Dan Rowe: Great Customer Service Starts with Engaged Employees

When you stop and think about it, the main reason you own a company is to get wealthy without doing all the work. ‘Don't buy a job, build a company,' as the old adage says.

When you own a restaurant, you want to open one or two locations and let the profits and teams compound that investment into a 10-to-20-location franchise business that pays you millions semi-passively – to the point where you can then sell for generational wealth. The key to accomplishing that, more than anything, is this:

You need to pay your staff enough to keep them happy and to keep them wanting to take care of your customers.

When you lose employees, now you need to go find new people – which is a major time drain. In that situation, you stress and overburden your managers, because they know their labor problems are only going to continue.

And how about the silent cost of employee turnover – your customers' experience? Imagine a busy, peak meal period: you're down two employees, but there's a line stretching to your door; What sort of guest experience is that? How are the customer reviews going to be? More than likely, those customers won't come back.

Conversely, if you're properly staffed with a team full of trained, engaged, and happy employees, how are guest experiences then? How likely will customers be to come back and also refer your business to their family and friends? And how much higher will your sales and profits be?

In a highly successful business that you don't need to micromanage, the outlook is bright. When you try to sell your business in that scenario, buyers will pay more knowing there's a strong team to build the business on.

It's crazy to let great employees leave your business. It's like dropping a pebble in the water and watching the ripple effect.

When you under-pay employees you have turnover, bad guest experiences, low repeat business, and you're strapped to your business, feeling trapped.

However, when you have the right team in place you tend to have a healthier business, higher profits, a business that runs itself, compounding returns, and a valuable business to sell – and that's why you bought your business in the first place. Food Institute Focus

Can Ghost Kitchens Be Resurrected?

Has the would-be darling of pandemic-era restaurants – the ghost kitchen – been resurrected by Denny's, or will the chain's recent 250-unit commitment fail to breathe fresh life into this novel, if challenging, limb of the foodservice industry?

In early January, it was widely reported that Denny's Diner had signed a 250-unit deal with ghost-kitchen specialist Franklin Junction, a business that often serves as liaison between brands hoping to expand their sales turf without developing more and/or newer restaurants and site builds and kitchen operations willing to rent their food prep spaces.

The announcement failed to address whether the sites would serve as ghost kitchens for Franklin partners or if they'd be the ones serving as the kitchens themselves. Denny's also has two virtual brands, The Burger Den and The Melt Down, which could also benefit from third-party facilities.

As the breakfast daypart business heats up for many chains around the country (and as McDonald's new concept CosMc's carves out a space of its own in the afternoon/beverage-oriented sector), longtime legacy brands such as Denny's have been forced to re-evaluate their menus, their consumers, and especially how they should (and often need) to adapt to how fundamentally different the restaurant foodscape looks from just a few years ago.

Buoyed by the Breakfast Boom

Technomic recently published a white paper proclaiming "a breakfast boom...as a satisfying, yet more affordable restaurant occasion" in 2024 and beyond. Can Denny's take advantage?

"The recent struggles by many ghost kitchen operators show how difficult it is to develop a brand without a physical store presence, especially when combined with higher food and labor costs," said R.J. Hottovy, head of analytical research at Placer.ai, to The Food Institute.

"The economics of ghost kitchens make them difficult to succeed on a standalone basis," he added.

"Other restaurant brands have successfully operated a delivery service out of their existing locations like Panera, and the inclusion of AI can potentially streamline some of the costs involved with these businesses in the future."

The Ebb and Flow of Pancakes and Product

Perhaps in the case of Denny's new deal, the first law of thermodynamics applies, which states that energy can neither be created nor destroyed; it merely changes forms.

That's how Bob Vergidis sees it, at least. Vergidis is chief vision officer at pointofsale.cloud.

"Ghost kitchens must remove the moniker of being a ‘ghost' and now need to be visible to matter. This may seem counterintuitive, however, being visible is the key to building brand recognition as well as offering customers new and cheaper ways to get their food."

From Walmart's recent commitment to expanded drone delivery to grocers like Albertsons incentivizing health to get consumers through the door (and food in their carts), finding new ways for customers to get food has never been more exciting, relentless, and necessary to compete in today's market, and with today's loyalty-free consumer.

"The premise of ghost kitchens was to offer cheap space in an undesirable location since customers would never see it," Vergidis added. "The next generation of ghost kitchens will be in highly visible environments making pickup and delivery convenient from a location that customers pass by every day."

Vergidis noted that ghost kitchens rose out of necessity from the pandemic and the advent of third-party delivery services. Now that the global health scare has abated and consumers are getting out more, can the ghost kitchen concept as originally conceived survive?

