At the close of 2018 Bloomberg reported in the article, “American Chain Restaurants Had a Tough Year and 2019 Looks Worse,” that chain restaurants in the US could be facing a tough year ahead. This is a continuation of a weaker 2018 with franchise restaurants seeing slower customer traffic, giants like Starbucks closing down locations, and McDonald’s continuing to find ways to stay relevant.
Franchise restaurant owners could be facing additional struggles this year because of rising labor and food costs. Bloomberg reports that the food cost increases will be seen most heavily in dairy, fresh produce, beef, veal, and poultry. This will impact franchise owners who cater to markets that demand fresh goods. Bloomberg also references the impacts of the low unemployment rates, which are creating demands for higher wages, bonuses, and benefits. These rising costs will have a direct impact on the organization’s revenue.
In addition to rising food and labor costs, the ongoing change to the generational landscape is altering consumer demand. Technology and time are the two biggest threats to the franchise restaurant environment. There’s more emphasis on immediate service and gratification and the desire for a more customer-centric experience. Franchisees must be more involved and engaged in technology, not only to allow customers to place orders, see the status of their orders, and rate their overall experience, but for social media engagement, too.
Although the predictions for a tough 2019 might come across as negative, there are bright sides. Multi-unit franchisees, if properly engaged in strategic planning, have set a foundation for navigating these changes without too much of a hit. You’ve got your best and brightest in place, solving the labor cost conundrum (as you have already had to cross that bridge) and you projected for the potential increased costs. More importantly, you developed a roadmap for where you would like to see your organization grow in the next five years and, with that, technology and time are not new facets to the franchise restaurant arena.
If not yet engaged in strategic planning, move yourself out of the denial column and get a jumpstart before the year is too far along. Take a look at where you want to be in five years and build the foundation to get there. Ensure you have the right team members in place, not just for the short-term, but also as you look to grow and put more managers or leaders into roles. Look at trends, innovations, and technology that are changing the landscape and identify how you incorporate them into your organization. Finally, determine what you want your growth to look like and how you can make that happen. Diversification, adding to your portfolio, growing locations, what will work best for you?
It is said that the only thing constant is change. It is inevitable that not all change is welcome. However, if we plan for change, embrace the change as it is happening, and leverage it to continue to help us grow, we find that when things get tough, we can still see the silver lining in the clouds.