Archive for March, 2008

Food Price Inflation Changes How We Shop

 

Steadily rising food costs aren’t just causing grocery shoppers to do a double-take at the checkout line – they’re also changing the very ways we feed our families.

The worst case of food inflation in nearly 20 years has more Americans giving up restaurant meals to eat at home. We’re buying fewer luxury food items, eating more leftovers and buying more store brands instead of name-brand items.

For Peggy and David Valdez of Houston, feeding their family of four means scouring grocer ads for the best prices, taking fewer trips as a way to save gas and simply buying less food, period.

“We do more selecting, looking around, seeing which prices are cheaper,” said David Valdez. “We are being more selective. We have got to find the cheapest price.”

Record-high energy, corn and wheat prices in the past year have led to sticker shock in the grocery aisles. At $1.32, the average price of a loaf of bread has increased 32 percent since January 2005. In the last year alone, the average price of carton of eggs has increased almost 50 percent.

Food Price Inflation Changes How We Shop

Meal-assembly kitchen keeps up with times

Not to be a downer, but I think we’ve heard most all of this before – and that was  when times were good…

When meal-assembly kitchens came on the scene in 2002, they were seen as the solution to that never ending dilemma: what to fix for dinner.

Customers would pre-order several meals, then attend a two-hour session where they assembled dinners while chatting with friends, maybe sipping a glass of wine. They left with a cooler full of meals ready to cook at home.

Great idea, except in the past two years, growth in the meal prep industry has slowed sharply, according to a recent New York Times article. It seems many people are not motivated to plan so many meals ahead of time. A lot of working women or frazzled stay-at-home moms have a grab-and-go mentality, resorting to fast food or takeout.

Mr. Stevens is confident his business will succeed because of the quality of the food. “The Bay Area is pretty snobby about food. We don’t buy from chains. We get our meat from a butcher in San Francisco and our fruits and vegetables from the produce market in San Francisco. Our herbs come from farms in Half Moon Bay. Everything is fresh but the shrimp.”

Meal-assembly kitchen keeps up with times

Record 28 Million Americans to Get Food Stamps

Not exactly encouraging news …

In an economic indicator that paints a grim future for swaths of the US population, an all-time record 28 million Americans are expected to be close enough to poverty to receive $36 billion in food stamps in the coming fiscal year, reports the New York Times. There is a surge in recipients in 40 states, with 14 already reporting a record count last year.

Record 28 Million Americans to Get Food Stamps

Imitation is the sincerest form of flattery

I was forwarded a copy of the EMPA newsletters the other day and I was struck by how much of its contents is a direct recap of the topics discussed on this site. From the article on Dinner by Design and Morton’s working together to the ideas of single servings, working with the elderly, delivering food to business complexes, changing food containers and even the idea of using FedEx to deliver meals overnight. From my observation a great deal of the newsletters content came from our “What IS working” article and its comments.

I’m not complaining mind you, the ideas expressed here are meant to be shared and used by all. At least they didn’t charge anybody to read those ideas… Well, not this time anyway…

What a Quiznos franchisee makes

Although this is talking about a Quiznos the items listed are probably applicable to most meal assembly stores. The information is from a couple of years back, but the category breakdown is interesting includes some cost we probably forget to take into account when figuring out the cost of a store.

Close? Not even in the ballpark?

 

If a store earns $40,000 / month:

7% Royalty $ 2,800
1% Local Advertising $ 400
3% national advertising $ 1,200
20% Labor $ 8,000
29% Food $ 11,600
3% Paper $ 1,200
.3% Accounting/Payroll $ 300
10% Rent/CAM $ 4,000
2.75% Insurance / Misc. $ 1,100
5% repay SBA loan $ 2,000
4.5% misc bills (utilities, etc) $ 1,800
.5% Spoilage $ 200
1% Supplies $ 400
1% Promo Food $ 400
1% Comp Food $ 400
2.9% Credit Card Fee $ 1,160
.4% Coupons $ 160
.5% Food Waste $ 200

No one has any control over %. They are fixed and that is that. So if a store is lucky enough to earn $480,000 annual, the owner can expect to walk away with a profit of 9.4% = $45,120 [edit by Ryan Knoll: I believe this should be 7.15% = $34,320 based on the numbers provided]. No one is going get rich off of that. Of course if an owner can get cheaper rent, and increase sales, it will be of great benefit.

The average store seems to be about 1,500 – 1800 sq ft. and the going rate is $17.50 – $30.00 sq ft + $5.50 – $8.00 CAM.

That looks reasonable to me and should be considered by anyone buying an existing or new franchise. People often forget the expense of promos and coupons, credit card fees, insurance, and payroll expenses. The pretty picture the franchise sales rep paints for you often is the “best case” scenario.

Well, you might think, “That’s a 18% return on my investment of $250,000! I’ll take it!”. That’s not an accurate reflection of your actual return. Those results assume you are working at the franchise full-time and do not include your or your manager’s salary. So, if you think your year’s effort is fairly compensated at $45,000, then your real return on your investment is ZERO (actually it’s negative because you could be making 4-5% in bonds).

What a Quiznos franchisee makes
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