One developer thinks so. Former Jimmy John's CEO Gregg Majewski says he has a model that works with his portfolio company Craveworthy Brands, which includes legacy operations Genghis Grill, BD's Mongolian Grill, Flat Top Grill, and several newer concepts including wings concept Wing It On!, Krafted Burger Bar + Tap, and Budlong Southern Chicken. All told, Craveworthy operates about 55 kitchens in 20 markets.

Per Restaurant Business, Majewski has big plans for the ghost kitchen for 2024. He's rolling out Craveworthy Kitchen and many newer virtual brands. Majewski hopes to create secondary brands that offer his franchise operators additional revenue streams without needing new equipment, more space, and in some cases even separate back-of-house operations.

Majewski knows ghost kitchens have struggled. Nonetheless – under the Craveworthy Kitchen banner – Majewski says boo! to detractors and hopes to change that perception in a big way.

"We control the food quality," he said. "We control the branding, the atmosphere and the fun," he said.

Perhaps he's onto something – in tests at two locations last year, he said the units saw between $150,000 and $200,000 in incremental top-line sales from the virtual brands. In short, the group's multi-brand model will reward operators under the Craveworthy Kitchen banner, doing more with less out of a single space.

As for Denny's, perhaps the renowned diner knows something the rest of the industry does not. Denny's has a second brick-and-mortar concept – Keke's – that recently debuted in Florida on the heels of a decent end to fiscal-year 2023, where the popular diner reported systemwide same-store sales rose 1.3% for the quarter and 3.5% on the year. Food Institute Focus

Burgernomics: Fast Food Inflation and an $18 Big Mac Combo

In the world of fast food, the Big Mac has become more than just a burger; it's a barometer for global economics. The recent uproar over a McDonald's in Darien, Connecticut, that charged a whopping $17.59 for a Big Mac combo meal is more than just local news; it's a snapshot of the changing economic landscape.

The ‘Burgernomics' phenomenon, as it's playfully termed, stems from the Big Mac Index, an informal but widely recognized measure of purchasing power parity (PPP) between two currencies. Introduced by The Economist in 1986, the index compares the price of a Big Mac across different countries to assess whether currencies are at their "correct" level. It's a blend of economics and fast food, offering a digestible take on complex fiscal concepts.

In this context, the Darien McDonald's stands out not just in the U.S. but on a global scale for its Big Mac pricing. While the average cost in the U.S. is around $5.35, Darien's $8.29 Big Mac surpasses even the most expensive Big Macs globally, including its Swiss counterpart at an average of $7.73.

The disparity in Darien is stark. Notably, just a short drive away, prices plummet by nearly $3 for the sandwich and $9 for the meal, underscoring the franchise's policy that allows individual pricing.

This price hike at one of America's most iconic fast-food chains is more than just a matter of paying extra bucks for a burger. It's a reflection of broader economic shifts. High prices at fast food joints, once the bastion of affordable eating, signal changes in consumer spending, inflation, and the economic well-being of a nation.

But it's not just about the economics – there's a human element, too. The price surge hits the wallet of average Americans, who turn to fast food for a quick, budget-friendly meal. Families especially feel the pinch – the added cost of delivery services, sometimes tacking on an extra $10 to $20, only deepens the financial blow.

The Darien McDonald's saga is more than just a story of one overpriced burger. It's a microcosm of global economic trends and a poignant reminder of the financial realities facing everyday consumers. The Big Mac, in this scenario, is both a culinary icon and an economic indicator, offering insights into the complex interplay of currency valuation, purchasing power, and consumer behavior on a global scale. Food Institute Focus

Store News:

Burger King's parent company—Restaurant Brands International Inc. (RBI)—intends to purchase the largest U.S. franchisee for about $1 billion in cash in a bid to fast-track an overhaul of hundreds of locations and win back customers. RBI expects to complete its acquisition of Carrols Restaurant Group Inc. by Q2 2024 and plans to spend another $500 million to remodel 600 of Carrols' Burger King locations, reported Bloomberg (Jan. 16). Full Story

White Castle will again host its annual Valentine's Day Dinner—a tradition that started in 1991—on Feb. 14 from 4 to 9 p.m. Reservations will be accepted at more than 300 participating Castles at OpenTable.com. Full Story

The Chuck E. Cheese eatertainment chain, which is reportedly exploring a sale, is adding more adult dishes to its menu, such as Saucy Meatballs and Spicy Hawaiian pizza topped with sweet chili sauce and jalapenos, reported Restaurant Business (Dec. 18). Full Story

