2016 Fall Summit

1

2016 Fall Summit October 26, 2016Orlando, FL

2

Welcome / IntroductionSteve PattisonChief Financial Officer & Vice President, Business Analysis & Risk Management, Restaurant Services, Inc.

3

Best PracticesSurvey

Web Portal

EducationCollege Outreach

Student EngagementParsley Scholarship

ConferencesSpring w/NRA

Fall w/Market Vision

Provides best in class reference information for food service supply chains to benchmark their progress and identify opportunities to optimize their supply chain

Creates awareness among top supply chain university programs to attract best and brightest talent to food service industry

Creates opportunities for food service industry supply chain executives to network and exchange ideas

Conference Content / Value

Drives Attendance

Drives Economic Performance

$

$

Supply Chain Management Executive Study Group

Strategic Vision

4

Platinum Sponsors

ARMADA HAVI Global Solutions

ITI / FAC P&G Professional

S&D Coffee & Tea Surlean Foods

SYGMA | Sysco

5

Gold SponsorsNational Cattlemen’s Beef Association Bongards

Consolidated Distribution Corporation Distribution Market Advantage

Edward Don Ken’s

F. W. Bryce, Inc. Mazzetta Company, LLC

MBM McLane

Pacific Supreme Company Sabert

SCA Stampede MeatTurano Baking Company

6

Silver SponsorsArrowStream Basic American Foods

Cargill CocaCola

Dow AgroSciences DOT

FoodLogiQ Genpak

Gardere Georgia Pacific

Huhtamaki Great Lakes Cheese

Jennie-O The Multi-Unit

Nation Pizza & Foods SCA Technologies

Sensitech SpenDifference

Sugardale SWS Re-Distribution Company

7

Five Year SponsorsArrowStream Basic American Foods

Cargill CocaCola

Distribution Market Advantage Edward Don

HAVI Global Solutions MBM

P&G Professional S&D Coffee & Tea

Sabert SYGMA | Sysco

Stampede Meat Turano Baking Company

8

Term Expirations

Vice ChairmanLynne Wildman

SecretaryBrandon J. Ray

9

Board of Directors & Advisory CouncilCHAIRMAN

Steve PattisonRSI, Inc.

VICE CHAIRMAN Lynne Wildman

American Blue Ribbon Holdings

SECRETARYBrandon J. Ray

Brinker International

TREASURER Joe Schechinger

Wendy’s / QSCC, Inc.

Mark SmithCentralized Supply Chain Services

Rif W. WigunaPanda Restaurant Group, Inc.

David D. CoxARCOP, Inc.

Chairman Emeritus

Rob DugasChick-fil-A

Janet D. EricksonBrinker International

George HoffmanRSI, Inc.

Sam KhouryNext Stage Partners | CIC

Partners

Charlie LousignontBrinker International

Evan S. Nash, C.P.M., C.P.H.S., A.P.P.

Johnson and Wales University

Matthew RiddlebergerFirehouse of America, LLC

John BaroneMarket Vision, Inc.

Ron CegnarCEO Partners, Inc.

James KennedyP&G Professional

Joyce MazeroGardere Wynne Sewell LLP

Jerry MurphyS&D Coffee & Tea, Inc.

David R. ParsleyDavid R. Parsley & Associates, LLC

10

Deb BillowExecutive Vice President of Marketing and Member Engagement

• New executive• Start - August 29, 2016• Marketing professional with over 20 years experience

• Executive leadership roles in various organizations including the GKIC, a marketing consultancy and the American Marketing Association

• Reports directly to Dawn Sweeney

11


12

Scholarship UpdateEvan Nash, C.P.M., CPHSDirector of Purchasing, Johnson & Wales University Charlotte

13

Overview

• (1) $10,000 and (2) $5,000 Supply Chain Management Scholarship application process opened in December 2015

• Scholarship application process closed on March 29, 2016

14

15

2016 Scholarship Awardees

“When I look at the restaurant industry through a supply chain lens,I see a world of remarkable opportunity. The alignment between thesupply chain and restaurant industries will allow for an integratedcareer. For example, I could work to procure fresh ingredients forrestaurants, transport food among supply networks, or influencemanufacturing processes. And, as out global infrastructurecontinues to expand, and foods become more worldwide, there isroom to improve our level of efficiency, cost-effectiveness, andimpact on the earth.”

$10,000 RecipientKaren Burlingame

Pennsylvania State University

16


“I am intrigued by supply chain management because it uses logic to add value for the customer.Another characteristic of supply chain management that entices me is that decisions have animmediate and measurable impact. Because of the inherent nature of a chain, all decisions areinterdependent and the outcome of any change can be seen throughout the supply chain.”

$5,000 RecipientOlivia Sequin

Boston University

17


“When I think of supply chain management the word versatility comes to mind. There iseverything from transportation to distribution to inventory to sourcing. And, it is also a careerapplied to every sector in the business world, allowing me to combine my passion for traveling,language skills, and hopeful law degree to be able to find suppliers and producers around theworld to help businesses lower costs and receive products more efficiently.”

