Our friend and franchise expert Ed Teixeira interviews Peter R. Taffae, MLIS, CFE and Managing Director Executive Perils, Inc. on the topic of Cyber Security Claims and Sexual Harassment claim that all employers need to protect themselves against.This important topic has faded from the mainstream ews media but remains a real problem that employers need to focus on…
Franchises Need To Protect Themselves From Increased Sexual Harassment And Cyber Security Claims
After hitting a two-decade low in 2017, sexual harassment complaints to the Equal Employment Opportunity Commission increased by more than 12 percent from last year. The federal agency has also been aggressive with litigation this year, filing 41 sexual harassment lawsuits so far, up from 33 in 2017. At the same time, cyber-crimes which involve the theft of personal information has cost some companies millions of dollars in damages to its reputation and from monetary claims.
Employer Liability Claims Increase
Over the course of this year, stories of sexual harassment have dominated the headlines. In what USA Today dubbed the “Weinstein Effect,” various sized companies have witnessed employees take part in the #Me To movement. This increased focus on sexual harassment has created a surge in protests, discrimination lawsuits, and government investigations, with almost no industry being immune, including a recent demonstration against McDonald’s franchise locations. Regardless of whether a sexual harassment allegation has merit, these claims can cause a company significant damage to its brand and sales. Seven in 10 human resource professionals said they believe sexual harassment complaints at their workplaces will likely be “higher” or “much higher” in 2018 compared to previous years.
A poll by the Human Resource Certification Institute found that “63 percent of HR professionals said that acts of sexual harassment “occasionally” or “sometimes” occur in their workplaces and 30 percent said that such acts “frequently” occur. Only seven percent said that such acts “almost never” or “never” occur.” The trend toward more sexual harassment lawsuits appears to continue as the EEOC increases efforts to crack down on sexual harassment. The EEOC has launched online access for employees to file harassment charges from their homes, with the EEOC.
Employment-related risks can represent the most damaging exposure to a franchiser. Claims involving sexual harassment, wrongful termination or discrimination, from a current or former employee can potentially cause irreparable damage to a franchise brand and reputation resulting in significant financial cost.
To gain more insight into employer liability and especially sexual harassment claims I spoke with Peter R. Taffae, MLIS, CFE and Managing Director Executive Perils, Inc. In 2014 they introduced a management liability policy, FranchisorSuite®, designed for the unique needs of Franchisors.
Q. How extensive are employer liability claims?
A. Companies of all sizes and industries have been affected by a surge in employment-related litigation and rising legal damage awards.
Q. What can be done to mitigate those risks?
A. Be sure that franchisers, franchisees and their employees are properly trained to understand the risks of sexual harassment, unlawful terminations, and discrimination claims. Have the proper procedures and protocols in place and have financial protection.
Q.What does the future hold for sexual harassment claims?
A. The threshold has been raised for what is appropriate in the workplace. This means that the expectation for proper employment practices is higher. Some experts believe that it will take 10 to 15 years to reverse the trend as current middle age retirees are replaced by today’s younger generation.
Q. Any other threats that franchises face?
A. One area related to the franchise industry that doesn’t receive a lot of coverage is cybersecurity. Every state has primary notification laws, which that when there is a breach of a customer’s personal data, the company or franchiser must notify every customer. In addition, there is no statute of limitations regarding these crimes. For example, if I purchased a meal at a franchise location 10 years ago and their system was hacked, and my personal information was stolen, that franchise is liable.
Franchise restaurants process so many credit cards and have the extensive point-of-sale equipment, that they are vulnerable to data theft. Websites, Wi-Fi and digital kiosks represent additional threats. Any franchise which does any of the following is at risk for a cyber-attack; Accepts credit cards, handles or views private information of employees or customers electronically, has Wi-Fi or conducts a portion of their business online.
It’s important that each component of the franchise industry be prepared to protect themselves from the threat of employer liability and cybersecurity claims.
About the Author: Ed Teixeira is Chief Operating Officer of Franchise Grade and was the founder and President of FranchiseKnowHow, L.L.C. a franchise consulting firm. Ed has over 35 years’ experience as a Senior Executive for franchisors in the retail, healthcare, manufacturing and software industries and was also a franchisee. Ed has consulted clients to franchise their existing business and those seeking strategic solutions to operational, marketing and franchise relations issues. He has transacted international licensing in Europe, Asia, and South America. Ed is the author of Franchising from the Inside Out and The Franchise Buyers Manual and has spoken at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. He has conducted seminars, written numerous articles on the subject of franchising and has been interviewed on TV and radio and has testified as an expert witness on franchising. He is a franchise valuation expert by the Business Brokerage Press. Ed can be contacted at [email protected]
Today the changing landscape in the restaurant business is not only a food driven event. It’s also being moved by all the other elements connected to the overall restaurant experience, such as convenience, payment method, dine-in options and delivery options. The way Baby Boomers steered America into fast food Drive Thru lanes, Millenials are swiping, tapping, and clicking the food service industry into a mash-up of digital convenience and real life communal eating experiences that are now addressed by the Virtual Food Hall.
An Innovation In Urban Dining – A Closer Look At The Virtual Food Hall By Gary Occhiogrosso
Originally published in Forbes.com
As a New Yorker, I’ve come to realize we are privy to numerous changes in the restaurant and franchise business long before people in many other parts of the country. One such change is the innovation of the “Virtual Food Hall”. With the advent of online ordering, third party order and delivery platforms such as Grub Hub, Seamless and Door Dash as well as the need to optimize occupancy cost in cities like New York, the Virtual Food Hall is taking a position in the already vigorous fight for the dining dollar.
I had the pleasure of interviewing Brian Berger on the topic of Virtual Food Halls. Mr. Berger is a founding partner of New York City based JBH Advisory, a firm that supports restaurateurs and retail brand owners with concept development, start-up planning, processes, and training. Mr. Berger and his team launched the first Virtual Food Hall in New York, Sous Vide Kitchen in 2017. I asked Brian to give us his insights into the Virtual Food Hall business model. He was gracious enough to explain the concept and answer my questions.
