Today’s slowing economy is having an impact on the restaurant industry, and a new report from The NPD Group aims to help the industry move forward by looking back over 30 years. A key finding of the report is that not all periods of economic stress resulted in traffic declines for the restaurant industry – and current downward trends may not be driven by the economy alone.
The restaurant industry has gone through five stressful periods in the last three decades, four of which were recession related. The weakness in 1979 was tied to exceptionally high inflation. While each recessionary period had its own unique characteristics, NPD found that current conditions are most similar to those experienced in 1979 and 1980 when the industry experienced it steepest traffic losses.
The restaurant industry posted no organic growth in 2007. Total customer traffic was barely up one percent (+0.7%) driven primarily by unit expansion, which suggests that traffic was flat on a comparable-store basis. This is the smallest traffic gain since the 2000-2003 period of unrest.
“While the economy is a major factor here, this particular slowdown goes beyond just plain economics,” said Bonnie Riggs, author of The NPD Group’s latest report, Why This Downturn Will be Different for Restaurants. “NPD is seeing consumer behavior at restaurants changing,” said Riggs.
Another factor influencing downward trends in restaurant sales is lifestyle changes. “One of the changes we’ve been watching is women in the workforce. Over the last several decades the restaurant industry’s growth was heavily driven by a greater percentage of women joining the workforce, but that trend is over,” said Harry Balzer, vice president and author of The NPD Group’s annual Eating Patterns in America report. “The trend in working women may be more of a long-term issue for the industry than the current economic situation,” said Balzer.
Additionally, over the last year consumers are eating more breakfasts and snacks at restaurants and fewer dinners. Historically, dinner traffic held up during difficult economic times.
“Consumers are getting fewer main meals at restaurants and even though inflation at supermarkets is the highest it’s been in 17 years, there are more, fast and inexpensive options available to consumers at grocery stores that didn’t exist years ago,” said Riggs. “Ready-to-eat meals, frozen meals, etc. have multiplied over the years giving consumers more options and putting additional downward pressure on the restaurant industry.”
Despite the challenges ahead for 2008, opportunities do exist. Riggs says restaurant operators and marketers need to understand what drives consumer behavior and how they manage their costs when they visit a restaurant.
“We know that consumers will always find a way to keep their check size down when economies slow down, and there are many different ways consumers do this,” said Riggs. “It is pretty clear that we are not going to have a strong environment moving the industry along in the near term. Customer traffic may stay positive in ’08 but will likely come in below ’07 levels (+0.7%). Restaurant companies need to look for new ways to offer value and find ways to make the restaurant experience as pleasant as possible,” said Riggs.
“Make no mistake Americans don’t want to cook, we’re just trying to figure out how to put food on the table the easiest and cheapest way possible,” said Balzer. “With restaurant meals costing three times that of in-home meals, the question is who will do the cooking?” said Balzer.
About The NPD Group, Inc.
NPD’s CREST™ service collects consumption information on 35,000 consumers each month.
The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for a wide range of industries. Today, more than 1,600 manufacturers, retailers, and service companies rely on NPD to help them drive critical business decisions at the global, national, and local market levels. NPD helps our clients to identify new business opportunities and guide product development, marketing, sales, merchandising, and other functions. Information is available for the following industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For more information, contact us or visit http://www.npd.com/.
Contacts:
Kim McLynn, 847-692-1781
Kim_McLynn@npd.com
or
Cristina
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Cristina_Hilsenrath@npd.com
