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  Economic Growth of Restaurant Industry Depends
on Its Response to Societal Trends
“Share of Stomach,” Labor/Management Issues and the Obesity Epidemic Play a Role in Industry’s Future

University Park, Pa.- May 14, 2003 - The restaurant industry seems to have weathered the worst of the economic storm brought about by the latest recession and the tragic events of 9/11, and the percentage of meals being prepared and consumed away from home continues to grow.  However, future growth in the industry will depend largely on competing against supermarkets, convenience stores and other businesses fighting for consumers’ “share of stomach”; hiring qualified managers that are passionate about the industry; and playing a proactive role in addressing the obesity issue.

These were some of the opinions recently shared by a panel of experts during “Emerging Trends and Growth Strategies for the Restaurant Industry,” a symposium sponsored by the Penn State School of Hotel, Restaurant and Recreation Management.  The symposium, which was held on April 8 at the Pavilion Theatre on Penn State’s University Park campus, was part of the School’s Conti Educational Series, which provides a forum for industry leaders to explore and analyze some of the most critical issues currently facing their professions.

Panelists for the symposium included 

  • Michael P. Berry, president and chief operating officer of The Cheesecake Factory; 
  • Denise Marie Fugo, president and chief executive officer of Sammy’s and past chair of the National Restaurant Association; and 
  • Malcolm M. Knapp, founder and president of Malcolm M. Knapp, Inc. 
  • Michael DeLuca, managing director of public affairs for Burson-Marsteller, served as the moderator.
Although the panelists offered different viewpoints on whether the economy has “bottomed out,” they seemed to agree that the restaurant industry was poised to rebound from some challenging times.  “I think most of us believe that there is a bottoming-out that’s natural,” Berry said.  “We may have been out of it, but then you go to war and that obviously causes another challenge because they’re uncertain times.  So I think the economy is very uncertain…and that is one of the challenges that we face as business people.  But, it’s one of those natural challenges in the business cycle, and I think we’ll come of it and we’ll be fine.”

According to Knapp, however, “the big overhang is not as much the economy, although that could be better.  It’s what I call an ‘emotional snowstorm’—just like a physical snowstorm, when it snows people stay home or they go very close to their home.  We started having an emotional snowstorm back in April and May of 2002 when people lost faith in their leadership and in public and private institutions: church, government, business.  People build up a very strong anxiety and eventually you come to a tipping point…which means that things that normally do not upset you change your behavior.  And when you change behavior, you don’t do things—you just get paralyzed.”

Fugo agreed that people are staying closer to home, but that doesn’t mean they are preparing meals at home; in fact, eating out has become the preferred eating choice.  “People are demanding food 24 hours a day, 7 days a week, where they want it and when they want it,” she said.  That isn’t only complete meals—that’s snacks as well.”

And, since the “emotional snowstorm” has increased the need for people to connect and remain close, Fugo noted that restaurants are replacing the dinner table as a place for families to catch up.  “At home, people are busy with computers, televisions, DVD players and all kinds of personal devices that interrupt with communication,” she said.  “At the restaurant, they actually talk to each other, and that may be the only time in the day that they spend real meaningful time with their family and friends.  So the restaurant community continues to play a really important part in bringing people together.”

At the same time, however, convenience stores, supermarkets and other businesses are offering increasing number of food choices for people who are in a hurry and don’t want to take the time to prepare meals or snacks.

“In terms of grocery stores, the frozen food entrée area is huge—you can buy a whole meal for less than three bucks,” Knapp said.  “This provides a very decent alternative to quick-service restaurants…but it’s not a big number.  It takes away some of the growth, but it’s not killing business.

“The basic response of the casual dining people is again following the consumer—they are now quite heavily into takeout,” he added.  “I doubt if anyone would have believed five years ago that Outback (Steakhouse) would do nine percent of its sales in takeaway, or Chili’s seven percent…that is in response to their core demographic, which is the Baby Boomers.”

Berry views the takeout market as an opportunity to increase sales, but only if done properly.  “If you don’t know how to do it, it takes you away from your core competency, which is providing a great dining experience to people in the restaurant,” he said.  “You have to have both competencies in order to do it right, which means you need to juggle your restaurant to be appropriate to do both types of sales. If you’re not, the to-go market actually knocks you off your game.”

One of the upsides of America’s recent economic woes is the fact that seems to be a greater supply of qualified individuals to work in the industry.  “With the current recession that we’re in right now, there is very good opportunity to find very good people, those that want to be in our industry,” Fugo said.  “What happens when we start up the economy again pose a different problem; but right now, from my perspective, there are very good candidates out there and it’s an opportunity for us to pick the best people.”

However, one of the obstacles the industry has needed to overcome to attract these workers is the perception that the restaurant industry is comprised of “burger flippers.”

