Consumer spending might be down due to the softening economy, but that hasn't weakened the food service industry's drive to put more eateries on the map.
Since restaurant kitchens traditionally are constructed with stainless steel for its intrinsically hygienic characteristics, the food service industry's sustained growth bodes well for stainless producers and suppliers.
Darden Concepts Inc., Orlando, Fla., owns several brands, including Olive Garden, Smokey Bones, Red Lobster and Capital Grille, using at least 10,000 pounds of stainless sheet in new restaurants, said Rich Jeffers, Darden's director of media relations.
Stainless prices have been riding a roller coaster, with Type 304 sheet fluctuating from $1.27 a pound in April 2006 to $2.49 a year later and down to $2.22 in April this year. The price peaked at $3.03 a pound in July 2007.
Darden expects to open 60 new restaurants in fiscal 2008, which ends May 31, and the same growth range for fiscal 2009, Jeffers said. Darden built 32 new restaurants in fiscal 2007, 24 in 2006 and 21 in 2005.
The company felt the impact of the stainless price hikes, but declined to specify how it affected the Darden's bottom line. "There was a fair amount of pricing pressure, particularly in the area of stainless fabrication," Jeffers said. "While the increases were aggressively negotiated on our end, our new builds and existing restaurant replacement needs were impacted."
The price of a stainless kitchen hasn't stopped Burger King from building new restaurants, either. In the United States, Burger King opened 89 restaurants in fiscal 2007 and 53 in 2006. And this year, while the company didn't separate out U.S. numbers, it said it plans to open 300 sites worldwide, with 80 percent of its growth from a push into Europe and Asia and 20 percent from North America.
"Steel does not impact our plans for restaurant openings. Greater economics drive that," Jeff Cook, Burger King's senior director of equipment, said.
The economics of a recession also bode well for growth at restaurant chains like Burger King. "It is a positive for Burger King because people are trading to value," Cook said.
While Burger King developed new, smaller restaurant designs that reduced average building costs by 25 percent in fiscal 2005, the savings came in the seating area rather than in kitchen or counter space. Burger King said its 62-percent drive-through sales warranted a slimming of its sit-down table requirements.
Both restaurant groups, however, said they're researching alternatives to the traditional Type 304 material.
Darden's stainless steel fabrication requirement remains Type 304, although it is testing some Type 201 material, which has half the nickel content and is, therefore, less costly, Jeffers said.
Burger King also is evaluating alternative materials to 304, including the 400 series, which contains no nickel, Cook said. "There are different views in the industry as to the best match for our application. The 201 series may be necessary in some applications, and 400 series—like 430 and 443—may be suitable for other applications. Unfortunately, there is not a one-size-fits-all alternative."
Dalo Construction Co. Inc., Tipp City, Ohio, builds about a dozen restaurant kitchens annually, Craig Peters, the company's project manager, said, adding that he hasn't seen a change in material requirements despite the increased cost.
Likewise, Terry Brenenstall, foreman at L&B Sheet Metal Manufacturing Inc., Rancho Cucamonga, Calif., said he hasn't seen the Type 304 material being replaced by alternate grades. "You really can't because of the health codes and standards. You have to use a minimum of 304," Brenenstall said adding that his company felt the impact of higher stainless prices last year. "It's just one of those things. We could raise prices to a point, but we couldn't raise everything by 40 percent or we wouldn't get the job. Some (price increases) we passed on and some we had to eat."