$5,000 RecipientTara Stolarski

Pennsylvania State University

18


19

Status of the Restaurant Industry One Year LaterHudson RiehleSenior Vice President, Research and Knowledge Group, National Restaurant Association

2020

AgendaOverview

Economic Backdrop

Industry Segments

Research Roundup

Regional Outlook

Wrap-Up

OVERVIEW

2222

$783Billion

*Projected

2323

$279Billion

*Projected

2424

45 Years of Restaurant Industry Sales (1971-2016)

Source: National Restaurant Association

2525

45 Years of Restaurant Industry Sales (1971-2016)


6.5%Compound annual

growth rate

2626

Employees14.4

million

Restaurant Industry 2016

2727

More than1 Million

2828

Restaurants per Capita Continues to Trend HigherNumber of Eating and Drinking Places per 100,000 U.S. Residents

Source: Bureau of Labor Statistics, U.S. Census Bureau, National Restaurant Association;; Establishments with payroll only

2929

National Average: 186.1

220 or more

200 to 219

180 to 199

160 to 179

Less than 160

DC

29

Lowest Concentration of Restaurants in the SouthNumber of Eating and Drinking Places per 100,000 U.S. Residents

Source: Bureau of Labor Statistics, U.S. Census Bureau, National Restaurant Association;; Establishments with payroll only

303030Source: National Restaurant Association

Restaurant Industry’s Shareof the Food Dollar

ECONOMIC BACKDROP

3232

2016 GDP Growth is Weakest Since 2011U.S. Real Gross Domestic Product – Historical and Projected Growth Rates

Source: Bureau of Economic Analysis;; National Restaurant Association projections

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

1.8%

-0.3%

-2.8%

2.5%

1.6%

2.2%

1.7%

2.4% 2.6%

1.6%

Projected

3333

Economic Growth Slowed in Recent QuartersU.S. Real Gross Domestic Product – Quarterly Annualized Growth Rates

Source: Bureau of Economic Analysis;; National Restaurant Association

-2%

0%

2%

4%

6%

13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 15:Q1 15:Q2 15:Q3 15:Q4 16:Q1 16:Q2

2.8%

0.8%

3.1%

4.0%

-1.2%

4.0%

5.0%

2.3%2.0%

2.6%2.0%

0.9% 0.8%

1.4%

3434

U.S. Presidential Campaign Dampening Consumers’ Spending Confidence

No Change55%Less Confident

31%

More Confident14%

Source: National Restaurant Association, August 2016

3535

Disposable Income to Post Moderate Gain in 2016Real Disposable Personal Income – Historical and Projected Growth Rates

Source: Bureau of Economic Analysis;; National Restaurant Association projections

-2%

-1%

0%

1%

2%

3%

4%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

2.1%

1.5%

-0.4%

1.0%

2.5%

3.1%

-1.4%

3.5% 3.5%

2.3%

Projected

3636

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real Household Income Rose in 2015, but Remains Down 2% From its Recent High in 2007Real Median Household Income (adjusted for inflation in 2015 dollars)

Source: U.S. Census Bureau

3737

Gas Prices Trended Somewhat Higher in Recent WeeksAverage price per gallon for regular gasoline

Source: U.S. Department of Energy, Energy Information Administration

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

Price per gallon

3838

Gas and Diesel Prices Down More Than 10% in 2016Annual average price per gallon for regular gasoline and diesel fuel

Source: U.S. Department of Energy, Energy Information Administration *projected annual average

$0.00

$1.50

$3.00

$4.50

Regular Gasoline Diesel Fuel

$3.51

$3.92

$3.36

$3.83

$2.43$2.71

$2.12$2.31

2013 2014 2015 2016*

3939

0

2

4

6

8

10

12

14

16

18

20

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Millions

Cash for Clunkers

Auto Sales Totaled Nearly 18 Million in SeptemberU.S. Monthly Auto Sales (Seasonally-adjusted annual rates)

Source: AutoData

4040

Where Consumers Spent in 2015

CATEGORYPERCENTOF TOTAL

Housing 33%Transportation 17Food 13Insurance/pensions 11Healthcare 8Entertainment 5Contributions 3Clothing 3Other 7

Total 100%

Source: Bureau of Labor Statistics, Consumer Expenditure Survey – 2015,; National Restaurant Association

4141

National Economy to Post Moderate Job Growth in 2016Total U.S. Employment – Historical and Projected Growth Rates

Source: Bureau of Labor Statistics;; National Restaurant Association projections

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

1.1%

-0.5%

-4.3%

-0.7%

1.2%1.7% 1.6%

1.9% 2.1%1.8%

Projected

4242

4343

Economy Added Nearly 2.5 Million Jobs During the last 12 MonthsTotal U.S. Nonfarm Employment – Change from previous month

Source: Bureau of Labor Statistics;; figures are seasonally-adjusted

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

295,000280,000 271,000

168,000

233,000

186,000

144,000

24,000

271,000252,000

167,000 156,000

4444Source: Bureau of Labor Statistics

National Average: 4.6% More Jobs

Economy is Now 6.3 Million Jobs Above Pre-Recession Peak43 States Have More Jobs Than Before the Jobs Losses Started in Feb.

2008

4% or more

2% to 3.9%

0% to 1.9%

-0% to -1.9%

-2% or fewer

DC

+22%

-5%

+14%

4545

Wholesale Food Prices on Pace to Decline for 2nd Straight YearAnnual Growth in Producer Price Index – All Foods

Source: Bureau of Labor Statistics *Year to date through September

-6%

-3%

0%

3%

6%

9%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

7.6% 7.7%

-3.8%

4.9%

8.1%

2.2% 2.2%

5.5%

-2.0%

-4.2%

4646

4747

Winter 2016-‐17

Temperature Outlook

4848

Menu Price Growth Remains ModerateAnnual Growth in Consumer Price Index – Food Away From Home

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

3.6%

4.4%

3.5%

1.3%

2.3%

2.8%

2.1%2.4%

2.9%2.7%


4949

Menu Price Growth Outpacing Grocery Store PricesAnnual Growth in Consumer Price Index – Food Away From Home vs. Food At Home


-2%

-1%

0%

1%

2%

3%

4%

5%

2010 2011 2012 2013 2014 2015 2016*

1.3%

2.3%2.8%

2.1%2.4%

2.9%2.7%

0.3%

4.8%

2.5%

0.9%

2.4%

1.2%

-1.0%

Menu Prices Grocery Store Prices

5050

Growth in Overall Consumer Prices Remains ModestAnnual Growth in Consumer Price Index – All Items


