“Some observers expect the economy to begin its upswing later this summer, but the restaurant industry is not likely to feel that surge anytime soon, according to The NPD Group.With total industry traffic continuing to decline and the previously robust morning meal and snack dayparts now falling victim to the recession, restaurants are looking at another six months or more of tough going, said officials of the Port Washington, N.Y.-based market research firm.”
‘“It’s going to be a while before things can move away from the current strategies,’ said NPD analyst Bonnie Riggs, referring to rampant discounting, giveaways and other programs designed to lure cash-strapped consumers. The majority of the industry’s current woes are related to unemployment, which isn’t expected to improve quickly, Riggs said. Often referred to as a “lagging economic indicator,” the overall unemployment rate—which reached 9. 4 percent in May—isn’t expected to peak until after the rest of the economy begins to recover, she added.
The recession and rising unemployment have even begun to stall growth in the morning meal and snack dayparts, two recent bright spots for the industry, NPD found. Even the morning meal, which has historically held up well during tough times, is being battered by the recession and rising unemployment, NPD found. In the three-month period ended in March, breakfast visits declined 2 percent, after several quarters of growth. It’s the first time morning meal traffic has fallen since 2004.
The decline in breakfast traffic is occurring across all segments, NPD found. The steepest decline in visits was seen at midscale restaurants, which fell 6 percent. But even the quick-service segment recorded a 2-percent drop in morning meal visits. A few segments, such as fast casual, bakery-sandwich, convenience stores and family dining, still managed to hold their own at breakfast, NPD found. Historically, the first “meal” that diners drop when times get tough is the snack, which is considered the most discretionary daypart. While snack-related visits did not grow compared to the strong gains they recorded in 2007, they are holding steady, NPD found.
Though lunch traffic had been picking up earlier in the year because of increased deal promotions, traffic at the midday meal held steady in the most recent quarter. As with breakfast, NPD attributes the decline in lunch to the rise in unemployment. Nearly three-fourths of the lunch traffic loss can be traced to fewer workers ordering lunch from commercial foodservice outlets, NPD found. More brown bagging and the increased availability of frozen entrées also have hurt lunch, which is historically the most vulnerable daypart during times of stress.
The weakness at lunch is widespread. In the most recent reporting period, both the midscale and casual-dining segments experienced sizable losses, while quick service held steady. The categories that have continued to drive traffic include quick-service hamburger units, convenience stores, sandwich shops, casual-dining Italian eateries, discount stores and midscale Mexican restaurants.
Once a dependable daypart for driving traffic, dinner has been crumbling under the pressure of the recession. In the quarter ended in March, dinner traffic was down 3 percent, after falling 2 percent in the previous quarter. While dinner continues to post the steepest traffic declines, however, NPD discovered that consumers were making more visits to casual-dining restaurants on the weekends than they were a year ago. In addition, more were ordering alcohol with dinner.