What is a Sous Vide Kitchen – Virtual Food Hall?
We coined the term Virtual Food Hall to represent the style of service and ordering offered at Sous Vide Kitchen. In a Virtual Food Hall guests order from our multiple brands using our self-order kiosk, pay in one single transaction, and receive their meal all in less than six minutes.
How is a Virtual Food Hall different from a Urban Food Hall or Food Court?
A traditional urban food hall has large open spaces where guests can enjoy a variety of cuisines in a hip atmosphere. Traditional urban food halls have a long history of success in Europe and metropolitan areas, with a recent explosion in U.S. cities. Traditional food halls have been gaining momentum for years. They present advantages and disadvantages for both guests and operators. On the plus side, guests can try multiple restaurants in one location, and operators can reduce their overhead cost by utilizing the shared physical infrastructure. However, this experience can be challenging for those looking to try multiple options or order and pay for a group with different tastes, as that would require each guest to wait in a separate line, pay and receive their meal at a different time. The Traditional Food Hall model is not ideal for groups wishing to dine together. We wanted to create an experience that would allow guests a more convenient way to enjoy items from multiple concepts and dine with others.
Another term I hear is “Ghost Kitchen.” What is a Ghost Kitchen, and how are they different from Virtual Food Halls?
A Ghost Kitchen is a foodservice operation meant for delivery only. In other words, these businesses have no dining room or storefront. In many cases, you cannot even carry out from these businesses. One major disadvantage from a guest perspective is that they do not have any visibility as to the location or condition of the restaurant. While we enjoy the operational efficiencies of a ghost kitchen, we offer guests the ability to come to the food hall, if they choose. We offer diners the ability to order delivery, or pick up, or enjoy their meal in a spacious seating area where guests can relax and enjoy.
When and why did you first come up with the idea of a Virtual Food Hall ?
We launched our first fast-casual restaurant, BONMi (Vietnamese Inspired Baguettes & Bowls), in 2011 in Washington, DC. Our goal was to create an innovative model for production which centered on the Sous Vide cooking method to overcome the increasing challenges the industry faces (labor, food safety, consistency, capital expenses) and produce consistent, healthy, safe and delicious food. We tested the concept in various formats: standalone restaurant, campuses/food court, high-end supermarkets, and food trucks. We learned from these tests and evolved our processes to cement operations prior to scaling. Our eight years of fast-casual operations experience blended with our advisory firm’s client work made us acutely aware of several trends that were developing. The first was an increased awareness of the origin of food, food safety, and reduction of waste. Through the utilization of proteins prepared using the sous vide method of cooking, we can offer our guests the safest food possible while maintaining the nutritional integrity of each item. The use of ready to serve pre-cut vegetables allows us to operate in a zero-waste environment since we obtain 100% yield on every product that we purchase and allow our produce vendor to repurpose the parts of the product that we may not utilize.
Can the Virtual Food Hall compete in the fast-growing Third-Party Delivery business?
Yes. We noticed an increase in meals consumed outside of the restaurant. In years past, delivery was a small arm of the business typically accounting for no more than ten percent of total sales; however, in recent years, the demand to enjoy meals outside of the restaurant has continued to grow. Acting as the sales arm of a brand, companies like Seamless/GrubHub, Meal Pal, Ritual, Fooda, Cater 2 Me, and Zero Cater continue to change the way guests order and receive meals. The expectation is that guests will receive the same quality of food and level of service that one would receive in the restaurant; as a result we have evolved our menus, processes, and strategies to ensure that we serve our meals in a variety of platforms; In-Store, Delivery, Catering, Off-Site Catering/Pop-ups, and third party pick up.
When we opened our BONMi in New York in April of 2017, we selected a larger sized store (2,500 Square Feet). Our strategy was based on our ability to utilize the store for testing our delivery only, virtual concepts and provide a New York City hub for catering, pop-ups, and delivery. With the success of our operational model, combined with the realization that a high proportion of guests dollars are spent outside of the brick and mortar store, we began to develop and launch additional concepts through third-party delivery services and catering, one step at a time. The first concept operating out of the BONMi kitchen is Pulled & Chopped BBQ. This concept immediately received excellent reviews, and we were able to increase sales without adding any additional overhead expenses. After seeing this success, we continued to create concepts and offer them through delivery and catering channels. The next concept to launch was SVK Greens & Grains followed by Mediterranean Pure Foods, then Eso Latin. At this point, we were operating four delivery, only concepts out of the kitchen, while the storefront remained BONMi.
Why did you marry the Virtual Food Hall idea to the Ghost Kitchen Concept?
We knew we had to find a way to offer the same variety of concepts to our guests in the store while maintaining the efficient production model that we were operating for our delivery-only concepts. That’s where the idea to utilize the self-order kiosk came into play. We determined that the growing popularity of this trend would be the best way to showcase our brands and allow our guests to order from multiple concepts easily. We had each ingredient and all the signature dishes photographed to present a glorious high-resolution display. Guests are now able to browse through the offerings within each menu easily, see the allergen and ingredients of each dish, put everything in one cart, pay at the kiosk and receive a text when their order is completed. Since opening our food hall, we have continued to increase our collection of brands and have added Vindy Indian Inspired Eats to our current offering. We have other concepts currently in development and can see this model featuring eight to ten various menus.
The concept could certainly live online only – however, our brick and mortar food halls are a great space where guests can enjoy their meal, socialize, or work remotely.
What are the advantages to the guest using a Virtual Food Hall?
Guests love having many options at their fingertips. Order, pay and enjoy the experience. The ability to easily identify ingredients or allergens within each dish is a significant advantage. With thousands of possible combinations, guests are inclined to visit multiple times per week without the risk of menu fatigue. We have noticed a bit of a trend with our SVK Greens and Grains as our highest volume concept at the beginning of the week and Pulled & Chopped BBQ as the most popular concept at the week’s end. Since there is something for everyone to enjoy, and multiple dietary constraints are satisfied, it is an excellent option for groups with a variety of preferences. Utilizing the sous vide method of cooking as the thread to bind our concepts together gives guests the peace of mind that items that we serve within our food hall are carefully selected contain clean ingredients with minimal processing.
