Market headwinds will challenge food service sector

by Keith Nunes
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CHICAGO — A new study from The NPD Group indicates restaurant traffic declined 1% in 2008 and the research firm forecasts that 2009 will be an even tougher year due to rising unemployment, eroding consumer confidence, market volatility and other economic concerns.

"Our industry began 2008 battling rising prices, especially for food and fuel, and slowing customer traffic counts, which resulted in extreme pressure on margins throughout the food service industry," said Bonnie Riggs, restaurant industry analyst and author of the report, "Challenging times … driving sales in 2009." "By the end of the summer, the economy had taken a sharp turn for the worse as housing and financial markets sunk deep into turmoil."

Ms. Riggs said that when consumers did visit restaurants in 2008, they kept a close eye on their budgets by trading down from full-service restaurants to quick-service restaurants and ordering more often from value menus.

"Now we face a much tougher marketplace, much greater uncertainty, and a very tight hold on our pocketbooks," she said. "Restaurant customers are being bombarded with great offers; they can carefully choose how and where to spend their food dollars. Much of the challenge for operators this year will be having a good understanding of what their customers want."

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