GROW LEADERS WITHIN YOUR RANKS

Posted on May 4, 2023May 21, 2023 by Franchise Strategist

If you want to increase retention and expand diversity in the restaurant business in 2023 – especially in leadership, on boards and with founders of growing brands – start with education.
The restaurant industry has an information problem. Historically, most restaurant education is limited to on-the-job (OTJ) training, which presents numerous challenges.

Increase retention and expand diversity through employee education
By Lauren Fernandez

Traditional restaurant OTJ training is fraught with issues such as a lack of budget, lack of time and no quality control standardization. Accessibility is also an issue: often we see that with OTJ training there is no way to accommodate different learning styles and languages, alienating non-English-speaking employees. A lack of training stems from many problems, such as categorically high turnover rates, high levels of attrition and a general lack of leadership training that plagues our industry.

I’m a Latina and a first-generation American, and my parents saw education as a means for me and my siblings to better our lives. They worked hard to make sure we received the best education in order to create more opportunities than they had.

While I followed a traditional educational path in law and business, my OTJ training operating our restaurants was undoubtedly the most impactful. Experience in the field as an operator taught me more about the restaurant industry than my previous education could, and it closed the information gap on what it takes to be a leader in our industry. But both my educations together – in graduate schools and on-the-job – have equipped me with a unique lens, and it informs my call to action: we as restaurant leaders can leverage education to overcome barriers and as a tool for growth.

When we champion education, we mean restaurant-specific training with a focus on operational excellence, profit and loss management, leadership development and more. Investing in people and their personal and professional development contributes to a culture where people are valued, and ultimately develops stronger leaders that will make the industry a better place to work. We must proactively nurture the next generation of restaurant workers who will see the industry as a long-term career rather than a temporary job.

And this isn’t as hard of a lift as you would think. While I was an operator, I hosted quarterly management team meetings where we not only focused on results and celebrated wins, but we focused on new leanings and sharing best practices. I taught high-level strategies like profit management, but we always-connected theory back to actual practice. These meetings created a collaborative and transparent environment where managers helped each other improve, and they were instrumental in improving the performance metrics of the group as a whole.

Restaurants nationwide employ nearly 12 million workers and account for 4% of the overall GDP in the United States. As an industry, we still suffer from very high turnover and attrition. Investing in education is one key to retention and building long-term, desirable careers in our industry. To address the challenges of turnover and retention, consider some of these additional ideas:

*Innovative incentive and rewards programs like matching payments on student loans. More than 43 million people in the U.S. owe money toward student loans, and the average federal student loan debt balance is nearly $38,000. Offering a program to help reduce that debt can be a huge incentive to draw good employees and keep them. In fact, one study noted that 86% of people between the ages of 22 and 33 would commit to an employer for five years if offered a student loan repayment program. And, through 2025, employers can offer up to $5,250 in student loan repayment benefits without paying any tax thanks to the Consolidated Appropriations Act, which was signed into law in 2020 as part of pandemic relief efforts.

*Volunteer days for a food-related cause like a community food bank. Many studies have shown that offering some sort of volunteer program can boost productivity, increase employee engagement and improve hiring and retention rates. Ask your employees to select a cause, or find something that ties into what your restaurant offers – not only are you giving back to your larger community, you’re also showing your employees that you are doing something worthwhile outside your restaurant’s four walls.

*Encouraging participation. Support your employees to seek out opportunities to learn and engage in the industry. It can also encourage them to grow and thrive in their potential hospitality career. That can be through culinary schools and events, volunteer board opportunities or speaking on panels and at conferences.

*Sponsoring conference membership and attendance. Encourage employees to attend conferences or pay for memberships to restaurant- or culinary-related organizations. This will help create networking opportunities for them, and they will bring back information that could help your business grow, too.

*Teambuilding retreats/exercises. Consider building a program that promotes your company’s mission, vision and goals while also creating an atmosphere for support and encouragement.
With education as the cornerstone of your efforts to retain good employees, expect it to play an even larger role in the future as labor challenges continue. To that end, Full Course launched a new 501(c)(3) nonprofit foundation, Full Course Learning Center, to ensure education and support are accessible to all in our industry, from back of house to operators. You can find educational tools and resources, including more ideas about employee retention, at fullcourse.com/education.

When it comes to employee retention, new ideas and approaches will continue to evolve. By implementing some thoughtful ways to address these challenges, you can make sure that not only will you find good employees, but that they stay and grow with you and your business, too.

Lauren Fernandez is the Founder and CEO of Full Course (www.fullcourse.com ), a non-traditional restaurant investment group created for operators by operators that is changing the way new businesses grow their brands. The company partners with restaurants in the early stages of development to optimize existing operations develop strategies for sustainable growth and bring the right investors or franchise partners to the table. Fernandez is a restaurant industry veteran with two decades of experience. She previously served as general counsel and head of franchise administration for FOCUS Brands, a multi-brand restaurant company with more than 4,000 restaurants (including Carvel, Cinnabon and Moe’s Southwest Grill) in over 15 countries, and was co-founder, president and operating partner for multi-unit franchise developer Origin Development Group, acting as a strategic growth partner for brands such as Chicken Salad Chick. She also is a frequent speaker in the areas of organic business growth, licensing and franchise operations across the country.

IS BUYING A FRANCHISE RIGHT FOR YOU?

Posted on March 29, 2023July 8, 2023 by Franchise Strategist

Ideal candidates for franchising are those who are excited about operating their own business, have no experience in the field, and are willing to accept the duties and obligations of being their boss. Purchasing a franchise could be an effective means of launching a new business. Consider franchising if you have yet to gain experience in the industry and are passionate about running your own business, and are willing to accept the responsibility and accountability that come with being in charge.

Is Buying A Franchise Right For You?
By: Gary Occhiogrosso – Founder & Managing Partner – Franchise Growth Solutions

Introduction
While franchising is an excellent way to enter the business world, it is not the best option for everyone. Consider the answers to the following nine questions before deciding whether or not your business might benefit from becoming a franchisee.

Do You Intend To Pursue Franchising In The Future?
If you want to start your own business, franchising may be an excellent option. However, franchising is also suitable for you if you want to be your own boss and run the show, but lack the competence or skills
required to do it independently. But franchising is not for everyone; if these reasons make sense to you, especially if they inspire and excite you, you should consider franchising as the right decision.

Do You Have A Proper Financial Plan And Ability?
As you begin the process of purchasing a franchise, you must have a sound financial strategy in place. You will need sufficient funds to cover the franchise fees and any other expenses that may emerge during the first phases of establishing your firm. Even though a particular franchise may be a solid investment, it may still need time and patience before it starts to pay off; you will also need to ensure that your cash flow can sustain your business moving forward.

