Retailer Daily

Restaurant Outlook Brightens for 2010

The U.S. restaurant industry should see a 2.5% increase in sales during 2010 compared to 2009, according to the 2010 Restaurant Industry Forecast from the National Restaurant Association (NRA). The study projects without adjustment for inflation, industry sales will reach $580 billion, compared to about $566 billion in 2009. Taking inflation into consideration, restaurant sales are expected to be flat this year. This still represents an improvement from the 1.2% and 1.9% negative growth in real sales that the industry experienced in 2008 and 2009, respectively.

Quick Service Beats Full Service

The quick service segment is expected to slightly outperform the full-service segment this year. Using current dollars, quick service restaurant sales are expected to grow 3%, from $160 billion to $164.8 billion. In comparison, sales in the full service segment are expected to grow 1.2%, from $182 billion to $184.2 billion.

Workforce Should Resume Growth

The restaurant industry lost jobs for only the second time in almost half a century during 2009. However, job growth is expected to resume in 2010. The restaurant/foodservice industry remains one of the nation's largest private sector employers with its 12.7 million employees. By 2020, the industry is projected to employ 14 million people – an increase of 1.3 million jobs.

Restaurants See Green, Local Opportunities

Restaurant retailers will increase their “green” environmental initiatives in 2010, including installing energy-efficient equipment and fixtures, using recyclable materials and reducing their water use. According to the study, 40% of full service and 31% of quick service operators plan to devote more resources to green initiatives in 2010 than they did in 2009, and 40% of consumers say they choose restaurants based on their conservation practices. In addition, locally produced food should be a growing trend this year. Study results indicate that 70% of consumers say they are more likely to visit restaurants that offer locally produced food, and nearly 75% say they are trying to eat healthier in restaurants now than they did two years ago.

RPI Expectations Index Shows Optimism for Future Sales

According to the NRA’s November 2009 Restaurant Performance Index (RPI), restaurant retailers are optimistic about future sales. Although the RPI declined for the third time in four months in November 2009, falling from 98 to 97.8, and has remained below 100, signifying contraction, for 25 straight months, its forward-looking Expectations Index portion shows the industry has hope for this year. The Expectations Index, which measures respondents’ expectations for the next six months, made gains from December 2008 – April 2009, breaking 100 in April. After falling in May and June, the Expectations Index rebounded to 99.5 in July and 99.9 in August, before falling to 99 in September. In October, the Expectations Index changed course and rose to 99.6, and stayed at that level in November. This marks the 24th time in 25 months the Expectations Index has remained below 100. Respondents showed increased optimism about the direction their sales are heading. Thirty-one percent of respondents expect to have higher sales in six months (compared to the same period in the previous year), up from 29% who reported similarly in October. In comparison, 24% of respondents expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 29% who reported similarly in the previous month.

Q3 2009 Restaurant Spending Declines

According to a recent report from market research firm The NPD Group, total customer restaurant traffic and spending levels declined in Q3 2009 (ended September 2009). Traffic declined across all segments. NPD’s CREST service, which tracks consumer usage of the foodservice industry, reports total restaurant industry traffic for the third quarter declined 4% compared to the third quarter of 2008. Traffic at quick service/fast food restaurants, the largest industry segment, declined 4% during the quarter, while casual dining traffic declined 5%. Midscale restaurants reported a 4% drop in customer traffic. Total customer spending in the restaurant vertical dropped 2% for the quarter. However, although NPD predicts declines in traffic and spending will slow during the first half of 2010, its research indicates traffic and spending will start gradually increasing in the second half of next year.