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Restaurant Industry Added 58,700 Jobs in February

The good news keeps on rolling in for the restaurant industry. Preliminary figures estimate that 58,700 jobs were added by the restaurant industry in February.

Here are some of the highlights:

  • 60th consecutive monthly increase and strongest gain since December 2012
  • December – February will represent the strongest three-month payroll expansion on record if the figures hold up through revisions
  • NRA expects eating and drinking places to add jobs at a 3.4 percent rate in 2015
  • That would equate to the fourth consecutive year with job growth of at least 3 percent
  • And the 16th consecutive year in which the restaurant industry will outpace total U.S. job growth, which is projected to come in at 2.3 percent in 2015

The full article from QSR is posted below:

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The National Restaurant Association’s chief economist Bruce Grindy breaks down the latest employment trends:

“Despite the challenging winter weather conditions in parts of the country, restaurants continued to add jobs at a robust pace in February, according to preliminary figures from the Bureau of Labor Statistics (BLS). Eating and drinking places added a net 58,700 jobs in February on a seasonally adjusted basis, their 60th consecutive monthly increase and strongest gain since December 2012.

“Combined with the solid gains in December (54,500) and January (37,400), eating and drinking places added more than 150,000 jobs during the last three months alone. If these figures hold through revisions, it would represent the restaurant industry’s strongest three-month payroll expansion on record.

“The extreme weather didn’t appear to dampen the overall labor market’s momentum either, as the economy exceeded expectations by adding a net 295,000 jobs in February. Total U.S. employment rose by nearly 3.3 million jobs during the last 12 months, which marks the largest 12-month gain in nearly 15 years.

“Looking ahead, the NRA expects eating and drinking places to add jobs at a 3.4 percent rate in 2015, which will mark the sector’s fourth consecutive year with job growth of at least 3 percent. It will also represent the 16th consecutive year in which the restaurant industry will outpace total U.S. job growth, which is projected to come in at 2.3 percent in 2015.”

Restaurant Industry Remained in Growth Mode During January

The good news continued through January for the restaurant industry. Foodservice Equipment & Supplies magazine posted an article on the National Restaurant Association’s Restaurant Performance Index for January 2015.

The restaurant industry again showed expansion in January with an RPI of 102.7. Here are some of the highlights from the article:

  • Seventy percent of restaurant operators reported a same-store sales gain
  • Sixty-six percent of restaurant operators reported an increase in customer traffic
  • Fifty-one percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months
  • Fifty-seven percent of restaurant operators expect to have higher sales in six months
  • Thirty-five percent of restaurant operators said they expect economic conditions to improve in six months
  • Fifty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months

The full article is posted below:

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The National Restaurant Association’s Restaurant Performance Index totaled 102.7 in January. Scores in excess of 100 indicate a period of expansion for the restaurant industry.

“A solid majority of restaurant operators reported higher same-store sales and customer traffic in January, which helped keep the RPI well into positive territory,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, nearly six in 10 operators expect their business to improve in the next six months, with plans for capital expenditures also continuing at a high level.”

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.7 in January – down slightly from a level of 102.9 in December. Key data points from the Current Situation Index include:

  • Seventy percent of restaurant operators reported a same-store sales gain between January 2014 and January 2015. Only 17 percent of operators reported a same-store sales decline in January.
  • Sixty-six percent of restaurant operators reported an increase in customer traffic between January 2014 and January 2015. Twenty-one percent of operators said their traffic declined in January, down slightly from 23 percent who reported similarly in December.
  • Fifty-one percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months.

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 102.8 in January — essentially unchanged from the previous two months. Key data points from the Expectations Index include:

  • Fifty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 52 percent who reported similarly last month.
  • Thirty-five percent of restaurant operators said they expect economic conditions to improve in six months, down slightly from 37 percent last month.
  • Fifty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 62 percent who reported similarly last month.

Businesses Balk at Obamacare Definition of Full-Time Work

US News and World Report posted an article today discussing the new provision in the Affordable Care Act that 30 hour work weeks are considered full time and it’s effects on the service industry and others. There’s a lot of debate on this topic in a lot of industries, but this hits the restaurant and hospitality industry the hardest.

