“Directors Corner”

By Tom Haas, CEO of The Haaspitality Group

Make Quality Pay

The retail world has been challenged with stores such as Macy’s, J. C. Penny, Sears, etc. all missing their sales and profit projections, forcing them to pull back, or worse, close many stores in order to survive. The whole concept of the mall and its anchors is being examined as consumers shop on the Internet.

The trend is for online transactions led by the multi-billion juggernaut of Amazon.  This trend, along with other factors, has impacted the grocery as well as the Restaurant/Hospitality business. Wal-Mart, Kroger, Wegman’s, Target and even convenience store chain WaWa have all accepted the challenge to meet Amazon head on.  The Internet is, without a doubt, forcing all retailers to examine their position and deal with future change before it is too late.

Grocery stores are also impacted by the fact that “warehousing” package goods on shelves is no longer good enough as consumer tastes for conventional stand-by items has changed.  As a result of the consumer’s change in eating habits grocers have been forced out of their comfort zone and committed in multiple ways to compete head on with the Restaurant/Hospitality Industry.

In my little community of Amelia Island, Florida, Harris Teeter (a division of Kroger) has tripled the size of their store, upgraded their meat, seafood and produce, and have entered the restaurant world by including a sit-down or take-out menu of fully prepared items.  They have an extensive salad bar, prepared food offerings such as Asian, as well as other entrees, and freshly-made pizza, all presented in a number of beautifully crafted stainless steel display cases staffed with cooks.

On certain days full dinner specials are offered such as lobster with two sides for  $10.99, prime rib with two sides for $10.99, etc., resulting in long lines winding outside the store.  In addition, they have a seating area for those who wish to eat right there, and have added a Starbucks in the same area.

What should the Restaurant Industry do in order to stay in the mix?  Expand take-out? Go after home delivery, etc. etc.?

According to the March 9th, March 11th and March 12th Wall Street Journal series entitled, “Your Food is Almost Here”, the paper discusses the pros and cons of home delivery for grocery stores, as well as restaurants.

The articles point out that 6% of the U.S. population wants home delivery, while at the same time, NPD research has found that 80% of all food is consumed in the home.

The most conclusive challenge of the Wall Street Journal series was how do you deal with the costs of delivery along with recognizing that the consumer only wants to pay up to $5.00 for the convenience of delivery.  Some operators such as Panera Bread lose at least $2.00 on every delivery.

I recently visited a number of Newk’s Eatery operations and was very impressed with the variety of their offerings and the quality of their food, all of which was prepared fresh on the premises.  I entered one location at the take out entrance and was met immediately by a manger ready to help with my take out order.  In my opinion, committing to expanded and efficient take-out makes more sense than having a half-baked home delivery option.  Even adding drive-thru lanes would, it seems to me, work better than restaurants attempting home delivery by a person or robot.

Anyone who has visited a Chick-fil-A has to have noticed that many of their restaurants are not only full inside, but have three busy drive-thru lanes, with runners taking and delivering orders.

Chick-fil-A deserves an Academy Award for their “consistent performance catering to the convenience of their customers”. They’re a perfect example of efficiency, and the ultimate in delivery standards.

How many times have you attempted to order take out in a single lane, waiting and receiving less than professional, well-trained staff?  And this includes McDonald’s.

The time is now for the Industry to face the challenge of the Internet and their customers, as well as the grocery trade.  It’s time to stop playing defense and start innovating.  The Industry needs to confront the changes in a realistic way that will protect the integrity of their product.

Remember what happened to “Howard Johnson’s” when they entered the New Jersey and Pennsylvania turnpikes which caused them to lose control over their product and service, failing to keep their promise to their customers, which resulted in failure?

To survive and meet the challenge of the future, the Restaurant Industry needs to “Make Quality Pay”.  Innovate to survive and grow.  Don’t try to do better what you shouldn’t be doing at all.  Know your customer first, and know your business secondly.  Innovate your entire operation and make take-out convenient and customer-driven in order to meet the challenge of this industry “Revolution”.