NRA forecasts return to industry sales growth

Restaurants poised for a comeback in 2011 after three years of negative sales

After three years of negative real sales, the U.S. restaurant industry is poised to hit a record $604 billion in sales this year, the National Restaurant Association said Tuesday.

In its “2011 Restaurant Industry Forecast,” the NRA said the nation’s 960,000 restaurants will see aggregate sales increases of 3.6 percent in 2011, or 1.1 percent in real, or inflation-adjusted, terms.

The NRA’s forecast also indicated that growth-minded operators will be able to grab market share by exploring such areas as mobile outlets and social media.

“As the national economy is slowly improving, the restaurant industry is climbing out of its most challenging period in decades to post positive real sales growth in 2011,” said Hudson Riehle, senior vice president of the NRA’s research and knowledge group.

“For the first time in four years,” he said, “there will actually be real industry sales growth.”

The forecast, Riehle said, was affected by real gross domestic product gains — the GDP rose 3.2 percent in the fourth quarter of 2010 — and real disposable income growth. “One of the challenges this year is obviously what’s going to go on with gasoline prices because the higher gasoline prices are, it acts to dampen restaurant industry sales growth,” Riehle said.

Among the NRA’s findings:

• Sales at full-service restaurants are projected to reach $194.6 billion in 2011, an increase of 3.1 percent in current dollars over 2010 and 0.7 percent in real growth. Higher income households have cut back on full-service dining, Riehle said, but there is a high proportion of pent-up demand among women, who are remain primarily responsible for at-home food preparation.

• The quick-service restaurant segment is expected to post slightly stronger sales growth than the full-service segment. Quick-service restaurants are expected to post sales of $167.7 billion this year, a gain of 3.3 percent over 2010, or 1.7 percent in real growth.

Social caterers will make up the foodservice industry’s strongest segment in 2011, with sales forecasted to increase by 6.2 percent, the NRA said. Other commercial foodservice segments expected to post solid sales growth in 2011 are hotel restaurants, 5.7 percent; hospitals and nursing homes, 5.5 percent; and primary and secondary schools, 4.8 percent.

Wholesale food prices are projected to rise 3.3 percent, Riehle said, but that is down from last year’s 4.9-percent increase, which followed a decline in 2009. “These continued increases in wholesale food prices will put pressure on operator margins this year,” he said. The cost of butter rose 33 percent last year, while pork was up 24 percent and beef 11 percent. “Depending on what an operator’s menu theme is and their focus on different commodities,” Riehle added, “their input costs will vary but the overall trend is up again this year.”

• Among sales growth by state, North Carolina is expected to post the strongest gains in 2011 at 4.2 percent with sales projected at $14.1 billion, followed by Idaho, $1.8 billion, and Virginia, $12.8 billion, both at 4 percent. Forecast to post growth at 3.9 percent are Colorado, $8.6 billion; Florida, $30.1 billion; Maryland, $9.4 billion; and Texas, $36.7 billion.

• Sales growth among the nine U.S. Census regions will be led by the South Atlantic, which is expected to post restaurant sales increases of 3.9 percent for a total of $93.9 billion among its eight states — Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia — and the District of Columbia.

Restaurant job growth will increase in 2011, Riehle said. Last year, the restaurant industry added 188,000 jobs. This year, the industry is expected to add jobs at a rate of 2.4 percent, compared with the 1.8 percent expected for the entire national economy, he said. Over the next decade, the NRA said, Texas and Florida will show the strongest job growth at roughly 17 percent, followed by Arizona and Alabama at about 16 percent. Restaurants are the nation’s second-largest private sector employer, behind the health-care industry, with 12.8 million employees. “That’s almost one out of every 10 individuals working in the country today who is actively employed in the restaurant industry,” Riehle said.

• The number of Americans viewing menus online increased 27 percent between 2005 and 2010, growing from 31 percent to 58 percent. “There is greater focus and resources allocated to how these menus are presented online,” Riehle said.

Mobile kitchens or food trucks are likely to become more widely available. “The industry has always been about points of access,” Riehle said, “so this will definitely become an important avenue of growth.”

Social media increasingly will affect how consumers choose restaurants, the NRA said. Frequent users of at least one social media tool — including Facebook, Twitter or mobile-phone applications such as Foursquare or Urban Spoon — or online review sites such as Yelp are more active in the restaurant community. These individuals dine out more frequently than the general public. Some 92 percent eat a meal at a sit-down restaurant at least once a month compared with 84 percent of all adults. Meanwhile, 87 percent buy a meal or snack at a quick-service restaurant or carryout place at least once a month versus 83 percent of all adults.

The NRA said 51 percent of social-media-savvy individuals say restaurants are an essential part of their lifestyle, while 43 percent of all consumers say that. This group also is more likely to use such in-store technology as electronic ordering and payment systems at the table, self-service kiosks, online ordering and mobile phone applications for placing orders.

Riehle said operators have many opportunities to “nudge and incent” customers to patronize restaurants more frequently.

“The social-media availability has really expanded the options that operators have now,” he said. “There is real-time incenting, for example, using Twitter, Facebook, text-messaging, to get new consumers in as well as get loyal customers to repatronize. It’s a very fluid day-to-day environment.”

Riehle noted that NRA staff members in the District of Columbia decide where to go for lunch depending on what social-media messages they have received in the morning.

“It is a rapidly unfolding and evolving component that alters the basic paradigm for marketing in restaurants in America,” Riehle said.

Contact Ron Ruggless at [email protected]