-1%

0%

1%

2%

3%

4%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

2.8%

3.8%

-0.4%

1.6%

3.2%

2.1%

1.5% 1.6%

0.1%

1.1%

INDUSTRY SEGMENTS


TableserviceRestaurant Sales

2015$247 billion

2016$259 billion

+4.9%

5353

Percentage of adults NOT eating on-premises at restaurants as often as they would like

Pent-Up Demand for Restaurants Remains High


September2013

October2007

September2016

47%31% 45%All Adults

Percentage Point Change 2007 vs 2016

+14

5454

5555

Higher-‐Income Households are Prime Restaurant CustomersShare of Total Restaurant Spending by Household Income Level

Less than $30,00015%

$30,000 - $49,99913%

$50,000 - $69,99912%

$70,000 - $99,99918%

$100,000 or more42%

Source: Bureau of Labor Statistics, 2015 data


Limited-serviceRestaurant Sales

2015$211 billion

2016$223 billion

+5.9%

5757

Limited Service Operators Who Plan on MakingAdditional Efforts to Expand the Off-Premises

Side of their Business in 2016

Source: National Restaurant Association, Restaurant Trends Survey, 2015

5858Source: 7-Eleven and Flirtey

5959

It’s a Bird, It’s a Plane,It’s … My Pizza?

Consumers who say they would be likely to use drone delivery of restaurant food if available

Source: National Restaurant Association, National Household Survey, 2015


Snack and NonalcoholicBeverage Bar Sales

2015$35.9 billion

2016$38.3 billion

+6.8%

6161

Monthly Restaurant Sales Above 2015 LevelsSeasonally-adjusted Monthly Sales at Eating and Drinking Places (in billions)

Source: U.S. Census Bureau

$25

$30

$35

$40

$45

$50

$55

$60

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Monthly Sales (in billions)

200820072006

2004

20022001

2003

2005

2009201020112012201320142015

2016

6262

96

97

98

99

100

101

102

103

104

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Restaurant Performance Index (RPI) Fell Below 100 in AugustValues Above 100 = Expansion, Values Below 100 = Contraction


6363

Labor Costs and Recruiting Employees are the Top Challenges Facing Restaurant Operators

Top Challenges Facing Restaurant Operators: Sep. 2014, Sep. 2015 and Sep. 2016

SEPTMEBER 2016

Labor Costs/Min. Wage 22%

Recruiting Employees 21

Government 18

Sales Volume 11

The Economy 9

SEPTEMBER 2014

Food Costs 30%

The Economy 18

Government 17

Sales Volume 11


SEPTEMBER 2015

Government 23%


Labor Costs/Min. Wage 17

Food Costs 10

Sales Volume 7

Source: National Restaurant Association, Restaurant Industry Tracking Survey

6464

Restaurants Added 300,000 Jobs During Last 12 MonthsEating and Drinking Place Employment – Change from previous month

Source: Bureau of Labor Statistics;; figures are seasonally-adjusted

0

20,000

40,000

60,000

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

49,100

28,400

35,500

29,90025,300

9,000 7,400

15,000

24,400

16,900

29,600 29,700

6565

Hourly Wages on Pace to Post Strongest Gain Since 2007Growth in Average Hourly Earnings of Non-Supervisory Employees

Source: Bureau of Labor Statistics *Year to date growth through August

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

4.0% 3.7%

3.0%

2.4%2.0%

1.5%

2.0%2.4% 2.1% 2.4%

6.3%

3.8%

2.9% 2.8%

2.1% 2.2%1.7%

3.2% 3.3%

4.2%

Total U.S. Private Sector Eating and Drinking Places

6666

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Average Hourly Wages

Average Wholesale Food Costs

Rising Labor Costs Are Offsetting the Benefits from Lower Food CostsAverage Hourly Wages of Restaurant Employees vs. Average Wholesale Food Costs

Percent change vs. same month in previous year

Source: Bureau of Labor Statistics

+4.8%

-‐4.8%

6767

RESEARCH ROUNDUP

6969

1 Locally sourced meats and seafood

2 Chef-driven fast-casual concepts

3 Locally grown produce

4 Hyper-local sourcing

5 Natural ingredients/minimally processed food

TABLESERVICE RESTAURANTS

Source: National Restaurant Association, What’s Hot in 2016 chef survey

7070Source: National Restaurant Association, What’s Hot in 2016 chef survey

6 Environmental sustainability

7 Healthful kids meals

8 New cuts of meat

9 Sustainable seafood

10 House-made/artisan ice cream

TABLESERVICE RESTAURANTS

7171

1) Natural ingredients/minimally processed food

2) Gluten-free items

3) Locally sourced produce

4) Artisan/house-made items

5) Ethnic condiments/toppings

LIMITED-SERVICE RESTAURANTS

What’s Hot in 2016

Source: National Restaurant Association, 2016 Restaurant Industry Forecast

7272Source: National Restaurant Association, What’s Hot in 2016 chef survey

1 Craft/artisan spirits

2 Local beer/wine/spirits

3 Onsite barrel-aged drinks

4 Culinary cocktails

5 Regional signature cocktails

ALCOHOL

7373

Americans More Adventurous in

Ethnic Food Choices

* Tried at least once

Source: Global Palates: Ethnic Cuisines and Flavors in America, National Restaurant Association, 2015

Rank* Cuisine

PercentagePoint

Increase Since 1999

1 Mediterranean +38

2 Spanish +28

3 Caribbean +27

4 Middle Eastern +24

5 French +22

6 Thai +21

7474

Restaurants Remain Extremely Labor IntensiveAverage Sales per Employee, 2015

Source: National Restaurant Association, based on Bureau of Labor Statistics and US Census Bureau data