This point is brought up a couple times in the article, but it’s very true that the schedule flexibility in the restaurant industry is attractive to a lot of people. I know when I was waiting tables and tending bar in a resort town it was great to be able to pick up shifts and work doubles when the snow wasn’t great or during the very busy weeks. Then take off on weeks when the snow was good and be able to give up shifts and spend more time on the mountain. I wonder how schedule flexibility is going to be affected with this change?

What are your thoughts on this provision? How is it affecting your business?

The full article is posted below:

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The controversy over what counts as a full-time job under the Affordable Care Act continues, especially for those in the service industry.

Lawmakers and several service industry associations are contesting the provision in President Barack Obama’s signature health care law known as the employer mandate, saying it is harmful for American workers. The mandate defines a full-time employee as a person who works on average 30 hours weekly, and requires that business with 50 or more full-time employees provide health insurance to at least 95 percent of those workers and their dependents up to age 26, or pay a fee.

“Lots of people who are working part-time now want to have full-time jobs, and that’s made more difficult by this provision of the health care law that discourages employers from hiring or keeping full-time employees,” said Jack Mozloom, spokesman for the National Federation of Independent Business.

The NFIB, some restaurant associations and certain community colleges support legislation in the House and Senate that aims to change the definition of a full-time employee to one working an average of 40 hours a week. Without such an alteration to the ACA, Republican-led lawmakers claim, there could be a devastating economic impact.

“The inevitable result is going to be fewer full-time employees, and I really don’t see how the other side can argue with that logic unless they completely misunderstand business,” Mozloom said.

Restaurant owners are also particularly concerned.

Thousands of jobs are at stake with the continuation of the provision, Sam Toia, CEO of the Illinois Restaurant Association, said in a statement.

“Because of the Affordable Care Act’s arbitrary 30-hour-per-week definition of a full-time employee, restaurants are being forced to restructure their workforce by reducing their employees’ hours,” he said. “Employees are losing the mobility and flexibility in their schedules they normally would enjoy when working at a restaurant. Opportunities are decreasing for young and inexperienced workers to gain entry-level employment and advance into a fulfilling career in the restaurant and hospitality industry.”

Karen Bremer, executive director of the Georgia Restaurant Association, said when she worked her way through college, having flexible hours allowed her to work less when she needed time to study for finals and work more during the holidays when others wanted time off. Less flexibility would mean workers had fewer opportunities to learn certain “soft skills.”

“We’re the industry that teaches America how to come to work on time, how to smile, how to work on a team with other people, to follow orders, and to make change and to provide customer service. We do a great service to the United States in terms…of teaching those soft skills,” Bremer said.

But Gary Burtless, an economist who researches the labor market policy at the Brookings Institution, said changing the employer mandate would hurt workers, not help them.

By raising the amount of hours classifying a full-time employee to 40 hours a week, employers are incentivized to cut workers hours to avoid providing health insurance, he said. Since those who work 40 hours per week represent a larger part of the workforce, the proposed alterations would do more harm than good, he explained.

“The whole rationale for this is so completely flipped on its head economically,” he said. “They basically want to exempt most, a huge share of employment in the United States, from mandatory coverage under the Affordable Care Act”.

The restaurant industry isn’t the only one struggling with the mandate. Some community colleges, like Ivy Tech Community College in Indiana, worry that the provision will make it difficult to find faculty members.

“We are challenged to find credentialed faculty in certain areas and if we are limited in the hours we can provide such faculty, it only makes that challenge more difficult and could put us in a position where we cannot (offer) many courses in some of the disciplines,” Ivy Tech spokesman Jeff Fanter said in an email.

Julie Garcia, director of human services at Northern Virginia Community College, said the provision has not plagued her college. But she understands how it could impact smaller schools.

Costs for personnel, the largest part of colleges’ workforce, rise every year, Garcia said. Managing this is difficult, especially for a small team juggling other things, she said.

The 30-hour provision has resulted in a smaller number of “classified part-time” employees, who work between 30 and 40 hours at NOVA, Garcia said.

The Save American Workers Act of 2015 passed the House in January without Republican dissension. It is currently in the Senate Finance Committee. The Forty Hours is Full Time Act, however, is still stalled in a Senate committee.