Do You Have Previous Experience Leading Others?
The terms "management" and "leadership" are not synonymous. Leadership inspires people to come together and move forward with a single goal, while management is about efficiently doing tasks. Leaders take control of a situation, define a crystal-clear vision for it, and motivate others to strive toward achieving that vision with inexhaustible fervor and enthusiasm. Because most successful franchises require strong leadership skills from the owner or manager at all levels of the organization, beginning with sales representatives and extending to upper management, franchising may not be the best business model for you if you do not feel comfortable in a leadership role.

Do You Have Sufficient Time To Manage Both The Workforce And The Business?
If you already have a full schedule, franchising may not be your ideal choice. Running a franchise requires a substantial expenditure of time and effort. You must be able to devote a large percentage of your focus and energy to the organization. Initially, there may be little room for vacations or even weekends off, and you may be obliged to work multiple days a week due to the long hours. There may be little room for either! Things might be challenging for both parties if you are already committed to another job or have family duties. In addition, managing employees might be challenging since each person has unique personality features. Also, suppose a corporate employee is terminated unexpectedly or quits due to a conflict with upper management or ownership within the parent company. In that case, this can cause problems within the franchise system due to a lack of consistency in the practices and policies established by the franchisor.

Is The Industry Category Stable?
You may ask yourself, "How stable is the franchisor and industry; The answer to this inquiry will help determine if acquiring a franchise would benefit you. If the franchise company you desire to join has a high failure rate and does not seem to be growing in the near future, it may not be worth your time and effort to become a franchisee of that company. For example, if you've always wanted to open an ice cream shop, but there are already twenty comparable businesses in the neighborhood that are thriving, what gives you cause to assume that yours will be more successful? Also, consider whether other franchisors are entering or leaving the market. That might negatively influence business; the present time may not be the best choice! If, on the other hand, the industry you have chosen appears stable and has ample room for growth and expansion over time (especially when macroeconomic trends are considered), that brand may be a good option for you, provided that other factors, such as the cost structure and overhead expenses, aren't too high when compared to revenue projections from previous years' earnings statements.

Are You The Only Franchisee In The Market?
Although franchising is an excellent business technique, it can also be helpful if other franchised units of the franchisor are already operating in the area. No one else may be familiar with the brand if you are the only franchisee in your area. If other franchisees are in the region, you will find it simpler to build your business. They can help with some legal difficulties and the Last but not least, these multiple locations assist with advertising strategies and marketing techniques, which are the two most influential factors in determining whether clients would buy from your firm.

Are You & The Business Capable Of Paying The Fees And Royalties?
There are costs involved with franchise ownership, ranging from $10,000. to $1,000,000. You must additionally pay a monthly royalty fee that is computed based on your sales and other company information. The royalty is the fee the franchisor collects; it is usually a percentage of each week's total sales. Royalties are calculated as a percentage of your business's total revenue.

How Much Support And Training Will You Receive?
You should anticipate a certain level of assistance from the franchisor throughout training and after that, but whether or not they give it primarily relies on the cost of their services and the nature of your connection with them after acquiring their brand name.

* Training: If you are new to operating a business or need help getting started, you should examine if the franchise you are considering offers any training options.

* Advertising Costs: The costs associated with advertising can vary widely based on the advertising medium used (for instance, TV ads may cost more than flyers or social media ads), but in general, these expenses will likely be higher than those of non-franchised businesses.

How much input do you need and want in determining prices?
It would help if you understood how much influence you will have on the pricing. While some franchisors allow franchisees to set their prices, others require franchisees to adhere to the same pricing structure as the company's flagship location.

It would be best to consider whether the franchisor will allow you to alter your product or service, add new items, and make any other required adjustments. Profit is directly proportionate to the degree of operational and marketing control a franchisor offers franchisees. Ideal candidates for franchising are those who are excited about operating their own business, have no experience in the field, and are willing to accept the duties and obligations of being their boss. Purchasing a franchise could be an effective means of launching a new business. Consider franchising if you have yet to gain experience in the industry and are passionate about running your own business, and are willing to accept the responsibility and accountability that come with being in charge. Franchising is a tried-and-true business model that allows business owners to profit from the knowledge and experience of the franchisor while also gaining from their successes. The required investment requires substantial time, money, and effort, but if executed well, it can be rewarding.

Conclusion
Some individuals may find franchising an excellent entry point into the corporate sector. Yet, not all individuals would profit from doing so. Before making a final choice, evaluate if acquiring a franchise matches your long-term goals and lifestyle.

BEST TIME TO OPEN A PIZZA FRANCHISE: 7 THINGS PROSPECTIVE FRANCHISEES LOOK FOR

Posted on March 28, 2023July 3, 2023 by Franchise Strategist

Franchise ownership gives you the financial freedom you’re looking for – but ONLY if you choose the right franchise. When you’re running your own Smokin’ Oak Pizza & Taproom location, you call the shots. Put the right team in place and you can have a flexible schedule that lets you work at your own pace

Best Time To Open a Pizza Franchise: 7 Things Prospective Franchisees Look For
Article supplied by Smokin’Oak Wood-Fired Pizza & Taproom

Your restaurant is the talk of the town. Business is steady and growing. The word-of-mouth brings in locals, business travelers, and vacationers. The goal you had of working for yourself has come true.

That’s the dream. And you’re ready to make it happen. But you’re wondering if now is the right time to open a franchise. It’s true that many business owners are hesitant during uncertain economic times. But research shows intrepid entrepreneurs can not only survive uncertain economic times but thrive.

But don’t just take our word for it… Hear from two of our successful franchises who opened during the 2020 pandemic and are continuing to serve authentic, artisan wood-fired pizza to their supportive communities today – with plans to expand!

With that in mind, no one knows exactly what the economy is going to do and how that will affect business. Evaluating the opportunity alongside the potential risk is imperative. That’s why we’re sharing seven things you should look for in a franchise before investing your savings.

Financial Security
Fast-casual restaurants are highly popular today. The ones that are franchises – a step up in quality and ambiance from the typical fast-food chain — have been opening new locations faster than any other dining category.

Their popularity could be due to profit margins, which are the highest among food franchises. Fast-casual restaurants enjoy a 6% profit margin, which is the same as full-service restaurants and nearly three times better than the typical fast-food eatery.

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ARTIFICIAL INTELLIGENCE WILL HELP FRANCHISORS SPEED UP FRANCHISE DEVELOPMENT

Posted on March 22, 2023July 8, 2023 by Franchise Strategist

In a report by Data IKU, Korn Ferry stated that 55 percent of staff believed AI had already changed the way their organization recruits. IBM receives about 8,000 resumes a day and is the most searched employer on Glassdoor, an employment site that includes employee ratings for their company. IBM uses an AI algorithm that can predict with 95% accuracy whether a worker is planning to leave his/her job.