Eating & Drinking Places $56,000

Grocery Stores $226,000

Gasoline Service Stations $478,000

Auto Dealers $769,000

7575

Labor Productivity in Restaurants Remained Flat in Recent Years

Average Annual Percent Change in Output per Labor Hour: 2005 to 2015

Source: Bureau of Labor Statistics

-0.5%

0.0%

0.5%

1.0%

1.5%

Eating andDrinking Places

FullserviceRestaurants

Limited-ServiceEating Places

Total NonfarmBusinesses

-0.1%

0.1%0.0%

1.3%

7676

Four in Five Restaurant Operators Agree

Source: National Restaurant Association, 2016 Restaurant Technology Survey

• Technology Helps Increase Sales• Technology Makes Their Restaurant MoreProductive

• Use of Technology in a Restaurant Provides a Competitive Edge

7777

(Mostly) Yes to Restaurant TechConsumers who agree with the following statements

Source: National Restaurant Association, Technology Consumer Survey, 2015

Technology increases convenience 72% 83%

Technology speeds up service 67% 76%

Technology increases order accuracy 65% 74%

Technology makes dining out more fun 39% 46%

Technology makes you dine out or ordertakeout/delivery more often 37% 51%

All adults Age 18-34

7878

Restaurant Smartphone Tech

Source: National Restaurant Association, 2016 Restaurant Industry Forecast – Base own/use smartphone/tablet

Percent of adults

Look up restaurant locations, directions and hours of operation 83%

Look at menus 75%

Read reviews from apps or sites like Yelp and TripAdvisor 55%

Order takeout or delivery directly from a restaurant’swebsite or branded app 51%

Use rewards or special deals 50%

Consumers who use smartphones or tablets for these activities occasionally

7979

Restaurant Smartphone Tech

Source: National Restaurant Association, 2016 Restaurant Industry Forecast – Base own/use smartphone/tablet

Percent of adults

Make reservations 43%

Look up restaurant nutrition information 42%

Pay for meals 32%

Order takeout or delivery via an aggregate service like Seamless or GrubHub 24%

Consumers who use smartphones or tablets for these activities occasionally

8080Source: National Restaurant Association, 2016 Restaurant Industry Forecast

3 out of 4 consumers say they would go to a restaurant during off-peak times if they received a discount.

8181

Restaurants = Meal SolutionsConsumers who say they would be likely to buy fresh uncooked

food in restaurants

Source: National Restaurant Association, National Household Survey, 2015

REGIONAL OUTLOOK

8383

Dramatic Consumer Confidence VariationsBy Region Continue Present Situation: September 2016

REGION INDEXWest North Central 149.8New England 137.8Pacific 136.1West South Central 132.1South Atlantic 130.0Mountain 127.1East North Central 125.0Middle Atlantic 104.7East South Central 97.5

Source: The Conference Board

8484

RegionPopulation Growth

EmploymentGrowth

Mountain 1.6% 2.4%

South Atlantic 1.4 2.1

West South Central 1.3 1.4

Pacific 1.0 2.2

East South Central 0.7 1.8

New England 0.5 1.6

West North Central 0.5 1.4

Middle Atlantic 0.2 1.4

East North Central 0.2 1.4

U.S. Average 0.8 1.8

The Critical Role of Demographics in 2016



8686

Top 5 States:Restaurant Sales 2016

CaliforniaTexasNew YorkFloridaIllinois

$79.152.442.540.324.5

$ Billion


8787Source: Moody’s Analytics

U.S. Population: 8%

Projected Growth in Total State Population2016 to 2026

15% or more

8% to 14.9%

5% to 7.9%

2% to 4.9%

Less than 2%

DC

87

WRAP-UP

8989

Americans Love RestaurantsPercent of consumers who say they enjoy going to:

Restaurants Grocery Stores

90% 66%

Source: National Restaurant Association, 2015

9090

Americans Retain PositiveView of the Restaurant Industry

Rank Industry % Positive

1 Restaurant 66%

2 Computer 66%

3 Farming/Agriculture 55%

4 Grocery 54%

5 Internet 53%

6 Automobile 52%

Source: Gallup, August 2016

9191

Americans Have Strong NegativeView of These Sectors

Rank Industry % Positive

25 Federal Government 28%

24 Pharmaceutical 28%

23 Legal 31%

22 Healthcare 34%

21 Advertising/Public Relations 35%

20 Oil/Gas 37%

Source: Gallup, August 2016

9292

Pent-‐Up Demand for Restaurant ServicesRemains Elevated

Over two out of five adults are NOT dining on-‐premises or using take-‐out as often as they would like

Source: National Restaurant Association, 2016

9393Source: National Restaurant Association, Food and Menu Trends Survey, 2015

72% of consumers say restaurant food provides

tastes and flavors they can’t duplicate at home

9494

2016-17 U.S. Economic OutlookModerate Growth Continues

Source: National Restaurant Association, projections as of October 2016

INDICATOR 2015 2016 2017

Real Gross Domestic Product 2.6% 1.6% 2.2%

Real Disposable Personal Income 3.5% 2.3% 2.0%

Consumer Price Index 0.1% 1.4% 2.2%

Total U.S. Employment 2.1% 1.8% 1.6%

9595

International Economic Outlook~ Real GDP~

Source: Blue Chip Economic Indicators;; National Restaurant Association, October 2016

Country 2016 2017India 7.5% 7.6%China 6.6 6.2

South Korea 2.7 2.6Mexico 2.2 2.4

United Kingdom 1.8 0.6United States 1.6 2.2Eurozone 1.6 1.4Canada 1.2 2.0Japan 0.6 0.8Russia -‐0.7 1.1Brazil -‐3.3 0.9

9696

§ 2016 and 2017 = moderate industry growth with strong geographic variations sustained.

