What is in this article?:
- Technomic: Mixed economic view could dampen spending
- Who's hurting most?
- Effects on the industry
Research firm Technomic is projecting modest sales growth in the restaurant industry for 2013 and 2014.
Effects on the industry
Because economic pressure will likely lead to small increases in spending for all consumer groups, competition for traffic will remain front and center, Technomic’s Paul said, especially among quick-service and traditional casual-dining chains.
“It really is a share game at this time,” Paul said, “because the total pie isn’t growing, but you have to grab your share. If there’s this slowdown in unit growth, it’s hard to keep growing in the U.S. with all these little guys nipping at your sales. Five Guys won’t do the average volume of McDonald’s, but their sales come at somebody else’s expense.”
During their most recent earnings calls, executives at McDonald’s and Darden Restaurants explicitly noted that marketing and menu development would focus on value to drive traffic, even at the expense of restaurant-level margins. First-quarter same-store sales for McDonald’s fell 1.2 percent in the United States, while Darden’s fourth-quarter comparable sales increased modestly at Olive Garden, Red Lobster and LongHorn Steakhouse.
Fast-casual bellwethers like Panera Bread and Chipotle increased same-store sales in their most recent quarters as well, as did Starbucks Coffee. Paul said that those increases likely resulted from customers’ view of those brands as more upscale.
The “polished-casual” segment should also see some better growth, Paul said, citing the Cheesecake Factory, whose first-quarter same-store sales rose 1.6 percent despite slightly negative traffic. But competition in the bar-and-grill segment would likely weigh down casual dining as a whole, he added.
“The traditional casual-dining players like Chili’s and Applebee’s are still stuck with a model that consumers think is kind of dated,” Paul said. “It’s almost becoming the family-dining segment of the decade, where those concepts have flipped into the not-cool places to go anymore.”