Margins Have Dropped 29 Percent. Here’s How Some Brands Are Fighting Back

According to an August report from Datassential, the average quick-service operation’s margin in 2022 is now 17 percent, down from a pre-COVID level of 24 percent. It’s no mystery what is causing these shrinking margins. That same Datassential report found that restaurant operators identified three major culprits—almost equally—as the biggest issue they now face: inflation (which 38 percent of operators identified as their largest pain point), labor (33 percent), and the disrupted supply chain (30 percent).

And yet, operators shouldn’t feel hopeless, says Lori Krieger, marketing director at Kagome USA. There are plenty of solutions on the market that could help increase operational efficiencies and immediately contribute to getting margin levels back up to where they once were. Kagome USA actually has a name for the level of support it gives its client operators in order to tirelessly work toward a shared success: “The Kagome Way.”

“The Kagome Way is about both our people and our processes,” Krieger says. “Our customers are connected with each of our departments, with open lines of communication at all times. The Kagome Way is elevated customer service through connectivity, transparency, and commitment from each department to provide the best service and solutions to our customers in order to make them more successful.”

The rest of this story will take a look at how The Kagome Way is taking on each of the industry’s three biggest challenges: inflation, labor, and the supply chain.

Labor

For most restaurants, the labor crisis has made its largest mark in the kitchen—Datassential reports that nearly two-thirds of restaurants do not have enough hourly cooks to meet demand. This is a distinct area where “The Kagome Way” is helping its foodservice partners thrive: for example, Kagome can help recreate a signature sauce that can then be poured straight out of a bag—no extra labor required.

While Kagome is known in some circles as Japan’s largest tomato-sauce distributor, the company’s sauces go far beyond pizza and pasta sauces. From Asian sauces, to Mexican sauces, to wing sauces, Kagome has various labor-saving products. Kagome can also make custom sauces for any type of operation, too.

Kagome USA

“The sauces we develop reduce strain on back-of-house operations,” says Daryan Johnson, R&D manager at Kagome USA. “Having fewer employees without sacrificing on quality—that’s a huge help in getting restaurants through labor shortages.”

Inflation

Here’s an interesting note from that same Datassential report: while the price of meat has increased a whopping 84 percent since the beginning of 2022, and eggs and dairy have increased 44 percent, plant-based alternatives have increased less than 1 percent during the same time period.

This may be a great moment for operators to lean into the growing desire for plant-based foods. While the majority of Kagome’s sauces are naturally plant-based, the company has expanded its plant-based offerings a great deal over the past couple of years in order for operators to meet demand. Kagome USA recently introduced a line of plant-based butters (salted or unsalted) that serve as a one-for-one swap for traditional butter. Further, the plant-based butters can even help elevate dishes.

“Our line is similar to compound butter in that each spread is packed with fresh ingredients and flavor and is visibly appealing as a finisher or topper for countless dishes and cuisine categories,” Krieger says. “This allows culinary teams to create alternatives to the classic method of finishing dishes with butter—they can still create plant-based dishes and use our spreads as an alternative.”

Supply

Perhaps the biggest influx of business that Kagome USA has seen over the past couple of years has been due to the supply chain issues wreaking havoc on the industry. When a restaurant brand can no longer source the correct ingredients to make its signature sauces, Kagome USA turns to its research and development team, which specializes in recreating sauces to spec.

“From a research and development standpoint, we are not just trying to make great products to help enhance back-of-house efficiencies,” Johnson says. “We’re trying to move the food science discipline forward. We have an incredible team here at Kagome that’s on the fast track to do great things in the food-service space. Customers realize and recognize our ability to develop products that help them stand out amongst the competition.

“That goes back to The Kagome Way,” Johnson continues. “We recognize that our success is our client’s success, and vice versa.”

For more on The Kagome Way, visit the company’s website.