§ Improved food cost situation;; local sourcing, eco-friendly, and ethnic dishes remain key menu trends.

§ Labor costs and recruitment are top operator challenges. § As restaurant labor costs continue to grow, greater emphasis on value-added products.

§ More technology integration to aid productivity/loyalty.§ With consumers still managing their check and needing “nudging,” technology offers distinct competitive advantages with patrons’ acceptance growing.

Wrap-Up

9797

Hudson RiehleSenior Vice President, Research and Knowledge Group

National Restaurant Association

Restaurant Industry 2016 and Beyond

October 26, 2016 Orlando, FL

Supply Chain Management Executive Study Group

9898


99

Managing and Building Resources for Developing Supply Chain Systems

Ron Cegnar, President and CEO, CEO Partners, Inc.Jeff Abramson, Vice President, Macaroni GrillDavid Parsley, President, David R. Parsley & Associates, LLCLynne Wildman, Vice President, Supply Chain Management, American Blue Ribbon Holdings

100

How Can Emerging Or Developing Supply Chains Systems

Compete with Developed Supply Chain Systems

101

– Jeff Abramson - Famous Dave’s, Macaroni Grill, BUCA Inc., United Airlines

– David Parsley - Carls, Panda, Brinker, Applebee’s, (CSCS) DineEquity

– Lynne Wildman – American Blue Ribbon Holding, ARCOP (Arby’s), Darden Restaurants

Panelists

102

Regulation• Costs & Complexity• Increased regulatory requirements• Food/Brand safety/traceability• Cap & Trade

Economics• Recession (Lingering Impacts)• Long term changes to

consumer behavior• Greater commodity volatility• Food costs• Margin management

Globalization• Trade and Environmental issues• Carbon input of suppliers• Global water crisis• Anti-globalization meets rising nationalism• Supplier consolidation, scale & global demand• Lack of harmonized standards

Consumers • More savvy consumers - higher expectations• Brand safety • Growing insecurity (physical, mental, emotional)• Time poverty• Changing demographics• Sustainability• GMO/locally grown

Health & Wellness• Public health policy• Aging population• Animal welfare (antibiotics,

gestation crates, etc.• GMO’s• Growth stimulants

Market Share Battle• Restaurant Business no longer growth industry• New products/menu/category – speed to market• Shorter product lifecycles/promotions• Rapidly changing consumer behavior• Higher forecast error• Intense competition for best talent

Technology• Moore’s Law • Social Networks • Demand Shaping• Data management• Testing technology sensitivity

evolution

Red-Supply chain impact

103

1Individual Purchasing

2Consolidated Buying System

3 Strategic Procurement

3Strategic Procurement

4Supply Chain Management

5Integrated

Demand System

Savings by Stage

518-27%

(-5% to -8%)over level 4)

413-19%

(-5% to -6% over level 3)

38-13%

(-6% to -8% over level 2)

2(-2% to -5% over level 1)

1Base

Supply Chain Development and Impact

104

Critical Supply Chain Issues Facing Emerging Supply Chains

Strategic Distribution

System

Strategic Sourcing

Technology

SCM Personnel and Organization

Funding

Risk Management

Transportation Management

Brand Safety

Forecast & Promotional Management

Corporate & Franchisee Support

105

COGS -Top 25% versus bottom 25%

Category Percent Difference

FSR 5.6%

QSR 4.7%

106

Ø Lower and predictable costs

Ø Better promotional capabilities

Ø Improved competitiveness and margins

Ø Enhanced responsiveness to market needs

Ø Improved franchisee support

Ø Increased Brand safety

Ø Significant return on investment

Benefits Of Investing In The Supply Chain

107

Building Awareness and Resources for Supply Chain

Management TeamsLynne Wildman

108

How to Build Awareness

• Know the company vision and purpose and build the supply chain management strategy around and supporting that statement– Critical to success

• Know the company P&L and the supply chain management impact

• Fully understand spend, responsibilities and areas of opportunities

• Educate and communicate impacts

• Ask for resources to deliver against strategies and show returns

109

Define A Vision and Purpose

Create a SCM vision and purpose statement aligned with the company, focused on deliverables

• Supply Management

• Cost Management

• Risk Management

• Support Service

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Communicate What SCM Does

• What is the team responsible for – spell it out!

– Support 300 corporate and 40 franchised owned operations

– Directly responsible for the sourcing and distribution of over 5 million cases of product and over 600 skus

– Execute costs and spend to annual plan projections

– Manage contract services for chemicals, pest control, waste management, CO2, fryer, oven and hood cleaning

– Responsible for total quality management, including but not limited to managing product specifications creation and compliance, product and vendor performance

– Risk management inclusive of confidentiality and contract management, supply and price consistency, disaster management, regulatory and economic impact

– Daily interaction with all support center departments supporting all cross functional areas

111

Understand the P&L

What drives P&L spend?

