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Holiday restaurant sales uncertain, but not doomed

As restaurant chains begin rolling out holiday promotions, researchers project a challenging season for sales.

However, some say slightly lower unemployment rates and gas prices may lift budgetary pressures for consumers in higher income brackets — which could give restaurants a slight boost in November and December.

Last week the National Retail Federation, or NRF, projected that retail industry sales for the months of November and December will increase 2.8 percent to $465.6 billion this season, compared with a 5.2-percent increase last year.

While the NRF projection does not include restaurants, the holiday shopping season is a key indicator for the foodservice industry, as it struggles to attract cash-strapped consumers.

“Just when you think the U.S. economy is turning around, another factor comes into play that changes the game,” said NRF chief economist Jack Kleinhenz in a statement. “Persistently high unemployment, an erratic stock market, modest income growth and rising consumer prices are all combining to impact spending this holiday season.”

A retail report by The NPD Group found that most consumers, 64 percent, are planning to spend the same amount on holiday gifts this year, compared with 2010. Only 9 percent said they plan to spend more, according to the Port Washington, N.Y.-based market research firm’s 10th Annual Holiday Retail Outlook report, released last week.

New retail sales figures for September are expected Wednesday, giving analysts more to work with in predicting holiday trends.

Hudson Riehle, senior vice president of the National Restaurant Association’s research and knowledge group, said restaurant industry sales have been running at about a 3-percent increase so far this year, “and there’s no reason to think it will diminish substantially over the fourth quarter.”

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In 2010, industry sales for the fourth quarter were up about 4 percent, he said. And though the rate of growth may end up being lower for the year in 2011, the overall economic environment is more positive than last year.

“It’s not an optimal economic environment, but there is an environment of slow improvement,” Riehle said.

Consumers have “frugality fatigue,” he noted. “This is the fifth year of economic weakness and the pent-up demand for restaurant dining is still elevated.”

In addition, Christmas falls on a Sunday this year, which could benefit restaurants if they take advantage of both Christmas Eve and New Years Eve falling on Saturday nights, typically the busiest day of the week for restaurant sales.

Darren Tristano, executive vice president of Chicago-based market research firm Technomic, said he expects restaurant sales this holiday season to be similar to last year.

In a recent survey with marketing firm WorkPlace Media, Technomic asked employed consumers about their 2011 holiday restaurant plans.

Half of respondents said they are more likely to eat out during the holiday season, compared with their average dining habits the rest of the year, and 43 percent said they are more likely to dine out with co-workers during the holidays.

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In addition, 63 percent said they intend to purchase at least one restaurant gift card, and 35 percent said they plan to purchase at least three restaurant gift cards.

Of those planning to buy gift cards, 67 percent said they will spend at least $51; and 37 percent intend to spend at least $101, the survey found.

“In this economy, the workplace is the most lucrative marketing channel for advertisers looking to fend off the effects of high unemployment and a slow economy,” said WorkPlace Media chief executive Stephanie Molnar.

The survey also found that nearly half of working men, 49 percent, and working women, 48 percent, said coupons are extremely or very likely to influence where they dine out.

The competition for holiday promotions is expected to be particularly intense, as restaurant operators battle to be top of mind for hungry holiday shoppers willing to spend, Tristano said.

Those not offering discounts are using limited-time offers, and some are doing both.

“We’ve seen a real uptick in LTOs this year,” Tristano said. “What we’re seeing is an earlier push by restaurants to be more top-of-mind in what they’re offering.”

For instance, San Diego-based Jack in the Box launched this week its annual Egg Nog and Pumpkin Pie shakes, two flavors only available through the holidays at the 2,200-unit chain.

Although it seems early for such an offer, Jack in the Box spokesman Brian Luscomb said the chain typically introduces the holiday promotion at this time, the first week of the company’s new fiscal year.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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