QSR September 2022

DEPARTMENT FRANCHISE FORWARD

Holding thePrice Line As inflation rears, quick-serves are working to guard their value proposition. B Y B R Y A N R E E S M A N

started looking at managing prime costs ver sus just managing food costs and labor costs. That’s at the heart of the P&L. [And] other lines in the P&L that you can manage and get one-tenth here, one-tenth there, and you try to survive.” For Layne’s franchisees, the No. 1 priority is to have available product. The company sells one protein ( chicken tenders ), one side ( French fries ), and the packaging. With over 70 percent of the chain’s business being drive-thru, it is important essentials be available. “We took a price increase earlier this year,” Wattir says, noting cross-country shipping costs have gone up as much as three or four times. “But we started managing more of prime costs, food and labor together, and implemented a labor management system based on productiv ity versus percentages. We’re able to control it that way, instead of saying, ‘I want X percent for food costs, and I want X percent for labor costs.’ Let’s combine them and manage them together. Then look at below the prime costs, see what’s on the P&L, and manage that— linen supplies, janitorial supplies, chemicals. Try to get some savings there so you don’t cheat

Supply is the top priority for Layne’s Chicken Fingers franchisees.

E ven though we have emerged though the thick of the pan demic, life has not quite gotten back to “normal.” Given supply chain logjams, labor shortages, and the rising cost of fuel, which is affecting shipping costs for all goods, restaurant chains and independents alike are coping with price surges at the counter and worrying about passing along those costs to customers. It is, as Garrett Reed, CEO of Layne’s Chicken Fingers, calls it: “A perfect storm of everything at once.” Reed and Layne’s COO, Samir Wattar, recall this climate started brewing mid-2021 as many supplies lagged and demand was high, and it has not stopped since. “I wake up every week to letters from manufacturers—‘We’re taking an increase in 30 days or in 15 days, or your next deal is going to be increased by X,’” Wattir says. For example, the company used to pay $2 per pound for chicken tenders. That cost at the start of the summer was up to $3.70. Fries and soft drinks cost more, too. “It’s been a struggle to manage,” Wattir adds. “We take price increases, but how much can we pass on to the consumer? When is the point that you’re going to price yourself out of the market? We

your customer and you don’t overprice yourself out of the market.” Layne’s took an approach where it will not reduce portion sizes ( “shrinkf lation” ) or make the customer feel cheated. It wants to stay fair to loyal users. Layne’s also notes it’s received little nega tive feedback from consumers, far less than normal even, which the brand sees as a sign people are adjusting to the overall price increases surfacing in post-lockdown life. “It’s been refreshing because we’re f ighting so many battles, and you really don’t want to fight the battle with your customer,” Reed says. Another company working to sustain customer satisfaction amid the surge is Atomic Wings. During lockdown, some of the brand’s locations saw business double, CEO Zak Omar says. Then a shift came. “I’m a Dunkin’ Donuts franchisee as well, and it seems like across [quick-service restaurants] transaction counts have [recently] gone down,” he says. “It’s a culmination of a couple things. Inf lation, and a lot more people have less disposable income. Quick-serves also had to announce about a 20 to 30 percent CONTINUED ON PAGE 54

LAYNE’S CHICKEN FINGERS

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SEPTEMBER 2022 | QSR | www.qsrmagazine.com