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July 29, 2013 • An Advertising Supplement to the Los Angeles Business Journal & BEVERAGE ROUNDTABLE

MARCO D. COSTALES ANNA M. GRAVES TIM O'SHEA HARRIS SMITH DONALD J. SNYDER, CPA Partner Partner & Co-Leader of President, Patina Southern California Partner - Practice Nossaman LLP the , Food & Restaurant Services Consumer Industrial Leader, Food and Beverage Industry Group Patina Restaurant Group Products Practice Leader Beverage Pillsbury Winthrop Shaw Audit Partner, Food & Green Hasson Janks Pittman LLP Beverage Sector Grant Thornton LLP

HE food and beverage industry as a whole is unique in many ways – and here in Los Angeles, where we have some of the finest dining options in the nation, there's perhaps an even finer tuned set of rules for success. TStir in an unpredictable economy and you’ve got a sector of Southern California business that continues to evolve as swiftly as any other. To make some sense of this exciting and unpredictable realm, the Los Angeles Business Journal turned to some of the leading experts in the region – from the financial, legal and food & beverage service perspectives – to get their diverse viewpoints and assess- ments regarding the current state of the industry that Angelenos most certainly couldn’t live without! ➼

This special advertising supplement did not involve the reporting or editing staff of the Los Angeles Business Journal. 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 44

44 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL JULY 29, 2013 Food & Beverage Roundtable

