Restaurant industry to grow despite challenges
While the operating environment will remain challenging, America’s 980,000 restaurants are expected to post record sales and continue to be a leading job creator in 2013, according to the National Restaurant Association’s (NRA) 2013 Restaurant Industry Forecast released today. Total restaurant industry sales are expected to exceed $660 billion in 2013 – a 3.8 percent increase over 2012, marking the fourth consecutive year of real sales growth for the industry.
In addition, 2013 will be the 14th straight year in which restaurant industry employment will outpace overall employment. Restaurants will employ 13.1 million individuals next year as the nation’s second-largest private-sector employer, representing 10 percent of the total US workforce.
“Despite a continued challenging operating environment, the restaurant industry remains a strong driver in the nation’s economy,” says Dawn Sweeney, president and CEO of the National Restaurant Association. “Ours is a resilient and flexible industry that continually finds new ways to keep growing, relying on the creativity and innovation exhibited by the entrepreneurial spirit. In 2013, restaurant operators will continue to explore ways of navigating the rocky economic landscape to find the road to success.”
“The fact that the restaurant industry will continue to grow in an operating environment that presents substantial challenges is a testament to the essential role that restaurants play in our daily lives,” says Hudson Riehle, senior vice president, Research & Knowledge for the National Restaurant Association. “Restaurants are offering products and services that consumers actively seek out and enjoy; an activity in which consumers are selecting to engage despite cash-on-hand restraints because it is an important component of their lifestyle.”
Total US employment grew at a rate of 1.4% in 2012, while restaurants added jobs at a strong 3.0% rate – more than double the overall rate. In 2013, the NRA expects the restaurant industry to add jobs at a 2.4 percent rate, nearly a full percentage point above the projected 1.5 % gain in total employment.
Looking ahead, the NRA expects restaurants to add 1.3 million new positions in the next decade, pushing industry employment to 14.4 million by 2023.
Because of this strong growth in restaurant employment, labor challenges will start to reemerge next year. Recruitment and retention, which was a top challenge pre-recession, will make its way back onto restaurant operators’ radar as the US labor pool is starting to become shallower; restaurant operators in all segments expect recruitment and retention to be more challenging in 2013 than in 2012.
While the restaurant industry is expected to grow in 2013, operators will continue to face a range of challenges. The top challenges cited by restaurateurs vary by industry segment, and include food costs, the economy and health care reform.
After increasing steadily in the last three years, wholesale food costs will continue on an upward trajectory through 2013, putting significant pressure on restaurants’ bottom lines as about one-third of sales in a restaurant goes to food and beverage purchases. Because of these prolonged cost pressures, restaurant operators will continue to use creativity and innovation to drive out cost inefficiencies and increase productivity to not pass along the increases to consumers at the same rate.
The sluggish economic and employment recovery impacts consumers’ cash-on-hand situation, which in turn impacts restaurants as there is a strong correlation between consumers’ disposable income and restaurant sales. There is currently substantial pent-up demand for restaurant services, with 2 out of 5 consumers saying they are not using restaurant as often as they would like; with improving economic conditions, that demand is likely to turn into sales.
Preparing for the implementation of health care reform will put additional cost pressure on some restaurant operators in the near future. One-third of a typical restaurant’s sales go toward labor costs, so significant increases in those costs will result in additional cost management measures to preserve the already slim pre-tax profit margins of 3-5% on which most restaurants operate.
Consumers’ interest in technology continues unabated. Restaurant operators recognize that technology can enhance customer service and appeal to consumers, but they are not fully meeting consumer demand in this area yet.
At tableservice restaurants, more than half of consumers say they would use tableside electronic payment options and 44% would use a tableside ordering system. Nearly one-third would use mobile payment options, four in 10 would use tablet menus (such as iPads), and 50% would use a smartphone app for viewing menus, ordering or making reservations. Less than one in 10 tableservice restaurants currently offer these options, but 54% say they will invest more resources in customer-facing technology in 2013.
At quickservice restaurants, 44% of consumers say they would use self-order terminals, two in five would use smartphone apps to place orders or view menus, and more than one-quarter would use mobile payment options. Currently, less than 2 percent of quickservice restaurants offer these technologies, though 48% say they plan on investing more in customer-facing technology next year.
Also among the strongest consumer trends for 2013 are local sourcing and nutrition. More than seven out of 10 consumers say they are more likely to visit a restaurant that offers locally produced menu items, and more than six out of 10 said locally sourced menus are a key attribute for choosing a restaurant. Currently, a majority of tableservice restaurants offer locally sourced produce, meat or seafood, with availability being highest in the fine dining segment.
In addition, more than seven out of 10 consumers say they are trying to eat healthier at restaurants now than they did two years ago; women more so than men (75% vs. 66% ). Similarly, about three-quarters of consumers say healthy menu options are an important factor when choosing a restaurant (80% of women vs. 71% of men). Restaurants are responding to this increasing demand for nutritious options, as 86 percent of consumers say that restaurants are offering a wider variety now than two years ago.