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4 restaurant myths that have just been busted

Recent events have shown articles of faith on the minimum wage, catering, virtual brands and casual dining are nothing more than fake news.
Photograph: Shutterstock

Like any industry, the restaurant business sports its share of convictions that have no foundation in fact. Here are four of those misbeliefs that were proven fake news in recent days.

Myth #1: Restaurant employers would rather eat nails than accept a $15 minimum wage
Mention of a wage hike is supposedly the restaurant equivalent of waving a red cape in front of a testy bull. But that’s not the situation this time around, even with a call for doubling the hourly minimum to $15 an hour. Restaurants, and chains in particular, seem more concerned with ensuring the rise to that level comes in steps rather than all at once.

“As long as it’s done in a staged way and in a way that is equitable for everybody, McDonald’s will do just fine with that,” Chris Kempczinski, CEO of the mega-employer, told investors.

Denny’s recently offered the same assessment, citing it’s experiences in California, where the minimum wage is already on a climb to $15. Units there are outperforming the system, with “six consecutive years of positive guest traffic—not just positive sales, but positive guest traffic—as the minimum wage was going up,” CFO Robert Verostek told financial analysts.

He contrasted that situation with what the chain experienced in Arizona, where the minimum wage was raised in one overnight hike. Units there were forced to raise prices by 5% to 7%, throwing customers into sticker shock.

The increase proposals currently alive in Congress call for raising the national pay floor to $15 an hour by 2025.

Myth #2: Virtual concepts are now table stakes for full-service chains
Over a two-day spread, Applebee’s, Outback Steakhouse parent Bloomin’ Brands, and Denny’s all aired plans last week to roll out virtual concepts—brands that exist only as a search result when consumers are looking for delivery options. Collectively, that means the addition of about 3,300 delivery sources in 48 hours to the estimated 100,000 that are currently in the market.

But not every full-service powerhouse is playing that game. One of the more notable takeaways from Texas Roadhouse’s conference call with analysts on Thursday was what executives didn’t mention:  Any interest in virtual brands. The company is exploring a host of new business lines, but a delivery-only concept isn’t one of them—a doh! observation given that Roadhouse has steadfastly refused to offer delivery.

It’s not alone in that aversion to virtuals. Olive Garden parent Darden Restaurants is similarly opposed, as CEO Gene Lee attested a few weeks ago.

Myth #3: Catering is dead
How do you sell group meals when gatherings of any size are tarred as a serious health hazard? Catering, a source of significant growth for restaurants in the months preceding the pandemic, understandably ground to a halt as social distancing became the rule of the day. Restaurateurs didn’t have time to lament the loss of that business because they were too busy trying to recast themselves as delivery-and-takeout operations.

But now come ample indications that restaurant catering is coming back, just in a much different form. Trays and other bulk servings of hot foods are being replaced by meals provided in single-portion packages—a complete lunch or dinner, provided in a convenient boxed-lunch-like container. BJ’s Restaurants, Cracker Barrel and Panera Bread have all added those one-person-at-a-time catering options, and report strong initial success.

Part of the appeal is that the meals can be ordered for a group that isn’t actually together but wishes to share a meal, albeit distantly. The boxed selections can be sent to a variety of locations—every at-home participant in a Zoom conference call, for instance.

Others have reported success in selling big shipments to frontline workers.

By all accounts, the work-around is getting traction.

Myth #4: Casual dining is dead
If that’s the case, the news hasn’t made it to Wall Street. Recent weeks have brought a slew of security filings by institutional investors gobbling up the stock of The Cheesecake Factory, BJ’s Restaurants, Darden, Roadhouse and virtually every other major player in the segment.

Investors such as Vanguard Group and The Blackstone Group are betting millions that the full-service sector will rebound on the strength of pent-up demand. Plus, they’ve been reassured by the operations that the head-turning increases in off-premise business aren’t going to disappear when dining rooms are full functioning again.

Clearly they’re seeing better times in the not-too-distant future.

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