As executive director of the Mississippi Hospitality and Restaurant Association (MHRA), Mike Cashion tackles issues in an industry that touches nearly every Mississippian on a daily basis.
It’s also an industry fraught with challenges: stiff competition, personnel issues, various taxation and regulatory concerns, as well as the routine trials that business owners face anyway, such as escalating overhead costs, cash flow concerns and personnel issues.
Cashion, a 26-year industry veteran, understands the tribulations unique to the restaurant business. His experience spans multi-unit management with Wendy’s and Pizza Hut, full-service expertise in the country-club environment and high-volume knowledge as food and beverage director for Ameristar Casino in Vicksburg.
Before being hired as association director in 1999, Cashion served on its board of directors for nearly a decade. During that time, he chaired several committees, earned the coveted Distinguished Service Award, and was elected association president.
Cashion has served on the board of directors of the National Restaurant Association and the International Society of Restaurant Association Executives. He is president-elect of the Mississippi Society of Association Executives and a board member of IMPAC, the political action committee of BIPEC, a political action committee of the business community.
The Mississippi Business Journal asked Cashion about the economic impact of the state’s restaurant industry, the anticipated effects of tort reform on restaurateurs, workforce concerns, smoking bans, liability concerns, and taxation and regulatory issues.
Mississippi Business Journal: What is the economic impact of the state’s restaurant industry?
Mike Cashion: Mississippi’s restaurant industry employs over 70,000 and generates $2.1 billion annually in sales. State sales tax figures reflect a contribution of over $178 million from restaurants.
On a national level, sales average $1.2 billion per day. Nearly 9% of America’s entire workforce is employed in the restaurant industry. One-third of all people in the workforce have at some time or another worked in the restaurant industry.
Restaurants truly are the cornerstone of our economy. Employment figures reflect the true diversity of our state and country. Nearly 70% of all eating and drinking establishments are single-unit independent operators employing fewer than 20 people. When you look up the definition, you are likely to see a restaurant as the epitome of small business.
Mississippi is known for its philanthropy and charitable activities. The restaurant industry reflects that as well. Nearly 90% of all restaurateurs routinely provide free food or cash donations to charities all over the state. Within Mississippi’s tourism industry, restaurants are only second behind casinos as top revenue producers. And the future continues to look bright. The post-9/11 economy has hurt the industry. Sales have been flat but are starting to rebound. It is estimated that by 2010, over one million restaurants will exist in the U.S., generating $577 billion in sales.
MBJ: How is MHRA helping develop a strong restaurant workforce?
MC: The restaurant industry is very labor intensive. As a result, recruiting quality employees is a constant priority for restaurateurs. Whether it is an entry-level position or a higher-level management position, strong employees are critical to the success of a restaurant. Being a service-oriented business, restaurants look for individuals that can work well with and relate to people. Basic social skills are a must. So are basic math skills. All employees need to apply simple math concepts from making change to figuring percentages.
To this end, MHRA sponsors ProStart, a two-year high school curriculum that teaches the basics of the food service industry in preparation of students continuing their education or entering directly into the workforce. We also sponsor other types of employee training programs that are geared to specific needs of the restaurant industry.
MBJ: Like many businesses, restaurants are faced with escalating overhead costs. But the restaurant industry has perhaps a narrower profit margin than most sectors. How are restaurateurs absorbing these costs?
MC: Many people have a gross misconception regarding the restaurant industry. The average restaurant generates only $600,000 per year in revenue and operates on about a 4% profit margin. You do the math: a $24,000 profit with 80-hour work weeks isn’t the greatest investment. Contrary to what some think, cost increases aren’t passed on as price increases.
Although sales remained positive, the National Restaurant Association’s comprehensive index of restaurant activity registered a 0.7% decline in May. The association’s Restaurant Performance Index is a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry. Pivotal to May’s Index performance were continued sharp gains in food costs. Twenty-eight percent of restaurant operators identified rising food costs as the number-one challenge currently facing their business, up from 22% of operators who reported similarly last month and the strongest level on record. Meat and dairy prices rose sharply in recent months, putting additional strains on already squeezed margins among restaurant operations.
When you add on the escalating costs of insurance lines and supplies and equipment, the operating margins become razor thin with little room for absorbing additional increases.
MBJ: You mentioned that, over the past several years, there has been a proliferation of industry-specific sales tax increases targeting the restaurant industry. Can you explain the effects of and concerns about these new and/or increased taxes?