Restaurant P&L Annualized $ Percentage of P&LAnnual Sales $600,000,000

Annual Labor $195,000,000 32.5%Annual Food and Beverage Spend Only $190,000,000 31.7%Annual Supplies/Utilities/R&M/Equipment/Contract Service Spend $75,000,000 12.5%Misc Marketing Spend $24,000,000 4.0%Misc Operations Spend $14,000,000 2.3%

+/-‐ 1% in spend change and impact Food and Beverage Only $1,900,000

112

Understand the P&L


SCM budget of $700,000 per year is .12% of total restaurant sales


Annual Labor $195,000,000 32.5%Annual Food and Beverage Spend Only $190,000,000 31.7%Annual Supplies/Utilities/R&M/Equipment/Contract Service Spend $75,000,000 12.5%Misc Marketing Spend $24,000,000 4.0%Misc Operations Spend $14,000,000 2.3%

+/-‐ 1% in spend change and impact Food and Beverage Only $1,900,000

Realized Negotiated Savings to Plan $1,000,000Times return on department spend 1.43

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Understand the P&L


SCM budget of $700,000 per year is .12% of total restaurant sales

Combine SCM responsibilities for 50% of supplies/utilities/R&M/contract services


Annual SCM Managed Spend including 50% Supplies/Services/R&M/etc. $227,500,000 37.9%Annual Labor $195,000,000 32.5%Annual Supplies/Utilities/R&M/Equipment/Contract Service Spend $37,500,000 6.3%Misc. Marketing Spend $24,000,000 4.0%Misc Operations Spend $14,000,000 2.3%

+/-‐ 1% in spend change on SCM Managed Programs $2,275,000Times return on department spend 3.25

Realized Negotiated Savings to Plan $1,250,000Times return on department spend 1.79

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What Drives Spend

SCM Responsibility Spend Annual Spend PercentageProteins $80,000,000 35.16%

Sauces/Soups $40,000,000 17.58%Mic Groceries $38,000,000 16.70%

Supplies $25,000,000 10.99%Utilities $18,000,000 7.91%Services $16,500,000 7.25%

Beverages $10,000,000 4.40%Total Spend $227,500,000

What drives spend and where are the opportunities

• What are the areas of key responsibilities• Where are the most impactful areas• Identify the hidden gems of efficiencies and opportunities• If you can reduce spend by 5% in supplies, you can save $1.25 Million• Managing contract services and incorporating preventative programs could save the company $1

Million+ in spend due to repairs and less equipment replacement• Contracting your utilities spend in deregulated markets can stabilize and reduce market impacts

115

Secure SCM Position and Resources

• Educate the leadership team on the importance and impact of Supply Chain – use the P&L, corporate knowledge and overall impacts to date• Document and sell SCM

• Understand where areas of opportunity are located

• Assign key responsibilities to those areas that will have the most impact• Deliver results

• Drive additional needs for resources based upon impact of opportunity savings or efficiencies

• Tie resources directly to overall impact and company vision and purpose• IE -‐ spending $50,000 for a team member to focus on small wares can save over $500K

• A 10X potential return for the organization – commit to that savings/impact/avoidance

• IE – hiring a team member to manage contract services takes pressure off the operators and allows them to focus on our team members and guests (and can save money)

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117

Networking BreakSessions resume in 25 minutes

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Roundtable Discussions:Animal Welfare

Moderators:Dr. Steven Lyon, Manager, Supply Chain Safety, Chick-fil-A Inc.Beth Medford, Director of Supplier Quality & Safety, Chick-fil-A Inc.

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Roundtable Discussions:Sustainable Sourcing

Moderators:Matt Daks, Senior Category Manager, National DCPKyle Newkirk, Senior Vice President, Global Sourcing, S&D Coffee and Tea

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Roundtable Discussions:Clean Label

Moderators:Anthony Epter, Senior Manager, Commercialization and Supply Chain, Dunkin’ Brands, Inc.Katie LeClair, Director, Innovation Management, Dunkin’ Brands, Inc.

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LunchSessions resume in 60 minutes

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Best Practices & Texas Christian University Review: Distribution and Logistics StudyRob Dugas, Chief Procurement Officer and Vice President, Chick-fil-A Inc.Les Karel, Senior Vice President, Indirect Sourcing & Canada Supply Chain, ARCOP, Inc.M. Dave Malenfant, Director, Advisory Board, Center for Supply Chain Innovation, TCUMark C. Smith, Chief Procurement Officer, Centralized Supply Chain Services, LLCDr. Morgan Swink, Eunice and James L. West Chaired Professor, Supply Chain Management, TCU

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Center for Supply Chain Innovation

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PURPOSE

• Best practices research and sharing program to turn research and insights into improvement and innovation

• Extend program reach and impact to interested member companies and professionals

• Grow awareness and engagement among SCM-focused students and career seekers

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SVP, Indirect Sourcing and Canada Supply ChainARCOP Arby's

Professor, Eunice and James L. West Chair of Supply Chain Management

Dave MalenfantTCU Center for Supply Chain Innovation

Chief Procurement OfficerCSCS Applebee's IHOP

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SURVEY CONTENT1. Description of the survey participants1.1. Job titles, reports, and experience1.2. Firm and SC organization size1.3. Number of concepts (brands) supported1.4. Restaurant categories, sales, locations, and ownership1.5. Growth trend

2. The Mainline Distribution network2.1. SKU size and mix2.2. Network structure2.3. Use of redistribution

3. Deliveries to Restaurants from Mainline Distributors3.1. Route dedication, case size and cube, delivery frequency3.2. Delivery restrictions and terms

4. Distribution Information and Performance Management4.1. Determinants of case fees4.2. Data feeds, ordering systems, and data capture4.3. Key performance indicators (KPIs)4.4. Changes in case fees and service

127

RESPONDENTS10%

23%

6%58%

3%

Please provide your job title

C-‐SuiteDirMgrVPOther

35%

22%

39%

2% 2%

Which of the following categories best describes this concept?

Quick ServiceFast CasualCasual or Family DiningFine DiningOther

0%

10%

20%

30%

40%

50%

60%

0-‐500 501-‐1,000 1,001-‐5,000 5,001+

Percen

t of respo

nden

ts

How many U.S. restaurant locations are supported for this concept?

128

BENCHMARKS

0% 20% 40% 60%

decreased 7% -‐ 10%



stayed about the same

increased 1% -‐ 3%



Over the past three years, what has been the average yearly change in your case fees?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Line haulsProportion of attended vs unattended …

Hitting delivery windowsUnloading fees

Number of key stops vs days stopsBack hauls

Proportion of proprietary vs distributor …Marketing allowances

Other factorsPrompt pay discounts

What activities raise or lower distribution case fees in this concept?