For those of you who have followed Ed Teixeira’s articles on FranchiseMoneyMaker.com it is with deep sadness that we report he passed away last week. We will miss Ed’s insights, willingness to help and the kindness he brought not only to our publication but the franchise community and the everyone he touched.

Artificial Intelligence Will Help Franchisors Speed up Franchise Development
By Ed Teixeira

Franchise Consultant, Blogger and Freelance Writer. Co- Author of New Textbook Franchising Strategies The Entrepreneurs Guide to Success. Franchise Executive with 40 years of Franchise Industry Experience.

During the past several years, you have probably read or heard about the increased use of Artificial Intelligence (AI) and its applications. AI has already had a significant impact on Human Resource departments, especially recruiting job applicants. In a report by Data IKU, Korn Ferry stated that 55 percent of staff believed AI had already changed the way their organization recruits. IBM receives about 8,000 resumes a day and is the most searched employer on Glassdoor, an employment site that includes employee ratings for their company. IBM uses an AI algorithm that can predict with 95% accuracy whether a worker is planning to leave his/her job.

Related to AI is natural language processing (NLP) which enables computers to read text, hear and interpret speech and determine which parts are important, like Alexa. A report from Tractica predicts that NLP software solutions capitalizing on AI will grow from $136 million in 2016 to $5.4 billion by 2025.

AI and Franchise System Development
If AI resume software automates resume screening, then AI applications should offer franchisors a major opportunity to improve their franchise system development. Using AI to automate the screening of franchise prospect information could help spot qualified candidates much faster. Also, using phone call speech-to-text and NLP can provide more opportunities to gain information from candidate conversations. Service Score’s Qualifier Call Optimization (QCO) platform uses recorded prospect calls with an analysis engine powered by the latest AI tools to deliver opportunities for converting more calls to applications. A number of franchisors currently use the Service Score application.

Franchise Departments Should List Its Telephone Number
A number of franchisors fail to list their telephone number on their franchise page and require prospects to submit a form. This has become somewhat of the norm rather than offering two ways to contact the franchise department. Hiya’s annual State of the Call report found that more than 12,000 consumers and 2,000 businesses ranked the phone call No. 1 for remote interactions, beating out text, email, video calls, and chatbots.

During my career I built three franchise systems in different business categories. In each case our phone number for the franchise department was available. I considered every franchise lead valuable and wanted our staff to be able to engage with potential franchise prospects as soon as possible. It was my experience, that individuals who called the franchise department before submitting a contact form, were eager to learn about our franchise opportunity and had important questions. In many cases it resulted in the person submitting a franchise application.

Top franchisors like Service Master Restore, BrightStar Franchising and Neighborly follow this process. Here is BrightStar’s Message: “Our friendly and experienced team is happy to help you get started. Call us at 872-xxx-xxxx or request a call from our team by filling out the form below.”

Franchisor’s Should Prepare for AI
Its time franchisors prepare for the increased use of AI applications in various franchise operations. This should include franchise development. Here are steps franchisors can take to begin the process:

* Compile data to construct a franchisee profile of top performing franchisees or the ideal franchise candidate.
* Incorporate franchisee profile data into contact form and franchisee application.
* Include franchise department contact telephone number.
* Franchisors should speak with several AI software companies to learn about the process and cost of using AI applications for franchise development. Mike Bidwell, president and CEO of Neighborly stated: “We believe employing AI will be key to gaining or even maintaining a competitive advantage in an increasingly informed and sophisticated marketplace.

About the Author:
Ed Teixeira
Franchise Consultant, Blogger and Freelance Writer. Co- Author of New
Textbook Franchising Strategies The Entrepreneurs Guide to Success.
Franchise Executive with 40 years of Franchise Industry Experience.

TIP TO INCREASE FRANCHISE RECRUITMENT

Posted on January 30, 2023July 8, 2023 by Franchise Strategist

It has been my experience that the franchisee territory does not receive enough analysis by some franchisors. While the type of territory, whether open, protected, or exclusive, is an important consideration for a prospective franchisee, the market potential is equally important.

A Strategy to Enhance Franchisee Recruitment
By Ed Teixeira
Franchise Consultant, Author, Franchise Executive and Former Franchisee with 40 years of Franchise Industry Experience.

To grow a franchise system a franchisor must have qualified franchise leads that can turn into viable franchise candidates. Whether a franchisor generates their own leads, uses Lead Gen portals, or receives franchisee prospects from other sources, acquiring franchise leads is only the start of the franchise development process. The franchisee prospect needs to be motivated by a franchise opportunity before proceeding to the next step in the process.
To achieve this objective the strategy employed by most franchisors is to cite the demand for the franchise’s products or services, in addition to franchisor training, support and a financial performance representation. However, these benefits exclude one of the most critical requirements of any franchise, the quality of the territory the franchisee will acquire as part of their franchise investment.

Not enough emerging and mid-sized franchisors emphasize in detail, how it analyzes, identifies, and determines the territory a franchisee will be granted. Although this subject is typically covered at the early stages of discussions between the franchisor and a franchisee prospect, it has been my experience that the franchisee territory does not receive enough analysis by some franchisors. While the type of territory whether open, protected, or exclusive is an important consideration for a prospective franchisee the market potential is equally important.

1. Franchisors should devote more resources and place more attention on how they identify and define a franchisee market and present this information at the earliest stages of the franchise process. This strategy may require a franchisor to invest additional resources into identifying and defining franchisee territories.

2. Franchisors should avoid utilizing surface metrics to define a market. For example, a home care franchisor may use the number of residents over 65 to define a market, yet that alone won’t indicate how many in this market segment can afford to pay for home care services? The same rationale relates to home restoration services. In addition to identifying the number of single family homes in a territory, the age, size and proximity of homes to potential environmental threats should be considered.

3. Invest in using an experienced market research firm to identify an ideal market profile to serve as the basis for identifying and defining franchisee territories. This approach will benefit the franchisor and its franchisees by maximizing opportunities for brand growth.

4. Some franchisees will request a territory based upon proximity to their residence and certain demographics. Franchisors should avoid accepting a franchisees choice of territory out of hand, without a detailed analysis of the territory. Otherwise, a franchisee that experiences poor sales may attribute the problem to their territory and place the responsibility on the franchisor.

