We spent a glorious weekend in Chicago at the National Restaurant Association Show, talking with restaurant operators, executives and others in the industry. Here are a few of the things people are talking about, at least to us.
Nobody knows anything about anything
One operator we spoke with noted that he’d attended the Restaurant Leadership Conference for the first time in April and that “it was dark.” He was speaking about the mood. Not the lighting.
The show this year is happening amid a cloud of uncertainty and weak sales. All but a few publicly traded restaurant chains reported weak earnings. Value offers seem to be increasing.
Tariffs aren’t the concern. Most restaurant chains in the U.S. get their food domestically. Consumer sentiment is.
Much of this has been created by the Trump Administration’s tariff policies, which have created fears of higher prices. Yet those policies seem to change by the day or the week, and while the mood appears to have calmed from those “dark” days in April, there remains considerable uncertainty about what is going to happen, and that might slow activity, at least in the near-term.
There is a real concern about immigration limits
Several people we spoke with expressed fear about immigration policies, and their potential impact on the supply of labor.
It wasn’t all that long ago when restaurant companies couldn’t even keep their doors open because they couldn’t find enough workers. The labor situation is more or less calm now, though it appears that how calm probably depends on the location of the operator’s restaurants.
Growth chains need a supply of workers to continue to open new restaurants. Some operators worry about their ability to find those workers, and keep the ones they have.
Yet a large proportion of the restaurant industry workforce comes from outside the U.S. America, like many other western nations, is not producing enough of its own people. Immigration has always been a competitive strength. Figuring that out over the long-term should be paramount.
For what it is worth, Michelle Korsmo, CEO of the National Restaurant Association, expressed about as much confidence about the prospect of immigration reform as we’ve heard. We don’t know if we would call it full-on confidence. But it was at least more positive than we ever recall. You’ll be able to hear those comments on my podcast this week.
Jack in the Box is making the right moves
The burger chain hired Lance Tucker as CEO earlier this year after opting for a change at the top.
Jack in the Box is largely wiping out much of the previous chief executive’s strategy. The company is selling Del Taco. It is also closing unprofitable restaurants throughout the system, as many as 200.
One operator we spoke with said that was the right move. The chain has too many unprofitable units. While Jack in the Box did close some unprofitable locations under former CEO Darin Harris, it apparently didn’t close enough of them. And it still pushed franchisees saddled with those locations to open more restaurants.
If a location is unprofitable, it could theoretically be turned around with some simple moves. But if it’s been unprofitable for a while, the turnaround effort may be costly, and could prevent the kind of growth the chain needs. While closures do not look good, for legacy brands they are often necessary.
Many restaurant chains these days want growth. And they are frequently impatient to get that growth. Yet getting operators to build new restaurants requires profitability, and that should be the more immediate focus. Even if it means closing some of those weak locations.