For some guests, the idea of ordering through a kiosk without any human interaction can be intimidating. We eliminate that fear by staffing our food hall with a “kiosk concierge,” one employee who helps to oversee the dining room and as well as assist guest who may be apprehensive through their ordering process. We are in the business of creating repeat guests, so we find that spending a few moments with a guest the first time they come in will give them the confidence to return and order without assistance again and again. We consider Sous Vide Kitchen to be High Tech & High Touch.
What are the advantages and disadvantages to the Operator?
From an operator’s perspective, there are only advantages:
* Reduction of Labor
Operators love serving several concepts within one shared production line, utilizing the same staffing levels that they would for one brand. Through our menu engineering and production processes, we have created an innovative system, which allows less staff to produce a consistent, high-quality menu. Additionally, we do not need highly skilled culinarians – our process enables us to hire based on hospitality attitude.
* Platform Flexibility
We can accommodate what the market is requesting; food when you want it, how you want it, delivered through a variety of platforms (in-store, delivery, pop-ups, catering & delivery). Retail concepts can easily be rotated with minimal challenges.
* Lower Cost of Entry
We do not require ventilation and have minimal equipment requirements, making it a perfect concept for host environments such as transportation hubs, business & industry, campuses, healthcare facilities, and more. Costs can vary greatly depending on the area of the country, and the size of the food hall; however, we have found that buildout costs are fifty percent less than that of a traditional restaurant. Our concept’s space requirements are as small as 300 Square Feet and may go to over 2,500 Square Feet.
Are Virtual Food Halls unique to urban centers with a concentration of daytime workers?
In general, Fast Casual restaurants do peak business during lunch hours; however, we do see guests picking up meals on their way home from work. Since our menu offering is very diverse, including a half chicken, ribs, and salmon, there is a great demand for delivery in the evening as well. There is potential to increase the take-out offerings and allow guests the option to pick up items to heat at home, allowing for the “semi home-cooked” experience. We are confident that this concept will thrive in any market from the inner city to suburban markets where other fast-casual options may be limited.
Do Virtual Food Halls offer delivery? If so, do Operators handle that on their own or use a third-party ordering platform?
Currently, we see that approximately sixty percent of our sales are consumed outside of the restaurant, including take-out, delivery, and catering. Our delivery method is a bit of a hybrid model as we do employ a team of delivery personnel, but also utilize delivery from third-party vendors to help during times of peak volume. We use third-party ordering platforms as the marketing arm of our brands; they help to introduce our concepts to diners – which we then will convert to repeat guests who order directly through our channels.
Where do you see this going in the next five years, and why?
We see this model as the future of foodservice as it addresses every major challenge facing the restaurant business, including rising wage costs, concern about food safety, the demand for customizable meals that cater to a variety of eating preferences, as well as the ability to serve guests through a variety of channels including dine-in, delivery, catering, or pick up.
External factors such as rising minimum wage and increased paid sick and vacation time for hourly employees cause us to believe that the traditional restaurant model is not sustainable. Rising wage costs will continue to force restaurants to make difficult decisions regarding staffing; in many cases, a reduction in staffing can lead to a decrease in quality. However, as a result of the production model developed by Sous Vide Kitchen, we can produce consistent quality and deliver guests the offering of six restaurants with the staff that would typically serve one brand. Our model revolutionizes operations to meet modern demands. The precision temperature control of sous-vide cooking means it safer than traditional cooking methods, as we can bring food to precise temperatures while maintaining the nutritional integrity of each item.
Our self-order kiosk allows guest the ability to select from a signature dish or select each ingredient to building their bowl, allowing for the ultimate customizable experience. Our streamlined and inexpensive buildout makes this an ideal offering not only as a standalone food hall but especially desirable within a host environment where space may be limited. The quality and flexibility of our offerings offer limitless opportunities for growth within stadiums, arenas, office buildings, higher education, and healthcare facilities.
To summarize my interview with Brian and after touring Sous Vide Kitchen; my takeaway is that the Virtual Food Hall model delivers many unique benefits not found in a brick and mortar restaurant, traditional urban food halls, or simple ghost kitchens. Virtual Food Halls enhance the guest experience with more choice, accuracy of ordering, speed of service and a dine -in option. For the restaurant operator it translates to lower buildout costs, more channels for distribution, and the ability to quickly address lagging menu items. If a particular concept or menu isn’t producing enough sales and profits, the operator can change the menu and pivot concepts. By creating a single kitchen that operates multiple concepts and sharing ingredients, restaurant operators can quickly benefit from economies of scale from one single location.
AN INTERVIEW WITH Mr. Brian Berger
Mr. Berger is a founding partner of JBH. He is an industry expert with extensive knowledge in food service management, healthcare support services, concept development, contractual agreements and negotiations, operational and financial analysis.
McDonald’s is the sales standout, and they are in a class by themselves, providing value and upgraded quality to a population hungry for price/value. Taco Bell is also an exception, for similar reasons. Even Domino’s and Wingstop, who have put up great numbers in recent years, are reporting only modest gains at the moment.
RESTAURANT MAIN STREET – WHAT’S HAPPENING ON THE GROUND?? By Roger Lipton
We have long believed that the restaurant industry provides an excellent leading indicator as to consumer sentiment. It is much easier to adjust dining habits, every day, than to plan and spend for large ticket items.
Quite a few restaurant companies have reported their quarterly results, ending 6/30. The sales and traffic trends, collectively, indicate that not much has changed in terms of consumer optimism. The table below provides the reported results for comp sales, including a breakdown, mostly provided by company operated locations, relative to traffic, pricing and menu mix. Also shown on the table are the outlook, when provided, relative to commodity and labor expense.
