NRA: Fast casual operators optimistic about 2012 sales gains

The National Restaurant Association has for the first time included the fast casual segment as a breakout in its annual restaurant industry forecast.

Overall, the limited-service segment is expected to register total sales of $209.9 billion this year, a 3.2 percent increase over 2011.

According to the forecast, 48 percent of fast casual operators reported stronger sales gains in 2011 when compared to 2010. Meanwhile, 33 percent reported sales at about the same compared to 2010.

Moving forward, 52 percent of fast casual operators expect business to be better in 2012 than last year, while only 3 percent indicated a sales decline. Meanwhile, 45 percent of quick-service operators indicated that they expect sales gains in 2012, while 9 percent indicated declines over 2011.

Annual sales, jobs expected to grow modestly

While total restaurant industry sales will reach a record high of $632 billion in 2012, a 3.5 percent increase over 2011, challenges, such as food costs, will continue.

The top challenges cited by operators include food costs, building and maintaining sales volumes and the economy. These have shifted slightly since 2009, when the top concern was the economy, at 44 percent.

Last year, wholesale food prices were up 8 percent, the highest annual gain in more than 30 years. This year, the NRA expects prices to grow by 4 percent.

"From an operator perspective, these continued gains in wholesale food price inflations put pressure on profit margins and make the focus on productivity, efficiency and effectiveness much more important," said Hudson Riehle, the NRA's senior vice president of the research and knowledge group.

Because of this continued inflation, the NRA predicts menu prices to increase 2.7 percent this year, compared to 2.4 percent last year. Commodities most affected by rising costs include:

?Flour, 22 percent
?Coffee, 18 percent
?Eggs, 17 percent
?Beef, 15 percent
?Butter, 13 percent
?Pork, 12 percent
?Sugar, 11 percent
"These are central components of any restaurant menu," Riehle said. "The challenge for operators is to ensure the food quality and service are at a level the consumer expects, and to have more focus on the supply chain and menu mix. You see ample opportunities for operators to examine and readjust the menu mix to tap into growing consumer trends and to manage more escalating commodity groups."

Overall industry performance

Sales from the restaurant industry this year will account for 4 percent of the nation's total gross domestic product.

"In just a year, that gain is the equivalent of adding the restaurant sales from a state the size of Illinois," Riehle said.

Although these gains are modest compared to five and 10 years ago, the restaurant industry remains an "economic juggernaut." Annual sales from the industry are now larger than 90 percent of the world's economies, and would rank 18th out of 194 countries.

Additionally, the national restaurant count is approaching 1 million, with 970,000 current units open. And 48 percent of all food dollars are spent away from home, up from 25 percent in 1955.

From a workforce perspective, the industry will continue to grow its jobs base this year as the country's second largest private sector employer. Overall restaurant industry employment will reach 12.9 million in 2012 behind a 2.3 percent growth rate. This is compared to a 1.3 percent job growth rate in the general economy.

"As our nation slowly recovers from the economic downturn, restaurants continue to be a vital part of American lifestyles and our nation's economy," said Dawn Sweeney, president and CEO of the NRA. "... Restaurant job growth is expected to outpace the overall economy for the 13th straight year, and it's clear the restaurant industry is once again proving to be a significant economic stimulant and strong engine for job creation."

The industry is expected to gain back all of the jobs lost during the recession early this year. The overall economy, however, isn't expected to be back at pre-recession employment levels until 2014.

Menu trends

The NRA again partnered with the American Culinary Federation to get a pulse on consumer trends for 2012, with top demands revolving around "local" and "healthy" concepts.

Specifically, the top five attributes consumers will look for when dining out include locally sourced meats and seafood; locally grown produce; healthful kids' meals; hyper-local (for example, growing produce onsite); and sustainability as a culinary theme.

According to the forecast, 72 percent of consumers said they are trying to eat healthier when dining out than they did just two years ago. Additionally, 72 percent are more likely to visit a restaurant that offers healthier menu options.

Riehle said operators will benefit from being mindful of these and other consumer trends, as pent-up demand remains high for restaurant usage. Between 2007 and 2011, there has been a 10 percent increase in the proportion of adults not using restaurants as much as they'd like.

"Consumers are still discerning and discriminating about what they spend at restaurants, and so operators need to remain top of mind for consumers. You'll see more operators focusing on promotional, marketing and social media opportunities to achieve that top-of-mind reach," Riehle said.

Technology usage up

One way for restaurant operators to achieve greater reach this year is by leveraging online and social media channels. About three in 10 adults said they would like to receive an email with daily specials, while about one in five prefer texts.

If a restaurant's specials were available on Facebook or Twitter, nearly one-third of consumers say they'd be likely to sign up.

Patrons also are increasingly interested in the availability of mobile and tablet integration. Nearly four in 10 consumers said they'll be likely to use an electronic ordering system and menus on tablets at table-service restaurants.

About half said they'd use at-table electronic payment options and a restaurant's smartphone app to view menus or make reservations.

"For restaurant operators to position themselves for the future and attract younger demographics, the integration and utilization of technology is an expectation," Riehle said. "The industry is so diverse now and there is an opportunity for the integration of technology into the restaurant experience that benefits both the operator and consumer alike."