Executive Briefings

Hold the Rye: Promos Leave Restaurant Supply Chains Stretched

First, Subway restaurants ran out of rye bread. Then the corned beef started to dwindle.

Just three weeks into an 8-week Reuben sandwich promotion last fall, Subway's supply chain couldn't keep up. Coupons and advertising drew more traffic than they'd expected in some regions. And patrons were adding rye bread and other Reuben ingredients to customize other sandwiches. Some customers hankering for a Reuben had to be turned away.

Restaurant chains are adding more limited-time items to their menus as they look for ways to temporarily juice sliding sales. The 100 biggest chains added 2,654 new or limited-time items to their menus last year, up 46 percent from 2015, according to market research firm Technomic.

That’s raising revenue, but also straining restaurant supply chains. National chains rely on a network of suppliers set up to ship tomatoes, hamburger buns and other staples in regularly scheduled truckloads. They aren’t always equipped for a sudden surge in demand for cookie-butter milkshakes or mango shrimp rice bowls.

Predicting demand for a new menu item is tricky. Overestimate interest in a promotion, and chains can get stuck with millions of dollars-worth of excess ingredients. Underestimating demand can force restaurants to turn away customers, as Subway was forced to do at the height of its Reuben promotion.

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Just three weeks into an 8-week Reuben sandwich promotion last fall, Subway's supply chain couldn't keep up. Coupons and advertising drew more traffic than they'd expected in some regions. And patrons were adding rye bread and other Reuben ingredients to customize other sandwiches. Some customers hankering for a Reuben had to be turned away.

Restaurant chains are adding more limited-time items to their menus as they look for ways to temporarily juice sliding sales. The 100 biggest chains added 2,654 new or limited-time items to their menus last year, up 46 percent from 2015, according to market research firm Technomic.

That’s raising revenue, but also straining restaurant supply chains. National chains rely on a network of suppliers set up to ship tomatoes, hamburger buns and other staples in regularly scheduled truckloads. They aren’t always equipped for a sudden surge in demand for cookie-butter milkshakes or mango shrimp rice bowls.

Predicting demand for a new menu item is tricky. Overestimate interest in a promotion, and chains can get stuck with millions of dollars-worth of excess ingredients. Underestimating demand can force restaurants to turn away customers, as Subway was forced to do at the height of its Reuben promotion.

Read Full Article