◆ New always seem to be COSTALES: From a legal perspective, restaurants partment of Alcoholic Beverage Control, opening – and closing. What advice would need to ensure that gift cards are not given away the time it takes to issue licenses, and the you offer to an early-stage restaurant (or sold at a discount) when customers purchase amount of disclosure required by private company seeking growth capital? an alcoholic beverage. Otherwise, the California equity funds, which take small interests Department of Alcoholic Beverage Control (ABC) in the proposed licensees. Can anything GRAVES: There are many financing options avail- could take disciplinary action, including the be done to expedite licensing procedures? able to early-stage companies. Generally, a imposition of fines and/or a suspension (or even founder should try to fund the first locations revocation) of the restaurants’ liquor license. In COSTALES: This is a standard complaint, but you with “friends and family.” This will be the cheap- addition, restaurants must make sure that gift have to remember the State’s budget crisis and its est money and allow the founder to retain the cards are not used by minors or obviously intoxi- impact on the ABC (which is both understaffed greatest control. For operators with a few success- cated persons toward the purchase of alcohol. and overworked). However, there may be some re- ful locations, an excellent choice, if you have the lief — the Legislature has a bill pending that, if bargaining position to obtain it, are high net GRAVES: Laws applicable to gift cards are complex. passed, would require the ABC to not only evaluate worth individuals who are willing to invest in Prior to launch, restaurants should determine its license review process for restaurants (in order to individual future locations (rather than the entire whether their gift card programs comply with fed- implement a more expedited process), but also pre- company). Frequent customers are excellent can- eral and state restrictions on expiration dates and pare and submit a report to the Legislature, on or didates for this. This arrangement is greatly fees, as well as cash redemption and disclosure before December 31, 2015, relating to the review. advantageous since the founder will retain both requirements, or whether they qualify for various As for private equity funds and ABC disclosure re- control over the concept and the greatest exemptions. Restaurants should also understand quirements, the ABC’s General Counsel recently in- amount of upside potential for him/herself and and account for any “unclaimed property” associ- dicated that the ABC may issue a new form of affi- the earliest-stage investors. Sophisticated money ated with unused gift cards, as they may, depend- davit that might allow private equity firms to make is going to want greater control and higher ing on several factors, need to escheat certain certain certifications about their passive investors. return and will only invest in the top tier entity. amounts to various states. The terms and condi- We’ll have to wait and see on both of these issues. Equipment loans, early franchising, joint ven- tions of their gift card programs should be “clear tures, SBA loans, and strategic partnerships are and conspicuous.” Restaurant companies should GRAVES: There are a number of approaches that also worthy alternatives to consider. also analyze whether their gift card programs trig- can streamline the licensing process. We have a ger any federal or state money services license former ABC Director and a former Deputy Director requirements or anti-money laundering or cus- for Southern California on staff that provides li- ◆ Brand extension is an important mar- tomer identification program obligations. Many of censees with valuable advice on mechanisms that keting tool for a variety of companies. these issues may also apply to rewards, loyalty, can often accelerate the process and overcome any What types of brand extensions are avail- and promotional programs, and restaurants special problems, such as protests against the pro- able to restaurant companies? should evaluate their programs accordingly. posed license. As to disclosure requirements, the California Restaurant Association and many licens- O’SHEA: Catering is typically the most common ing professionals, including our experts, have con- brand extension for restaurant brands. What ◆ Restaurant companies seem to be the vinced the ABC to amend their requirements so began as a few intimate in the homes of target of a multitude of class action suits. that private equity funds will be able to simply cer- our most loyal patrons of Patina Restaurant has What advice can you offer restaurant tify that no investor holds an interest in other alco- grown into Patina Catering. We also have Patina executives to reduce their risk? holic beverage licenses prohibited by the “tied- Weddings, which we cross promote with all of house” laws (which restrict cross-ownership be- our restaurants and catering operation. O’SHEA: Consistent internal communication is tween suppliers and retailers) and that no investor the most important way to create and maintain a will own more than 10% of the proposed licensee. GRAVES: Restaurant companies have a wide range corporate culture of openness and engagement. This change is important because previously many of potential extensions, which can be quite profit- Follow the basics of active listening, training, funds preferred to forego their investment in a able and can greatly increase the company’s public recognition, and fairness. Developing managers California licensee than to disclose their investors. profile and popularity. Some extensions can be seen to be active listeners and leaders who embrace on street corners everywhere (food trucks!), which, their teams while providing fair and consistent if used properly, can substantially raise brand aware- discipline is also important. This culture of open ◆ What will be the major issues facing ness. Smaller footprint stores and fast casual and communication helps to reduce the risk of class the food and beverage industry in the “grab-and-go” brands can complement casual din- action lawsuits. next 3 to 5 years? ing concepts. License agreements with food manu- facturers to produce and sell a restaurant’s signature GRAVES: Class actions are the bane of many O’SHEA: Some of the major issues facing the items in grocery stores can drop significant reve- restaurant companies because restaurant opera- industry are rising insurance costs, liability issues, nues directly to the bottom line. Higher-end restau- tions inherently involve many factors that are employee retention, and human resource issues rants, especially those with celebrity chefs, can frequent subjects of lawsuits. Large numbers of such as new laws and lawsuits. license their name for a variety of consumer goods hourly employees create a heightened risk of such as cookware, knives and lifestyle products. It is employment class actions. Advertising exposes SNYDER: In our 2012 Food and Beverage Industry imperative to negotiate the license agreement prop- restaurants to class claims attacking the ads. Survey, 80% of respondents listed increasing com- erly; otherwise operators can severely limit their op- Restaurants handle private consumer data such petition and fuel costs as among their top chal- portunities, lose value in their brands, or receive sig- as credit card information daily, with a volume lenges for the coming year. I believe that fuel nificantly lower royalties than they should. that attracts class action lawyers. Restaurant oper- costs and higher ingredients costs add competi- ators need to engage specialists who understand tive pricing pressures which can be particularly compliance requirements to limit exposure. challenging to small or start-up companies. Also, ◆ Gift cards provide a significant source more than 70% of survey respondents cited fi- of revenue to restaurants. What are the nancing and cash flow as an additional challenge. most important issues associated with ◆ Restaurant companies frequently com- While lending has been on the rise, it seems that launching a gift card program (legal, plain about the complexity of liquor li- banks and other lenders may still be limiting the accounting, etc.)? censing procedures at the California De- amount of financing available to small businesses, 46 ➼ 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 45

JULY 29, 2013 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL 45

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Grant Thornton refers to Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd. 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 46

46 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL JULY 29, 2013

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‘There are many financing options available to early-stage companies. Generally, a founder should try to fund the first locations with “friends and family.” Equipment loans, early franchising, joint ven- tures, SBA loans, and strategic partnerships are also worthy alternatives to consider.’ ‘Catering is typically the most common ANNA GRAVES brand extension for restaurant brands. What began as a few intimate dinners in the homes of our most loyal patrons of Patina Restaurant has grown into Patina Catering. We also have Patina Weddings, which we cross promote with all of our restaurants and catering operation.’ TIM O’SHEA

