Foodservice Equipment & Restaurant Supply Blog

A news release issued by the National Restaurant Association today detailed efforts by the Depreciation Fairness Coalition (led by the National Restaurant Association), to urge an extension by Congress of the 15-year depreciation schedule for restaurant improvements and new construction, leasehold improvements, and retail improvements that is set to expire at the end of 2009.

The Coalition says that a seamless extension is essential to provide businesses with the certainty they need to undertake capital expenditures, which are critical to fueling economic activity and creating jobs.

History the the 15-Year Depreciation…

A provision in the American Jobs Creation Act of 2004 shortened the depreciation period for qualified improvements to leasehold and restaurant property from 39 to 15 years. The provision applied to improvements that included new HVAC systems or refrigerators, and expired December 31, 2007; the EESA reinstated the allowance for the accelerated depreciation for leasehold and restaurant improvements retroactively from January 1, 2008 until December 31, 2009.

EESA also expanded the depreciation allowance to include improvements to retail buildings and new restaurants for 2009.

Other incentives - Section 179

Also this year, Congress increased the amount that small businesses can write off for capital expenditures to $250,000. Operators can take advantage of these incentives by purchasing new equipment during the 2009 calendar year. The law also maintains the bonus depreciation of 50% for qualifying assets. This bonus is in addition to regular first-year depreciation.

• What is Section 179?
• Lease Benefits
• Savings Calculator

Sample Calculation:

Assume you finance $300,000 worth of business equipment, put it to use in 2009, and take advantage of Section 179. Your TAX SAVINGS could be significant.

1st Year Write Off:

• Section 179 $250,000
  ($250,000 is the maximum write off in 2009)
• 50% Bonus Depreciation $25,000
  (On remaining value: $300,000-$250,000=$50,000×50%=$25,000)
• Normal 1st Year Depreciation $5,000
  (Depreciation calculated at 5 years=20%; $25,000×20%=$5,000)
• Total 1st Year Deduction $280,000
  ($250,000+$25,000+$5,000=$280,000)
• Tax Savings Assuming 35% Bracket $98,000
  ($280,000x.35=$98,000)

1st Year Net Cost After Tax Savings: $202,000

Qualifying Products:

Business owners who acquire equipment including machinery, computers, and other tangible goods, usually prefer a substantial deduction in a single tax year, rather than a little at a time over a number of years. This accelerated deduction is known by its section in the tax code: a Section 179 deduction. The 2009 law extends the amount of qualified property that a business can expense under Section 179 to $250,000.This incentive is for equipment placed in service by December 31, 2009 and is designed for small companies, so the deduction phases out when a business purchases more than $800,000 in one year. (Companies cannot write off more than their taxable income).

View qualifying products. (Please contact your tax advisor to confirm the specific product you are interested in qualifies under the Section 179 prior to purchase.)

I’d like to share a few articles I read this week that address the changing climate of the restaurant industry and changes in the demographics and habits of diners. Each of these pieces touched on a common theme - that restaurants are going to have work harder to be relevant among a changing -and less loyal- demographic; one that is causing the market to become more competitive and more driven than ever by exceptional customer service.

First, a report released this week from the NPD Group ReCount showed the “total number of restaurant locations in the U.S. shrunk during the past year as smaller chains and independents in particular had difficulty weather the economic storm.”

And, coincidentally, a report from Technomic showed that consumers are entertaining at home more often than a year ago. That trend is expected to increase throughout the year.

The Technomic study is a good segue into a Wall Street Journal article that identifies a trend of restaurants opening fewer locations and instead trying harder to improve service. Mystery shopper programs and online surveys abound.

And the last article, from the Orlando Sentinel, shows how dining habits have changed. Older consumers, who represent a large portion of the casual-dining market, have reined in spending as their retirement savings have taken a hit during the recession. Meanwhile, the next generation of diners is less loyal to casual dining and often feel that traditional sit-down restaurants take too long. Moreover, grocery store chains are honing in on restaurants’ territory by offering more pre-packaged and ready-to-eat meals.

It’s easy to see the downside, but what opportunities do these trends present for restaurateurs?

