Blog #5: Business Structure of the Restaurant Industry

The Restaurant industry incorporates all different employee structures due to the varying sizes of different companies, from one location, ‘mom-n-pop’ restaurants, to the large chain restaurants like McDonald’s or Olive Garden.  Most companies in the restaurant business are hierarchical (Mealey, 2012).  Smaller restaurants usually take on the functional organization structure, with each task delegated to an individual or a group and the benefits will affect the whole company (White, 2012).  Some larger restaurants will choose a divisional organization structure, this means that each division will handle all of its tasks within its division, and the benefits will only affect that division.  The divisions can be divided based on geography, brand, or market served (White, 2012).

Starting with the small restaurants, normally there is a single owner or partnership at the top.  These owners sometimes manage the company, and other times will work as a chef, waiter, or some other position and will hire someone to manage the restaurant.  Many of these types of restaurants will be split in two when it comes to management, the ‘front-of-house’ manager and the person who runs things in the kitchen.

Restaurants with more locations tend to have more layers of management.  Each restaurant will be structured relatively the same as smaller restaurants, but there will be some mix of divisional and functional organization.  Management or purchasing may be structured divisionally, while marketing may be structured functionally. 

The biggest problem that restaurants have when it comes to employees is keeping them in the company.  According to Lorri Mealey at About.com (2012), “turnover is notorious in the restaurant industry.”  This high turnover is normally due to the fact that jobs are relatively low-paying in the restaurant industry, compared to the same types of jobs in other industries.  This causes a problem because the firm needs to continually pay to have employees and managers trained to work at their position.

Cited Sources:

White, M. (2012). Types of organizational structures for businesses. Retrieved from: http://business.lovetoknow.com/wiki/Types_of_Business_Organizational_Structures  

Mealey, L. (2012). How to hire a great restaurant team. Retrieved from: http://restaurants.about.com/od/restaurantstaffing/a/Staffing.htm

Blog #5: Opportunities for Entrepreneurs in the Restaurant Industry

               There are numerous opportunities for small businesses and entrepreneurs in the restaurant industry.  Many of them, however, call for a significant amount of startup money, ranging anywhere from $80,000 dollars (restaurants such as Subway) to $375,000  (like Dunkin’ Donuts) to $1 million (restaurants like McDonald’s or Denny’s) (Entrepreneur, 2012).  Such an investment is a hefty and risky one, but the reward that could potentially come out of is just as great.  For example, many people from countries like India come to America to start up their own franchise.  This is because finding jobs in those types of overpopulated and somewhat underdeveloped countries are jobs that are relatively low in risk and even lower in reward.  Becoming part of a major quick service (or even full service) restaurant in America is one that certainly provides an attractive opportunity for entrepreneurs from not only within borders, but also from thousands of miles overseas.

                Another opportunity for entrepreneurs include entrepreneurial veterans.  “‘America’s restaurants are…a stronghold of entrepreneurial spirit and opportunity, and veterans are finding both in the nearly 66,000 restaurants that are owned by former military personnel’” says Dawn Sweeney, National Restaurant Association President and CEO (Stensson, 2011).  In fact, almost 10% of American restaurants are 50% owned by military veterans (Stensson, 2011).  This is a phenomenal opportunity for an even greater variety of people to contribute to the restaurant industry.  Hopefully in a time like today, where the U.S. economy is slowly coming out of a recession and into a recovery stage, people of all ages will begin to take hold of this entrepreneurial spirit and contribute to the growing economy.

                In order for the restaurant industry to really take off, however, entrepreneurs need to take hold of the technology that is now offered.  For example, to better manage tables in one’s restaurant, a new app by New York City “restauranteurs” offers the ability to view tables in “real-time,” send orders to the chefs, arrange menus by catagories (alphabetically or by ingredients), and more (Stensson, 2011).  Technology like this is certainly valuable to a new restaurant, be it part of a franchise or a privately-owned full-service restaurant.  Embracing such technology could lead to a definite surge in sales, and thus a major opportunity for entrepreneurs in the restaurant industry to really succeed.

