At this year’s National Restaurant Association Show, some of the industry’s leading executives stopped by QSR magazine’s booth to chat about the landscape—what they’re seeing, hearing, and what might be next. We asked everybody the same three questions: One on tariffs and consumer sentiment; their thoughts on value; and lastly, to separate myth from reality with restaurant technology. In the days and weeks to come, we’ll share their answers.
First up, Donatos CEO Kevin King (read more about King’s plans for the cult-favorite pizza brand here). And join us in Atlanta at the QSR Evolution Conference, where King will be speaking on franchising.
Other conversations:
Sunny Street president Mike Stasko
Your take on tariffs and the state of the consumer.
I think the consumer made it loud and clear right after the tariff conversations that they’re being careful with their spending. And it’s impacted the restaurant category in a big way. There’s a lot going on in there. There’s immigration issues and those guests are staying away. There’s inflation worries. So people are being careful. The optimism the consumer had in November and December, sometime in February, certainly in March [it went away].
It’s not really shown up in sales—it’s a little early—but maybe there’s some clarity more recently that tariffs are not going to be so bad, if you’re watching the stock market and its recovery. Perhaps the consumer will take some keys from that. But you look at all the consumer confidence and measures, and they haven’t been this low since COVID. And outside of COVID, it’s as low as it was in 2008. The consumer feels the pressure and they’re reacting.
It’s the uncertainty that I think bothers all of us the most. We don’t know how to plan. We don’t know what to do from a CEO perspective, or a business perspective. Nor does the consumer know what to do. Listening to the airlines, they were the ones who right away were like, “bookings dropped off.” Travel is probably the first thing everybody cut.
And for us and tariffs, we don’t have a lot of exposure. We don’t buy much internationally. So our food supply is all domestic. However, if other people who are importing switch to buying domestic, then there could be pressure on those prices going up. And then, the reverse could be true: if the farmer cannot sell dairy and grain internationally, then the price of those commodities could go down and they go down in the short-term because then they react. They produce less later and prices go back and sometimes up even higher.
It’s all unknown.
How do you define value these days, with everything we’re talking about?
I think value is super important right now to the consumer. The question is how do you define it. Price is obviously a big part of value. But we’re a brand that has a hard time being the low-priced option. So we have to define value with quality and service as well as price or we’ll wind up losing. Value for us has got to be more than just price. And that’s what we’re focused on trying to do—is give a high-quality food, high-quality pizza with a really good experience. If we can do that at a competitive price, maybe not below, I think we have a shot at winning. The consumer, if you look at brands that are still winning or are less impacted, they’ve been able to differentiate their brand more than some others.
If you look at what Chili’s has been able to do, super impressive, it’s a price play but it’s not cheap. I think they’re getting high marks for value at a price point of $10.99.
Give us your thoughts on the tech arena and how it’s really impacting restaurants.
AI is the huge topic. What impacts it’s going to have on the restaurant industry, I think beyond order taking, suggestive selling, mining data, is really powerful for what the guest is going to do. We’re using some AI in the call center to hopefully give customers a good experience. I don’t know where else AI plays in the sector. It certainly does on the backside. If we have a bunch of data that we can apply AI to and get meaningful insights to drive traffic, I think those are the places where AI can factor in.
I think automation is going to continue to be a big play. Not necessarily AI, but automation in general, because of the price of labor. I was at the leadership conference yesterday (at the National Restaurant Association Show) and the $30 minimum wage for Los Angeles came up. That’s as ridiculous as when I first heard $15 minimum wage 15 years ago. But it’s scary. The more people talk about it, the more the expectation is that wages will go that high. And the quick-service restaurant industry at $30 minimum wage, there’s got to be a lot of automation. We’re going to have to take labor out.
We love automation at Donatos, first and foremost, with how we can deliver a more consistent experience. But automation is going to come into play on the labor side as minimum wage continues to go up. It just has to. Technology will help. The things technology can do today that we dreamed of—I was over looking at Middleby Marshall’s automated pizza machine and on June 9, we’re going to open up a fully automated kitchen at the Columbus airport (sister company Agápe Automation in partnership with Appetronix), which looks really, really cool. I’m excited about that kind of innovation and that kind of automation. But I still lead with the biggest reason we want to automate in a restaurant is not to eliminate people, but to make the product more consistent and better.
