1. Combating Shrinking Margins COEX 2008 February 24, 2008 1 Combating Shrinking Margins February 24, 2008 download this presentation at: www.datassential.com

2. Combating Shrinking Margins COEX 2008 February 24, 2008 2 Strategies for Enhancing Operator Profitability The general economy, rising costs, and increased competition are all having a profound impact on operating margins. This session explores how operators and suppliers can work together to counteract these margin pressures and strengthen profitability. Research:  Online Survey of 150 operators  Using the Datassential Opera™ panel Objectives:  Prioritize operators’ key business challenges  Identify proven strategies to enhance profitability  Determine critical areas in which operators need help  Spark discussion on potential tactics

3. Combating Shrinking Margins COEX 2008 February 24, 2008 3 The business environment is becoming more competitive…

4. Combating Shrinking Margins COEX 2008 February 24, 2008 4 Operators face mounting margin pressures from all sides… o Higher labor costs o General economic downturn o Increased competition o Rising energy costs o Escalating food costs o Customer demand for value-priced menu options o And the list goes on… But which factors matter most?

5. Combating Shrinking Margins COEX 2008 February 24, 2008 5 Rising expenses are a bigger factor than falling revenues Rising food costs, labor costs, and energy costs are most critical Which factors have negatively impacted your margins?

6. Combating Shrinking Margins COEX 2008 February 24, 2008 6 Rising food costs have cut into operator margins in multiple areas Three categories are of greatest concern: dairy, protein, and produce

7. Combating Shrinking Margins COEX 2008 February 24, 2008 7 While rising food costs are most critical, operators are quick to note other areas of profitability concern, including… o Rising energy costs o Rising transportation costs o Ethanol o Rising labor costs (minimum wage) o Rising disposables costs o Changing weather patterns o Health consciousness o Chain proliferation o Increased competition o General economy / macro issues

8. Combating Shrinking Margins COEX 2008 February 24, 2008 8 “…Health conscious consumers have harmed the business since they do not associate eating out with eating healthy; also, the mandatory switch to trans-fat free oil altering fried foods’ taste; and the cost of transportation of goods has increased, decreasing my net profit…” Operators recognize the specific issues that are pressuring their bottom line… “…Corn used as a biofuel has hurt more than anything. Everything that is tied to the petroleum industry is causing a sharp increase in price. Since corn is a primary feed source, this in turn has caused items to become more expensive. Many purveyors are adding fuel surcharges to their invoices.…”

9. Combating Shrinking Margins COEX 2008 February 24, 2008 9 Operators recognize the specific issues that are pressuring their bottom line… “…The economy, gas prices, mortgage crisis...people just aren't spending as much as they used too. Also the cost of food has increase, and my prices have not yet reflected this…” “…Higher food costs, mandated nutrition standards that have caused us to drop popular choices thus affecting participation levels and decreasing revenue, higher employee costs…” “…The cost of food has skyrocketed and our customers are not willing to pay the difference. Also, more and more restaurants are opening up…”

10. Combating Shrinking Margins COEX 2008 February 24, 2008 10 Yet despite all these challenges, operators learn to adapt Only one-third indicate having experienced a decrease in profitability over the past three years. [But keep in mind that this considers only those operations that are still in business]

11. Combating Shrinking Margins COEX 2008 February 24, 2008 11 So what strategies have operators used to enhance profitability?

12. Combating Shrinking Margins COEX 2008 February 24, 2008 12 But what has been most effective?

13. Combating Shrinking Margins COEX 2008 February 24, 2008 13  Improving procurement and waitstaff training are highly effective.  Raising menu prices, though extremely common, tends to not work as well.

14. Combating Shrinking Margins COEX 2008 February 24, 2008 14 Operators expect more challenges in the future… yet few are prepared.  75% expect the business environment to become even more competitive…  Yet only 16% say they are well prepared to face further margin pressures This is a great opportunity for suppliers to help operators maximize their bottom line.

15. Combating Shrinking Margins COEX 2008 February 24, 2008 15 Operators recognize the specific issues that are pressuring their bottom line… Issues operators want help with: o Staff training o Proven menu ideas / recipes o Suggestions for premium menu items o Tips on in-demand foods / flavors o Labor-saving items o Tips for lowering food cost o Accounting procedures / controls o Energy and waste control o Labor attraction & retention “…Training manuals. Hire a consulting team to revamp the training process, which increases efficiencies in the workplace and can have a positive impact on the revenues…” “…Finding products that are cost effective that would add variety to the menu. A web site with proven menu items listed where we could go as a resource…” “…More labor saving menu items either fully prepared or semi homemade. Recipes that use products that are stocked in present inventory, instead of items that are used just for one menu item.…”

16. Combating Shrinking Margins COEX 2008 February 24, 2008 16 Combating Shrinking Margins February 24, 2008 download this presentation at: www.datassential.com