- WHITE PAPERS
After a three-plus-year lull influenced by the Great Recession, the restaurant industry is expected to boomerang back to positive growth numbers in 2011. Research released today by the National Restaurant Association predicts a record $604 billion in sales this year, an increase of 3.6 percent over 2010, or 1.1 percent in inflation-adjusted terms.
The NRA’s “Restaurant Industry Forecast,” which surveyed operators across the country in all segments, made its New Year’s predictions in industry segment growth, state and regional sales growth, workforce outlook and consumer and menu trends. That forecast appears to be mostly sunny for the 960,000 U.S. restaurants, which rake in more annual sales than 90 percent of the world’s economies.
“As the national economy is slowly improving, the restaurant industry is climbing out of its most challenging period in decades to post positive real sales growth in 2011,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. “While pockets of challenges remain, we are looking forward to a brighter future in 2011.”
Operators received some good news for a change, as 2008-10 proved to be the most challenging for the industry in recent history. In 2009, the GDP was -2.6 percent. By the fourth quarter of 2010, it bounced back to 3.2 percent.
“We’re seeing a substantial reversal in the trend and consumer confidence is getting better,” Riehle said. “Challenges remain, but from an industry perspective, the momentum levels are the highest they’ve been since 2007.”
Among the bright spots is business generated through tourism hubs. International restaurant visitors have increased by double digits from the same time last year, mostly from China, South Korea, Brazil, Japan and Australia.
Optimism also comes from the untapped potential of consumers, Riehle said. Two out of five adults are not patronizing restaurants as much as they would like to, which presents a big opportunity for restaurants to get them in the door, provide them with a great experience and keep them coming back.
Industry Segment Growth
Continuing the trend from last year, the quick service restaurant segment is expected to post slightly stronger sales growth than the full-service segment. QSRs are projected to post sales of $167.7 billion this year, a gain of 3.3 percent over 2010.
Sales at full-service restaurants are projected to reach $194.6 billion in 2011, an increase of 3.1 percent in current dollars over 2010. Pent-up demand within higher-income households should provide a boost this year, Riehle said.
The eating-and-drinking place segment expected to show the strongest growth this year is social caterers, with an anticipated sales increase of 6.2 percent. Other commercial foodservice segments expected to post solid sales growth in 2011 are hotel restaurants (+5.7 percent), hospitals and nursing homes (+5.5 percent), and primary and secondary schools (+4.8 percent).
State and Regional Sales Growth
Among the 50 states, North Carolina is expected to post the strongest sales growth in 2011 at 4.2 percent (industry sales are projected at $14.1 billion), followed by Idaho ($1.8 billion) and Virginia ($12.8 billion) at 4 percent. Forecast to post growth at 3.9 percent: Colorado ($8.6 billion), Florida ($30.1 billion), Maryland ($9.4 billion) and Texas ($36.7 billion).
Of the nine U.S. Census regions, the South Atlantic is expected to post the strongest restaurant sales growth at 3.9 percent, totaling $93.9 billion among its eight states (Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia) and the District of Columbia.
The regional predictions are based on varying levels of employment throughout the country. For example, many markets in the upper Midwest remain at an 11 percent unemployment rate, which will stunt restaurant sales in those locations, according to the NRA.
Although the restaurant industry posted modest job growth last year, that growth is expected to accelerate in 2011. This year, the industry will add jobs at a rate of 2.4 percent, compared with the 1.8 percent expected for the national economy. In the next decade, the industry will add 1.3 million positions.
“We are the second largest private sector employer in the country. One out of every 10 people in the U.S. is employed in the restaurant industry,” Riehle said. “By 2021, more than 14 million individuals will be employed in the industry. The growth rate is more than double the national employment rate and is expected to continue.”
Consumer and Menu Trends
The NRA’s forecast outlined the biggest trends for 2011, including social media marketing, nutrition, local sourcing, green initiatives, online and mobile applications and in-store technology components.
Social media savvy consumers are more active in the restaurant community, and dine-out more frequently than the general public. This group also is more likely to use kiosks, electronic ordering and payment systems, online ordering and mobile phone applications.
“Social media has become very important to the industry and social media users are much more active and likely to dine-out, to connect with restaurants online and post reviews,” Riehle said. “More than 8 out of 10 operators say social media is becoming a more important marketing tool. And there is much more acceptance of restaurateurs e-mailing and texting their consumers.”
The 2011 forecast also shows that local sourcing, sustainability and nutrition will top menu trends. The NRA’s survey of more than 1,500 professional chefs listed locally grown produce, locally produced meat and seafood, healthy kids’ meals, sustainable seafood and gluten-free/food allergy conscious cuisine among their top priorities this year.
In the QSR segment, all eyes are on healthier kids’ meals, gluten-free items, spicy flavor profiles, locally sourced produce and smoothies.
“The trends seem to be local, local, local. Consumers have become interested in the story behind their food. We’ll see a lot more communication and menu offerings regarding local sourcing, sustainability and balanced children’s dishes,” Riehle said.
Reflecting these menu trends, seven out of 10 consumers say they are trying to eat healthier when dining out now than they did two years ago. This trend is mirrored by restaurant operators, as two-thirds say their guests order more healthful items and pay more attention to the nutritional content of food than two years ago.
The NRA lists mobile food service units and pop-up restaurants as a big avenue for growth in 2011. Nearly half (47 percent) of consumers said they would patronize a food truck.
“These units provide an additional point of access for consumers. Convenience is important for restaurant industry growth and this is another venue of convenient food service,” Riehle said.
Although the sales projections provide a much needed break in the clouds, Riehle said there are still plenty of challenges ahead. Among those include wholesale food prices, which are expected to increase 3.3 percent, continually rising gas prices and stagnant unemployment levels.
Riehle said the economy remains the No. 1 challenge, as considered by 35 percent of respondents, but its steady improvement is reason to bet on a bright future.
“This year will be a better operating environment than the past three years,” he said. “Challenges remain, but we’ll continue to gather momentum as the year moves along. For the first time in four years, there will be real industry sales growth. There is momentum and it’s gaining a foothold.”
Topics: Business Strategy and Profitability, Customer Service / Experience, Equipment & Supplies, Food & Beverage, Food Safety, Franchising & Growth, Health & Nutrition, Marketing / Branding / Promotion, National Restaurant Association, Online / Mobile / Social, Operations Management, Staffing & Training, Sustainability, Trends / Statistics