“I think we’re past (that image) as an industry,” Fugo continued.  “You need to realize that whenever that term is used, it is used in the meanest-spirited political sense, and whenever anyone uses that term, you have to put in their place.  Every job in America is a great, honorable job, period—I’m a six-year veteran of Burger King, so I’ve flipped a lot of burgers.  It put me through school and it taught me wonderful things and it helped me get to where I am today.  No, it’s not an industry of “burger flippers.”

While Berry agreed with Fugo’s assessment, he also said that the restaurant industry has not “put its best foot forward” in terms of paying its workers.  “When you pay minimum wage, you get minimum wage expectations,” he said. “The reason the baggage screeners were so lousy before 9/11 and so forth is because they were put in miserable conditions doing degrading work and were paid sub-living wages.

“I’m a firm believer in a livable wage.  I know I’m in the minority in the restaurant industry, but I do believe there’s such a thing as a wage that you can live with, with any decency and respect.”

According to Knapp, an even bigger issue confronting the industry is the quality of the managers running the restaurants.  “A lot of managers just suck—they are terrible,” he noted.  “They abuse the workers, and they are disgraceful.”

And, since many Americans’ first jobs are in the foodservice/restaurant industry—30 percent, according to recent statistics from the National Restaurant Association—this does not help the industry’s image.  “If they had a good boss, they felt well about (about the experience); but, if they a lousy boss, they say this industry is a terrible place and they would never let anybody work in it,” Knapp said.

“What I like to tell students is that if you are not passionate about coaching, training, and motivating, please do not come into our business,” Fugo said.  “Go somewhere else…but don’t come into our business, because to survive at what we do and to have the great industry that we do have, (managers) have to be passionate teachers, trainers, motivators and coaches.  That doesn’t stop whether it’s day one on the job or you’ve been in the business for 30 years—it just does not stop.”

Another issue that is certain to affect the restaurant industry in the future is growing concern over the obesity epidemic.  As DeLuca pointed out, lawsuits against the industry—quick-service restaurants in particular—are growing. 

“We have trial lawyers who are following the path of the litigation against the tobacco industry, looking at the same source of strategies and saying, ‘we’re going to identify a villain, and that villain is the restaurant industry,’” he said.

“Again, we have to keep this in perspective,” Fugo said.  “This is about politics and money, so we have to realize that it should not knock the industry off its skates.  We have to keep our focus on what we do, but this is something that will have to be in our playing field now and we’ll have to respond to it.”

Berry pointed out that three states — California, New York and Maine — already have introduced legislation that requires quick-service restaurants to post nutritional content and that there will probably be an increasing number of lawsuits in the near future.

“I understand (the lawsuits surrounding) cigarette smoking — clearly, despite 40 years of Surgeon General warnings, it’s still an addictive substance,” he said.  “But I think it is wrong when…parents want to put the blame off onto someone else for behavior patterns that are no different than if they’d let children watch whatever TV they wanted to watch and so forth.  So I think it is a political football…I think it’ll surprise us the way it goes, but it does come down to opportunism on the part of a litigious society.”

Knapp added that schools need to bear some of the responsibility for resolving the problem by teaching nutrition education in the classroom, by making sure children have some sort of physical education every day and by offering better food choices for school lunches—and more time to eat.

“The feeding of our children in K through 12 has just gone wrong,” he noted.  “They’ve brought all the foods that they now say are bad for them into the schools and they jam the meal period into 20 minutes, which is teaching them horrible eating habits…and they’ve done it for the wrong reasons because they get the payoff from the brands, they get the payoff from the soft drink manufacturers and so forth.  It’s horrible what they’re doing to American children by feeding them this stuff.”

“We’re in “the game” now, so we have to be proactive,” Fugo said.  “I think we should make real sure that we don’t allow trial lawyers to kill the largest industry in the United States.”

--
Mr. Hessert is director of college relations for the Penn State College of Health and Human Development.  He can be reached at (814) 863-4325 or swh4@psu.edu
 
“Emerging Trends and Growth Strategies for the Restaurant Industry” was the second symposium in the Penn State School of Hotel Restaurant and Recreation Management’s Conti Educational Series, which was created to provide a forum for industry leaders to address and discuss the most pertinent issues facing the hospitality industry today.  The series is named in honor of Walter J. Conti, a distinguished alumnus of the School, past chairman of the board of the National Restaurant Association and member of the Penn State Board of Trustees.

Ideas generated through the series are then disseminated to industry and government leaders, students, faculty, alumni, media and others associated with the profession in order to shape policies and strategies affecting the hospitality industry for years to come.

A copy of the entire symposium is available in DVD format.  To order a copy or to obtain additional information about the Conti Educational Series, please contact Harvey Kamp, director of alumni and industry relations in the Penn State School of Hotel, Restaurant and Recreation Management, at (814) 865-6673 or huk3@psu.edu

Contact:


S. William Hessert, Jr.
Director, College Relations
College of Health and Human Development
The Pennsylvania State University
102 Henderson Building, University Park, PA  16802
(814) 863-4325
swh4@psu.edu


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