A Deeper Dive

Everybody talks about having a good corporate culture. But what does that mean? This week’s episode of the Restaurant Business podcast A Deeper Dive features James Pogue, the CEO of the leadership consulting firm JP Enterprises, to talk about culture and inclusivity. Pogue is a former researcher and administrator who now works with companies—including many restaurants—to help them attract and retain younger employees. We speak with him because we’re curious about what it means to have a good corporate culture, one that promotes inclusivity and diversity. Pogue is as good as anybody to talk about that topic. He quickly notes in the podcast that a company has a culture whether it tries to have one or not. And he talks about how to promote that culture—particularly in a time when so many things are so divisive. He talks extensively about promoting an open and honest culture at a time when political divisions are raging.

How does a mall concept do well in stand-alone locations? With chicken wings. This week’s episode of A Deeper Dive features Charley’s Philly Steaks President Candra Alisiswanto, who talks about Charley’s growth strategy. Charley’s operates 670 locations. Most of those have traditionally been in mall settings. But more recently, the company began expanding outside of those shopping centers and into stand-alone locations, many of which have drive-thrus. It has done so in part with an expanded menu that features chicken wings in addition to its traditional menu of steak and chicken Philly sandwiches. We spoke with Alisiswanto about this strategy, and why chicken wings have helped the company intensify its growth. He talks about the difference between operating in malls and operating standalone locations and what it takes to make that transition. He also talks about technology and bringing kiosks and mobile apps to the malls. He talks about franchisee demand and how drive-thrus fit in Charley’s future.

How many restaurants does Subway need to close? This week’s episode of the Restaurant Business podcast A Deeper Dive features Trevor Haynes, president of North America for the Milford, Conn.-based sandwich giant, to talk about the chain’s future. Subway remains the largest chain in the U.S. by unit count. But it has been shrinking for years. Franchisees have closed about 6,000 locations since the brand peaked at 27,000 restaurants in 2014. Restaurants have low unit volumes and franchisees on average own just two locations. Haynes was acting CEO in 2018 and 2019 before giving way to John Chidsey. He talks about the likelihood of more closures ahead. But he also says the closures open opportunities for new locations, though the restaurants may be different and could feature things like kiosks and vending machines. Haynes talks about the company’s plan to recruit larger franchisees and the future of business developers, the sometimes controversial operators who act as master franchisees and take on some of the roles of the franchisor. And he talks about the company’s efforts to build unit volumes.

How do you create a restaurant concept when so much about the business is uncertain? This week’s episode of the Restaurant Business podcast A Deeper Dive features Jack Gibbons, the CEO of concept incubator FB Society, to talk about concept development and the industry’s future. FB Society, formerly known as Front Burner Brands, is known most for creating Velvet Taco, which has since been sold—though FB still has an interest in the chain and is a licensee. The company has created several other full-service and fast casual brands including Sixty Vines, Mexican Sugar, Whiskey Cake and Son of a Butcher, among others. Gibbons talks about how FB Society thinks when it creates a concept right now and what things they consider when developing full-service and fast-casual brands. He also discusses consumers’ continued desire for service and the demand for high-quality restaurants and what kind of takeout consideration full-service restaurants should have. And he talks about whether fast-casual restaurants should focus on the dine-in business at all. Gibbons also takes some time to talk about how best to win the labor shortage and about rethinking unit economics when everything costs so much.

How do operators overcome rapidly shrinking profit margins? This week’s episode of the Restaurant Business podcast A Deeper Dive features Jim Balis, managing director with the investment firm CapitalSpring, to talk about the rising cost environment and how operators can overcome these problems. Labor costs are soaring right now, with wage rates up more than 13% over the past year. But food costs are up even more, rising more than 16% according to federal data. Add in the higher prices for construction, equipment, real estate and interest rates and it’s difficult to improve profits. Menu prices are up 7.2%, not nearly enough to offset the higher costs. In addition, a potential recession could push more consumers to shop on price, which may hurt operators’ ability to keep raising costs. Balis is an operational expert and discusses strategies restaurants can use to offset the higher costs without simply raising prices. But he also talks about price strategy. And he talks about the technologies that could do the most to improve operations down the road.

