Restaurant outlook reflects uneven recovery, analysts say

Restaurants aren’t expected to have a particularly robust year this year and next, but two industry reports give differing views of how difficult times might get.

Even as the economy slowly improves, “consumers are not going back to conspicuous consumption or their free-spending ways,” said Bonnie Riggs, restaurant analyst in the Chicago office of market researcher NPD Group.

“It really is going to be a battle for market share,” Riggs said. “It’s going to be those that are innovative and creative and best meet consumers’ needs that will alter their forecast and win the battle for market share.” NPD Group, which tracks restaurants, sees a decline of 0.6 percent in visits to restaurants, and growth of 1.8 percent in sales this year, while it is forecasting flat traffic and sales growth of 2.7 percent next year, Riggs said.

Disconcerting to NPD researchers is a recent survey that showed that more consumers who fall into the “controlled spenders” category are likely to watch their restaurant spending this year than last year, even though the economy has improved since then. “It’s all about check-size containment,” Riggs said. Consumers are “leaving off the extras — the beverage, the dessert, the appetizer,” to reduce the size of their checks, she said. Chicago food and restaurant researcher Technomic takes a less pessimistic view, saying last week that it had seen “slight slippage” in 2013 growth expectations — to 3.8 percent from 3.9 percent.

Technomic, which includes institutional food-service providers in its calculations, sees slightly better growth of 4.1 percent for the industry next year.

Both Technomic and NPD see bright spots in their outlooks:

“Sales growth for independent restaurants has been outpacing chains,” Technomic said. “College and university, hospital, senior living, lodging and supermarket food service are all expected to outperform restaurants and bars this year and in 2014.”

Meanwhile, NPD has been surprised to see the baby-boomer and older generations increasing restaurant visits, countering significantly fewer visits by younger consumers.

“The boomers and the seniors are keeping the industry from experiencing weaker performance,” Riggs said. “They’re driving all of the growth at the morning meal. They’re driving growth at dinner.”

Successful restaurants will grab the growth in an economy that has rebounded from its low a few years ago but continues its “slow, creeping improvement,” said Jim O’Connor, chief financial officer for the Columbus-based Bravo Brio Restaurant Group.

“The consumer has been cautious over the last few years, and they will be cautious over the next few years,” said O’Connor, whose restaurant company is on an aggressive growth track to open 40 to 50 of its Bravo Cucina Italiana and Brio Tuscan Grille restaurants over the next five years.

One way for restaurants to succeed is to “cater to the needs of their cost-conscious customers to build loyalty and enhance value,” NPD said in a February report.

Customer loyalty is big among Cameron Mitchell Restaurants, a family of fine-dining restaurants, bistros and gastro-pubs in Columbus.

“We are very fortunate to be experiencing continued growth throughout our restaurants and catering company,” said spokeswoman Heather Leonard.

Late last year, Bravo Brio introduced programs to reward loyal customers with free food or priority seating. The company’s Lighter Side menus, launched in January, have earned a loyal customer following.

“We expect to get more than our fair share of the market,” O’Connor said. “We expect to be market-share gainers, but that’s all going to be in the context of a pie that is not growing very quickly, if at all.”