Event Recap: Restaurant Finance & Development Conference

Last week, our team attended Restaurant Finance Monitor's annual Restaurant Finance & Development Conference, where we spent three days connecting with industry colleagues about all things restaurant finance, operations and development. While there, we had the pleasure of speaking with prominent industry leaders about the challenges and opportunities that exist for restaurants as the marketplace continues to evolve. 

During these conversations, it fascinated us that, in a conference attended by nearly 2,600 people—from top 200 franchise groups to emerging brands with one or two stores—the same topics continued to arise, suggesting that restaurants face similar issues and trends across the board, regardless of the stage in their lifecycles. What were the top three themes that emerged in our discussions? 

Lack of preparedness for the journey to EMV compliance, and the importance of software integration: Our own Dana Zukofsky led a panel called "A Day in the Life of a Digital CFO/Controller," which explored technology issues faced by restaurant executives. Attendees discussed the new EMV requirement and its October 1 liability shift date and, specifically, how a lack of preparation has led to challenges in its implementation for restaurants and customers alike. Technology glitches, software vendor outages and delays in EMV equipment availability has resulted in business' inability to process EMV transactions and/or implement the technology altogether. For customers, confusion with using EMV terminals is common, and delays caused by the new equipment are pervasive. 

Conversations about restaurants’ difficulties integrating these technologies fueled a broader debate about software integration overall. According to restaurant executives, the newest and fanciest software technology may have its perks, but ease of use, time-savings and integration with existing systems are most important when it comes to using new software. 

High levels of interest and money flowing in the industry: 
For evidence of the level of investor interest in the industry, look no further than the number of attendees at the RFDC — a conference that touts itself as the "industry's dealmaker event."

Optimism among restaurant executives is fueled by overall economic health, high levels of investment from private equity funds, commodity deflation and multiples reaching an all-time high. Along with this optimism, however, comes concern that these peak or near-peak multiples and levels of financing are not sustainable. The underlying question is, "How much longer could this possibly last?" Some legacy brands or restaurant owners looking to retire may be considering selling sooner rather than later in case valuations begin to decline. Another factor driving increased M&A activity is that the cost of building a new store far exceeds the cost of purchasing an existing store location, which leads to a more favorable return on investment. Large franchisee systems are able to pay higher multiples because they achieve G&A savings by adding stores into their existing infrastructure rather than having to take on additional overhead costs. 

The no-tipping movement gaining ground: 
Now that casual seafood chain Joe's Crab Shack is testing a no-tip model, the concept can no longer be chalked up to a provocative statement by a single restaurateur. Spearheaded by Danny Meyer in New York, the idea of eliminating tipping from restaurants has industry players, from restaurant board members to servers, considering its potential impact. 

Conversations among attendees revealed a mix of attitudes towards the move, and reactions stemmed from two primary perspectives: customer experience and business. Some people appreciate the ability to tip based on their experience at a restaurant, while others believe eliminating tipping would boost convenience. From a business and financial perspective, concerns about how restaurants will compensate employees and the issue of losing the FICA tip tax credit are top of mind. To learn more about the economic considerations of eliminating restaurant tipping, read the latest Selections blog post from my colleague, Phil Hofmann, in which he explains that the business impact of the tip elimination trend could be substantial, requiring restaurants to adapt practices accordingly. 

Be sure to keep up with the Restaurant practice’s latest thoughts by following us on Twitter at @BDORestaurant.