1. State of Training & Development in the Hospitality Industry July 2013 Prepared by:

2. Executive Summary 2 Introduction To understand the current state of training and identify emerging trends in workforce training investment, formats/platforms and resource allocation among its member companies, the Council of Hospitality and Restaurant Trainers engaged Technomic to field a member survey. The survey was conducted online in May 2013, and involved a comprehensive line of questioning. Of 250 CHART member companies, 51 companies completed the survey and reflect a fairly representative sample of CHART members. It should be noted that certain information in the study findings is directional due to the low rate of response on some questions. The key finding of this report is that training is in a unique position to support the hospitality organization’s ability to compete in today’s challenging environment. Training resources such as personnel and dollars are increasing, and turnover is improving, but training professionals are multi-tasking and feel stretched. Industry Overview The restaurant industry grew 5.2% in 2012, although small/regional chains and independents outperformed chain restaurants. Due to a softening economy, a slower rate of expansion is expected in 2013 and projected for 2014. When inflation is factored in, real growth is estimated at 0.8% in 2013 and projected at 1.0% in 2014, resulting in a “take-share” environment for restaurant operators. Member Survey The respondents reflect the overall composition of CHART membership. The majority (75%) are chains and are privately held companies (88%). All segments of the industry are represented. The average number of locations is 237; the mean is 60. Turnover has improved for respondent organizations during the past three years, and total turnover is now below the industry average. The most improvement was achieved in hourly employee turnover.

3. Executive Summary 3 Training Resources Overview & Trends Training departments average five members, although the size of training departments has increased for half of respondents compared with three years ago and one-third compared with one year ago. Half of organizations report annual training expenditures of less than $500,000. Two-thirds indicate expenditures have increased in the last three years and slightly more than half report increases in the past year. Respondents indicate that on average, half of training expenditures are allocated to line-level employees and management employees. Just over half (55%) of participants indicate training content is created via both internal and external resources. The average portion of annual training expenditures spent on external resources is 13%. The largest external expenditure is printing (16%). Half of respondents indicate external expenditures will increase in 2013. Training Delivery Formats & Platforms Training professionals allocate their time against three major areas: training-specific functions such as training development and class facilitation, organizational initiatives and management functions. Training time allocation reflects expenditure allocations, with half of training time going to hourly and management employee positions. Basic job skills, customer service and food safety/sanitation are the top three training topics for both hourly and management employees. Management personnel receive the highest number of training hours, both annually and during new-hire orientation. On-the-job training is the primary delivery format for all positions. Ues of e-learning formats are expected to increase, particularly web-hosted (internet) training. Use of non- networked (CD) training is not expected to increase.

4. Executive Summary 4 Insights & Opportunities The majority of training professionals polled (73%) report feeling that upper management supports training and values it as a contributor to the organization’s overall success. The implication is that a portion of trainers do not feel supported by top management. The leading three training topic areas for 2012 – management, employee-level position and customer service training – remain the top priorities for 2013 and have increased in importance. The required skill set for trainers has changed dramatically in recent years, and digital proficiency has emerged as an increasingly important skill. However, training professionals feel more resources are needed to enable them to achieve levels of competency necessary to be effective. Despite reported increases in training resources, half of training professionals indicate they are doing more with less financial and personnel resources, and one-third (29%) are concerned about their ability to meet their department’s goals with current resources.

5. Today’s Objectives Industry Update Member Survey Training Resources, Platforms & Delivery Formats Insights & Opportunities 5

6. Restaurant Industry Had a Good 2012 2012 Restaurant Industry Total = $435B Sales Growth vs. Previous Year Independents outpaced chains. 6 * Small restaurant chains and independents, with <$39MM in sales Source: Technomic Top 500 Reports

7. Same-Store Sales % Change vs. Previous Year Chain Same-Store Sales Turned in Q1 2013 7 LSR0.8%LSR0.8% CDR-0.5%CDR-0.5% Q1-’13 Source: Public Company Reports, Technomic

8. Hotel Revenue and Pricing Indicate Health Property TierRevPAR—YTD Avg. Daily Rate—YTD Luxury8.9% 5.7% Upper Upscale6.8% 4.6% Upscale6.6% 4.7% Midscale w/F&B5.2% 3.5% Economy5.8% 3.7% Independent7.0%4.2% Lodging industry holding strength, although figures are slowing down relative to last year. Source: Smith Travel Research; as of April, 2013 8

9. Hotel Rooms Sold Trend Moderating 9 Hotel Rooms Sold—U.S. % Change vs. Prior Year May 2013 1.6% 1.6% Source: Smith Travel Research

10. 10 Consumer Confidence Yet to Rebound Index Jul 2007 111.9 Jul 2007 111.9 Feb 2009 25.3 Low confidence results in less spending. Base: 1966 = 100 Source: Conference Board May 2013 76.0 76.0