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which many companies depend on to stay com- SMITH: Attitudes are changing toward ingredient COSTALES: The public’s desire for a more stream- petitive and to meet growth objectives. quality, and consumers are looking for more nat- lined ABC licensing process, and private equity ural occurring colors and flavors from plants. An- firms’ concerns about the ABC’s disclosure re- SMITH: Food industry executives will continue to other new trend: touch sensitive labeling where quirements are hot topics right now. In addition, face uncertainty from the cost of commodities, in- packaging will become touch sensitive to reveal the ABC remains very concerned about the use of gredients and energy. They also must navigate in- additional information on demand. Consumers social media (or third party marketing firms) to creasing government regulation in the form of want to know instantly about the product advertise the sale/service of alcoholic beverages. food safety, taxes and healthcare. At the same time, they’re purchasing. It’s no longer about conven- food executives have to develop a new strategy for ience, it is about “is this brand or product good identifying and interacting with their customers. enough to bring into my home and represent my ◆ How is increased interest in natural and Technology and social media have forever changed lifestyle?” Lastly, consumers want to know how organic food products impacting food and the way food companies attract and retain custom- “green” a food manufacturer is: was the choco- beverage manufacturers and retailers? ers. Food and beverage companies recognize the late sourced ethically? Is the packing made from shift in how consumers prefer to get information 100% recycled material? Were the chickens the SNYDER: There is no doubt that our clients see nat- and are responding by implementing strategies to broth was made from treated ethically? It is no ural and organic food as a growth opportunity. The take advantage of new opportunities to track pur- longer just about the product. A purchase deci- majority of our clients are either producing natural chases, drive sales and communicate to—and sion is now a holistic one. and organic lines or are investigating this option. with—customers and target audiences, while They are responding to consumer demand, and guarding against the security and reputational risks COSTALES: We’re seeing a major uptick in the fulfilling retail requests. Nearly 3 in every 4 con- that are inherent in social media channels. Com- craft beer industry. I think that this is due, in ventional grocery stores are carrying organic prod- panies that will be most successful in managing large part, to the successes of companies like Sier- ucts. By some estimates, the organic food industry these impacts are those that are the most proactive, ra Nevada, Stone Brewing Co., and Firestone- will grow by 50% over the next five years. We still implementing strategies to minimize or avoid pass- Walker. Consumers appear to like the variety be- caution our clients to consider the fact that pro- ing along price increases to consumers. ing offered by these smaller breweries; it’s similar ducing natural and organic lines of products tend to what happened in the wine industry several to be more expensive than more conventional GRAVES: One of the biggest issues looming ahead years ago. This will impact many restaurants be- products. We recommend they closely examine is implementation of the shared responsibility cause they may need to broaden their beer men- their market opportunities to be sure that sales provisions of the Affordable Care Act. Currently, us to satisfy this consumer demand for variety. increases will offset increased expenses. many food and beverage employers do not offer health insurance to their service workers. Begin- SNYDER: Far and away, the number one con- ning in 2015, however, businesses that have at sumer trend that we see is the push for natural ◆ What is the level of M&A activity in the least 50 full-time equivalent employees must pro- and organic food lines. In fact, at our Food and food and beverage industry now (in 2013)? vide a minimum level of coverage to at least 95% Beverage Conference held in October 2012, Kev- of their full-time employees or pay a penalty of in Davis, CEO of Bristol Farms mentioned that GRAVES: Transaction levels are pretty high, and up to $2,000 per employee. Even if the employer any product that is either all natural or organic is the trend seems to be continuing. There have does offer health coverage, it may owe a penalty a hot product for their store. Baby boomers may been a substantial number of restaurant deals in if the employee premium is more than 9.5% of be contributing to this trend as they look for the first half of 2013 (Mimi’s Café, Maestro’s, his/her household income. Hourly wages may that contain higher nutritional value and Johnny Rockets, and Romano’s Macaroni Grill to serve as a proxy for household income, but be- will help them age gracefully, but we are seeing name a few). Capital is relatively easy to access, cause food and beverage employees often earn a an interest in organic and natural foods from all and the lending environment remains favorable. substantial portion of their income in tips, they consumer segments. Other hot consumer trends Expect more deals in the near future. can have relatively low hourly wages, making it that we are seeing now include “green” type food difficult for employers to structure their health- products and the use of claims such as “eco- SNYDER: In our 2012 Food and Beverage Industry care programs to keep premiums below the friendly” and “free-range,” as well as a push to- Survey, more than half of respondents indicated affordability cap. ward locally sourced food and beverage products. that they anticipated a sale or merger of part or all of their company within five years. Compan- ies may find it necessary or desirable to increase ◆ What are the newest consumer trends ◆ What are the latest licensing and regu- market penetration, expand developing lines, in the industry? latory issues? transform company identity or diversify invest- 48 ➼ 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 47

