Despite various challenges, restaurant industry sales this year will reach a record high of $799 billion, up 4.3% over last year, said Hudson Riehle, senior vice-president, Research & Knowledge Group, National Restaurant Association.
“That’s a staggering sum,” he said during a presentation at the National Restaurant Association Restaurant, Hotel-Motel Show, held May 20-23 in Chicago. “If the restaurant industry was actually a country in the global economy, the restaurant industry now in the United States is larger than 90% of the world economies.”
Consumer trends have shifted in the industry’s favor, with now almost $1 out of every $2 spent on food allocated to restaurants. That’s up from $1 out of $4 in 1955.
Now, for the bad news. In the past 10 years, the restaurant industry’s growth has slowed significantly.
“That’s important to understand because that is the operating environment going forward,” Riehle said. “It is a moderate growth environment and definitely lower than it was pre-recessionary.”
Pent-up demand for restaurants remains high; 42% of consumers aren’t dining out as often as they would like, which compares with 27% in 2006. Moreover, the key millennial demographic is saddled with student debt.
While perceptions of the economy have improved, most consumers maintain a dampened outlook.
“Value proposition has to be stronger than ever today,” Riehle said.
Three out of four consumers said they would visit a restaurant during off-peak hours to receive a discount, a strategy more restaurant operators may be exploring in the future, Riehle said.
“With video menu boards in quick-service restaurants and tablets in table service, it is now possible for operators to change pricing by time of day,” he said.
Restaurant meal subscriptions present another opportunity, enticing cost-conscious consumers and helping operators generate incremental demand. Forty-two per cent of consumers said they would join a monthly program that pays in advance for restaurant meals with such benefits as discounts and exclusive offers.
“Over half of millennials would subscribe to a restaurant meal plan,” Riehle said. “Why? They grew up with the Netflix model.”
He added, “In the years ahead there is going to be a lot of innovative pricing, not only in terms of by time of day but in terms of subscription models.”
Technology may offer distinct competitive advantages, too. About two-thirds of consumers equate technology with convenience, and nearly as many said technology options speed up service, said Annika Stensson, director of research communications for the N.R.A.
But many consumers hesitate to adopt cutting-edge technology, and operators face such barriers as cost of implementation and transaction fees.
“When consumers dine out there are some attributes that play into their decision matrix,” Stensson said. “Convenience, value and food quality are important, but what’s on the menu also matters.”
The availability of healthy menu items is an important driver, she said. Two in three consumers said they are ordering more healthful options in restaurants now than two years ago.
“Trends are becoming more concept-based, more idea-based than single ingredient-based or dish-based,” Stensson said. “These days it’s not so much about whether kale or cauliflower is going to be the hottest trend of the year; it’s more about if that kale or cauliflower is sourced locally, if it’s grown in an environmentally friendly way and how it’s prepared.”