BUSINESS: Looking at the Future of Restaurant Franchising
In the last few decades, the landscape of restaurants and franchising has changed drastically. In the early ‘60s, the easiest way for an operator to start a restaurant business was to open a single franchise. It was a first-time choice for many entrepreneurs that wanted to become business owners. Over the years, the future of franchising has begun to morph into a different type of investment. Here’s what the future holds.
DID YOU KNOWS…
Looking at the Minimum Wage
The House of Representatives passed the Raise the Wage Act which aims to gradually raise the fed minimum wage to $15 by 2025. However, it’s unlikely to pass the GOP-controlled Senate or get signed by Trump. While the minimum wage may not be raised to $15 in the near future, a more moderate hike seems slightly more likely. After all, it has been unchanged since 2009 – the longest period of standstill since its introduction in 1938. Adjusted for inflation, the minimum wage has been above the current rate for large parts of the 20th century, with 1968 marking the peak. Back then, the minimum hourly earnings for U.S. workers amounted to $11.69 in 2019 dollars.
Netflix Plummets
As the chart here illustrates, Netflix’s growth increasingly shifted to international markets in recent years as the streaming giant expanded to more and more markets. In the most recent quarter, however, international subscriber additions also fell sharply, a fact that many observers attribute to the weak lineup of exclusive shows debuted over the past three months.
Over-Charging?
Reddit is known for its calm and polite demeanor (note: sarcasm), so you would be shocked to find out that Reddit users exploded over service charges and fees at Pez Cantina, a Mexican restaurant in LA. The restaurant charges an 18% service charge as well as a 5% kitchen charge. While guests never like to feel nickeled-and-dimed, there’s some extra messiness as the restaurant’s website says it only charges an 15% auto-gratuity, but also this 18% service charge came on a buffet for a table of two. The restaurant’s owner blamed their POS for the error and says their service/kitchen charge policies are easily found on the menu. The owner also offered a free meal to the guest who started the initial thread. Either way, there’s a whole lot of mess in this story. Perhaps just raising menu prices would’ve been easier – and safer.
LIMIT YOUR SUMMER
Why it matters to you: Where do limited-time offers fit in your summer marketing strategy?
Summer is one of the best times for Limited Time Offers (LTO) promotions, which is why so many quick-service restaurants employ them. The good news is that LTOs are not their exclusive domain. Identifying a dish or themed menu that you run for a limited time creates a sense of urgency and scarcity. Some of the hottest ones this summer are not even food items. Take Dunkin’s Cosmic Strawberry Coolatta; it is here for a short time and demands a pretty high price point. The strategy is to get folks to trade up to the LTO or be excited by something they can only get seasonally.
We have long discussed the value of offering a frozen drink menu during the summer. Folks are more willing to trade up for frozen drinks even alcohol free ones. But it’s not limited to beverages, because summer offers amazing options for peak quality local produce. If you’re in New Jersey, tomato season began in early July. From now until August 1st, you can offer amazing salads or crostini with the best tomatoes available. The core strategy is simple enough: create excitement, add the urgency of an LTO and focus on the season. From there you should be able to conceive a great LTO of your own. Let us know if you are already doing something creative with your special offers.
[Source: Restaurant Business Online]
WHO IS EUGENE?
Why it matters to you: Introducing Eugene Scalia as the next pick for Secretary of Labor.
After Alexander Acosta resigned as Secretary of Labor due to the questionable plea deal he made with Jeffrey Epstein, many were speculating who would replace him and how long it would take. That wait appears to be among the shortest allowed by the Trump Administration as they have now announced Eugene Scalia as their candidate for Secretary of Labor. If that name sounds familiar it’s because his father was late Supreme Court Justice Antonin Scalia. Like his father, Eugene Scalia is a lawyer with a long history of public service who most recently was the solicitor for the Department of Labor (DoL) under George W. Bush. But what does all this say about Scalia’s potential to be confirmed and how he will act as Secretary?
If his history and success at suing the Federal Government over regulation is any indication, he will continue a stark policy of reducing rules in favor of employers. As restaurant operators, we handle our fair share of regulation, much of which seems arbitrary and vague, so this may feel like a good thing. Among the issues still needing resolution at the DoL are joint employer status, overtime thresholds salaried employees and the proper management of tip-share. There is some indication from his record that Scalia will side with owners in these cases, but we will need to see what happens IRL. One place the DoL has no standing is setting the minimum wage. Given that this was recently voted on by the House of Representatives, this could be the most important labor fight that the DoL isn’t central to its outcome. Should be an interesting next 17 months.
[Source: Fortune]
