restaurant industry 2008 and beyond rhode island hospitality & tourism association economic...

Restaurant Industry Restaurant Industry 2008 and Beyond2008 and Beyond

Rhode Island Hospitality Rhode Island Hospitality & & Tourism AssociationTourism AssociationEconomic Outlook BreakfastEconomic Outlook Breakfast

Providence, RIProvidence, RIOctober 21, 2008October 21, 2008

Hudson RiehleHudson RiehleSenior Vice President Research and Information Services Senior Vice President Research and Information Services National Restaurant AssociationNational Restaurant Association

Agenda

• Overview• Economic Backdrop• Industry Segments• What’s Hot• Workforce• Wrap-Up

DEFINITION:

“Restaurant Industry”All meals/snacks prepared away from home, including all takeout meals and beverages

Restaurant Industry

Commercial Restaurant

Services

Non-Commercial Restaurant

Services

Military Restaurant

Services

Overview

Annual Sales:

$558 billion

Employees:

13.1 million

Locations:

945,000

38 Years of Restaurant-Industry Sales 1971-2008

Source: National Restaurant Association

2008 Restaurant IndustrySales Gain:

$24 billion


1955: 25% Present: 48.0%

Restaurant Industry’s Share of the Food Dollar

• Fullservice• Quickservice• Cafeterias and buffets• Caterers• Snack and nonalcoholic

beverage bars• Managed services/

contractors at•Industrial plants•Hospital/nursing homes•Schools and universities•Airlines•Recreation and sports centers

• Lodging places• Retail hosts

• Book stores• Service stations• Convenience stores

• Self-operated restaurant services

• Military restaurant services

The Industry Mosaic

Economic Backdrop

3.7%

0.8%

1.6%

2.5%

3.6%

2.9%2.8%

2.0%

1.6%

1.2%

0%

1%

2%

3%

4%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Economy Expected to Post Modest Growth into 2009Real Growth in U.S. Gross Domestic Product

Source: Bureau of Economic Analysis, National Restaurant Association

Projected

4.8%

1.9%

3.1%

2.2%

3.6%

1.4%

3.5%

2.8%

1.6%

1.0%

0%

1%

2%

3%

4%

5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Disposable Income Growth Projected to SlowReal Growth in Disposable Personal Income


Projected

2.2%

0.0%

-1.1%

-0.3%

1.1%

1.7% 1.8%

1.1%

0.0%

-0.5%

-2%

-1%

0%

1%

2%

3%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

National Job Losses Expected to Continue in 2009U.S. Total Employment Growth


Projected

National Economy Posting Job LossesU.S. economy shed 760,000 jobs in the last nine months

U.S. Total Job Growth

Source: Bureau of Labor Statistics; figures are seasonally-adjusted

140,000

60,00041,000

-76,000 -83,000 -88,000

-67,000-47,000

-100,000

-67,000 -73,000

-159,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08

Industry Job Growth FaltersEating and drinking places lost jobs in two of the last three months

Eating and Drinking Place Job Growth

Source: Bureau of Labor Statistics; figures are seasonally-adjusted

33,300

12,60010,100

6,500

13,20015,000 14,400

1,100

7,200

-4,200

1,800

-4,800

-10,000

0

10,000

20,000

30,000

40,000


Consumer Confidence Remains at a 15-Year LowU.S. Consumer Confidence Index

Source: The Conference Board

40

60

80

100

120

140

160

Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08


Consumer Expectations Lowest Since 1991Present Situation and Expectations Indices

0

20

40

60

80

100

120

140

160

180

200

Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08

Present Situation Component

Expectations Component

Regional Consumer ConfidenceSeptember 2008

77.2

88.5

50.0

39.6

63.7

45.0

61.7


59.8

79.9

Home Equity LoansTotal amount outstanding at the end of each year

Source: Federal Reserve Bank

$215 $222$217 $210 $222 $237$263 $297 $310 $334

$407 $439$501

$593

$776

$915

$1,066$1,129

$0

$200

$400

$600

$800

$1,000

$1,200

Bill

ion

s

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Home Equity Cashed Out Through Refinancing Each QuarterIncludes refinancing of prime, first-lien conventional mortgages