No Meaningful Improvement
The company operators show, with just a couple of important exceptions (Chipotle and Starbucks) modest comp gains, more than offset by pricing and menu mix, so traffic is negative almost everywhere. The only other outlier is Diversified Restaurant Holdings, franchised operator of the Buffalo Wild Wings system, going against very easy comparisons. Most importantly, In terms of third quarter to date, virtually no one is guiding toward a meaningful improvement. In our view, Chipotle and Starbucks (with the strongest trends) can be viewed as “special situations”. Chipotle is bouncing back from their multi-year troubles and doing a great job with mobile app/delivery, and Starbucks is the premier worldwide brand selling an addictive product by way of an extraordinary employee culture and great technology.
The franchising companies that have reported are showing a similar trend, modest sales gains in almost all cases. The franchising companies steer away from reporting traffic, but it is safe to assume that pricing and sales mix trends are similar, so traffic is no doubt down. McDonald’s is the sales standout, and they are in a class by themselves, providing value and upgraded quality to a population hungry for price/value. Taco Bell is also an exception, for similar reasons. Even Domino’s and Wingstop, who have put up great numbers in recent years, are reporting only modest gains at the moment.
Delivery On The Rise
It’s important to note that, within the sales mix, delivery, curbside and in-store pickup, are rapidly increasing portions of the revenue mix, so dine-in traffic is down materially more than the comps that are reported. We haven’t heard any restaurant company bemoan, though they could, the fact that their physical plants are only fully utilized a few evenings per week.
In addition to the sales and traffic trends, we are equally interested in the commentary relative to cost expectations, namely commodities and labor. Expectations are mostly higher for commodity costs, dramatically so for chicken wing prices. It is clear that the benefit a year or so ago from lower commodity prices is in the rear view mirror, and higher cost of goods is likely. Labor expense, predictably, is expected to move ever higher.
The beat goes on. With prime costs, as well as other expenses such as insurance, common area charges, utilities, etc. also increasing, it takes more than two or three points of comps to improve margins. A handful of the larger premier operators such as Starbucks, McDonald’s, Darden, Domino’s and Wingstop continue to provide better the best results. However, even among these “best of breed” operators, it’s a battle for market share and an increasing challenge to generate a worthwhile return on incremental investment.
About Roger Lipton
Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .
Our guest contributor, James A. Meaney shares his insights on why franchisors should seek mediation when settling disputes with franchisees. saving costly legal fees not only benefits both parties but often times leads to a better outcome.
Why I Love Mediation and You Should Too! By James A. Meaney – Franchise Attorney
The majority of franchise agreements that I come across or create these days have a mediation clause. For those of you who have no clue what I’m talking about, when a dispute arises, the disagreeing parties have only a few options: do nothing, file a lawsuit, go to arbitration, or sit down and try to work it out a/k/a MEDIATION.
Avoid spending a fortune
This is not the first time I have addressed this important topic and you can find earlier posts here. And, full disclosure: I serve as a mediator when selected by the parties or their counsel. But, here is why I love mediation and you should too! To help your clients or your company resolve disputes before spending a fortune.
Litigation and arbitration can burn up a very large sum of money. Remember it is a battle. The courtroom or the arbitration room is the battleground and counsel are the warriors. Let’s not get too carried away here but some of these disputes run from tens of thousands of dollars to over hundreds of thousands of dollars.
Mediation is a process that allows parties to work together, usually with the help of a trained and experienced mediator (often a lawyer but not universally), to settle a dispute before an action is filed and sometimes after. Mediators come in all types (ex. commercial law, domestic disputes) and styles (ex. objective neutrals, aggressive, evaluative). But the hallmark of an effective mediator is keeping the parties engaged, keeping them talking and negotiating. Also, an astute mediator may offer “creative” solutions that the parties did not consider.
So counsel, if you have a long-standing client, wouldn’t you want to save them time and money? Wouldn’t it be the best advice you can provide under the circumstance? Besides, litigation or arbitration is always on the table but why not think of it as a last resort? Company officials or franchisees, not only could you save those precious funds, but you may find a solution that preserves the relationship. The earlier you seek resolution, the more latitude you have.
Of course some disputes cannot be resolved through mediation but, even when there is a small chance of resolution, it seems like a wise investment. And, as any commercial lawyer knows, whether a litigator or transactional lawyer, serving our clients’ needs is our top priority.
About The Author:
James A. Meaney is an Attorney on the Zaino Law Team. Zaino Law Group, LPA, in Dublin, Ohio, serves clients in Columbus, Dayton, Springfield and communities throughout Central Ohio. Our lawyers offer a unique blend of practical advice and a thorough understanding of legal issues. We recognize the importance of being part of a total planning team. Our attorneys consult and work closely with your accountant, your financial planner, your insurance professional and other attorneys in order to provide comprehensive legal counsel.
As a long-time restaurateur primarily in the franchised, fast-casual business, I understand the need to outpace and add more value & service to customers. Our contributing writer today, Roger Lipton highlights and adds his insights to what he calls the “The Last Mile” in the restaurant business. As more and more operators are fighting for the same dollar, speed, value, and convenience become the point of differentiation for many restaurant brands. Enjoy Roger’s take on ‘Delivery Land.”
Another potential problem, as pointed out by a group of restaurant operators in Los Angeles, is that delivery agents are not trained in food handling and temperature maintenance standards. One LA-based operator said, “If a customer gets hepatitis, they are going to sue the restaurant.” Another stomach-turning pitfall, as described, is the hungry delivery person that helps themselves to part of the milkshake or a couple of the ribs.
DELIVERY, THE BIG THING IN RESTAURANT LAND – THIS IS WHAT “THE LAST MILE” LOOKS LIKE.
Restaurant companies are unanimous in their pursuit of delivery as one of the huge opportunities to increase the productivity of their physical plants. Too much square footage continues to be a burden on productivity, especially when it takes labor at $15.00 (ex the tip credit) per hour to service the space. It’s also clear by this time that control over the “last mile” is of major concern to restaurant operators. Not only is the reputation of The Brand at stake, but valuable information relative to the customers is in the hands of the third-party agent, potentially not as useful to the food provider.
