Continued Commodity Pressures
Many of the forces that caused the crazy commodity price increases several years ago are still at work: concerns about supply, rising energy costs, growing worldwide demand, and financial speculation through recently developed financial instruments. As most restaurateurs have neither the means nor knowledge to protect ourselves through contracting things out, we will continue to feel this inflationary pressure throughout 2011 and beyond.
Consumers will be feeling this punch wherever they spend their food dollar. In mid- December, the Department of Labor noted that grocery prices increased at 1.5 times the rate of inflation for 2010. The DOL also predicted a 4 percent increase for 2011. However, fast casuals offer the whole social-dining experience that most grocery stores cannot. While shoppers only see price increases, fast-casual consumers see our stores as places where good times and life’s small luxuries can be shared with friends and families. After several years of bad economic times, people want to feel good about themselves and the future. Wise operators and marketers will give them places and reasons to do so.
Moderate Economic Recovery
As I went out to do my holiday shopping, I was excited to see both more shoppers and fuller carts than in the last several years. Nonanecdotal evidence also seems to suggest a slow recovery is underway. Consumer spending and single-store sales are improving.
I hope for the best, but I firmly believe that we should be prepared for the worst and a long, slow recovery, as it will take many years for the market to make up for the jobs lost since 2007. The restaurant industry benefits from the opportunity to hire new employees who might never have given our industry a chance, but I would gladly give up this luxury for lower unemployment nationwide. Overall, fast casuals could benefit relative to much of the industry due to the superior value proposition we provide.
The Employee Free Choice Act Isn’t Dead
Many of us breathed a sigh of relief when the Orwellian-named Employee Free Choice Act (EFCA) did not become law. However, the experts tell me that this fight is far from over. Unions and true believers in the administration may try to force through some of EFCA’s provisions administratively. I am most concerned about policies similar to card check and mandatory arbitration where a bureaucrat can impose a two-year contract on employers and employees.
The bureaucratic process gets far less press than Congress, so we must watch things very closely. Recent attempts by the lame duck congress demonstrate how political types (from both parties) and special interests are willing to do whatever it takes to accomplish their agendas while still in power.
More Unions Organizing
The recent attempts by unions to organize Starbucks and Jimmy John’s workers (defeated by only two votes) are just the start of increased efforts to organize our workers. Experts close to the issue tell me that unions will initially focus their efforts on one or two metro areas initially to build momentum. While very few people in the administration probably understand that many large restaurant companies are made up of hundreds of franchisees, the unions know this and will go after midsize franchisees like they did with Jimmy John’s in the Twin Cities.
Labor knows that few relatively small companies or franchisees will want to spend or be able to afford almost $90,000 rumored to have been spent by the Jimmy John’s franchisee during the election. Since many fast casuals fall in the small-company range, we need to be particularly concerned.
Labor also knows that the high turnover in our industry will easily allow them to plant multiple union organizers in our stores and have multiple (and costly) elections over several years. Since many fast casuals try to do the right thing in terms of the food we serve, our communities, and the environment, unions could try to use these beliefs against us to essentially publicly guilt us into not fighting them. After studying labor history during my undergrad years, nothing would surprise me. Check out both the SEIU and IWW websites for more info.
Under the Employee Free Choice Act, secret ballots would have been done away with and some employees would not even have been given the chance to vote at all once organizers coerced a majority into signing cards.
I want the best for all of my employees, so I want any process impacting them to be fair and free from intimidation. My internal customers are equally as important to me as my external ones.
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