Informational Interview

I interviewed my father, Louis Brienza. He owns a Dunkin Donuts in Bethpage, NY. My father manages the day-to-day operations and deals with the financial end of the business. He makes all business decisions for the company ie: loans, real estate, expansion, and banking. He looks for employees that are outgoing, reliable, confident, and who can communicate well with customers. The entry level jobs in his business include crew-members that handle customers, bakers who handle the manufacturing of the products, and store managers. I also learned that in recent years there has been a decrease in sales due to the recession our economy has been facing. The customers are cutting back on there discretionary income. Some businesses will see an increase in the next five years because the financially strong companies will stay in business and build while the weaker companies end up closing. This will create less competition, therefore, increasing the sales of the bigger companies.

Informational Interview

I interviewed Edward Din, owner and manager of Wong's Chinese Restaurant in Norfolk, Virginia.  From this interview, I was able to gain an insight into a family-run business and how it is affected by seasonal changes.  Mr. Din and I spent the majority of the interview discussing how his restaurant's business is affected by its location as it sits on the beach.  In the summer, Mr. Din employees many employees because the restaurant sees a lot of customers in the warm weather.  Once the season's start to change and the temperature cools, the restaurant loses many of its customers and they are forced to let non-family employees go until business once again regains momentum.   I had never thought before how the economics of a business could be affected by its location and and the regional weather.  It makes me wonder how many other restaurants see a change in profits and have to let their employees go at certain times of the year and how important it is to those restaurants when they open.  I thought the interview was definitely beneficial because I learned about a different aspect of the restaurant industry.

Informational Interview

I interviewed Steve Efstathiou, owner of three diners in New York and Virginia. The interview was very helpful in understanding the competition in the restaurant industry. Mr. Efstathiou informed me that the industry is very competitive. The increase in national chains, for instance, Chinese and Italian chains, has made it hard for diners to gain support, especially with the economy how it is now. He said the restaurant industry was hit hard five years ago and he has seen a turnaround this year that he expects to last into the future. To gain consumers, restaurants must differentiate themselves from others. The main way restaurants differentiate themselves is by pricing. Offering 2 for the price of 1 meals, and discounts draw consumers in. I mentioned the high demand of diners in the area, especially around the college where students see many diners in their hometowns, and he said that he would love to open one around the school but property prices are way too high. This is very important to consider when opening a business since you need to be able to cover your costs.

Informational Interview

My informational interview was with Mr. Brett Kelly, the co-owner and co-manager of a small business restaurant named "La Terrazza". It is located in New City, New York. Mr. Kelly and his friend began the Italian restaurant 16 years back. As of now, he has 40 employees. As the manager, he is in charge of scheduling staff, purchasing items, booking affairs, printing/updating menus, having owner/manager responsibilities, and assisting for the hosts if needed. During the interview, he spent time explaining the different types of entry-level jobs. He focused on the "front of house" staff, which include waitresses, head waiter, booking manager, and assistant managers. However, his main focus however was on chefs. His small business has 6 different chefs, including preparation/salad chef, broiler chef and executive chef.
A really interesting part of the interview was when he explained the recent increase/decline in certain jobs over the past few years. He has noticed that weekly dinners (from Monday-Thursday) have declined over the past few years. Mr. Kelly states this is a direct effect from the recession - many people do not have the time or money to go to restaurants on weeknights. He also stated his restaurant is becoming increasingly popular for events - such as weddings, birthday parties, retirement parties, etc. The part of his business that was most striking to me was his staff is mostly made up of full time workers. These full time workers include teachers and nurses - workers who are looking for more ways to "make ends meet." I did not realize that some restaurants may participate like this. Speaking with him showed me how difficult it is to run a small business, especially during a recession. However, it also showed me how rewarding it can be.

Informational Interview

My informational interview was with Valarie Zuffanti, the Senior Sales Manager at the Ritz Carlton Corporations in Boston, Massachusetts. Her hectic day starts at 8:30 am, which is when the staff meets to discuss their goals for the day, any important guests that are arriving (since the hotel is a high-end one), etc. This meeting will last approximately 30 minutes, until nine am, when the group breaks off, and starts accomplishing their goals. Currently Valarie is figuring out the price of beds in the hotel- meaning at The Ritz Carlton- for the next year, 2011. During the day, Valarie will also talk with clients in the companies target audience, such as workers at Goldman Sacks, to make sure they are aware of the great deals at The Ritz Carlton. Prior to the stock market crash, the primary consumer of The Ritz Carlton's services were Wall Street workers, but since the crash in 2008, there has been a complete shift. This shift has come from financial workers no longer bringing in income for The Ritz Carlton employees, since they cannot shell out the expensive room rates. Hence one reason the hospitality industry has been declining, even for the upperclass workers, who have not been as taken aback by the financial crisis of 2008. Despite the 80 percent of Ritz Carlton clients that were in administration, and the financial sector; the hotel industry is beginning to buzz again. Although, this is not in full swing, there is an increase in the number of jobs, due to a somewhat stable footing in the stock market, and more jobs- such as security, bell hops, and front desk receptionists; have been desired from this increase.