Obama has vowed to veto any legislation aiming to change the definition of a full-time employee.

“We can’t put the security of families at risk by taking away their health insurance,” the president said.“And if a bill comes to my desk that tries to do any of these things, I will veto it.”

Proposed R.I. bill to regulate restaurant tips draws a crowd

Below is an article from the Providence Journal regarding some proposed state legislation in RI around tips. Here are a few of the items the bill covers:

  • Would prohibit employers from deducting a credit card service fee from a tip left for an employee
  • Would also ban required tip pools
  • Would require that the employee receive the total amount of both tips and “service charges”
  • Anyone in violation would be fined up to $1,000, be sentenced to up to 60 days in prison or both
  • Employees who successfully sue their employers for relief would be entitled to attorneys’ fees and three times the damages claimed

What do you think about these proposed changes in RI? Are any of these happening currently at your restaurants? The tip pools seem a little odd to me. They also mention in the article that there’s some goofy language that needs to be ironed out. Are similar bills being proposed in your states?

The full article is copied below:

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PROVIDENCE, R.I. — With more than 65 people signed up to testify on a bill that would impose a number of restrictions on how employers handle tips, K. Joseph Shekarchi, chairman of the House Committee on Labor, asked that the hearing room doors remain open Thursday so that fire code standards could be met.

“I know this bill invokes a lot of passion,” Shekarchi said as a marathon of testimony from restaurant owners and servers began.

Rep. Aaron Regunberg, D-Providence, who sponsored the bill, described it as legislation intended to address the “widespread problem” of “tip theft.”

The bill would ban employers from taking a portion of an employees’ tips in several ways. Among them: It would prohibit employers from deducting a credit card service fee from a tip left for an employee. It would also ban required tip pools. Several people, however, questioned language in the bill that would permit a “valid tip pool” without defining what would meet that standard.

The bill also would require that the employee receive the total amount of both tips and “service charges,” a separate fee sometimes placed on a bill and then divided among multiple parties.

Anyone in violation would be fined up to $1,000, be sentenced to up to 60 days in prison or both. Employees who successfully sue their employers for relief would be entitled to attorneys’ fees and three times the damages claimed.

Chris Tarro, co-owner of the Sienna Restaurant Group, said that while he understands the intent of the bill, it would take money out of an already struggling industry. For example, he said, his staff is aware that credit card fees are deducted from tips. Those fees annually total roughly $65,000 at his restaurants. While he said he didn’t doubt there were examples of people in the industry who aren’t able to pay their bills, at his restaurants, servers are typically the highest-paid hourly employees.

“It’s a tough industry,” Tarro said, “and if you keep taking money out of this industry … we only have so much. We’re bone dry.”

But Jamie Sarafeh, a former waitress and dishwasher, said servers need a more reliable form of income.

“Everyone I know that works in food service is scraping by,” she said. “I understand that a lot of you restaurant owners aren’t multimillionaires, but relative to what we’re making — a few cents means so much more to us.”

But the arguments weren’t all based on who should keep the money.

Bill Kitsilis, owner of Angelo’s Pizza Palace in Cumberland, called the bill an “administrative nightmare,” referencing language that the only times tip can be shared are in proportion to the service provided.

“What does that mean?” Kitsilis asked. “On Friday night at Angelo’s Pizza, I have two people working the counter up front, two cashiers in the bank answering phones. They’re not doing the same exact work. There’s one tip jar up front. They all share equally. They’ve been doing it this way for 30 years without a problem.”

Regunberg said he realized there were valid issues with the language and definitions in the legislation that could be addressed.

“In order for us to have productive dialogue and come to a solution that’s optimal for all parties,” Regunberg said, “we first have to take as valid that this is a real issue.”

 

Feds roll out new way to analyze food outbreak data

Interesting article from the University of Minnesota Center for Infectious Disease Research and Policy about the US Government improving methods for sifting through data to estimate which foods are contributing to outbreaks. They focused the report on the four main outbreaks: Salmonella, Escherichia coli O157, Listeria monocytogenes, and Campylobacter.