In order to attract qualified franchise candidates franchisors should devote the necessary resources to defining franchisee territories and its market potential and present the franchisee territory as a major feature of the franchise opportunity. This feature of the franchise opportunity should be introduced at the beginning of the franchise presentation process.
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About the author:

Ed Teixeira has 40 years experience in the franchise industry as a franchise executive and franchisee. He is the co-author of the new textbook; Franchising Strategies The Entrepreneurs Guide to Success published by Rutledge. Ed’s franchise experience includes the retail, manufacturing, home health care, medical staffing and technology industries. Mr.Teixeira has franchised brands in Asia, Europe, and South America. He have lectures at Stony Brook University Business School on the subject of Franchising and been interviewed by the Wall Street Journal, Forbes, Bloomberg, Franchise Times, Franchise Update, New York Newsday and Long Island Business Review. Am available for Expert Witness testimony.

He has written and published The Franchise Buyers Manual a comprehensive guide for people considering buying a franchise. Ed is an Industry Partner of Stony Brook University and member of the Advisory Board Pace University Lubin School of Business and was qualified by the International Center for Dispute Resolution and The Business Broker Press as a franchise expert.

KEY TIPS FOR LAUNCHING A SUCCESSFUL RESTAURANT

Posted on December 1, 2021December 3, 2021 by Franchise Strategist

Key Tips For Launching A Successful Restaurant.
BY Gary Occhiogrosso Contributor

For many people, opening a restaurant is a dream. One of the many things I find so interesting about the restaurant business is the blend of creative artistry and the detailed and challenging business aspects necessary to be successful. As an Adjunct Instructor at NYU’s School of Professional Studies, I teach restaurant concept development and business planning. On several occasions, I have been asked by my students to summarize the top issues that one must consider when planning to open a restaurant. Generally, regardless of the type of restaurant, the planning and considerations are the same. I’ll cover a few of the top line elements here.

At the beginning of the process, you should write a simple business plan. It would help if you thought about the many pieces of the puzzle connected to a successful outcome. Many novice restaurateurs, very often chefs, only consider the food component, but there is so much more. A well thought out business plan will include creating a unique concept, a competitive analysis, site selection, financial projections, equipment needs, staffing, and of course, the menu.

Let’s start with a concept

It’s essential that your restaurant offers a unique experience. It could be a Wine Bar with small plates, or a BBQ theme or a Create Your Plate concept. Whatever you decide, it is critical that the environment and “vibe” within the restaurant places the guest firmly inside the experience you’re attempting to create. Don’t confuse the guest with a concept that’s disconnected. As I often remind my clients, “everything touches everything else.” For instance, you wouldn’t use elegant tableware in a fried chicken restaurant or disposable plates in an upscale steakhouse. As obvious as this may seem on the broader elements, it’s essential to take that idea to every detail of the restaurant concept, no matter how small. Everything from the paint color to the music to the tabletops to the wall hanging must work together. The decor elements, the menu, and the service level need to provide the guests with a seamless experience that, when done well, goes almost unnoticed because it’s natural and authentic.

If You Build It, Will They Come?

Building a clientele is never as easy as hanging a sign over the door. It takes smart planning, execution of marketing, and living up to the promise in your mission and brand position statement. You should never assume, “if you build it, they will come.” Questions to ask yourself are; how will my restaurant connect with people? Why does my restaurant exist? What type of people am I looking to attract? What do they read or watch? How do they spend their spare time? What is the best way to reach them? Your concept should appeal to a particular, selected audience. There is no such thing as “everyone is my customer.” Knowing why and for whom your restaurant exists is crucial to success. Your marketing plan should offer compelling reasons why that guest base should frequent your establishment regularly. Is the concept created for health-conscious people? Is it aimed at Millennials or Baby Boomers? It is a full menu or dessert brand or a convenient, fast food, value-based concept. Your social media, print ads, and community outreach should focus on one single audience with one single message. Once you’ve built a loyal base of customers and repeat business, then you should consider expanding your base by marketing to others in the area with a proposition that appeals to them.

Your People Plan is Key

A great team will help you win everyday. Hiring great people is the first step in delivering service excellence and a consistent product to your guests. Your mission statement “the why” along with a corporate culture that emphasizes respect for employees, commitment to your guests, service to the community, and concern for the environment will guide you when selecting your staff. It’s not enough to hire people with restaurant experience; they should also understand and be excited about the mission of the restaurant. If not, they will go through the motions with an inauthentic approach and often fail at exceeding guest expectations. Examine your corporate core values and hire people that match it. Next, supply your staff with comprehensive, ongoing training and the proper tools so can they carry out the day to day tasks flawlessly. Hire for qualities, train for skills.

The Market and Competition

Understanding the market area where you’d like to open your restaurant is a crucial element to the plan. Carefully research the demographics to ensure there are enough people in the area that match whom you believe will embrace your concept. When looking for your location, work with an experienced commercial broker that can supply you with data to help you choose the area and the site correctly.

A full competitive analysis is also essential. For example, check the pricing of your competition. Be sure you’re not over or underpriced for the market. Check other services they offer, such as delivery and online ordering. Spend time in the market area, dine several times at as many competitors as possible, and position your restaurant to address the missing needs in the market. Having a unique value and selling proposition will keep you ahead of the game. Remember, everyone is vying for the same consumer dollars, so you need to create points of differentiation that will help your establishment stand out from the competition.

Consistently Great Food

Your menu must not only be relevant to the concept and the market but should be prepared and served perfectly every time. Restaurant guests expect dishes they grown to love to have the same flavor and high quality each time they visit. Inconsistent products can lead to disappointed guests, bad reviews, and slumping business. Your menu should be not only delicious but also simple to execute. The more straightforward the menu, the less chance of mistakes in preparation. Consistency increases guest satisfaction. Some chefs and “foodies” create menu items that are too complicated and require a highly skilled professional in the kitchen. This approach is fine if you intend to open a high-end restaurant staffed with high price personnel, but not in a fast-casual or family restaurant setting. A winning menu is simple, fresh, relevant, and great tasting. A competent chef can assist in developing dishes that are unique and great tasting that are also simple to produce with less skilled labor. If you have aspirations of owning more than one location, then simple execution, and consistent products are a must to achieve the goal of operating multiple restaurants.

Cash Is King

There are many reasons why restaurants fold. It could be the wrong concept, poor choice of location, not correctly researching the competition, poor service, an uninspiring menu, or bad food, to name a few. That said, the negative impact of undercapitalization may be the most frequent cause of restaurant failures. Knowing how much money you need to launch the restaurant is only the tip of the iceberg. You must assess ongoing cash needs while the restaurant is newly opened and gaining momentum. It may take many months for a restaurant to break even and then eventually become profitable. Being able to support the financial needs during this phase is often the “make or break” challenge that many new restaurateurs cannot overcome. A well thought out projection model that you create with the help of a professional financial advisor can save you from the frustration, negative financial impact and heartbreak of a failed restaurant. Considering capital needs for the first twelve to fifteen months is not only prudent but essential to the success of any new restaurant. You must be prepared to cover the operational costs and expenses as the restaurant “ramps up.” Carefully consider your cash needs and how much working capital you must have on hand, ready to deploy.

