Outlook for Restaurants Rosier than Overall Economy

March 15, 2012

Outlook For

Outlook for Restaurants Rosier than Overall Economy

Assuming that spiraling gas prices don’t pull the rug out from under any fragile recovery, restaurant operators might finally feel like celebrating a little this year.

In its 2012 forecast released earlier this month, the National Restaurant Association projected that restaurant sales will grow 3.5 this year, to $632 billion. Another recent report from Packaged Facts, “The Foodservice Landscape in the U.S.,” was even more optimistic, predicting a 4.2 percent jump.

Apparently, there is pent-up demand for meals away from home. NRA notes that two out of five consumers say they are not using restaurants as often as they would like, and “with the right incentives, that demand can translate into sales.”

Besides higher gasoline prices, restaurants face another threat to profitability this year: rising food commodity costs. NRA’s report notes that wholesale food prices grew last year faster than they had in more than three decades. This year, prices are expected to continue climbing for some commodities, but ease for others.

“Such price increases have the potential to erode the pricing gains restaurants have made relative to grocery prices, creating increased incentive for consumers to eat at home and throw into the disarray the delicate balancing act so many restaurant operators now walk in planning their menu strategies, which rely more now than ever on hitting the appropriate pricing and food margin mix,” Packaged Facts observes.

For many operators, that mix is increasingly looks like fast casual concepts, a segment where Technomic expects 8 percent annual sales growth over the next five years. “Full- and quick-service operators continue to adapt and reposition their concepts toward areas in which fast casual has been effective with consumers,” says Darren Tristano, executive v.p. at Technomic.

But full-service restaurants, which saw sales grow last year by 8.1 percent, are one of the biggest benefactors of the return to dining out, Packaged Facts notes.

Several other areas hold above-average upside potential:

Breakfast: Sales increases in this segment have outpaced population growth since 2008 by 5 percent. According to Technomic, 46 percent of consumers now occasionally purchase weekday breakfasts, compared to 33 percent three years ago. Health and convenience—both location and time—are the top considerations.

Mature audiences: Consumers 65 or over are spending significantly more (13 percent) on limited-service restaurants than they did five years ago, Packaged Facts reports.

The heavy half: It’s hardly surprising to hear that households with $100,000+ incomes, which represent only 17 percent of all households, make up more than one-third of the spending at restaurants.

View the full article on Restaurant Hospitality


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