11. 11 Looking Ahead Growth forecast—tempered 2013 trend softer than 2012 Slight pick-up in 2014 P-Preliminary F-Forecast * Assumes 3% inflation Real growth trend indicates continuation of the “take-share” environment. NominalReal* Segment2013 (P)2014 (F)2013 (P)2014 (F) LSR4.0%4.5%1.0%1.5% FSR3.5% 0.5% Bars/taverns4.5%5.0%1.5%1.9% Total3.8%4.1%0.8%1.0%

12. Consumer Value Equation 12 Importance of Select Restaurant Attributes By age Flavor and service outrank price as priorities for restaurant consumers, especially younger diners. Take-share environment with a consumer focused on experiential attributes. Source: Technomic, Inc., Consumer Restaurant Brand Metrics (Q1, Q2 – 2013)

13. 13 CHART Member Survey

14. Average years spent in hospitality training and development field = 16.9 years Majority of respondents are either Training/HR Directors (43%) or Training/HR Managers (24%); another 16% are Training/HR Executive/VP level Respondent Job Profile 14 Level Base: 51 respondents Years of Experience

15. Three-quarters are chains 88% privately held companies Organization Type & Segment 15 Type of Organization* Base: 51 respondents *Figures do not equal 100% due to rounding ** Figures do not equal 100% due to companies operating concepts in multiple segments Segment** Two-fifths operate restaurants in fast casual Two-fifths casual dining One-fifth hotel Franchise 20% Independent 6% Chain 75%

16. Average number of locations = 237 Organization Size 16 Base: 51 (employees) and 48 (location) respondents Number of Locations Systemwide Annual Revenue Millions Two-fifths operate 40 or fewer locations The majority report revenue below $100 million

17. Turnover Trend—Positive CHART member turnover currently is below the industry average. Total Average Turnover by Year: 2010: 63% 2011: 62% 2012: 56% 17 Past Employee Turnover Means Base: 51 respondents

18. Anticipated Turnover Trend 18 What is your expectation for turnover in 2013 in your organization? Nearly half expect consistent turnover, and one-quarter foresee decreased turnover in 2013. Base: 51 respondents Sum of percentages in pie chart does not equal 100% due to rounding

19. Anticipated Turnover Trend 19 Anticipated Turnover in 2013 by Type of Employee Base: 51 respondents Turnover is expected to increase the most among hourly and management employees.

20. 20 Training Resources Overview & Trends

21. Training departments average five employees. Two-fifths of training departments report to Operations. Training Personnel 21 Number of Employees Base: 50 (number of employees) and 51 (report structure) respondents Reporting Structure

22. Training Personnel Headcount Increasing Nearly half of organizations report increased headcounts compared to three years ago and one-third since a year ago. 22 How has the number of people in the training department changed compared to ___? Base: 51 respondents 31% increase One Year Ago 49% increase Three Years Ago

23. Training Expenditures 23 Base: 51 respondents Annual Training Expenditures 000s of dollars Half of organizations spent less than $500,000 on training last year.

24. Training Expenditures Increasing Investment in training is up significantly from three years ago for 35% of organizations 24 How has the total amount your company spent last year on training changed compared to___? Base: 51 respondents 53% increase One Year Ago 62% increase Three Years Ago

25. Training Dollars—Allocation by Position 25 Percentage of Annual Training Dollars Allocated to Role Means shown Base: 51 respondents 24% of respondents indicated that they don’t know Half of training dollars are allocated to in-unit personnel Line-level employees Assistant manager General manager Certified trainers receive 5% of total training dollars

26. Less than half of organizations create all training content internally. Training Content Creation 26 Source of Training Content Base: 51 respondents

27. The average expenditure on external training resources was 13% of total budget. Three in 10 organizations increased their spending on external resources External Resource Expenditures 27 Percentage of Training Budget Allocated to External Resources Last Year Base: 51 respondents Changes to This Expenditure Since 2011

28. External Resource Expenditures 28 Percentage of Total Training Budget Allocated to External Resources Means Base: 51 respondents Printing is the largest external expenditure.

29. Changes to External Training Budget Notable expenditure increases in technology/software, video, training tools, printing, topic- specific training programs and printing Decreases occurred in printing and video 29 Change in Percentage of Total Training Budget Spent on External Resources from Previous Year Base: 45 respondents

30. More than half of organizations anticipate spending more on external resources in 2013. External Resource Expenditures 30 Do you expect spending on external resources to increase in 2013? Base: 51 respondents

31. 31 Training Platforms & Delivery Formats

32. Time Allocation by Training Area 32 What percentage of your time do you personally spend on each of the following areas? Means Base: 51 respondents 4% of respondents indicated that they don’t know CHART members multitask…. Spread their time among a variety of areas: Training-specific activities and functions such as training material development, class facilitation, design and new store openings Organizational initiatives Management functions—departmental, program and event Personal development

33. Training Delivery Time Allocation 33 What percentage of your company’s annual training delivery time is allocated toward ____? Means Base: 51 respondents Training time allocation mirrors dollar allocation 52% goes to line-level employee, assistant manager and general manager positions 6% to certified trainers

34. Training Topic Allocations 34 Percentage of Training Time Allocated to Topic Means Base: 51 respondents Basic job skills and customer service are the top-ranking training topics for both hourly employees and managers.