Source: Freddie Mac

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Bill

ion

s

00:Q1 01:Q1 02:Q1 03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1

Gas Prices Fell From Record High of $4.11Weekly average for a gallon of regular gasoline, including taxes

Source: Energy Information Administration

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Pri

ce

pe

r g

allo

n

Regional Average on October 13thWeekly average for regular gasoline, including taxes

$3.27

$2.99

$3.19

$3.10

$3.29

$2.99

$3.42

Source: Energy Information Administration

Wholesale Food Prices on Pace for Strongest Gain in 29 Years2007 was strongest gain in 27 years

*Year-to-date growth through September

Source: Bureau of Labor Statistics, National Restaurant Association

-0.3% -0.2%

0.6%

3.2%

-1.2%

5.5% 5.6%

1.8%

0.7%

7.6%8.8%

-4%

-2%

0%

2%

4%

6%

8%

10%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Individual Commodities Posting Stronger GainsYear-to-date Growth Through September 2008


Milled Rice 63%Flour 55Fats and Oils 55Eggs 34Cheese 14Milk 9

Grocery Store Price Growth Outpacing Menu PricesMenu prices on pace for strongest growth since a 4.7% gain in 1990

*Year-to-date growth through September


2.5%

1.3%

2.1% 2.2%

3.0%

3.8%

3.1%

1.9%

3.1%

1.7%

3.6%

4.2% 4.3%

6.2%

0%

1%

2%

3%

4%

5%

6%

7%

2002 2003 2004 2005 2006 2007 2008*

Menu Prices Grocery Store Prices

Corn-based Ethanol Requirements Under RFSBillions of Gallons

9

11

1213 13

14 1415

0

2

4

6

8

10

12

14

16

Bill

ion

s o

f G

allo

ns

2008 2009 2010 2011 2012 2013 2014 2015

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Sh

are

of

Co

rn D

ive

rte

d t

o E

tha

no

l

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Share of Corn Diverted to Ethanol Production% of total

U.S. Corn Use – Projected to 2015Billions of Bushels

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Feed & Residual

Ethanol

Food, seed & industrial less ethanol

Exports

Source: USDA

Energy Prices on Pace for Strongest Gain Since 1980Consumer Price Index (CPI) for Energy

Source: Bureau of Labor Statistics, National Restaurant Association *Year-to-date growth through September

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008*

menu reengineering cost management productivity targeted marketing efforts expansion

Typical Restaurant Operator Reactions

September 2008September 2008

The EconomyThe Economy 31% 31%

Food CostsFood Costs 22 22

Sales VolumeSales Volume 15 15

R&R Employees 8R&R Employees 8

Gas/Energy Prices 6Gas/Energy Prices 6

Competition 1Competition 1

Source: National Restaurant Association, Restaurant Industry Tracking Survey

Top Challenge Facing Restaurant OperatorsSeptember 2006, September 2007 and September 2008


R&R EmployeesR&R Employees 32% 32%



The EconomyThe Economy 8 8

CompetitionCompetition 6 6



R&R EmployeesR&R Employees 34% 34%



The EconomyThe Economy 9 9

CompetitionCompetition 7 7


Top Challenges Facing Restaurant Operators% of Operators Saying “The Economy” vs. “Recruiting/Retaining Employees”


0%

5%

10%

15%

20%

25%

30%

35%

40%

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

The Economy

Recruiting & Retaining Employees

Restaurant Performance Index Fell Below 100…Values Greater than 100 = Expansion; Values Less than 100 = Contraction


97

98

99

100

101

102

103

104

Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

…but Total Sales Remain Above 2007 LevelsSeasonally-adjusted monthly sales at eating and drinking places

Source: U.S. Census Bureau

$25

$27

$29

$31

$33

$35

$37

$39

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Mo

nth

ly S

ales

(in

bill

ion

s)

2008

2007

2006

2004

2002

2001

2003

2005

Restaurant Industry Outperforming Retail Sector in 2008Year-to-date growth through September 2008

Source: U.S. Census Bureau, Bureau of Labor Statistics, National Restaurant Association