A reality of this new source of business is that margins for the restaurant company will be affected since 15-30% of the ticket is paid to the delivery agent. While some argue that a large portion of the delivery dollars is “incremental,” it stands to reason that a customer who receives the product at home on Wednesday night is less likely to visit that restaurant on Thursday or Friday. On the hopeful side: delivery companies are already competing for market share, negotiating their fees lower, therefore improving the remaining margin for the restaurant. Overall, this is a portion of dining dollars that is very much in a state of flux.
ON THE GROUND IN DELIVERY LAND
Two articles caught our eye in the last day or so, in the New York Times and the New York Post, describing the reality of “the last mile,” and it’s not pretty.
The Post described how a delivery worker (from DoorDash) punched a pizza store employee in the head because the order wasn’t ready for pickup. We are not trying to focus on DoorDash (DD) in particular, because this could happen with any third party agent, but another DD employee posted a negative review on Yelp because the food “trash” wasn’t ready on time. Another DD hire made a scene after getting a parking ticket while waiting for a delivery pickup. Since delivery agents, including DD, UberEats, Postmates, and others, get paid primarily for completed deliveries and little, if anything, for waiting time, they are obviously very sensitive to the availability of the order. At the same time, restaurant employees, including one cited at (well run) Cheesecake Factory, are not necessarily treating the delivery person with great courtesy.
TRAINED TO DELIVER FOOD BUT NOT HOW TO “HANDLE” IT
Another potential problem, as pointed out by a group of restaurant operators in Los Angeles, is that delivery agents are not trained in food handling and temperature maintenance standards. One LA-based operator said, “If a customer gets hepatitis, they are going to sue the restaurant.” Another stomach turning pitfall, as described, is the hungry delivery person that helps themself to part of the milkshake or a couple of the ribs. All of this can be considered “anecdotal,” but the proper selection and training for third party agents are no doubt far from optimal at this early point in the evolution of the food delivery industry. Parenthetically, stock investors might well keep all of this in mind before they pay a considerable valuation for DoorDash when it comes public.
The New York Times described the experience of a bicycle delivery person in Manhattan, obviously a unique market, but still indicative of urban issues. The bicycle person, working for UberEats as well as Postmates, had continuous decisions on the run to make, all while anticipating traffic patterns and potential delays. Should he pick up several orders at a Mexican restaurant five blocks away for UberEats, or divert to two orders for Postmates at Shake Shack that was a little closer. As he said, “I had to decide: take on three orders at once and risk falling behind? Stick with UberEats, which was running a $10 bonus for doing six deliveries by 1:30, or try for a Postmates bonus? Information was limited. The UberEats app doesn’t tell you where the delivery is going until you pick it up. I could not know what the Postmates job would pay. The Postmates clock ticked down – you have seconds to accept or decline an order. I was threading my way around lurching honking trucks and oblivious texting pedestrians and watching for cops and looking down at the phone mounted on my handlebars and calculating delivery times.”
The article goes on to describe the intense competition among companies like Grubhub Seamless, UberEats, Caviar, DoorDash and Postmates, and delivery agents are often representing more than one company. The restaurants have been forced into the e-commerce business, outsourcing their product to the hands of a fleet of freelance personnel who may or may not appropriately represent the restaurant Brand. Especially as competition has increased, the net hourly pay for delivery agents has become closer to $10/hour than $20, sometimes even less than $10. We can only imagine the professional skills, or lack thereof, of a person that is going to subject themselves to this kind of pressure for that kind of wage. There is a myriad of other hurdles that delivery agents in urban areas will have to deal with, but that will vary by venue. We can say with assurance; however, just as above described in suburbia, there is enormous work to be done to iron out the issues, reduce the risk, and improve the profitability for the restaurant operator.
The challenge remains to make delivery incrementally profitable, without taking on considerable risk to The Brand in the process. To whatever extent possible, maximum control over the delivery process should be at The Brand level. In the meantime, takeout and curbside pickup may be convenient enough to maintain market share, without incurring the risks as described above. Perhaps orders, above a specific size at limited times of the day within a certain radius, can be delivered by properly trained store-level employees. There is a large market to be served, but not necessarily at the risk of The Brand.
If you own a business, franchised or otherwise, succession planning is key. What happens to your business when you’re gone, or disabled or decide it’s time to exit the business and retire….These very important questions are often overlooked by the business owner only to create difficult situations for family members, partners and other stakeholders.
Our article today is presented by Neel Shah or Shah & Associates, P.C. Please free free to contact Neel directly after you read the article and have questions regarding a succession plan for your business
Look at all the Pieces
Having an estate plan for your business is just as important as having an estate plan for your individual purposes. There are many different components that go into a business estate plan including a will, a living trust, a financial durable power of attorney, a succession plan, a buy/sell agreement, and life insurance.
All of these can be discussed directly with an experienced attorney. Your will and your living trust are the cornerstones of your business estate plan.
A will enables you to name who you wish to receive your assets, including your company, if you wish upon your death. A living trust is similar to a will in that it allows you to decide who will receive your assets when you pass away, but this is a private document that has benefits when compared with a will. A financial durable power of attorney enables you to authorize an agent to act on your behalf if you are unable to do so for yourself.
Your succession plan which might also include considerations of a buy/sell agreement and life insurance is your opportunity to outline what will happen to your company in the future if you were to leave. Many people anticipate that they will continue working in their business forever. However, it can be a big mistake to assume that you will always be able or interested in working on your business. Scheduling a consultation with an estate planning attorney who has familiarity with adapting and creating business succession plans should be the cornerstone of the next steps that you take in planning your company’s future.
Meet the Author: Neel Shah
My law practice is focused on helping individuals, families & business owners to protect their wealth & their legacy for current & future generations. Estate taxes, lawsuits, poor/inadequate planning, the escalating costs of nursing homes/long-term care are such sources of attack.
