Foodservice still can 'show you the money.' - Brief Article - Column

Restaurant stocks have fared poorly even while some companies have reported higher-than-anticipated earnings.

McDonald's has announced that per-store sales have been dropping, forcing it to make radical changes in pricing and promotional strategy in order to stem the tide. The leaders of the industry, from McDonald's to Burger King to casual concepts, according to most reports, have been fighting declining store sales for some time. The answer to those issues from most analysts' perspectives seems to be that the marketplace is overstored, and that the various segments are saturated.

Is saturation an accurate appraisal of what's happening? Or are we just analyzing the numbers in terms of brick and mortar, leaving out the most important components for success, such as quality, innovation, creativity, execution and price/value?

In 1969 my friend Dave Thomas, along with Bob Barney, created a concept called Wendy's, positioning their product as the adult hamburger made with fresh beef -- "Hot and Juicy." Wendy's today has considerably more than 4,000 units, and according to the 1996 NRN Top 100, it is the seventh-largest company in terms of U.S. foodservice revenue. That success was a total contradiction of most industry pundits, who predicted failure for Thomas for the reason that -- you guessed it -- the hamburger category was saturated.

The steak market was dead, as exemplified by the declining fortunes of Bonanza, Steak and Ale, Sizzler and so on. Then along came Outback and made liars out of all the researchers, proving again that creativity, innovation, quality and price/value -- and not the number of "stores" -- determine the status of foodservice. Why should everyone feel that they need to be national or international?

How many companies today, failing to deal with existing problems in the United States, extend their shelf life via the escape of international expansion? Store is not a good word for foodservice. Home Depot, Wal-Mart, and Kmart have stores. Our industry has a more human concept, which requires the assembling of ingredients and the serving of a food product, digested directly by a consumer.

Whether the product is good or bad, whether it is served properly in a proper manner and whether the price is considered worthy of the experience result in consumer satisfaction. The more QSRs, family restaurants, casual-eating and casual-dining units, the more difficulty operators have in ensuring that the consumer experience at their restaurants compares favorably with the ever-changing options available in each and every marketing area.

The industry is in a mature cycle, and mature concepts have to be fixed if growth is expected. In the interim don't confuse dead-in-the-water concepts with the lack of industry opportunity. History is a big part of every business, but often it is ignored.

History does tend to repeat itself, and as with Wendy's, Outback, Houston's and others, every time the statisticians feel they see the end of the rainbow, some entrepreneur with guts, passion, an innovative spirit and an overpowering desire to win will come along and prove the pundits wrong.

Talk to us

Have you got something to say to your peers in the foodservice industry? Here's your chance. Every week in Nation's Restaurant News readers take center stage on the Opinion page.

NRN's Web site, NRN-Online -- located at http://www.nrn.com -- also runs viewpoints on management, human resources and service issues. If you've got a viewpoint and want to be heard, send us your ideas. You can write NRN at 425 Park Ave., New York, N.Y. 10022. Or you can E-mail us at postofficenrn@worldnet.att.net.

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