4.2% 4.3%

-0.1%

6.1% 6.2%

-0.1%

2.3%

4.6%

-2.3%

-4%

-2%

0%

2%

4%

6%

8%

NominalSales

Menu Prices

Real Sales

NominalSales

GroceryStore Prices

Real Sales

NominalSales

ConsumerPrices

Real Sales

Eating & Drinking Places Grocery Stores Total Retail (excluding food)

Operators Are Uncertain about Sales GrowthRestaurant operators’ outlook for sales volume in six months compared to the same period in the previous year


47%

16%

39%

25%

29%28%

31% 30%32%31%

30%34%

29%

38%

29%

34%

29%

37%

29%

38%

29%34%

30%33%

0%

10%

20%

30%

40%

50%


Higher Sales in Six Months Lower Sales in Six Months

Quickservice Operators Are Most OptimisticRestaurant operators’ outlook for sales volume in six months compared to the same period in the previous year


26%

36%

28%32% 32% 31%

40%

26%

28%33%

0%

10%

20%

30%

40%

50%

Family Dining Casual Dining Fine Dining Quickservice Quick-Casual

Higher Sales in 6 Months Lower Sales in 6 Months

Operators Are Pessimistic about the EconomyRestaurant operators’ outlook for the economy in six months


26%

21%

19%

40%

16%

41%

16%

44%

21%

37%

14%

46%

16%

44%

14%

42%

12%

45%

15%

43%

21%

29%

24%

33%

0%

10%

20%

30%

40%

50%


Better Conditions in Six Months Worse Conditions in Six Months

Operators Are Pessimistic about the EconomyRestaurant operators’ outlook for the economy in six months


22%

40%

20%

29%32%

25%

21%

36%

19%

34%

0%

10%

20%

30%

40%

50%

Family Dining Casual Dining Fine Dining Quickservice Quick-Casual

Better Than Now Worse Than Now

Industry Segments

Total Restaurant Industry Sales2008 Forecast


2007 2008

$535 billion$558 billion

Fullservice Restaurant Sales2008 Forecast

2007 2008

$180 billion$187 billion


Limited-Service Restaurant Sales2008 Forecast

2007 2008

$150 billion

$157 billion


Snack and Nonalcoholic BeverageBar Sales2008 Forecast

2007 2008

$19.6 billion

$20.9 billion


Managed Services Sales2008 Forecast

2007 2008

$36.2 billion

$38.3 billion


Segments With Negative Real Sales GrowthSegments With Negative Real Sales Growthin 2008in 2008


Cafeterias, grill buffets/buffetsCafeterias, grill buffets/buffets - 4.6%- 4.6%

Bars and tavernsBars and taverns - 0.6- 0.6

Managed ServicesManaged Services

- Manufacturing/industrial plants- Manufacturing/industrial plants - 0.3- 0.3

- In-transit restaurant services- In-transit restaurant services - 4.6- 4.6

Segments With Negative Real Sales GrowthSegments With Negative Real Sales Growthin 2008 (cont’d)in 2008 (cont’d)


Mobile caterersMobile caterers - 0.7%- 0.7%

Non-CommercialNon-Commercial

- Employee restaurant services- Employee restaurant services - 4.0 - 4.0

- Elementary/secondary schools- Elementary/secondary schools - 0.8- 0.8

- Colleges/universities- Colleges/universities - 3.1- 3.1

0%

10%

20%

30%

40%

50%

60%

70%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Per

cen

t in

Lab

or

Fo

rce

Female Labor Force Participation Rate1950 to 2007

Source: Bureau of Labor Statistics

What’s Hot

Hot Items1 Bite-size desserts

2 Locally grown produce

3 Organic produce

4 Small plates/tapas/mezze

5 Specialty sandwiches

Source: National Restaurant Association; American Culinary Federation, 2007

Food

Wraps/pitas/tortillas 64%

Entrée salads 59%

Chicken sandwiches 59%

Breakfast sandwiches 59%

Source: National Restaurant Association, 2007

Operator Survey:Menu Trends in Quickservice RestaurantsPercent of quickservice operators reporting increase in popularity of the following items

Beverage

Energy drinks 77%

Espresso/specialty coffees 75%

Bottled water 58%

Iced tea/hot tea 42%

Better Food QualityPercent of consumers who say:

