NPD Cautions Structural Market Changes Affecting Slowdown
It ain't just the economy, folks, that's driving the slowdown in restaurant traffic, according to a new report from The NPD Group.

"While the economy is a major factor here," said NPD's Bonnie Riggs, author of the report Why This Downturn Will Be Different for Restaurants, "this particular slowdown goes beyond economics. NPD is seeing consumer behavior changing."

Overall traffic rose only 0.7% in 2007, a number driven completely by unit expansion, according to the report. In other words, comparable-store traffic was flat. It's the slowest growth since the '00 through '03 downturn.

Riggs analyzed traffic patterns during five previous periods of stress for restaurants and pointed out the biggest traffic declines were during the 1979-'80 inflation-driven recession. "The current conditions are most similar to those experienced then," she said.

Among the behavioral changes noted by Riggs is a leveling off of women entering the workplace. "The trend in working women may be more of a long-term issue for the industry that the current economic situation," Riggs said.

Riggs and NPD's V.P. Harry Balzer added that the growth of supermarket take-away options, both prepared and frozen, is also a factor in the slowdown of dinner occasions at restaurants. In previous restaurant industry downturns, dinner occasions held up. Not this time.

"Make no mistake, Americans don't want to cook," Balzer said. "We're just trying to figure out how to put food on the table the easiest and cheapest way possible. With restaurant meals costing three times that of in-home meals, the question is who will do the cooking."

Still, Riggs said customer traffic growth may stay positive in '08, though at a slower rate than in '07. "It's pretty clear that we are not going to have a strong environment moving the industry along. ... Restaurant companies need to look for new ways to offer value and find ways to make the restaurant experience as pleasant as possible."