My past & present clients include parents, grandparents, children, established corporations, LLCs, individual entrepreneurs, and start-up ventures.
Clients value my diverse training & expertise across the Wealth-planning, Business Law & Real Estate Law disciplines.
I use my skill set to foresee, analyze & implement business-succession techniques for my corporate and individual clients as they initiate different stages of their lives & business ventures. I provide relevant, actionable advice for Estate Planning & Asset Protection strategies for families, business owners & real estate investors so their business actions do not jeopardize their family’s wealth.
According to a NY Times interview with Ms. Husler, she said her boss tasked her with specific instructions to find things wrong. “I was kind of his hit man,” she said. Ms. Husler went on to say that Mr. Patel considered his own interests when determining which stores were to be sent into arbitration.
A Bite Of The Sandwich From Both Ends?
By Gary Occhiogrosso – As seen in Forbes.com
Like a “Player/Manager” of a baseball team, there are often conflicts that never seem to settle and resolve. The recent news that Subway, and it’s “Development Agents” are allegedly “pushing out” other smaller Subway operators is not unlike the player/manager deciding to bench a good teammate so he can get more playing time. As a 35-year veteran of the franchised restaurant industry, I know I am not alone in my opinion. You can’t play both sides of the fence then expect not to run up against motives that may sometimes appear to be questionable.
Subway has grown to its behemoth size by employing a program whereby some franchisees are also sales agents and operational support personnel for the parent company. They are titled “Development Agents.” On the surface, it seems like a good idea. It seems to make sense to appoint brethren franchisees to help build out territory by recruiting new owners and then assist them in setting up their shops and growing their business.
Cutting the Sandwich Business Into Pieces
Subway divides its roster of sandwich shops into more than 100 regional territories. These territories are controlled in part by a development agent. The development agents are responsible for recruiting new franchisees and finding & approving buyers for existing shops. As compensation for this sales effort, they receive a portion of the upfront franchise fee for a new shop or transfer fee if it’s the sale of a current location.
Also, for a share of the company’s royalty fee, they are obligated to visit shops and conduct shop audits focused on operational compliance. This inspection task is carried out through the use of inspectors — known as field consultants. The question of conflict comes up when you consider that many of the development agents are also franchisees themselves. As this is the case, it’s hard to separate the idea of running their own shops, and be responsible for inspecting shops which directly compete with them. The question of motive grows more plausible when you add in the fact that these development agent’s shops are self-inspected by their own paid staff members.
Is Rapid Growth Always a Good Thing?
Consider the history of Subway’s voracious appetite for growth and the lack of exclusive territories granted to their franchisees. In my opinion, all franchised units regardless of the brand, should have a protected territory. These protections help prevent the parent company from encroaching on the trade area of an existing operator and hurting their sales. This protection is not the case with many Subway franchises. There is not exclusive territory protection. The location of a new shop is at the discretion of the company. So it should come as no surprise that the brand has overdeveloped in certain territories. These saturated markets are at a point of sales cannibalization. Mr. Deluaca’s dream of 50,000 Subways has now left some franchisees feeling like their local development agents are pushing them out of business to gain market share for themselves.
Case in point, as reported in the NY Times, Subway franchisee Manoj Tripathi felt that someone had a vendetta against him. The 20-year franchisee noted that each time the inspector arrived, she would find more and more minor infractions. Things like fingerprints on the doors or vegetables cut incorrectly or the wrong soap in the restrooms. On one visit, Rebecca Husler, the Subway inspector who worked for Chirayu Patel, a Development Agent in the Northern California region, noticed that a single light fixture needed a new bulb. Mr. Tripathi replaced the bulb before she left; nonetheless, it was a violation. Mr. Tripathi wasn’t overreacting to his feeling of being set up to fail, as it turns out within a year he was terminated, and he lost his shop.
According to a NY Times interview with Ms. Husler, she said her boss tasked her with specific instructions to find things wrong. “I was kind of his hit man,” she said. Ms. Husler went on to say that Mr. Patel considered his own interests when determining which stores were to be sent into arbitration. Mr. Patel made it “very clear that his stores were to pass” and that “the people he wanted out of the system were to fail out of the system.” she said in the interview. The light bulb incident gave her pause to say, “We’re ruining these people.”
Systemic or Isolated?
One of the people on the company side of this debate is Don Fertman. Mr. Fertman is Subway’s chief development officer and a veteran of the company for 38 years. He claims development agents owning restaurants helps give them “a better understanding of all aspects of owning a small business.” He went on to explain that the company reviews the agents’ work and expects them to uphold ethical standards, dealing with violations “on a case-by-case basis.” He continued by saying, “Our business development agents are well-respected members of our business community,” he said. “And when we hear these allegations, I would say that they are false.”
My takeaway is not this stunning revelation of alleged unfair business practices, but instead that it’s taken this many years to consider that Development Agents competing with other franchises might abuse their position when auditing competing shops in their region. As a former franchisor and development consultant, I do see merit for brands to use the development agent system. I believe there needs to be a robust system of oversight by the parent company to prevent abusive business practices by development agents. This is not to say that Subway corporate hasn’t developed a system of checks and balances, but the allegations from its franchise community leave one to wonder how vigorously it is employed.
Given the number of Subway units in the USA, this may only be the beginning from Subway franchisees who feel Subway is taking a bite out their business.
It could be a Wine Bar with small plates, or a BBQ theme or a Create Your Plate concept. Whatever you decide, it is critical that the environment and “vibe” within the restaurant places the guest firmly inside the experience you’re attempting to create. Don’t confuse the guest with a concept that’s disconnected. As I often remind my clients, “everything touches everything else.”
BY GARY OCCHIOGROSSO – FOUNDER OF FRANCHISE GROWTH SOLUTIONS.
Tripwires to avoid – Desire and passion will only get you so far. Create your business plan as a road map.
