NRA: Economy pressures consumers, but restaurants eye opportunities

Consumers emerging from the recession are demonstrating significant levels of pent-up demand for dining out, the lead economic analyst for the National Restaurant Association said Wednesday during an online presentation of the trade group’s 2012 Restaurant Industry Forecast.

As a result, he added, there will be opportunities in 2012 for operators who can leverage food and beverage trends and emerging technologies.

The restaurant industry overall is expected to register “modest gains” in sales this year, said Hudson Riehle, the senior vice president of the NRA’s research and knowledge group.

At the same time, it is projected to enjoy more robust hiring growth in 2012 than the economy as a whole, he added.

Riehle said the foodservice industry is expected to post $631.8 billion in sales this year, up a nominal 3.5 percent, or 0.8 percent adjusted for inflation, over last year’s figure. That total reflects year-over-year growth of $21 billion.

EARLIER: NRA: Foodservice sales to hit record $632 billion

The foodservice industry “has become an economic juggernaut” in the United States, he said, with the $632 billion in sales restaurants are expected to ring up in 2012 representing 4 percent of the gross domestic product.

Moreover, he said, the industry would exert an estimated total impact in 2012 of $1.8 trillion, when calculating sales, food and beverage purchases throughout the supply chain, and thousands of jobs in other industries that support restaurants.

Because restaurants are expected to add jobs at a faster rate than the economy as a whole — an estimated 2.3 percent in 2012, compared with 1.3 percent for the economy at large — the foodservice industry is expected to reach its pre-recession peak workforce by 2014.

But until the country reaches its full pre-recession employment rate, consumers still are expected to limit their restaurant visits and manage their spending, Riehle said.

“When individuals are employed, it creates more demand for convenience,” he said. “There always has been a strong correlation [between] household incomes and restaurant sales.”

Bearing that moderate growth in mind, Riehle identified some challenges likely to face restaurateurs in 2012, as well as some opportunities for solutions.

Food costs, consumers under pressure

While the 4-percent increase in food costs projected for 2012 is only about half of the 8-percent spike registered last year — the highest annual increase in 30 years — it still will pose problems for operators, Riehle said.

“From an operations perspective, these sizeable gains will put pressure on restaurants’ pretax profit margins and will make the focus on productivity, efficiency and effectiveness more important,” he said.

Operators responding to the NRA’s survey for this forecast identified food costs as their No. 1 concern heading into 2012. The economy had been their prime concern going into 2011, but the number of operators reporting that have been decreasing. Levels of concern about maintaining sales volumes fell from last year to this year, and worries about recruiting and retaining employees have been consistently very low throughout the recession.

Acquiring and retaining customers will remain difficult in 2012, Riehle said, as consumers surveyed by the NRA reported that they have cut back on dining out more than they would have liked. About 40 percent of respondents said they are not patronizing restaurants this year as much as they want to, which is a 10-percent increase from last year.

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Resist the urge to discount

We enjoyed your coverage and Hudson's research on dining trends and the constant uptick in commodity prices.

We encourage all operators as margins become leaner, to resist the temptation to devalue your food and brand by discounting, doing daily deals or relying on excessive advertising or thinking a generic PR firm can help.

Work to get some objective advice and develop a written marketing plan that uses both traditional partnerships and alliance building in your communities, as well as taps into the social media universe -- all in creative ways.

Find industry veterans who have objective advice, and take it!

Above all, please, focus on what made you great and don't do harm to your brand with all the offers you get for quick fixes.

We know 2012 will be a great year for us all!

Tom Kelley

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