Are overseas markets losing their luster?

Casual chains cite problems abroad. Labor is one of the ailments globally.
Photograph: Shutterstock

peter romeo

Once upon a time, international development presented a panacea for U.S. restaurant chains grappling with the maturation of their home market. If they could find the right local partner, adapt their menus and navigate a few social and sourcing peculiarities, opening units abroad was the closest thing to marrying into money.  

Mounting evidence suggests those days have gone the way of print translation guides and propeller-driven transatlantic aircrafts. A host of casual-dining chains posted unexpectedly strong financial results for the third quarter—except from their international markets. Outback Steakhouse, for instance, reported a 4.6% jump in domestic same-store sales. But comps for its Brazil units fell 3.3%, a result of political turmoil and a truck drivers’ strike, both dynamics beyond the control of parent company Bloomin’ Brands.

Chili’s overseas franchises posted a 3% decline in comps for the quarter ended Sept. 26, the first fiscal quarter for parent Brinker International. That compares with a rise of 1.5% for U.S. franchised stores and a gain of 1.9% for domestic operations as a whole.

Coming off a 7.7% jump in domestic comps for Q3, the best gain in 14 years, Applebee’s advised investors that it is tempering its expectations for international expansion. The Dine Brands Global holding now expects to close 20 stores abroad, instead of the 10 originally forecast, and cut in half the projections for new openings abroad to fewer than 10, from a previous estimate of 15 to 20. Applebee’s President John Cywinski declined to speak about the change.

The challenges of overseas expansion were underscored at the Global Restaurant Leadership Conference, a four-day gathering for restaurant executives hosted by Winsight, the parent of Restaurant Business. For one thing, if U.S. operators are looking for relief from the ever-present challenge at home of staffing restaurants, they’re not likely to find a cakewalk in most areas of the globe. Operators from regions ranging from the U.K. to China attested that the industry’s labor difficulties are a global problem. The precise issues differ from region to region; in some areas, for instance, the ordeal is finding individuals with sufficient skills, unlike in the States, where securing any life form that can fog a mirror is a withering task. But the bottom line issue, literally, is soaring costs.

A remedy was offered during the keynote presentation that opened GRLC, a session I was privileged to moderate. The conference marked the kickoff of a new worldwide program called Fair Kitchens, a collaborative initiative intended to change the industry’s thinking about how to interact with back-of-house staff. Spearheaded by global supplier Unilever Food Solutions, the undertaking calls for chefs to lead a global transformation in kitchen culture. The goal is to draw attention to the personal needs and concerns of back-of-house staff—to treat them as people, not as subordinates to be ordered about or left to weather the pressure typical of a kitchen on their own.  A discussion of FairKitchens by newfound adherents, including Legal Seafoods EVP and Executive Chef Rich Vellante, underscored how much of an ROI can come from such simple adjustments as listening, discussing issues as they arise, and fostering a sense of teamwork to replace the command-and-obey mindset that has persisted despite the business drawback.

The program was conceived as a global undertaking, a reflection of the labor issues facing a worldwide industry as a whole. The intended solution has a similar scope. 

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