First, as noted in the MediaPost article, it offers an opportunity for restaurants -especially the independent and smaller chains that are struggling the most- to place a greater emphasis on offering box lunches and party platters, complete with off-site preparation.

Second, these trends should tell restaurateurs that there are too many establishments that are almost exactly the same. Operators should be in a mode of constantly improving and reinventing themselves and keeping the concept fresh.

And last, restaurants should place an even greater emphasis on customer service that is second-to-none. I don’t just mean greeting the diners with a “Hi, my name is Kristy and I’ll be your server,” with a side-order of deadpan stare.

What I mean is to provide a customer experience that isn’t artificial and suffocating, but unique and special enough that people will tell their friends about it.

Now more than ever, your success depends on a unique and memorable experience, and depends on taking advantage of new trends and dining styles. Because in THIS economy, if you build it, sometimes they still won’t come.

If you’re looking for a combination cooker that doesn’t take up a lot of space in the kitchen and has a variety of cooking modes and programmable settings, the Cleveland Convotherm combi oven OGS-6.20 and the Hobart boilerless combi oven CE10FD are two popular, fairly new models on the market.

The Hobart CE10FD was a 2009 winner of the National Restaurant Association’s Kitchen Innovation Awards. It offers convection and steam cooking, with a water injection button to easily add water for the convection mode. It also has combi modes to bake, grill/roast, proof, rethermalize, “health fry” and “Delta T” slow cook.

The CE10FD has a four-speed auto reversing fan and digital controls. The unit can be controlled manually or using up to 100 programmable recipe functions.

The optional Bluetooth-enabled barcode scanner and software system links recipes to bar codes on food packages or unique codes generated by the software.

The CE10FD has eight auto-cleaning programs and alerts including flashing door lights and an audible alarm when cooking cycles end. The unit also has an energy efficient “cool to touch” glass door to help save on energy costs.

The CE10FD holds up to twenty 12″x20″ pans or ten 18″x26″ sheet pans and comes with five wire racks.

The CE10FD comes with a one year parts and labor and a two year control board warranty. It is available in electric models only (120V, single phase).

The Cleveland OGS-6.20 also has a variety of cooking modes, including hot air, retherm, “Delta T” slow cook, steam, cook and hold, and a “crisp and tasty” demoisturizing function.

The OGS-6.20 has two auto reversing two-speed fans and digital, manual or programmable controls with up to 250 programmed recipe functions.

A plus with this unit is that it comes with free start-up service from Cleveland.

The cooking compartment is fully insulated for maximum energy savings and has coved corners for easy cleaning. Boilerless units can be cleaned without the use of chemicals.

The OGS-6.20 can hold up to seven 18″x26″ sheet pans or 14 12″x20″x2-1/2″ steamtable pans. It has three wire shelves.

The OGS-6.20 comes with a one year limited warranty and is available in boiler, boilerless and gas and electric models.

Recent economic turmoil is forcing restaurants to get creative.

The saying, “adapt or perish” is true now more than ever: KFC now offers grilled chicken, Pizza Hut has pasta, and Morton’s Steakhouse has a $5 burger.

But another (warmer, fuzzier) way that restaurateurs are combating the recession is by hosting charity events, where part of the proceeds go to the cause.

Indeed, many charities also have struggled as regular givers are forced to cut back.

That’s why many non-profits are teaming up with local restaurants in a joint effort to raise awareness and fill seats at the same time.

Family-owned restaurant MiSaVi frequently hosts private parties, charity auctions, benefits and even organized a mini class reunion in a creative effort to drum up new business.

Last month in Pasadena, more than two dozen restaurants offered lunch and dinner specials all week, and then donated 10% of the profits to a local homeless shelter.

And last night in Attleboro, Mass., restaurants teamed up with a performing arts group in a charity auction to restore a local theater.

Likewise, a group of friends in Ohio were treated to a VIP chef’s dinner at the Vue Restaurant & Lounge in Hudson, a dinner they purchased at - guess what? - a charity auction.

On June 15, Patrick’s Kitchen & Drinks in Zionsville, Ind., will host an event benefiting the American Cancer Society’s Relay for Life. Complete with live local music, artists, magicians and even a few town big-wigs generous enough to paint themselves purple and bus tables for a good cause, owner Patrick Mullen said the event “hopefully will spill out into the parking lot and down the sidewalk.”