Have A Plan And Follow Your Dream

Owning a restaurant can be personally rewarding and profitable. Many people have built great restaurant companies following these simple guidelines. Desire and passion will only get you so far. Create your business plan as a road map. Your plan will help you stay on track when dealing with the many moving parts of launching and successfully operating a new restaurant.
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About the author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com

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LEARN MORE ABOUT STARTING YOUR RESTAURANT: www.frangrow.com www.frangrow.com

FULL SERVICE CASUAL DINING – WE GO TO SCHOOL WITH GENE LEE, CEO OF DARDEN (DRI)

Posted on August 1, 2021August 2, 2021 by Franchise Strategist

Darden’s most recent reporting period was their fourth quarter, ending at the end of May. Their two largest chains are Olive Garden and Longhorn Steakhouse. Important, but less material, are Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Season’s 52, Bahama Breeze and Eddie V’s.

FULL SERVICE CASUAL DINING – WE GO TO SCHOOL WITH GENE LEE, CEO OF DARDEN (DRI)

BY Roger Lipton

Gene Lee, and his management team at Darden (DRI), provide about the most candid description of current fundamentals among the publicly held full service casual dining companies. Not only are their reported results about the best in the industry, but they describe, on their quarterly conference call, how and why. Our summary below is of “best practices”, as produced by Darden, and the outlook as presented within their conference call on June 24th.

GENE LEE’S SCRIPTED COMMENTARY

Gene Lee, CEO, commented that they have begun to see demand come back strongly. They are relying on Technomic for industry data, which quantifies the casual dining industry at $189B in 2020, down from $222B in 2019. Though the industry has shrunk by 10% in units during the pandemic, Darden believes the industry will at least regain the 2019 level, implying that AUVs could be higher than before. Not mentioned was “price”, but that would obviously contribute to higher nominal sales.

Lee considers that the Darden business model has improved over the last year. “We’ve invested in food quality and portion size….made investments in our team members to ensure our employment proposition…..and we invest in technology, particularly within our to-go capabilities, to meet our guests growing need for …the off premise experience.”

RICARDO CARDENAS’ (COO) SCRIPTED COMMENTARY

Ricardo Cardenas, President and COO, described the operational simplification effort, which has improved execution and strengthened margins. Even as dining rooms have reopened, off-premise sales have remained strong, proving to be “stickier” than expected. During Q4 off-premise was 33% of sales at Olive Garden, 16% at Cheddar’s and 19% at Longhorn. Technology within online ordering has improved to-go capacity management and curbside delivery. During the quarter 64% of Olive Garden’s to-go orders were placed online and 14% of Darden’s total sales were digital transactions. Nearly half of all guest checks were settled digitally, either online or on tabletop tablets or via mobile pay. Cardenas described the effort to recruit and retain operational talent, claiming no systemic issues. Supply chain issues have also been largely avoided.

RAJESH VENNAM’ (CFO) SCRIPTED COMMENTARY

Rajesh Vennam, CFO, described how SSS compared to pre-Covid (2019), improved from negative 4.1% in March to positive 2.4% in May and positive 2.5% in the first three weeks of June. Though to-go sales have seen a gradual decline, this has been more than offset by in-store dining. In the fourth quarter, CGS was 90bp higher (investments in food quality and pricing below inflation), labor was 190bp lower (320 bp of simplification efforts, partially offset by wage pressures). Marketing was 200 bp lower. Restaurant EBITDA margin was at a record EBITDA of 22.6%, 310bp higher than pre-Covid. CGS inflation is expected to be about 2.5% and hourly labor inflation at about 6%.

QUESTION AND ANSWER DISCUSSION

Gene Lee talked further about the “employment proposition”. The store level margin allows for adequate wages, along with promotion of a thousand team members per year into management. When questioned about store level margin expectation, CFO Vennam indicated that store level EBITDA in the short term is expected to be 200-250 bp better than in 2019, with pricing of 1-2%, lower than CPI inflation of about 3%, but full year margin (ending 5/22) has yet to play out. Commodity inflation of 2.5% for the year will be 3.5-4.0% in the first half, expected to tail off to roughly flat by Q4. Chicken and seafood are elevated, also cooking oil and packaging, a little bit in dairy.

Lee feels that the throughput improvements, including menu simplification, allow for more sales capacity from this level. Mother’s Day sales were a record and mid-week capacity is not fully utilized. Consumer behavior is not yet normalized, so the mix between dine-in and off-premise is still uncertain.

When questioned about the sales improvement “flattening” in May and June, CFO Vennam pointed out that promotional levels are not as heavy now as in ’19, obviously helping the operating margins even with sales just modestly higher. Gene Lee commented later that the current advertising is generic, removing all incentives and discounts, with record operating margins, so marketing decisions going forward will obviously be carefully considered. Later in the call, Gene Lee talked about the Fine Dining segment also improving (a little later than Olive Garden and Longhorn) from down 12 in March to down 6 in May.

COO Cardenas described how technology is reducing “friction” in the guest experience, as well as for team members, making ordering and pickup easier. To further improve the process within the restaurant, a revamp of the point of sales system is planned.

Gene Lee talked about the potential to improve direct marketing to new digital customers, especially with the newly acquired ordering preferences. Lee emphasized the effort to improve the craveability of the menu, at the same time simplifying and improving the core items.

Relative to the addition of additional brands, Lee expressed great satisfaction with the improved returns within the existing portfolio. While not ruling anything out, he seemed to feel that there is substantial opportunity to profitably invest internally.

GENE LEE OPENS UP A LITTLE FURTHER

When pushed about why the sales recovery within Darden is not as fast as elsewhere, Gene Lee’s response was telling. “Because we’re not participating giving away food to third-party channels…not discounting heavily….not discounting cash through selling gift cards….we put up 25% fourth quarter restaurant margins….that’s what we’re focused on. A lot has changed…..virtual brands….guys, you got to get off this……this (Darden’s portfolio of brands) is the best business in casual dining, not even by a little bit anymore…..our guests are loving the experience ….they love the changes that we made….but we’re not chasing an index and we’re not chasing where we were in the past. We love our position today.”

