Chain restaurants maintain a notable presence across the United States. This article examines the operational strategies these establishments employ to sustain business amidst economic pressures.
Operational Cost Management
The preparation of meals in chain restaurants involves a multi-stage production process. These businesses have navigated increased operational costs stemming from tariffs and inflation by implementing rigorous cost management and standardization protocols. Stephen Zagor, a restaurant industry expert and adjunct professor at Columbia Business School, identifies food businesses as manufacturing operations. He states that success in this model is achieved through repetition, standardization, and waste reduction. This approach is applied to ensure consistent menu item delivery across various locations and to optimize procurement, such as specifying ingredient purchases (e.g., buying ground beef instead of pre-made patties, selecting different types of produce) to control expenses.
Industry Economic Pressures
Casual dining establishments position themselves to offer an experience between fast food and fine dining in terms of price and service. The broader food sector has experienced increasing costs attributed to supply chain disruptions, environmental factors, and tariffs. According to the Bureau of Labor Statistics, grocery prices have risen by 29% and the cost of dining out by 33% since 2020. David Ortega, a professor of food economics and policy at Michigan State University, notes a convergence of factors contributing to these increases, with double-digit price rises observed in 2022.
Restaurant Responses
To manage increased operational expenses, restaurants implement strategies such as adjusting menu pricing or discontinuing less profitable items. Texas Roadhouse, for instance, increased its menu prices by approximately 1.7% in the fourth quarter of the current year, citing rising wage and utility costs. Similarly, Applebee's adjusted the price of its "All You Can Eat" offering from $12.99 in 2022 to $15.99. Executives, including Jerry Morgan of Texas Roadhouse and John Peyton of Dine Brands (Applebee's parent company), have stated an objective to limit the extent of cost transfer to consumers. This has led to strategies like menu consolidation; Applebee's reduced its menu from an initial 135-140 items to 105 to enhance operational efficiency.
Role of Food Distributors
Major food distributors in the United States include Sysco Corporation, US Foods, and Performance Food Group. Companies such as Sysco operate large-scale facilities for processing and distributing food products to restaurants nationwide. These distributors also provide services aimed at identifying cost-effective menu solutions for restaurateurs. Examples include recommending ingredient substitutions, such as alternative lettuce varieties or poultry options when beef prices are affected by tariffs. Ryan Forth, president of Sysco's South Texas region, notes the company's involvement in menu development and profitability analysis for its clients.
Criticisms and Market Consolidation
The reliance on large food distributors for cost management has received scrutiny. Reports from the Outlaw Ocean Project indicated that certain Chinese seafood suppliers to Sysco utilized North Korean forced labor. Sysco has stated that it terminated relationships with these suppliers upon becoming aware of the allegations and asserts that it maintains stringent human and labor rights policies for its supplier network. Sysco's market presence has expanded through strategic acquisitions, including at least eight food service, equipment, and food providers since 2017, and a 50% stake in two Latin American food service providers in 2020. Journalist Adam Chandler has commented that this consolidation can lead to a homogenization of food offerings and an increased use of pre-prepared ingredients, which he attributes to methods for cost reduction, consistency, and service speed. Greg Keller, executive vice president of national sales & specialty businesses for Sysco, stated that the company seeks to provide a diverse range of products and pricing to satisfy customer demands and consumer preferences, noting that regional food distributors also operate in the market.