Hotel F&B: The Benefits of Nurturing and Utilizing Local Products

By Erik Wolf Executive Director, World Food Travel Association | August 12, 2012

Turn on the television and we’re overwhelmed by the endless choices of food and travel programs. It’s even easy to find food shows on travel channels and travel shows on food channels. Food and travel go hand in hand, and it’s no surprise then, that food and drink are the fastest growing sectors of the travel industry.

That said, local foodservice businesses have a hard time competing against bigger companies like national chains and franchises. Consequently, many local foodservice businesses are closing. The reasons for struggle are many. A weak economy has beset us with job layoffs and reduced demand for travel. Foodservice businesses need a steady volume of customers to survive. Low-margin food establishments can hardly survive today without a higher volume of customers. None of us has to think hard to recall a restaurant, wine shop, gourmet store or other food-related business that has recently closed.

Researchers say we are bombarded with thousands of marketing messages each day. Consequently, we have to make many choices every hour – either consciously or subconsciously. It’s so easy just to stop into a nearby outlet of Global Coffee ( name changed but you know who we mean ). The ordering process is seamless. The service is great. If they mess up, they’ll make it right – no questions asked. Whether the coffee is actually good or not is another question. Yet the experience is terrific. Compare that to perhaps one of a handful of local coffee shops in your area. Sure, you have to drive to the individual café. There may not be parking. But the coffee is probably a lot better, it’s probably not any more expensive, and chances are you may even know the staff who work there. And if a conversation ensues, it’s probably rooted in a genuine relationship and/or interest in you. You’re not just a number in a production line like at Global Coffee. It does take more effort to buy local, but it’s worth it. Here’s why.

Let’s look at a locally-owned restaurant owner who serves 400 meals/day at an average price of $22/meal. The owner’s income is $8800/day. He sources most of his food and drink from the local region. On an average $22 meal, let’s say his net profit ( after staff salaries, rent, insurance, cost of food and other business expenses ) is $2.20/meal or $880/day ( $22,880/month or $274,560/year ). That’s nearly $275,000 per year that is available to be reinvested back into the local community. The restaurant owner may buy a house or a new car. He may purchase new equipment for his restaurant, clothing and entertainment for his family, and so on. He has to pay his bookkeeper, accountant, lawyer, dentist and doctor. His profit pays for a lot of local goods and services.

Now let’s compare that scenario with a national franchise restaurant owner who also serves 400 meals/day at an average price of $22/meal. The restaurant’s income is $8800/day. Of that money, the owner needs to pay staff, rent and insurance. He sources most of his food and drink from a foodservice supply company that his franchise has procured through a national contract. His food costs will most likely be lower so on an average $22 meal, let’s say his net profit ( after staff salaries, rent, insurance, cost of food, national franchise fee and other business expenses ) is $3.20/meal or $1280/day ( $33,880/month or $399,360/year ). That is an additional $400,000 of profit that is sent back to the franchise’s national headquarters. Sure, money is spent on hiring local staff and managers, but that was accounted for in the net profit. $400,000 is leaving the local economy vs. $275,000 staying in the local economy. Multiply that by the hundreds of thousands of foodservice outlets in the US alone, and the impact is staggering. The bottom line is that with national chains and franchises, a lot more cash is leaving, than staying in, communities. This is an important fact that is not advertised to local residents who are all too elated when they learn that a huge hypermarket is slated to open in their area next year.

Now let’s look at economic impact as it relates to travel specifically. Let’s say a family of 4 from Australia comes to the USA for vacation for two weeks. The fly into Los Angeles and stay a couple days, visit Disneyland, drive to Las Vegas and then drive through the Grand Canyon, Bryce and Zion national parks in the area. They stay the last night in Scottsdale, Arizona and fly out of Phoenix back to Australia. Over the course of two weeks, they spend $150/night on hotel ( $1950 for 13 nights ). They will also need to rent a car ( $600 ) and buy gasoline ( $300 ). They’ll need to eat out every meal ( $50/person/day or $200/day = $2800 for 14 days ). Of course they need to do some sightseeing ( $500 ) and go shopping since many things are much cheaper in the USA than Australia ( $3000 ). This very realistic scenario nets a total expenditure of $9150. Now let’s say there are 50,000 such families per year who take this kind of trip ( a very, very modest number judging by data from the Travel Industry Association of America ). If these families chose not to take this trip, then that is nearly $457,500,000 million less each year that isn’t being pumped into local economies.

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