Bring together 1,400 opinionated restaurant leaders for a three-day groupthink and you’re sure to get an earful about the industry’s challenges and opportunities. Add in such dynamics as the boom in off-premise sales, the rise of ghost kitchens and advances in technology, and you have what amounts to a mind meld on common problems and tried solutions.
The flow of ideas was facilitated at this year’s Restaurant Leadership Conference, the first in 32 months, by what more than a few participants described as pent-up demand for peer-to-peer networking. Attendees seemed primed to compare notes, particularly after what the industry has experienced in the last 2.5 years. Ideas were clearly colored by the need to reset—and rethink— because of the pandemic.
Here’s some of the brainfood that was provided by presenters and attendees during the get-together in Scottsdale, Ariz. The conference was presented Dec. 7-9 by Winsight, the parent of Restaurant Business.
Who needs brick-and-mortar?
The conference provided ample evidence that ghost kitchens and virtual concepts are sure to outlast the pandemic. Indeed, announcements of new ventures in those realms were almost routine.
The company behind the MrBeast Burger and Steve Harvey’s Family Food virtual concept, Virtual Dining Concepts, revealed from the stage that it’s about to add a delivery-only brand in collaboration with TikTok, the mega-popular video sharing platform. Virtual Dining CEO Robert Earl said TikTok Kitchen will be ever-changeable, since any number of menu items can be promoted via the short videos that have made TikTok such a hit.
Texas Roadhouse CEO Jerry Morgan revealed that his company is looking at virtual concepts, though more likely for Roadhouse’s secondary brand, Bubba’s 33, than its namesake chain.
Another driver of menu simplification?
Asked how operators can maintain an ancillary virtual concept when their core business is humming, Wow Bao CEO Geoff Alexander suggested that the menu simplification trend could provide the solution. He noted that many places slashed their menus early in the pandemic to ease the burden on skeleton-staffed kitchens. By keeping the bills of fare short or giving them a new trim, establishments are essentially freeing up capacity. Virtual brands, he asserted, are merely absorbing the work and production know-how the discontinued items formerly required.
No shortage of shortages
Supply-chain problems were as likely to arise in presentations and casual conversations as the labor shortage and galloping inflation, the other bugaboos that were near-constants. The consensus seemed to be that to-go packaging is the hardest staple at the moment to secure. But attendees also complained about periodic shortages of just about every food ingredient, with special dismay reserved for the challenge of lining up sufficient supplies of poultry products.
When attendees ventured out for lunch or dinner at one of the restaurants that abound in Scottsdale, they got a close-up view of how those shortages can frustrate customers. It was not unusual for servers to caution patrons while taking their orders that they’d have to see if the place was in stock on the requested items.
At the airport used by most attendees traveling by plane, full-service places posted menus with all the missing items blacked out. The bills of fare looked like a checkerboard.
One of the lamented problems was a kink far down the supply pipeline. “The biggest challenge in the supply chain is distribution,” Vince Purves, president of Consolidated Concepts, said during a breakout session entitled “Solving for the Supply Chain.” “Fill rates are down to 80%, when they normally don’t go below 98%.” Consolidated acts as a facilitator in getting supplies to restaurant operations.
Restaurants are yelping about costs …
Shortages are a key reason for the sharp inflationary spike restaurateurs are seeing in the cost of their supplies. Joe Pawlak, managing principal for Technomic, noted that the price of cooking oil is up 39% year over year, while beef costs have climbed 41% and the wholesale price of chicken has spiked by 36%.
... But customers aren’t balking at higher prices—at least for now
Pawlak noted that menu prices have risen 5.8% overall and by 7.9% at limited-service restaurants, the highest inflation reported by the government in 40 years.
He and other presenters said that consumers have been willing to accept those increases because their pent-up demand for restaurant meals is overriding their usual price sensitivity. Indeed, that willingness to pay more is the industry’s best defense against galloping inflation, according to Robin Robison, COO of Modern Market and Lemonade parent Modern Restaurant Concepts.
But speakers warned that a day of reckoning may be coming. “Prices are getting higher and higher,” Pawlak said. “At what point does this impact consumers?”
Emerging new problems
Presenters had varying takes on what challenges are likely to vie for the attention of chain leaders in 2022.
Aaron Noveshen, CEO of the fast-casual chain Starbird, noted that the boom in off-premise business is posing a new issue. “The biggest thing I’m seeing today in our industry is order accuracy,” he said during a main-stage presentation on virtual concepts and ghost kitchens. “So less is more, in terms of how to add things on [to a kitchen’s operation].”
Alexander, a fellow participant on that panel, said the rapid proliferation of virtual concepts will force providers of that option with a new challenge. “New-guest acquisition is the secret sauce for a successful virtual concept,” the Wow Bao CEO said. “At the end of the day, virtual guest acquisition is no different from attracting dine-in guests.”
Omicron isn’t topping that list
Concerns about the new coronavirus variant were cited from time to time during the conference, but not with the apprehension that might have been expected, given the uncertainties that persist about the mutation.
The National Restaurant Association’s scientific and health experts “feel comfortable that this is not going to have the same impact that delta had,” said Sean Kennedy, the association’s EVP of public affairs.
He said the industry is not likely to see the sort of shutdowns and shaken consumer confidence that cut into sales in August because of the delta variant. “We feel relatively comfortable right now,” Kennedy said.
Co-dependence on third-party deliverers
Opinions of third-party delivery services were frequently aired during the conference, and many of those assessments were in line with the comment from Nicholas Scarpino, SVP of marketing and off-premise dining at Portillo's: “We are frenemies with our third-party partners.”
He talked about inflating prices on third-party orders and the fact that “we try to remind all of our guests that is the case” to encourage them to order directly through Portillo’s channels. He also said he is seeing delivery demographics widen considerably, from being popular with younger consumers to a much broader base because of the pandemic.
Town hall meetings are the new email
Domino’s CEO Ritch Allison says he holds one every two weeks for some group within the chain. Jose Cil, his counterpart at Burger King and Popeyes parent Restaurant Brands International, revealed that he convened one at least every other day while his charges were plotting their way through the pandemic.
“One of the things I learned very early on was the importance of being transparent, more transparent than ever,” said Cil.
They were far from the only speakers and audience members at RLC to cite their reliance on town hall meetings as a key management tool. The mass get-togethers, presumably both virtual and face-to-face, were lauded as a way of ensuring that all constituents get a clear picture of where a brand is heading or how a situation is being handled.
Whether the target was corporate employees, restaurant-level team members or all of a system’s franchisees, the leaders recounted, each member of the group got the message directly from top management. Similarly, information flows upward without the static or distortion that can come from rising through layers.
The practice they described fit what marquee speaker Adm. Bill McRaven (Ret.) cited as a key underpinning of leadership. He explained it by recounting an old piece of folk expression: “A shepherd should smell like his sheep.”
Best joke of the conference
The funniest line of the conference may have been Cil’s reaction to the video that led into his presentation as this year’s RB Restaurant Leader of the Year. By design, Cil had not yet seen it. All he knew was that the tape included on-screen comments from both his mother and his wife. The CEO of Restaurant Brands International suggested that the two don’t always see eye to eye, and don’t hesitate to push their view. “They’re both strong personalities,” he diplomatically put it.
Now that he’d seen the tape, Cil said, he was going to invite its producer to the restaurant leader’s home every holiday. It may be the only way to keep the peace between the two, he said to loud laughter and applause.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.