Nine months into 2013, the restaurant industry, overall, is finding itself in stable waters as margins appear to have steadied, spending has returned to pre-recession levels and a record low number of restaurants are facing financial distress. Looking ahead to 2014, however, traffic and spending concerns loom as consumers plan to dine out less frequently in the coming year (primarily due to a desire to eat healthier), as well as spend less per meal when dining out, according to a new study of the North American restaurant and foodservice industry from AlixPartners, the global business advisory firm.
The AlixPartners North American Restaurant Consumer Sentiment Review examined the financial performance and fiscal health of more than 80 restaurants and seven foodservice companies representing approximately $230 billion in annual revenues.
“While the restaurant industry, overall, is in a good position entering the final quarter of 2013, shifting consumer preferences will likely make for a challenging 2014,” said Adam Werner, managing director at AlixPartners and co-lead of the firm’s Restaurant and Foodservice Practice.
According to the AlixPartners consumer survey, consumers are dining out less now than in early 2013 as dining frequency dropped from an average of 5.8 meals out per month in the first quarter of 2013 to only 3.8 meals out per month in the third quarter of 2013.
“The primary driver behind the notable decline in meals out versus earlier this year, is that people who had been dining out multiple times per week are dining out less frequently—we’re seeing an overall shift toward dining out only once per week,” observed Werner.
Amidst already declining dining-out frequency, consumers surveyed by AlixPartners also reported that they plan to dine out even less in the coming year, especially at quick-service restaurants. However, in marked contrast from five previous diner surveys—where consumers cited financial concerns as the primary factor preventing them from eating out—AlixPartners’ most recent survey finds that the primary reason consumers plan to eat out less in the coming year is because of a desire to eat healthier.
According to the AlixPartners survey, consumers are planning on spending an average of 4.5 percent less per meal in the coming year than they have in the past 12 months. Furthermore, while the survey finds that the availability of healthy menu items has a significant impact on restaurant choice—51 percent of consumers rated healthy menu options as “important,” “very important” or “extremely important” in choosing where to dine out, and consumers indicated they are unwilling to pay extra for “healthy” or “quality” menu options.
“The challenge for restaurant operators in 2014 will be finding a way to balance what consumers say they want versus what they are willing to pay for and what’s actually going to get them in the door—and that’s going to take some creativity,” continued Werner.
The survey found that digital media has little impact, while loyalty programs do help attract diners. AlixPartners also found that restaurants should keep their eyes on grocery and convenience segments, which continue to be an increasing threat.
“Grocery and convenience stores present a real threat to the traditional restaurant segments as more and more consumers are purchasing prepared meals at these stores,” said Werner.
Outlook for 2014
While AlixPartners anticipates trends such as consumers’ interest in innovation and convenience will remain strong, the firm also sees other trends emerging that are likely to create challenges for restaurant operators in 2014. Emerging trends include a sharpening of consumers’ price sensitivity and focus on value, a further fragmentation of consumer segments based on demographic shifts, an increase in technology’s impact on dining decisions and brand loyalty and stiffer competition from convenience and grocery stores, as well as regional restaurant rivals.