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Top 10 stories of 2014

For most years, the history of the restaurant industry is a recap of how the business chased consumer trends. Not so for 2014. The major change agents this year weren’t customers, but the unlikely combo of government and the gizmos Steve Jobs left us. No wonder the most noticeable shifts took place not on menus, but in operations and business fundamentals.

See for yourself. Here are what we at Restaurant Business regard as the 10 most influential developments and trends of 2014.

1. The possible end of franchising as we know it

Credit the National Labor Relations Board with two of the year’s Top 10 stories. First, the referee of interactions between business and organized labor upended a longstanding reality for the industry when it ruled nine days ago that a restaurant franchisor could be held accountable for the labor policies and practices of franchisees. By deciding McDonald’s was really a joint employer of the people hired and paid by franchisees, the NLRB opened the way for staffers with a gripe to seek redress from the deep-pocketed franchisor.  The implication is that the parent of the brand has to police such fundamentals as shift scheduling across tens of thousands of stores.

Otherwise, the franchise community is convinced, franchisors will be hit with a debilitating number of lawsuits and regulatory actions. As a result, they warn, big brands are going to do less franchising and more corporate development, which is far more costly and time-consuming.

2. Unions gain momentum

The NLRB’s ruling was specifically a go-ahead for employees participating in union-organized activities to bring complaints against McDonald’s USA for alleged retaliation by franchisees. Few dispute that the actions were actually drafted by unions and pushed with their legal resources. The organizations argued that fast-food workers needed more protection from employers for legal organizational activities. The NLRB agreed, providing labor with a big success story and more cover for its unionization efforts.

But that concession from the NLRB was hardly the only sign of restaurant-focused unions gaining traction in 2014. Nationwide job walkouts and demonstrations for a $15 wage drew considerable media coverage and sympathy, and turned talk of a living wage into a frequent focus of news programs, legislatures and newspaper op-ed pages.

3. Big changes in the minimum wage and how it’s raised

In one day, six states approved an increase in the minimum wage. More extraordinary was the way they did it: Voters rather than legislatures cast the deciding votes.  Ballot measures emerged this year as the preferred way for unions and other proponents of a wage hike to push the measures through. The new model also calls for indexing the minimum to inflation, so future increases will come automatically.

That’s not to say there wasn’t considerable wrangling over wage hikes in statehouses, county legislatures and city councils from coast to coast. President Obama very publicly set a $10.10 federal minimum as one of his objectives.

Meanwhile, proponents of a so-called living wage, a $15-per-hour rate, won a big victory when Seattle pushed through that new minimum.

4. Menu labeling requirements are finally revealed

After 18 months of wrangling, the Food and Drug Administration finally disclosed the particulars of the Affordable Care Act’s menu-labeling requirements. If there were any surprises for restaurants, they were good ones. For instance, the agency decided that convenience stores and supermarkets, increasingly close competitors in the battle for share of stomach, would have to abide by the rules for ready-to-eat food, too.

5. Tipping undergoes a revolution

In what seemed a matter of months, tipping became a dangerous practice for restaurants to tolerate. Conventions like tip sharing and tip pooling led to class-action suits and federal investigations, prompting many operators to experiment with service charges. Meanwhile, many of the minimum-wage proposals that were floated in state legislatures called for doing away with the tip credit for servers.

6. Food costs skyrocket

Even here, many in the industry felt politicians were responsible for lighting the fuse. With federal policies favoring the diversion of corn into ethanol production, demand for all grains climbed accordingly, dragging the cost of flour, baked goods and animal feed with them. But that wasn’t the only reason for the spike, particularly in the price of dairy products. As we reported, costs rose as a result of factors ranging from weather to demand from the other side of the globe.

7. Mobile goes mainstream

Last January, having a smartphone app was grounds for some serious trash talk from chains. And if a brand’s app went so far as to allow for remote ordering, watch out.

Now the ability is in hand, literally, for consumers to order, pay for and pick up a meal without any contact with a restaurant employee. The only interaction they have is with a touchscreen. And the installation of tabletop tablets in full-service places is now a dog-bites-man story for us. Wendy’s, Outback and McDonald’s, among others, have all undergone reconfigurations of their infrastructures to keep apace of the changes still unfolding with mobile.

8. Downfall of Darden

The Darden Restaurants of Jan. 1 will be a markedly different operation from the one that rang in 2014. Red Lobster, the foundation upon which it was built, is gone. So is a management team that was widely recognized as one of the industry’s most talented. Such longstanding policies as declining to franchise and owning the real estate underneath stores are under likely to change as well. The catalysts were disgruntled shareholders, but the real issue was the inability of the much-vaunted management team to keep the company’s workhorse concepts in step with changes in the market. One of casual dining’s undisputed leaders was decidedly humbled.

9. Overseas markets sour

A food-safety scandal flattened the sales of McDonald’s, KFC and Pizza Hut, but the challenges for U.S. chains abroad didn’t end there. Outback had to pull out of South Korea, McDonald’s got caught in a political crossfire in Russia, and its Japanese stores had to ration fries. The biggest limit to thriving overseas is no longer extreme jetlag.

10. Chipotle becomes The Beatles

The New Age burrito chain was the undisputed heartthrob of the public in 2014, with sales gains that kept it atop the charts. No wonder so many other operators dreamed of becoming the next Chipotle in ______ (fill in the blank with whatever segment you want: pizza, health, Mediterranean, Asian.) Even some scandalous stories about employment practices failed to prevent it from becoming the most envied operation of the year.

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