Some 50% of restaurateurs expect better profitability in 2009 compared to 2008

U.S. restaurateurs are simultaneously optimistic about the future and concerned about inflationary trends in commodity and labor costs for the remainder of 2009 according the 2nd Annual ArrowStream Foodservice Industry Survey.

Conducted in August by ArrowStream, a leading provider of supply chain solutions for the foodservice industry, the survey was completed by more than 50 restaurant chain executives including members of the ArrowStream Network of restaurant chains, distributors and manufacturers that moves almost 10 percent ($15 billion) of the products in the foodservice industry.

Profitability & Budgets Up

“Restaurant executives are indicating some light ahead in this long, dark tunnel of industry and economic challenges,” said ArrowStream CEO and Chairman Steven LaVoie pointing to plans to increase budgets, improve supply chain processes and generate logistics efficiencies as examples of key competitive strategies of the industry leaders surveyed.

“Despite lower sales expectations, a full 50 percent of all restaurateurs expect better profitability in 2009 compared to 2008 due to cost cutting and lower commodity prices, which boosted profits. The fear of a resurging commodity pricing bubble makes cost cutting/operational efficiencies even more critical to ensure improved profits in the coming year.” continued LaVoie.

An additional 34 percent of restaurateurs expect almost the same profit levels as 2008, and only seven percent predict a gloomier outlook for 2009. Likewise nine percent of restaurant executives expect their supply chain budgets to fall in 2010 while almost 60 percent report a planned increase

Supply Chain Process Improvements Needed

While operators are warily optimistic, they are brutally frank about the need for improvement in supply chain operations and very open about the areas of most need including visibility and forecasting. When asked what areas they see as most important for reducing supply chain operations costs, respondents reported:

Areas of for reducing costs


Responding
-- Freight cost visibility & accuracy
-- Forecast accuracy
-- Supply chain visibility

Squeezing for Logistics Efficiencies

Generating logistic efficiencies is a common strategic goal currently done largely via outsourcing according to respondents with more than 82 percent already outsourcing logistics and transportation. More than three quarters of all restaurateurs said that additional visibility into freight costs would improve the supply chain process. And 61 percent reported that logistic efficiency strategies will support the coming year’s business objectives.

Limited Time Offers: Love ‘em and Hate ‘em

Forecasting, according to all respondents, is the bane of the industry’s Limited Time Offers (LTO) practice. Topping the list of problems (77 percent) most often associated with LTOs, demand planning seems to be difficult at best. Whether having product in the store at the right time (reported by 62 percent of executives) or needing to transfer product efficiently between distribution centers (reported by 56 percent), the ability to correctly anticipate supply and demand appears to be constant battle related to LTOs.

“Only 36 percent of chains use a software solution to help with promotion planning and forecasting. Increased predictability in this segment of the revenue equation would equate to both increased sales as well as stronger bottom line results. Because this is a critical pain point for restaurateurs, we anticipate an increase in the demand for this type of software solution in the next 18 – 24 months,” concluded LaVoie.

For more information on the survey or to request a complete copy, please e-mail ckelly@arrowstream.com.