The State of Restaurant Investing in 2024
Chaos, caution, and potential. PwC said in early January the starting bell was beginning to sound for M&A. It also acknowledged the country was slogging through “one of the worst bear markets for M&A in a decade.” The puzzle was a convoluted one, mainly drawn by inflation, interest rates, and difficulty accessing capital to fund growth. The climate, broadly, made it challenging for many brands to generate profitability through high-cost measures, like commodities and building materials. In all, it depressed valuations, which made it appear wiser to wait things out. PwC’s thought, however, was decelerating inflation and expected reductions in interest rates, along with pent-up demand for (and supply of) deals could tip the scales later this year. In this special report, we’ll touch base with some of the restaurant industry’s top thought leaders in the investing arena to take their pulse on the current state as well as what could be coming next. Additionally, we’ll explore how brands can position themselves to partner with investors and what they need to check off before taking that leap. There are a few converging factors muddying the growth proposition, says Lauren Fernandez, CEO and founder of Full Course, a restaurant industry incubator and accelerator of early-stage brands. You could start with the high interest rates tied to construction lending. It’s also true for general business lines of credit. These rapid rate hikes, she says, did nothing to support banks wanting to lend because they weren’t sure when things would level out. “So, like many investors in this space,” Fernandez says, “they were just waiting to see what’s going to happen.” That lack of lending action showed up in different places for restaurants in 2023. Big deals slowed since private equity firms didn’t want to buy and sell without leverage. Large bank offers were hit by unfavorable interest rates. And, in turn, activity ground to a halt. Andrew Smith, cofounder and manager partner of Savory Fund, a group that oversees 11 brands, says 2023 was the toughest year over the last 15, even more so than 2020 or 2021. “I think a lot of people kind of felt like, gosh, what is this next phase in the F&B industry? And all I would say is from a Savory standpoint, our team, our leadership, will be the first to say that we are extremely excited and bullish about the future. We feel like the future is going to be better than the past.” Fernandez agrees with PwC on the point of there being a backfill of demand and people sitting on the sidelines ready to go when money starts moving.
Making Local Feel Global on Restaurant Menus
Chefs are concocting fresh, globally inspired twists to local and seasonal ingredients. Chef Evan Hennessey has spent over a decade honing his approach to local and seasonal sourcing at Stages at One Washington in Dover, New Hampshire. There’s seaweed, clams, scallops, and oysters he gathers from the shore himself. The vegetables are hyper local, too. Those ingredients flux more than the land animals, which are sourced from one farm and planned out a year in advance. The restaurant also works with a team of foragers who arrive at the doorstep with whatever the land has to offer. After a heavy rain, it might be black trumpet mushrooms. The next time, it could be berries or freshly plucked wild herbs. “That’s a fun one, because I don’t always know when they’ll show up,” he says. “Right in the middle of service, they’ll walk in with bags of something. The question is always, ‘What do you have today?’” The result is an ever-changing tasting menu showcasing the local landscape. That doesn’t mean he sticks to regional classics like clam chowder, lobster rolls, and blueberry pie. The ingredients might come from New England, but the culinary influences come from around the world. “If you look at a map and draw a line from New England, you’re going to run into parts of Northern Europe and eventually land somewhere in the area of Japan,” Hennessey says. “You’ll see a lot of similarities between the agriculture and aquaculture in those places, so it made sense to incorporate some of those cooking practices, because the ingredients are the throughline.” One recent dish that showcases this latitudinal inspiration is sea truffle chawanmushi, a riff on traditional Japanese steamed custard made with red algae harvested from the New Hampshire coast. Hennessey’s goal is to demonstrate the creativity inherent in utilizing local ingredients. That extends beyond culinary innovation to encompass collaborative efforts with the local food system, emphasizing the importance of restaurant involvement in supporting and enhancing regional foodways. Pushing the farm-to-table message forward comes with plenty of challenges, says Bobby Will, chef and owner at Thistle & Grouse, an elevated gastropub in Portland, Maine. It means giving up a certain amount of control and letting nature dictate what ends up on the plate.
