Wednesday, May 4, 2011

Maybe you should sell T-shirts

Good news for family travelers: You won’t have to drive three hours this summer to take in attractions like Paul Bunyan’s Giant Ball of Tinfoil. This vacation season those educational opportunities will be no more distant than the nearest restaurant, where June, Skipper and Princess can witness the World’s Greatest Vise in action.

But first, a primer is in order. During the Great Recession, discounting was one of the few ways restaurants could brake the loss of customers. And, man, did they use it. According to Burger King franchisees, they were actually losing money on some of the bargain-priced items they were forced to sell by corporate. McDonald’s ‘zees similarly griped about the dollar price tag they were pressed to put on some breakfast options.

Rock-bottom deals weren’t merely a quick-service phenomenon. Steak chains survived the downturn largely by giving customers low-ticket alternatives, like bar menus and drink specials. Casual chains bundled their selections, packaging two entrees and a shared appetizer at what an entree alone might’ve once cost.

Deal-making, once merely a tactic, became a fundamental strategy. Customers came to expect the deals. Some might say they became addicted. But, hey, the approach worked.

The industry might’ve had time to ease through a reasonable detox. But the rise in commodity costs snatched that option away. Patrons still refused to step through the front door unless they were offered a steal. But the bargains were harder for operators to swallow because ingredients like tomatoes and beef were costing a lot more at the back door.

Voila: The World’s Greatest Vise, a.k.a. the after-Recession squeeze on margins.

Commodity prices are difficult to cover because they’re slipperier than an eel with a law degree. The direction can shift profoundly, one way or another, in a matter of days or weeks.

But recent headlines suggest we’re seeing just the beginning of the climb.

Consider, for instance, one little-noticed effect of last week’s tornadoes in the Southeast. The twisters hit nearly 400 chicken coops in Alabama alone, or roughly 25% of the state’s bird-rearing facilities. The Wall Street Journal reported that about 5 million birds were killed, putting an extreme crimp in supply.

That devastation came as chains like Wendy’s were tinkering with new chicken sandwiches, a move interpreted by many observers as a reaction to soaring beef prices.

The good news: Chickens require only about six weeks to reach maturity. If facilities can be repaired and flocks replenished, the damage could presumably be offset quickly.

Not so with sugar. The Journal, a real bummer this past week, reported that domestic crops of sugar cane were undercut by Florida’s cold snap in December.

Yet to be determined, it added, is the effect of flooding on Midwest areas that cultivate sugar beets. The experts are gauging how the rainfall affected plantings for the spring and summer growing season.

And, just to put that (unsweetened) cherry on top, the paper noted that the U.S. government is tightening the cap on sugar imports.

Not that the worldwide market is awash in the stuff. Bloomberg reported a few months ago that cyclones destroyed much of Australia’s sugar-producing fields. The European Union had already addressed the issue.

So had the United States. Farmers had indicated an intention to cultivate more sugar beets to exploit the worldwide opportunity. Oh, well.

At least families won’t have to use as much gas this summer to take in cultural sites like House o’ Mud, Alligatorville and Michigan’s Largest Ball of String.

Maybe they’ll use the savings to buy a drive-thru burger—at full price.

No comments: