(upbeat music) - [Announcer] This is "Carolina Business Review," major support provided by Colonial Life, providing benefits to employees to help them protect their families, their finances, and their futures.

High Point University, the Premier Life Skills University, focused on preparing students for the world as it is going to be.

Sonoco, a global manufacturer of consumer and industrial packaging products and services with more than 300 operations in 35 countries.

- Restaurants seem to have been a proxy for broader business challenges, but also, the most overt business casualty when it came to the pandemic back in the spring of 2020.

Welcome again to the most widely watched and the longest running program on Carolina Business Policy and Public Affairs seen every week across North and South Carolina.

The food service industry has been very publicly struggling, maybe overly stating it, but certainly, trying to achieve healthy profitability during post and the pandemic.

With everything like, and like many businesses, from the cost of raw materials, to finding, importantly training, and even more importantly, keeping good talent, but also, keeping prices affordable, and basically, staying in business.

On this Special "Carolina Business Review," we will unpack with experts in this field, how the hospitality, retail food industry is right now, finally, and what it may look like, and how much more change is yet to come.

- [Announcer] Major funding also by Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

And Martin Marietta, a leading provider of natural, resource-based building materials, providing the foundation on which our communities improve and grow.

On this edition of "Carolina Business Review," Frank Scibelli, of the FS Food Group, Parker Milner from The Post and Courier.

Fred Tiess of the College of Food and Innovation, Johnson & Wales University, and Justin Shoener from the Indigo Road Hospitality Group.

(upbeat music) - Welcome to our program, gentlemen.

Thank you for being here.

Nice to see some of you guys.

And welcome back, and hope you'll come back.

Hope we don't scare you off.

But Frank, I wanna start with you.

So, let me rattle off some numbers, because it would be important to know about the restaurant industry.

The share of food away from home spending reached a record high in 2022 last year.

Food spending last year was 54% away from home, 46% at home, and I know none of these things are gonna surprise you.

Just this past September or the second consecutive month of restaurant sales growth, restaurant sales outpacing increased menu prices, et cetera, et cetera.

But now, reversing a 33-month trend restaurant employee decline, employment declined in October, and restaurants were still 14,000 jobs below where they were in February of 2020.

Frank, this is a little bit of a hyperbole question, but was April, 2020, was that the darkest moment you can ever remember in the industry?

- So, for us it was for really for about a week, and then we got our feet under us and we said, I think there's generally sort of two buckets of the people how they got hit with the pandemic.

We had always done to-go business.

It was a part of what we did.

And so, we just pivoted towards all to-go, instead of to-go being 20, 25%, it was now 100%.

And we got pretty efficient at takeout business.

So we actually, did very well during the pandemic.

We're fortunate to have some people around us that are very entrepreneurial on our teams, and so, we were literally serving senior citizen homes and we were bringing it to neighborhoods and apartment.

So it actually, like initially the first week, you're like, oh my gosh, what am I gonna do?

And then you pivot and say, okay, people are gonna still wanna eat and we need to figure out how we do what we do.

And so, that's really what happened.

- Justin, I mean, you're a provider, you're a proprietor here.

Were you, you know, Frank talks about the first week, you're kind of stunned and, you know, deer in the headlights.

What was that, those first moments like, was it a week, was it a month?

Did you have any idea where the arc of this thing was going?

- We didn't.

I remember March 17th, we pretty much had to lay off our entire team and our Charlotte region and across our company.

The next day we started, we jumped into the to-go business and started doing to-go.

And we wanted to make sure we were gonna do everything we could to provide people with a meal, but also, make sure that our restaurants continued to be there through whatever was gonna happen and whatever outcome was gonna develop.

- Yeah, gentlemen, jump in here, Parker, Fred.

- So, you know, right now North Carolina is a $30 billion industry as far as food service and South Carolina is $15 billion.

As you look at the trends, you know, from 2019 to now, you see a major dip, right?

And that was when we, as Frank said, pivoted, right?

We went from in-person, in-service to drive-up to everything from, you know, allowing restaurateurs to go and sell some of their products that they wouldn't normally sell.

Cleaning supplies, right?

Some paper supplies as well.

So, the people that are very entrepreneurial as far as their mindset did very well.

And those that didn't, weren't able to change or pivot.