Works Cited:

Entrepreneur (2012). 2012 Fastest-Growing Franchise Rankings. Retrieved from www.entrepreneur.com/article/224332

Pullen, John Patrick (2012, September 6). 5 Technologies Changing the Restaurant Industry. Retrieved from www.entrepreneur.com/franchises/rankings/fastestgrowing-115162/2012,-2.html

Stensson, Amanda (2011, November 7). Restaurants Support, Provide Entrepreneurial Opportunities for Veterans. Retrieved from www.restaurant.org/nra_news_blog/2011/11/restaurants-support-provide-entrepreneurial-opportunities-for-veterans.cfm

Blog #5: Opportunity for Small Businesses and Entrepreneurs

             According to NPD group, which is a large marketing research company, in their census in fall of 2010, there were 311,694 independent restaurants accounted for. This number obviously proves that their is plenty of opportunity for small businesses and entrepreneurs to start their own restaurant. There is just as much opportunity for entrepreneurs to open up chain restaurants since the census also reported  267,408 chain restaurants (NPD Group, 2011). However, since there are so many restaurants available to consumers the more important opportunities are more centered around opportunities for small businesses and entrepreneurs to attract more consumers than their many competitors. One these opportunities is the traveler consumer base. “We believe the decline in travel-related restaurant meals over the last few years has been significant, due to less discretionary income available to consumers and business cutbacks on travel. However, as the recovery continues and businesses once again become willing to spend on travel, we think restaurants will see a modest uptick in travel-based traffic.According to the National Restaurant Association’s 2012 Restaurant Industry Forecast, published in February 2012, travelers and visitors in 2011 accounted for a median of 15% of sales at quick-service restaurants, 24% at casual dining establishments, and 30% at fine dining restaurants ” (Standard and Poor, 2012). 

              Another opportunity for entrepreneurs as well as established restaurants, is to fill the void of restaurants that reach out to places that they would not normally be able to be. One major way to do this is through kiosks and  modernized vending machines. The few restaurants that have stepped out to make this move have seen success. For example in an article in Nation’s Restaurant News, this opportunity was discussed by highlighting the successful implementations of it from Sprinkles Cupcakes and Jamba Juice. Sprinkles Cupcakes opened up a “cupcake ATM” in Beverly Hills, CA. Customers can select the cupcake they would prefer on the touch screen and pay with a credit card at anytime of day. According to the article, the cupcake ATM alone sells over 1,000 cupcakes a day.  Meanwhile, Jamba Juice begin new JambaGO outlets that we more based in elementary and middle schools, and have an expectation of $700,000 for the 2012 fiscal year (Jennings, 2012). These are all great opportunities that would attract a larger consumer base because their is still great room for restaurants to take advantage of it.

Work Cited:

Jennings, L. (2012, June 13). 3 automated restaurant innovations. Nation's Restaurant News, Retrieved from http://nrn.com/latest-headlines/3-automated-restaurant-innovations

NPD Group. (2011). U.s. restaurant count down by 5,551 from last year; independents declined by 2 percent and chain units remained stable. Retrieved from https://www.npd.com/wps/portal/npd/us/news/press-releases/pr_110124/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3g3b1NTS98QY0MLkzBDA0-PQKcAw1BzA4MQI_1I_Shz3PLG-gXZgYoAgkBuqg!!/


Yin, J. (2012). Industry surveys restaurants . Standard and Poor, Retrieved from http://www.netadvantage.standardandpoors.com.proxyau.wrlc.org/docs/indsur//pdf/rst_0612.pdf

Blog #5: Influential Leaders

Influential leaders in the restaurant industry are Howard Schultz and Donald Thompson. They each have impacted the industry greatly and changed the system with their innovative ideas. I believe that in order to become  successful in the restaurant industry, one needs persistence, knowledge, and most importantly a vivid imagination.

Howard Schultz, Chairman and CEO of Starbucks Corporation, was the man who brought the unique and leisured coffee bars to the United States. His great idea started when he travelled from New York to Seattle to visit  a store called “Starbucks” that had been buying many of the Hammarplast Swedish drip coffeemakers he was selling. Schultz  saw much opportunity within this business and after a year finally convinced the Starbucks owner to hire him. He wanted this coffee business to mimic a “European way” of drinking coffee, where it was seen as a leisurely, social gathering, but the owner resisted many of Schultzes ideas. Schultz quit and created his own coffee bar which soon became very successful. Finally, a year later, Schultz bought Starbucks for $3.8 million dollars [Myprimetime.com 2001]. I believe that Howards Schultz became so successful because he had a bright and detailed vision of what he believed consumers yearned for. He saw the future restaurant, Starbucks, as not just a place to buy coffee, but yet a place where people could come together, socialize, and be in a relaxing environment amidst their busy lifestyles.

