When Good Is Not Good Enough

During the depths of the recession, people would often joke that flat was the new up. In other words, if a company was not losing ground fiscally that was as good as gaining ground, given the challenging economic environment. Well, it's been a while since the recession ended and yet growth remains hard to come by for the foodservice industry.

Why? On the surface, things appear to be better, right? Earlier this year, for the first time since the Clinton Administration, the economy added more than 200,000 jobs for 6 consecutive months. And, as the National Restaurant Association continues to remind us, the foodservice industry continues to add jobs at a rate faster than any other segment.

Despite this wonderful macroeconomic news, the industry remains in a take-share mode. Technomic projects restaurant industry sales will be flat this year and grow at a rate of 1.5 percent in real terms during 2015. It feels like the foodservice industry is stuck in neutral.

Why? Well, for 2014 the lousy first-quarter weather is partly to blame. What made this past winter so unique is the depth and breadth of what occurred. We here in the upper Midwest are used to snow and ice, but our friends in Georgia and the Carolinas are not. And that's a big difference.

There's more to it than that. Restaurants used to consider the joint down the street as their main competitors. Today, however, a restaurant's competitive set has become much more complex.

For example, non-commercial operators continue to step up their game, as Dana Tanyeri illustrates in her story on business and industry foodservice. In addition, because consumers continue to wrestle with a crippling combination of stagnant wages and rising costs for such services as healthcare and child care, their ability to use restaurants remains severely compressed. (See the 2015 Foodservice Equipment and Supplies Industry Forecast.) Simultaneously, operators face financial pressures in the form of rising food and labor costs. With these developments chipping away at their already thin margins, operators have little choice but to drive cost out of every transaction, including their purchases.

By doing so, however, operators run the risk of eroding the true value the supply chain provides. That's because by deeply cutting the price, and often the timelines, the end user gains little outside input from their suppliers — they miss the experiential knowledge that could dramatically impact their concepts, as Chip Evans points out in this month's Parting Shot. But because most people seem to live in the short term, it's rare when they recognize how the value proposition continues to erode across the board.

Indeed, the concept of value remains an elusive one in today's foodservice industry. The only way to seemingly break this cycle is to make sure each transaction is a dynamic experience that meets the customer's expectations for quality, convenience and value. 

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