march 2008 casual dining executive summary – talking points –
TRANSCRIPT
March 2008
Casual Dining Executive Summary
– Talking Points –
III-A. Current Operating Environment
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Why is Casual Dining Struggling?Several elements within the current operating environment are contributing to the lackluster results currently experienced by many concepts:
Economic pressures
Various economic factors can create positive or negative drags on consumer perceptions and spending patterns/habits. Many of the current trends are creating a negative effect on sales demand.
Historically aggressive Casual Dining unit growth
In recent years, Casual Dining unit growth rates have exceeded the overall restaurant industry. This has created a scenario where restaurant supply arguably is greater than consumer demand.
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Why is Casual Dining Struggling?
Lack of differentiation among Casual Dining brands
As concepts look to attract more customers, many are losing their unique identity. Consumers often see very little difference among the menu offerings and experience perceptions of various brands (especially in the Bar and Grill segment).
Changing consumer dining habits
Recent trends show consumers eating more meals at home, while total meals sourced outside the house have flattened and even decreased slightly.
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Economic Pressures
Potential Drivers of Restaurant Industry Sales Demand
Source: UBS
FactorProjected Effect on
Restaurant Spending
Rising gasoline prices Negative
Rising wage and salaries Positive
Higher unemployment rate Negative
Lower restaurant unit growth Positive
Rising consumer prices (energy) Negative
Positive wealth effect Positive
Falling consumer sentiment Negative
Consumers are currently experiencing all of the “Negative” influencers, while the “Positive” elements have been non-existent, or exhibited minimal influence.
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Casual Dining Unit Growth Has Outpaced Demand
An analysis of 146 Leading Casual Dining Chains
included in the Technomic Top 500 shows that their
rate of unit expansion has averaged nearly 5% during
the period 2004-2007 as shown on the following
chart.
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Historical Casual Dining Unit Growth
Source: UBS
Casual Dining unit growth has outpaced the general restaurant industry three of the past four years.
0.0%
2.0%
0.0%
1.0%
4.7%
6.1%5.3%
3.1%
2004 2005 2006 2007
Restaurant Industry Casual Dining
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Consumers have almost unlimited choices.
Little perceived differentiation.
Many concepts have spent too much time focusing on trying to be “all things to all people.”
The result is “everyone looks the same.”
Undifferentiated Concept Landscape
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Undifferentiated Concept Landscape
When participants were asked to identify differences among Classic Casual concepts they struggled to find differences, reporting that they are “very similar.”
Other focus group comments included:
“They all look alike. You walk in and the waiting area is like a box. The booths are so close together. It’s like everyone is on top of each other.”
“…they all have similar atmospheres as far as casual dining goes.”
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Casual-Dining’s Dinner Traffic Is Down
Dinner Traffic at Casual-Dining
Source: The NPD Group/Foodservice/NPD Crest and UBS
-2.4%
2.2%
-6.6%
-4.3%
-2.9%
-4.9%
3.1%
-2.6% -2.7%
SON'05 DJF'06 MAM'06 JJA'06 SON'06 DJF'07 MAM'07 JJA'07 SON'07
Similar trends are noted in fast food as well, but not to this degree.
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Meals Purchased at a Restaurant Flattening
Consumption Has Decreased Slightly Over the Past Several Years– Annual Per Person –
Source: The NPD Group/Foodservice/NPD Crest and UBS
160
170
180
190
200
210
220
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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Meals Prepared and Consumed at Home Increasing
Consumption Trending Upward– Annual Per Person –
Source: The NPD Group/Foodservice/NPD Crest and UBS
780790800810820830840850860870880890900910920
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Consumers Report Cutting Back at FSRs (Full-Service Restaurants)
In a recent survey, approximately a quarter of consumers reported they had cutback back their usage at FSRs in the past 90 days for lunch and dinner.
9%
14%
25%23%
Lunch Dinner
Visiting More Visiting Less
% of Consumers Who Have Increased or Decreased Their FSR Visits in the Past 90 Days
Source: American Express Market Brief, March 2008; n=1200
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Consumers Report Having Less Discretionary Income Available for Dining at FSRs
77%
26%
13%
Less moneyavailable to spend
on extras like eatingout
Cost of gas to drive
I don't feel there areenough healthy
options
Top Reasons Given for Dining at FSRs “Less Often”
Source: American Express Market Brief, March 2008; n=1200
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Consumers are Most Likely to Blame Gas Prices and Utility Bills
70%
50%
37%
36%
19%
13%
13%
Gasoline Prices
Utility Bills
Lost Job/Pay Cut
Mortgage/Rent
Higher Credit Card Minimums
Increase in Credit Card Interest Rates
Media Reports on the State of theEconomy
Factors Impacting Consumers’ Decisions to Spend Less Money at Restaurants
Source: American Express Market Brief, March 2008; n=1200
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Most of these Meals Have Been Replaced By Meals Prepared at Home
89%
22%
18%
5%
Food prepared atand/or eaten at
home
Prepared food froma retail store
Visit to a LSR
Work cafeteria orsome other
cafeteria
Meal Types That Replaced What Were FSR Occasions
Source: American Express Market Brief, March 2008; n=1200