Restaurant Sector: Survival and Potential Conflicts, Part 2

Restaurant 3Despite the initial cost markup on food—restaurants have heavy fixed costs and really are truly busy with customers only a few hours a week. For example, the most profitable restaurants—McDonalds and Darden have reported total company profit margins only around 10%.

For the independent operator, the economics is all about trying to pay their rent and debt service, and grinding out a salary. For the chains, getting new funding and debt service remains a critical factor, too, as does splashy growth. You can’t make much money from one restaurant. You need steady, profitable growth year after year, to attract the best sites, bank financing, or keep Wall Street happy.

The publicly traded chains are under enormous pressure from security analysts and                the investment community to develop sales and profit gains quarter after quarter.               The chains have and report via a complicated and detailed series of projections and             metrics. Even a month’s lack of sales momentum can cause a major problem.

About John Gordon

John A. Gordon is a restaurant sector expert, who focuses on restaurant management, operations, and related earnings and economics matters. He consults with attorneys and other professionals who need to know about restaurants, via expert research, expert consultant and expert witness roles. Working for both plaintiffs and defendants, he has experience with both state and federal actions. He is an expert on chain restaurant business conditions and publicly traded companies. Gordon has extensive, career-long executive restaurant operations, corporate staff, financial management and management consulting experience, and is familiar with virtually all management issues and business disciplines. He has completed PSLRA securities, financial projections, due diligence reviews, earnings and damages, franchisee/franchisor matters, wage and hour and menu analysis expert work. Expert witness and article contributor for www.ForensisGroup.com

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