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NRA: Consumer confidence to remain fragile in 2013

This article is part of Nation's Restaurant News' coverage of the NRA's 2013 Restaurant Industry Forecast on, which explores various parts of the report.

Restaurant operators should prepare for another year of “economic chicken” in 2013, with consumers reluctant to spend until the job outlook improves and employers unwilling to hire until household spending increases.

So concludes the 2013 Restaurant Industry Forecast released this week by the National Restaurant Association, which paints a still-clouded picture of U.S. consumer sentiment about the economy.

Despite ongoing improvement, the U.S. economy has only recovered about half of the jobs lost during the Great Recession, and consumer confidence is expected to remain fragile in 2013.

In the NRA’s 2012 National Household Survey, only 1 out of 10 adults described the economy as “excellent” (1 percent) or “good” (10 percent), while the rest chose the descriptors “fair” (36 percent) or “poor” (53 percent) — an outlook that has remained essentially unchanged from the previous two years.

As a result, the report said, the restaurant industry is seeing an “almost unprecedented tightening of purse strings by many households, with consumer spending growing at rates well below what would be expected during a normal post-recession recovery.”

Still, the forecast notes, pent-up demand for dining out remains high, with four out of 10 respondents saying they are not using restaurants as often as they would like. In the heyday of the mid-2000s, only 1 out of 4 adults expressed such unfulfilled demand.

“It’s clear that these underserved consumers have not abandoned restaurants, but rather are choosing their visits more carefully until their financial situation improves,” the forecast said.

The economy continued to grow in 2012, but it was never able to accelerate to the point where it could break the cycle of uncertainty, the report said. In the coming year, businesses face the added uncertainty of future fiscal policy, which contributes to their unease about hiring.

The financial position of most consumers is improving, with household debt declining 6 percent since 2008. And while the total household net worth remains 7 percent below a pre-recession peak, it is trending upward, the report found.

Unemployment, however, remains high in many parts of the country. California, for example, added jobs at a solid 4.2 percent rate since the national recovery began in 2010, but the Golden State’s unemployment rate was 10.1 percent in October, the third highest in the country.

In October, only seven states and the District of Columbia had more jobs than they did before the recession started.

Avoiding the fiscal cliff

(Continued from page 1)

Still, if lawmakers can successfully forge a path around the “fiscal cliff” of tax changes and cuts in government spending scheduled to take effect in early 2013, the economy is expected to continue its gradual recovery, the report said.

For restaurants, the continued growth in tourism from overseas could help. International travel to the U.S. was expected to hit a record level in 2012, with about 65.4 million visitors coming from other countries. That growth will continue, with 68.3 million international visitors expected in 2013 — another record high.

Fine-dining and casual-dining players are expected to benefit in particular from international tourism. Travelers and tourists represented about 29 percent of sales in fine dining and 25 percent for casual-dining and family-dining operators over the past 12 months.

In today’s competitive marketplace, restaurant operators must give every customer the “complete experience” that convinces him or her to return, the forecast contends. However, the NRA’s research indicates that restaurant operators across all segments say customer loyalty is more difficult to maintain than it was two years ago.

Repeat customers generally represent an average of 71 percent of sales at quick-service restaurants, 68 percent at fast-casual concepts, 64 percent among casual-dining restaurants and 51 percent among fine-dining concepts.

While word of mouth carries the most weight in driving restaurant selection, customer loyalty and reward programs are increasingly popular across all segments, the report said.

According to NRA surveys, 66 percent of adults said they would be more likely to patronize a restaurant if it offered a loyalty or reward program — particularly younger diners. And with consumers looking for convenience, demand continues to rise for takeout and delivery options from restaurants, according to the report.

The report also indicated that diners remain budget conscious, with nearly 80 percent of consumers surveyed by the NRA indicated they would eat out more often if menu prices were lower during off-peak times.

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

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