Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
January 6, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
Bay Area Charbroilers Can Register Online
Grease, The Sequel, Plays Out In Milwaukie
Charlotte, Ogden Limit Vendor Trucks, Carts
San Jose Sets Stronger Green-Building Standards

Industry Report:
Sponsored by:
The NAFEM Show '09
Krispy Kreme Unveils Smaller Prototype
Culver's New Proto Cuts Construction Costs
New Tool Helps Budget Landscape Water Needs
Toronto Preps For CRFA Show

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In This Section:
NRA Forecasts 1% Real Sales Decline In 2009
NRA Index Hits Another Record Low
Consumer Confidence, Expectations Remain Very Low
FER Still Forecasts 3.8% Real Decline For E&S

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: The NAFEM Show '09
Economic Report Food&HotelVietnam2009

By Robin Ashton

NRA Forecasts 1% Real Sales Decline In 2009

Even the usually optimistic National Restaurant Association recognizes foodservice operators are struggling in the current economic environment. The organization forecasts operators will experience a 1% real decline in sales in 2009, following a projected 1.2% real decline in '08. NRA released its forecast at a press conference and Webcast Dec. 19.

If the forecasts hold, it will be the first time the industry has experienced two consecutive years of falling real sales since NRA began estimating the measure more than 40 years ago.

Still, NRA estimates current-dollar sales grew 3.3% in '08 and will register another 2.5% nominal gain in '09. These positive nominal numbers are inflated by two years of the largest wholesale-food and menu-price increases the industry has seen since the early 1990s. NRA estimates menu prices jumped a whopping 4.4% in '8 and will rise 3.6% for '09.

True to form for most of the current operator downturn, full-service operators are expected to continue to bear the brunt of declining sales as hard-pressed consumers flee to value. Full-service restaurants are forecast to grow only 1% in nominal terms in '09, a 2.5% real decline. Quick-service, on the other hand, is one of the few segments NRA predicts will show real growth in the coming year, with a predicted 0.4% real gain, translating to 4% growth in current dollars. Overall, eating and drinking place sales are forecast to grow 2.2% in nominal dollars and shrink 1.3% in real terms.

NRA Pres. and CEO Dawn Sweeney noted during the press conference that while the restaurant industry faces some of the most severe challenges it has seen in decades, it continues to outperform other retail and most other business segments.

"The restaurant industry is both innovative and resilient,"Sweeney said. "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." Sweeney noted nearly half of consumers' food budget will be spent in restaurants. NRA estimates total industry sales of nearly $566 billion in '09.

As is often the case, the NRA forecasts range a point to two points higher than those of the other major foodservice forecasting organization, Technomic Inc.

Technomic's '09 forecast, released last September, is for 1.7% nominal total industry growth and a 2.7% real decline. Technomic's estimates for '08 are 1.2% nominal growth and a 2.9% real decline.

Technomic typically takes another look at its forecast in January. The firm's V.P. Joe Pawlak told FER Fortnightly in December that the company would likely revise its forecast downward for '09.

You can get the complete '09 NRA forecast, including detailed segment and state-by-state forecasts, as well as a wealth of trends data, for a nominal fee by calling 800/482-9122 or by going to NRA's Web site


Section sponsored by Food&HotelVietnam2009

NRA Index Hits Another Record Low
As if to underscore the National Restaurant Association's somewhat gloomy 2009 forecast, the organization's Restaurant Performance Index hit another record low in the November survey, released Dec. 31. The overall Index fell 0.4 point to 96.7, its 13th consecutive month in recessionary territory. A reading below 100 marks contraction; above it marks expansion.

The declines were broad-based across the Index' eight components, with only the two capital expenditure markers showing flat to modest improvement. The Current Situation Index also fell to a new record-low, of 96.2, 0.2 point off its September record low. The Expectations Index fell half a point to end at 97.1, only 0.1 off its record low in September.

Same-store sales and traffic indicators in the Current Situation Index each fell 0.3 point in November. Sixty percent of the operators surveyed have reported lower same-store sales in each of the last three months. Only 26% said same-store sales were higher in November, again matching the September number.

Operators remain pessimistic about the next six months. Same-store sales and future-business conditions components of the Expectations Index fell 0.5 and 0.9 points respectively.

Capital-goods indicators were the only moderately good news in the entire survey. The Index for capital goods purchased in the past three months held steady while that for expected purchases during the next six months showed the survey's only gain, a 0.5 point increase. Still, both components remained in contraction territory, below the Index value of 100 that indicates stable or flat values.

 Section sponsored by

Consumer Confidence, Expectations Remain Very Low
Worried about jobs and the dreadful overall state of the economy, U.S. consumers are still very pessimistic about the short- and mid-term economic outlooks. The latest readings on consumer confidence and expectations from both the University of Michigan's Surveys of Consumers and The Conference Board remained dismal in late December.

The Conference Board's Consumer Confidence Index surprised many economists and hit a record low of 38 in December, down from 44.7 the month before. The group's Present Situation Index now sits close to levels last seen in the 1990-'91 downturn, but still not quite as low as the level reached in the '81-'82 recession. The Conference Board's Expectations Index was also lower.

The Consumer Sentiment Index maintained at the University of Michigan Surveys of Consumers actually rose to 60.1 from November's near record low of 55.3, but the group's Expectations Index was up only marginally to 54 from 53.9.

It will be interesting to see whether the new administration in Washington, D.C. and its expected flurry of economic stimuli begin to move the consumer mood in a more positive direction, or whether expected continuing job cuts continue to erode confidence.

 Section sponsored by

FER Still Forecasts 3.8% Real Decline For E&S
We at Foodservice Equipment Reports magazine and FER Fortnightly haven't revised our forecast for the foodservice equipment and supplies industry since mid-October. At that time, we predicted E&S sales at the manufacturers' level, including exports, would fall 3.8% in real terms in '09 on the heels of a 3.4% real decline in '08. Until we see the fourth quarter '08 numbers from the MAFSI Business Barometer and the public E&S companies in late February or early March, we're sticking with our October forecast.

You can see the whole thing, including the assumptions and data behind our forecasts, for a now-discounted $249. The forecast includes six PowerPoint decks analyzing general economic, operator, material-price and E&S trends and the hard-number forecasts, plus an analysis of the top 150 E&S manufacturers from John Muldowney at Clarity Marketing, Tipp City, Ohio, and historical E&S price-change data from AutoQuotes, Inc. To order the forecast or for more information, contact Jessica Scurlock at or call 800/986-9616.

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