Donald Thompson, President and CEO of McDonalds Corporation,  originally started his career on the technical side of the business. With his fantastic people skills and work ethics, he later  moved up in the ranks and held other key positions. In support of McDonalds success, he was noted for creating three global growth priorities, which included, “ to optimize our menu, modernize the customer experience and broaden restaurant accessibility [Don thompson: 2012].” Today, Thompson is known as one of the highest ranked African Americans in the restaurant Industry [Answers.com]. I believe Thompson had come so far due to his amazing leadership qualities. He displays the importance of dedication, collaboration, and even perseverance. Thompson had travelled up  the McDonald’s hierarchy, which proves how one can become successful in the industry. This is a quintessential example portraying how the restaurant industry provides much opportunity for those who are determined and willing to take advantage of all that it offers.

Works Cited:


Myprimetime.com. (2001). Retrieved from http://www.myprimetime.com/work/ge/schultzbio/

Answers.com. (n.d.). Retrieved from http://www.answers.com/topic/don-thompson

Don thompson: president and chief executive officer. (2012, July). Retrieved from http://aboutmcdonalds.com/mcd/our_company/leadership/don_thompson.html

Blog #5: Innovation in the Restaurant Industry

           Innovation is what sets companies apart, and without it there would be no groundbreaking products in business or great ideas that launch a company to the top. However, different industries have to find different ways to innovate their products and company. For the restaurant industry, innovation, as described by Jim Carroll, is all about both big innovation and fast innovation (Carroll 2009). Big innovation is the launch of new products and services, and fast innovation is the ability of the company to respond to rapidly changing market trends, such as consumer and economic trends, and changing products. (Carroll 2009). For the restaurant industry, the most important of these innovative ideas is fast innovation. Since changes in food preferences and recessions are a constant part of the market, a company’s success relies on its capability to bring in new ideas to counter these changes in the market. Recently though, there have been more exact ways for innovation, which Mr, Carroll talks about in his keynote address at the YUM! Brands 2009 global leadership meeting which still exists right now.

            The first big way of innovation that Mr. Carroll talks about is expansion into the global market. According to Jim Carroll, chain restaurants made up 1% of total food services in China and 2% for Europe compared to 50% in the USA (Carroll 2009). If companies develop ways to penetrate these markets, they would see huge success and growth in size and sales. This is seen by Starbucks, which has been steadily expanding around the globe in areas such as china, which has brought them a great increase in their revenue (Gertner 2012). Another way innovation is important to the restaurant industry is being able to adjust to the change in consumer choice (Carroll 2009). Consumers are the most vital part of any industry, and if their preferences change then the industry has to find ways to adjust to these changes. For the restaurant industry, consumers want more healthy food options and it is up to the restaurants to create new products and menus to fit these new wants. Starbucks is one of the companies that have found success through innovation in relation to changing customer preferences. “Over the past two years, Starbucks has collected a trove of consumer research to develop what executives there call a ‘sensory map’ map” (Gertner 2012). Using innovative techniques to go to the customer and see what they want, Starbucks has been able to capitalize on the changing preferences of its consumers. Yet, another chance for innovation in this industry is being able to adjust to social desires of the consumers (Carroll 2009). This is also how Starbucks has been able to have its recent success. CEO, Mr. Schultz, has increased Starbucks’ public reputation through community events such as Starbucks’ Jobs for U.S.A. program, which gives out wristbands for fund raising and raising job creation incentives (Gertner 2012). Starbucks is just one company that has been able to thrive in this new age of innovation for the restaurant industry, and as new innovative opportunities arise, many companies will look for ways to capitalize.  

Carroll, Jim. (2009) Recent Keynote: innovating for growth in the restaurant industry. Retrieved from: http://www.jimcarroll.com/2009/02/recent-keynote-innovating-for-growth-in-the-restaurant-industry/#.UKkFMSqF_hI

Gertner, Jon. (2012). The World’s 50 Most Innovative Companies. Retrieved from: http://www.fastcompany.com/most-innovative-companies/2012/starbucks

Blog #4: Accounting

             Panera Bread is growing quickly and increasing its profit swiftly and more fiercely every quarter. In fact, according to a recent Wall Street Journal, Panera has not reported a decline in profit since the beginning of 2008 (Rubin). This is exceptional because this is when the recession started and many other companies saw an extreme decrease in profit. CBS reported that the Dow Jones U.S. Restaurants and Bars index dropped 13 percent (CBS News). Despite its competitors though, Panera continued with growth through the recession; even still now, coming out of the recession,  their revenue continues to increase past expectation “The restaurant chain’s total revenue escalated 17% year over year to $529.3 million in the third quarter and beat the Zacks Consensus Estimate $522.0 million” (Yahoo Finance). Their EPS has increased with third quarter 2012 report showing a $1.24 value in earnings per share, when the estimate was $1.19.

