May 20 2015 – Robert Fiumara
Since the recession of 2008, restaurants and the food industry in general has struggled to reclaim some of the impressive growth that had largely remained unchecked up until the financial downturn of the 21st century. Now it seems, the time has come for impressive growth – sales are good for most restaurants, chains are expanding and adding to their staff. Industry experts continue to warn that while the industry is stable, the growth in the next few years will be moderate, at best, instead of the explosive growth of times past.
The prediction for growth this year is around 5 percent in sales but when adjusted for inflation, it’s more like 2 percent. While consumers have more confidence in spending their residual income on things like eating out, they’re not doing it very often, which is leading to slower growth than average. In the first quarter of 2015, restaurant sales increased by 2.8 percent – the best quarterly performance recorded since 2008. Many experts look to the positive economic growth and decrease in prices, especially gas prices, as contributing to the positive increase in restaurant diners.
Even more positive is the fact that concern levels of restaurants remain at an all-time low and few companies are at risk of failure. In fact, chains continue to expand and grow at an extraordinary rate. In 2014, Popeye’s chain was the overall largest growing chain while Domino’s, after years of non-existent growth, began adding locations. More than 150,000 foodservice positions were added from December 2014 to February 2015 and stock prices continue to rise. The real predictor for explosive growth is an increase in traffic, which unfortunately, experts aren’t seeing. Consumers continue to prefer establishments that are quick service instead of full and fast-casual popularity is on the rise. While fast casual restaurants are becoming the most popular choice among consumers, they still only represent about five percent of total industry traffic.
Competition among restaurants remains fierce but it’s not just brick and mortar and traditional restaurants that are offering competition. Now, restaurateurs must contend with popular retail food stores, like Wegman’s, who offer high quality ready to eat meals. Perhaps the biggest competitor is the consumer’s own home – since 2008, more and more families have chosen to eat at home. To succeed in such a tremulous market, brands will need to meet consumer’s high expectations and ensure that quality products and quality customer service remain high on their priority lists. Building loyalty among customers will ensure success in the restaurant business.
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