WASHINGTON — Food service operators are facing some of the most challenging market conditions in a decade and the outlook for the restaurant industry worsened in November, as the National Restaurant Association’s (N.R.A.) comprehensive index of restaurant activity plummeted to a record-low level. The N.R.A.’s Restaurant Performance Index (R.P.I.) stood at 96.7 in November, down 0.4% from October and its 13th consecutive month below 100.
"The November decline in the Restaurant Performance Index was the result of broad-based declines across the index components, with the Current Situation index falling to a new record low," said Hudson Riehle, senior vice-president of Research and Information Services for the Association. "A solid majority of restaurant operators reported negative same-store sales and traffic levels in November, while nearly one-half expect their sales in six months to be lower than the same period in the previous year."
The R.P.I. is based on responses to the N.R.A.’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators, including sales, traffic, labor and capital expenditures. The R.P.I. consists of two components – the Current Situation Index and the Expectations Index.
"The continued deterioration in economic conditions is reflected in operator sentiment, with a record 47% of restaurant operators saying the economy is currently the No. 1 challenge facing their business," Ms. Riehle said. "Looking forward, restaurant operators aren’t particularly optimistic about an improvement either, with 49% expecting economic conditions to worsen in six months."
The latest R.P.I. data comes a week after Moody’s Investor Services, New York, published a report that said the outlook for the restaurant industry is negative in the short term due to the weakening of the economy and escalating costs for consumers. The ratings agency said current demographic trends are positive for the restaurant industry in the longer term, but that the current economic pressures will outweigh those benefits for some time.
Restaurant industry sales are expected to reach $566 billion in 2009, with the industry employing 13 million in 945,000 restaurant and food service outlets nationwide, according to the National Restaurant Association’s 2009 Restaurant Industry Forecast. The N.R.A. Forecast projects that while overall restaurant industry sales will increase in current dollars by 2.5% over 2008 figures, the numbers translate to an inflation-adjusted decline of 1%.
"The restaurant industry is both innovative and resilient," said Dawn Sweeney, president and chief executive officer of the N.R.A. "In the year ahead, the industry’s sales are projected to continue to increase, with a total economic impact that exceeds $1.5 trillion, yet at the same time, the industry is experiencing unprecedented challenges due to the economic recession and elevated food prices."
The N.R.A. Forecast projects sales at full service restaurants to reach $182.9 billion in 2009, an increase of 1% over 2008. Quick-service restaurants are projected to post sales of $163.8 billion in 2009, a gain of 4% over 2008.
While the food service industry may be facing the toughest market conditions in recent memory, opportunities are still present for operators that know how to focus their efforts where it really counts, according to Technomic, Inc., Chicago. In particular, the food service consulting and research firm sees these five trends as looming large in 2009:
1. Experimentation and innovation: An upside of operators’ struggles will be innovations resulting from experimentation with new menu items, delivery services, price/bundling schemes and unit designs (including smaller, more efficient footprints).
2. Ethnic flavors: As one of the most significant ways food service operators may signal differentiation, expect to see more regional ethnic cuisine with flavors specific to a certain country or area, such as regional Italian entrees, Jalisco-style Mexican fare, and Korean or Vietnamese instead of just "Asian."
3. Local: Restaurants will make greater use of local food sourcing and regionalized menu offerings, according to Technomic. The trend also will generate stronger consumer support for local restaurant operators.
4. Portion control: Expect more small-plate, price-fixed and bar menus, in addition to more family-style entrees that may feed two or more. Food service operators also will focus on large-order catering, particularly for business events.
5. Upscale children’s menus: Restaurants are moving their children’s menus beyond the mac-and-cheese comfort zone with items that reflect their signatures — for instance, a crab cake on the children’s menu of a seafood restaurant — along with more specialty beverages and smoothies.