Technomic sees tough economic times ahead for same-store sales

Technomic sees tough economic times ahead for same-store sales

ROSEMONT ILL. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Inflating commodity prices, a slowing gross domestic product, skyrocketing fuel costs and a weak dollar confront operators with such force that restaurateurs nationwide should expect to see real growth in sales of only about 1 percent this year, said Ron Paul, Technomic’s president and chief executive. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

“You will see increasing menu prices,” Paul said. “That will be a considerable problem and challenge for most operators. It becomes a battle for [market] share.” —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

However, not all of the economic indicators are bleak, Paul said, pointing to continuing new-job creation, steady growth in disposable personal income, higher corporate profits and recent stock market rallies. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

“The restaurant business overall is healthy,” he said. “Adding employees is a good measure of that.” —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Technomic research indicated that growth in the limited-service sector is better than for the full-service sector, whose same-store sales increases in 2006 were 0.9 percent lower than in 2005. By comparison, same-store sales increased 1.9 percent over 2005 levels at limited-service concepts. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

There are some geographic differences in economic health, with the West Coast and Southeast doing better than the Midwest and the Northeast, Paul said. However, he does not foresee too much more negative impact from high gas prices. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

David Henkes, a Technomic senior principal, advised operators to position their restaurants and marketing programs to meet multigenerational demands and Hispanic and Asian consumer desires. The growing number of consumers under 35 in particular presents opportunities for targeted marketing. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

“They are not cooking, so they will be very heavy restaurant users,” Henkes said, noting that younger consumers grew up with chains and often view restaurants as a “third place” for socializing and incorporate technology into their restaurant behaviors. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Diners of all ages are using the Internet more to research restaurants, and older consumers spend more on dining-out occasions and place a higher value on good service and healthier food choices, Henkes said. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Operators would do well to address the growing influence of Hispanics and Asians, the Technomic officials advised. Each of those demographic groups will grow 68 percent by 2020, not counting undocumented immigrants, said Joseph Pawlak, a Technomic vice president. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

For both of those ethnic groups, eating out plays more of a social role than it does for the typical American, Pawlak said, so operators may need to provide more large tables and tailor their advertising to eating as a social occasion. Also, chains including McDonald’s [3] and Denny’s [4] are doing some Spanish-language advertising in Los Angeles neighborhoods with high Hispanic populations. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

The general consumer demand for convenience continues to grow, and operators in all segments are addressing that need in many ways, including adding more locations, longer hours, more menu choices, easier ordering and pickup methods, and better employee training, Henkes said. Full-service restaurants that started offering curbside to-go service have found that it does not cannibalize their eat-in business because customers use both services for different occasions. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Regarding variety, Henkes said, “Restaurants that don’t provide both comfort food and culinary adventure risk getting a veto vote.” He cited Cheesecake Factory as effective in that regard. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Customers are still confused about what “healthy” foods are, but they are increasingly interested in health, so operators should emphasize healthful aspects of their offerings, Technomic officials said. Other growing consumer interests are affordable indulgences as a treat, premium options and customization. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

“Corporate social responsibility is a huge buzzword today,” Pawlak said, adding that only 54 percent of consumers surveyed think the foodservice industry is doing enough on such issues as nutrition, animal welfare, fair employee pay, recycling and energy-saving programs, and community involvement. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Pawlak told a questioner that he believes consumers are not concerned about the overly large portion sizes typically served in restaurants. “Value still equates to large portions,” he said. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

In a breakout session on trends for limited-service restaurants, which include fast casual, Pawlak and associate Sara Gillis cited projected segment growth for 2007 as follows: hamburger, 5 percent; pizza, 2 percent; other sandwich, 8.5 percent; chicken, 4 percent; beverage, 14 percent; Mexican, 4.5 percent; and bakery-cafe, 14 percent. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

The hamburger segment is emphasizing premium beef, expanded flavors, bigger burgers, fresh-cut fries, trans-fat-free frying oils, specialty beverages and breakfast expansion. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

The pizza sector’s growth rate dipped in 2006, versus 2005, because key players consolidated while focusing on international expansion, Pawlak said. Segment trends include online-ordering developments, menu expansion and a focus on ethnic customers. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Some strategies helping the “other sandwich” category are more salad introductions, premiumization, more breakfast options and more hot sandwiches. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Chicken chain growth declined sharply last year as unit expansion slowed and newer grilled-chicken chains positioned themselves as more healthful than fried-chicken specialists. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Pawlak blamed a 4.9-percent drop in growth in the Mexican segment on the shrinking of the two leading chains: Taco Bell [5], which accounts for 55 percent of the segment, and Baja Fresh Mexican Grill [6]. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

“It will be early 2008 until Taco Bell recovers,” he predicted, an apparent reference to its setbacks from publicity during the past year about an E. coli outbreak and a rat infestation at a since-closed New York City branch. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Bakery-cafes had the strongest growth, led by Panera Bread [7]. The category has started featuring more dinner items, dedicated snack counters, premium ingredients, regional and ethnic menu influences, and limited-time offerings of seasonal soups and salads. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Explosive growth is expected in the next several years in the Asian and noodle segment, which currently is too small for its growth to be measured, Pawlak said. He cited Pei Wei Asian Diner [8], owned by P. F. Chang’s China Bistro, as a leader in the Asian fast-casual category and pointed out the chain’s contemporary twists on classic Pan-Asian favorites, open kitchens and curbside to-go option. —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

The disconcerting upshot of the popularity of such chains, Pawlak said, is that “full-service customers are trading down to fast casual.” —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.

Increased competition from abroad also is a factor confronting the industry. Guest speaker Neil Stern of the McMillan Doolittle research firm told attendees that five of the largest global retailers currently do not do business in the United States, but he noted, “You are starting to see foreign-owned chains coming here.” —In the face of growing inflation, a sluggish economy and soaring energy costs, the industry’s quest to boost same-store sales has become one of its most daunting challenges, a prominent consultant and researcher told the Technomic 2008 Trends & Directions conference here.