I'm afraid that a lot of those have gone to the wayside.

- And we saw a lot of, we saw different states and cities react differently.

For instance, North Carolina was a little more lax with perhaps some of the allowing alcohol sales to go to continue on longer than maybe South Carolina was.

We also see the parklets, which were the street seating, those were more prevalent in other states than South Carolina.

South Carolina, we only allowed a few and then they took 'em away.

And whereas Washington DC are still seeing those to this day.

So, I think that was interesting to see as well.

- So, what are the indelible marks of what a restaurant is now versus what it was pre-pandemic?

I mean, if you all just talked about those things and not to say that you haven't done a good job at this, but you kind of glossed over the fact that there was probably a lot of fear and ringing of hands wondering, number one, if you're not just gonna stay in business, but, you know, is my livelihood over.

But what's the restaurant business, what is hospitality, what is food retailing and hospitality like now, better or worse?

- I don't know that it's better or worse.

I think it's just it's more that it's different.

I think it's harder to find staff.

I think people made lifestyle decisions.

They said, you know, during Covid it's normally servers would work seven or eight shifts a week, and now they might work five shifts a week.

And I think the life balance is both for everyone in our industry has really changed.

And I think there's a lot of people who left our industry who said, we, you know, don't wanna put up with those hours.

And so, that's changed.

So, wages have gotten a lot higher, which is fine.

I mean, it just sort of everything, prices move up and et cetera.

But it was a time, yeah, we didn't really know what was gonna do, but people were still going to eat.

I mean, we did have that right off the bat.

We knew they weren't gonna shut everything down.

People, you know, almost essentially we were an essential business within days or whatever.

- Yeah.

- So.

- Yeah, yeah.

- Yeah, absolutely.

You know, I think, coming out of all of what had happened and Covid and everything was going on, we really turned to making sure our people are okay.

And making sure that the culture in our restaurant was good, and making sure that the people, as they were escaping what was happening in the world and coming into restaurants, that they were able to come in and get hospitality and get taken care of and kind of go away from what's happening and just enjoy a great meal with friends, and for us to be able to take care of 'em.

- And in places like Charleston, and I'm not picking on you here, Parker, but you are, you know, the Post and Courier is in Charleston, even though you cover the region.

You know, Charleston, the identity of the city is pretty heavy foodie, right?

For years and years have been built on that.

So, it has to strike at fear at the core of a city like Charleston, New Orleans, New York, et cetera, et cetera, when this happens.

- Yeah, it was certainly a bizarre time to be around Charleston.

I think people didn't really know what to do.

We obviously, didn't have our tourism that we've become known for.

And I think the fortunate reality for restaurants in the area is Charleston was one of the places that opened up sooner than some other parts of the country.

And I think we did see dining revert back to more of what people would expect.

People would call normal sooner rather than later.

Now, that doesn't mean the hardships went away.

It was still not the same kind of dining.

There were still masks and social distancing and I think one of the results from that time period is labor people started to really value their servers a little more and understand the type of work that goes into what they do on a daily basis.

And the result of that has been, you know, calls for better wages.

And as Frank and Justin know, you know, that has an impact on the bottom line.

- Yeah, so Fred, this idea that we've heard more than a couple times now that the wages have gone up and we all know that labor's the single biggest challenge in any ongoing business or concern.

So, can you point to, and let's talk about revenue.

Let's talk about growth of restaurants, let's talk about how much it costs to go to a restaurant.

Is all of that driven because the labor has gone up?

Can you point to that one thing?

- I think because of the shutdown there was pent up demand.

People were very anxious about going out.

They were apprehensive, not wanting to put themselves out in public too much, but once we started to realize that we were gonna be okay, then we had this massive kind of spike up as far as revenue.

And to the point where, and thinking 2030, we're gonna be seeing another 12% increase in the need for labor force as far as food service.

So, it is a growing industry.

People are moving from all parts of the country to North and South Carolina, - And still it's growing, but you're 14,000 less jobs in the industry than pre-pandemic, but it's growing.

Is that because it's growing in a different way?

- Because of the need.

We need to fill those positions as far as cooks, as far as chefs, pastry chefs, servers, and young folks are finding other opportunities, right?

They wanna do different things besides maybe just being a chef or a cook.