MC: Cities and counties throughout the state ask their legislators to pass a “local and private” tax that enables the municipality to levy additional sales tax on restaurant purchases. Originally, these taxes were to be used by convention and visitors bureaus (CVBs) to fund advertising and promotion campaigns designed to bring tourists to the community. Unfortunately, these taxes are now being used for projects that have little, if anything, to do with tourism. Monies are now being spent on construction projects that should be paid for by a broad tax base, not an industry specific tax base.
There are currently 46 of these taxes in place throughout the state, generating almost $33 million in additional sales taxes. This past legislative session, eight more bills were passed that could enable eight more municipalities to charge the public more for restaurant meals or hotel rooms. The MHRA feels that enough is enough. Restaurant customers are saying the same thing. They do not want to pay any more in taxes. Gas prices are high, insurance rates are through the roof, and the job market is still tentative. Our customers want their money in their pockets, not in the hands of those wanting more taxes. There is only so much they have to spend, and they want to stretch a dollar as far is it can go.
MBJ: The restaurant industry is one of the nation’s most regulated businesses. Can you share with us some regulatory challenges, what can be done to level the playing field, and what the MHRA is doing to help its members?
MC: Food safety is regulated by the Mississippi State Department of Health. Fire suppression systems must meet fire departments specifications. Labor laws including compliance with the ADA (American Disabilities Act) are enforced. Music licensing fees must be paid any time a restaurant plays a CD or cassette or offers live entertainment. OSHA monitors workplace safety and the list goes on. It is the goal of legitimate restaurateurs to provide a safe environment for their guests and employees.
Unfortunately, a growing number of businesses are operating illegally. The health department has recognized this and has introduced legislation to address the issue. Unfortunately, there are members of the Legislature that feel illegal operators should not be punished. They feel that it really isn’t a public health risk. Tell that to the 80 people who were sickened last month by a food borne illness outbreak because of unsafe food handling by an unlicensed caterer providing food for a golf tournament in the Delta.
The MHRA is proud of the strong relationship we have had with the health department. We have provided free training for health department employees. When their budget got tight, we provided free training materials and books for their employees. Food safety is a top priority for the restaurant industry. I feel comfortable saying that the average restaurant practices safer food handling procedures than most residential kitchens. The industry is highly regulated, but it is for the sake of the consumer and the employee. Strong operators welcome strong but consistent regulation.
MBJ: How do restaurateurs feel about mandated smoking bans?
MC: This is a very sensitive and emotional issue for many. It has been hotly debated at the state and local levels. The industry’s bottom line position is this: smoking policy should be set by the owner of a restaurant based on the demands of customers. There is not a one-size-fits-all solution to this issue. Some proponents of smoking bans may be willing to concede that smoking can be allowed in a bar. The problem with that is, with limited exceptions, there is no such thing as a bar in Mississippi. In order to serve alcohol and wine, a business must show 25% of their revenue from the sale of food, thereby making them restaurants. Restaurants with bars attached are not exempt and smoking would be banned in the entire location.
If customers do not like the smoking policy of a restaurant, they should vote with their feet and not visit that business. Many restaurants have voluntarily gone smoke-free without a mandate from government. Some restaurants simply can’t afford the negative financial impact associated with a ban. Make no mistake, there is a significant risk of revenue loss when a ban is in place. It has been documented through out the country. For that reason, we will continue to oppose bans and encourage operators to listen to the requests of their guests and act accordingly.
MBJ: What effect is tort reform expected to have on the restaurant industry?
MC: While the recently passed tort reform legislation will have a positive long-term impact on the entire business community, the restaurant industry is subject to some very specific targeting. Obesity is a major public health concern in Mississippi. Unfortunately, some believe that the restaurant industry is the primary culprit. Many people may be aware of the lawsuits that were filed against a fast food company alleging they were responsible for a man’s weight problem. Even more recently, a movie was produced that vilified the fast food industry. Today’s sedentary lifestyle and poor diet are the prime contributors to our obesity issue.
The truth is the restaurant industry has taken a leadership role in addressing the obesity issue. In the past year, restaurants have modified their menus to add more healthy options. Salad lines have expanded, bottled water is now a staple beverage, and vegetables are taking the place of starches and other high-calorie side dishes.
The MHRA sponsored a public relations campaign entitled “Restaurants for a Healthy Mississippi.” Cooking and dining tips were offered via a handout that was made available to customers throughout the state.
On the federal level, Congress has introduced a bill entitled the Common Sense Consumption Act, designed to protect restaurants from frivolous lawsuits. The MHRA is considering statewide legislation to mirror that same piece of federal legislation.
Contact MBJ contributing writer Lynne W. Jeter at email@example.com.