129

COMPARISONSQuick Service N=28

Fast Casual N=17

Casual & Family Dining N=32

Percentage reporting growth 75% 78% 42%

Number of restaurants 2731 247 466Percentage of stores that are franchised 62% 52% 20%

Percentage of spend on proprietary items 75% 64% 51%

Stores per DC 99 77 51

Cases per delivery 105 136 189

Number of data feed types from distributors 3.4 2.8 2.5

Number of redistribution companies used 1.9 1.3 2.1

Small Regional Chains N=26

Large National Chains N=48

Huge Global Chains N=5

Sales (millions) 82.7 892.7 7000.0

Number of U.S. restaurant locations 28.3 611.5 10088.8

Percentage of restaurant locations franchised 13.6% 50.5% 68.0%

Number of mainline SKUs 369.1 423.3 1400.0

Annual $ spend (millions) 15.9 267.0 n/aPercentage of total SKU count that is proprietary 37.4% 52.9% 68.7%Percentage of total dollar spend that is proprietary 43.0% 64.5% 80.7%

Number of DCs 2.3 16.4 40.3Stores per DC 17.7 57.5 292.0SC Employees per concept 5.1 9.4 83.3Restaurants per SC employee 27.4 129.3 81.3Purchase spend (millions) per SC employee 4.95 1.56 n/aDCs per concept 1.3 10.7 49.0

130

WEBSITENeeley.tcu.edu/scmesg

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132

133

134

WEBSITE

Neeley.tcu.edu/scmesg

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136

SVP, Indirect Sourcing and Canada Supply ChainARCOP Arby's

Professor, Eunice and James L. West Chair of Supply Chain Management

Dave MalenfantTCU Center for Supply Chain Innovation

Chief Procurement OfficerCSCS Applebee's IHOP

137

138


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Developing an International Supply Chain Sam Khoury, President, Next Stage Partners and Operating Partner, CIC PartnersJeff Amoscato, Vice President of Supply Chain and Menu Innovation, Shake ShackBarry Barnett, Senior Vice President, Global Supply Chain and Purchasing, Church’s ChickenPete Jensen, Vice President, International Supply Chain, Dunkin’ Brands, Inc.Joyce Mazero, Co-Chair, Global Supply Network & Corporate Partner, Gardere Wynne Sewell LLP

140

Networking BreakSessions resume in 25 minutes

141

Center for Food IntegrityTerry Fleck, Executive Director, Center for Food Integrity

Consumer Perceptions of Today’s Food System

Terry [email protected]

TO HELP TODAY’S FOOD SYSTEM EARN CONSUMER TRUST

ü Be a Leading Voice in a Balanced Public Conversation about Food

ü Align the Culture of Today’s Food System with Consumer Expectations

ü Convene, Empower and Support Food and Ag Stakeholders to Operate in a Manner that

Builds Consumer Trust

The Center for Food Integrity

Consumers are asking more

questions about food

Today’s Food Issues

The Decision-‐Making Maze

Why and How Trust was Lost

Breaking through Consumer Skepticism

History: The Decline of Trust

Authority is granted primarily by office

Broad social consensus driven by WASP males

Communication is formal, indirect (mass communication)

Progress is inevitable

“Big” is respected

Historical Perspective: Decline of TrustTHEN NOW

Authority is granted primarily by relationship

No single social consensus, great diversity, many voices

Communication is informal, direct (masses of communicators)

Progress is possible

“Big” is bad

Consolidated, Integrated, Industrialized

• The public senses a change in the way food is produced but doesn’t know why

• Social media quickly amplifies information – factual or not

• Media focuses on dramatic stories• Food is necessary, traditional &

emotional

Compounding Factors

INFLUENTIAL OTHERS

Value SimilarityTRUST

Trust research was published in the December 2009 Journal of Rural Sociology

The CFI Trust Model (Sapp/CMA)

CONFIDENCE

COMPETENCE

SOCIAL LICENSE

FREEDOM TO OPERATE

Shared values are 3-5x more important to building trust than sharing facts or demonstrating technical skills/expertise

What Drives Consumer Trust?

TRUST

Sustainable Balance

Answering the Wrong Question

Science Question Ethical Question

CAN SHOULD

CFI’s 7Elements of Trust-‐Building Transparency

– 1 –Motivation

– 5 –Clarity

– 4 –Relevance

– 3 –Stakeholder Participation

– 2 –Disclosure

– 6 –Credibility

– 7 –Accuracy

2015 Consumer Trust Research

Consumer Concerns About Life and Current Events

Rising Energy Costs(63%)

Keeping Healthy

Food Affordable

(68%)

U.S. Economy

(69%)

Rising Cost of Food (70%)

Rising Health Care Costs (73%)

Women were more concerned about most

issues than men

Early Adopters

Earlier adopters were more concerned about all issues

than later adopters

*Top Box ratings (8-‐10)

All of the Most Concerning Life Issues are Beyond the Consumer’s Direct Control

Additional Food System Concerns*Food Safety (62%)Enough to Feed U.S. (53%)Humane Treatment of Farm Animals (47%)

Lowest concern was for having enough food to feed people outside the U.S. (31%)

Keeping Healthy Food Affordable (8.15)Rising Cost of Food (8.01)Rising Health Care Costs (7.95)U.S. Economy (7.91)

Keeping Healthy Food Affordable (9.12)

Rising Health Care Costs (9.08)

Rising Cost of Food (9.00)Food Safety (8.98)

U.S. Economy (8.98)Rising Energy Costs (8.86)

