October 27, 2009
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Restaurant trends are obvious, you just need to look for themA number of really revealing news articles hit the listserve system on Thursday and Friday this week. I imagine many of you read them after seeing the teaser headlines in your email updates. I was struck by two, in particular. One, with a by-line from the October 21 Sacramento Bee reported on a new Zagat Survey of 145,000 "local restaurant-goers" across the United States. There were 11 bullet points, with some pretty down-beat responses.
But the most meaningful bullet point from this list is that over the last five years the percentage of lunch and dinner meals eaten away-from-home has turned down from 53% to 48%. Since the beginning of the 1950's this trend had been heading in a positive direction as more people ate in restaurants and not at home, even during past recessionary periods. The slide in dining out is consistent with survey results showing that 44% of respondents said that they are cooking more at home.
The second article, by Ashley M. Heher of the Associated Press and dated October 22, reports on findings from a number of sources including the NPD Group. The author cites Brinker International's stated first-quarter results for Chili's Grill & Bars. Customer traffic fell for the 21st consecutive quarter. Revenue was down 21% and profits were off 34%. Also mentioned in this piece but with considerably less worrisome numbers were Applebee's, P.F. Chang's, Benihana, and Ruby Tuesday. A dozen other brands in the casual segment could easily have joined this group as examples.
Now here is why these two articles are important. Go back and look at the time periods mentioned- "...over the last five years..." and "...for the 21st consecutive quarter." These are not statistics about the current recession; these are about trends which have their roots reaching back to the economic expansion of 2004-2005. The current recession it is not the underlying cause of these figures, but serves only to intensify its effects. This isn't about bank failures, foreclosures or recent high unemployment.
In these numbers we can see a significant change in the nature of restaurant consumer behavior. These are emerging trends that need to be addressed by strategic and long-term thinking. They mirror the rising importance of the Millennials as demand drivers; the slow decline in the percentage of women in the American workforce; and the rapid increase in the market belief that food is more than a low cost convenience. These trends show consumers are choosing modified vegetarian diets and smaller portions, that both women and men are preparing more meals for their families, and everyone is interested in health and wellness-even if they don't know exactly what that means. Restaurant use is a dynamic activity because consumer lifestyles change. As retail consumer products restaurant companies need to change, too, or they will become obsolete.
As surveys such as the two I've mentioned reveal, it is all but impossible to deny that there are simply too many casual theme full service restaurant seats in the United States, with too few customers seeing the companies which own them as relevant to their daily lives.
There are companies in and out of the casual segment which are emerging as the beneficiaries of the new demographics. They are not doing so by relying on deals and discounts, in fact most are increasing menu prices because demand is up. They are not doing so by engaging in karaoke menu design and merely copying popular items from their competitors, most are creating innovative items that address new consumer needs. Ingenuity and creativity, used in the practice of identifying and capturing changing market trends, are the keys to the future.
2009 is coming to a close. We will look back and see it as a transition year for the industry, similar to 1954, 1968, 1988 and 2001. What happens in 2010 to your company will in large part depend on the decisions your management team makes now to address the new realities of a changing market. The trends are obvious, you just need to look for them.
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