It’s great that the government is focusing on these issues and trying to use data to draw correlations to try to minimize these outbreaks, but what I found most intriguing were the breakdowns of the various food groups by outbreak. Here’s what they found:

  • Salmonella: seeded vegetables (18%), eggs (12%), fruits (12%), chicken (10%), sprouts (8%), beef (9%), and pork (8%)
  • E coli O157: beef, 46%; vegetable row crops, 36%
  • Campylobacter: dairy foods, 66%; chicken, 8%
  • Listeria: fruits, 50%; dairy, 31%

Salmonella spans quite a variety of food groups and dramatically more than the others. The full article is below:

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US government agencies today reported on what they billed as an improved method for sifting foodborne disease outbreak data to estimate the contributions of different foods to outbreaks sparked by four common types of foodborne bacteria.

The report, focusing on outbreaks involvingSalmonella, Escherichia coli O157, Listeria monocytogenes, and Campylobacter, estimates the percentages of such outbreaks that were related to various foods from 1998 to 2012.

It was developed by the Interagency Food Safety Analytics Collaboration (IFSAC), a partnership of the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration, and the Department of Agriculture’s Food Safety and Inspection Service, according to a CDC statement today.

In general, the analysis found that Salmonella outbreaks were caused by a wide range of food categories, with no particular one predominant, whereas just two food categories were dominant contributors to outbreaks of each of the other three pathogens.

“The new estimates, combined with other data, may shape agency priorities and support the development of regulations and performance standards and measures, among other activities,” the CDC statement said. “The recently developed method employs new food categories that align with categories used to regulate food products and emphasizes more recent outbreak data.”

Four leading pathogens

The CDC estimates that the four pathogens cause 1.9 million cases of foodborne illness each year.

The 12-page report says the four pathogens were blamed for 2,655 foodborne outbreaks between 1998 and 2012, but the study focused only on 952 outbreaks for which the implicated food or foods could be assigned to a single food category. Of the 952 outbreaks, 597 were caused by Salmonella, 170 by E coli O157, 161 by Campylobacter, and 24 by Listeria.

The report describes various statistical methods used to refine the estimates, including steps to smooth variations in outbreak size and reduce the influence of outliers. In the interest of timeliness, the model gives greater weight to data from 2008 through 2012 than data from the earlier years. The agencies divided foods into 17 categories.

Among principal findings, the authors found that seven food categories accounted for 77% ofSalmonella cases: seeded vegetables (18%), eggs (12%), fruits (12%), chicken (10%), sprouts (8%), beef (9%), and pork (8%).

In contrast, for each of the other three pathogens, just two food categories accounted for the majority of cases, as follows:

  • E coli O157: beef, 46%; vegetable row crops, 36%
  • Campylobacter: dairy foods, 66%; chicken, 8%
  • Listeria: fruits, 50%; dairy, 31%

The CDC cautions, however, that the Listeria data were sparse, leading to considerable statistical uncertainty (wide confidence intervals), and the 50% estimate for fruit reflects the impact of a large cantaloupe-related outbreak in 2011.

Toward greater consistency

The report acknowledges a number of limitations, including that it covers only foodborne disease outbreak cases, not sporadic cases.

It states, however, “Our novel approach produces better estimated attribution percentages than those based solely on the observed numbers of outbreaks and outbreak illnesses, and can be used to produce new estimates when outbreak data are updated.” In addition, it says that having consensus on one analytic approach may make for greater consistency in interpretation of estimates across different federal agencies.

The CDC said IFSAC was scheduled to describe its methods at a public meeting in Washington, DC, today, as part of federal efforts to improve foodborne illness source attribution.

 

How much money do we lose every year?

 

Having manager’s perform SMART Pre-Shift Inspections every meal period refocuses them on what is important to running a successful operation. The benefit of focus is something that I had to rediscover recently, but it makes so much sense.

We don’t do enough as an industry to focus and ground our manager’s every single shift on what is important to running a profitable business, and it is a gigantic missed opportunity. Managers are expected to be multi-tasking omnipotent robots that can instantly shift between their different responsibilities, and that is just not always the case.