For many people, opening a restaurant is a dream. One of the many things I find so interesting about the restaurant business is the blend of creative artistry and the detailed and challenging business aspects necessary to be successful. As an Adjunct Instructor at NYU’s School of Professional Studies, I teach restaurant concept development and business planning. On several occasions, I have been asked by my students to summarize the top issues that one must consider when planning to open a restaurant. Generally, regardless of the type of restaurant, the planning and considerations are the same. I’ll cover a few of the top line elements here.
At the beginning of the process, you should write a simple business plan. It would help if you thought about the many pieces of the puzzle connected to a successful outcome. Many novice restaurateurs, very often chefs, only consider the food component, but there is so much more. A well thought out business plan will include creating a unique concept, a competitive analysis, site selection, financial projections, equipment needs, staffing, and of course, the menu.
Let’s start with a concept
It’s essential that your restaurant offers a unique experience. It could be a Wine Bar with small plates, or a BBQ theme or a Create Your Plate concept. Whatever you decide, it is critical that the environment and “vibe” within the restaurant places the guest firmly inside the experience you’re attempting to create. Don’t confuse the guest with a concept that’s disconnected. As I often remind my clients, “everything touches everything else.” For instance, you wouldn’t use elegant tableware in a fried chicken restaurant or disposable plates in an upscale steakhouse. As obvious as this may seem on the broader elements, it’s essential to take that idea to every detail of the restaurant concept, no matter how small. Everything from the paint color to the music to the tabletops to the wall hanging must work together. The decor elements, the menu, and the service level need to provide the guests with a seamless experience that, when done well, goes almost unnoticed because it’s natural and authentic.
If You Build It, Will They Come?
Building a clientele is never as easy as hanging a sign over the door. It takes smart planning, execution of marketing, and living up to the promise in your mission and brand position statement. You should never assume, “if you build it, they will come.” Questions to ask yourself are; how will my restaurant connect with people? Why does my restaurant exist? What type of people am I looking to attract? What do they read or watch? How do they spend their spare time? What is the best way to reach them? Your concept should appeal to a particular, selected audience. There is no such thing as “everyone is my customer.” Knowing why and for whom your restaurant exists is crucial to success. Your marketing plan should offer compelling reasons why that guest base should frequent your establishment regularly. Is the concept created for health-conscious people? Is it aimed at Millennials or Baby Boomers? It is a full menu or dessert brand or a convenient, fast food, value-based concept. Your social media, print ads, and community outreach should focus on one single audience with one single message. Once you’ve built a loyal base of customers and repeat business, then you should consider expanding your base by marketing to others in the area with a proposition that appeals to them.
Your People Plan is Key
A great team will help you win everyday. Hiring great people is the first step in delivering service excellence and a consistent product to your guests. Your mission statement “the why” along with a corporate culture that emphasizes respect for employees, commitment to your guests, service to the community, and concern for the environment will guide you when selecting your staff. It’s not enough to hire people with restaurant experience; they should also understand and be excited about the mission of the restaurant. If not, they will go through the motions with an inauthentic approach and often fail at exceeding guest expectations. Examine your corporate core values and hire people that match it. Next, supply your staff with comprehensive, ongoing training and the proper tools so can they carry out the day to day tasks flawlessly. Hire for qualities, train for skills.
The Market and Competition
Understanding the market area where you’d like to open your restaurant is a crucial element to the plan. Carefully research the demographics to ensure there are enough people in the area that match whom you believe will embrace your concept. When looking for your location, work with an experienced commercial broker that can supply you with data to help you choose the area and the site correctly.
A full competitive analysis is also essential. For example, check the pricing of your competition. Be sure you’re not over or underpriced for the market. Check other services they offer, such as delivery and online ordering. Spend time in the market area, dine several times at as many competitors as possible, and position your restaurant to address the missing needs in the market. Having a unique value and selling proposition will keep you ahead of the game. Remember, everyone is vying for the same consumer dollars, so you need to create points of differentiation that will help your establishment stand out from the competition.
Consistently Great Food
Your menu must not only be relevant to the concept and the market but should be prepared and served perfectly every time. Restaurant guests expect dishes they grown to love to have the same flavor and high quality each time they visit. Inconsistent products can lead to disappointed guests, bad reviews, and slumping business. Your menu should be not only delicious but also simple to execute. The more straightforward the menu, the less chance of mistakes in preparation. Consistency increases guest satisfaction. Some chefs and “foodies” create menu items that are too complicated and require a highly skilled professional in the kitchen. This approach is fine if you intend to open a high-end restaurant staffed with high price personnel, but not in a fast-casual or family restaurant setting. A winning menu is simple, fresh, relevant, and great tasting. A competent chef can assist in developing dishes that are unique and great tasting that are also simple to produce with less skilled labor. If you have aspirations of owning more than one location, then simple execution, and consistent products are a must to achieve the goal of operating multiple restaurants.
Cash Is King
There are many reasons why restaurants fold. It could be the wrong concept, poor choice of location, not correctly researching the competition, poor service, an uninspiring menu, or bad food, to name a few. That said, the negative impact of undercapitalization may be the most frequent cause of restaurant failures. Knowing how much money you need to launch the restaurant is only the tip of the iceberg. You must assess ongoing cash needs while the restaurant is newly opened and gaining momentum. It may take many months for a restaurant to break even and then eventually become profitable. Being able to support the financial needs during this phase is often the “make or break” challenge that many new restaurateurs cannot overcome. A well thought out projection model that you create with the help of a professional financial advisor can save you from the frustration, negative financial impact and heartbreak of a failed restaurant. Considering capital needs for the first twelve to fifteen months is not only prudent but essential to the success of any new restaurant. You must be prepared to cover the operational costs and expenses as the restaurant “ramps up.” Carefully consider your cash needs and how much working capital you must have on hand, ready to deploy.
Have A Plan And Follow Your Dream
Owning a restaurant can be personally rewarding and profitable. Many people have built great restaurant companies following these simple guidelines. Desire and passion will only get you so far. Create your business plan as a road map. Your plan will help you stay on track when dealing with the many moving parts of launching and successfully operating a new restaurant.