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‘Consumers want to know how “green” a food manufacturer is: was the chocolate sourced ethically? Is the packing made from 100% recycled material? Were the chickens the broth was made from treated ethical- ly? It is no longer just about the product. A purchase deci- ‘Companies are using social media outlets sion is now a holistic one.’ (Facebook, Twitter) to advertise, gauge HARRIS SMITH customer satisfaction, and build/maintain brand awareness. They are also using sites (such as Kickstarter) to help fund initial operations. Because these are novel areas, they are being scrutinized by feder- al and state regulators. ’ MARCO CONTALES

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ments. While M&A activity in the food and bev- become more flexible and dynamic to adjust to the beverage companies. erage industry has decreased since the fourth rising uncertainties in the economy and market- quarter 2012, trading multiples in the industry place. Historically, technology has contributed to SNYDER: In our 2012 Food and Beverage Industry are higher. Our clients are expecting strong M&A the demise of some businesses and the success of Survey, respondents indicated that new cus- activity to continue throughout the year, includ- others. Today is no different. tomers in existing markets are the top source of ing high trading multiples which are ranging new revenues. They also indicated that expan- from 7X to 12X multiples of EBITDA. We believe O’SHEA: Social media is no longer a trend. It’s a sion of business with existing customers and new that food products such as dairy, juice, health mainstay and essential part of the marketing product offerings were critical to growth. Many and functional foods will continue to be mix. This is partially due to the generational shift of our clients are exploring adding natural and hot prospects for M&A activity in 2013. in culinary awareness with snap-happy smart organic food lines or targeting the rapidly grow- phone users. For many diners, a great restaurant ing Hispanic market to find new clients where now includes the obligatory food photo to they already have a foothold. Other food sectors ◆ How are food and beverage companies show their social media following where they’ve that are hot and are growing are “green” or using social media in their businesses? been. Our Chefs and managers review the aggre- “ecofriendly” products, locally sourced or sus- gated reviews and postings from all social media tainable food products, alternative types of pro- COSTALES: Companies are using social media out- channels on a daily basis and share with their tein products and premium foods. lets (Facebook, Twitter) to advertise, gauge cus- back-of-house and front-of-house teams. This tomer satisfaction, and build/maintain brand heightened transparency through social media SMITH: The most important industry factors influ- awareness. They are also using sites (such as helps improve operations, extend awareness encing sales growth in 2013 are new customers, Kickstarter) to help fund initial operations. about the restaurant, and proselytize new fans. new products and increased selling prices. New Because these are novel areas, they are being scru- customers and products are increasing sales due tinized by federal and state regulators. Both the SNYDER: Most of our food and beverage clients are to innovation, and increased selling prices are due U.S. Alcohol and Tobacco and Trade Bureau (TTB) actively using social media. Through Facebook, to the economy slowly improving and consumers and the Federal Trade Commission (FTC) are look- Twitter, YouTube, Pinterest, Instagram and blog- valuing quality over affordability. ing closely at social media activities by alcoholic ging, companies are working to raise brand aware- beverage companies. The TTB has issued a state- ness and to deepen relationships with their cus- ment that all such activities are considered adver- tomers and followers. Due to the real-time, inter- ◆ With over 48% of the Los Angeles tising, and steps must be taken to ensure that active nature of Social media, many of our food County population being Hispanic or pages are viewed primarily by persons over 21. and beverage clients are hiring full time employees Latino (per 2012 US Census data), how is The California ABC has become involved in this to manage social media campaigns that align with that impacting the food and beverage area as well. We caution our clients to be very other forms of advertising, respond to Facebook industry in the greater Los Angeles area? careful about user generated content on their and Twitter feeds, blog ideas for using or finding Is there impact beyond Los Angeles? social media sites, to limit it wherever possible and product, and even producing video content. The to delete any references to underage drinking. challenge these companies face is tracking the SNYDER: With the rapid growth of the Los return on investment from social media. Even Angeles Hispanic population, many of our food SMITH: Food and beverage manufacturers are using without hard numbers, many of our clients are and beverage clients are seeking ways to sell to social media in new and creative ways to create a seeing the benefits of investing in social media. this market. However, in many cases, it is not dialogue with their customers. The information easy to break in to this sector with existing prod- gleaned from these customer interactions, in turn, ucts. Some shopping trends are starting to helps manufacturers create and market innovative ◆ What are the top sources of revenue change with second and third generation products that satisfy the ever-changing market. But growth for food and beverage companies Hispanic shoppers, and manufacturers may find social media is not without its risks, and companies this year? that their products are more appealing to this are becoming more sophisticated about imple- younger generation, who are more inclined to menting controls and policies for their social O’SHEA: Healthy dining options continue to shop based on convenience. Language and cul- media efforts. Amid the uncertainties, one thing is dominate the at most restaurants. Trends ture can be barriers to entering in the Hispanic certain. If food and beverage companies plan to such as raw, paleo, gluten free, and juicing con- marketplace. Brands must make an authentic continue to thrive in this environment, they must tinue to serve as revenue generators for food and appeal to the unique interests and tastes of the 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 49