I was a floor manager at one of the busier Changs in the early 2000’s when it was not uncommon for us to be on a 1:45-minute wait on a Monday night. I remember it as a very chaotic job that could go from 0 to 60 to 30 to 90 to 120 back to 0 in a single shift.

I remember scrambling to work on projects and deal with putting out fires in that two-hour window between lunch and dinner. Then getting back into the driver seat again for the dinner rush.

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I have also managed at slower restaurants, and I found myself fighting boredom and apathy. Trying to stay motivated and keep my team motivated to give great service.

Manager’s make restaurants successful. We have all seen a manager who got a location rocking and rolling: high sales, good profits, great service. They leave, and the next guy comes in and this location goes from hero to zero in 3 months. There were no major changes in the area driving the decline, it was just that the new manager couldn’t keep the staff on point, service up, and customers reacted.

It is the nature of this industry that we have customers in our building for large portions of our day. There is a ton of moving pieces that need to be dealt with every single shift. It is easy to get caught up in fire fighting and then stumble into your next shift without having the opportunity to focus yourself and your team on what is important.

Two tools that I have seen implemented with a lot of success are SMART pre-shift Inspections that manager’s conduct before each meal period and pre-shift meetings with each department.

SMART Pre-shift inspections get your managers walking around your restaurant looking at your critical safety and operational readiness items ensuring that you are ready to handle the rush. Performing this inspection reminds managers what is important and helps them catch things that they might have missed if they hadn’t done the inspection.

Pre-shift meetings with service and kitchen teams give us an opportunity to communicate shift info to the team and get them focused on serving guests.

Both tools have the same effect on your restaurant, they focus your staff on what is important, and that focus cascades through your operations.

We have recently created a free ebook on SMART Pre-shifts you can get a copy by clicking here.

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New York to raise wages for tipped workers

This story from Nation’s Restaurant News is all over the place. The New York state commissioner approved a 50% rate hike in the minimum hourly wage for tipped employees up to $7.50/hr. With New York City going up to $8.50. This seems to be the trend lately. Local and federal governments are calling for minimum wage hikes across the board.

The New York Restaurant Association was fighting the hike and lobbied to have the increase phase in over time, but that failed and the new rate hike will take place by the end of the year.

Even Walmart has stated that they are planning on raising their pay up to $10/hr over the next 2 years. This will certainly put pressure on the restaurant industry in terms of recruiting and retaining good employees. What types of programs are you putting into place to handle these situations?

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Here’s the full article from nrn.com:

Restaurant wait staff and other tipped workers in New York will earn $7.50 an hour before tips effective Dec. 31, after the state’s acting labor commissioner approved the increase on Tuesday.

Servers in New York currently earn $5 per hour, compared with a non-tipped minimum wage of $8.75. The state allows businesses to use tips to meet or pass the minimum wage.

In New York City, the tipped wage will rise to $8.50 an hour if the city gets permission to raise its minimum wage above the state’s rate.

New York Gov. Andrew Cuomo’s acting state labor commissioner, Mario Musolino, approved the tipped wage increase. The state’s minimum wage for hourly workers is scheduled to rise to $9 an hour at the end of the year.

“The sweetest success is shared success, when we all do well together,” Cuomo said Tuesday at a Manhattan labor rally, according to the Associated Press. “We want businesses to do well. Let’s share with the workforce. Let’s all rise together. That’s what New York has been about. That’s what this nation is all about.”

However, the New York State Restaurant Association accused Musolino, who made the recommendations to the governor, of “rubberstamping” the minimum wage increase for wait staff.

Melissa Fleischut, president and CEO of the association, said nearly 1,000 representatives of the hospitality industry had asked Musolino and the wage board to phase in a moderate wage increase over time.

The wage board recommended, and Musolino approved, a 50-percent increase to be phased in by the end of this year.

“By rubberstamping an extreme, unprecedented, 50-percent increase, it becomes hard to believe New York is really ‘Open for Business,’” Fleischut said, referring to the state’s marketing slogan to attract businesses.

Saru Jayaraman, a founder of ROC United, which has been pushing for increased minimum wages across the nations, said in a statement that “although ROC will continue to fight for One Fair Wage, we are thrilled that New York state will have the ninth-highest state wage for tipped workers in the country, with $7.50 an hour.”

