Federal Court Sides with Restaurants
Blocks expanded overtime eligibility. In a significant victory for restaurants, a federal judge in Texas struck down a 2024 rule that would’ve given overtime eligibility to roughly 4 million more workers and passed along significantly higher costs to operators. Most hourly employees are entitled to overtime pay, but at the beginning of 2024, salaried workers making more than $35,568 were not. The new rule increased that threshold to $43,888 on July 1 and would have bumped it to $58,656 in January, meaning millions more would have been entitled to overtime pay. Then starting on July 1, 2027, salary thresholds would have been updated every three years by applying up-to-date wage data to determine new salary levels, the federal government said. In May, the Restaurant Law Center, the Texas Restaurant Association, the Plano Chamber of Commerce, and a coalition of national business groups filed a lawsuit challenging the rule. They argued that it improperly prioritized salary over job duties when determining exemptions and that changes would push employers to either absorb higher payroll costs or limit employees’ hours. Also, they claimed automatic increases to the salary threshold without public input would violate the Administrative Procedure Act (APA) and go beyond the DOL’s rulemaking authority. Additionally, the organizations argued the changes disproportionately impacted industries with lower regional wages and smaller businesses. The court sided with the plaintiffs and ruled the Department of Labor exceeded its authority by emphasizing salary as the determining factor for exemption status. The court noted that the Fair Labor Standard Act’s intent was for an employee’s job duties—not compensation—to dictate overtime eligibility. Also, the updates every three years without public input were deemed a substantive regulatory change that required Congressional action or traditional rulemaking procedures. “Today’s decision is a win for restaurant operators and their business viability,” National Restaurant Association CEO Michelle Korsmo said in a statement. “During the past five years, the average operator’s labor costs have gone up more than 30 percent. The challenge to recruit talented managers is already pushing salaries higher, ensuring that good employees are making more through increases happening in the marketplace, in a more manageable manner for operators”…
Blackstone Acquires Majority Stake in Jersey Mike’s
CEO Peter Cancro will maintain a significant equity stake and will continue to lead the business.
Private equity giant Blackstone will acquire a majority ownership position in Jersey Mike’s, the fast-growing sub shop purchased by Peter Cancro in 1975. Terms of the deal were not disclosed. Cancro will maintain a significant equity stake and continue to lead the business. The partnership with Blackstone is intended to help enable Jersey Mike’s to accelerate its expansion across and beyond the U.S. market, and continue its technology and digital transformation, according to the companies. “We believe we are still in the early innings of Jersey Mike’s growth story and that Blackstone is the right partner to help us reach even greater heights. Blackstone has helped drive the success of some of the most iconic franchise businesses globally and we look forward to working with them to help make significant new investments going forward,” Cancro said in a statement. Cancro has served as chief executive officer since 1975, overseeing the brand’s growth to nearly 3,000 locations across the country. The chain totaled $3.4 billion in sales last year, a 25% increase over 2022, according to Technomic data, with 12% year-over-year unit growth. In 2019, Jersey Mike’s finished the year with 1,665 locations, illustrating its recent expansion. Indeed, the company has added than 1,000 new restaurants in the past nine years. The company is on track to reach $4 billion in sales and 3,000 units in 2024, with international expansion in Canada and Europe in the pipeline. Cancro was named the 2024 Restaurant Leader of the Year in April during the Restaurant Leadership Conference where he noted that one of Jersey Mike’s differentiators is its annual Day of Giving – when all participating stores donate 100% of the day’s sales to a local charity of their choice. The company also prides itself on being a training company that just happens to sell sandwiches, conducting more than 5,000 classes in the field impacting nearly 35,000 employees, for instance. This focus on training ensures consistency across the system as it continues to grow, executives have noted. Rumors about a Blackstone deal have been swirling since the spring. Addressing those rumors in April, Cancro said the company is “always for sale”…
Bielat Santore & Company – Restaurant Industry Alert
MONMOUTH COUNTY, NJ SPORTS BAR-RESTAURANT FOR SALE
Photo used to illustrate “Sports Bar/Restaurant” only and not actual representation.
Turn-key Restaurant/Bar for Sale in Western Monmouth County, NJ
- Location: Highly visible State Highway
- Property Size: 3.88 acres
- Building: 6,500+ sq. ft. free-standing structure
- Seating:
- Dining: 90 seats
- Bar: 95 seats with flat screens
- Outdoor Patio: 30 seats
- Recent Renovation: Complete top-to-bottom bar overhaul
- Financials: Grossing approximately $1.6M annually
- Financing: Available for qualified buyers
- Utilities: Electricity, gas, water, sewer, and telephone
This property offers a fantastic opportunity for a new owner to step into a strong high-traffic location with a lot of upside potential. Interested?
Contact Richard Santore 732.531.4200 for additional information.