No toy without certain fat restrictions

Recently a bill was passed by the San Francisco Board of Supervisors that states that restaurants cannot give away toys in their meals unless they meet certain health requirements regarding fat, calories and sodium.  The bill, which blatantly takes on the Happy Meal, was headed by Supervisor Eric Mar after he became horrified by his daughter's growing collection of free toys.  He believes this new rule is a way to counter the fatty, salty fast food.  Mr. Mar has said that he hopes this will act as an incentive for fast food companies to "provide better choices".

A spokeswoman for the company has said that she does not believe that this is what customers want "nor is it anything they asked for".  The mayor, Gavin Newsom, was also not pleased with this new ban and had hopes to veto it because he does not think this will fight child obesity.  The boards counter fact was that roughly 30% of the city's fifth graders are overweight, which is an extremely scary statistic considering the Happy Meal is aimed towards their age group. "Under the bill, any meals will have to have fewer than 600 calories, fewer than 640 milligrams of sodium and less than 35 percent of calories from fat (with an exception for some healthy items, like nuts)." If restaurants fail to adhere to these policies, then no toy for their customers.

I believe that this is a smart move for the city as child obesity is one of the biggest growing problems in the country. I think that this will be an incentive for children to choose healthier options as the toy is the rewarding piece of the meal. Hopefully this new standard will convince fast-food restaurants to serve healthier meals as they will begin to see what their customers are drawn too.

Minimum-Wage Debate Divides Hong Kong

In response to growing public calls to tackle the widening wealth gap, lawmakers passed the minimum-wage bill after a 41-hour session in July. Some of Hong Kong's lowest-paid workers, such as toilet cleaners or security guards, earn as little as HK$20, or about US$2.60, an hour. A Provisional Minimum Wage Committee appointed by the government has yet to recommend a new the hourly rate. HK$28 per hour is the median between what labor representatives and business groups are calling for.

A dispute between labor groups and the business sector last week raised the question of whether a minimum wage might backfire more directly against the workers it is meant to help. Trade unions called for a boycott of one of the city's largest fast-food groups, Café de Coral Holdings Ltd., which operates restaurants in Hong Kong as well as the Manchu Wok chain in North America (Steger).

While the minimum-wage law has yet to take effect, Café de Coral last month acted pre-emptively by increasing hourly pay by between HK$2 and HK$3.50 (Steger). However, because the company eliminated a paid 45-minute paid daily lunch break, the move turned into a public-relations fiasco. Employees found out their original earning of $22 an hour would end up being less less each month if they worked eight hours a day, 26 days a month. The boycott plan soon followed.

Hong Kong Chief Executive Donald Tsang, addressed to business groups that the government was forced to legislate a minimum wage after a "tepid" response from the business community to a voluntary plan for a minimum wage proposed in 2006 (Steger). "[T]ensions are developing in society because the fruits of the economic recovery have not trickled down to all levels of the community," said Mr. Tsang. "Some people feel that they are being ripped off" (Steger).

Workers will not only respond to low wages with boycotts; but it will also be reflected in their work ethic. If employees at restaurants are not working as hard this will directly affect customer satisfaction. Meals may not be prepared as quickly or there mite be less effort put into making them. If the workers got paid normal wages all the disputes between employee and employer will be settled and the consumer will be happy.

http://online.wsj.com/article/SB10001424052748704737504575601832288088158.html

Rise in Input Prices Causes Higher Prices for Consumers

Prices of milk, beef, coffee, cocoa and sugar have gone up recently and restaurants are raising their prices to make consumers bear most of the cost. However, this could cause problems for the restaurant industry because of the position many consumers are in. With high unemployment consumers have found ways to save extra cash by not going out to eat as much, or buying generic brands.

Cheif executive of Stater Bros. Market, a grocery store chain in California said, "The big challenge will be, how much can we swallow and how much can we pass along?" Recently, cereal prices for Stater Bros. has risen 5%. They dealt with this increase by passing half the cost onto consumers, by rising the prices they pay, and by bearing the other half of the cost by cutting other expenses.