In-N-Out has added two new beverages, Lite Pink Lemonade and Cherry Coke, as the fast-food beverage market becomes increasingly competitive, reported Restaurant Business (Dec. 21). Full Story

How did McDonald's get its groove back? By leaning into nostalgia. McDonald's chief marketing and customer experience officer Tariq Hassan said, "We lost our connection with the customer" a few years ago; since then, the brand has been focusing on culture and connection to re-engage with its consumers, resulting in merchandise collaborations, Adult Happy Meals, and more, reported CNBC (Dec. 26). Full Story

California Pizza Hut franchises are planning delivery driver layoffs ahead of a new minimum wage increase. Notices have been filed by several Pizza Hut operators in accordance with the Worker Adjustment and Retraining Notification Act, reported RetailWire (Dec. 26). Full Story

Tropical Smoothie Cafe is planning a $2 billion sale. The sale of the Atlanta-based chain is the latest sign of growing interest in restaurant mergers and acquisitions. Tropical Smoothie is one of the restaurant industry's top-performing chains with 22% system sales growth over the past five years, nearly double the average for quick-service beverage concepts, reported Restaurant Business (Dec. 21). Full Story

Starbucks is adding two new egg dishes to its menu in a bid to boost its $3 billion food business. The chain will add a chicken, maple butter, and egg sandwich to its permanent menu starting this week, as well as a potato, cheddar, and chive bake, reported Bloomberg (Jan. 3). Full Story

Meanwhile, Starbucks now accepts personal cups for drive-thru and mobile orders. The decision follows the company's efforts to expand the availability of reusable cups and foster more sustainable practices. Participation in licensed stores (such as those in supermarkets) may vary, reported Progressive Grocer (Jan. 4). Full Story

Sonic has released its first LTOs of the year – a peanut butter bacon double cheeseburger and peanut butter bacon shake. Full Story

Brazilian acai chain Oakberry has raised $67 million to help fuel its U.S. expansion. The quick-service bowl-and-smoothie chain said it plans to have more than 200 stores in the U.S. by 2026, reported Restaurant Business (Jan. 2). Full Story

TGI Friday's will close 36 stores and sell more to Ray Blanchette, CEO of the chain, who will operate them as franchises. Blanchette called this phase an "era of transformation." The closed stores are scattered across the country and financial details were not disclosed, reported Restaurant Business (Jan. 3). Full Story

Blank Street Coffee was founded in 2020 and has already grown to over 74 units on the East Coast and in London on the strength of its cheaper-than-the-competition subscription coffee program. The store's small footprint and semi-automated espresso machine has found favor with consumers, reported CNBC (Jan. 5). Full Story

Papa John's is planning more marketing, more locations, and is increasing its supply charges. The pizza chain still hasn't recovered from closures in 2017 and 2018 after sales fell in the aftermath of controversial comments from founder John Schnatter, reported Restaurant Business (Jan. 8). Full Story

Taco Bell debuted a new Craving Value Menu, offering 10 items for $3 or less, including options for vegetarians and flexitarians, reported Restaurant Business (Jan. 8). Full Story

Applebee's is elevating its bar experience with new partnerships and premium options. The restaurant chain created three $9 craft cocktails with Dos Hombres, a mezcal brand owned by actors Aaron Paul and Bryan Cranston, and will also be focusing on Gen Z and younger millennials with zero-proof mocktails, reported Restaurant Business (Jan. 10). Full Story

Meanwhile, Applebee's is offering an exclusive weekly "date night" pass for $200 that includes up to $30 worth of food per week for a whole year. The restaurant stated the date night pass has a value of up to $1,500; a limited number of the passes will go on sale on Monday, Jan. 22 at noon, reported New York Post (Jan. 17). Full Story

Shipley Do-Nuts is poised for major growth. The family-owned doughnut chain of 85 years was sold to a private equity firm in 2021 and now plans to double in size over the next five years, reported Restaurant Business (Jan. 12). Full Story

Jack in the Box has easily outsold its expectations with its new Smashed Jack burger, making twice the expected sales. The burger was two years in development as the chain pushes aggressive new unit growth as CEO Darin Harris said the burger is "hands down one of the best in QSR," reported Restaurant Business (Jan. 9). Full Story

Dave's Hot Chicken has added cauliflower sliders and bites to its menu, marking the first time the chain has expanded its core menu, reported USA Today (Jan. 8). Full Story

