RESTAURANTS FAIL TO RECOVER FROM RECESSION

An Olive Garden restaurant awaits the return of a robust patronage.
An Olive Garden restaurant awaits the return of a robust patronage.
U.S. restaurant traffic has failed to recover from the slowdown of the recession, and despite Menu changes and lower prices, the continued evaporation of the Middle Class erodes hope that recovery is possible for many still struggling to keep doors open.

Consumers made 61 billion visits to restaurants in the year ending May 2014, which is roughly 2 billion fewer visits than in 2008, according to data from The NPD Group, an industry research firm.

Traffic has remained relatively flat since 2010. Here’s a chart from NPD showing the trend over the last six years:

(from The NPD Group)
(from The NPD Group)

Restaurant traffic isn’t expected to pick up any time soon, according to NPD restaurant analyst Bonnie Riggs.

“The restaurant industry in total is forecast to grow less than .5% a year over the next decade,” she said.

Quick service restaurants, such as McDonald’s, and casual dining chains, such as Olive Garden and TGI Fridays, will suffer the most from the traffic slowdown, she said.

Fast casual restaurants, however — which include chains like Chipotle and Panera — will see traffic grow at a faster rate of about 2% per year, according to NPD’s estimates.

McDonald’s same-store sales in the U.S. fell 1.5% in the most recent quarter, the company reported Tuesday. By comparison, Chipotle’s same-store sales rose 17% in the second quarter.

Consumers perceive fast casual restaurants, which are often more expensive than quick service, as having healthier, better quality ingredients, Riggs said.

“When you deliver on consumers’ value expectations, price isn’t the issue,” she said. Yet, even those restaurants that embrace commitment to superior service and upgraded ambiance equally struggle when there are fewer (typically) Middle Class patrons regularly eating out as they once were accustomed.

BOTTOM LINE: Be prepared for more overnight closures of both chains and independents, as this is seemingly the only alternative to bleeding cash while hopelessly waiting for the return to the Good Old Days when the Middle Class was not an endangered reality …