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Let's face it: Life offers no guarantees. But as tumultuous as the world is, the restaurant industry is about as rock solid as it gets. If all goes as projected, this industry will experience its 15th consecutive year of real sales growth this year. Not many industries can make such a boast.

The National Restaurant Association predicts that annual industry sales this year will total $511.1 billion. That's a 2.5% inflationadjusted gain over last year's sales, and it will mark the first time industry revenues have crossed the half-trillion-dollar mark.

Take a bow, restaurant folks, you've been kicking butt under some incredible pressures. Last year alone, you stood tall against the effects of soaring gasoline and energy costs, monster hurricanes and a contentious war on terrorism. But, year-in and yearout, when the dust clears, there you are with a welcoming smile and a wide-open door. You, friends, are like a giant tablet of Tums for our collective agida.

Once again, the full-service sector will lead the way in 2006 with expected sales of $173.4 billion. Adjusted for inflation, the 2.5% growth rate expected this year is better than last year's 1.9% increase, but less than 2004's 2.8% gain. That's not bad when you consider unstable energy costs will continue to chip away at disposable income.

On the other hand, the NRA is predicting that wholesale food prices, which rose a whopping 13% from 2002 to 2005, will likely decline modestly this year. Specifically, beef and pork prices are expected to stabilize, and so may dairy prices. Nevertheless, with energy costs continuing to rise, the NRA predicts that menu prices will increase by 2.7% this year (which is still below the inflation rate of 3.2%).

Unwelcome Visitor
What do the Olympics and Hurricane Katrina have in common? Both were bad for business, says Bob Derrington, an equity research analyst at Morgan Keegan & Company. As the country appeared to be recovering from escalating gasoline prices, the 2004 summer Olympics began to air on television, and a lot of customers stayed home to watch, he says. Call it the couch-potato effect.

Katrina had a similar effect last year, but on a more dramatic level, says Derrington. In much the same way everyone was glued to their televisions after 9/11, consumers stayed home to watch the aftermath of Katrina. On one level, it's heart-warming that people thousands of miles away from a disaster apparently care about their fellow man, but on another it means that isolated disasters can dramatically hurt business across the land.

The NRA says full-service restaurants not only serve as America's dining rooms, but are increasingly becoming America's family rooms. To support its point, the association asked adults if they would watch a small television at the table of their favorite full-service restaurant. One in four of them said they would. So, when disaster hits again, you might consider having a bunch of television sets around and letting your customers know it. It may be one way to offset the couchpotato effect. Oh, and let's not forget the next winter Olympics, which begins on the 10th of this month and will continue through the 26th.

Takeout and Curbside Pickup
Couch potatoes have to eat, and so do people with hectic schedules. If you haven't begun to offer takeout and/or curbside pickup, you're missing valuable sales. More than nine out of 10 family-and casual-dining operations offer takeout, according to the NRA. In that same survey, nearly two out of five adults said they bought takeout food from a full-service restaurant in the last year. According to the stats, you'll do even better if you offer curbside pickup.

It comes as no surprise that customers are demanding speed and convenience like never before. And 2006, says Derrington, may be the year fast-casual restaurants hit their stride.

"Consumers are demanding fresh, quality food at reasonable price points that comes with the convenience of quick service," he says. "Fast-casual restaurants meet all those demands and they provide it better than the fast feeders and casual dining."

Are you beginning to see that customers are in the driver's seat? Competition is fierce, margins are small and customers have a lot of choices, including staying home. They may be increasingly using your restaurants like their family rooms, but the truth is they can always stay home and make a baloney sandwich. The good news is that most customers admitted in a recent NRA survey that they go to restaurants for tastes and flavors they can't duplicate at home. All of this suggests that mediocre restaurants are one step closer to extinction and the good ones must do their best to create loyalty.

Customer Satisfaction
Customer satisfaction played a huge role in McAlister's Deli having its best year ever in 2005, says Phil Friedman , president of the Ridgeland, MS-based company. The 181-unit, fast-casual deli hopes to add another 50 units this year through franchising.

