Highlights of the 2014 Restaurant Industry Forecast

Every year, the National Restaurant Association (NRA) puts out a comprehensive annual forecast for restaurant industry opportunities and challenges that are likely to arise in the year to come. The NRA bases these predictions on the most current economic data available, as well as extensive surveys of both restaurant operators and restaurant patrons alike, providing valuable insights across all dining segments. Here are some highlights of the 2014 Restaurant Industry Report.

Restaurant Industry Sales will Increase but Consumer Confidence May Remain Fragile

Sales in the restaurant industry have been steadily increasing since the recession four years ago. While the gains still aren’t near what they were after any of the previous four recessions, 2014 is actually projected to be a record year in terms of restaurant industry sales. Early reports indicate industry sales will reach $683 billion in 2014; a 1.2% increase from last year (after adjusting for inflation.) It is interesting to note that in terms of size and scope, the restaurant industry is larger than 90% of the world’s economies. If the industry were a country, it would rank number 20 in terms of economic strength!

One of the biggest factors that influences sales in the restaurant industry is consumer confidence—in other words, their willingness and ability to spend their hard-earned cash. It would appear that many consumers are stuck in a ‘recessionary mindset’ and, unfortunately, this aspect really hasn’t improved much over the course of the past several years despite the addition of several million jobs and the economy gaining momentum. An NRA survey conducted at the end of 2013 reported nearly 60% of respondents as describing their personal finances as either fair or poor. What’s more, nearly half said that they aren’t dining out or ordering in as much as they would like to, creating what some are terming a “pent up demand.” The good news is that 35% of respondents in this same survey also indicated that they felt their personal finances would improve in 2014, and the odds that restaurants will be a beneficiary of that pent up desire to spend are good.

Restaurant Industry Job Growth and Expectations in Terms of Recruiting and Retaining Employees

Another key driver of restaurant sales has always been job growth, and 2014 stands to be a good year in that arena as well. The NRA expects total employment to rise 1.8% this year (the most impressive increase since 2006.) The increase in the availability and security of jobs helps boost consumer confidence as well, which should unlock some consumer spending.

Nearly half of restaurant operators across all segments (except fine dining) expect recruiting and retaining employees to be more difficult in 2014. Many plan to put more focus on labor issues this year and bolster their training budgets in an effort to develop existing employees and enhance overall productivity.

Food Prices & Other Top Challenges Restaurants Face in 2014

The average wholesale price of food rose 2% in 2013. Food prices this year are expected to be mixed, but to continue to advance overall. Beef, in particular, is projected to move up higher than any other commodity group in 2014. In terms of other top challenges operators expect to face this year, many are similar to concerns voiced in 2013. Topping the list is complying with health care reform, followed by building and maintaining sales volume, dealing with fierce competition for the market share and the state of the economy in general.

In sum, 2014 stands to be a good year in the restaurant industry, despite cautious consumer spending and a host of operational challenges that must be addressed. If you’d like some help getting geared up for the coming year, the Restaurant Management Group provides comprehensive operational and turnaround management assistance. They can help identify specific areas of opportunity as well as effective strategies to maximize your margins, reduce your costs and improve your overall profitability.

Restaurants Show Best Traffic Increase in Years

Over the winter of 2011 and spring of 2012, restaurants have seen an increase in traffic that has been unmatched since 2008. Analysts have presented a few theories as to why this increase has occurred, but most restaurant owners are continuing to focus on their own plans for more growth rather than watching other’s performance.

While there has been a significant growth in sales overall, there are still important areas in which there has been no increase in sales – or even a decrease. Restaurants are continuously working to gain a piece of this increase, which is helping numbers look better across the board.

What’s Happening?

Oddly enough, the two segments of the restaurant industry that seem to have shown the most growth, fall on opposite ends of the spectrum. One segment is quick service, like fast-food or fast casual restaurants. These may have received more growth because those who want to eat out but don’t want to pay as much are opting for less costly options for their dining choices.

The other segment that has shown growth is fine dining establishments. The increase has also been seen especially in two particular meal times, breakfast and evening snacks, while lunch and dinner meal times have shown no change.

Unfortunately, it’s not all good news for every restaurant. Recent statistics have shown that while some restaurant types are flourishing, midscale family-dining chains have still been losing clientele. This can probably be attributed to the fact that many of the people that these restaurants cater to are still reeling from the economic downturn and doing their best to stay home for most meals.

Why Now?

One theory for the increase in restaurant traffic is that much of the country experienced a very mild winter. Customers are naturally more inclined to venture out of their homes, and therefore dine out more, when the weather is nice. A small portion of this increase could be attributed to consumers who depend on good weather to work, and would have possibly seen a favorable upswing in their personal finances. Again, this would only contribute a very small portion to the overall increase, but as the great fundraisers say, every little bit helps.

Other analysts believe that the increase in traffic is due to an increase in consumer confidence. Statistics show that the unemployment rate in America has been falling steadily since fall of 2011. This could contribute to a larger number of consumers feeling financially stable enough to eat out again. With recent trends showing that more and more customers are cooking and eating at home, this is a very good sign for the restaurant industry and for the economy in general.

The most surprising thing about this increase is that it has accompanied an overall increase in price at many popular restaurants. Even though some of these restaurants have shown up to a six percent increase across their whole menu, customers are still providing restaurants with the first significant financial improvement that they have seen in quite some time.