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Firehouse CEO: Restaurant industry dealing with unprecedented headwinds

Union activism, food costs, data breaches and minimum wage debates are just part of the 'external factors' facing restaurant operators.

October 16, 2014 by Alicia Kelso — Editor, QSRWeb.com

Firehouse Subs CEO Don Fox has been involved in the restaurant industry in one capacity or another for more than 40 years. However, last week during the Fast Casual Executive Summit in Denver, he said he can't remember a time when there were so many headwinds.

"In this, a business of 1,000 details, it's tough enough doing the basics. But now there are so many external factors – headwinds – and they can make or break our industry or your brand," he said.

Among the headwinds he cites are:

• The Affordable Care Act. Fox called this the single most impactful government action in his time with the restaurant industry.
• Minimum wage debates. The minimum wage has gone up in some cities, including up to $15 in Seattle. Fox said it has "drastic consequences" for the industry. "I don't think a raise is a bad idea, but that level ($15/hour) is not sustainable," he said.
• Salary and overtime laws. The proposal is to lift $24K to over $50K, which Fox calls "very onerous when you think of our business and the typical manager salary."
• Union activism. Unions, Fox said, are at the root of many of these issues, specifically the Service Employees International Union. "With the decline in manufacturing, that's where the jobs are in today's economy," he said.
• National Labor Relations Board decisions. This is directly in reference to the McDonald's joint employer ruling in July which holds franchisors accountable for their franchisees' businesses.
• Assault on the franchise model. Fox said this assault is a collaborative effort between unions and the administration.
• Commodity increases. Some food costs are at or near all-time highs.

Fox added that technology could also be considered on this list.

"Although technology has been a positive, there is a threat because of PCI compliance and the recent attacks on our business, which is an increasing concern," he said. "This laundry list reminds me of the phrase: ‘Well, Lincoln, other than that, how was the play?'"

As operators, he said it's critical to turn these lemons into lemonade. For example, Firehouse Subs got a head start by implementing ACA in January.

"That's been great for us. We turned it into a positive and now we're ahead of where we need to be," Fox said.  

He also said that, despite these issues and fights, the overall relationship between employers and employees – the 13 million restaurant employees in the US – isn't as bad as it seems.

"There are all of these outside forces trying to turn these relationships adversarial," Fox said. "It's important that you cement relationships with your team members and make sure you're doing right by them. Go for the best-in-class employees. None of us can run a business without our employees. Open the door and let great people come in."

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