Lastly, when questioned about what the new normal will look like, Gene Lee summarized by saying: “I think we’ve still got another six to nine months to understand (if we don’t have any more problems with Covid) what are going to be the normal behaviors….and then you start developing your market plans and you get tactical on how to get these folks into your restaurant or use you as an off-premise occasion.”
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ABOUT THE AUTHOR:
ROGER LIPTON is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .

He also invested in gold mining stocks and studied the work of Harry Browne, the world famous author and economist, who predicted the 2000% move in the price of gold in the 1970s. In this regard, Roger has republished the world famous first book of Harry Browne, and offers it free with each subscription to this website.

In the late 1970s, Roger left Wall Street to build and operate a chain of 15 Arthur Treacher’s Fish & Chips stores in Canada. In 1980 he returned to New York, and for the next 13 years worked at Ladenburg, Thalmann & Co., Inc. where he managed the Lipton Research Division, specializing (naturally) in the restaurant industry. While at Ladenburg he sponsored an annual Restaurant Conference for investment professionals, featuring as keynote speakers friends such as Norman Brinker (the “Babe Ruth” of casual dining) , Dave Thomas (Wendy’s) , Jim Collins (Sizzler & KFC), Jim Patterson (Long John Silver’s), Allan Karp (KarpReilly) and Ted Levitt (legendary Harvard Business School marketing professor, and author). Roger formed his own firm, Lipton Financial Services, Inc. in 1993, to invest in restaurant and retail companies, as well as provide investment banking services. Within the restaurant industry he currently serves on the Board(s) of Directors of both publicly held, as well as a private equity backed casual dining chains. He also serves on the Board of a charitable foundation affiliated with Israel’s Technion Institute.

The Bottom Line: Roger Lipton is uniquely equipped as an investor, investment banker, board member and advisor, especially related to the restaurant, franchising, and retail industries. He has advised institutional investors, underwritten public offerings, counseled on merger transactions, served on Board(s) of Directors, public and private, been retained as an expert witness, conducted valuation studies and personally managed a successful investment partnership, all specializing in restaurants/retail. He has studied great success stories over the last 40 years, from McDonalds to Shake Shack. Even more important he has watched scores of companies stumble and sometimes fail. It is this insight that Roger brings to this website. His post, dated 9/30/15, called “VISIT THE GRAVEYARD…..” lists a long list (though only a sample) of companies that have come and gone over the length of Roger’s investment career. This platform is his way of maintaining a dialogue with other professionals in the field, improving his own investment results, and remaining well informed on industry issues.
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FRANCHISE YOUR RESTAURANT – CLICK HERE: http://WWW.FRANCHISEGROWTHSOLUTIONS.COM

DOORDASH – IN A HUGE STATE OF FLUX AS THE PANDEMIC WINDS DOWN

Posted on April 2, 2021April 2, 2021 by Franchise Strategist

The business model is relatively simple. Once on the DoorDash platform, the company will take orders and deliver those orders for a fee ranging from 15-30%. At the same time, DoorDash charges the customer a service fee and a delivery fee that ranges from 15-25% of the cost of the order.

DOORDASH (DASH) – IN A HUGE STATE OF FLUX AS THE PANDEMIC WINDS DOWN
By Roger Lipton with permission

DoorDash is one of the largest “local logistics platform” i.e., food delivery firm, with 450,000 merchants, over 20 million consumers, 1 million Dashers (drivers) and 1.2 billion orders completed since the founding. The company has a 50% market share in the U.S. Revenue growth over the last five quarters has averaged over 211% with Q4 2020 revenue growth coming in at 226%. However, the company has lost over $1.2B since inception and lost $312M in Q4 2020. In preview of our summary: the fact the company cannot make money in the most ideal environment for its business model in 2020 is concerning. So is the fact the company has 46 pages of risk factors listed in its 10K.

We also point out that, while we are providing some “food for thought” below, third party delivery is a complex subject and in an enormous state of flux, so we don’t expect that we can answer every potential concern within these pages. We have stated before our reservations about the enormous capitalization of DASH ($42 billion as of today) and our concern about future operating margins for all the major third party delivery companies. Our intention here is to present what we can, in the hope that our work will be useful to the restaurant companies with which we have a working relationship.

THE BUSINESS MODEL

DoorDash and the other food delivery companies such as GrubHub and Uber Eats, were primary beneficiaries of governmental policies that either closed or significantly restricted seating options for most restaurants. Adding a delivery service through DoorDash, GrubHub or Uber Eats was one of the few options available to restaurants and was therefore a requirement to stay open. Obviously when demand for your service is almost mandated by the government, you are going to grow your business tremendously.

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While DoorDash holds a 50% market share nationally, the company’s dominance is not universal across the country. In many of the major markets the company’s market share is less than 40%, which means that competition remains fierce, and this should keep margins under pressure in the long-term and advertising costs and competition for drivers increases. The lack of customer loyalty, as illustrated by the large overlap of usage of other deliver platforms, is also a long-term problem.

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THE REVENUE BASE

DoorDash makes money by charging both the restaurant and the customer. While the company does not report its actual fee structure, the practical result is that DoorDash is charging the merchant an average of about 18% of the cost of the order, though that fee is apparently negotiable from 15-30% of the cost of the order. In addition to charging the merchant, DoorDash also charges the customer fees ranging from 12-18% of the order. The average order size is approximately $37 and only 20% of orders are for more than $50. It remains unknown to what extent this is a long term sustainable model, when the profit margin of the restaurant is materially compromised and the customer ends up paying 40% or more above dining within the restaurant or picking up the food themselves. It is also not yet clear to what extent delivery cannibalizes dine-in or pick up sales.

It is important to note that cities are passing “Temporary” Price Control Regulations in response to high delivery fees.In response to companies such as DoorDash charging upwards of 30% of the cost of an order in fees. cities are starting to pass regulations to cap the fees third-party ordering services can charge restaurants. For example, in the company’s Q4 2020 investor letter, DoorDash co-founders, Tony XU and Prabir Adarkar, stated that there are now 73 jurisdictions imposing temporary price controls, which is more than double the 32 jurisdictions in the third quarter. Generally speaking, these price controls cap the amount of delivery fees charged the merchant to 15%. The controls have predictably negatively impacted DoorDash’s profitability.

The company disclosed that the net impact of price controls in Q4 2020 was $36M or 44bps of profitability. The company expects the impact of price controls to almost double in Q1 2021. In the meantime, DoorDash is trying other measures to manage these caps. The company is charging an additional $1 to $2 fee in at least 11 municipalities that have caps in place. In Denver and Chicago, DoorDash began charging customers a $2 “Denver fee” and $1.50 “Chicago fee” per order. While these price controls are said to be temporary, that remains to be seen.