Retailer Walmart said Thursday that it would raise wages to $9 an hour in April, and then $10 an hour in a year, an increase that would affect 40 percent of its workforce. That moved raised speculation that McDonald’s Corp. and other large restaurant companies would be pressured to follow suit.

New York has more than 200,000 tipped minimum wage workers, and some sources put the number of restaurant workers in that category at 133,550. The median income of New York’s wait staff is about $19,103.

Restaurant Tech Restocked For Tomorrow And Beyond

Here’s a great article from TechCrunch on technology in the restaurant industry. A major focus of this article is on POS systems. Mobile POS systems are moving in on long time dominant systems such as Aloha and MICROS. It seems that mobile POS is the future. Either having guests swipe their own cards at the table or servers carrying tablets with them and swiping at the table will streamline the checking out process. The deli in the building that I office out of has moved to Square and they love it. They say it’s cheaper and they don’t need all the equipment that other payment processors require. The mobile solutions are preaching, rightfully so, simplicity, efficiency, and convenience.

The article also goes on discuss mobile payments which seems to be catching on across most of retail. As mobile security gets better I see this becoming more and more the norm. The “mobile wallet” is the next logical step for the mobile phone.

What are you doing as far as technology in your operations? Do you see these solutions in your business if they aren’t already? If not, why?

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Here’s the full article:

A recent article in TechCrunch characterized nascent upstarts in the restaurant industry as wide-eyed idealists with little reality of the harsh, high-touch operating environment in which they operate. Having worked in the tech, food and health worlds for most of my career, I believe the article misrepresented the significant progress being made across the industry. On almost every front within hospitality — be it point of sale, loyalty, delivery or sourcing — change is in the air.

Point of Sale Systems Are Shifting Rapidly

For all the talk of the Aloha and MICROS point of sale (POS) systems dominanting in restaurants, a bevy of newcomers have been making inroads. Square, with its slick reader and now retail POS terminal, carries the most gravitas among the mobile POS companies for good reason: it inks deals with large retailers: Starbucks in 2012, then Whole Foods, Uniqlo and Godiva in 2014. Granted, none of these establishments switched over an entire store to Square, but these relationships suggest large retailers will embrace new technology.

Square isn’t alone in this space, either. Longtime ecommerce site Shopify launched its own POS system in 2013, bridging together digital and in-store selling in ways old-line providers can’t match. Even venerable POS provider NCR has dipped its toes into the market. Adil Consulting, a merchant POS consultancy, found 52% of small merchants now use a mobile POS for the majority of their payment processing, a huge change from even a couple of years prior.

Mobile POS upstarts are also eyeing the market leaders with more sophisticated products. POS startup Revel (which recently raised a $100 million Series C round) and ShopKeep aim at the heart of Aloha and MICROS by combining deep business analytics with mobile-based front-of-the-house systems. Alex Konrad of Forbes reported Revel’s growth rate at 250 percent year-over-year in February 2014.

If you want a historical parallel for the mobile POS market, consider the arrival of Japanese cars into America back in the 1970s. Toyota and Honda targeted the low end of the market, but within a generation, they delivered Lexus and Acura into the U.S. market, upending the staid American luxury brands like Cadillac and Lincoln. Substitute MICROS and Aloha for Cadillac and Lincoln and you can get an idea of what’s coming for the biggest POS names.

Mobile Payments Are Coming to Restaurants

For high-end retail, which acts as a harbinger of things to come, mobile payments have already arrived. Starbucks, an early mover in this space, reported 14 percent of its U.S. transactions were completed using its mobile app in 2014. But it’s not just the big players; even small merchants that represent the long tail of the industry are adopting new technology.

I spoke at length with Andrew Cove, co-founder of the Cover for this article. Long considered one of those ‘Why hasn’t anyone done this already?’ mobile opportunities, Cover brings mobile payments and check splitting into the high-end restaurant market. Built around creating a seamless payment transaction for users — think Uber, Cove said — Cover also delivers flat-fee transactions and 24-hour payment disbursement to restaurants. Cove said the product has already reached over 150 restaurants in NYC, San Francisco and Salt Lake City.