"We have become a much better company in recent years because of a strong guest focus, which we call the McAlister's touch," he says. "Customers order at a counter, but we deliver their food to the table. And if they want a refill, we get that for them. A little extra service in a fast-casual environment goes a long way with customers."

He says rising gas prices have cut into profits, particularly because of higher costs for delivery and petroleum products, such as the 32-ounce plastic cups McAlister's uses for sweetened ice tea. On the other hand, McAlister's is benefiting from customers who believe they can get a very good meal at one of its units for a lot less money than they could at a casual restaurant. Call it a positive trade-down.

Looking up
Customers may be watching their pennies, but they're still willing to swing for the fence on occasion. According to a NRA survey, 69% of fine dining operators said they were expecting a better year this year as opposed to last. That compares to 59% in the casual sector and 48% in the family sector.

New York City restaurateur Geoffrey Zakarian says he's banking on a great year ahead. He's the chef/owner of Town restaurant at the Chambers Hotel and Country restaurant, which opened late last year in the Carlton Hotel.

"When you open a restaurant you have all these ideas about what people want, but when they finally arrive they decide how they're going to use your place," he says. "Your vision and their desires don't always match, so you listen to them and give them what they're asking for. That's how you become a success in this business, and it's why I'm expecting a good year ahead."

The days of chefs dictating to the public are gone, says Zakarian. Anybody with that kind of attitude is probably a young chef who doesn't have to make payroll, pay investors or make interest payments. "Give customers what they want. Charge 'em for it, but give it to them and you'll have customers for life."

Like most full-service operators, Zakarian is concerned about hiring the best help he can. He's done well, he says, because he looks for two qualities— emotional intelligence and a sense of urgency. If you can find those two qualities in a person, you generally won't go wrong.

In Chicago, media darlings Blackbird and Avec restaurants appeared to have done everything right last year and their owners are expecting good things again in 2006. "For Blackbird, our seventh year in business was awesome," says owner Donnie Madia .

"What really helped was opening Avec right across the alley. Each restaurant played off the other. If one was busy, we directed folks next door." Madia is particularly pleased with Avec, which has perfected the small-plate concept. Six restaurants featuring small plates will open in Chicago this year, he says. "It's good to be ahead of the curve."

With that thought in mind, Madia and partners hope to open a third concept nearby this year. He would not discuss the concept until papers are signed, but hinted that it would have a Parisian flavor, be beer focused (think Belgium) and have an outdoor cafe.

Meanwhile, Blackbird and Avec will focus more on increasing private party business, which began to take off last year. James Beard awardwinning Chef Paul Kahan says he'll also implement a prix-fixe degustation menu Monday through Thursday.

"We've been open several years and a new tasting menu will get our staff excited and allow us to open different bottles of wines during a meal," Kahan says. "We're hoping it will also excite our customers and kickstart some new business."

A Healthy Bottom Line
Speaking of new business, the founder of Boston Market, George Naddaff , is on his way to creating another empire. Capitalizing on the growing consumer trend to eat more healthfully, Naddaff created KnowFat! Lifestyle Grille, a concept where everything on the menu is, in Naddaff's words, "betterforyou food."

People are totally aware that they have to start eating better. This growing health movement is no fad, and it will gain momentum this year and continue on," he insists.

Growth of the new concept supports his claim. Currently six units are open, with five more under construction and 27 signed agreements to build more. His goal is to have 600 units up and running by 2009. The key, says Naddaff, is the company's dedication to create a more healthful menu that tastes great.

"Our menu is not about denial. If you want to have a cheeseburger, have a cheeseburger. But ours will have fat-free cheese, turkey bacon and a whole wheat bun. And, I'm not kidding, it tastes great."

Naddaff is so committed to his belief that people in the future will be more health-conscious, that he has also created in each unit a retail nutritional store, much like GNC or Vitamin World.

"It's a convenience play," he says. "People who are attempting to live a better lifestyle take supplements. So why not make it convenient for them, and have a restaurant and nutritional supplement store under one roof?"

Surprisingly, or maybe not, nearly 40% of sales are coming from the retail side of the business. If you believe the desire to eat more healthfully is a fad, perhaps you should rethink things this year.