Starbucks has decided to leave the costs of their coffee the same, to keep from losing supporters of their main product, but to rise the prices of other harder to make drinks. Kraft, General Mills, and Safeway have decided to pass the rise in prices on to the consumers.

Foood prices are rising faster than overall inflation. The CPI (consumer price index) for all items minus food and energy had risen 0.8% up until September. The Bureau of Labor Statistics has recorded this as the lowest 12-month increase since 1961. However, the food index rose 1.4%. It is predicted that overall food inflation will be at about 2% to 3% next year.

If overall inflation does not begin to rise more sharply then I think the restaurant industry is going to take a huge hit. They will not be able to put a 2% to 3% rise in prices on consumers within the next year. They will have to take some of the burden and cut their costs just as Stater Bros. Market has done. Otherwise, consumers will find the cheapest prices and resort to them if they have to.

http://online.wsj.com/article/SB10001424052748704506404575592313664715360.html?KEYWORDS=restaurant++industry

Can Starbucks Adapt Like McDonald's Has?

According to Forbes, starting seven years ago, McDonald's Corp has been growing slowly in the total amount of restaurants. Also, for the past seven years, McDonald's has been making a serious effort at "smarter more cost-efficient operations." In turn, this change has increased McDonald's stock.

Starbucks, on the other hand, has only recently decided to enter the "slow growth stage". Since then, the company has closed 1,000 locations and similar to McDonald's, tightened up its operations. This has also led to an increase in Starbucks' stocks. Another important change Starbucks is pursuing is making more of its stores licensees. This is also similar to McDonald's.

The article states that McDonald's has a better profit margin due to its "larger network of franchisees." Furthermore, the productive at McDonald's restaurants has risen over the past few years, because of new menu items, cleaner restrooms and faster drive-through times.

With McDonald's as its model, Starbucks is trying out the same idea. Though Starbucks is trying, it is too early to tell if the company is making any progress.

I think Starbucks has the potential to adapt like McDonald's does, but not in the same magnitude. Even though the two companies "operate from very similar real estate" by hiring the same workers and competing for casual dining and snacking spending by consumers, I think McDonald's has more of an edge over Starbucks. McDonald's offers more selections than Starbucks does, it has been around much longer than Starbucks has, and its restaurants are open longer than Starbucks' restaurants on average. Based on the article, it would be great if Starbucks can adapt because it would most likely lead to greater shares, but I am not sure if Starbucks is the type of restaurant that should adapt in the way McDonald's has adapted.

http://blogs.forbes.com/investor/2010/11/04/can-starbucks-adapt-like-mcdonalds-has/

Low Cost Comfort Foods Save Restaurants

Restaurants in the Bay Area of San Francisco were hit hard by the recession, just as everyone else had. However, restaurants are very vital to San Francisco because they draw in many of the tourists. Employment in San Francisco has declined about 6% over the past year, a result of restaurants unable to adjust to the changes in the economy.

Several restaurants have adjusted to the economy by increasing comfort foods, like fried chicken and pizza, and and cheaper menu items on their menus. Those who have failed to do this, have gone out of business. Even restaurants who have adjusted their menus have not all found success.

Anne Le Ziblatt, owner of Tamarine in Palo Alto, has added more affordable dishes to her menu. Rather than serving the same dishes that range from $14 to $28, she began selling Vietnamese dishes that sell for $13 each. This has helped Ms. Le Ziblatt's business to increase 15% from last year.

These kinds of changes have made the future look promising for the Bay Area restaurants. Restaurant employment has decreased at a slower rate than overall employment has in the Bay Area over the past two years. Some restaurants have even found the opportunity to expand higher end restaurants. The most important fact however, is that customer numbers are increasing to pre recession numbers. For without the customers, restaurants can not make a comeback.

http://online.wsj.com/article/SB10001424052748704141104575588982760967058.html?KEYWORDS=restaurant+industry

Holiday Inn to Turn Bars into Social Hubs

According to an article in the WSJ, Holiday Inn intends to "edesigning and expanding its hotel bars to make them livelier." Holiday Inn is a part of InterContinental Hotels Group. InterContinental's reasoning for turning Holiday Inn's bars into social hubs is "dogged midmarket full-service hotels" with 150 rooms or less do not have enough customers to provide full-service food 24/7 that will make a profit.

Another reasoning is frequent customers of Holiday Inn, which are primarily "middle managers, route salespeople, entrepreneurs, and government supervisors, want to be around other people than holed out in their rooms." Holiday Inn came across this through a survey it offered to its most frequent customers. It is replying to its customer's wants.

