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MAY 2025
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Chain Saw Politics The Potential Costs of Cutting Too Deep
That would hit franchisees at a vulnerable time. The industry has been having a hard time building traffic, even with aggressive value-meal pricing. Traffic from low-income consumers has been soft for more than a year. What would happen to those customers if Washington takes a slice out of Social Security and Medicaid? Most of our franchisees’ customers are middle- to lower-income citizens whose disposable income — the cash they are willing to spend on eating out — can disappear fast when the government cuts benefits. A few months ago, some guy here in Seattle was randomly declared dead by the administration and his Social Security benefits were cut off. Getting that undone took him two months, and he received no benefits during that entire period. He and his wife managed to scrape by using other assets. But his wife told the media they didn’t know what they would have done if Social Security had been their sole source of support — as it is for about 27% of older adults. Government benefits are critical to the fast-food workforce, too, as I’ve written in this newsletter in the past. A parent with two young children, whose income is below a certain level, can qualify for as much as $30,000 in government food, child care, housing, and health care benefits, according to a study by the Atlanta Fed.
I was driving to a business meeting on a state highway recently when a thought hit me: This road is in really good shape! Lately, I have been noticing the infrastructure the government provides more often, and I am increasingly aware of how critical it is to my business, my clients, and my life. As the current administration takes a chain saw to the bureaucracy, I just want to say one thing: I hope you know what you’re doing. In my view, many of the basic government functions we take for granted are underrated. I think most of us like our government to be predictable and boring. Many of the things I enjoy are facilitated by the government — like taking road trips on our interstate highways, visiting our national and state parks, and swimming in clean water. So do a lot of American families. Many of them eat at fast-food restaurants while traveling and vacationing at those parks. If government staff cuts create major traffic jams or service problems at our state and national parks, more families are likely to eat at home.
If Washington reduces those benefits, as the administration seems intent on doing, many fast- food employees could no longer afford to pay for the child care or commuting expenses that enable them to get to work, making it even harder for fast-food franchisees to recruit and retain workers than it already is.
Nobody likes paying taxes. But one of the things our taxes provide is stability in the form of infrastructure, in the form of basic regulations, in the form of critical benefits. All of that enables us to sustain the illusion that we can plan our lives. From my standpoint, that’s what we look to government to do. Are we in the midst of sacrificing that?
– Nate Riordan
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Turning Tension Into Trust Smart Strategies for Handling Tough Customers
AI Takes Your Order
Where Bots and Fast-Food Customers Meet
Rude customers are a growing problem for businesses.
Fast-food operators are paddling hard to stay atop a rising tide of customer data. Growing use of digital tools has left many struggling to integrate a mishmash of apps and hardware from different vendors. Only 35% of restaurant operators in a recent industry survey say they use the customer data they collect in a targeted way to increase sales. Many say they need more support from third- party vendors to integrate AI into their operations and marketing. Yum! Brands has taken a different tack. In what Restaurant Business calls a landmark moment in the industry’s AI era, Yum! recently announced a major scaling-up of its in-house AI development. The big restaurant operator is partnering with the world’s largest maker of AI chips, Nvidia, to use AI-powered voice ordering at drive-thrus and by phone at 500 Taco Bell and Pizza Hut stores. Yum! also plans to use computer vision to identify botched orders and labor hang-ups and report problems to managers. About half of Yum!’s orders now come through digital channels, up from 19% in 2019, according to The Wall Street Journal. Yum!, which has long kept development of AI applications in-house, believes digital ordering increases sales by making it easier to upsell, entice eaters through notifications, and personalize their interactions. Eventually, Yum! intends to move 100% of orders to digital channels. Of course, many other operators have embraced AI, too. Wendy’s uses it to offer gamified promotions and deals to loyalty customers. Domino’s tracks customers’ preferences and suggests what to order. In operations, Dillas Quesadillas, a quick-service restaurant, uses PreciTaste technology to predict
According to the Society for Human Resource Management, more than 70% of workers experienced or witnessed acts of incivility daily for three months in 2024, damaging employee productivity and morale.
Is it ever okay to “fire” a customer? Or is there a hidden upside to investing the time and energy required to win them over?
Challenging customers allow you and your employees to practice active listening and show empathy for the customer’s anger or frustration. Consider the possibility that the customer is having trouble understanding what to expect from your product or how to interpret the instructions. In some cases, the customer’s problems may have nothing to do with your company. They could be looking for attention or venting to ease their own anxiety over other issues. To understand the problem in depth, allow the customer to voice their complaints completely — don’t interrupt them. Practice active listening by making eye contact, avoiding distractions, and signaling your interest by verbally confirming you hear their concerns.
Repeat a description of the customer’s complaint to show that you understand. For example, you might say, “If I understand you correctly, you’re upset because the product you received arrived too late for you to use.” This shows the customer you’re paying attention and validates their emotions. Figuring out the underlying issue can help you respond most effectively. Even if your business is not to blame, never descend to the level of an irate customer by abandoning your professionalism, politeness, or respect. Instead, apologize for their distress and work with them to find a solution. With luck and a little skill, you can turn that stressful encounter into an opportunity to show you are committed to excellent service — and transform that irate customer into a loyal, trusting fan.
order flow and streamline preparation of ingredients.
