The U.S. restaurant industry is still overbuilt, according to an analyst report from Barclays Capital, but expected unit contraction in 2011 may bring restaurants closer to a sustainable supply-demand equation with consumers.
Jeffrey Bernstein, a securities analyst with New York-based Barclays, is forecasting another year of contraction for the restaurant industry, projecting a decline in total unit count of between 0.5 percent and 1 percent. He added that many of the public restaurant companies Barclays covers have said they plan to focus more on driving incremental sales at existing locations than on expansion. True unit growth would also most likely come from abroad.
“Looking to 2011, with demand (i.e. comps) showing early signs of improvement and supply (i.e. units) relatively ‘tame,’ we expect supply and demand to converge,” he wrote. “As for future growth, such is predicated on further comp improvement along with further easing of unit growth.”
The U.S. restaurant industry has already booked two years of nearly flat or negative unit growth, as consumers’ demand for dining out fell and restaurants closed doors during the recession. Bernstein cited data from The NPD Group that showed the overall unit count for the U.S. restaurant industry decreased 0.9 percent in 2010, after a modest 0.4-percent growth in 2009. Since 2001, overall industry unit growth has ranged from between flat to an increase of 2 percent.
But all the negative numbers were not necessarily bad for the restaurant industry.
“We view such contraction favorably, as a means of helping the industry ease the historical (and most recently more severe) supply/demand imbalance,” Bernstein wrote in his research note Friday.
Casual dining drove much of last year’s contraction, with the total unit count in the segment falling 1.1 percent, reflecting declines 0.7 percent at chains and 1.2 percent at independents. For the first time since Barclays began compiling this data, both chains and independents had net closures in the bar and grill segment.
“While pleased to see the modest contraction, we are hopeful it is only the beginning,” Bernstein wrote. “The prior rapid growth highlights ongoing concern we have noted related to overexpansion in bar and grill, leading to continued disappointing sales, compounded by ongoing macro struggles.”
According to Barclays’ research, contraction in the quick-service segment wasn't as severe as it was in casual dining. The segment’s total unit count declined 0.7 percent, with chains' 0.2-percent growth offset by a 2.6-percent decrease at independents.
Contact Mark Brandau at [email protected].