What is the state of the restaurant industry this year? This week’s episode of the Restaurant Business podcast A Deeper Dive features Lance Trenary, the CEO of Golden Corral and chairman of the National Restaurant Association, to discuss the general state of restaurants. Trenary joined the podcast from the association’s recently completed show, the first one in three years. The show was held just days after Congress could not muster enough votes to approve a package that would have provided $40 billion in funding for the Restaurant Revitalization Fund. Trenary talks about what that means for restaurants that had been counting on receiving their grants. He also talks about the numerous challenges facing the industry, notably soaring labor and supply chain costs, and what impact this is having on operators. Trenary also talks about how his own chain, Golden Corral, has been able to deal with these issues.

Why are grocery prices going up so much? This week’s episode of the Restaurant Business podcast A Deeper Dive features Christine LaFave Grace, the executive editor of RB sister publication Winsight Grocery Business, to talk about last week’s consumer price index data. The CPI rose 8.3% in April. Food prices have soared, rising 9.4%. That includes 7.2% at restaurants. But at grocers, prices are up 10.8%. This affects restaurants in two ways. First, it increases overall costs for the base consumer, which may cause them to cut back on spending. Yet they also see the prices and start dining out instead, especially given the 3.5% gap in pricing between the two industries. And indeed, restaurant and bar sales have continued to thrive this year. We talk about this issue from the retailers’ perspective. Why are grocery prices increasing so much? How are consumers reacting when they do shop for their groceries? And how long is this all expected to last? We also provide some context on what this means for restaurants.

Restaurants aren’t the only businesses with labor problems. Distributors have their own challenges that are also driving up costs for operators. This week’s episode of the Restaurant Business podcast A Deeper Dive features Terry Walsh, the president of small California distribution company Southwest Traders, to discuss the impact of the labor shortage on distributors and how that affects restaurants. A lack of truck drivers has been an increasing problem for distributors for years but was worsened during the pandemic, which has played a major role in an increase in supply chain costs while causing problems with delayed or even cancelled deliveries. But a warehousing worker shortage has also caused problems. Terry talks about these roles, why companies have had problems getting these workers, and what distributors are doing about it. He talks about their impact on operators and overall costs and what steps operators can do to make life easier on drivers. Walsh has more than 30 years in the distribution business and has president of Southwest Traders since 2016. He has spent 14 of those years on the board of the International Foodservice Distributors Association.

How did Crumbl Cookies go from an off-the-wall idea between two cousins into one of the country’s fastest-growing restaurant chains in just five years? This week’s episode of the Restaurant Business podcast A Deeper Dive features Jason McGowan, the CEO and cofounder of the fast-growing cookie chain, to talk about its history and its growth. McGowan founded the brand with his cousin, Sawyer Hemsley, in 2017. The brand has since grown to more than 400 locations that largely sell just cookies (as well as some ice cream). It was the fourth fastest-growing restaurant chain in the country last year, according to the Technomic Top 500 Chain Restaurant Report. Sales are up nearly 500% since 2019. But there is a real foundation here. Crumbl’s locations average $1.7 million and generate more than $350,000 in net profit by largely selling just cookies. It also has a massive social media following. McGowan talks about the company’s unique formation, its quick rise and the strategy behind its success. He talks about the company’s franchising strategy, which has thus far completely avoided any sort of advertising.

What can operators do to avoid raising prices too aggressively? Or should they? This week’s episode of the Restaurant Business podcast A Deeper Dive features John Gordon, a restaurant consultant out of San Diego, to talk about the industry’s historic level of menu price inflation and whether consumers will ultimately respond. Restaurants are raising prices at historically high rates, including 6.9% year over year in March, continuing a high run of price inflation. Restaurants are doing this because their own costs are soaring. Consumers at least thus far have yet to reject these higher prices. Gordon discusses why consumers haven’t yet rejected higher prices. He also discusses how long this will last. There are growing fears that consumers will shift their spending habits in response to inflation. Yet operators’ own prices continue to increase. Gordon discusses what they can do to avoid further price increases, and a potential consumer blowback, without having their margins hurt even more.