ACAI EXPRESS A HEALTHY AND DELICIOUS FRANCHISE…While food fads come and go, real trends that point to major shifts in attitudes and behaviors are invaluable cues for entrepreneurs looking for emerging and sustainable business opportunities. “Consumer Trends in Health and Wellness”, published in Forbes magazine reveals “the “new healthy” is a consumer journey of contradiction and discovery: Progressive health and wellness consumers are seeking alternatives to fear-based information, a phenomenon that has been driving wellness views for decades.
(They) are paving the way, sharing their enthusiasm and knowledge with mainstream consumers who are hungry for guidance and direction. As shoppers, progressives are no longer thinking about condition management (lowering cholesterol or blood pressure) or dieting (low fat, low carb) but are focused on real quality food, positive nutrition, fresh, less processed foods, and beverages and fun.” Translation: there is a growing wave of consumers — particularly among Gen Xers and Millennials — who are looking for a change in wholesome eating and are prime targets for the Acai Express experience and a healthy lifestyle brand. Entrepreneur, Hector Westerband, founder of Acai Express, has developed his low entry cost franchise concept to meet the cultural lifestyle change that is underway. With three flexible footprints: brick and mortar venues, trailers and food trucks — and a menu featuring new health-rich options — acai berry and pitaya bowls, smoothies and natural juices — he offers solutions to consumers and franchise owners alike.
Mind and body-pleasing bites, sips, and slurps.
Acai Express’ eye-pleasing colorful bowl menu is an Instagram worthy meal option that satisfies customers with 100% organic acai berries and pitaya, fresh fruit, berries, nuts, grains and an array of toppings. A wholesome smoothie with innovative combinations serves as a convenient, meal-in-a-cup breakfast or anytime boost that helps customers power through an energy lag. Healthy natural juices, recognized for the nutritional value: vitamins, minerals, and antioxidants, make upping the daily fruit and veggie consumption an easy and nutritious choice for active people on the go. Good health to go! Speed and portability rank high in the fast service world. The quick serve model and totally portable menu of an Acai Express franchise are very accessible in this hurry-up world. With franchise opportunities in protected territories now available, finding a healthy meal, snack or meal supplement need not be time-consuming or inconvenient whether home is near the beaches in Puerto Rico or suburban Rockaway, New Jersey.
Too good to pass up!
Given that the average American eats out between 4 and 5 times a week and can choose from hundreds of fast-casual options, it’s significant that Acai Express franchisees report an enviable frequency of visits rates of 2 to 3 times a week. The taste and experience are memorable and consumers are returning to again and again. That’s healthy for the bottom line as well. As consumers of all ages become increasingly aware of the need for healthy and delicious alternatives to the high-fat, high-sodium, high-calorie foods that have dominated the menu of traditional fast-food giants, the small, more nimble quick-service entrepreneur can respond quickly to changing tastes with something new, refreshing and healthy that doesn’t look or taste like the health food of early days. This creates exciting and profitable opportunities for franchisees to be among the pioneers in the healthy lifestyle revolution while enjoying the reassurance of a proven model like Acai Express.
BURGER VILLAGE, A STORY OF PASSION…With over 15 years of experience in food industry and restaurant management, Burger Village is a dream concept and creation of four Long Islander brothers – Sam, Nick, Vick & Ravi. They have also owned QSRs and full service restaurant in the past; and due to their expansive individual experiences each of them has their unique contribution to Burger Village such as operations, cooking skills, recipes, management, marketing and service which overall provides customers with a qualitative dining experience.
By keeping in mind the need to eat healthy with busy lifestyles of today gave us an idea which finally came up as Burger Village where everyone can eat healthy organic meals alongside a great customer service. Burger Village opened its first location in Great Neck, NY in 2013. Customers loved us there and with their immense love and appreciation, Burger Village opened up their second location in Park slope, Brooklyn in 2014. Burger village believes in serving the best of the best so our patrons recognize what Burger Village values are.
Eat Organic, Live Healthy
We strive to serve organic, all natural, antibiotics and hormone free products in form of juicy burgers, fresh hand cut fries, salads, soups, shakes and other beverages along with delicious Desserts. We believe that Organic is sustainable and will always be. It does not only benefit the consumer but it is also helpful for the environment. Our products do not come from a factory, they come from farms and dairies that are mostly family owned and operated. The livestock and produces are nourished and cared for in a natural and humane way. They are pasture raised and cage-free rather than confined spaces. It’s delectable, nutritious and ecological and promotes our farmer families.
Food with style
A patty with cheese in between a bun was the beginning of burger era and it has been through many levels and phases. Here at Burger Village, we garnish each of our burgers with its own recommended signature pair. Pick a signature pair or have it the way you want with a variety of bread, cheese and veggies. Burger village pays great attention to a customer’s wellbeing, and by keeping that in mind we have Gluten free, Peanut free and Vegan choices.
Delectable organic grass-fed Beef, cage free organic chicken and turkey, exotic meats like bison, elk, wild boar & lamb are offered on the menu. Tasteful organic veggie, black bean & mushroom patties are kept especially for our Un-meat lovers.
Our bowls of salad are loaded with fresh produce without the harmful pesticides and herbicides. Think about hot aromatic organic soup with healthful and nutritious ingredients. Yummm… Our fresh cut fries, onion rings, chicken tenders, wings and are made in Rykoff Sexton rice bran oil which is Trans fat and GMO free.
An assortment of handcrafted organic sodas and organic milk shakes made with organic fruits can be a great companion to meals offered. A great variety of beer and wine suited to individual taste. Sweet and delicious delicacies comes in form of desserts.
Burger Village believes in Farm to Fork and that is why we work with our farmer families to provide our customer with best quality food which is grown and produced in actual fields or farms. We are a 100% family owned and operated and treat our clientele as a family. We believe that health is an asset that we can choose for ourselves and pass it on to our future generation.