Study: More dining out, smaller checks in 2011

Good news first: Americans are expected to dine out more in 2011. Not-so-good news: it's predicted they'll spend about 5 percent less per meal while doing so.

These are the estimates derived from a study by AlixPartners, an international business-advisory firm that offers services in operational performance improvement, among other disciplines.

The AlixPartners Restaurant & Foodservice Industry Review entailed an online consumer poll conducted in December. Questions were presented to 1,000 U.S. consumers and focused on planned frequency of dining occasions, expected spending on meals outside the home, preferred restaurant types and key criteria for restaurant selection.

According to survey results, consumers expect to spend 5 percent less per meal at restaurants this year – an average of $12.90 versus the $13.60 spent throughout 2010. Eleven percent anticipate spending $5 or less per meal, which is up 6 percent.

A majority – 60 percent – of consumers plan to take advantage of coupons and promotions.

Lower checks, however, are expected to translate into increased visits: 57 percent of consumers surveyed said they dined out at least once a week in the past year, an 8 percent increase from a similar survey conducted in March 2010.

In 2011, 11 percent of consumers plan to increase their dining-out frequency.

"From all indications, 'the year of the meal deal' looks like it may be turning into 'the era of the meal deal,'" said Adam Werner, head of AlixPartners' North American Restaurant & Foodservice Practice. "The good news is, diners are coming back into restaurants, but they remain cautious and very price-sensitive. As a result, the rebound in the industry could remain sluggish."

Promotions, healthy items the way to go

The survey showed that promotions remain the most effective way to draw in new and existing customers. Despite the strong and growing importance of food quality among diners, AlixPartners' survey indicated that 43 percent are willing to trade down to less-expensive restaurants in order to save money.

Of those planning on dining out less in 2011, 54 percent said it was because they needed to save money, while 50 percent said it's because they wanted to eat healthier (an 8 percent increase).

"This focus on saving money, coupled with the desire to eat healthier, will put pressure on companies to take a hard look at their menus and the price-value equation they're presenting to the increasingly frugal and health-conscious consumer," Werner said.

Foodservice stability

The second part of the survey included a comprehensive examination of the foodservice industry's financial stability across the sectors of quick service, fast casual, casual and fine dining. The pace of recovery in the industry remains spotty with growth strategies -- including more mergers and acquisitions -- playing a big role in 2011.

The study found that QSR, in particular, continues to feel the effects of competition from convenience stores and a core customer base that is more severely impacted by unemployment levels. Fast casual, however, experienced solid improvement in same-store sales over 2009.

The outlook for the casual dining sector seems positive based on revenue – 85 percent of casual restaurants experienced higher growth in 2010 compared to 2009. However, overcapacity continues to affect the sector as many chains attempt to reduce their footprint.

Among the four primary sectors, fine dining experienced the strongest turnaround within the past year, which was largely attributed to increased business-travel spending.

Challenges continue

Despite the many signs of optimism in the foodservice industry, challenges will remain throughout 2011, including rising commodity prices such as gasoline, logistics and food products.

"Some 37 percent of companies studied face liquidity risk and, as such, a primary focus in the industry is paying down debt and improving balance sheet health," said Eric Dzwonczyk, director in the Restaurant & Foodservice Practice at AlixPartners. "However, rising commodity prices and consumers' unwillingness to see price increases pose a real threat to companies facing financial distress, as well as those taking steps toward improving financial health. Companies have two options, either absorb commodity price hikes or pass them onto consumers, and neither is preferable in the still-recovering U.S. economic environment."

Also according to the study, while cost-improvement measures remain key, growth initiatives such as menu optimization and marketing effectiveness, as well as international outreach in markets such as China, will be the main differentiators separating the winners and losers moving forward.

"Moving into 2011, winning companies will be those that simultaneously deliver value, operational efficiencies and much-needed innovation and growth," Werner said.



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