enacted tax reform, and part of those savings, Overton says, will be invested in its staff—not necessarily by raising wages but rather through enhanced benefits. Given the company’s track record, those perks could set new benchmarks for the greater industry. Earlier this year, Cheesecake Factory was included in Fortune magazine’s 100 Best Companies to Work For. It marked the brand’s fifth consecutive appearance on the list. “Once again, we were the only restaurant company on the list, solidifying our position as an employer of choice in this tight labor environment,” Overton said. – Source: Cheesecake Factory.
When Restaurants Should Beware of Debt Financing
Debt financing has become widely available to restaurant companies in recent years, and many operators have taken advantage of this source of capital to fund development. This is a big difference compared with 30 years ago, when banks and other lenders shunned the industry and many companies had to grow within the limits of their cash flow or raise expensive equity. In many ways, the availability of debt is good because it reduces the need for equity and increases returns to investors. However, there is a downside to debt that could be harmful, especially to younger, growing companies. The benefits of debt are obvious. Here’s an example: If a restaurant costs $3 million to build and produces $600,000 in annual cash flow on $3 million in sales, it would generate a 20-percent return on investment. If an investor put up all the cost in equity, the return on equity would also be 20 percent. If the investor put up $2 million and the rest of the investment was borrowed at 8 percent, the return on equity would be 26 percent ($600,000 cash flow less $80,000 of interest, or $520,000 divided by the investment of $2 million). However, many operators fail to account for two things: 1) The debt has to be paid back, even if the loan is interest-only for a period of time; and 2) The risk profile of the company has increased significantly as a result of the debt. The first issue is easy to quantify. If the $1 million loan at 8 percent is amortized over five years, the annual debt service is approximately $250,000. Therefore, the true cash flow at the restaurant level is about $350,000, or 17.5 percent of the $2 million investment. After five years, there is no debt service, so the return on investment would jump to 30 percent in the sixth year and, over a 10-year life, the returns would be greater under the leveraged scenario than if the project was fully funded by equity. Further supporting the case for leverage is a net present value calculation. Under the above scenario, assuming a 10-percent discount rate, the net present value of the $2 million of equity invested ($1 million borrowed) is approximately $740,000, whereas the net present value of the $3 million equity investment is approximately $687,000. One could argue, however, that the risk profile of the $2 million investment is higher because of the leverage associated with the restaurant, so the discount rate should be higher. Even with only a 1-percent increase in the discount rate to reflect the higher risk, the net present value of the leveraged investment would be lower than that for the unleveraged investment. The increase in the risk profile is what most operators fail to fully appreciate, especially because most analysis is done at the restaurant level, not at the corporate level. That risk can manifest itself in several ways, including a decline in future sales and profitability or lower-than-expected sales of new restaurants. If either or both of those scenarios occur, a leveraged company can quickly come under significant financial stress. In the above example, the restaurant cash flow margin before debt service is 20 percent, and 11.7 percent after debt service. Assuming overhead costs of 4 percent, the corporate margins are 16 percent for the unleveraged restaurant and 7.7 percent for the leveraged one, equating to cash flow of $480,000 and $230,000, respectively. If sales decline by 5 percent, and assuming a 50-percent negative flow-through, cash flow after debt service would decline $75,000 under each financing scenario. In dollars, the leveraged restaurant would earn $155,000, or only about 5 percent of sales, while the unleveraged restaurant would still be earning more than $400,000. It doesn’t take too much imagination to think of a scenario where most, if not all, of the leveraged cash flow could disappear, especially in a highly competitive market or during an economic slowdown. For younger brands with less seasoned business models, the leverage risk is magnified because of less predictable sales at new restaurants. This analysis is not intended to suggest that debt should never be used to finance growth. Rather, restaurant operators — especially younger, rapidly growing companies — should fully understand the risk inherent in taking on debt and proceed cautiously. Analyze the impact on cash flows of a worst-case scenario, and then reduce that by another 10 percent. If there is still a good cushion, debt may be an excellent financing alternative. Look forward a few years and see who you will be working for as defined by what portion of your cash flow will be going to pay lenders in the form of interest and principal payments. If that proportion gets to be more than 50 percent, put the brakes on new debt if possible, because you are working for the banks more than half the time. Raising equity is difficult for smaller companies and dilution can be significant, even if equity capital is available. The reduced risk and greater margin of error in a difficult environment could justify the dilution. After all, it can be better to own a smaller percentage of a company that is performing well than a larger percentage of one that is performing poorly. – Source: NRN.