My prediction: Expect to see more events like these in the future - where restaurants not only team up with charities, but but even partner with competing restaurants in mutually profitable ventures.

Maybe alliances are the new black?

Maybe Peter Pan had it right - maybe thinking happy thoughts is the key to rising up out of the recession.

Reports this week show that consumer mood has given stocks a boost. According to Chain Leader:

The stock market rose for the first time in a week Tuesday as unexpectedly strong data on consumer confidence sparked optimism that spending by Americans could support a hoped-for economic recovery in the second half of the year.

Citing a bunch of numerical data that means absolutely nil to me, the report went onto describe how consumer sentiment is at it’s highest since September, and investors hope resilient consumers will increase spending in time for the back-to-school season in late summer, helping manufacturers and retailers boost their depleted earnings.

Obviously, there is only so much consumer confidence can do to repair the state of the economy. But for restaurant operators, it could be a sign that banks will begin to ease up on lending as the markets rebound.

In a panel discussion at the recent NRA Show in Chicago, Bernie Siegel, founder and chairman of Siegel Financial Group and NRA Show panelist, said the key to staying afloat is to getting banks to start lending again.

He advised operators to seek financing from smaller, regional banks, as opposed to those with more than three branches.

In addition, the SBA offers a number of online courses aimed at helping small business owners obtain financing and develop a business plan. The SBA announced recently it will guarantee up to 90% of a loan submitted under several of the administration’s small business programs.

And, let’s not forget Obama’s economic stimulus package. Millions of dollars are still up for grabs in federal foodservice equipment grants for K-12 schools.

The government hopes to begin awarding the school foodservice grants beginning June 8. State deadlines to apply are approaching - in just Arkansas, Kentucky and Missouri (whose application deadlines are next week) almost $4 million in grants will be awarded. For more information and to get a state-specific application, CentralRestaurant.com

According to San Francisco Business Examiner, not since 9/11 have restaurants experienced such a rapid decline in customer count, volume and profit.

You’ve probably already heard this advice before: offer specials to attract customers; change out the menu often; analyze costs and take precautions against overspending.

But it’s also important to consider higher-profit menu items that won’t cost you an arm and a leg to prepare.

And studies actually show that comfort foods like hot sandwiches, homemade breads and appetizers are even more popular during tough economic times.

Following are three economical and space-saving countertop cooking appliances that can also help increase profits:

PANINI GRILL

• Grill a variety of different menu items - hot sandwiches, burgers, quesadillas
• Easy to clean with a grill brush or sponge

TOASTER

• Quickly toast English muffins, Texas toast, bagels
• Two-sided toasting for faster cook times

COUNTERTOP FRYER

• Use minimal countertop space to cook a variety of menu items
• Cook chicken fingers, egg rolls and French fries

Also consider a grill brush for easy cleanup; fry baskets to prepare a variety of menu items and a butter spreader to save valuable prep time.

In 2009, the (lousy) economy will be the driving force behind trends we saw emerging in 2008, including energy conservation and sustainability, health and nutrition, and new technologies like online ordering, mobile applications and social networking.

Tough times inspire change

According to a poll conducted by the National Restaurant Association, the issue that had the greatest effect on companies in 2008 was –surprise!- the economy, followed closely by rising food costs, food safety, and nutrition and calorie legislation. So, although these are not new concepts, I think they’ll be back with a vengeance in 2009.

Not just about saving the planet anymore

Foodservice operators are scrambling to improve efficiency and productivity in light of the economic downturn (can we finally just call it a recession?), so I think sustainability and energy conservation will continue to be at the forefront of foodservice trends in 2009; now, not only because it’s the right thing to do, but because our livelihood may depend on it.

According to the Associated Press, restaurants, colleges and other institutions are coming up with new, innovative ways to cut waste. We’re beginning to realize that these practices are good for more than just saving the planet—they’ve also helped improve the reputation and bottom line of many dining establishments.

I think it’s kind of a shame that it took some –but not all!- of us an economic crisis to become interested in “green” business and conservation. But, regardless of the reason, it can only help keep the industry afloat during these tough times.