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Restaurateurs Expect Labor Inflation to Keep Surging
89% of operators expect wages to keep climbing over the next 12 months. Food inflation may be moderating, but don’t expect labor costs to similarly ease near-term, according to “Labor & the Workforce,” the first in a new series of research reports from Restaurant Business. The survey of operators found that 89% expect to pay more for labor in the next 12 months, with roughly a third (35%) of the business predicting the rise will be significant. Fewer than 1 in 10 (9%) said they expect the cost to stabilize, and only 2% predicted a decline. About 3 of 4 participants said affording labor will be their biggest staffing challenge in the coming year. The canvass showed that labor costs have soared like a rocket during the past year. Nearly all the respondents (92%) said they paid more for staff during the last 12 months, with more than half (54%) describing the increase as significant. The increases raised the average hourly wage for the industry to $14.58, with limited-service restaurants paying a few pennies less and full-service operations paying 12 cents more. The leading way by far of coping with the wage upswing, according to the data, was “judiciously” raising menu prices, the reaction cited by 65% of the participating operators. Cross-training was the second-most frequent strategy for contending with the costs, with 48% of respondents saying they now prepare staff to work a variety of jobs. Simplification of menus, recipes and back-of-house operations helped 25% of the respondents hold down their labor needs and costs. The potential hires most in demand will be back-of-house workers, with 75% of respondents saying they’ll have kitchen positions to fill. The data was captured via a survey of 330 chain and independent restaurants during September. Included in the group were both full-service and limited-service operations…
Restaurant Spending Reaches New High Compared to Grocery Shopping
Restaurant market share was 56.4% in October. Restaurants’ market share was 56.4% in October, with groceries and supermarkets making up the rest, according to data released Friday by the U.S. Census Bureau. “This is a new all-time high for the domestic restaurant industry in this regard,” Mark Kalinowski, president and CEO of Kalinowski Equity Research, said in an analyst’s note. “The year-over-year gain was about 40 basis points, marking slight sequential acceleration from September 2024’s 30 basis-point market-share rise.” Retail sales for September were also revised upward, the Census Bureau said. “After the uptick we witnessed in September—which was later revised even higher— the U.S. Census Department of Commerce reported more good news in October,” said Chip West, retail, and consumer behavior expert with Chicago-based RRD. “Retail sales increased 0.4% month-over-month and 2.8% year-over-year, highlighting continued healthy consumer spending.” West noted that many businesses were imposing return-to-office requirements, which were “expected to positively impact the restaurant category, which saw a slight bump in October,” West said. “Dining establishments, which have faced significant challenges due to the loss of weekday foot traffic since the COVID-19 pandemic, are likely to benefit from an increased presence of in-office workers,” West said. “This resurgence in workplace activity could help drive weekday lunch and happy hour traffic, providing a much-needed boost to these businesses.” As the winter holidays approach in November and December, West said restaurants with catering options, “will certainly have an opportunity to promote and attract the number of consumers that are planning to host holiday celebrations this year.” Kalinowski noted that while restaurant same-store sales gains slowed noticeably through the end of the third quarter, “it appears perhaps a little more likely that the worst is over”…
Restaurants Are Finally Taking Price Hikes Off the Menu
The share of operators who say they’re still raising prices on patrons has shrunk. Inflation is drifting down in fits and starts, and so are restaurant menu prices. Consumer prices were 2.6% higher in October than the same time a year ago, according to federal data released Wednesday, up slightly from September’s 2.4% annual rate. But while the “last mile” in the fight against inflation has proved slow going, dining out costs are moving in a more affordable direction. The prices of food purchased away from home rose just 0.2% from September to October, down from 0.3% the previous two months, as restaurants ease up on price hikes. About 34% of operators told Toast that they’ve still raised prices over the past year, compared with 42% last year, the point-of-sale software provider found in a survey it released late last month. “If you think back to last year, there was a lot of uncertainty about how 2024 would play out,” said Kelly Esten, Toast’s chief marketing officer. Since then, an improving economy has restaurants “feeling more optimistic about the future than last year,” she said. Consumers’ hunt for bargains has forced a reckoning over restaurant prices this year. Fast-food brands like McDonald’s have leaned into value menus to lure customers back, and full-service chains like Red Lobster are embarking on ambitious makeovers to fend off bankruptcies that have rippled through the sector. Dining out is still noticeably pricier than a year ago, with costs up 3.8% last month since October 2023, Wednesday’s government data showed. But restaurant operators are still seeing “healthy sales volume” as inflation cools, according to the National Restaurant Association. “Consumers’ ability and willingness to spend in restaurants remains intact,” the trade group said last month, noting that the industry’s annual sales growth as of September was more than double that of non-restaurant retailers during the same period. Diners are more likely to notice stabilizing menu prices at quick-service restaurants than at sit-down ones…
