Smart operators can make the most of a lean economy by maintaining long-term perspective

Nation's Restaurant News,  March 3, 2008  by Jim Sullivan

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The daily headlines in our industry are enough to scare the bejeebers out of any foodservice operator. The short- and long-term effects of subprime mortgage lending, hundred dollar barrels of oil, slumping customer counts, slouching same-store sales, election year jitters, and rising grain, protein, dairy and commodity prices sap our reasoning, perspective, and leadership skills daily.

Nervous yet?

According to Inc magazine, the last two recessions in the United States, in 1991 and 2001, lasted approximately eight months each. It should be noted that recovery did not mean that everyone who declared bankruptcy became solvent again or that factory workers who were laid off during the downturn got their jobs back when the economy improved. Manufacturers typically react to downturns by identifying ways to reduce payrolls through mechanization, "right-sizing" or outsourcing.

Nervous now?

While previous recessions had an upside of increasing our available labor pool, this one may not. Unemployment is low across all age groups. There are more young people than ever in the 16-to-19 age demographic available to join the workforce today, but most of them are choosing not to work. By encouraging their children to choose more extracurricular school activities instead of work experience, parents are complicit enablers in this sobering statistic. Apparently the belief is that Harvard values a resume chock-full of team sports and chess club experience over part- your, time work in the real world.

Trembling yet?

Fed chief Ben Bernanke recently told us that we're not in a recession, which is defined as two consecutive quarters or more of declining gross domestic product adjusted for inflation, but the truth is that because of the lag time between reporting and results, he and we won't really know until we're at least halfway through it.

On the positive side, it should be noted that a major difference between 2008, 2001 and 1991 is that today, more than ever, Americans have incorporated dining out into their lifestyles. According to industry research, Americans now eat an average of 4.2 meals per week outside the home. Plus some studies indicate that a family of four spends $7 less to eat at a restaurant than they would buying and preparing a similar meal at home. I'm not trying to put a happy-face sticker on a serious concern, but perspective is always critical.

So, yes, things look uncertain, and, yes, things may even look grim, depending on your segment and sentiment. But this is the time to keep a steady hand on both the tiller and the till.

Experience shows that it's more productive to your long-term success to invest time focusing on the things you can control instead of endlessly worrying about the things you can't. So while you're waiting on the real or imagined recession to hit, here are some smart things that operators start concentrating on.

What counts is what stays: Your first responsibility in tough times--or any times--is to retain at all costs your current customers. Give them more of what they come in for. In quick service, increase the speed, improve the accuracy, enhance the service. In full service, pile on the hospitality with managers' visits to all tables and with a stellar waitstaff that knows how to take care of guests. Service is free. Pile it on.

Be smart about where you cut costs: Be careful what you cut if you're shaving costs. Make certain it's not something the guest values more highly than you know, such as amenities, portions and a well-trained team. Also, market harder and smarter in tough times. Now more than ever, ratchet up your local-store marketing and connect better with the business and residential communities within a l-to-5-mile radius of your restaurant.

"Segment leaders market their way through a recession," Mike Ganey, senior vice president of the public relations firm Howard, Merrell, advised in a recent issue of Fast Company magazine. "All other companies try to save their way through a recession."

Don't rely solely on media advertising or local-store marketing to produce more traffic. That may produce "trial." But smart hiring, training and service creates something just as valuable: frequency.

Sharpen the saw: If other operators in your trading area are losing focus by worrying about the stock market instead of their customers, make them pay by adding value and stealing their customers the smart way: Hire better people and invest in stronger training. Ironically, the economy gets better when you get better.

See forward, look back: When charting your course through murky waters, don't just consider future possibilities without similar due diligence on what you learned from the last down turn. Look twice as far into the past as you do into the future for the best perspective of what actions may be necessary now.

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My first area manager was fond of saying, "I believe there's an old answer for every new problem." Henry Ford more famously opined: "Those who ignore history are doomed to repeat it."