2010: Time to Manage Our Business

I spent most of last week at the Restaurant Finance & Development Conference in Las Vegas, the annual event for growing restaurant company owners and executives. In one place at one time we meet with restaurant owners and lenders who focus on restaurant industry growth, like representatives of banks, finance companies, investment banks, private equity firms and merger and acquisition specialists. Of course, companies like us, who specialize in restaurant real estate are there, too.

The conference is touted as the must attend event for growth-minded restaurant company owners and executives focused on the business side of the restaurant business. I’ve attended this event for nearly as long as it’s existed, missing it just once in twenty years. It’s always a productive time for me and our business.

For Foremark, the event is more than a special opportunity to meet industry people and learn. (Funny how when you attend an annual event for twenty years, you get a sense of what you look forward to.) For me the conference has come to represent an exciting preview of the next year, that is, an opportunity to learn the attitudes of industry players about growth in the upcoming year. I’ve come to find the tone of this meeting usually depicts what our business will be like, what we can expect, how ambitious we can be, expansion plans we’re likely to encounter from our clients, on and on.

Here are the highlights of what I took away this time. This is a list of what we’ll discuss in our planning meetings:

• Keynote speaker, economist, Paul Kasriel, said “the recession is over and we are in a recovery.” Not back to where we need to be, of course, but, according to Kasriel, the worst is over. Proceed cautiously and optimistically. (Imagine the cheer that received.) * The recovery will be very long and slow. Unemployment will remain high and peak at near 10.5%.
• Over-supply is still a problem. Anticipate more closings, 5,000-6,000 restaurants are likely to close in 2010. A lot of closings means a lot of opportunities.
• Restaurant sales will be flat to down. Operators will maintain profits by managing costs – labor, food, etc.  Commodity prices are in favor.
• For the first time in years, more meals are being eaten at home; grocery prices are down.
• Lenders are generally credit sensitive. Lenders will favor larger companies with respectable balance sheets. Smaller companies will find it difficult to obtain financing.
• Analysts claim the quick-service operating model is the most promising for the future.
• Because taxes and health insurance, companies are paying special attention to Obama’s healthcare plan.
• Restaurant companies must grow to survive; for restaurants choosing not to grow is not an option.

The message: smart growth. The economy is improving. Restaurants must grow, but growth will not come from over-flowing demand, cheap money and a robust economy. Instead, growth must be fueled by savvy and prudent management decisions.