- I don't wanna be disrespectful, but I do have to ask this question.

It's gotten so expensive to even go to lunch, let alone dinner.

What demographic is paying the increased prices?

Because clearly as you all talk about, there's growth in the industry, people are dining out more.

Is that across all demographics, is that a certain demographics, is it just a couple demographics?

What do you see when you do it for Indigo?

- Yeah, I mean, we've seen a growth in revenue across the board in our different cities for sure.

And we've had to adjust on prices, and it's really the result of the way we've adjusted on wages.

and the way we've adjusted on salaries, which is great, but you know, it's not just wages and salaries.

We've had construction costs go up, and merchant account fees have gone up, and insurance has gone up, and rent's gone up, and pretty much every category has gone up.

You know, so when those things go up the price of your burger's gonna go up, you know?

So, but revenue continues to be strong and people are continuing to go out and we're very mindful of that.

Of how much do we raise a price versus what are people willing to come out and pay?

And we just believe that if the experience is right, it's all gonna work out.

- And it's interesting you bring up a burger because I'm coming at this from a diner's perspective, whether it's me or the readers that are reaching out to me and a burger is one of those dishes that I think diners really have a tough time adjusting the price in their mind.

They think that if a burger's over $20, it's overpriced.

And that's kind of a marker for how people view dining out.

And I think if wages are going to continue to go up, there's gonna have to be a mental adjustment for some of these dishes where... - Many people feel the same way about pasta.

Pasta's the same, they think, but they don't understand that there's been tariffs from on cheeses and the olive oil world.

Olive oil market went up 50%.

And that things that were historically cheap products are no longer cheap products.

- So, is there a tipping point for this, Frank?

I mean, do you look down the road, you go, you know, at some point we're gonna hit some inflection point and it's gonna be quiet again.

- You know, we've been fortunate.

I mean, all the restaurants we have, we've got 14 restaurants, we got 2 under construction, they're all moderate price point.

They've always been moderate price point.

We actually, during the '07, '08 recession, we actually went up in sales.

And so, we are conservative to how we run our business.

And so we think, you know, we don't have debt.

I think people who have debt are gonna have a problem.

I think people who have very, very, you know, paper thin margins, they're just scraping by now.

I think they're gonna have a problem.

And so, I think the people who are well capitalized on how to run a business and manage their margins are gonna continue to thrive.

And the people who don't, aren't.

I mean, it's that simple.

- And you don't need to give me inside secrets, but is your profitability as a percentage greater than it was pre-pandemic, or is it narrowed because as you just talked about, Justin, that the gap of everything else has gone up too?

- Yeah, it's definitely narrowed and it's just, you know, there's, restaurant industry margins are already thin, right?

So, when you increase wages and all of the other costs, you know, it's gonna hurt.

It's gonna hurt, you know, profit a little bit.

But there are adjustments that are made and there's things that just are happening and need to happen.

- So, ours has been about the same.

What we've done is gone to like the olive oil companies directly and sort of we're buying larger.

We're trying to buy smarter and do things to manage our margins on that way.

- Will they play that with you?

- Absolutely.

I mean, if they know you're doing a certain amount of volume a year and you're growing, absolutely.

- Again, not to put you on the spot here, Frank, but does that put you in a pickle with your food broker or is this just about finding a new source.

- Not at all.

I think what ends up happening is you usually have four or five layers of something.

You have a guy who brings it in the country and then he brings it to someone else.

And so, what we're really doing is trying to just cut away one of the layers.

- [Chris] Yeah, yeah.

- And that's really all we're trying to do.

- I think it's really about, you know, one of the things that both of your ventures really promote is authentic cuisine, right?

So, whether it's in Indaco or whether it's Mama Ricotta's it is authentic, right?

Both are Italian restaurants, both great food.

I've eaten at both of them.

But here you have the opportunity now to make the supply chain more transparent, right?

So, as you're sourcing from Italy, from Spain for your olive oil, that you'd be able to then, you know, share that story as far as those producers.

- Yeah, Fred, I wanna ask you this question.

I was gonna do this a second ago, but thank you.

I don't wanna use this term flippantly again, but is dining out experiential, obviously.

- Absolutely.

- But is it escapism?

Do people have some level of, I don't know, enjoying the country of Italy, because they go to Mama Ricotta's?