Restaurants Re-Work the Food-Cost Equation
First, the good news: Food prices, with a few exceptions, have stabilized over the past few years. Now, the bad news: The price of pretty much everything else has gone up. “Food cost used to be your highest cost,” said Kelley Jones (left), president and COO of Hospitality Alliance, a restaurant consulting, operations and management firm. “Now it’s occupancy cost, followed by labor cost, followed by food cost.” That makes managing the cost of what goes on the plate even more crucial to turning a profit. New tools can help restaurateurs keep track of what’s happening in their establishments, and operators have gotten smarter at looking at the big picture when it comes to ensuring that the menu is profitable. The new food-cost equation. Chefs have traditionally been taught to keep a close eye on food cost, or the percentage of the menu price that it costs to make a dish. For example, if the ingredients in a dish cost $1 and it’s priced at $4 on the menu, the food cost is 25 percent. “So many chefs erroneously look at that percentage,” Jones said. “But you don’t bank percentages; you bank dollars.”
The more important measure is margin, he said. For instance, if a calamari dish priced at $12 on the menu has a 10-percent food cost, the profit is $10.80. But a rib-eye steak priced at $40 on the menu with a 40-percent food cost nets a $24 profit. “You’re making a lot more on that rib-eye than you are on that calamari,” Jones said. But slavishly ensuring that the food cost of every item meets budget — whether at a doughnut shop with a 5-percent food cost, a ramen joint with a 20-percent food cost or a steakhouse with a 32-percent food cost — is to miss the big picture. Instead, operators must price menu items in a way that makes sense to customers, Jones said. When Hospitality Alliance enters a new market, they do a deep dive into what competitors are charging and price the menu at the middle to low end of that range, according to Jones. “Our long-term growth is through covers, not check averages,” he said. Still, operators must know the cost of everything that comes out of the kitchen, not just center-of-the-plate proteins, but “sub recipes” such as sauces and sides, Jones said. Other costs also factor in, according to Stacy and Adam Jed, owners of Bluestem Brasserie in San Francisco. Adam Jed said the old rule-of-thumb for independent restaurants like Bluestem was to calculate a food cost of 28-33 percent and add a few cents for washing dishes, the cost of energy and the like. But those few pennies are no longer enough, so they now additionally calculate the cost of labor of a dish. For example, if the restaurant makes burger buns in-house, they don’t just calculate how much flour, yeast and oil cost, but also the time it takes to prepare the buns and the worker’s hourly wage. That calculation is a more accurate way to see if the restaurant really saves money compared with buying the bun from a supplier, Stacy Jed said. Adam Jed is now working on how to factor in the cost of washing dishes, plating, clearing and setting the table to determine how to price a dish on the menu.
Labor costs are also on the mind of Aaron Noveshen, restaurateur and founder of The Culinary Edge consulting firm. “In Sunnyvale, [Calif.,] minimum wage went from $11 to $15 in 13 months,” he said. As a result, he keeps a tight rein on schedules at Starbird, his quick-service chicken chain with locations in Sunnyvale; San José, Calif.; and at Levi’s Stadium in Santa Clara, Calif., home of the San Francisco 49ers. Noveshen schedules staff by half-hour and even 15-minute increments, and has implanted prep lists and built schedules based on projected sales to improve efficiency. Improving value perception. Noveshen has also worked to save on packaging. Although the 50 percent of customers who order takeout get their food packed in boxes, dine-in customers get their chicken sandwiches wrapped in less expensive paper with half of the sandwich exposed, improving its visual appeal. Salads are similarly served in what Noveshen called an “oversized fry boat” that helps to improve its perceived value. “Why put a closed box on a tray when you can show beautiful food?” he asked. And if the packaging is less expensive, all the better, he added. Presentation can affect perceived value in full-service restaurants, too, so the rice bowl trend has been a boon to Pacific Catch, Noveshen’s full-service concept. But when it comes to profit, free ingredients like air and water are tops, he said. “Starbucks wins that war pretty well,” he said, as coffee is mostly water and much of the milk added is steamed and aerated. After free ingredients come commodities such as grains and oils. By filling a bowl with rice and enhancing the flavor with sauces and ingredients such as grilled pineapple, pickled vegetables and ginger, customers don’t need a huge piece of protein to feel satisfied. Pacific Catch charges $16.50 for rice bowls, according to its website. Noveshen advised experimenting with different presentations to see how customers respond. “We’ve replaced one plate versus another and the [perceived] value goes through the roof,” he said. Messaging helps, too, according to the Jeds at Bluestem. “All food cost is based on the price that you can charge for the product,” Stacy Jed said, so it’s important that customers perceive the food as high quality. Conveying quality, reducing waste.
