Source: National Restaurant Association Consumer Survey, 2008
Challenging times require the keenest minds, so to shine a light on the road ahead, we sought the opinions of three individuals who have spent their careers fielding and analyzing data. All are uniquely qualified to speak about the outlook for the restaurant industry in 2009. This three-part article shares the perspectives of J. Walker Smith, executive vice chairman, The Futures Company; Hudson Riehle, senior vp, research and information services, National Restaurant Association; and Harry Balzer, vice president and chief restaurant industry analyst, NPD Group.
HUDSON RIEHLE: SENIOR VP, RESEARCH AND INFORMATION SERVICES, THE NATIONAL RESTAURANT ASSOCIATION
“It’s clear that 2008 will end up being the most challenging environment in several decades and that 2009 will definitely be a weaker than usual sales environment…but I don’t think as bad as 2008. Surveys show quite clearly that the higher the average check per person, the more challenged the establishment is in this environment. Consumer patronage patterns are shifting across the spectrum, and consumers are changing ordering patterns within establishments.
In response, it’s really a twofold approach for operators: control costs and maintain, even build, sales. The industry is still extremely competitive and people will vote with their feet. Operators are naturally inclined to cut back on marketing and advertising, but in this environment it is even more important to stay top of mind with consumers.
The objective is to not necessarily discount price points but rather for operators to work on their value propositions – basically providing lots of choice and options; coming up with incentives, such as two for one; promoting traffic on less busy nights; presenting a viable gift card program, etc.
Overall, the focus should be on getting loyal customers in again. Our research confirms the importance of repeat customers to tableservice restaurants – in family dining, they account for 75% of sales; in fine dining for 60% of sales. Good loyalty/frequent diner programs have never been more important.
"The savvy operators, the ones who have gone through downturns before,
understand that they can’t be shortsighted about controlling costs, by cutting
service and letting food quality slip." – HUDSON RIEHLE
Menu price inflation has been increasing at higher rates than historical norms, but still below overall inflation, and a full two points behind grocery store price inflation, which is running at 6%. On the subject of grocery stores, we asked consumers if they enjoy going to grocery stores and/or enjoy going to restaurants. Obviously, they most enjoy having restaurants as part of their lifestyle – it’s a better use of their time, provides social opportunities, etc. Consumers want to continue to use the restaurant industry in a way that they did in prior lifestyles. Once the economic situation improves – in the second half of 2009 – we’ll see them back in restaurants. That said, this economy has caused fundamental, lasting changes in consumers’ attitudes – they are more risk averse and more prone to saving – and they will not return exactly to their previous behavior and spending patterns in restaurants. Savvy operators are already adapting to what is emerging as their new demographic and are developing different strategies to appeal to them.
The hallmark of the restaurant industry has always been extreme flexibility and adaptability, which has served it well. There’s no reason to expect that this won’t be the case during and after the recovery. This economic environment is certainly unprecedented and the severity of the downturn can’t be understated. But this too shall pass.”
January 13, 2009.
To read future thoughts from Harry Balzer, NPD Group, regarding the Industry Outlook for 2009, click here