The way Holiday Inn is approaching this request is impressive. By making the bar area more of a social hub, Holiday Inn plans to have the bar staff serve food, which would allow the hotel to reduce restaurant staff - which will reduce labor cost. This applies to all meals during the day. For breakfast, there will be "buffets and cook-to-order stations." This will also cut labor costs for the Holiday Inn.

However, Holiday Inn will "go slow" with the idea of social hubs, especially because most of its hotels are owned by franchisees. The social hubs will be tested in newly renovated and newly built hotels, most likely beginning in 2012. Holiday Inn is planning to have all of its hotels have the new menus and the breakfast programs (at the least) by 2012. The "pricier changes" will probably happen while the hotels are under periodic renovations. As of right now, Holiday Inn does not have an estimate of the cost of installing these hubs because "the concept is likely to undergo changes during the test during next year."

I think this is a great idea! I feel like these midmarket full-service are too impersonal (obviously not for the people sharing a room). The feeling of these types of hotels are "come in, sleep, wake up, leave, do work, come back," and restart the cycle. There aren't many opportunities in these hotels to meet other guests. Even though some people think of a hotel as just a place to sleep on the go, I believe they will benefit from these social hubs. I also believe these social hubs will attract more people to the hotel, which should raise its profits and help the hotel industry recover in general.

http://online.wsj.com/article/SB10001424052702303443904575578613162270270.html?mod=WSJ_Hospitality_leftHeadlines

City Center failing to pay bills

Last December, the City Center in Las Vegas opened amidst the largest decline in tourist travel in decades. This project, roughly worth 8.7 billion dollars, is more than just a hotel: there are condominiums, a casino as well as a giant mall.  The hotel was supposed to start a new wave of "sophistication and urban living in the gaming capital".  But the innovation of this building has almost been over-shadowed by its huge scale and cost.  There is an outlined plan to seek relief for $1.8 billion loan, but if terms cannot be negotiated then City Center could be responsible.

MGM resorts reported a net loss of $1 billion, which includes a write-down of nearly $600 million.  Also the hotels worth has reported fallen from $5 billion to $2.4 billion in a single year.  MGM is still spending money to end construction as well as keep operations at City Center going.  There was a report in July that stated within a year City Center would see major improvements and for right now they have seen an increase in earnings, yet the hotel is still on track to violate their loan.

The cost control problems with City Center have seemed to induce problems between the partners as some wish to close certain operations while others believe it would be more detrimental to the center.  The executives are also faced with what to do about the nearly 2,000 condos that are unsold.  At first the 2,400 condos were expected to produce a revenue of $2.7 billion, but now the total sales are $372 million.  By maintaining 530 of these unsold units, the center is set to witness an additional $11 million loss in profits.  One plan is to lease 200 of the condos while another is to make City Center more livable by installing a grocery store.

These financial problems co-inside with complaints from customers who say the casino is too dark as well as other design faults.  I believe that this center was built at a completely wrong time in American society.  With the economy still reeling from the crash, people are clearly not making to trips to Las Vegas regularly and spending thousands of dollars to stay the night.  I think that this center should try to target international waters because they might be looking for an experience they could provide.  I believe that it is going to take a very long time before the hotel is going to see a complete pick-up in revenue and for now they are going to have to search for ways to maintain their creation.

Developer Recaptures a Maritime Motif

"Frank Fusaro, of Handel Architects, embarked on a historical reclamation mission of sorts when he took on the job of designing the new Dream Downtown hotel now taking shape in Chelsea with its distinctive punched-out porthole windows"(Rubenstein). Now a developer by the name of Sant Singh Chatwal is converting the annex into a $230 million, 316-room hotel scheduled to open this spring.

After Mr. Chatwal bought the annex for $70 million in late 2007, Mr. Fusaro designed the plan to cover the building in stainless steel tiles fabricated in Kansas City with a special-made coating dubbed the Dream Finish: "it's polished enough to reflect the blues and whites from the sky overhead, but not so reflective as to mirror passersby" (Rubenstein).

In today's recession, consumers are seeking high quality hotels for lower prices. This annex that Mr. Chatwal purchased will prove to fit that standard. He turned the old hotel into a $230 million, 316-room hotel. The hotel industry has been a very competitive industry lately in the United States. Companies differentiate themselves from each other by having different promotions, offering special rates, and basically become the best they can be. For this key industry player, after purchasing the annex for $70 million, he has invested a lot into the annex in hopes of achieving big things in the near future when it becomes operational.

http://online.wsj.com/article/SB20001424052748703708404575586591685653962.html#articleTabs%3Darticle