Texas-based burger chain Whataburger is working with Morgan Stanley to secure a $340 million leveraged loan. The burger chain plans to use proceeds to buy back preferred equity, a hybrid form of capital that sits between equity and debt, reported Bloomberg (Jan. 10). Full Story

Little Caesars announced Wednesday that it plans to partner with Deliverect to help scale delivery operations. Little Caesars locations will now be able to connect all their third-party delivery channels to their POS system through a single integration. Full Story

Next Level Burger, along with investment fund VegInvest, has acquired Veggie Grill. VegInvest has subsequently joined Next Level Burger as a mission-aligned shareholder. Full Story

Executives on the Move:

Bloomin' Brands named Dave George and Jon Sagal to its board as part of an agreement with Starboard Value, reported The Wall Street Journal (Jan. 2). Full Story

Sodexo named Sebastien de Tramasure as CFO, reported Reuters (Jan. 8). Full Story

The National Restaurant Association has named Jeff Lobdell – president of Restaurant Partners Management – this year's chairman of the board. Meanwhile, the National Restaurant Association Educational Foundation appointed Ohio operator Shaun Beard as its chairman. Full Story

Bonchon's U.S. announced Suzie Tsai as CEO. Full Story

Report: Global Seafood Production Could Rise 20% to 2050

Global seafood demand per capita is expected to grow through 2050 according to a new Seafood Forecast report from Norwegian risk management firm Det Norske Veritas (DNV). The firm expects annual seafood production to reach 160 million metric tons by the midpoint of the century.

"We forecast an increase in overall marine seafood production of about 20% to 2050," said Bente Pretlove, Program Director of Ocean Space at DNV Group, in the report. "While capture fisheries output is stagnant, marine aquaculture will double and finfish production almost triple in this period."

Seafood's Role in Global Food Demand

Across the globe, all regions except Latin America and OECD Pacific are predicted to see per-capita seafood demand increase more than the consumption of terrestrial meat and vegetarian foods, such as plants, eggs, and milk. However, this change in consumption patterns will not constitute a large-scale dietary shift towards seafood.

With an estimated 2050 population of just below 1.5 billion, Greater China could be the biggest marine seafood market in absolute numbers.

Furthermore, seaweed production is slated to grow rapidly in Europe and North America. This growth will primarily be driven by demand for industrial and food additives, whereas consumption as direct food will be low.

Marine Aquaculture Outlook

While marine aquaculture production is expected to double by 2050, the forecast for capture fisheries output could remain stagnant, leading to the 20% increase in global production of marine seafood.

Finfish should remain the most preferred seafood item and overtake mollusks as the leading farmed species type in terms of live weight. The demand for finfish is expected to grow to account for about 70% of the total market for marine seafood.

By 2050, marine finfish production is predicted to expand from sheltered waters to onshore and offshore facilities and reach a global share of 12% and 7%, respectively.

Scaling up land-based food production to meet global food demand is facing significant challenges," said Pretlove. "A future shift in demand towards a more seafood-based diet could relieve some of this pressure, but this is a slow-moving process influenced by affordability, food culture, and other consumer preferences."

"Given a sufficient change in demand, expanding marine aquaculture represents a significant worldwide opportunity in the Blue Economy."

Change Drivers: Seafood Trade Patterns

Globally, Europe and Latin America are expected to become the leading exporter regions by 2050, accounting for 19% and 18%, respectively. Sub-Saharan Africa, with its declining regional captures and fast-growing population, could face the greatest seafood production deficit and therefore become the biggest importer.

North America's efforts to upscale offshore and onshore farming of marine finfish are not expected to offset the region's reliance on seafood imports.

Overall, DNV predicts that supply-demand imbalances will drive a 50% increase in interregional trade by 2050, keeping seafood among the world's most traded foods.

This is considerably more than the projected 20% increase in global seafood production, which implies that regions will become more dependent on imports.

Diversification of Aquaculture Feed

Aquaculture feed supplies are expected to diversify further in the years ahead, reducing the dependence on marine and agriculture-based ingredients.

"Marine aquaculture must maintain an intense focus on fish health and welfare, technological innovation, and sustainability measures to meet future growth," said Pretlove. "One key priority will be to meet the demand for feed ingredients by decoupling it from sources of food for human consumption."

Plants are expected to remain the largest source of ingredients by volume in 2050, while combined share of fish meal and fish oil could decrease. Inclusion of novel ingredients such as single-cell proteins, insect meal, and algal oil present significant growth potential.

"We forecast that feed supplies will improve on sustainability by transitioning to novel ingredients," Pretlove added. "These developments are crucial for the long-term sustainability of fed aquaculture in our seafood mix." Food Institute Focus