Rising Cost of Food (8.59)Rising Health Care Costs

(8.51)Keeping Healthy Food

Affordable (8.51)U.S. Economy (8.34)Food Safety (8.22)

Rising Energy Costs ( (8.18)

Top Concerns About Issues by Segment

Moms

Millennials

Foodies

Foodies Expressed a Higher Level of Concern

Right Direction/Wrong Track 2015

40%All consumers believe the food system is on the

right track

49%Right

Direction

31%Wrong Track

Top Sources Ranked #1Websites (35%)

Local TV Station (14%)Family-‐Not Online (12%)Friends-‐Not Online (11%)

Websites are Top Source of Information on Food System Issues for Moms, Millennials and Foodies

Moms

Millennials

Foodies

Top Sources Ranked #1Websites (37%)Friends-‐Not Online (17%)Family-‐Not Online (12%)Friends Online (7%)Local TV Station (6%)

Top Sources Ranked #1Websites (34%)Friends-‐Not Online (18%)Family-‐Not Online (9%)Food Specific TV (9%)Local TV Station (7%)

Likely to Put Their Interests Ahead of Consumer Interests*

• Commercial Farms (50%)• Large Food Companies (57%)•National Food Companies (54%)

*% Strongly Agreed in 2015 Consumer Trust Study

TrustMotivation Bias

Shared Values

Foundation to Building Trust

Transparency Effective Mechanism for Overcoming Motivation Bias

Role of Transparency in Promoting Trust

166

Topics of Interest

2015 CFI Research

Food Safety

Impact of Food on Health

Labor & Human Rights

Animal Well-‐Being

Business Ethics

Environmental Impact

Company Trust

Global Transparency

in Topic

PoliciesIllustrative Policies

PracticesIllustrative Practices

Performance

VerificationIllustrative Verification

Transparency Model Per Topical Area

What I did in the past

What I’m supposed to do

What I actually do

What someone else proves I did

Does Transparency Build Trust with Food Companies

0% 50% 100%

7%

7%

7%

7%

6%

5%

42%

41%

40%

37%

35%

34%

51%

52%

53%

56%

60%

62%

0 to 3 4 to 7 8 to 10

Food safety (mean = 7.71)

(n=2001)

(mean = 7.63)

(mean = 7.41)

(mean = 7.27)

(mean = 7.24)

(mean = 7.15)

Food produced by the company may impact your health

Treatment of animals raised for food

Labor and human rights

Business ethics

Environmental stewardship

Foodies and Earlier Adopters More Likely to Believe Transparency Builds Trust

Who Consumers Hold Responsible

Farmers Grocery StoresFood Companies Restaurants

Impact of Food on Health

Food Safety

Environmental Impact

Labor and Human Rights

Animal Well-‐Being

Business Ethics

28 1641 15

2837 1717

3240 1415

3738 1213

3049 1011

27 1642 15

Impact of Policies, Practices, Performance and Verification on Global Transparency

Performance

Global Transparency

in Food Safety

Practices

Policies

VerificationPractices

Global Transparency in Impact of

Food on Health

Performance

Policies

VerificationVerification

Global Transparency Impact on the Environment Practices

Policies

PerformancePerformance

Global Transparency in Labor/

Human RightsPractices

Policies

VerificationPolicies

Global Transparency in Well-‐Being of Animals

Practices

Performance

VerificationPerformance

Global Transparency in Business

EthicsPractices

Policies

Verification

Practices were most predictive of Global Transparency in 5 out of 6 topical areas

Best Practice: Overall

Provide stakeholders with means to engage and participate in discussions about your products or services.

Today’s consumersShifting societal attitudes

Many choices, Many voices Mistrust in farming and food

Desire to know/trust people behind food

The public senses a change in the way food is produced

but doesn’t know why

Conversations, not Messages

– Consumer Questions, Expert Answers

– 200 University experts– Content that addresses the silly and “sciencey” conversations about food in a way that’s easy to understand.

Transparency Means Business

“Consumers have begun to weigh a new set of factors

more heavily in their purchase, disrupting the consumer value equation in ways that present both

opportunities and challenges for the food industry.”

Engaging Meaningfully to

Build Trust

What Matters Most?

Our Goals Should Be...

Embrace the skepticismConsumer concerns are real

Perception is their reality

Share your values

Resources

FoodIntegrity.org

BestFoodFacts.org

© 2016 The Center for Food Integrity This is copyrighted for the 2016 CFI Members and Research Sponsor Presentation; Not for distribution

2016 Consumer Trust Research

Inside the Mind of Influencers

The Truth About Trust

© 2016 The Center for Food Integrity This is copyrighted for the 2016 CFI Members and Research Sponsor Presentation; Not for distribution

FOOD IS DIRECTLY CONNECTED TO WHETHER SOMEONE FEELS LIKE THEY ARE LIVING WELL.

Treating the body as a temple and focusing

on the future.

Enjoying life’s pleasures and living in the

moment.

Living well means

Questions and Discussion

Consumer Perceptions of Today’s Food System

Terry [email protected]


187

Closing RemarksLynne Wildman, Vice President, Supply Chain Management, American Blue Ribbon Holdings

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Upcoming Events

• 2017 SPRING MARKET VISION CONFERENCEMarch 21 – 23, 2017 Palm Springs, CA

• 2017 NRA SUPPLY CHAIN ESG CONFERENCEMay 18 – 19, 2017 Chicago, IL

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• NRA SUPPLY CHAIN MANAGEMENT ESG CONFERENCEOctober 17-18, 2017 Orlando, FL

• MARKET VISION CONFERENCEOctober 18 - 20, 2017 Orlando, FL

189

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• www.etouches.com/scmsp17• Use promo code SPRING17 for $100 off your registration• Expires November 18, 2016.

190


Documents

2016 Fall Summit