FER EXCLUSIVE: Operators: Cautious Progress

So (dramatic pause here). How do a glacially slow economic recovery, continued employment frustration and faint income growth add up for foodservice these days? Now that the elections have passed, will Congress find an updraft off the fiscal cliff?

Perspective is everything, as they say. Last year’s economic improvement was slow, but it was positive growth again, the third year in a row after the scary nosedives of ’09 and ’08. So last year, as consumers regained a sense of equilibrium, if not of actual well-being, they began venturing out to restaurants again. Late last year, consumer sentiment was running at its highest levels in five years.

And for those of you who want to jump to the bottom line, here’s the word for the coming year: Barring unforeseen calamities, which is a disclaimer worth thinking about, the year ahead for foodservice should look much like last year. And maybe a hair better.

RPI Stays Positive

Several indicators suggest foodservice has some self-sustaining strength in it now, even without a lot of support from the larger economy. At press time, for example, the National Restaurant Association’s Restaurant Performance Index had stayed at or above 100—indicating improvement above year-earlier levels—every month from September ’11 to September ’12, the last month for which data were available for this story. The growth wasn’t strong, but it was growth.

“We do expect the overall operating environment to remain uncertain and the top challenges of 2012 to persist, including volatile consumer confidence and rising wholesale food prices,” says Hudson Riehle, sr. v.p. of research for the NRA.

“Whatever happens with the so-called “fiscal cliff” at the end of 2012, it will impact the confidence of both consumers and businesses in the first part of 2013, resulting in sustained deliberative and cautious spending patterns. The good news is that consumers have a high pent-up demand for restaurant services, with more than two out of five saying they are not using restaurants as much as they would like.” Going forward, as the employment situation continues to improve in 2013, that growth is likely to convert into restaurant sales, he says.

Same Store Sales Strengthening

Same Store Sales were a bright spot, continuing their healthy upward trend through ’12. A slide that began in ’08 clearly ended in early ’10, according to data tracked by Chicago-based research and consulting firm Technomic Inc. By 2Q10, for example, Quick Service Restaurant same store sales, adjusted to exclude McDonald’s, moved into positive growth, and since then the growth rate has trended upward for nine straight quarters. The chart ends with 2Q ’12, but incomplete data at press time showed 3Q growth looked on track.

The trending was similar, if not as strong, for Full Service Restaurants. FSR Same Store Sales growth turned positive during 3Q10 and has stayed positive since with a generally upward trendline.

One factor that makes the trends look so solid is that they’re so broad-based. Upward of 90% of QSRs tracked by Technomic report positive growth. For FSRs, that figure is better than 80%.

Steady Gains For 2013

So what’s ahead? Technomic, which was cautious at this time last year, now says ’12 came in better than expected with overall real growth of 1.5% for all sales (food, alcohol, non-alcohol and nonfoods) across all segments. And it projects ’13 will be that good and a little better, at 1.8%.

Those numbers will fluctuate by segment, of course. The biggest single driver will be Limited Service Restaurants, a 30% chunk of all foodservice (and more than half of all restaurants and bars) that is expected to see 2.2% real growth this year, Technomic figures. But the good news extends to Full Service Restaurants, too. That segment, almost 26% of all foodservice, is forecast to grow at an even 2%.

Smaller segments, which also are expected to do well, include lodging (3.9% growth), colleges and universities (2.9%), and caterers (3.9%). On the negative side, recreation and long-term care are expected to shrink again. The line-by-line projections appear in the table.

So there’s the snapshot as it stands now. If nobody makes any sudden moves, and consumers don’t perceive any shocking news, figure some real growth more or less like what you saw last year.