CRFA is an important investment for your business
Presentation to The Canadian Restaurant Investment Summit
May 27, 2010
Toronto, ON
Garth Whyte, President and CEO
Canadian Restaurant and Foodservices Association
It is a pleasure to be opening the first Canadian Restaurant Investment Summit. I want to commend the organizers for hosting this event, which is important for the future growth of our industry.
It is great to see many leaders in the restaurant industry and CRFA members here today. I would like to introduce two of my colleagues – Jill Holroyd, CRFA’s Senior VP Marketing and Communications, and Stephanie Jones, CRFA’s VP Membership. Both are key players at CRFA and you should search them out during this conference. Among her many responsibilities, Jill oversees CRFA’s research and the publications I will be referring to. Many of you know Stephanie as our Ontario Government Affairs spokesperson and she has recently taken responsibility for our membership sales and services.
Many years ago, when I was a board member on a business association, a board colleague gave me two bottles of wine. I was very surprised and I asked him why he was so generous. He said, “Six months ago you told us that there was no way the federal government would let Air Canada go under. So I bought 20,000 shares at $2 and recently I sold them at $10 a share.” He made $160,000 and I got two bottles of wine.
It is clear, I am not here to tell you how to invest. However, I do understand entrepreneurship. I come from an entrepreneurial family and I have worked with and represented entrepreneurs for 25 years.
My definition of an entrepreneur is “body mass divided by scar tissue”. Many of you in this room have a lot of scar tissue. You have been investing, creating and growing restaurant businesses for many years. You have learned a lot through trial and error and some of you have had some failures. That is another important definition of entrepreneurship – the ability to fail and start again.
Experienced investors take measured, calculated risks. Investors base their decisions on the best available information and research they can find. They also want confidence that there will be few surprises that can hurt their investment. Finally, investors, especially restaurant investors, should be celebrated and recognized for the positive impact they have in their community, with employment and with Canada’s overall economic growth.
This morning I want to show how CRFA contributes to those three important conditions for investing: quality research and information, business confidence, and creating a positive image and a restaurant industry brand to give to the public, policy-makers, and influencers such as politicians, government officials and the media.
Importance of accurate restaurant research information
First, I want to start with the importance of sound and accurate research information about the restaurant industry.
2009 was a tough year for everyone. There was a recession and a lot of political uncertainty combined with declining consumer spending and declining restaurant sales. Add to that a significant jump in menu prices caused by surging food prices and increasing labour costs. Throw in a mix of bad weather, an H1N1 scare, some municipal garbage strikes, minimum wage increases and other various government regulations and taxes, and it is good to put last year behind us.
The good news is that research has found that investors who start up businesses during economic downturns have a higher success rate than business start-ups during good times. This is probably because during tough times more experienced entrepreneurs and investors are looking for investment opportunities. They do their homework before plunging into an investment. They also follow closely their input costs and they know what the expected return on investment needs to be to succeed. To do so, it is essential they get timely and accurate research information and economic indicators.
The Canadian Restaurant and Foodservices Association plays a key role in this area. We publish our Foodservice Facts annually, which provides key industry indicators such as foodservice sales and a detailed sales forecast.
This research report is one of many available to CRFA members. For example, we conduct an annual Chain Compensation Survey, and we have just published findings from the first-ever Canadian Chef Survey, which tracks up and coming food and beverage trends. Jill’s team can also provide members with detailed industry information upon request. It is critical to get access to timely information you can trust.
Many of you have received a copy of CRFA’s new magazine, which is published by MediaEdge Communications. The first edition was launched in March this year and the second edition will be ready next week. When you receive your copy, turn to page 52. You will see a picture of our economist, Chris Elliott and I meeting with Canada’s Chief Statistician Munir Sheikh to review the quality of the monthly foodservice sales data produced by Statistics Canada. Let me show you two graphs that we presented at the meeting.
The first slide shows Statistics Canada’s indicators for: employment (purple), GDP (red) and retail sales (blue). It is no surprise to anyone in this room that starting in September 2008, the GDP declined, employment declined and retail sales dropped like a stone. All three indicators were in negative growth for the entire year.
The second slide shows Statistic Canada’s estimate of foodservice sales during the recession (green line). StatsCan estimated that foodservice sales grew by almost 5% in 2009, during the recession. It is true that some chains actually had positive sales growth last year but they are in the minority. Every economic indicator tells us that foodservice spending was down overall. You don’t need a PHD in econometrics to figure that out.
We told Dr. Sheikh that it is critical that Statistics Canada quickly fix this problem with their methodology. This information is a benchmark that is critical to our industry and investors. Just as important, this inaccurate information paints a rosy picture for the media and policy-makers that can be used to justify increasing taxes and regulations on our industry.
Needless to say he got the point. He told us that we represent an important sector and accurate and timely information is essential for future investment and developing policies that help, not hinder, expansion in our sector. He committed to quickly resolve this issue, so that you have the reliable research information you need for your investment decisions.
Importance of fighting harmful government taxes and regulation on our sector
The second key role CRFA plays to assist investors in our industry is to improve investor confidence by making all levels of government – federal, provincial and municipal – accountable for their actions. Business confidence erodes if owners are continually blindsided by taxes and regulation.
I have met with members across the country in every province. I have talked to all of our 30 board members and asked them what we need to do to improve. It was clear they are frustrated. As one member put it, with minimum wage increases, garbage strikes, credit card fees and all the other federal, provincial and municipal government taxes and regulations it feels like death by a thousand cuts.
Our role as the voice for the restaurant and foodservice industry is to fight against harmful government taxes and regulation and to push policies that will help not hinder our industry to grow and prosper. For this to work, we need the input and participation of our members throughout the lobbying process.
