TORONTO — Restaurant operators and investors gathered Wednesday at the Hilton Toronto Downtown for CRIS+CROS, an event that brought together the Canadian Restaurant Operators Summit and the Canadian Restaurant Investment Summit under one roof.
The opening plenary, presented by Robert Carter of The NPD Group and Todd Jones from GE Capital, shared the top trends for brands and offered actionable ideas to help drive business. “The only way to win [in this business climate] is to steal share from your competitors,” said Carter, adding that today’s customers are looking for emotional experiences when choosing a restaurant.
The Canadian restaurant industry remained flat in 2015, he said, with $50 billion in spending, representing a two-per-cent increase over 2014. “Canadians average 181 restaurant visits a year,” he said, citing a preference for home-cooked meals as the top reason people are eating out less.
Meanwhile, in the U.S., Jones highlighted breakfast as the daypart to watch. “In the U.S., the breakfast segment is all-out war,” he said. “QSR breakfast is growing in double-digits.”
Other Canadian trend highlights include an increased desire for Canadian-sourced food on the menu (55 per cent) and demand for all-natural food choices (54 per cent). And what should the industry look forward to in 2016? “More of the same,” predicted Carter.
Chris Elliott, senior economist for Restaurants Canada, offered insight into the state of the Canadian economy and how it will impact the restaurant industry. “[Last year] was a much worse year [than predicted], with a recession in the first quarter and instead of seeing a rebound in economic growth … we’re actually going to see weaker growth in 2016.”
The current economy is having a direct impact on the restaurant industry. A recent survey by Restaurants Canada asked operators across the country how they felt about the weak economy and 54 per cent said it was having a direct impact on their business. Although respondents in Ontario and B.C. were more optimistic about 2016 sales growth, Alberta, Saskatchewan, Newfoundland and Labrador were much more pessimistic. “It’s basically Armageddon out there right now,” said Elliott.
Property-related costs are a big line on any operator’s ledger with six to 12 per cent of restaurant P+L allocated to occupancy. For fast-food locations, that number grows to seven to 14 per cent. Grant Kosowan of Orange National Real Estate Group and Michael Horowitz of Minden Gross LLP tackled the topic of advanced real-estate metrics and the impact they have on a restaurant’s income.
“There is 40 per cent less product available in Canada in terms of real estate,” said Kosowan, who singled out drive-thru locations as the most difficult to acquire. “Drive-thrus in Canada are the golden goose,” he said. “But restaurants fall about fifth in line, behind banks, for having access to suitable properties.”
Merger on the Menu
Journalist Amanda Lang led a panel of restaurant operators to discuss some of the recent mergers and partnerships that have developed in Canada over the last year. The panel included Derek Doke of FranWorks Group of Companies, Michael Glen of Laurentian Bank Securities, Bill Gregson from Cara Operations Ltd., Sean Morrison of Diversified Royalty Corp. and Paul Rivett from Fairfax Financial Holdings.
Cara has been synonymous with M&A recently and Gregson was quick to point out that it’s the people factor that drives the company’s purchasing decisions. “It’s been a ramp up year [for Cara] but we only want to buy something if the talent comes with it.”
Despite some gloomy economic forecasts delivered earlier in the deal, Rivett says Fairfax is not backing away from the Canadian restaurant industry. “We’re open to investing in this climate, but cautious,” he summed up.
According to Glen, the fast-casual model is going to accelerate in the coming year. “Operators just need to find the right concept,” he said, noting that home-grown brands such as Freshii, who know the market, are most likely to be successful.
A Delicate Balance
The day wrapped up with an operators panel on brand transformation and the delicate balance of continual reinvention. A&W, Earls, La Cage and Cara all weighed in on questions from moderator Mike Cordoba of Empresario Capital Partners and the audience on topics ranging from technology, customer connections and the rise of competitors to war stories of each brand’s successes and failures.
“We knew the world was changing and we looked at where [the brand] needed to be in 10 years,” said Mo Jessa of Earls Restaurants Ltd. Earls’ path to reinvention started with millennials, he said. “I didn’t have to go far to find millennials — there are about 5,000 in my company.”
This 18 to 34 demographic was key to A&W’s transformation journey as well, said president and COO Susan Senecal. “Millennials have a broader consideration set but also a lot of overlap with what all Canadians want,” she said.
For Ken Otto, president, Family Dining and chief development officer at Cara Operations, transforming the Swiss Chalet and Harvey’s brands in Canada was long overdue. “One day you wake up and your guests have changed,” he said. “We made Swiss Chalet at your kitchen too easy, so we had to re-ignite the dining room fire.”
Otto stressed that franchisees were key players in the reinvention process. “Franchisees are part of your management team and need to be at the table for every decision,” he said.
Jean Bedard, president at La Cage – Brasserie sportive, agreed. “During any brand transformation, you need to be flexible when it comes to franchisees and their needs.”