Third-party delivery companies are joining the fray. DoorDash recently crunched its vast database of restaurant customers to promote
its own list of the 50 most-loved eateries on its platform. Clearly, wherever fast-food diners choose to eat in the months to come, AI will be a growing presence.
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“A single act of kindness throws out roots in all
directions, and the roots spring up and make new trees.”
— Amelia Earhart
Pizza Wars The Fast-Food Chains That Sat Out Inflation
In the 1990 film “Home Alone,” child star Macauley Culkin orders a pizza for delivery to his house while he battles two dim-witted wannabe burglars. The price he paid: $11.80. Today, the price of a pizza for delivery is about the same. Pizza lovers at many locations can order a large one-topping pizza for $7.99 from Domino’s and $9.99 from Pizza Hut, plus a delivery fee.
sales volume, their per-pizza cost declined. Selling one pizza at full price enabled the chains to cut prices on additional pies, because labor costs for one versus several pies are about the same, Dent found. Also, Domino’s has built its own low-cost supply chain. This enables its stores to “lean into value” as a marketing strategy and put up with thinner margins, Domino’s CEO said on a Q4 2024 earnings call. Although margins for both chains have plummeted, Pizza Hut has taken the bigger hit since its peak in the “Home Alone” era. Its store count and same-store sales have plunged in recent years. Domino’s now sells about 20% of the pizza consumed in the United States, compared with Pizza Hut’s 12%. Nevertheless, the price wars have helped turn the U.S. into a nation of pizza eaters, with annual consumption rising to 8.8 pizzas per person from 5.6 in 1988, Dent reports. The biggest winners? The independent and regional pizza restaurants that now capture nearly half of the U.S. pizza market.
What happened to inflation?
The nation’s two biggest pizza chains basically sat it out. In a 30-year period when the price of a Taco Bell taco and a Big Mac have each risen more than 200%, a one-topping pizza is up only 14% at Domino’s and 18% at Pizza Hut, according to research by journalist Mark Dent of The Hustle. While Domino’s touts its $9.99 “Dream Pizza Deal” as the best ever, Pizza Hut fires back: “No One OutPizzas the Hut!” How do they do it? “By paring down costs, adding fees, and putting up with slimmer margins in a prolonged slugfest for higher volume,” Dent says.
Visit our blog for helpful franchise law insights and industry trends: westcoastfranchiselaw.com/insights
While both chains delivered pizza for free decades ago, they now charge about $5 per delivery. Also, as the chains increased
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600 Stewart Street #1300 Seattle, WA 98101 westcoastfranchiselaw.com (206) 724-0846
In This Issue 1
Are Basic Government Functions Underrated? A Game-Changing AI Deal in Fast Food Savvy Ways to Handle Difficult Customers Tired of Sticker Shock? Order a Pizza Workers Savor the Adrenaline- Pumping Energy of a Fast-Food Job
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Hourly Employees Speak Up on Pros and Cons of Their Jobs Kitchen Camaraderie
that difference, with restaurants reporting 107% turnover every 12
months, compared with 84% in other industries. The downside of food- service jobs, workers say, is having their shifts changed on short notice or being scheduled for fewer hours than they want. Other industries tend to have more stable work schedules. Restaurant employees also described challenges in communication, such as being left out of the loop on pricing changes. Another issue for employees was a lack of recognition for their work.
One of the greatest strengths of many fast-food managers is that they have a better understanding of their hourly workers than supervisors in other industries. As they recruit, train, and supervise employees in their stores, fast-food managers learn a lot about what motivates them, including the camaraderie and teamwork required to keep a busy restaurant running well. A recent large survey of more than 46,000 hourly workers confirms that observation. Many restaurant employees enjoy their coworkers more than hourly staffers in other industries, and savor the adrenaline-pumping energy of a restaurant during a busy shift, according to the survey by goHappy, a provider of workplace communication technology and a sister company to Snagajob, an
online hiring platform for hourly workers. Some 52% of the survey participants work in food service, and the rest are employed in retailing, manufacturing, health care, logistics, and other industries. The survey aimed to measure workers’ engagement — that is, the extent to which respondents feel inspired and empowered to do their best work every day and to go the extra mile on the job. Engaged employees say they are likely to stay for at least a year, are proud of where they work, and would recommend their employer to friends. In food service jobs, about 66% of employees are engaged, compared with 74% of hourly workers in other jobs. Twelve-month churn rates reflect
The survey charts a path toward improvement: When managers
communicate clearly, express appreciation for employees’ contributions, and provide clear guidance and opportunities to grow and advance, workers’ engagement scores rise. The smartest fast-food franchisees already know this, and they’re using their insights into their workers to make their lives better. They know their customers want a consistent, reliable, respectful experience — and that treating employees the same way can go a long way toward achieving that goal.
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