One way to convey the quality of food is with whole-animal butchery. Bluestem brings in whole hogs, lamb and beef primals to butcher in-house. Although the labor involved in butchering must be taken into account, ranchers and farmers are willing to sell animals at reduced prices if restaurants buy them whole, Stacy Jed said. That also allows the restaurant to make its own stocks and broths, “those things you need and forget about, and often end up buying,” she said, as well as charcuterie. But to make whole-animal butchery profitable, the kitchen must make sure to use the meat, bones and organs wisely. “Eliminating waste is clutch to keeping costs in line,” Adam Jed said. To reduce waste, Noveshen is obsessive about taking care that his ingredients are in good condition. “At Pacific Catch, we’re religious about our fish handling,” he said, and the restaurant keeps it on ice at all times. He’s similarly fanatical about Starbird’s chicken. As part of recording food costs, chefs often have a “waste sheet” to record product that couldn’t be used. But Jones of Hospitality Alliance discourages that. “I don’t allow waste sheets on my properties because they become a crutch,” he said. “It’s management and chefs’ job to control the product — what they order, receive and prep.” Trim can be repurposed for specials and, if it doesn’t hurt quality, product can be frozen for later use, he said. But outsourcing some of the labor can make sense, Noveshen said. Pre-butchered products can improve consistency and safety and reduce training and daily labor costs. Harnessing tech. Bluestem recently upgraded its point-of-sale system, allowing the Jeds to look at everything in real time from anywhere. They can also categorize menu items more precisely. For example, they can sort complimentary meals based on why they were comped, so food given to an employee goes into a different category than that of a dissatisfied customer. That allows them to see if a dish wasn’t prepared properly. “All of that is informing us in changes we need to make, either in what’s on the menu or the way we’re preparing the food,” Adam Jed said. They review the data weekly to spot any other red flags, such as food that went missing or dishes they need to rework or promote differently. – Source: Restaurant Hospitality.
Pew: 4 Food Safety Issues Worth Watching in 2018
The Pew Charitable Trusts highlighted four food safety policy developments the organization will be monitoring in 2018. Pew released its analysis citing the importance of the ongoing implementation of the Food Safety Modernization Act (FSMA) in the wake of a foodborne illness investigation of an E. colioutbreak linked to leafy greens that killed one person and sickened at least 25 individuals. “Food safety — overseen by FDA and the US Department of Agriculture — should remain a priority for federal policymakers this year,” wrote Sandra Eskin, director, Food Safety, The Pew Charitable Trusts. “We already saw a major step forward in produce safety in January as FDA’s first enforceable food safety standards for fresh fruits and vegetables took effect on large farms.”
Other significant policy developments in Pew’s list include:
Food and Drug Administration recall guidance. The FDA issued draft guidance on product recalls, including food recalls after a report by the Office of the Inspector General of the Dept. of Health and Human Services said the FDA’s food recall process sometimes falls short of ensuring the safety of the nation’s food supply. A proposed change that The Pew Charitable Trusts and other organizations have supported is disclosing more information about the companies that sold or served recalled products. The draft guidance states that “In some cases, it may also be necessary to include the recalling firm’s supply-chain relationships in order to alert the public of the product being recalled. When possible, FDA encourages firms to provide specifics about firms it sold product to in order to help people better identify and avoid recalled product.”
The New Swine Slaughter Inspection System (NSIS). The US Dept. of Agriculture released a proposed rule that establishes a new inspection system for pork processors. The NSIS would increase the number of offline inspection tasks of USDA food safety inspectors while continuing 100 percent FSIS inspection of hog carcasses. The rule also would require pork processors to implement HACCP-based inspection measures that prevent contamination throughout the entire production process. Industry groups have supported the hog slaughter modernization plan, while consumer and labor advocates have argued that the NSIS would jeopardize consumers’ safety and the safety of workers in processing plants.
Food safety funding. The Pew Charitable Trusts noted that President Donald Trump proposed a change in how meat and poultry inspections are funded from taxpayer dollars to user fees collected from businesses under FSIS oversight. “For many years, lawmakers, meat and poultry companies, and consumer advocates have strongly objected to any shift in the funding mechanism from a taxpayer-supported, general good to a program funded directly by the regulated industry,” Erskine wrote. “Meanwhile, with bipartisan support in Congress, FDA’s food safety program has received funding increases for six years running as it implements FSMA. However, this portion of the budget could be targeted for cuts in fiscal 2019.”
The Farm Bill. A farm bill has sometimes included policies related to meat and poultry safety. For example, the 2008 law created enabled interstate shipment of some state-inspected meat and poultry products. Until then, only federally inspected meat and poultry was allowed into interstate commerce. Pew believes reauthorization of the farm bill is worth watching because it is unclear whether next law will contain meat and poultry safety-related provisions, according to Erskine.
Food Waste, Sustainability Guides Published By NRA
The 2018 edition of The State of Restaurant Sustainability highlights the sustainability efforts restaurant operators are undertaking in their operations. The association surveyed more than 500 restaurant owners and operators about their sustainability efforts, opportunities and challenges as well as 1,000 consumers about the best ways restaurants can communicate their sustainability initiatives to their guests. Among the key takeaways: Energy-saving equipment and practices are common. About eight in 10 restaurant operators use energy-efficient lighting, while six in 10 use programmable HVAC thermostats. More than four in 10 use Energy Star-rated refrigerators, freezers and icemakers. Food waste reduction is emerging as a key activity for operators. About half of restaurant operators track the amount of food waste their restaurant generates and about one in five donate edible leftovers to charities.
