Page 11 - 2018 Apple Annual Report

MACRO VIEW Examples of some RPM projects:
U.S. and Global economies were generally steady to strong
through much of the year, with some softening as the Fed Pasta: As mentioned above, the move from a cooked,
raised interest rates, trade/tariff actions were implemented, frozen Cavatappi to raw Fettuccini and Penne created an
and volatility returned to the equities/securities markets. average savings of nearly $5,000 per restaurant per year.
Even with U.S. GDP forecast up 3.1% and very strong labor/ Burger Meat: Moved from a specific Chuck meat grind to a
employment markets, inflationary fears did not materialize, broader full-beef grind and adjusted the lean/fat ratio slightly
and commodity costs remained generally favorable to improve flavor. These changes were preferred by the
(supported in part by a $US that regained some strength). consumer and lowered the cost of product by over $1,500
per restaurant per year.
The Producer Price Index (PPI) for Finished Consumer Shredded Cheese: Developed and implemented a third
Foods was up 3.3% in 2018 and the Consumer Price Index source of supply that delivered a cost improvement of $480
(CPI) for U.S. Food and Beverages was up 1.4%. (The PPI per restaurant per year.
measures cost at the Producer level, while CPI measures Parm Cream Sauce: Reformulated product, validated
cost at retail). with consumer, engaged multiple suppliers, and are now
transitioning to a product that will lower cost by $645 per
FOOD restaurant per year.
Higher Chicken costs accounted for over 90% of the net
increase in ingredient costs for 2018, driven by a supply In all cases, the above examples include changes in product
marketplace that pushed costs up after what were favorable specifications, approval of new suppliers of the same
2017 costs, as well as a change in specification on Chicken product, or leveraging existing suppliers to improve costing,
Chunks costing on average $2,760 per restaurant per year all with the intent of not harming the Applebee’s customer
in order to improve consistency and quality of product. experience.
French Fry costs were up over 10% as the delayed increase
negotiated in 2017 went into effect January 1. Processed These projects will help improve your cost structure
Potato capacity continues to be tight across the industry. moving forward. More importantly, we have established a
framework of improved collaboration and engagement with
On the positive side, CSCS was able to contract a these functions that will help drive smart, beneficial savings
lower cost for Ribs, primarily as a result of a softer EU opportunities to Applebee’s operators in the future.
marketplace as a large rib user moved to domestic/US
supply. Softer Dairy/Cheese markets helped push YOY INDIRECT SPEND
costs for Cheese and Mozzarella Sticks lower. We continue to improve our Linens programs by reviewing
the marketplace, utilizing formal RFP tools, and levering our
Applebee’s Vendor of the Year was T. Marzetti, our supplier volume to offer better options to our Members. Our new
of Salad Dressings and oil-based Sauces. Marzetti took on program with Aramark lowers cost by 10% versus the prior
100% of this business after the failure of a second supplier program.
due to an acquisition.
We also renegotiated and improved our DirecTV and NFL
Your CSCS Procurement Team was heavily engaged in the Sunday Ticket packages.
Restaurant Profitability Management initiative throughout
2018. Working with cross-functional teams including Levering a successful program with Apple American Group,
Applebee’s franchisees, Culinary, Marketing, Consumer we implemented an Awning restoration program that has
Insights, Operations, and our suppliers, we identified 40 brought benefit to the system.
opportunities the teams felt could delliver favorable costs
at the restaurant level without negatively impacting guest
perception on quality. 25 of those opportunities were
implemented in 2018.

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