With the economic downturn easing, the restaurant industry is expected to show gradual improvement in 2010, according to the National Restaurant Association's 2010 Restaurant Industry Forecast. Industry sales are projected to reach $580 billion this year, a 2.5 percent increase in current dollars over 2009 sales. When adjusted for inflation, 2010 sales will be essentially flat, which is an improvement over the 1.2 percent and 2.9 percent negative growth in real sales that the industry experienced in 2008 and 2009, respectively.
 
Restaurants will continue to be strong contributors to the recovery of the nation's economy, with industry sales representing 4 percent of the U.S. gross domestic product and employees comprising 9 percent of the U.S. workforce.
 
"The past two years have been a very challenging time for our industry. While there are still substantial challenges ahead, we are encouraged that the outlook is improving," said Dawn Sweeney, President and CEO of the National Restaurant Association. "With a total economic impact of more than $1.5 trillion, the restaurant industry is a strong player in the economic recovery. Restaurants are the cornerstone of communities across this nation and we are a key player in propelling job retention and creation across the United States."
 
Industry segment growth
 
Continuing the trend from last year, the quick-service restaurant segment is expected to fare slightly better than the full service segment as diners focus on value and specials.
Quick-service restaurants are projected to post sales of $164.8 billion in 2010, a gain of 3.0 percent over 2009. Sales at full service restaurants are projected to reach $184.2 billion in 2010, an increase of 1.2 percent in current dollars over 2009.
 
The eating-and-drinking place segment expected to show the strongest growth in 2010 is social caterers, whose sales are expected to increase by 4.5 percent. Among all commercial industry segments, the strongest growth is expected in retail-host restaurants (including those located in gas/service stations and drug- and grocery stores) with a 4.9 percent sales increase.
 
Workforce outlook
 
For only the second time in nearly half a century, the restaurant industry lost jobs in 2009. Despite the losses, the industry still outperformed the national economy, and job growth is expected to resume in 2010. The restaurant-and-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.
 
"This year, we do expect national industry employment and growth, but not as the industry performed this past decade," Hudson Riehle, the NRA's senior vice president of research and information services. "The economy is reported as the top challenge by a number of operators. Two years ago, recruitment and retention was the top challenge. Once the economy gathers steam and national employment starts to rise again, recruitment will become a challenge again for operators."   Demographics of the industry's labor pool also are expected to change. Historically, the labor pool has consisted of individuals between 16 and 24 years of age.   "If you go back 20 years, 20 percent, or 1 out of every 4, was 16 to 24 years old. In 2008, that had dropped down to 14 percent and that will continue to decline over the next decade. The basic demographic of America changes as it ages," Riehle said. "Operators will need to look to alternative labor sources or technology to help deal with the demographics that will unfold over the next decade."  
State sales growth
 
Colorado is expected to post the strongest sales growth in 2010 at 2.9 percent (2010 industry sales of $8.7 billion), followed by Idaho at 2.8 percent ($1.6 billion). Forecasted to post growth of 2.7 percent: New Jersey ($12.8 billion), New York ($29.0 billion), North Carolina ($12.8 billion) and Texas ($34.8 billion).
 
The top states by restaurant sales volume in 2009 will be California at $58.0 billion (2.3 percent growth); Texas at $34.8 billion (2.7 percent growth); New York at $29.0 billion (2.7 percent growth); Florida at $27.6 billion (2.4 percent growth); and Illinois at $18.7 billion (1.9 percent growth).
 
Consumer and menu trends
 
According to the National Restaurant Association's 2010 Restaurant Industry Forecast, consumers will continue to seek value, convenience and expanded menu options in 2010 – and restaurants will deliver. Consumers forced to cut back on spending say they aren't dining out as often as they would like, and this pent-up demand will turn into restaurant traffic as economic recovery continues.
 
The Association predicts that growth opportunities can be found in delivery and other off-premise options, cooking classes and other interactive guest activities, and using new media to reach new and returning guests.
 
Social media will become more critical to restaurant marketing this year. A good plan and solid understanding of those tools – including Facebook, Twitter, Yelp, and YouTube – can help operators mitigate the economic environment. "Word of mouth" has moved online, and more consumers use the Web to browse menus, make reservations, and get recommendations from other diners. Restaurants' use of e-mail, Internet and cell phone text messages in marketing efforts is also a growing trend.
 
Restaurant operators continue to step up their efforts to go green, investing in energy-efficient equipment and fixtures, using recyclable materials and reducing their water use. Green initiatives not only help manage costs, they can also drive traffic. Four of 10 full service and 31 percent of quick service operators plan to devote more resources to green initiatives in 2010 than they did in 2009, and four in 10 consumers say they choose restaurants based on their conservation practices.
 
For more information about the National Restaurant Association's 2010 Restaurant Industry Forecast, visit www.restaurant.org/research/forecast.

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