An example is our dairy campaign. Our members tell us that they are fed up with rising dairy prices every year. With the help of some of our key members we launched a major media campaign. Last fall you may have seen an advertisement in The Globe and Mail protesting high dairy prices. We also put it in The Hill Times which is read by all federal MPs and federal officials. It was a very aggressive approach, especially since the ads featured silhouettes of the three Dairy Commissioners we met with on that same day. The message was, “enough is enough.” We were not prepared to quietly accept another dairy price increase on top of cheese prices that are 30 per cent higher than our competitors.
As a result of that campaign the commission decided against a price increase and it was only the second price freeze over the last 15 years. We are not stopping with this issue. We want to see actual price decreases.
There are several major issues and successes I could talk about that are keeping us busy such as beating back the disposable coffee cup ban in Toronto, pushing for more transparency and accountability with credit and debit card fees and launching a major campaign to fight the HST in BC which will result in a 7 per cent sales tax increase on our BC customers and a major drop in our sales.
Other issues we are dealing with include: EI, minimum wage, small business financing, temporary foreign worker program, sodium, trans fat, menu and menu board labelling, food supply, music royalties, G20 preparations, pandemic planning, fiscal evasion, waste diversion, payroll taxes, liquor control and licensing, and food safety training. You get the point.
Business owners do not have the time and the expertise to deal with this long list of government issues that impact their business – costing them time and money. It is our job to defend the interests of our members and the restaurant industry by making government accountable for their actions. We may not win every campaign but you can be confident that we will neither quit nor will we go away.
Importance of the restaurant and foodservice industry to the Canadian economy and job creation
I can talk about these and many other issues that concern you and our members. However, we need to be focused on one issue or one key message if we are going to have a real impact. This is my third point – we need to get our politicians and Canadians to better understand and appreciate the importance of our industry to Canada’s economy, job creation and local communities.
If we don’t get our message across to politicians we will continually experience policy death by a thousand cuts. We have to answer these questions: Why should politicians care about our industry especially when they are concerned with the recession, the financial crisis, unemployment, the debt and Afghanistan? What makes us so special?
We have been meeting with the Prime Minister, Premiers and politicians across the country. We have been telling them their primary goal should be to make the restaurant industry a top public policy priority for Canada, and in their respective jurisdictions.
A prosperous and growing restaurant sector is critical to Canada’s future growth and job creation. It is critical to growth and job creation in every community across the country.
Our challenge to our federal, provincial and municipal leaders is to develop a vision for the restaurant industry in Canada and in their province or territory.
United Way advertising campaign
This is what I call the anti-vision – the one that perpetuates the negative misperceptions of our vibrant industry.
Some of you might have seen this United Way advertising campaign last summer. I saw it every day on a billboard as I took the subway to work. It is a very effective campaign, similar to a theme used by other social groups – to give a hand up, not a hand-out.
As you can see it is a picture of a newcomer to Canada, standing in front of a stack of dirty dishes in a restaurant kitchen that looks more like a dungeon. He is lifted out of that job to a more meaningful job in the medical field.
This is a wake-up call to our industry. It is clear that many Canadians and governments do not fully appreciate the important role the restaurant and foodservice industry plays in Canada and in our communities.
My intent is not to attack the United Way campaign. In fact, I showed this picture to my board members. We need to do a better job of communicating about our entrepreneurship, our innovation, our job creation, our community support and our success stories. This is a non-partisan issue.
When I describe this dishwasher image to my members, they are often hurt and then angry. It is our industry that gives many people their first job. It is our industry that lifts people into better and bigger jobs.
A president of a multi-billion-dollar company told me that his first job was as a dishwasher. Another told me that he recently gave a franchise to a Canadian who immigrated here 10 years ago and started as a dishwasher.
In foodservice, it really is possible for a motivated employee to grow from washing dishes in the kitchen to cooking up deals in the boardroom.
Canada's restaurant and foodservice industry employs more than one million people and generates $60 billion in annual sales. We contribute to communities of all sizes, all across Canada.
Like many other industries, foodservice has been hit hard by the recent recession – but at the same time we are uniquely positioned to contribute to economic recovery and growth.
Every dollar spent at a restaurant generates an additional $1.85 in spending in the rest of the economy – well above the average for all industries in Canada. And the benefits are felt in every community, not just in major centres.
Over a 10-year period from 1999 to 2008, Canada’s accommodation and foodservices industry created nearly 160,000 jobs – that’s more than agriculture, forestry, fishing, mining and finance combined.
We create one in five jobs for youth. We build future leaders.
I would argue that our governments do not fully appreciate the enormous economic and social impact of the restaurant and tourism industry.
My question to the Prime Ministers, to the several Premiers and to politicians I have met over the past year has been this – is the foodservice industry important or not?
If the answer is yes, then we challenge governments to make the restaurant and foodservice industry a policy priority.
We are not asking for a hand-out or a hand up. We are asking for a fair shake – and some applause on occasion.
I think you get the point we need to remind politicians and Canadians about how important we are to this country.
Conclusion
CRFA contributes to three important conditions for investing: quality research and information, business confidence and creating a positive image and vision for the restaurant industry.
My final message is we need to speak in a unified voice. Together, we can be very powerful and influential. Divided, we lose every time.
You will notice a lot of changes with CFRA. We have a members’ first attitude with a new mission: to help create an environment where all members in every community can grow and prosper. If you are interested in learning more, please see myself, Stephanie or Jill.
Join us! It is an important investment. The more members we have the stronger our voice will be. If you don’t speak up about your concerns, why should our politicians listen or make policy and regulation changes important to your business?
I can assure you that CRFA will continue to speak up. We will continue to meet with the Prime Minister, Premiers and political leaders across the country. We will continue to do so until they hear our message. This is too important an industry to be ignored. It is too important for Canada’ future growth and prosperity.
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