The Continued Struggle Of The Restaurant Industry In The U.S.
Despite economic recovery being seen in the U.S., the restaurant industry continues to struggle, as sales and traffic remain weak. Since the beginning of 2016, comparable sales (except February) and traffic have been deteriorating in every single month. This is despite the improvement in the job market, which is said to be closely linked to consumer spending.
In such a scenario, it has become increasingly difficult for independent restaurants to operate profitably. Not only do they lack the funds to spend on marketing, but they also have to compete with ubiquitous chain restaurants, such as McDonald’s, Burger King, Dunkin’, Starbucks, etc. This leads to a problem of inadequate presence, which results in low traffic. Consequently, a staggering number of independent restaurants have closed in the last four years, while the number of chain restaurants continues to grow.
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Quick Service Restaurants (QSR)
Of the total industry traffic, roughly 80% is from quick service restaurants. Fast casuals, a segment of QSR, had been growing at a spectacular rate for the last few years. However, as of late, fast casual traffic has failed to show any meaningful growth in comps. According to NPD, the growth stagnation problem revolves around fewer lunch visits to restaurants this year, as an increasing percentage of the labor force is choosing to work from home, thus skipping the lunchtime restaurant rush. Further, in the face of economic uncertainties, consumers are spending less of their disposable income on eating out. This issue is further compounded by the decline in food at home inflation, while restaurant menu prices continue to increase.
As can be seen in the table above, the only daypart that continues to show improvement in terms of visits is breakfast. NPD forecasts total breakfast occasions, in- and away-from-home, to grow by 5% through 2019, faster than the increase in population. If QSRs are to escape the industry-wide slowdown in traffic and sales, it is essential that they leverage the breakfast daypart. In line with this, companies like McDonald’s and Starbucks have introduced all day breakfast, and more breakfast-centered menu items, respectively.
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