              However, this restaurant is not the only one who has had success within the industry. McDonald’s and Darden Restaurants also saw some growth during the recession. McDonald’s had a 5 percent increase in shares while Darden Restaurants rose 1 percent (CBS News). This is a small increase but considering the impact the recession had on many restaurants, that is an accomplishment.  In recent days though, Starbucks just reported an 11 percent increase in their fourth quarter EPS with an expected revenue growth between 10-13 percent (Standard and Poor). These are restaurants who have partaken in good news along with Panera Bread, and I also feel that these restaurants are the leaders among the restaurant industry.  

Work Cited

CBS News. (2009, February 11). Recession took a bite of restaurant sales. Retrieved from http://www.cbsnews.com/2100-500395_162-4693779.html

Rubin, B. (2012, October 23). Panera bread 3rd quarter net up 27% on stronger same store sales. Wall Street Journal. Retrieved from  http://online.wsj.com/article/BT-CO-20121023-714934.html?mod=WSJ_qtnews_wsjlatest

Standard and Poor. (2012). Marketmovers,starbucks corpor **** up 4. Retrieved from http://www.netadvantage.standardandpoors.com.proxyau.wrlc.org/NASApp/NetAdvantage/cp/companyIndustryNews.do

Yahoo Finance. (2012, October 24). Panera tops, ups view. Retrieved from http://finance.yahoo.com/news/panera-tops-ups-view-122917469.html;_ylt=A2KJ3CaRBptQ_QsANQSTmYlQ

Blog #4: Darden Restaurants Inc. Financial Statements

            Darden Restaurants Inc. released its annual financial report for the fiscal year ending on May 29^th, 2012.  Darden reported a net profit of $475.5 million after calculating expenses and tax for the year (Darden Restaurants Inc. [DRI], 2012).  The same reports from 2011 and 2010 showed net earnings to be $476.3 million and $404.5 respectively (DRI, 2012).  This shows that Darden Restaurants had major growth in their fiscal year ending in 2011, but was unable to sustain that profit growth through the fiscal year ending in 2012.  According to the annual report (2012), Darden earned $7,998.7 million in total sales in 2012.  In 2011, Darden Restaurants had a total revenue of $7,500.2 million.  This growth in total revenue was accompanied by a slightly larger growth in total costs, causing the net earnings in 2012 to be smaller than in 2011. Even though the company did not increase their profits between 2011 and 2012, they were able to increase their earnings per share.  In 2011 the reported basic earnings per share was $3.48, and in 2012 the same value was $3.65 (DRI, 2012).  This shows that although they were only able to create a similar amount of profit as the year before, Darden Restaurants was able to increase the value for each individual investor.

            The recession of 2008-2009 did not seem to have an affect Darden Restaurants.  The company had steady profit growth from 2004 to 2006, as shown in figure 1 (DRI, 2006).  The company did have a major dip during the fiscal year ending in 2007.  As shown in both figure 1 and figure 2, Darden went on to continue increasing either their net earnings or their earnings per share until 2012.  Many other restaurants stayed steady or took a hit during the recession (DRI, 2009) (DRI, 2012).  It seems that since Darden was able to maintain profit growth through the recession, they have an advantage over other companies in the industry.

Figure 1. DRI annual profit. This figure show the annual profit of Darden Restaurants Inc. in dollars. Created using multiple sources.

 

Figure 2. DRI annual basic earnings per share. This figure shows the basic earnings per share of Darden Restaurants Inc. in dollars. Created using data from multiple sources.

Cited Sources:

Darden Restaurants Inc. (2006). 2006 annual report. Retrieved from: http://investor.darden.com/files/doc_downloads/Annual_Report_2006.pdf

Darden Restaurants Inc. (2009). 2009 annual report. Retrieved from: http://investor.darden.com/files/doc_downloads/2009_Annual_Report.pdf

Darden Restaurants Inc. (2012). 2012 annual report. Retrieved from: http://investor.darden.com/files/doc_financials/Darden_2012AR%5B1%5D.pdf