PUBLISHER'S VIEWPOINT
January 2006
2006:  A Year For Living Cautiously

You know, this forecasting business is a hard job. First, you have to get a picture of what the industry will do, which involves processing and weighing a lot of information from sources that sometimes contradict each other. Then you give it your best shot, with an eye to caution.

Fortunately, I am happy to report most of us will continue to eat well, and probably too much, in 2006. We forecast better than 2% real growth for the E&S market this year. Technomic Inc. forecasts positive real growth for operators. The National Restaurant Association will likely forecast positive real growth in ’06 a few days from my writing this, according to Hudson Riehle, the group’s senior v.p. of research and information services.

Details on the rationales for these projections appear in the two forecast stories in this issue. Yet even more detail is available in the Economic Report sections of our e-mail newsletter, FER Fortnightly, in last year’s Nov. 29 and Dec. 13 issues. You can find those by going to our Web site, www.fermag.com , clicking on “Fortnightly” and getting to the issue archives.

But while our best guess is for more growth this year, I also want to urge all of you to keep on eye on Economic Report throughout the year, and on other indications of industry trends, not to mention the trends within your own businesses, whether you are an operator, dealer, consultant or supplier. (The service folks are doing well in any market these days.) It’s a year for living cautiously, for a number of reasons.

While our best guess is for more growth this year, keep an eye on industry trends.

First, the general economy chugs along, but not without its fragilities. The growth of gross domestic product never benefits everyone equally. Lower income households, a big part of the foodservice market, got battered by high gasoline prices and will get battered again by the high cost of heating fuel, especially natural gas, this winter. Consumer confidence plunged post Hurricane Katrina and amid the second run-up in gas prices last year. It’s recovered some, but many consumers are still uneasy. That affects eating out behavior and already has. And interest rates have risen, and we’re still losing jobs to China and replacing them with lower-paying ones.

Second, and perhaps even more importantly, we’re pretty far along in the current foodservice expansion cycle. The big chains, which tend to lead this market both up and down, started booming mid-year ’03, and they’ve had a remarkable run since. But we’re now beginning to see very moderate or even negative same-store sales numbers from many chains.

So just keep your eyes open as the year develops. E&S usually lags the operators by six months or more, barring dramatic changes. And since we don’t foresee any, we expect another decent year.

Cheers,

Robin Ashton
Publisher