June 2006
SHORT REPORT:
Future Focus Dominates Operator Minds
By Janice Cha

Wondering how your company will compete in foodservice 15 years from now? Start thinking of ways you can “emphasize health and nutrition, increase customer convenience, reduce your onsite labor needs and boost your energy efficiency,” said Hudson Riehle, senior v.p. of research and information services for the National Restaurant Association, Washington, D.C.

Riehle offered this advice based on new NRA research reviewing everything from current restaurant sales and locations growth to customer preferences in service and menu. While presenting the NRA’s findings at last February’s MUFES 2006 meeting, Hudson began by telling a room of operator spec/buyers and their equipment suppliers that this year should produce a $25 billion net increase in industry sales over last year, with ’06 sales approaching the $511 billion mark.

More important for future opportunities is the share of the consumer dollar that foodservice now claims. Today restaurants receive 47.5% of the food dollar, compared to just 25% in 1955, and that shows no sign of changing anytime soon.

And while the number of foodservice locations currently stands at about 925,000, locations are expected to be added at a rate of 8,000 to 14,000 annually, said Riehle, depending on how the economy performs. That will mean both more opportunities and more competition for everyone.

Snacks Score, Operators Plan To Spend

Following his big-picture overview of the NRA research, Riehle sketched in this year’s growth prospects by segment, from QSR to fine dining.

“Of all the segments, the fastest growing continues to be ‘snack and nonalcoholic beverage bars,’ which includes coffee shops,” Riehle said. That segment has a predicted 5.7% growth rate this year and should return $18.4 billion in sales. In comparison, researchers predict a 2.3% growth for limited-service restaurants, 3.8% for managed foodservice and 2.5% for full service. But to add perspective, Riehle reminded the MUFES audience that “the snack segment represents a small slice of the pie.”

Riehle also reviewed the ways operators intend to spend money in the foreseeable future. Full-service operators plan to spend money on remodeling, food safety and security, and technology, according to the NRA research. Among QSR operators, future money will be focused on utility expenses, wages, remodeling and training.

Room To Grow In Energy Efficiency

“Energy efficiency will become a very important priority,” Riehle went on, citing an NRA study released last month called “Restaurant Industry 2015.” In the study, operators put energy efficiency among the top three concerns for 2015.

When asked what they were currently doing to trim energy bills, operators gave encouraging responses: More than half from all segments said they have updated their refrigeration, air conditioning or heating over the past two years, and/or invested in energy-saving equipment. And nearly half reported that they’ve switched to more efficient lighting.

However, far fewer—only 23% to 40% of operator respondents—have installed water-saving warewashers or toilet fixtures, indicating there’s room for more to be done on this front.

Demographically Speaking…

Another significant change facing the foodservice industry is a demographic one: the ever-increasing average age of diners. Between the years ’04 and ’14, the number of customers age 55 and over is expected to increase by 4%. More importantly, “the population now entering retirement is the most experienced dining group ever,” Riehle said.

Happily for operators, there’s also been a lot of growth in the number of high-income households. The percent of households earning $75,000 or more stood at 26.7% in ’04, up from 18% in ’84. “This is why restaurants have done so well,” Riehle added.

Riehle also highlighted a gradual shift toward customers viewing restaurants as “America’s family room” instead of “America’s dining room.” For example, 25% of respondents in the NRA survey said they would use a TV at a restaurant table if it were offered. Of that, half of 18- to 24-year-olds said they would use the TV, compared to only 12% of those 55 and over.

Customers are also looking for more wireless Internet access. Some 27% of adults said they were likely to use Internet if it were an option at their favorite table-service restaurant. That number includes 52% of 18- to 24-year-olds, vs. 12% of those 55 and over.

For operators who still might be debating the value of adding curbside service, customers say they like it. Per the NRA research, more than half of all adults said they were likely to use the service if it were offered at their favorite restaurant. Of that, 73% of 18-24 year-olds said they would use curbside service, and 41% of the 55-plus age group said the same.

Riehle finished with a review of more opportunities for growth and sales, including these points:

q       For the older diners, figure out how to emphasize your food’s health and nutrition plusses.

q       Work on energy efficiency and long-term cost savings, since, as Riehle said, “we’re facing a permanent change to operating costs. There’s no going back to ’00 levels.”

q       Look into joint marketing efforts, such as partnerships between restaurants and suppliers to promote furnishings, flatware, tableware and equipment.

q       Seek visual media exposure. “Use cell phones to send pictures of daily food specials, for example.”

For the full NRA report, visit www.restaurant.org.