Seeking Alpha

RestaurantResearch's  Instablog

RestaurantResearch
Send Message
Phil Mangieri is a Partner at Restaurant Research LLC - a research firm which provides clients with valuable restaurant store level benchmarking data for $1B+ chains. RR data, which is obtained through our extensive network of restaurant industry players, is used by clients to maximize unit... More
My company:
Restaurant Research LLC
View RestaurantResearch's Instablogs on:
  • California Wage Implications For Industry

    ChainRestaurantData.com

    (click to enlarge)

    California Wage Implications for Industry

    • Minimum wage requirements are rising in California which leads the nation with a 9.1% concentration of $1B+ chain units (with Texas close behind as #2 state).
    • AB 10 will raise the minimum wage in 2 separate one-dollar increments: from $8 per hour today to $9 per hour, effective July 1, 2014, and from $9 per hour to $10 per hour, effective Jan. 1, 2016.
    • From start to finish, this represents a 25% increase in the minimum wage over the next couple of years.
    • Chains with a heavy unit concentration in California are required to lead the industry with innovations to react to a new economic environment that is likely to impact the entire country.
    • A hypothetical unit in California with $1MM AUV and $300k in labor costs (say $250k in hourly wages) today can expect an additional $62.5k in staff expenses.
    • This could be offset by an 8.9% cumulative price increase (or 4.45% per year for 2 years with constant traffic) on top of any price increases needed to cover rising healthcare and commodity costs.
    • More realistically, it seems that the industry must answer with entrepreneurial solutions which balance pricing/mix initiatives, traffic growth and added efficiencies. Fortunately, the industry's top-line will benefit somewhat in California from higher disposable income for the younger demo (a core QSR target market). In any case, there seems to be no escaping that economic forces require the restaurant industry to rapidly move-up a technology curve in order to leverage things like automation and big data. Maybe the industry would do well to search in Silicon Valley for answers to rising California wages...

    (click to enlarge)

    Source: Restaurant Research State Unit Database

    RR Clients

    Includes major lenders, investors, major US restaurant chains, operators and industry consultants. Please check www.ChainRestaurantData.com for a partial client list and customer testimonials.

    More About Us

    Restaurant Research LLC leverages an extensive network of industry players as part of its annual Concept Benchmark Analysis due diligence process for 22 large US restaurant chains. Also, RR tracks store level data for all major chains with system-wide sales in excess of $1B across all major restaurant segments in order to produce 11 key Industry Data Topic reports.

    Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research's analyses and opinions are not a guarantee of the future performance of any company or individual franchisee. RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2013 Restaurant Research® LLC. All rights reserved.

    Nov 26 1:42 PM | Link | Comment!
  • Rising Healthcare Insurance Premiums Are Double-Edged Sword

    www.ChainRestaurantData.com

    (click to enlarge)

    Rising Healthcare Insurance Premiums are Double-Edged Sword

    • Much attention has been spent considering how the implementation of the Affordable Care Act (ACA) is poised to increase labor costs for operators.
    • Perhaps less attention has been spent analyzing the other side of this equation - i.e. how rising premiums could diminish disposable income, and, in turn, spending on restaurant visits.
    • According to government data, households during 2013 are forecast to spend $297B on private health insurance premiums (including contributions to employer-sponsored health insurance and health insurance purchased through Exchanges).
    • While it is impossible to forecast exactly how much the ACA will increase health insurance premiums, we have seen published forecasts from reliable sources indicating the possibility of +30% median increases in premiums for the young and old (presumably the cost of covering those with pre-existing conditions while also providing extended benefits).
    • Further, the point of the ACA is to expand the coverage base by requiring those that do not currently spend on health insurance (the young and healthy that are not presently included in the $297B number above) to sign-up. Notably, the young and healthy also tend to represent the core QSR target market.
    • We will not try to forecast exactly how much actual spending on health insurance premiums will increase because there are too many moving parts (for instance, the government plans to subsidize some of this spending increase for the lower income).
    • All-the-same, it seems reasonable to consider that a possible 10% increase in health insurance premiums (whenever the ACA actually becomes effective) would mean -$30B less in ongoing aggregate disposable income, a 20% increase would mean -$60B, and 30% would mean $90B... As a point of comparison, we have read published estimates that the return of the payroll tax to normal levels has cost consumers $125B this year. Our conclusion? Rising insurance premiums could be bad for consumer health…

    (click to enlarge)

    Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

    RR Clients

    Includes major lenders, investors, major US restaurant chains, operators and industry consultants. Please check www.ChainRestaurantData.com for a partial client list and customer testimonials.

    More About Us

    Restaurant Research LLC leverages an extensive network of industry players as part of its annual Concept Benchmark Analysis due diligence process for 22 large US restaurant chains. Also, RR tracks store level data for all major chains with system-wide sales in excess of $1B across all major restaurant segments in order to produce 11 key Industry Data Topic reports.

    Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research's analyses and opinions are not a guarantee of the future performance of any company or individual franchisee. RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2013 Restaurant Research® LLC. All rights reserved.

    Nov 19 1:46 PM | Link | Comment!
  • Chain Restaurant Margins Vs. Commodity Retailers

    www.ChainRestaurantData.com

    Think Piece Library

    (click to enlarge)

    Chain Restaurant Margins vs. Commodity Retailers

    • As pricing power goes to companies, and industries, perceived by their customers as providing more value, COGs represents a good proxy of perceived value.
    • Warehouse club gross margins, which have generally trended upward as consumers chase value, are steadily closing the margin gap with grocery stores. Not surprisingly, gas station margins have trended steadily lower given sharp gas price increases which has prompted consumers to reduce consumption.
    • $1B+ restaurant chain gross margins (total sales - COGs) declined by 1% from a high of 71% in 2009 (when commodity costs skyrocketed) to a low of 70% in 2011. However, we can see from the right chart that large restaurant chains have held their own in terms of pricing power compared to grocery stores and gas stations when comparing the percent change in gross margin from 2008-2011.
    • In conclusion, we believe that large chain restaurants capable of innovating and improving products and services enjoy greater pricing power relative to retailers of pure commodity goods which must resort to pure price competition during difficult economic times.

    (click to enlarge)

    (click to enlarge)

    Source: RR estimates & US Census (latest available data)

    RR Clients

    Includes major lenders, investors, major US restaurant chains, operators and industry consultants. Please check www.ChainRestaurantData.com for a partial client list and customer testimonials.

    More About Us

    Restaurant Research LLC leverages an extensive network of industry players as part of its annual Concept Benchmark Analysis due diligence process for 22 large US restaurant chains. Also, RR tracks store level data for all major chains with system-wide sales in excess of $1B across all major restaurant segments in order to produce 11 key Industry Data Topic reports.

    Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research's analyses and opinions are not a guarantee of the future performance of any company or individual franchisee. RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2013 Restaurant Research® LLC. All rights reserved.

    Nov 12 3:44 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.