- I think, you know, it's gotta be a shareable experience.

The first thing to each of the table these days is the phone.

It takes a picture of what the chef has put together, and that's shared as far as the social media campaigns.

And what that does then is that allows that diner then to have a belonging to the brand, which is so essential.

That when they go to, you know, to Mama Ricotta's and they're having the Chicken Parmesan and they're tweeting about it.

- Sorry, Justin, we're gonna get a plugin.

- Or they go to Indaco and have that wonderful, I don't care what pasta you have, right?

That they're saying that this is something that I really enjoy.

It's not a commoditized ingredient, it's something that is really special.

And I think that's essential.

- In a city like Charleston, Parker, will as Fred just described that, will that continue to confound those who try to look at restaurants as simply cost, benefit, a price point on a certain dish, et cetera, et cetera, is that the thing that drives this?

- Well, I think, to your point, we're seeing people are taking more photos of their pictures.

That's the start.

But I think their phones are coming into the dining experience more and more, whether it's QR code menus and restaurant technology, I think has a lot of potential to not only make things more seamless for the restaurant, but to also connect them to some of their most loyal customers in ways that we're not really possible before.

One example would be from the founder of Resy, which is a reservation platform.

He's launched a new venture called Blackbird.

And that is essentially, a way for restaurants, diners to check in at a restaurant and gain loyalty points.

And as they dine more, they might get a free appetizer, they might get a text if a table opens up.

So, the way that technology can really remove some barriers between busy restaurants and guests that are on their phones all the time is interesting.

- But let's go to that very personal experience between the wait staff and the patron.

You can't do much with technology.

It's gonna be what it is.

I mean, it's a very personal experience.

Frank, does it just come down to training?

And how do you train authenticity and a genuine a waiter or what?

- Well, I think that, I think the authenticity and someone being warm, I think we all want someone who's warm and friendly as part of our experience, right?

That hospitality piece I think is so important.

And that is really hard to train.

I mean, you can try to do it, but a little bit, you gotta look at their parents and say, Hey, mom and dad, you did a good job teaching this kid how to be a polite kid, you know?

And so, I think there's some of that going on where you try to hire people they're warm.

And they wanna do a good job, and taking care of people is important.

And I don't think that's gonna ever change.

I think the technology piece, it's interesting.

And I'm sort of would wait and see how people do over the years who you'll see in QR codes and people are ordering in QR codes and I don't think we'll ever go to that as a group.

I think we'll always try to be very old school and try to take care of the customer.

- Tactile menu.

- Absolutely, you wanna, you know?

We actually, during Covid, we had a consultant, a health consultant come in and say, how do we do things to make sure, because the tactile menu was something that was important to me.

And so, we ended up having buy different cleaners and stuff.

But I'm old school, I think people are still gonna want that dining experience and they're still gonna want that warmth.

So, that's what we're gonna focus on.

- And I'll say as a guest, the QR codes do drive people nuts a little bit.

I mean, you wanna hold a menu, you wanna feel like you're having a restaurant experience.

But some of this technology can maybe enhance that in a way.

But I agree with you there that some of the, you know, the relationship between the customer and the server that needs to stay intact.

And that's really just as important than ever.

- I think that some operators do it too, to be cheap.

- For sure.

- They don't wanna pay the printing costs, they don't wanna buy the menus and replace the menus or have someone wipe 'em down after every use.

I really do, I think some of it isn't a- - Yeah.

- you know, let's be safe.

I think a lot of it's like, I don't wanna spend the money on the paper.

- Yeah.

- Is that your experience?

- Yeah, I mean, we don't do the QR codes.

It's a menu in your hand.

But I mean, what he said, it's the hospitality, it's the warmth in a restaurant starts at the interview process of making sure that we are hiring the right people.

We are looking for individuals who are kind and positive and want to take care of people.

I just had an interview with a young lady who had three months total of serving experience, but was so friendly and so warm and everything that we look for in our values that I hired her.

And in the same week interviewed still somebody.

- Is she still working there?

- And still working there.

And in the same week interviewed somebody who had seven years of experience, and tons of wine knowledge, and zero personality.

People wanna come in and feel that warmth.

They wanna feel taken care of.

When you come and sit down at a table, we want someone that's gonna say, "how are you doing today?"

