Speaker: Steve Churci, President and CEO of Arizona Restaurant Association
Subject: Issues the Industry Faces in a Down Economy and an Early History of Different Types of Restaurants

This talk has turned out to be very timely. We have just launched Restaurant Week this past Saturday and it is our second annual event. Last year was a big success and we have 115 participating restaurants this year in the Phoenix Metro area. We have partnered with Shamrock Foods and you can go to www.dine4az.com where you can find coupons and deals for some of the restaurants and we have 9000 restaurants listed.

Some interesting facts: Famous people who started their careers in the restaurant business. Madona, Sharon Stone, Shawnia Twain, Jay Leno are some examples. What are the total projected restaurant sales for Arizona for this year? The answer is 8.7 billion dollars. We grew by 300 million dollars this year but just 4 years ago we were growing by 750 million dollars. Restaurant employees account for 10% of the working public. Right now we have just over a ¼ million employees. Almost ½ of the American public has worked in the restaurant industry. We have 9000 restaurants operating, and our job growth is expected to increase by 21% by 2019 and that means we are going to have 60,000 jobs. We were leading the nation in sales, just behind Nevada, for the past 5 years. This year we went to number 5. Some of the competitors who left the state went to New Mexico, Texas and Nevada and we hope in time to get them back when the economy improves.

Three principles that we believe are credibly important to our industry and they are 1) Diversity, 2) Innovation and 3) Endurance. I would like to talk about some of the great people in this industry that really drive these points home. These people really helped to define what we are about. Carl Kurchner, who started Carl's Jr., was born in Sandusky, Ohio and went to Anaheim, CA to work with his uncle in a small business for 3 years. He left that job to work as a bakery delivery boy to increase his salary by $6 a month. He married in 1931 and he and his wife started a hot dog stand business on July 17, 1941 in Los Angeles. They borrowed $311 on their Plymouth automobile and added $15 from his wife's purse to make that purchase. The stand originally sold hot dogs and Mexican tamales. In 1945 they opened their first restaurant called Carl's Drive In and Bar-b-que in Anaheim. It quickly grew and they opened several more restaurants. By 1974 they had 100 and 300 by 1981. At one point he was removed from his company by his own Board, but he went on to get control back and remove all of those who had removed him. They have 60 stores in Arizona alone and his grandson is running them. McDonald's was an innovator in our industry and it started with two brothers from Manchester, NH. They established one restaurant in San Bernardino, CA, in 1940 and they were the first to introduce the speedy service system which we refer to as quick service today. What they franchised was the system not necessarily McDonalds, but the system. Original franchisers did not change McDonalds since it worked as it was. Ray Croft who was selling milk shake machines at the time came into McDonalds and told them they had a real jewel. Ray Croft being the innovator he was went out and started Taco Bell and Wendy's. We had Carl Sanders who represents endurance, and later became Col. Sanders. As a child he lost his father at a very early age, 4 years old. He had a variety of jobs as a youth an enlisted in the army when he was 16 years old. At the age of 40 he felt he needed to do something with his life. So he cooked chicken and other meals and took it to people who stopped in at a service station in Corbin, KY. He didn't advertise and it was all by word of mouth and before he knew it he would serve 140 people. He realized that he had something pretty good. His method was using a fryer that a lot of chicken could be cooked in which was faster than pan frying, and that was really his technique. He was given an honorary title of KY. Col. in 1935 by the Gov. He decided to franchise the chicken restaurants at age 65 using $155 from his first Social Security check. He sold it for 2 million dollars in 1964, but kept the rights to Canada.

What is important to us and what we try to trumpet out to people is that restaurants are the cornerstone of our community. It is a place that is the extension of your dining room, the place to celebrate that milestone anniversary, that special birthday, graduation. It is all of those things in one. So on behalf of our 9,000 restaurants and 300,000 employees we invite you come and dine.

Questions:

How is Restaurant Association related to tourism? In 2002 restaurants were about 15% dependent on tourism. Today it is about 26% of our receipts derived from tourism. We have just under 2300 members and we are the largest trade association in AZ.

What is the responsibility of the Association? 50% of what we do is Lobbying and this year it has involved guns in restaurants, smoking ban. To help and advise you on how to make your business more profitable, such as dealing with insurance.

What type restaurants are you finding a drop in business in this economy? Fine dining is the hardest hit overall. Restaurants like Paradise Bakery, quick service restaurants are doing fine. They may be down a little or up a little. We are just starting to see some consistency in the restaurants-say this month a restaurant was down 10% but last month it was 11%. If you made it through the summer you can be pretty sure you will be able to make it. How restaurants do this October will be a true measure of how the economy is coming back.

How many restaurants closed? 2% is our average per year and it has gone up to 4.5%. Some closings have not been due to the economy. For example, in a family owned restaurant you find the owners want to retire, but the children don't want to take over the business. So they close for that reason and others that are not related to the economy.

We spent 8.7 billion in restaurants and it is increasing? Yes, last year it was 8.4 billion so we grew by 300 million this year. In 08 we grew by about 450 million. A few years ago we were growing by 700 million, so due to the economy and restaurants closing our growth will be only 300 million.

Did the man showing up with a gun and sign saying something like stay away from AZ hurt the restaurant/tourism industry? Yes, but the letter from the Justice Department hurt more as it said that if you are a government entity you better not be going to these fancy resorts even though they are paying $85. We were lobbying on this just last week saying not only are you killing the hotel industry you are also killing the restaurant industry. The average person used to eat out about 5 times a week (breakfast, lunch or dinner) and that has gone down to 3 to 4 ½ times a week.

How about the catering industry? Some caterers have merged, but we don't keep track of that industry.

Most successful restaurant in AZ? Not so much a restaurant, but people like Sam Fox and his restaurants, the Grande Orange people have been able to find the right niche for their restaurants and they know their marketing strategy and are able to adjust in this economy.