35. Annual Training Hours 35 Hours of Training Provided Annually Means Base: 51 respondents Managers receive the highest number of training hours annually and in orientation, followed by hourly employees. Hours of New Hire Training Provided During Orientation Means

36. Training Formats 36 Base: 51 respondents Percentages for each position may not add up to 100%; remaining percentages represent “don’t know” responses On-the-job training is the primary delivery vehicle for training in all positions. What percentage of your training is administered in each format for each position? Means

37. Base: 51 respondents 37 Delivery of Training Topics Delivery of Training Topics (Top Three Methods Shown) Basic job skillsOn-the-job (92%)Classroom: mixed media (33%)Classroom: printed materials (25%) Customer serviceOn-the-job (86%)Classroom: printed materials (39%)Classroom: mixed media (37%) Technology/ systemsOn-the-job (86%)Classroom: printed materials (29%) Classroom: mixed media/ E-learning: web-hosted (20% each) Culinary skillsOn-the-job (78%)Classroom: printed materials (22%)Classroom: mixed media (12%) Supervisory skillsOn-the-job (69%)Classroom: printed materials (57%)Classroom: mixed media (37%) Food safetyOn-the-job (69%)Classroom: mixed media (43%)Classroom: printed materials (37%) Interpersonal skillsOn-the-job (65%)Classroom: printed materials (45%)Classroom: mixed media (33%) Train-the-TrainerOn-the-job (63%)Classroom: printed materials (53%)Classroom: mixed media (35%) Desktop computersOn-the-job (63%) Classroom: printed materials /Classroom: mixed media/ E-learning: web-hosted (12% each) Financial managementOn-the-job (61%)Classroom: printed materials (47%)Classroom: mixed media (24%) New hire orientationOn-the-job (61%)Classroom: printed materials (33%)Classroom: mixed media (29%) ComplianceOn-the-job (55%)Classroom: printed materials (41%) Classroom: mixed media/ E-learning: web-hosted (25% each) MarketingOn-the-job (53%)Classroom: printed materials (43%)Classroom: mixed media (22%) LeadershipOn-the-job (53%)Classroom: printed materials (35%)Classroom: mixed media (31%) HR programs Classroom: printed materials (45%) Classroom: mixed media (43%)On-the-job (33%)

38. 38 E-Learning Formats Usage of E-learning formats varies. Web-hosted (internet)—65% Casual dining, full-service hotels Internal network (intranet)—59% Family dining, resort and fast-casual restaurant Non-networked (CD)—32% Select-service hotel, resort Base: 34 respondents who use e-learning training Note: data should be considered directional only due to low base

39. Anticipated E-Learning Changes More than half expect to increase Web-hosted e-learning. 39 Anticipated Changes to Company’s Use of E-Learning Formats Base: 34 respondents who use e-learning training Note: data should be considered directional only due to low base

40. 40 Areas of Opportunity

41. Importance of Training 41 Perception of Management Attitudes Toward Training Top two box = agree and agree completely Base: 51 respondents Respondents were asked to indicate their opinion on a scale of 1–6 where 1 = disagree completely and 6 = agree completely CHART members feel top management values training—but needs to see the business case for it.

42. Training Priorities 42 Priority of Training Areas Top two box = important and extremely important Base: 51 respondents Respondents were asked to indicate their opinion on a scale of 1–6 where 1 = not important at all and 6 = extremely important The top-ranked training areas for 2012 are even more important in 2013.

43. Training Topics 43 Potential Training Topics Top two box = agree and agree completely Base: 51 respondents Respondents were asked to indicate their opinion on a scale of 1–6 where 1 = disagree completely and 6 = agree completely Food safety, alcohol service and diversity are seen as important training topics for CHART members.

44. Evolving Trainer Skill Set and Learning Styles 44 Attitudes Toward Training Skills Top two box = agree and agree completely Base: 51 respondents Respondents were asked to indicate their opinion on a scale of 1–6 where 1 = disagree completely and 6 = agree completely Digital proficiency is a priority in a changing skill set.

45. Lack of Resources 45 Attitudes Toward Lack of Training Resources Top two box = agree and agree completely Base: 51 respondents Respondents were asked to indicate their opinion on a scale of 1–6 where 1 = disagree completely and 6 = agree completely CHART members are feeling the strain of “doing more with less.”

46. Conclusions 46 Industry improvement continues Moderate growth, some bumps—take-share environment Training resources expanding post recession Headcount and expenditures increased from prior years External resource expenditures rising On-the-job training remains the primary delivery format E-learning expected to increase Stronger focus on management, employee-level position and customer-service training in 2013 Members feel supported by upper management But also feel stretched and “doing more with less”

47. Thank you! 47 Donna Hood Crecca Senior Director 631-265-3839 dcrecca@technomic.com