The Next Six Years

I tend to be a pessimist when it comes to the performance of foodservice operations. When we meet with potential in-experienced clients who are contemplating opening a restaurant we spend an hour trying to talk the client out of going into the restaurant business. We always tell them to put their money in the bank, they will make more money in interest than they will in the next ten years owning a restaurant. However, for the experienced operators out there, we are very optimistic about the next six to ten years in our industry.

Over the past few years we have seen a definite shrinkage in the number of independent restaurants. This shrinkage means that many borderline operations have closed and are no longer grabbing disposable dining income that could have been going to the good operators. We see ten percent plus in sales growth from our experienced clients (mainly independent operators) over the past year and expect to see this trend continue.

We feel there are two factors that have contributed to the decline of marginal independent operators. The first is the tightening of credit. Ten years ago it was fairly easy to get thirty even forty-five days credit from your suppliers. This helped create artificial cash flow that allowed operators to stretch through slow times by financing their losses by extending their payables (even I played that game years ago). Now credit and terms are hard to come by for new operators (and even many experienced operators). This means you have to operate your business successfully to keep the doors open. The second interesting thing that seems to be happening is that the new breed of independent operators is moving much more into the bar type business. This new breed of operator is often financed by non-traditional sources (ie. well off parents) and is a different animal from the independent restaurateurs who entered the business fifteen years ago.

The only thing we can really predict about the future is that it will change but if the following happens then there is a good chance that our forecast of a healthy environment for foodservice operators will hold true and be very predictable. First, interest rates need to stay low. Many, many people in North America have moved up and maximized their mortgage based on low interest rates. If interest rates rise it will in effect add to peoples payments thereby reducing the disposable income available to eat out. Also, operators margins will be hurt in higher interest payments on any outstanding bank loans associated with the business. Second, the government both federally and locally must be business friendly. It would seem obvious but if, during election time, a socialist type government is elected it can have a fearsome and negative impact on the ability of a foodservice operator to make a decent profit. All else being equal, the next six to ten years in our business should be extremely successful ones!

It begs the question "As a professional foodservice operator how do I take advantage of this expected golden years in the restaurant business?". Well, first and foremost, build your business so it is ready to sell at the peak. If you can renegotiate your lease, pay off your bank debt, have a long term marketing plan and spend money improving your operation on a continuos basis so it gets stronger and stronger. The worst thing you can do is sit on your hands and expect things to automatically get better for you. The foodservice business is a great deal of hard work and you can never stop trying to get better. Build, improve, build and improve some more. Make your business move forward every day and you shall reap the rewards when you sell.

Congratulations, if you are a foodservice owner we predict the next six years to be very good ones in our industry. Reap the rewards!

Does it seem like it takes till breakfast to close your operation after a busy night. Everything is done except all the pots and pans. Are you spending an hour or two waiting for the dishwasher to finish up. Well, there is a great pot sink out there that will make your life much easier. Instead of rewriting the obvious, here is a quote from Hobart’s web site regarding a great high powered pot sink:

If you have lots of pots and pans this will save you time and labour.

Restaurantsoftware.com is the most Comprehensive Web Directory of Restaurant Software Vendors, Services, and Accessories available for the food service and hospitality industry. Have a look at the site. It is brand new, well laid out and a great resource when you are looking for products related to the hospitality industry.

The kick in my behind that made us decide to bring back the newsletter was when Marie (ROI’s Director of Operations) was on a sales call and the gentleman across the desk from her said "ROI, I used to get the newsletter all the time and loved it". So we are back.