And let’s not forget what Apple Pay may do in this area. Payment industry guru Mike Dudascalculated almost 1 percent of Whole Foods transactions are happening with Apple Pay. Sure, that’s a tiny part of the retailer’s overall sales, but, if true, it represents phenomenal growth of a new technology no one had even heard of six months ago.

A Food Service Sourcing Revolution in the Making

Long dominated by Sysco and US Food, even the purveyor system — with its 10 mile wide moat to market entry — is at the dawn of a new age. Another innovative startup, Sourcery, allows chefs to manage disparate food suppliers from a central dashboard, streamlining payments and invoicing.

Ashwin Mudaliar, head of business development at Sourcery, spoke to me about Sourcery’s operations. A molecular biologist with a passion for food system reform, Mudaliar describes Sourcery as a commerce platform for the modern commercial kitchen. Restaurants bring their purveyor network into Sourcery’s orbit and they weave their technology across each restaurant’s web of suppliers.

The result of reducing friction for food sourcing may ripple through the supply chain, a long-term goal highlighted by Mudaliar. It encourages more restaurants to source widely, pulling restaurants away from the broadliner model embodied by Sysco. While it’s very early, technology like Sourcery has the potential to increase the diversity of local food options available at every restaurant.

Delivery and the Broader Food Industry VC Presence

GrubHub and Seamless dominate the restaurant delivery market, but that doesn’t mean innovation is out of reach here, either. Instacart, the grocery delivery service launched only back in 2012, is reportedly raising $100 million at a heady $2 billion valuation. Other upstarts like the more local-flavored grocery delivery services (Good Eggs on the West Coast and Relay Foods in the Mid-Atlantic) raised $21 million and $8.25 million in their last funding rounds, respectively.

There’s also a host of tangentially related food-tech startups that align spiritually with the restaurant industry and the broader food movement. VC funding in the food vertical has been on a steadily increasing trajectory for at least the last five years, touching all corners of the industry.

The DC-based organic salad chain SweetGreen raised $22 million in 2014 to promote expansion. West coast competitor Lyfe Kitchen boosted its reserves by at least $21 million in 2014, according to an SEC filing. Revolution Foods, the firm trying to remake school lunches, raised $30 million in 2014. And Hampton Creek, the food company replacing animal products with unique plant-based substitutes, managed to get its Just Mayo product into over 20,000 stores in just the last 12 months, according to Danielle Gould’sFoodTechConnect.

Solutions to the uniquely complex problems facing the restaurant and food industries will require still more innovation than what has been discussed here. Discovery, nutrition information, loyalty, distribution and food waste represent just a few of the frontiers that await intrepid entrepreneurs. But no matter what dimension of this industry you look at, it’s hard not to see the seeds of change blowing in this venture capital-fueled wind.

Time To End Tips?

Read an article from the local CBS affiliate in San Fran/Bay Area suggesting that it’s time to change server compensation away from tips. The article mentions that this is an archaic way of compensation.

I remember when I was waiting tables and tending bar the pay was much better than any other job that I could have gotten with my skills at the time. Of course there was always the bad tip from time to time, but overall the good tips more than made up for it and I was able to make decent money. Also I was able to live is some amazing places too. I worked hard for the money, but again for the most part it was enjoyable and worth the effort.

What do you think? Is this something that could happen in the near term? If it did what would it look like? I guess prices would go up 20%ish to cover the extra wages. It would be interesting to see what would happen with service levels without the extra incentive. Although in Europe most places it’s not customary to tip, but I have noticed that the service is a lot slower. That could also be because they tend not to be as “in a hurry” as we seem to be here in the US.

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The full article is copied below. Let us know your thoughts.

KCBS News Anchor Stan Bunger offers his unique analysis of an American dining tradition.

When San Francisco Chronicle restaurant critic Michael Bauer speaks, people tend to listen. I’m thrilled to see Bauer call for an end to the practice of tipping in restaurants, but I wonder if his call will be heard by the right people.

Bauer suggests the end is near for the archaic (and some might argue, barbaric) system of compensating restaurant employees based on the whims of customers. He cites recent policy changes at places like Bar Agricole and Trou Normand in San Francisco and Camino in Oakland. They’ve raised their prices to include a service charge. Other restaurants are tacking on a per-person service fee.

