NRA 1998 Restaurant Industry Forecast
7th Consecutive Year of Growth For Restaurant Industry Predicted
for 1998
The National Restaurant Association's 1998 Restaurant Industry
Forecast predicts restaurant industry sales will reach $336.4
billion in 1998 ? up 4.7 percent over 1997. Employing roughly
10 million people and representing more than 4 percent of the
nation's gross domestic product, the industry is expected to mark
its seventh consecutive year of real growth. These numbers indicate
that consumers are relying on the restaurant industry more than
ever. Higher demand has pushed the industry to offer more services
and has increased the number of foodservice businesses.
Overall, operators are upbeat about the future of the industry
in 1998. More than two-thirds of tableservice operators and slightly
fewer quickservice operators expect business in 1998 to be better
than it was in 1997.
Fullservice operations should post a real growth rate of 2.0%,
with sales predicted to advance to $110.3 billion, the strongest
growth since 1995.
Total sales at quickservice (fast-food) restaurants are forecast
to total $105.7 billion in 1998, a 2.1 percent increase over 1997.
After years of explosive expansion that fueled sales growth, 1996
marked the beginning of a unique period in the industry when sales
at limited-service restaurants grew at a rate close to the pace
achieved by fullservice restaurants. Menu prices are expected
to rise 3.0 percent in 1998, increasing slightly over the 2.8
percent rise in 1997.
Flavor, Value & Convenience
A growing number of higher income households ? prime users of
restaurants ? is one factor driving the industry's growth. Economic
growth and a modest inflation rate have also propelled the restaurant
industry to new heights, proving more options for time-starved
consumers. According to the forecast, restaurants usually provide
a convenient, reasonably priced experience that offers better
flavors and taste sensations than consumers can get a home. A
1997 Association consumer survey found 60 percent of adults agreed
that their favorite restaurant offers tastes that can't be reproduced
at home. An even higher percentage of younger adults ages 18 to
34 agreed, with 66 percent saying the tastes can't be duplicated
at home.
Besides the fervor for flavor, consumers demand value ? and restaurateurs
have responded. A 1997 Association consumer survey reports 65
percent of adults believe the value of their meal met or exceeded
their expectations. Eighty percent of operators say the bundled
value meal ? a main dish, side dish and a beverage sold for one
price ? will be even more successful in 1998.
Meeting consumers' demand for convenience, taste and value are
just some of the challenges restaurateurs will face in 1998. As
the needs of the consumer have increased, the restaurant industry
has responded with increased services, whether they are new takeout
options, additional promotions or more choices in cuisine.
As the number of consumers seeking freshly prepared food has grown,
so has the number of restaurants. There are now 799,000 foodservice
locations, compared with 155,000 about 25 years ago. For many
operators, that translates into competition. One out of five tableservice
operators identified competition and maintaining their volume
as the most significant challenges expected in 1998. Operators
are optimistic about the challenges predicted for 1998 with the
majority of them reporting that they expect business to be better
in 1998 than it was in 1997.
The forecast indicates that one of the main challenges, because
of increased competition, will be satisfying and keeping repeat
business. Identifying frequent diners helps restaurateurs bring
in more repeat business. The forecast details five categories
of frequent diners:
Busy Parents
On-the-go parents who frequent drive-thrus and fast food carryouts
as they aim to feed and please the kids in a quick, easy and inexpensive
way.
Care Seekers
Mainly older adults craving comfort and care who eat on premises
and are attracted by buffets and home-cooked dishes.
Too Tired to Cook
Harried habitual diners who hunger for a convenient, tasty and
healthy dinner that is still relatively inexpensive and can be
eaten at home.
Urban Sophisticates
Younger, urban professionals who frequent higher-priced restaurants
as an affirmation of their lifestyle.
Flavor Savorers
Adventurous diners who favor flavor over familiarity and can be
tempted by new ingredients, items or new establishments ? especially
places that are recognized as "the best" for a certain cuisine.
Challenges and Concerns
The prosperity of the last few years has benefited the restaurant
industry by bringing in new customers. The increased business,
however, has created more demand for workers in an already diminished
labor pool. Finding qualified workers, rising labor costs and
maintaining customer loyalty are the biggest concerns operators
reported for the coming year.
The forecast reports that three-quarters of quickservice operators
plan to increase employee training in order to enhance the quality
of employees and to motivate staff members. To lighten the load
in the tightening labor situation, the forecast predicts more
operators will turn to technology, such as software for payroll
or scheduling as a way to stay ahead of competition and cut costs.
Operators say technology will also be important as the use of
credit and debit cards increase. Half of the quickservice operators
surveyed expect the use of credit cards will increase. More than
40 percent said they expected debit card use to increase.
What's Hot?
Pita dishes and wraps continue to be in high demand. There is
also continued popularity of chicken items. Four out of 10 quickservice
restaurant operators say bagels, espresso/specialty coffees, and
"real meals" (typically an entree with a side order) are gaining
popularity as well. Two-thirds of the respondents to the Association's
survey, cited in the forecast, reported they added new items to
their menus in 1997. A larger proportion expects to offer new
items on their menus in 1998.
Tableservice operators report the following are among the items
that are gaining in popularity:
- vegetarian items
- tortillas
- locally grown produce
- organic items
- fusion dishes
- microbrewed/local beers
The National Restaurant Associa-tion's 1998 Restaurant Industry
Forecast is available to Association members for $11.50, plus
shipping and handling. To order, call the NRA at (800) 424-5156,
x5475.
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