George Green: Fast-Casual Expert | July 2011 | By George Green

The (Mid) Year in Review

A look at how the fast-casual industry did in the first half of 2011.

Corner Bakery was aquired by Roark Capital as a positive sign for fast casuals.
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In both my business and personal life, I always take a few minutes in July to look over the first half of the year to recalibrate and get ready for the next six months. Let’s take a look at how the industry has fared in the first half of 2011.

First of all, I am very excited to see more activity in the financial markets. Two men who made my list of the most influential people in fast casual, Phil Friedman and Larry Reinstein, recently joined forces to take over Salsarita’s. In addition, Tavistock and Roark Capital have continued their buying sprees in the industry. Roark’s purchase of Corner Bakery is one of the most exciting purchases in recent years. Hopefully its acquisition of the perennially challenged Arby’s won’t take resources away from Corner Bakery’s possible growth in the still-under-saturated bakery/café segment.

Now, let’s see how I did with my predictions for the year. First, my rather obvious prediction of continued commodity pressures was spot on. According to A.T. Kearney, from April 2010 to April 2011, lettuce prices increased 27.3 percent, butter went up 30.7 percent, bread increased 5.9 percent, processed turkey went up 11.6 percent, and tomatoes went up 6.5 percent. Of even greater concern in terms of delivery costs and consumer behavior, gas prices went up 14 percent. Although the U.S. and other countries recently released some of their strategic petroleum reserves, I doubt the energy picture will get better on any long-term basis. In terms of input costs and the impact on other markets, ethanol continues to be the enemy of all that is good and just in the world.

In terms of my prediction on the economy, I am still trying to find the recovery. As I noted last month, many concepts in the fast-casual segment continue to outperform other segments and the industry as a whole, so the news isn’t all bad.

If you aren’t doing at least 15 percent of your sales in catering orders, you are missing a very profitable opportunity.

As far as my prediction about increased union organizing in the restaurant industry and unions pushing other measures through administrative provisions, increased union activity in these areas is still likely to have a major impact on the industry in the next several years.

I was thrilled a few weeks ago when the Senate failed to pass the measure delaying swipe-fee reform. This is a major victory for all small-business owners, and our industry especially, given the economy’s condition. We shouldn’t get complacent, as the banks will certainly try to make up this revenue in other ways, and we will need to fight for our businesses, employees, and customers.

The next year and a half will be very important for our industry and fast casual on the government and political-activity fronts. I have said this before, but it is more important now than ever that we get and stay engaged with our elected representatives and government officials.

I have been outspoken about my belief that catering is both the sweet spot and promised land for fast-casual operators. If you aren’t doing at least 15 percent of your sales in catering orders, you are missing a very profitable and relatively easy opportunity to both pay the bills in slow months and grow your business.

Unfortunately, our legislators are trying to mess with this, too. In future months, you will hear more from me on how the Physician Payments Sunshine Act provisions of the health care reform bill could result in a substantial decrease in the number of catered meals doctors accept from pharmaceutical reps.

Government action and health care reform, it seems, continue to be the gifts that keep on giving.

George Green

George Green is vice president of the Nashville-based fast-casual concept Bread & Co. Since establishing itself as the first European-style bakery in the Tennessee city when it opened in 1992, Bread & Co. has grown into a brand with more than $10 million in annual sales.

Green’s 20 years of experience in the restaurant industry started in his native city of New Orleans where he worked with the Brennan family, a restaurant-industry dynasty. He shares his insights on the fast-casual industry in his monthly column Fast Break!