Restaurant downturn a result of more than economics

by Staff
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PORT WASHINGTON, N.Y. — The current downward trend in the restaurant industry might be the result of more factors than the current economic conditions alone, according to a new report from The NPD Group.

The restaurant industry had no organic growth in 2007 and total customer traffic was barely up 1%. Even this gain was driven mainly by unit expansion, suggesting traffic was flat on a comparable same-store basis.

Bonnie Riggs, author of the new report "Why This Downturn Will Be Different for Restaurants," said while the economy is a big factor, the current slowdown is going beyond economics as consumer behavior is changing.

"One of the changes we’ve been watching is women in the workforce," said Harry Balzer, NPD vice-president. "Over the last several decades the restaurant industry’s growth was heavily driven by a greater percentage of women joining the workforce, but that trend is over. The trend in working women may be more of a long-term issue for the industry than the current economic situation."

Other consumer factors include a trend of eating more breakfasts and snacks at restaurants while dining out for fewer dinners. During other difficult economic periods in the past, dinner traffic traditionally held up.

"Consumers are getting fewer main meals at restaurants, and even though inflation at supermarkets is the highest it’s been in 17 years there are more fast and inexpensive options available to consumers at grocery stores that didn’t exist years ago," Ms. Riggs said. "Ready-to-eat meals, frozen meals, etc. have multiplied over the years giving consumers more options and putting additional downward pressure on the restaurant industry."

In the last three decades, the restaurant industry has experienced five stressful periods, and four of these periods were recession related. The NPD Group found current conditions are most similar to those in 1979 and 1980 when restaurants experienced the most significant traffic losses.

Ms. Riggs said restaurant operators and marketers need to understand what drives consumer behavior and how consumers manage costs when visiting a restaurant. She said customer traffic may stay positive in 2008 but will likely be below 2007 levels.

"Make no mistake: Americans don’t want to cook, we’re just trying to figure out how to put food on the table the easiest and cheapest way possible," Mr. Balzer said. "With restaurant meals costing three times that of in-home meals, the question is who will do the cooking?"

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