THE ECONOMICS FOR RESTAURANTS, CONSUMERS, & DRIVERS (“DASHERS”)

The Restaurants

The pre-tax profit margin of a restaurant generally ranges from 5-10% of revenue at the corporate level. If a restaurant is having to pay DoorDash 15-30% of an order, and DoorDash does a material portion of the sales, the company’s profit margins can easily drop by a couple of hundred basis points. If deliveries become 30-50% of total revenue the company could turn unprofitable. While some of the deliveries may currently be incremental business, and a year ago publicly held companies were accepting that premise, we haven’t heard anyone making that claim recently. While we have no doubt that delivery sales in aggregate will be higher going forward, it is questionable whether the current growth is sustainable because of the high cost to both consumers and restaurants.

In addition, by utilizing drivers from third parties, the restaurant loses the direct relationship with the customer and there is no incentive for the driver to enhance the customer experience with any particular restaurant. This lack of control and incentive could negatively impact the customer’s relationship with the restaurant. Drivers for pizza chains like Domino’s and Papa Johns are more incentivized to enhance the customer experience because they can move up the ladder at these firms and many have eventually become franchisees. There is no upward mobility for drivers at DoorDash.

Every major restaurant chain has its own app that it uses to take orders and communicate with its customers. More importantly, when a customer uses the restaurant’s app, they gain valuable information, such as order size, composition and frequency, that the company can use to improve customer relationships. They can also offer loyalty rewards and other customer-centric offers, such as sales on specific food items.

On the latest Brinker International earnings call, CEO Wyman Roberts said that DoorDash only offers high level information about orders for their Just Wings virtual brand offered on DoorDash. Because they do not share individual customer data, it complicates their marketing and data collection efforts. In the long run, we think most major brands will try to increase customer usage on their proprietary apps and reduce reliance on third-party delivery services for customer acquisition.

As more people go back to work, we believe the necessity of paying huge markups for food delivery will diminish and DoorDash will lose a big tailwind. We also believe that companies like Brinker or Darden that already have large To-Go offerings will try to replace delivery with more To-Go orders. It is a win-win for the company and customers. Customers pay significantly less, even including drive time to pick up their food and the company saves the fee they pay DoorDash. The restaurant leverages their existing infrastructure and gains more valuable data on their customer that can be used to increase sales and profitability. It can also improve kitchen efficiency.

The Consumers

To recover some of the fees, many restaurants are increasing the menu prices for items ordered for delivery. Researchers in Minneapolis recently conducted a case study of delivery platforms to compare pricing and consumer fees.

There are several takeaways from this case study.

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Since restaurants appear to be marking up the menu price to recoup most of the DoorDash fee, the customer is paying 40-60% more than they would by eating in the restaurant and this is before the tip. It is therefore clear that DoorDash is the largest beneficiary, in this simplistic example, without considering the customer acquisition cost or the sustainability of the model in terms of satisfying the drivers and food consumers.

The Restaurant Business editorial staff did a test ordering chicken sandwiches from various fast-food concepts. It reported that some editors paid $15 or more for a single sandwich to be delivered. As one editor stated,
“My cost to have Chick-fil-A delivered to my home was roughly the same cost as I paid to east out at a local Mexican restaurant.”

The “Dashers” – a few problems

Similar to Uber and Lyft, the DoorDash business model relies on independent contractors utilizing their own vehicles to provide the service to customers. According to the 10K, there were 1 million Dashers (drivers) and their total earnings were $2B. Though Doordash says on their website that a Dasher can make between $15-$25 an hour, dividing $2B by 1M drivers amounts to $2,000 per year, $167/month, or $40/wk. Since over 90% of Dashers work less than 10 hours a week, this would amount to only about $4.00/hr. The company touts examples in California where Dashers earn $33-$36 an hour working less than 7 hours a week ($1000 a month) in various cities. We believe these figures are clearly outliers and not representative of the true earnings potential of a Dasher. Moreover, relying on a worker that only wants to work 10 hours a week for less than $167 a month does not seem to us to be a way to maintain a consistent, quality experience for the customer.

There is also a growing political pressure to increase the pay and benefits to so-called “gig workers”. A group in Washington state called Working Washington is running a “Pay Up” campaign to increase the income of these workers. The group published a study on the net income of Dashers in Washington state. We encourage subscribers to read it. The conclusion was startling, supporting our calculation above:

“On average, DoorDash pays just $1.45 per hour worked, after accounting for the expenses of mileage and the additional payroll taxes borne by independent contractors. The average job requires 6.8 miles of driving and takes 30 minutes to complete. “

As a result of negative publicity and new legislation, the company has already been forced to increase the amount it pays Dasher on a per order basis. The passage of Proposition 22 in California and the potential for other states to do enact similar legislation could cause the company to raise wages again. As discussed in the 10K, the impact of Proposition 22 on the company were as follows:

Amongst the 46 pages of risks in the 10-K are a few nuggets as they relate to these costs.

Several other states where we operate may be considering adopting legislation similar to Proposition 22, which we would expect to increase our costs related to Dashers in such jurisdictions. This could result in lower order volumes if we charge higher fees and commissions and could also adversely impact our results of operations.
Several jurisdictions where we operate may be considering adopting legislation that would pair worker flexibility and independence with new protections and benefits. To the extent these are adopted, we would expect the costs related to Dashers in such jurisdictions to increase and we could experience lower order volumes if we charge higher fees and commissions.
The necessity for DoorDash to improve the economic proposition for their Dashers will most likely reduce DoorDash operating margins because the merchants and consumers are already more than adequately burdened.

NOW – THE RUBBER MEETS THE ROAD – AND OUR CONCLUSION

Before presenting our conclusion, the following post by an industry insider on an investment website supports our concerns.:

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As the pandemic winds down, it should be no surprise that recent guidance shows sharp deceleration in revenue growth for 2021.In the Q4 2020 earnings release and shareholder letter, the company issued guidance for 2021. While the company guided for 187% growth in revenue in Q1, revenue growth for all of 2021 is only expected to be 28%. This is a significant deceleration from the 200%+ growth in 2020. Wall Street is expecting revenue growth in 2022 to slow ever further to 26%. In addition, because of the increasing costs and limits on fee and commissions discussed above, the company guided adjusted EBTIDA to $0-$200M, considerably below the $250M Wall Street was expecting going into 2021. Underlying the slower growth, we think it likely that as more people go back to work, we believe the necessity of paying huge markups for food delivery will diminish. We also believe that companies like Brinker or Darden that already have large To-Go offerings will try to replace delivery with more To-Go orders. It would be a win-win for the company and customers, as customers pay less, even including drive time to pick up their food and the merchant saves the DoorDash fee. The restaurant also gains the valuable customer data that can be used to increase sales and profitability.

