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Thursday, October 16, 2008

Some Let Up In Sight

Oil is trading below $70 a barrel today for the first time in over a year! Hopefully, we'll see the grain prices which have followed crude prices continue their downward trend. If you haven't locked prices on your high volume items, you may want to let the market drift lower.

Lower oil prices will eventually make the price of gas cheaper and this will give consumers more discretionary income. Your delivery fuel surcharges should be moving lower. As lower energy prices revive the food service model, we should find lower cost of goods sold, lower heating and cooling charges, and higher customer counts.

The federal government's recent decisions may not jump start the housing market but the inflation fears should be less. This will help keep interest rates low. Americans are adjusting to the reduced access to credit and they are watching their expenses closely. Value menus will still have the edge. QSR patrons like to build a meal from a value menu. Casual dining guests are searching for meals below $15.

Generally, the recent crisis should give way to a challenging but manageable business climate for restaurants. If you are in range of the break even point sales level, some proactive measures may help put you in the black. Make sure you challenge fuel surcharges. Look at the invoices from 2 years ago and document the increases. If you haven't been able to raise menu prices, the lower cost of sales will immediately help your bottom line. Stay on top of market conditions.

David Maloni, of American Restaurant Association, now offers a free portal Commodity Central with daily trends in the futures markets. Both Hogs and Corn futures are down over 4% today. If these trends persist, you'll see lower invoice prices.

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