The Changing Role of the Restaurant CFO
The traditional role of the CFO was to make sure the accounting was proper and the bills were paid. “Today,” Blake Bailey, CFO of Zaxby’s Franchising LLC in Athens, Georgia, says, “we are at the intersection of what matters and what we can control.”
In an environment of slowing restaurant sales, everything matters. A CFO’s responsibilities now stretch from pricing and labor retention to customer behavior, cultural alignment and even storytelling.
CFOs of public companies must still keep their eyes on the bottom line. Anthony Laday, CFO of 29-unit Fogo de Chão, based in Dallas, says, “We must set prices to what drives traffic, not just sales.” For example, the Brazilian steakhouses’ high dinner price points kept guests from going more often. To bring them back, and to introduce more people to the brand, Fogo now offers a lunch platform beginning at $15, Laday said.
At newly public Habit Burger Grill, in Irvine, California, CFO Ira Fils watches over unit growth. “We know we can get the great returns Wall Street likes from our core markets,” he says. “Sales are lower in new markets, so we must balance growth between new and existing markets.”
Dana Zukofsky, director with BDO USA, a specialist in the restaurant and hospitality industries, said their privately held companies struggle with weaving their brands’ culture into expansion decisions. “Our private equity investors would like us to grow quickly,” says Bill Long, CFO of Snooze, an A.M. Eatery, in Denver. “We have 23 company-owned restaurants now and we don’t want to grow so fast that we lose what makes our brand special.” Snooze’s culture is reinforced by its “highly visible” CEO and COO who, Long said, visit current locations frequently and would prefer that new markets are within a two-hour flight from headquarters.
Black Bear Diner, in Redding, California, a chain of 105 mostly- franchised family dining restaurants with a log cabin look, uses a national public relations firm to tell its folksy back story when entering new markets, said CFO Anita Adams.
MOD Pizza, in Bellevue, Washington, is growing by 100 units a year, 75% of them company owned. The brand set a franchising limit by “the number of franchisees that can sit around one table,” says CFO Bob Barton. “We have nine now that share our mission.” That mission, to employ people that need a second chance at life, is so critical that everyone, including the CFO, is charged with telling their story.
Even large players are being careful about expansion and capital allocation. Taco Bell, in Irvine, California, has more than 7,000 domestic units, mostly franchisee operated. CFO Liz Williams says, “We like the asset-light model and have franchisees that are excited to invest their capital into developing more units.” To facilitate expansion into U.S. cities, Williams notes, Taco Bell has a new urban model with a smaller footprint that can fit into existing retail centers.
Bailey says that 870-unit Zaxby’s also wants to “stay in vogue with Wall Street and spend less on fixed assets. But there’s tons of white space across the country where we know it’s important to gain market share. If a franchisee doesn’t want to take a market, we will consider taking it ourselves.”
CFOs have taken on a more strategic role in marketing, says Fogo’s Laday. They can analyze customer metrics to help other departments understand what drives consumer preferences, especially the highly desirable millennials.
“Millennials want new products, but everything has to be authentic,” says Williams. “At Taco Bell, we’re trying to develop new menu items, like breakfast quesadillas, that stay true to our brand.”
Millennials also want to customize their food, which is easier with digital ordering, says Zaxby’s CFO Blake Bailey. “Technology takes pressure off the counter staff,” says Ira Fils of Habit Burger, “and enhances the speed of service.”
Technology can also improve operations, but Zaxby’s success in that realm has been mixed, says Bailey. When the company tried out predictive software that told managers what to cook “it was a great annoyance because it was beeping all the time,” he says. Predictive analytics telling them what to order is acceptable and keeps food costs down.
CFOs said they worry about employee recruitment and retention in the tightening labor market. MOD, Barton says, pays 20% more than minimum wage and “tries to make it simple. If you care enough, but make a mistake, we’ve got your back.”
The culture at Snooze—the breakfast chain gives 1% of sales back to the community and recycles 90% of its waste— resonates so well with millennial employees, says CFO Long, that some have left, then returned.
Larger chains are sweetening incentives for their general managers, hoping their enthusiasm will trickle down to line workers. Zaxby’s has a deferred compensation trust fund for management-level employees, while Taco Bell provides leadership development for general managers at company headquarters, a program that also makes franchisees feel more connected to corporate, Williams says.
Mike Gottlieb, assurance partner of Ernst and Young’s restaurant practice summed up the changing nature of the CFO's role. "The CFO is called the chief financial officer, but in today’s world their in influence spans the entire restaurant operation, not just finance.”