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The Importance of Upselling
And an effective way to do it. Upselling is a lucrative tactic restaurant operators use to persuade customers to buy an additional or more expensive item. If done effectively, it will increase ROI while attracting and retaining customers. Restaurants that do not provide diverse side options overlook an entire segment of potential customers. When a party decides on a restaurant, they expect options everyone will love. “Adding sides can significantly increase check averages and prevent veto votes when ordering for a group,” says Thomas Wenrich, senior director of culinary at Tyson Foodservice. “Offering diverse options like salads, protein-topped salads, or boneless chicken wings can attract customers with varied tastes, ensuring everyone finds something they like and avoiding the need for multiple orders from different places.” Encouraging extra toppings on pizzas is another way operators can increase ticket sizes while creating a more fulfilling meal. “Consumers want to feel they’re getting value for their money, especially with premium toppings,” Wenrich says. “Our proteins are definitely high quality, designed to deliver the best taste and texture, ensuring customer satisfaction and justifying the price point.” Tyson Foodservice offers a variety of protein toppings and sides making them the perfect addition to pizza orders. “We offer everything from traditional old-world sausage and pepperoni to new, fun options like bacon, chorizo, and chicken toppings,” Wenrich says. “This allows us to support any restaurant operator and their menu needs.” Maintaining a clear brand position while having an adventurous menu is important in today’s competitive restaurant industry. Pizzas are a great canvas for introducing new flavors and recipes, attracting attention, and driving traffic. “Offering unique toppings and sides can help differentiate your brand and keep customers excited about your menu,” Wenrich says. “One effective strategy is creating specialty builds or recipes that enhance the pizza experience, such as a steakhouse pizza with added steak for a higher ticket average.”
Preventing Supply Chain Shortages
Menu optimization, building partnerships and LTO maximization. Create strong relationships with local retailers. Having these retailers on speed dial can make sure both the restaurant and the retailers are on the same page. Often this can make sure you know in advance if there will be a shortage on certain ingredients. Also garner strong relationships with your manufacturer. It is crucial to dedicate time to real talk with them about the demands of your restaurant. Often if they know there is a certain ingredient you will always need in bulk, you work together to have deals on these bulk buys. Creating strategic LTOs is a great way to keep customers interested each season on the brand, but it’s also important to be strategic about the recipes you create. Creating a limited time offer that utilizes ingredients that are already in the kitchen to maximize sales without adding other ingredients to your supply. Optimization is fundamental in culinary management, and it is something I’ve become deeply passionate about. At an emerging brand like Protein Bar & Kitchen, this skill has become essential as we work to curate a menu with longevity in mind while also capitalizing on trends within the industry. The key is finding an operational sweet spot while remaining both innovative and efficient. It is important to note that while menu optimization is for the benefit of our customers and our financial bottom line, it should ease the burden of back-of-house operations. A large part of my focus is finding ingredients that can be used across the entire menu. For example, if we have a surplus of a particular vegetable, we might feature it in multiple menu items to maximize the ingredients usage throughout the menu. This not only minimizes waste but also adds versatility to our offerings, without excess cost. Seasonality of ingredients is an imperative factor when planning menu rotations. Incorporating seasonal produce not only takes advantage of ingredients at their peak freshness and flavor but also can reduce costs while decreasing the brands carbon footprint. For instance, in the summer months, we might showcase dishes featuring juicy tomatoes and crisp cucumbers, while in the winter, we might focus on hearty root vegetables and leafy greens.
Some Bars and Eateries are Banning 20-Somethings
Can it become a widespread practice? When Johnny B. Barounis opened The Auction House in New York’s Upper East Side in 1993, he knew he wanted to deter a certain type of customer in their early 20s — in his words, “those kids that had their flannel shirts tied around their waists, wearing their Villanova hats backwards, walking around in the street with their Amstel Light in their hand.” He deliberately cultivated an atmosphere at his bar that he felt might intimidate a fresh-out-of-college 20-something: rich velvet drapes, crystal chandeliers, antique furniture. On Fridays and Saturdays, the message was more explicit: Only patrons 25 and up were allowed in the door. “I didn’t need a 21-year-old to come in with two of his friends, to make a ruckus and then get sick in the bathroom,” Barounis says. Barounis says his age policy was rare back then, and some at the time questioned his decision to keep out younger customers. Three decades later, the bar is something of an institution — and the 25-and-up policy on weekends was so well-received that he implemented it at his sister bar, The Back Room. Today, plenty of bars and lounges around the US impose similar — if not stricter — age restrictions, hoping to curb unruly behavior sometimes exhibited by newly legal drinkers and appeal to an older crowd. But such age limits are still unusual at restaurants, as evidenced by the recent controversy around a Missouri eatery. Bliss, an upscale Caribbean restaurant that opened last month in the suburbs of St. Louis, provoked numerous headlines and fervent debate for limiting entry to women 30 and up and men 35 and up. As Barounis sees it, the uproar over the restaurant’s age policy suggests it might have been too extreme. “The difference between 21 and 25 is greater than 25 and 35,” he says. “Where do you draw the line?”