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U.S. Hispanic market through distinct products, channels, messaging and marketing strategies. ‘There is no doubt that our clients SMITH: Hispanics will also drive industry growth through their demand for traditional Latino see natural and organic food as a foods and their growing population in the Unit- ed States. The increase in demand for bolder, growth opportunity. The majority spicier ethnic foods could lead to increased M&A of our clients are either producing activity in the near future as companies aug- ment their organic growth plans with acquisi- natural and organic lines or are tions. U.S. companies have started gradually entering the market by expanding their product investigating this option. They are lines to include ethnic-flavored foods. Flavor responding to consumer demand, companies have also recognized the potential of ethnic foods and have been working to expand and fulfilling retail requests.’ their offerings. For example, Flavorchem Corp., a food and beverage flavor solutions manufactur- DONALD SNYDER er, has been sending teams of researchers to La- tin America to find new food trends from street vendors and shopping centers. The demand for ethnic foods is expected to remain strong be- cause the millennial generation and the Latino through 2013 (2014 for long production proper- deduction that is available to food processors. population both drive growth. The millennial ty). Of importance to the restaurant industry, the generation is well traveled, has developed a 15-year straight-line cost recovery for qualified diverse cultural palate and demands authentic- leasehold improvements, restaurant buildings and ◆ Culture is very important to a company. tasting ethnic foods. Their strong purchasing improvements, and retail improvements has been Can you talk about what it means and power has and will continue to compel food and retroactively extended through 2013. Many com- how does a company hold on to their cul- beverage companies to cater to their needs. panies in the food and beverage industry have ture as they grow? activities that qualify for the R&D tax credit, which provides taxpayers with a dollar-for-dollar COSTALES: Building a company culture is critical- ◆ What tax planning strategies are avail- reduction in tax. The American Taxpayer Relief ly important to customer satisfaction and, ulti- able to the food and beverage industry? Act of 2012 (ATRA) retroactively extended the mately, repeat business. Unfortunately, I think enhanced deduction for donation of “apparently we’ve witnessed quite a loss of culture due to the SNYDER: Food and beverage companies can bene- wholesome food” (intended for human con- consolidation in the industry. I’d rather not give fit by exploring tax strategies related to deprecia- sumption) for January 1, 2012 through December examples in this regard, but suffice it to say that tion, R&D credits and deductions for food inven- 31, 2013. Lastly, the Domestic Production Activi- the menus and overall “feel” at some of my tory contributions and domestic manufacturing. ties Deduction (DPAD), intended to support favorite high-end restaurants (that are now part The 50% bonus depreciation has been extended domestic manufacturing, is an underutilized of large conglomerates) have suffered greatly. 50 ➼

Pillsbury has you covered from aperitif to digestif.

