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.
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