- Can Johnson & Wales train that?

- Absolutely, you know, our hospitality college is one of the most internationally ranked schools, you know, in the world.

It's really up there.

And the reason why is because we teach students to have a servant's heart.

Hospitality in Greek means the love of strangers.

So, when the customer sits at the table, and that server comes to them, and is making that connection, it's gonna extend what that brand means to that person.

- Okay, so Fred, I've gotta ask you this question.

You're speaking a little bit like faith values here so.

- Well.

- A servant's heart?

- A servant's heart.

- Humility.

- Absolutely.

- Okay, all right.

And how do you train to that?

Either it's endemic or it's not.

- I think for our school, the students see, and we're living in a, for the most part, a little bit of a kinder world than we were three or four years ago.

People see the value in being kind to one another.

They're seeing the opposite on television or on social media of how people act to each other.

So, I think there's gonna be a shift as far as folks really wanting to get into being a server or being a chef, because they really like to please people.

And you've seen it before, you've seen it.

When you look in the dining room and you see a customer smile, it just like everything else melts away.

- Yeah.

- Right, because then you're bringing joy to them.

- Yeah, I wanna, let's go to the revenue numbers.

So, you've had growth, it seems like it's back.

As you said, Frank, there's still not enough people in the business.

But when you're looking on the horizon, do you see a tipping point when it comes to how far, and I'm not saying that you are sitting behind your desk or with your team saying, "Yeah, let's see how high we can push this revenue."

I'm sure there's a motivation to that, but at what point do you think, and this is my term, that there's a tipping point in the price and the experience?

Are we close to it on this cycle?

Is there a challenge that you have to?

Chris, we've really never thought that way, because I've always thought like, I would rather be the restaurant that people wanna come to once a week and that we're the neighborhood restaurant.

I've never wanted to be the once a year experience restaurant.

I think those are the restaurants that are gonna struggle more.

But we're, you know, we have people who eat multiple times a week in our restaurants, and I think that's a big habit to get people to change.

I don't think they're necessarily gonna change.

Is as long as we keep doing our job, I think people will continue to come in.

- Are there people, Parker, that you know in the industry without naming names, that look at it as more of a financial equation and they're looking down the road to say, you know, we're watching this and at some point we're gonna hit it an inflection point, and then we're gonna see it drop off again?

- I mean, I think you have to.

I think every restaurant it has to consider it.

Particularly, the independent owners that, you know, they have their one restaurant and that's all they have, and they've put their life and savings into it.

I mean, if you're not keeping an eye on the numbers and you know, thinking about revenue every single minute, then you're not gonna survive.

And we see it all the time in Charleston.

There's incredibly high turnover in particularly, in some parts of town more than others.

And I mean, it's just, it's (indistinct).

- I'm sorry, I asked you a question.

You didn't have enough time to answer it, and we've got a minute left and good news, bad news.

You get the last one.

The bad news is, it's a question about tipping.

Is there a sensitivity to tipping to how people are reacting to tipping?

- I mean, it's pretty much the same as we've been running.

We haven't experienced much of a dialogue on tipping and we are just focused on the guest experience.

We're focused on the quality of what we do, and that starts the quality of the ingredients, what we're doing in the kitchen.

The service in hospitality we're providing the guest, the ambience that we have in our restaurants.

And as we look at the tipping point and all these things happening, we feel that, if the experience is there, we're gonna keep seeing people.

And if we just take care of people, they're gonna keep coming in.

- Thank you, that's the last word, gentlemen.

Thank you for taking time to do this.

Good to see you again, sir.

- Thanks to See you too.

- Parker, come back, please.

Thanks for making the commitment- - Thank you.

- to drive in from Charleston.

Fred, good to see you.

- Yes, sir.

- Justin, thanks for being here.

Thank you for watching our program.

If you have any questions or comments, CarolinaBusinessReview.org.

Until next week, I am Chris William, goodnight.

(suspenseful music) - [Announcer] Gratefully acknowledging support by Martin Marietta, Blue Cross Blue Shield of South Carolina, Sonoco, High Point University, Colonial Life, and by viewers like you, thank you.

For more information, visit CarolinaBusinessReview.org.

(suspenseful music) (suspenseful music continues) (suspenseful music continues)