Pillsbury’s Restaurant, Food & Beverage practice represents clients across the entire industry, including restaurant companies, wineries and distilleries, hotels, F&B manufacturers, and nightlife and entertainment operators. For every stage and every aspect of your business—from start-up and financing to acquisition and IPO—Pillsbury advises you on the best recipes for legal and financial success with practice strength in all areas relevant to the industry: gift cards, ABC law, brand licensing, capital formation, wage and hour litigation, M&A, IP protection, franchising, social media, class action defense, sweepstakes and promotions, SEC compliance, supply and distribution agreements, private equity investments, insurance coverage, and executive compensation and benefits. Learn more at www.pillsburylaw.com/restaurant-food-and-beverage or contact Anna Graves, co-leader of Pillsbury’s Restaurant, Food & Beverage industry group, at 213.488.7164 or [email protected].

Pillsbury Winthrop Shaw Pittman LLP | www.pillsburylaw.com 725 South Figueroa Street, Suite 2800 | Los Angeles, CA 90017-5406 | +1.213.488.7100 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 50

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O’SHEA: Patina Restaurant Group started with one used not only to raise funding, but also to make and core customers. Legal issues arise in many restaurant, Patina Restaurant, and and Founder contributors feel that they have a vested interest in branding areas, including loyalty programs, adver- Joachim Splichal. He has successfully shepherded the enterprise. Of , they don’t receive an own- tising campaigns, sweepstakes, other promotions, the company into a national restaurant group with ership interest per se, but these sites have a strong and content and presentation, and operators over fifty restaurants, cafes, and more. Through this psychological component associated with them. need to get them all right. It is also crucial to pro- growth period and as we continue to grow, the cul- tect the protectable elements of a brand, including ture of Patina Restaurant Group has remained very the brand name, key tag lines, trade dress, menus, chef driven with an emphasis on its brand and its ◆ More and more in the food industry, we recipes, operational methods, patentable processes, people. We continue succession planning and career hear companies speak about the “custom- newly developed equipment and predictive soft- mapping to drive retention. We also have various er experience” and the consumer’s rela- ware, as well as other unique brand elements. managers and chefs champion different projects. tionship with a brand. What does this mean and what are the critical “to dos” for food and beverage companies? ◆ Expecting the “unexpected” is not good ◆ How are companies innovating to enough anymore. What can food execu- attract new customers? O’SHEA: Creating multiple customer touch points is tives do to manage risk and prepare for crucial to strengthening the customer experience. the unexpected? SMITH: We have seen food and beverage compa- You need to listen and engage with your customers nies engage in multiple innovating tactics, in- every day. Some of the critical to-dos are de- SMITH: Crises happen — so it is imperative to cluding producing different packaging and prod- veloping ways to speak to your guest in your brand control what you can and be prepared. To pre- uct variations; developing channel and distribu- voice pre, during, and post dining experience. This pare for a crisis, here are steps to take in advance: tion strategies for streamlined efficiencies in de- includes various messaging and promotions • Line up company spokespeople livering their product to the consumer; and ad- through print, digital, mobile, and in-person. • Have external and/or internal PR professionals vancing technology. Specifically, food and bever- on hand age companies have developed technologies for GRAVES: Your brand is everything. It is who you • Foster a culture of open employee their products that do the customer’s job for are, what you do, what you stand for and why you communication them. When customers have it easier because of matter. Nothing could be more essential! I chair • Know where your vulnerabilities lie a food company’s innovation, they’ll either pay the Restaurant Industry Conference for UCLA • Monitor third party vendors more for that product or will choose that brand Extension, and our theme in 2013 was “Brand • Monitor online influencers and word clouds. over the competition. Relevance and Evolution.” I think the title says it Word clouds are comments about your brand all. Food and beverage companies must remain and the white space that ties back to your brand. COSTALES: The use of social media is becoming very true to their fundamental values, while also being This is where having a good social media influ- prominent in this regard, as part of building brand responsive to a changing market and a variable ence is critical. Here are steps you can take in awareness. The use of fund raising sites also is being consumer – and retaining their brand authority reacting to a crisis: 43 51_food&beverageroundtable.qxp 7/26/2013 10:30 AM Page 51

