Closures, downbeat industry reports deflate recent turnaround optimism

Closures, downbeat industry reports deflate recent turnaround optimism

NEW YORK —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

According to The NPD Group, more than 4,000 restaurants lost their battle against the recession and closed between April 1, 2008, and March 31. And the most recent National Restaurant Association [3] survey of operators, found that the majority of respondents continue to report declines in traffic and same-store sales as well as eroding optimism about future sales growth. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

“While there are signs that suggest an improvement may be on the horizon, the latest figures indicate that the restaurant industry’s recovery has yet to gain a firm foothold,” said Hudson Riehle, senior vice president of research and information services for the NRA. “Restaurant operators continued to report declines in same-store sales and customer traffic in June, and their outlook for sales growth in the months ahead remains mixed.” —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

Only 22 percent of restaurant operators surveyed in June by the NRA for its monthly Restaurant Performance Index reported a year-over-year same-store sales gain for the month, the lowest reading in the seven-year history of the association’s index readings. Looking ahead, 33 percent of restaurant operators said they expect their sales volume in six months to be lower than they were during the same time frame in the previous year, while just 24 percent of restaurant operators said they expect to have higher sales in six months, the NRA reported. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

Without the foot traffic and sales gains needed to sustain operations, businesses are faltering. Last month, Morton’s The Steakhouse [4] closed three of its locations and The Oceanaire Seafood Room [5] closed four of its 16 locations and filed for Chapter 11 bankruptcy protection. Among the larger chains, Starbucks Coffee continues to close units on its way to a total of 800 domestic closures, and Whataburger [6] closed 18 locations, 14 of which were in Central Florida, an area it had previously earmarked for growth. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

According to the latest NPD Group ReCount, which tallies all commercial restaurant locations in the United States, the number of restaurants fell 1 percent to 577,178 locations from the spring of 2008 to this spring. Smaller chains and independents had the most difficulty weathering the economic storm, the Port Washington, N.Y.-based firm found. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

The hardest-hit categories were fine-dining independents, which saw unit counts fall 7 percent. Smaller family-dining chains were close behind, with a 6-percent drop in locations among chains of between 50 and 99 units, and a 5-percent drop in locations among chains that numbered between 100 and 499 locations. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

“It is clear that independent restaurants and smaller chains have been most impacted by the slower economy,” said Susan Kleutsch, director of product development for foodservice at The NPD Group. “The recession appears to have weeded out restaurants performing poorly prior to the economic downturn, and this seems most true for independents and smaller chains that are likely having a hard time competing with the resources and marketing power of major chains.” —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

During the time frame of NPD’s unit tally, restaurants were battling such economic pressures as slowed sales from reduced consumer spending and increased operating costs related to commodities, higher rents and labor expenses. During 2008, high-profile unit closures occurred at such chains as Bennigan’s, Steak & Ale, Ruby Tuesday and Ryan’s Grill Buffet & Bakery. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

The largest chains, which NPD classifies as those with more than 500 units, posted unit growth in all segments except family dining, where growth remained flat. Among the largest chains, the number of total restaurant locations rose 1 percent, reflecting a 1-percent uptick in quick-service locations and a 2-percent increase in casual-dining restaurants. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

Similarly, in Nation’s Restaurant News 2009 Top 100 report, which covers the largest restaurant chains ranked by total domestic foodservice sales, the aggregate restaurant unit count hit 195,227 for those operations ranked Nos. 1-100, a 1.6-percent increase from a year ago. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

That figure compares to a 2.2-percent growth rate in the 2008 Top 100 report. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

Among NRN’s 2009 Second 100 chains, which are mostly mid-sized, growth-oriented brands, the aggregate unit count totaled 29,299, which was a 1.5-percent increase from a year earlier. In the 2008 study, unit counts the Second 100 chains increased 1.8 percent. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

2009 VERSUS 2008 RESTAURANT UNIT COUNTSPERCENT CHANGE, FROM APRIL 2008 TO MARCH 2009 SOURCE: THE NPD GROUP/RECOUNT
 ALL SEGMENTSQSRFAMILY DININGCASUAL DININGFINE DINING
TOTAL RESTAURANTS-1%0%-2%0%-4%
  MAJOR CHAINS (500+ Units)1102N/A
  MIDSIZE CHAINS (100-499 Units)-1-1-526
  MINOR CHAINS (50-99 Units)-2-1-6-26
  SMALLEST CHAINS (3-49 Units)-1-1-201
  INDEPENDENTS-2-2-2-1-7

Days before the latest industry-specific data points were released its most recent index, The Conference Board said job insecurity had led to a further retreat in its Consumer Confidence Index in July, which had fallen in June. The news quashed optimism inspired by the stock market’s July rally and news that housing starts in June had been unexpectedly strong. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

Of the 5,000 U.S. households surveyed to compile the Consumer Confidence Index, those claiming jobs are hard to get increased to 48.1 percent, from 44.8 percent. Meanwhile, the number of respondents who said they anticipated business conditions to improve in the next six months fell to 18 percent, from 20.9 percent. And the number of consumers expecting their incomes to increase decreased to 9.5 percent, from 10.1 percent. —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.

News that the second-quarter growth rate for the GDP fell 1 percent from the first quarter prompted Bart Van Ark, The Conference Board’s chief economist, to say, “The path to recovery remains a long haul, with more disappointments likely in the months to come.”— [email protected] [7] —Several negative late July reports chronicling restaurant closures, faltering consumer confidence and eroding operator optimism are dashing hopes that the industry’s fortunes will improve in the near future.