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Where do we go in 2011?

December 23, 2010 by Don Fox — CEO, Firehouse of America

This week, all across America, there are countless restaurant executives taking stock of how they and their companies performed in 2010. Even the casual observer of the trade press knows that there were decided winners and losers this past year, while perhaps the abundance of restaurant operators fell in the middle.

How best to describe 2010? If 2009 was defined as a year when many brands adjusted their business model to survive the ravages of the recession, then 2010 was a year of putting those measures to the test while waiting for the economy to rebound. There has certainly been improvement in the industry, as evidenced by slightly positive comparable sales for most of the year. But for most brands, the gains are not sufficient to make up for two years of declining sales and higher costs of doing business. As we stand at the doorstep of 2011, many executives are still staring out the window at the economy, hoping that salvation will come in the form of an improvement in the unemployment numbers and the unshackling of capital by the banking system.

For me, 2010 will best be remembered as the year that positive leadership was rewarded. At Firehouse Subs, the changes we implemented in 2009...a new advertising campaign and a significant increase in our advertising budget...ensured that 2010 will go down in the record books as the best year the Firehouse Subs brand has ever had. Of course, we could not have done it without the strong operational culture and execution that is engrained in our brand. And we could not have moved the needle at all without the great franchisees in our system that ensure proper execution every day (and who made the investment in the incremental media budget).

Firehouse is not alone in making 2010 a stellar year. This is not the place to tally a list, but what I will say is that the brands that came out winners are not to be found among the ranks of cost-slashing chains who retreated to their bunkers. The winners are those who found the courage to be aggressive, innovative, and true to their brand strengths.

So, in many respects, 2011 is starting with a somewhat similar tone as it did 2010. But this year, the winners from 2010 are poised with an advantage, having gained momentum in excess of the industry. The business formulas that worked in 2010 should play well in 2011. With the tax policy for 2011 now more certain, the economy will most likely continue its improvement, which may benefit a broad swath of the restaurant sector.

Coupled with some very real improvement we are seeing in access to capital (for deserving brands, mind you), 2011 should be a better year for many brands. In many respects, I believe 2011 will be the "year of the consumer." Coming out of the recession, the consumer has a deeper appreciation for the value of their dollar. With increasing confidence, they will spend it. And I believe the likelihood is that they will spend it with the brands that have provided great experiences and products during a period of time when every penny counted more than ever. In the post recession world, the industry landscape will look decidedly different than it did at the close of 2007.