SIX FOR ' 06


In light of the overall economic environment, the industry situation and the consumer's "mood," Ron Paul, president of Technomic Inc., expects the following six issues to be big ones in 2006.

  1. "Traditional" casual dining chains will focus on differentiation. Consumers over the last few years have begun to treat a number of these chains as if they were commodities; if one is busy and another nearby isn't, they'll go there. The mood, dècor, prices, noise level and service style are "all the same," as consumers tell us. Remodels, refreshed menus and creating signature dishes are among the activities we expect.
  2. "Upscale casual" is where the growth will be. Obviously, this is closely related to #1 above. The success of such chains as Cheesecake Factory and Flemings, to name just two, is providing a wakeup call to the " traditional" players. Their high volumes, favorable same-store sales trends and planned unit expansion should reinforce the fact that the consumer is ready for something more and something better and is willing to pay for it.
  3. The level of value and price promotions will increase compared to 2005. Combo-meals, special pricing on selected items on selected days, limited-time offers, etc., are going to be aggressively used as operators fight for customers. Energy prices are only one of the factors affecting consumers whose income level forces them to become more price/value conscious.
  4. "Bar food" and bar menus everywhere. Small burgers, tapas and chili are only a few of the items operators are featuring to meet the needs of consumers who may want to snack, spend less or just like more "comfortable" food than that featured on the regular menu.
  5. Operators will feel the competition from beyond restaurants. Grocery-type chains like Whole Foods are having an impact in the slow-toreact supermarket industry. Even frozen foods are showing some growth and the newest players to watch are the small segment of "meal assembly" or "do-it-yourself" locations where consumers can prepare bulk meals without having to do the clean up.
  6. Internet marketing will come of age. Shame on any operator who is not busy building a database of e-mails. Those customers can opt in for promotions, news, etc. This is especially important for operators that don't have the scale for mass media. The Internet is a valuable development and one that should be employed appropriately in light of the very competitive environment we forecast for 2006.



RESTAURANT HOSPITALITY'S intrepid reporter John Mariani eats in more restaurants in one year than most people will in a lifetime. Here's what he sees ahead.

  1. Retro design. After a few years of extravagant restaurant decor driven by designers' egos, restaurants are getting back to elegant atmospheres in the highend, like Alex at Wynn Las Vegas, Ortolan in Los Angeles and the soon-to-open Le Cirque in NYC.
  2. Into the burbs. Once conservative culinary enclaves, affluent suburban towns are seeing the emergence of some of the country's best restaurants with fine young chefs, as restaurant real estate becomes prohibitive in the major cities. Great examples include Gaia in Greenwich, CT; Restaurant Eve in Alexandria, VA; and Red in Beachwood, OH.
  3. It takes a bistro. Look for smart, modern French bistros serving wholly loveable classics like steak frites, mussels in white wine and croque monsieur sandwiches in every big city, like Bistro Modern in Houston, Cafè de la Press in San Francisco and Bistro Petit Robert in Boston, always at moderate prices and in cheery surroundings.
  4. Italian seafood. The old clichès of shrimp scampi and clams Posillipo don't matter any more when great Italian seafood restaurants are now cooking impeccable fish the authentic Italian way at places like Mare in Boston and Bartolotta in Las Vegas.
  5. The retrenching of celebrity chefs. If you've noticed a low rate of expansion of celebrity chefs' empires, it's because the public has started to regard them as chain restaurants and won't pay top dollar for chefs not in their kitchens as advertised.
  6. Steakhouses go upscale. Even as steakhouses continue to proliferate, you can no longer depend on a menu of six items after the success of places like BLT Steak in New York, Barclay Prime in Philadelphia and Strip House in Houston expanding the possibilities of a once-sacrosanct genre.
  7. Very many Japanese. Sushi is more popular than ever but now Japanese restaurateurs are following the route of the Nobu chain in offering far more on their menus than raw fish and a few teriyaki items.
  8. Sci-fi cuisine tops out. America simply does not need, nor will it embrace, many more of the so-called "sci-fi" chefs and overly hyped restaurants that try to twist and manipulate food into indecipherable puzzles and exotica. Enough already with the science experiments.
  9. The sad demise of the clothed table. Though marketedas a "design point," bare tables have become more and more popular with trendy new restaurants whose owners deep down don't want to pay the linen bills. Now it's hip to be naked.
  10. Expect more attempts to ban certain foods. The ban on foie gras production in California is probably only the beginning of an increasingly vocal minority trying to keep people from eating foods special interests don't like for reasons of health or inhumane treatment, however misguided their zealotry.