5 Ways Restaurants Can Prepare for a Successful Grand Opening
Back to basics. Training, research, marketing, influencer buzz and loyalty programs can all ensure patrons walk into the restaurant on day one, and return during the weeks after, experts say. Excitement and opportunity accompany opening day of a new restaurant, as its restaurateur finally sees their vision play out to the world. However, ensuring success during that grand opening requires months, or even years of labor, planning and preparation. A successful grand opening takes more than serving an excellent plate of food to customers, experts say. It requires time to properly train employees, a soft launch, a lot of research, and making sure customers actually walk through their doors on day one and return the days and weeks after. “Great signage, media coverage, influencer buzz, social media marketing, and digital ads can all go a long way in driving business during the first days or weeks of a new restaurant,” said Ryan Goff, executive vice president and chief marketing officer at restaurant management agency, MGH, in an email. So does ensuring they are adequately staffed up and prepared. “Under-preparation can kill a grand opening,” said Goff. “It’s always better to be overstaffed, over-prepped, and to be ready for the best-case scenario of lines out the door.” That hard work before the grand opening is critical, because once a restaurant opens for business, there’s no do-overs, said Rick Camac, executive director of industry relations at the Institute of Culinary Education, in an email. “It’s like a Broadway play. No such thing as a bad day,” he said. “Quality and consistency day in and out.”
How Celebrities Drank and Dined in the Golden Age of Hollywood
Hollywood Heritage Museum pays homage to the era of glamorous nightspots. The Garden of Allah. The Cocoanut Grove. The Brown Derby and The Luau. They were the hottest places to see and be seen during the Golden Age of Hollywood, from the 1930s to the 1960s. Anyone who dined at these glamorous venues or wishes they had will thrill to the Out With the Stars exhibit, opening Saturday at the Hollywood Heritage Museum. The exhibition showcases these starry restaurants and much more from the 20th century in Los Angeles, Las Vegas and New York, with a special room devoted to World War II’s Hollywood Canteen. Most of these atmospheric spots are long gone now, except a few stalwarts like Musso and Frank, the Tam O’Shanter and the Smokehouse. But in the days before social media and TMZ, making the scene at one of Hollywood’s swanky nightspots was the best way to boost your career, explains entertainment manager Darin Barnes, who helped curate the exhibit. An up-and-coming starlet could mingle with studio execs and get photographed for the morning and evening newspapers while dining on stuffed squab at Sardi’s or sipping a zombie at Don the Beachcomber. “I Love Lucy” famously filmed at the Brown Derby, and many of these restaurants were also celebrity-owned, including Clara Bow’s It Cafe, a short-lived 1937 spot on Vine St. with impeccable art deco branding, on display in the exhibit. Angie Schneider, director of the museum that is housed in the historic Lasky-DeMille Barn across from the Hollywood Bowl, is working to bolster its programming with exhibits featuring rare items from entertainment collectors, such as the recent MGM 100th anniversary showcase.
Did You Know?
New federal overtime-pay standards take effect. Salaried restaurant employees earning $43,888 or less annually will now be entitled to overtime pay for worked hours exceeding 40 per week, the result of an update, effective today, of U.S. Department of Labor (DOL) regulations. Until yesterday, salaried employees were exempted from federal overtime requirements if they earned $35,568 or more per year. The broadened scope will entitle about 1 million more workers across all industries to time-and-a-half pay for hours exceeding 40 per week, according to DOL.
Employee Tip
DOL issues employer mandates for protecting workers from excessive heat. The requirements include providing paid breaks every two hours when temperatures soar in indoor workplaces like kitchens, as well as providing cool-down areas, drinking water and establishment of a safety “buddy system.” Restaurants with more than 10 employees would be required to draft a plan for protecting their workers from dangerous heat under new employer regulations proposed Tuesday by the U.S. Department of Labor, or DOL.
