The challenges of labor costs and shifting customer tastes are forcing the restaurant industry to find new strategies, from licensing brands for products found on big-box store shelves to using creative ways to cut overhead.
This shift was portrayed as a life-and-death struggle at the UCLA Extension restaurant industry conference last week, “The Fight of Your Life: The Fate of Hospitality Right Here, Right Now.”
Delivery and labor were two of the hot topics at the event, now in its 21st year, which was attended by members from all corners of the industry, including DineEquity Inc. That company’s beleaguered Applebee’s Neighborhood Grill & Bar was the subject of some unfavorable comparisons by several presenters – an added insult because the Glendale corporation was one of the conference’s sponsors.
The rise of the minimum wage, the Affordable Care Act, frivolous lawsuits, and ingredient price increases have pushed chef Suzanne Goin and business partner Carolyn Styne to look for out-of-the-box opportunities, said Goin, who has founded restaurants including Larder, which has several L.A. locations, and Hollywood’s Hungry Cat.
The duo’s Lucques Group in West Hollywood will debut three concepts this summer that the company has developed as part of its 10-year food and beverage contract at the Hollywood Bowl.
“We avoid liability and financial responsibility completely, and we come up with the restaurant concept,” Goin said. “It allows us the magic of cooking at the Hollywood Bowl without the potential liability.”
Also thinking outside the box was Raul Porto, president and owner of Porto’s Bakery and Café. He said the company would begin selling frozen versions of its treats online to reach out-of-state customers.
The Cuban bakery has three L.A.-area stores and just opened an outpost in Buena Park this year. Although it has been around since 1960, when Porto’s parents started selling cakes in their house after moving the family from Cuba to Los Angeles, most of the growth for the business happened in the past 15 years, he said.
Porto’s Bakery annually sells 25 million pieces of its most popular item, a cheese roll priced at 80 cents, he said, adding that the chain has 200 items.
“I wish I could tell you we planned it all along,” Porto said. “It happened organically. Much as I’d love you to know what the secret is, I don’t know it. Hard work, taking care of the customer, things you all do.”
The family’s authenticity as Cubans and the internet also helped, he said, noting that Porto’s earned the No. 1 spot on Yelp’s Top 100 Places to Eat in the United States last year. Over 40 years, the business had only one “down year,” he noted.
Sales through retail partners have helped Beverly Hills’ Fatburger Inc., said Chief Executive Andy Wiederhorn. While the chain’s 100 locations sold 10 million hamburgers last year, it sold 8 million frozen patties courtesy of a deal with Wal-Mart Stores Inc.
The burger chain’s success is part of a trend of restaurants licensing their brands for products, according to Jeff Lotman, chief executive of Santa Monica brand licensing agency Global Icons.
“Historically, restaurants feared going in the space because they thought it would damage their brand or cannibalize sales,” Lotman said.
He said studies have shown that restaurants that license their brand actually get a lift in sales.
Retail sales of restaurant-branded products generated $4.4 billion in 2015, according to Terry Italia, president of Greystar Products Inc., which has helped companies such as Rosemead’s Panda Restaurant Group get their products on grocery store shelves.
About 90 percent of the restaurants doing branded products began in the last five years, Italia said.
Mining Data
Culver City data tracking company Sense360, which made a name for itself gathering restaurant customer data, raised $7 million last month in a Series A round with investors including Upfront Ventures, Qualcomm Ventures, and Firstmark Capital.
The company, whose clients include Chipotle, said it will use the money to hire more engineers and to expand to other industries, including hospitality and auto sales, said co-founder and Chief Executive Eli Portnoy, who expects to double staff size to 24 employees.
Portnoy declined to share revenue or say if the company, founded in 2014, was profitable.
Sense360 uses anonymous data from smartphones to help businesses figure out who their customers are and why they come. The company initially focused on the restaurant industry because of its number of locations, the frequency of its transactions, and the competition.
Portnoy said the information will ultimately help investors make decisions in evaluating a business.
“Investors have more confidence in an acquisition if they can better understand the levers and opportunities of acquiring,” he said.
The latest round added to $2.75 million the company had raised from Firstmark and others.
Staff reporter Caroline Anderson can be reached at [email protected] or 323-556-8329.