The NRA also has published the Restaurant and Foodservice Food Waste Action Guides These guides were developed by ReFED, a nonprofit committed to reducing the $218 billion of food waste in the United States, in partnership with the Food Waste Reduction Alliance, of which the NRA is a founding member. The guides present proven prevention, recovery, and recycling solutions to help restaurant businesses prioritize and accelerate waste-reduction activities. The Foodservice and Restaurant Food Waste Action Guides build on ReFED’s 2016 report A Roadmap to Reduce U. S. Food Waste by 20 Percent, and were created with input from more than 80 expert contributors, including the four largest U.S. foodservice providers: Compass Group, Aramark, Sodexo, and Delaware North, and a host of leading restaurants across the country. – Source: NRA.
What Restaurants Need to Know about Predictive Scheduling
Though many hourly employees choose to work in foodservice because they need more flexible schedules than they can find in other fields, this same flexibility has also put strain on workers. Many common practices in restaurants, such as short notice of shifts, on-call scheduling, sending employees home when they are scheduled, and scheduling closing shifts followed by opening shifts, can make it difficult for employees to plan their budgets and schedule childcare or transportation, all of which can lead to increased stress.
The Economic Policy Institute conducted a study on the consequences of irregular work scheduling. The study found that while fewer than 11 percent of workers with “regular” schedules reported that they experienced work-family conflict “often,” 26 percent of irregular and on-call shift workers and 19 percent of those with rotating and split shifts reported this issue. “There has been a history of hourly workers in this industry not having stable hours, and if you don’t have a commitment on hours, you can’t make a living,” says Jordan Boesch, CEO of 7 shifts, a restaurant employee scheduling app. “A 2017 study said the average amount of notice employees received before a shift was 2.4 days. To only be notified of your schedule two days before it makes it hard to plan the rest of your life. Too much flexibility takes advantage of the worker.” To combat these issues, in 2014, San Francisco passed the first predictive scheduling laws, and many cities and states have passed and debated similar legislation since then. Though the specific regulations included in predictive scheduling legislation vary by region, laws may include any combination of the following: requirements for schedules to be posted within a certain timeframe before a shift; minimum rest periods between shifts; extra pay for scheduling changes; extra pay for cancellations within a certain timeframe; and promises of estimated hours to new employees. Failure to comply with these guidelines can result in large fines and penalty pay owed to workers. Many of these laws only apply to businesses operating a certain number of locations within the region or managing a certain number of employees. While the legislation may not apply to small chains and independent restaurants yet, many of these other brands might soon comply with these same guidelines for the business benefits they provide.
Turnover is high in foodservice, and competition for hourly employees is stiff. Scheduling stress can foster low morale, which can increase employee turnover and harm guest experience, Boesch says. Additionally, replacing workers who leave can be costly. “I don’t think many employers realize the average cost to the employer is $2,000 to find an employee, post ads, interview, and train them—it’s a huge time sink,” he says. “Unhappy employees are also a risk, because ultimately the quality of restaurant and food and service is a reflection of who works in the restaurant.” Predictive scheduling policies can actually help increase employee morale and retention. “That’s not something restaurants are thinking about, because they are usually thinking about booking tables,” Boesch says. “But there is a leaky bucket affecting the bottom line, and if you don’t keep good people and treat them the right way, then they will leak out of the bucket.” Regardless of which region a restaurant operates in, preparing for these changes is crucial. For those operating in states and cities that already have this legislation, learning what is required is crucial. “Especially in California, New York, and Seattle, spend time reading over regulations and look at how a scheduling tool could help you,” Boesch says. “These are not easy regulations to follow if you’re tracking them manually. For example, in New York, if you can only change 20 percent of a schedule to stay in compliance, that’s hard to keep track of manually. Read up on the regulations and look for a scheduling tool that will give you alerts.” Scheduling software, such as 7 shifts, can give restaurant managers warnings when they make changes to the schedule that are outside of these guidelines. It can also help managers monitor employee overtime and enforce legal break requirements by sending alerts that an employee needs to be relieved. It also keeps scheduling records that will soon be a requirement for many regions. These features give restaurants managers and multi-unit operators peace of mind because they make it easy to comply with legal changes. “A lot of people get really scared and angry when regulations come into effect, but I wouldn’t get apprehensive about these changes,” Boesch says. “I’d see this as an opportunity to be fair to great workers, treat them in a way they want to be treated, and to deliver a better quality of service. This could be an accelerant to your bottom line.” – Source: Fsrmagazine.
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