We believe the DoorDash business model is far from sustainable in its present form. It is especially concerning that DASH has reported nothing but red ink in an environment so enormously supportive of third party delivery agents. Though the stock is 50% off its highs, we do not think the Enterprise Value, still over $40 billion, is justifiable. The EV multiple is over 10x 2021 projected sales and an indeterminate multiple of the ridiculously large guided range of Adjusted EBITDA from zero to $200M. We are not long or short the stock, just saying 😊

About Roger Lipton
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Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .

THE RESTAURANT INDUSTRY AT THE PANDEMIC’S ONE YEAR ANNIVERSARY – WHAT NOW?

Posted on March 9, 2021March 9, 2021 by Franchise Strategist

We thought that the last twelve months of performance for individual restaurant stocks might give us a hint as to where to focus going forward. Since some of the obviously large stock gains have taken place among those with the heaviest short position, we have focused on the “short interest ratio”, the number of shares sold short divided by the average daily trading volume.

THE RESTAURANT INDUSTRY AT THE PANDEMIC’S ONE YEAR ANNIVERSARY – WHAT NOW?

By Roger Lipton with permission

The last twelve months have been unprecedented, not only from a business/health standpoint, but from a fiscal/monetary standpoint. There has been more governmental stimulus as well as monetary accommodation than ever before, which has floated all kinds of boats. The Dow Industrial Average hit an all time high just this morning, and, though the NASDAQ index has retreated the last month or so, stocks from Apple to Tesla to Gamestop have written a new book in terms of valuation.

Based upon the new $1.9 trillion Covid bill, the likelihood of a new multi-trillion dollar infrastructure bill, as well as the Federal Reserve’s ongoing willingness to buy at least $120B of Treasury securities every month, there is every indication that the above trends will continue.

From a broad brush, it is shocking to see how large the moves have been from March 8, 2020 until now. It is interesting that several of the best performing “pandemic plays”, namely Domino’s, Wingstop and Papa John’s, which made very big moves over six to nine months, have retraced and are up more modestly now (zero, 56% and 47%, espectively).

This industry, by no stretch of anybody’s imagination is generally in a place that makes these companies “worth” from 50% to 90% more today than they were before the pandemic. There is somewhat less independent competition, and some companies may have learned how to serve off-premise diners better than before, but there are also a great many uncertainties. These include (1) the cost of labor with a new mix of in-store vs. off-premise (2) commodity inflation (3) other expenses to meet health requirements (4) unpredictable consumer spending (5) still substantial competition (6) ongoing high occupancy expenses, especially for new sites. There is also, in many cases, new debt to service.

Fundamentals aside: the stocks have done the following, ranked by today’s short interest ratio.

What do we see? The average gain among the fourteen stocks with the highest short interest ratio is 90%. The bottom fourteen stocks went up by 57%. Without our focus on individual company fundamentals, readers can scan the list and conclude for themselves which stock performance is most removed from the fundamental outlook.

Where do we go from here?

Before considering the above noted $1.9 trillion Covid bill and trillions more for infrastructure, the Treasury is sitting on $1.44 trillion (to be reduced to $500B by June 30th) that was returned from the Fed last year and the Fed is currently creating $120 billion per month. This means that almost $1.5 trillion of accommodation will be provided to the economy and the markets by June 30th, before the effect of the new $1.9 trillion. This also means that equities, including restaurant stocks, may well go a lot higher in the short term. There is just too much liquidity in the capital markets.

THE BOTTOM LINE

For investors: Other things equal, we would focus on the top portion of the table above. 90% is better than 57%

For companies: In almost all cases, we would sell company stock. Pay down debt and/or build your cash balance. It may be a long time before you see these valuations again.

For management: Lighten up. You can always grant yourselves some more stock options.

Roger Lipton

Click here to visit Roger’s website: https://www.liptonfinancialservices.com/2021/03/the-restaurant-industry-at-the-pandemics-one-year-anniversary-what-now/

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About Roger Lipton
Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .

If you own a business, you’ve only got days left to apply for a Paycheck Protection loan

Posted on March 5, 2021March 5, 2021 by Franchise Strategist

If you own a business, you’ve only got days left to apply for a Paycheck Protection loan

(BPT) – by Jennifer Roberts, CEO, Chase Business Banking and Sean ‘Diddy’ Combs, Founder, Our Fair Share, entrepreneur and media mogul

In just four months last year, more than 5 million U.S. businesses received a Paycheck Protection Program (PPP) loan. That helped them pay their workers, their mortgage or rent, and their utility bills. Unfortunately, many small businesses owned by minorities, women and veterans didn’t get PPP loans last year. We want to make sure you know how to apply for the funding your business really needs.

But you need to act quickly. PPP ends March 31, but many lenders may stop accepting applications sooner so they have time to process. That means you need to get started on an application quickly for PPP funds to help with your payroll costs and other bills, to get your fair share. The Small Business Administration (SBA) and participating lenders are working hard to make these loans available to more businesses in low- and moderate-income communities. And to smaller businesses, like barbershops, restaurants, nail salons, clothing brands, bars, bodegas and independent contractors.

Here are eight facts you should know about PPP that may encourage you to apply:

1) Congress funded it with $284 billion for 2021. That’s enough for millions of more loans.

2) It’s for first-time borrowers. The SBA has already approved more than 704,000 loans for borrowers who didn’t get one last year. The SBA also has approved loans for second-time borrowers.

3) A PPP loan may be forgiven. Up to 100% of your loan could be forgiven if you qualify and meet the SBA’s requirements. That means you wouldn’t have to pay back the forgiven amount.

4) Businesses with few employees get special attention. Through March 9, the SBA is accepting applications only from businesses with fewer than 20 employees.

5) Most loans are relatively small. The average loan to first-time PPP borrowers this year is $22,000, the SBA says.

6) Smaller businesses are getting approved. 90% of Chase’s approved PPP loans in 2021 are to businesses with fewer than 20 employees.

7) Help is available to understand PPP. chase.com/ppp has a webinar, checklists and FAQs to walk you through the application process. You can also check out sba.gov/ppp.

8) It’s easy to find participating lenders. The SBA’s website — sba.gov/funding-programs/loans/lender-match — has a “Lender Match” link to help you connect to a lender near you.

The 2021 PPP is scheduled to expire March 31, but to get your application to the SBA by then, you need to act now. If you believe you are eligible, we urge you to find a lender, prepare your information and apply.

Get started now. Don’t miss out!

To learn more, or to access helpful tools and resources, please visit chase.com/ppp or ourfairshare.com.

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FRANCHISE YOUR BUSINESS – COLLECT ROYALTIES – CREATE LEGACY