Technomic Information Services held its annual Restaurants: Trends & Directions Conference in Rosemont, Ill., on June 18. Paul Kasriel, director of economic research with Northern Trust Corporation, kicked off the event with his presentation, “Economic Overview 2009.” In the year since the last Technomic Trends & Directions Conference, the economy has undergone quite an upheaval, though the current recession actually began in December of 2007. He believes the worst has past, though the economy will contract more in 2010.

With a decline in house prices, there was a decline in home equity. With less equity to extract, consumers have reduced discretionary spending -- this, among many other reasons, has obviously impacted dining out. That point was demonstrated again in Ron Paul’s presentation. Paul, founder, CEO and president of Technomic Information Services, revealed the [foodservice] industry grew only 0.4% in 2008. While the top 100 and top 500 each grew 3.4%, respectively, the rest of the industry fell 4.3%, and full-service restaurants (FSR) experienced a 2.5% decline in sales.

In terms of percentage growth, burgers and sandwiches are the frontrunners. Five Guys (burgers), Jimmy John’s and Potbelly (the latter two being sandwich shops) led the pack in limited service restaurants (LSR). In dollar terms, Subway led the way, with 2008 sales of $9.6 billion (a growth of $1.4 billion), followed by McDonald’s (which grew $1.275 billion).

Among FSR, Buffalo Wild Wings was the winner in percentage terms and a strong third in dollar terms, as well. Leading the pack in dollar terms in 2008 FSR, however, was Olive Garden, followed by Chili’s Grill & Bar in second.

Unfortunately, the consumer outlook for restaurants presents a grim picture. Technomic consumer research has found nearly a quarter (24%) of consumers expect no change in their restaurant spending. However, 35% will use the “same restaurant, less often,” 19% are going to restaurants for “special occasions only,” and 4% are no longer going to restaurants altogether.  Some 8% plan to go to restaurants just as often, but to less-expensive ones, while 10% are going to spend less at their usual restaurants.

What is most important to consumers? In both FSR and LSR, the results were virtually the same. The number-one factor was portion size, followed by overall experience/environment, quality of items/ingredients and price, in that order.

Operators, meanwhile, have seen traffic and sales decreases, by and large. In terms of operator confidence, only 35% are optimistic on foodservice growth over the next 12 months, which is an increase over the 31% sharing that opinion in January, yet still far off the 67% pace of August 2006. In 2009, operators are expecting traffic decreases, and no one is looking for robust growth, at least through this year, Technomic research has found. In fact, some 73% believe their business will not recover until after 2010.

Technomic predicts LSR sales will grow 1.5% in 2009, with FSR declining 7.5% and no growth in bars and taverns. For the industry as a whole, therefore, Technomic is predicting a 2.4% decline in 2009.

Kasriel expects economic growth overall to emerge in the 4th quarter, but he did ponder what the post-recession economy and consumer will be like. Consumer spending will be around 67% of income, he expects, with them saving around 8%. Some of the discretionary spending that soared during the past cycle simply is not going to come back, he warned.

More coverage of Technomic’s Trends & Directions Conference will appear in upcoming issues of E-dition and in the “On the National Menu” column in the August issue of Prepared Foods.

From the June 22, 2009, Prepared Foods E-dition