Food quality is better in sit-down tableservice restaurantsthan it was two years ago 76%

Food quality is better in fast food restaurants than it wastwo years ago 64%

Source: National Restaurant Association, consumer research 2007

Going to restaurants with family and friends is a better use of leisure time than cooking and cleaning up: 82%

Source: National Restaurant Association, October 2007 consumer survey

What Consumers Think About RestaurantsPercentage of adults who say:

E-mail Notificationof Daily Specials

30 percent of adults likely to useif offered by their favorite

tableservice restaurant

Source: National Restaurant Association, Consumer Survey, 2007

Going GreenPercent of operators, by type of operation, who say they intend to spend a larger proportion of their budget in 2008 to green initiatives

Source: National Restaurant Association, October 2007

Family dining Casual dining Fine dining Quickservice

23% 31% 32% 21%

Workforce Outlook

Source: Bureau of Labor Statistics, National Restaurant Association * Projected

1998

10.6 million

2008* 2018*

13.1 million

15.1 million

Total Restaurant-Industry Employment

Potential Labor ShortageGrowth in Key Indicators: 2008–2018

Source: National Restaurant Association projections, based on historical data from the Bureau of Labor Statistics

Restaurant Industry Employment

16%

Total U.S. Labor Force

16-to-24 Year Old Labor Force

9%

-7%

One-Half of Restaurant

Industry Labor Pool


1983: 6% 2006: 21%

Foodservice Occupations:Proportion of Employees that are Hispanic

Table Top PaymentSystems on Rise

Over half of adults (53 percent)would use if offered by their

favorite tableservice restaurant

Source: National Restaurant Association Consumer Survey, 2007

Wrap-Up

Unfulfilled Demandfor Restaurant Services

Remains HighOver 30 percent of adults are NOT

dining on-premises or usingtake-out as often as would like


Opportunities

• Convenience demand• Decrease on-site labor needs• Develop simple cost/benefit analysis• Energy efficiency and long-term cost

savings• Value emphasis

Opportunities

• Long term health/nutrition trend• Joint testing/marketing initiatives• Promotional opportunities—menu,

table tents, off-premises, on-line• May 16-19, 2009 NRA Show -

Chicago

Growth in Key IndicatorsGrowth in Key Indicators

Source: National Restaurant Association *projected

20072007 20082008* * 20092009**

• Gross Domestic ProductGross Domestic Product 2.0% 1.6% 1.2% 2.0% 1.6% 1.2%

• Real Disposable Personal Income 2.8Real Disposable Personal Income 2.8 1.6 1.0 1.6 1.0

• Total EmploymentTotal Employment 1.1 1.1 0.0 -0.5 0.0 -0.5

Growth in Key IndicatorsGrowth in Key Indicators

Source: National Restaurant Association, 2008

20082008 U.S.U.S. Rhode IslandRhode Island

PopulationPopulation +0.9% -0.1% +0.9% -0.1%

Real Disposable Personal Income (DPI) Real Disposable Personal Income (DPI) +1.6% -0.1% +1.6% -0.1%

Construction EmploymentConstruction Employment -5.1% -5.9% -5.1% -5.9%

2008 and Beyond

• Restaurant-industry sales will reach a record high• Record levels also for employees and locations• Weak economic fundamentals• Energy and food cost challenges will remain• Menu — small is big, alternative sourcing, ethnic

ingredients• Workforce — higher productivity• Technology more critical• Modest industry growth expected

Restaurant Industry Restaurant Industry 2008 and Beyond2008 and Beyond

Rhode Island Hospitality Rhode Island Hospitality & & Tourism AssociationTourism AssociationEconomic Outlook BreakfastEconomic Outlook Breakfast

Providence, RIProvidence, RIOctober 21, 2008October 21, 2008

Hudson RiehleHudson RiehleSenior Vice President Research and Information Services Senior Vice President Research and Information Services National Restaurant AssociationNational Restaurant Association

restaurant industry 2008 and beyond rhode island hospitality & tourism association economic...

Documents

overview slide

adjusted slide

beverages slide

industry mosaic slide

economic backdrop slide

conference board slide

years of restaurant

freddie mac slide