Eating is a necessity, socializing is part of our lifestyle, and food is the great satisfier - by Dennis Serpone

Dennis Serpone, New
England Restaurant Brokers

As we head into the first quarter of 2016, there are so many factors to consider in evaluating the strength of the hospitality industry in New England.

The food and beverage industry can be considered a microcosms of our country, and, to  a degree, reflects climate and political conditions around the world. This opinion can be framed by two recent movies, The Big Short and 13 Hours.

The Big Short tells the story of the components that triggered the housing collapse and which led to the Great Recession which we’re now slowly climbing out of. The problem is that the same conditions that caused it are now slowly seeping back in. I’m seeing more and more frequently on television “no income verification...no documentation.” Isn’t that what caused our collapse?

The horror of 13 Hours is just one small facet of the overall global problem that effects us every day. The undeclared war that were involved in effects our desire to travel and the cost and availability of numerous food commodities.

Now, back to the restaurant industry in New England

Of major concern, and the common thread that I hear from restaurant owners and managers, is that finding and keeping good help is a problem. The recent crescendo of workers and unions pushing for higher minimum wage has motivated upper management to shop for higher wages and benefits also. Simultaneously, if you’ve got good people, you can assume that your competition is trying to steal them away. Thus you have your classic ‘payroll creep’. With the constant wage, tax, and mandated benefit increases, keeping overall payroll costs manageable has become a daunting task.

But yet, the industry keeps happily rolling along. It’s kind of like boiling a frog, where you turn up the water temperature a little bit at a time.

With the unprecedented  glut of oil and gas, travel and delivery costs are way down, directly off-setting, to a degree,  the wage creep.

The reality is that our lives revolve around eating out. Whether it’s the coffee and Egg McMuffin in the morning, the fast lunch at the local Subway, or the lets go out for pizza tonight, we spend a lot of time in restaurants of every size and ilk. On the weekends, it’s the sports bar, the movie and dinner, the special occasion treat, or the night of dancing and drinking at a downtown club.

The most visible recipients of this activity are the plethora of franchises on every corner and in every shopping center. Intermingled with all the Mom & Pop independents are the chain stalwarts like Panera, IHOP,  Buffalo Wild Wings, and on and on. The consensus is for continued growth in same-store sales but at a slower clip.

An interesting phenomenon is occurring. With money so cheap and available, growth of restaurants abound. Venture capital companies, and private investment groups are bankrolling well-known chefs and unique concepts. Throwing caution to the wind, investors are turning over millions to developers who want to have the ‘next major restaurant’ in Boston. This activity is evidenced by the non-stop growth of food and beverage concepts from the financial district to the waterfront, and from the South End to the North End.

Supporting these restaurateurs is the continued confidence level of the populace. As long as people have credit cards and a job, money is no object. Credit card usage represents somewhere in the 90% range for full service restaurants and bottoms out at about 25% for most fast food operations. Interestingly enough, more and more, restaurants are adding ATM machines to their lobbies and posting “Cash Only” signs at reception to avoid the onerous credit card processing fees.

So, is the glass half full or half empty? I would say, going into 2016, that it is half full. Eating is a necessity, socializing is part of our lifestyle, and food is the great satisfier in good times and bad. We simply trade up when we have financial security and trade down when that security wanes.

I hope you’ll see both movies.

Dennis Serpone is president of New England Restaurant Brokers of Wakefield, Mass.