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• Perform an assessment and determine the root ers to survive. The corporate acquirers we have spo- under-performing. For small and medium-sized busi- of the issue ken with recently value niche offerings, innovation nesses in the food and beverage sector, growth is • Leverage external sources and R&D but they are further looking for businesses often difficult to achieve, so strategic acquisition is • Open communication with your board with a capacity for overseas expansion or to acquire one way to move forward. Companies can achieve • Consult industry experts strong consumer brands to add to their stable. economies of scale through M&A, which can then • Maintain communication lines with your PR be used to reduce costs and shed debt. agency GRAVES: Investors are, of course, looking for high It is imperative that your communications convey returns and low risks (even though those two traits trust and transparency internally and externally. are not found together often). The most important ◆ Please describe the effect that down- factors for restaurant investors are demonstrated town is having as an emerging market GRAVES: Prevention is cheaper than cure, and performance, significant growth potential, and for restaurants in Los Angeles. most professionals with real industry experience strong unit level economics. Consistently high can identify “unexpected” risks in advance. It is comp store sales, experienced management and a O’SHEA: Downtown LA is exploding with new and critical to understand the known risks restaurants strong development pipeline are also important. trendy restaurants. It wasn’t always this way, and and nightclubs face, and to have a compliance Food and beverage companies should strive to Chef and Founder Joachim Splichal was one of the plan in place. Professionals can assist companies excel in these areas. Luckily, most of these results first to gamble on downtown Los Angeles. In 1995, to purchase the right types of insurance coverage will follow directly from sticking with restaurant he opened Café Pinot, which is located next to the in the right amounts, and to understand what fundamentals: excellent customer service, a high Central Library, and then added Nick + Stef’s Steak- risks are - and are not – covered. When a lawsuit value proposition, and a strong brand message. house and Kendall’s Brasserie and Bar. The biggest or other claim comes up, operators should imme- affirmation of downtown as a viable and successful diately speak with policyholder counsel who can location for restaurants was when the original best advise how to most effectively shift the ex- ◆ What will be the main drivers of Patina moved from its original Melrose location to pense of litigation. While litigation is a fact of life, consolidation? inside Walt Disney Concert Hall in 2003. operators can effectively plan for the unexpected. SMITH: The food and beverage sector has been in COSTALES: With the developments that have the process of consolidation for many years and this occurred over the last several years (for example, ◆ What are investors looking for and is showing no signs of slowing in the immediate Staples Center, L.A. Live, the conversion of his- what can F&B companies do to attract future. Consolidation comes as a byproduct of vast toric office buildings into lofts), more people are capital for growth and expansion? change in the market, responding to consumer viewing Downtown Los Angeles as an entertain- tastes, demand and buying habits. Both private eq- ment destination. As a result, there is increased SMITH: Our research shows that private equity houses uity and corporate investors agree that consolidation activity here and additional opportunity for new value innovative businesses offering niche services, is mainly driven by a need to save costs and a need restaurants, bars, and nightclubs. We're working which do not depend entirely on the multiple retail- to revive or offload distressed companies, which are on several deals in the area as well.

Hot town, summer in the city. Patina Restaurant SUMMER Group has created more reasons for you to leave work early and enjoy downtown Los Angeles this summer. IN THE CITY Quench your thirst with four unique options.

SUMMER SOMMELIER SERIES SECRET GARDEN ENDLESS SUMMER SOLSTICE GET FRENCHY We’re celebrating summer by Be enchanted by Maguire Gardens Leave the office early and enjoy Enjoy French-inspired pulling out some extraordinary as you sip on handcrafted herb our weekly summer celebration cocktails and the debut of our wines from the cellar. Join cocktails and enjoy Cal-French small with our thirst-quenching cocktails new absinthe and pastis menu us in this rare opportunity to bites by Chef Sydney Hunter. and Chef Megan Logan’s by Mixologist and Sommelier enjoy tasting flights curated by BBQ favorites. Paul Sanguinetti. Featuring Sommelier Silvestre Fernandes Voted ‘Most Romantic’ and ‘Best absinthes from France, paired with small bites from Chef French’ by Downtown News ‘Best Every Thursday and Friday Switzerland, and the United Charles Olalia. of’ for 2013 4-8PM | Patio and Bar States. 5-7PM | Patio Sunday to Friday | 2:30PM to close Live music on Thursdays. Please check online for our August 1 - ‘Pinot Noirs 2000 Pitchers of sangria, Moscow mules, summer hours of operation. $5 Beers, $6 Wines by the Glass, Vintage’ tableside martinis, and more. August 15 - ‘Taste of Shafer’ $7 Herb Cocktails For more info visit www.patinagroup.com