FROM THE FIELD
November 2006
The Threats to Casual Dining

It’s no secret that rising gas prices this year have put a crimp in foodservice. The National Restaurant Association’s Restaurant Performance Index began detecting it in April data, and a report released by Technomic Inc. around that time did likewise.

By the time July data rolled in, Technomic’s same-store sales figures showed QSR up just 1.4% nominal from year-earlier levels and full service down 1.7%. Factor in price increases, and you have to start figuring the math on negative bonuses.

Casual dining has absorbed the biggest hit. Second quarter filings from several of the big publicly held casual-dining companies reported sales declines. All were attributed to gasoline prices, and historically speaking, the correlation between gas pricing and restaurant sales is so tight that cause-effect is virtually undeniable.

But high gas pricing isn’t the only threat to casual dining. Even if gas prices continue to drop, other storm clouds bear watching.

First the obvious: Ongoing inter-segment competition remains a factor. Just as family dining some years ago got crunched between quick service and full-service casual dining, now casual dining is getting chewed into by fast casual on the lower end and some upper scale concepts at the high end.

And then there are the demographic/economic patterns. Pull together a bunch of government reports, and you quickly see the population is polarizing in both age and income. Boomers, maturing and flush with discretionary income, will fuel their own favorite concepts for awhile yet, and they’re tending to graze up-market. Technomic, in fact, says 26% of U.S. households earn $70,000 or more each year and account for 47% of foodservice spending. So that group will drive plenty of mid- and upscale dining for awhile yet.

"Do casual-dining customers perceive they're getting fair service for the price?"

But average real income, according to government data, is dropping, and all the population growth is in the lower-income sectors—definitely not good for casual dining as we know it.

And apart from price point, there’s perceived value. In a casual conversation during lunch at the Foodservice Consultants Society Int’l. meeting in Louisville, Ky., a consultant friend put it bluntly: Do casual-dining consumers perceive they’re getting fair service for the price? Waiting to be seated, waiting to be served and waiting for the check aren’t worth a lot.

All of which came into focus last night as the Ward family careened into one of the couple-dozen well-known casual chain units at Woodfield Mall in suburban Chicago. The four of us were greeted quickly and seated quickly. A vodka tonic arrived sans lime and sans any signs of fizz, looking for all the world like a plastic tumbler of ice water. Upon request for a slice (singular) of lime, the server delivered a plate of four without comment on the oversight. No apology, which might have indicated awareness 

Next came a group appetizer, delivered without plates. Upon request, a runner brought plates. Our thank you was met with “No problem,” which just reeks of carelessness and poor training.

Then another runner tried to deliver food that wasn’t ours. And for the grand finale, when our check came, it was wrong, including desserts that had gone to another table. Our corrected bill, for four, came in at a little over $80. The food was very good, but it almost didn’t matter.

If gas prices, demographics and economic patterns don’t strangle casual dining, that kind of service, for $20 a head, just might.

Brian Ward
Chief Editor