Healthy eating trend sparks conversation and controversy

In the same way that we’re learning about the importance of conserving energy, we’re realizing that promoting health and nutrition will be crucial to staying prosperous in the foodservice business.

The controversy surrounding menu labeling, and the efforts of restaurants to introduce more healthful menu items, are just two examples of America’s new interest in healthy eating. And a 2008 investigation that found some restaurants had published inaccurate nutrition information, shows just how seriously consumers and federal regulators are taking it.

Niche Web communities maturing

It also shows just how much the Internet, and the developing trend of social networking has affected the industry. Whereas once, an obscure report in a trade journal would be overlooked by just about everyone, most consumers now have the tools to research and share just about any piece of information that’s out there.

And whereas, in 2008, we dabbled in social media, and restaurants began publishing menus online and a few even created the capability for online ordering, in 2009, this is a trend that the lagging economy will force everyone to embrace.

Not only will businesses have a web address, but they will become more conscious of their online presence; they will be more saavy when it comes to search engine optimization and PPC marketing. They will use the Internet to promote special events, catering, promotions and merchandise. They will offer applications for customers to download to their mobile phones. They won’t do it because it’s trendy; they’ll do it because they have to.

According to Food-Management.com, “Web community is important to more than just the ‘geeks’ among us. It also matters in personal and professional group life, and the food service industry — where networking is such a critical activity — is no exception.”

In closing, I think there are tough times ahead, but I think we as an industry are innovative –and perhaps, desperate!- enough to continue to develop new ways to prosper.

The economy is forcing us to save money by eliminating waste and conserving energy; the obesity epidemic is helping us realize that we can serve healthy food and that our customers will appreciate it; and the Internet is allowing us to do it together, using our growing network of online customers, colleagues and friends.

I think 2009 is going to be a great year for foodservice.

Here’s a bit of research I’ve been doing on marketing during tough economic times.

1. Trim the fat

Instead of focusing on how bad things are, try to identify opportunities unique to periods of economic recession. Let’s face it– we rarely make changes when things are going well. According to an article from Experience Thread, “during good times, fundamental problems are frequently ignored, like outdated products, services and technologies.”

It’s only when we are forced to scrutinize every expenditure that some of these redundancies and wasteful practices come to light. Look at where your money is being spent. What about your energy usage?

2. Emphasizing value and networking

The majority of articles I’ve come across focus on ways to cut spending without sacrificing quality; in other words, saving money in ways your customers won’t notice!

Don’t discount! Chain Leader firmly states.

Offering discounts boosts guest counts but also pressures margins and weakens image, the article said. Instead, sell gift card at 3rd party retailers. Host tastings or other special events that will offer customers more opportunities to come visit your establishment.

3. The Club Culture

According to Chain Leader, the loyalty program, or club, is a new trend restaurants are embracing. An email or loyalty program makes it easier to build a network with existing customers and gives them one more reason to come to you.

An article from DM News described efforts by Ted’s Montana Grill to use e-mail and social media to increase brand engagement and customer loyalty.

Their Thanksgiving e-mail invites people to sign up for a Facebook page where they can take surveys about how they like the restaurant. The Facebook page has different content than the e-mail and also encourages people to sign up to receive the e-mails. Both ends work to acquire and retain customers.

It’s a great way to talk to current customers and keep them involved with the restaurant and it’s a good targeted approach to reach guests and to build your list.

Ted’s also sends triggered e-mails for birthdays and anniversaries, as well as monthly newsletters about new menu items, gift cards, new retail items, promotions and events at their 57 restaurants across 19 states.

4. Revamp the menu

According to Nation’s Restaurant News, restaurants introduced a record number of new menu items during October, 2008.

According to a Technomic report, chain restaurants introduced a record-high number of limited-time offers and other menu additions this October as sluggish traffic prompted them to try new customer lures.

Other examples include marketing specialty, limited-time and holiday items for added variety.

5. Know thy customer

Last, and maybe most importantly, restaurateurs must know their customers.

MSNBC offered several tips for conducting customer surveys in order to understand your customers’ interest, goals, priorities and desires, and thus, create “laser-focused marketing that speaks directly to them and solves their specific problems.”