All well and good, but the places Bauer cites and reviews tend to represent the tip of the restaurant iceberg. Many more meals are consumed (and money spent) at places farther down the food chain from the establishments he reviews.

The restaurant business is a notoriously tough one where low profit margins are the rule. Analysts assume labor makes up about a third of the average restaurant’s costs–but remember, the restaurant owner has taken a big piece of his labor cost “off the books,” relying on customers to compensate the staff with tips.

There’s a popular perception that servers are fairly compensated because good service equals a good tip. Ask anyone who’s spent any time in the business, especially at the places below Michael Bauer’s radar, and they’ll tell you the truth: it’s a crapshoot. Friendly, efficient service might produce a sweet tip…or not. It’s completely up to the customer.

It’s bizarre, when you think about it. It’s like letting moviegoers decide how to much to pay AFTER they’ve seen the movie or letting you wear a new suit for a day before you decide what you’ll pay for it.

We’re all a part of this, and of course, plenty of other cultures play it very differently. We seem to want good service but don’t value it enough to accept that it’s worth paying for. I don’t know about you, but I’ve always felt uncomfortable with the dynamic in which I hold the pursestrings and the waitress tries to curry my favor for a tip. It’s like tossing coins off the cruise ship to the natives, isn’t it?

I hope Bauer is right and the trend of building the price of service into the price of a meal spreads, but I’m skeptical. There are just too many indications that the restaurant industry typically views its service staff as expendable. Take the “auto-gratuity” situation: once the IRS started classifying things like the “18% service charge for parties of six or more” as subject to payroll tax withholding, many big chains simply ended the practice. Result: big parties, big tabs, small tips.

With any luck, places that don’t make Michael Bauer’s Top 100 list will get on board and price a meal in a way that fairly compensates all the people who create and deliver it. But I’m not holding my breath.

How Americans Are Spending Their ‘Reverse Tax’

I read an interesting article today from a financial newsletter that I subscribe to, Money and Markets. In the article, Jon Markman, looks at what Americans are doing with the extra money that we are saving at the pump.

Saving it or spending it? In typical American fashion we are spending it, but where? Of the $24.4 billion saved most of it has been spent on cars and restaurants/bars. Restaurants are 2nd to cars by only 1/100 of a percent, up over 8% vs a year ago. Restaurant stocks are up over 25% in the last 4 months.

Here’s the full article:

Economists and investors are dying to know what consumers are doing with their gasoline savings windfall. Will they save it, invest it, or upgrade their mobile phones?

To answer this question, the data analysts at Bespoke Investment Group first determined how much the windfall is. I won’t bore you with all their calculations but basically they determined a total consumption figure then divided by the monthly gasoline retail price and compared last year’s level with this year’s level.

They figure that roughly $24.4 billion has been saved at the pump since gasoline prices have been falling. And of course that does not include the “perceived” savings to the collective consumer psychology, as studies have shown that there is a multiplier effect in which a single dollar saved ends up feeling like several dollars earned. This is why consumer confidence figures soar disproportionately from a decline in gas prices.

Anyway, of that $24.4 billion saved, Bespoke figures that $21 billion has piled up since October alone, when the gasoline price plunge really got rolling.

So what have you Americans been doing with your “reverse tax”? Contributing to charities? Saving and investing for the future? No —

You, my fellow Americans, have been eating more. And drinking more. And buying more gas guzzlers. Congratulations, you are blowing your windfall.

According to Bespoke data, which comes from government sources, spending on cars and restaurants are up 8 percent vs. a year ago, and 4 percent more on sports and hobbies. So basically you are spending your extra $24.8 billion on burgers and fries, new wheels, and having fun.

The stock group that has benefited most are restaurants, with Wendy’s(WEN), PolloLoco (LOCO), Sonic (SONC), Jack in the Box (JACK) andCosi (COSI) performing best this year, up 10 percent to 76 percent. As a group, restaurants have surged 25.6 percent over the past four months. That is a huge gain in a short period, so you don’t want to pile in now. But it’s a good concept to put in your back pocket for the next time there is a consumer spending windfall of any kind.

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