A Surge of New Restaurants Drives New York City’s Storefront Revival
Store vacancy rates are above pre-pandemic levels. New York City’s thousands of empty storefronts, a symbol of the lasting effects of the coronavirus pandemic, are filling up faster than many predicted. Thank your local taqueria. A surge of food and drink businesses, led by Mexican, Japanese, and Caribbean kitchens, most of them outside Manhattan, have played an outsize role in the city’s storefront revival, according to a study released Friday by the Department of City Planning. About 16,000 of the city’s 143,000 storefronts were empty in the third quarter of this year, for a vacancy rate of just above 11 percent. The share of empty stores has fallen citywide for four straight quarters. Storefront vacancy rates in Queens, Staten Island and the Bronx specifically are already below 10 percent, which is widely considered a healthy level, the report showed. “It’s remarkable how few storefronts are vacant today,” said Jonathan Bowles, the executive director of the Center for an Urban Future, a public policy think tank that reviewed the study. “And so much of it is about food coming to the rescue.” New York has long been a culinary destination, but after four years of stark job losses in other forms of retail, as apparel and electronics sellers have closed, the city is now — perhaps more than ever — relying on dining to brighten its darkened storefronts and bolster the economy. The shift has been long in the making. From 2000 to 2023, the number of restaurants in the city nearly doubled, climbing to over 21,170, according to an analysis of data from the New York State Department of Labor. In the same period, there has been a drop in nearly all other types of storefronts, including retail, pet care and professional services. Since 2020, there were 2,200 more closures than openings in so-called dry goods, which include clothing, furniture, and beauty products, according to the report…
Chains Struggle to Stand Out Amid ‘Noise’ of Value Wars
Several restaurants have struggled to stand out in a sea of value offers. During the third quarter, Portillo’s, Papa Johns, Popeyes and Burger King all saw their comparable sales decline. For some of these brands, the lackluster sales results stem in part from their much-publicized discounts falling flat amid a sea of competitive deals. Burger King, which saw a sales lift last year from its $3 Royal Crispy Chicken Wraps, has struggled this year to stand out with its Fiery menu, and other summer promotions. The offers had trouble cutting “through all the value messages in the market,” Restaurant Brands International CEO Joshua Kobza said during a November earnings call. Sister brand Popeyes also met with stiff competition last quarter. Kobza said the chain didn’t offer the types of promotions needed to attract consumers, though late in it added a three-piece chicken offer for $5 and a $6 Big Box that has helped drive traffic and sales improvements. Companies whose deals have fallen flat so far are honing those deals and trying to develop the secret sauce for value pricing. Papa Johns, for one, plans to refresh its Papa Pairings, a $6 mix-and-match deal, in future quarters as part of its value strategy. Interest in affordable meals is unlikely to wane. According to Captify data emailed to Restaurant Dive, searches related to “high cost of fast food” and “why has fast food become so expensive” are up 8% so far this year. Searches for value pricing were up 56% year-over-year in 2023 and have held relatively steady since. Food away from home prices are still rising, and were up 3.8% year-over-year in October, according to the Bureau of Labor Statistics. But not all brands want to partake in the value messaging. While Portillo’s comp sales were “challenged by this rampant discounting,” the brand doesn’t want to enter the value wars, CEO Michael Osanloo said during an earnings call. “I don’t want to get into the discounting business,” Osanloo said. “I don’t want a value menu.” Osanloo said many brands are engaging in pricing wars for the benefit of short-term sales, but Portillo’s is more focused on protecting its margins, preserving cash, and staying disciplined…
Did You Know?
Five Reasons Your Business Needs Video Surveillance. Is your business as well-protected as it should be? Do you truly know what goes on when you’re not there to see it firsthand? As a business owner, safeguarding your investment from potential losses—whether from the public or your own employees—is essential. Society Insurance outlines five reasons why every business owner should have an effective video surveillance system. Installing a video surveillance system can be a strong deterrent against crime. When potential criminals see that your business is equipped with cameras, they are less likely to commit vandalism, shoplifting, or other illegal activities, knowing there’s a higher chance of being caught.
Employee Tip
Restaurant Workforce Research: Reflecting on 2024 and Optimizing for 2025. Long after the restaurant industry felt the most significant impacts of the pandemic, echoes still reverberate in the form of workforce realities and operational challenges. After millions left the industry in 2020, restaurants responded by increasing wages and leaning into incentives to attract employees back. This adaptability allowed the industry to come back even stronger, but to this day, the struggle to attract and retain a stable workforce remains. To help restaurant operators better understand what employees want and need, close to 1,000 restaurant managers were surveyed regarding compensation, technology use, retention tactics, and more. Here’s a look at some of the key findings so you can reflect on 2024 and prepare for maximum growth in 2025…
