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More consumers plan to increase restaurant spending

More consumers plan to increase restaurant spending

ATLANTA Despite another jump in the national unemployment rate and conflicting economic indicators released last month, a new survey shows that consumers' plans to spend at restaurants are only improving as confidence in the economy grows.

According to Atlanta-based RBC Capital Markets' September restaurant spending survey, restaurant spending plans rose 3 percentage points from the prior survey in May, and 14 percentage points from the same September survey a year ago. The survey, which is completed by the investment bank quarterly with ChangeWave Research, taps more than 2,000 consumers.

Looking out over the next 90 days, 16 percent of respondents said they planned to spend more on dining out, up from the 13 percent in May and just 8 percent in February who responded similarly. A reduced 33 percent of respondents said they planned to spend less on dining out during the next 90 days, down from 39 percent in May and 50 percent in February who answered that way.

"Confidence in the economy is improving, as those planning to spend more at restaurants cited better job security and less need to save money," said the report from RBC restaurant securities analyst Larry Miller. "Value is driving consumers to eat out more, as are having less time to cook and an uptick in workers per household."

Brands that stand to benefit, according to survey respondents, include Red Lobster, Chipotle, Olive Garden, Maggiano's Little Italy and Panera Bread. Concepts that respondents said they would not frequent more often included Denny's, Golden Corral and Morton's, The Steakhouse.

The recession is pushing more people back into the workforce, Miller noted, meaning certain families have less time to cook at home, a typical driver of eating out at restaurants. In addition, research showed that respondents pointed to better job security and less need to save money as reasons behind increased tendencies to eat out.

Still, the primary reason for increased plans to dine out rests on value. The surge in dollar menu items, bundled three-course meals or fixed price menus have helped spur restaurant traffic.

"The increased value restaurants have been offering has not gone unnoticed; it's the No. 1 incremental reason for eating out more," Miller noted.

In the September survey, consumers said they were using coupons more since the May survey, had reduced instances of skipping beverages or ordering less-expensive items, and had reduced their tendencies to eat at less expensive restaurants — all because of the various value deals being offered.

As consumers begin to dip their toes back into the spending pool, a focus on value is perhaps the lasting takeaway from this "great recession," sources say.

 

"The consumer's focus on value will remain and signifies a shift in consumer behavior that must be addressed," the latest industry newsletter from mid-market investment bank The Cypress Group highlighted. "Concepts must effectively communicate their value proposition and become ‘top of mind' when consumers evaluate choices."

The Englewood, Colo.-based firm noted that while price value is important, successful restaurant brands also will look to service, menu quality and experience as part of the value equation.

For example, while Red Lobster currently is promoting its Endless Shrimp deal for $19.99 in most markets, Chipotle, which raised prices last year in the midst of the recession's depths, focuses on its quality of food, convenient online or text ordering, and in-store service.

Addressing whether additional price increases might be forthcoming, even as consumers continue to focus on value, Chipotle's chief financial officer said during its latest call that the chain could boost prices even more.

"We still think we offer, and our research says [that] we offer, a compelling value to our customers," John Hartung said.

Contact Sarah E. Lockyer at [email protected] .

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