Since 1985, Cini-Little International has provided restaurant business and design consulting services around the world. Here's what Ron Kooser, president and c.o.o. of the organization, sees in the year ahead.

  • Competition is blurring. You no longer just compete against other restaurants. Hospitals, universities, grocery stores, theme parks and corporations are operating restaurant-like foodservice facilities with saute stations, woodburning pizza ovens and the like.
  • Differentiate. Because of the blurring, you're looking an awful lot like your competitors. Change your lighting, rethink your merchandising, implement display cooking stations. The most exciting restaurants win.
  • Big platters are out and small plates of food are in. This trend will put considerably more stress on your kitchen, which will be putting out many more menu items. Are you geared up to handle the overload?
  • What did you say? Sure, a frenetic, loud restaurant can be appealing, but customers are getting fed up with excessive noise. If guests at a table can't hear each other, your place is too loud and you stand to lose customers to your competitors.
  • Takeout is a big deal. It appears that every other place is offering takeout. If you don't offer it and offer it well, you may lose out. Don't treat it as an afterthought. Designate kitchen areas specifically for takeout and think about pickup areas in your parking lot.
  • Deal with rising energy costs. Your restaurant, like most, probably is operating with old, inefficient equipment. Newer equipment is much more energy efficient. Consider, for example, a variable-speed exhaust hood that only goes on when you're cooking. It will prevent heat and money from going up your chimney.
  • Know your customer. During your next redesign, consider your customer. Don't put in granite countertops when stainless steel will do. Don't outsmart yourself and waste money.


Few parts of your business bring more to the bottom line than beverage sales. Philip Raimondo, the director of beverage development and training for Patrick Henry Creative Promotions, suggests you jump on one or more of these trends:

  1. Pom juice. Pomegranate will be more popular this year with the launch of new liqueurs, such as Pama, which contain pomegranate juice and the introduction of pomegranate-flavored vodka.
  2. Latin flavors. Latin American-inspired cocktails such as the caipirinha and mojito are becoming more mainstream. Look for pisco sours and classic daiquiris made with the original recipe of fresh squeezed lime juice, rum and sugar.
  3. Asian flavors. Asian influences such as green tea, ginger and the exotic fruit lychee will be appearing in drinks and manufactured liqueurs such as Zen Green Tea Liqueur.
  4. Fresh & organic. Fresh and organic ingredients and garnishes, such as fresh fruit, honey, mint leaves and flowers (rose petals) are gaining popularity. So, too, are new organic wines.
  5. Hot brands. Hot brands such as Ketel One, Absolut LEVEL and Stoli Elite will continue to grow. This trend will support the emergence of super premiums in other spirit categories, such as 10 Cane rum.
  6. Flavored spirits. Whiskies and tequilas will capitalize on the flavored white spirits trend by creating their own flavored brands.
  7. White hot. Vodkas, especially flavored vodkas, will continue to dominate the spirits category. Look out for additional flavored vodkas, such as grape, blueberry and espresso.
  8. Berry nice. Fresh blueberries, raspberries and blackberries will be used more widely as drink ingredients and garnishes.
  9. Infusions. Infusion jar cocktails have been revived and are gaining momentum as they provide operators with the tools to create their own signature cocktails that are not easily duplicated.
  10. Half bottles. Restaurants, bars and hotels will offer a wider selection of premium wines in half bottles for guests who want a better wine without the cost of a full bottle. The trend is appealing to guests dining alone and single travelers (especially in-room dining), as well as lunch guests who may only desire a glass of wine or two.
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