Nation’s Restaurant News asked some of the industry’s top trend-watchers to discuss what they expect for foodservice in the year ahead. Here are their predictions:
Darren Tristano, executive vice president, Technomic Inc.
Restaurant nutrition: Growth in menu labeling will increase nutrition awareness among many restaurant users, compelling some operators to add vegetable entrees and appetizers; expand their use of whole grains, such as buckwheat and quinoa; or use salts less for cooking and more as dish-finishing components or customer-applied garnishes.
Locavore concepts: We’ll see rising numbers of farm-to-fork conceptsthat offer regional craft beers and wines and regularly changing menus of upscale comfort foods made with local produce and culinary customs in mind. The settings may include salvaged fixtures or building materials.
Daypart growth: The growth in snacking will continue as around-the-clock dining moves closer to the mainstream and operators look for ways to build checks and meet Millennials’ hunger for group grazing. Street foods will inspire many small plate offerings, and thoughtful infusion of “global flavors” will increase their craveability.
Bonnie Riggs, restaurant analyst, The NPD Group
Customer expectations: In 2013, as in 2012, customers aren’t just going to go for the cheapest thing. They’re going to judge “value” as the best quality they can get for their money — meaning that consumers will expect to get what they pay for. Successful restaurants will be the ones that can provide quality food to consumers at affordable prices.
Consumer demographics: A lot of restaurants have been focusing on marketing to Millenials, but it's those younger folks who have cut back on visiting restaurants. Restaurants would be wise to begin marketing more heavily to Baby Boomers in 2013 since they're continuing to work longer, aren’t cutting back as much and have a greater need for convenience than ever before.
Hudson Riehle, senior vice president for research, National Restaurant Association
Restaurant sales: There is substantial pent-up demand for restaurant services, with two out of five consumers saying they are not using restaurants as often as they would like. Continued growth in national employment and consumers’ disposable income in 2013 is likely to turn that demand into sales.
Customer-facing technology: Technology is becoming an expectation rather than a novelty. Consumer interest in technology remains strong and will keep growing, spurring restaurant operators to dedicate more resources to customer-facing technology such as smartphone apps, ordering kiosks and mobile payment options.
Labor issues: Because of strong growth in restaurant employment, labor challenges will start to reemerge. Recruitment and retention — a top challenge before the recession — will make its way back onto restaurant operators’ radar as the labor pool becomes shallower.
Larry Miller, analyst, RBC Capital Markets LLC
Stock challenges: It could be a very challenging year for restaurant stocks in 2013, reflecting the potential for sales softness as we lap this past year’s strong first-quarter results. More challenges may arise if consumer spending slows after we implement austerity measures in the U.S. We will also see downward pressure on restaurant margins as food costs remain elevated, companies have limited pricing power, and health care costs get baked into earnings models in the second half of the year.
Same-store sales: The trajectory of same-store sales will depend on the resolution to the fiscal cliff. The MillerPulse same-store sales index recently dropped below the 2- to 3-percent range that it’s been in since 2010. Whether we can recover back to that range or not largely depends on how we resolve the fiscal cliff. In the best case, we reach a compromise that allows job growth to win the tug of war against future austerity measures. In the worst case, consumer spending slows materially as the U.S. economy dives back into recession.
Stock picks: Two of our restaurant company stock picks, Yum! Brands Inc. and Jack in the Box, are repeats from last year. Yum’s modest U.S. exposure and high level of earnings predictability makes it a defensive play. Jack in the Box is not only one of a select few companies with multiyear earnings visibility into fiscal 2014, but its earnings are also growing at a 30-percent clip, and its price/earnings multiple is expanding from its business transformation and revved-up Qdoba growth. Finally, we like Buffalo Wild Wings Inc., as we think earnings could benefit from easingwing prices starting in the second quarter of 2013 and valuation that is too low.
Menu, policy and commodities outlook
Nancy Kruse, president, The Kruse Company
Menu trends: A couple of burgeoning food trends will have an increasing impact on restaurant menus throughout the next year.
Greek cuisine is coming into its own in the mass market, with the extraordinary success of Greek yogurt opening the door to wider experimentation. Feta cheese, tzatziki and lamb will get more play, and chains like Little Greek will expand.
Salads will get a new lease on life as consumers seek healthful foods that are tasty and attractive. The use of kale will increase by leaps and bounds, along with specialty grains like farro and quinoa as salad toppers.
Steve Caldeira, president and chief executive, International Franchise Association
Tax reform: Caldeira says the IFA will continue to push for comprehensive tax reform for both corporate and individual rates. “The U.S. has the highest corporate tax rate in the world,” he said. “We need to be more competitive in the global economy, but it can't come on the backs of the small business community. Small business creates nearly two-thirds of the net new jobs in the U.S., and that's why we need to be focused on extending income tax rates for all levels. Why should we raise taxes on anyone in this fragile recovery?”
Health care: With the Affordable Care Act set to kick in 2014, franchisors and franchisees must make critical decisions on how they will implement the law in 2013. “Health care will not be repealed,” Caldeira said. “So the IFA will continue to work with the administration, looking for areas of flexibility to help mitigate some components that can be burdensome and costly for members.”
Access to capital: Caldeira said access to capital for restaurateurs looking to grow has improved slightly over the past several years. “But it is still not where it needs to be to fund the kind of growth we'd like to see," he noted. "The IFA will continue to forge connections with the lending community” in an effort to free up more capital.
John Barone, president, Market Vision Inc.
Beef costs:Beef represents the biggest challenge for foodservice operators for at least the next two years. The 6-percent increase in cattle prices in 2012 translated into roughly an 8-percent increase in ground beef prices and a 14-percent jump on choice steak cuts. The USDA projects 2013 beef production to be 5 percent lower than in 2012. Forward cattle futures contracts for 2013 are averaging mid-$130s per hundredweight, roughly 10 percent above 2012 levels. Beef prices hit record highs in June 2012. Those levels will likely be exceeded in spring 2013.
Corn costs: High corn prices will prompt U.S. growers to put another record corn crop in the ground for 2013, and their South American counterparts may do the same. If the weather cooperates, corn prices have the potential to be substantially lower by fall of 2013.
Chicken breast prices: Lower feed prices, combined with ever increasing broiler weights, will keep chicken breast prices relatively reasonable (compared with other proteins) in 2013. Chicken breast was the go-to protein for foodservice in 2012 and could be our saving grace again in 2013.