Cornell's Center for Hospitality Research just released its "Emerging Trends in Restaurant Ownership and Management," with lead author Benjamin Lawrence, Ph.D. The report was derived from a roundtable session that focused on the "macro issues facing restaurant owners and managers."
Topics tackled included private equity, social media, restaurant design, talent management and expansion. The session was sponsored by the National Restaurant Association.
The first topic addressed was the growth of private equity investments in the restaurant industry. These investments, most in the roundtable agreed, are driving expansion. Private equity groups were involved in 27 percent of industry acquisitions in 2012, according to the report. Session leaders, including Geoff Hill, vice president of Roark Capital (which owns Arby's, among other brands), and Louis "Dusty" Profumo, EVP and CFO of Church's Chicken, said private equity's influence on the management of a brand depends on the firm.
"(Our franchisees) are more concerned about what is the (private equity firm's) strategy for the brand. Is this an owner that's going to invest or are they there just to milk the cash flow?" Profumo said.
A "full understanding" of the concept and industry is important before a private equity firm should make an investment in the restaurant space, Hill said. Firms tend to look for growth opportunities, including same-store sales and expansion.
Roundtable experts agree that financing is opening up more, and ownership turnover should pick up accordingly. The report states there was some concern that this "buying spree" has resulted in highly leveraged purchases that will add to prices.
Characteristics that attract private equity firms include:
- Systems that provide scalability in the future while at the same time provide operational feedback;
- Development of a one-page strategic plan about how to position your company for future growth;and
- The willingness to partner with the firm after the acquisition to align the interest of both parties.
Advertising and social media
Social media's influence continues to grow, especially as mobile adoption and one-to-one engagement demand increase. Cornell's session on advertising and social media was led by Veggie Grill's CEO Greg Dollarhyde. He said a brand should leverage social media to gain new customers, and engage existing ones to develop loyalty.
"Consumers are willing to share information as long as it provides a more convenient experience and they are in control of the communication channel," Dollarhyde said.
Those who use social media as part of their marketing plan should understand the types of social media that are relevant to their specific customer base, and reward and recognize customers on those channels.
The restaurant design topic was led by Steven Starr, partner of Tobin Starr+ Partners, and Stephani Robson, senior lecturer at the School of Hotel Administration. They agreed there are design differences in a restaurant that wants to "reinforce a brand community" versus one that wants to take a "community brand" approach.
The brand community approach focuses on core values, regardless of location. A community brand, in contrast, tries to connect with specific, individualized communities. For example, Chick-fil-A has an in-line urban model that debuted in Downtown Chicago in 2011, which is different from its typical suburban design. Wendy's now has four prototypes in test, ultra-modern, urban, traditional and classic, depending on location.
Also, Starr added that being a "community brand" means being involved in nonprofits and other community activities. Both approaches should have the same objective: Being relevant to a target audience.
"We all want to be relevant to our audience. The key is to decide and make a very definite decision on which direction you want to go," he said. "The key to the proper branding strategy is to pick a design aesthetic and stick with it."
The roundtable group suggested consistent design that reinforces a brand's "DNA." Dunkin' Donuts' recent marketing shift to its beverage line is reflected, for example, in its new design that includes plenty of coffee imagery.
While having consistency is important, it's necessary for brands to avoid a cookie-cutter approach. Consumers tend to prefer authenticity, such as Mellow Mushroom's unique designs that reflect each location's cultural roots, the panelists said.
The roundtable also discussed human resources management, led by Jim Knight, CEO of Hospitality On Point. A major objective within the industry is to lower its high turnover rate, to better develop future leaders and also improve the guest experience.
Knight said there are three top priorities of the restaurant experience — service, product and atmosphere — and the people who work at a restaurant have to be committed to make all three work. A brand's culture should be outlined in recruiting materials, and employees should have a strong character and be a cultural fit.
To find the right employees, Knight suggests conducting three interviews by three different people and presenting a different set of questions from each. Also, videos are a good tool to communicate the culture of a brand, while training manuals reinforce this message.
The final topic tackled by the group was that of restaurant growth, led by Nick Bayer, CEO and president of Saxbys Coffee. Bayer considers franchising as an important component to the business, since franchisees have more connection to their communities and their customers.
Geography can be tricky when growing, however, as product distribution is more complex without commissaries or common networks.
Another issue with growth is finding the right type of owner — a large, multi-unit owner or a smaller owner/operator. Saxbys' franchisees operate two units at most, Bayer said, but there are benefits to multiunit franchising. Those include limiting the number of franchisee relationships, more capital and more expertise.
Read more about operations management.
Photo provided by Wikimedia.