Restaurant traffic to improve in 2016, but industry remains below pre-recession trends

Consumers are expected to spend more of their gasoline savings at restaurants in 2016, but foodservice visits are expected to grow only 1% during the year, according to a recent report by the NPD Group.

NDP analysts said the U.S. foodservice industry in 2015 recovered the visits it lost during the recession and long recovery. The research group estimates that 2015 ended with total traffic volume at 61 billion, with visits up 1% and a consumer spending gain of 3% compared to same time last year.

“It has been a long slow recovery but the foodservice industry has recovered nearly all of the steep traffic losses incurred after the recession began in 2008,” said Bonnie Riggs, an NPD Group restaurant analyst. “QSRs (quick service restaurants) have and will continue to support the traffic gain, while casual dining visits are forecast to hold steady and midscale to decline by 1%.”

NPD reports the drivers behind foodservice growth continues to be breakfast foods and QSR traffic growth and menu innovation. Riggs said breakfast is still the fastest growing segment of foodservice.

Riggs said QSR venues were the strongest performing segment this past year representing 79% of all foodservice visits. The QSR Fast Casual category increased visits by 8% and retail convenience store foodservice traffic grew by 2%. These two top growing QSR categories are on opposite ends of the price spectrum, but both are meeting consumers’ needs for quality, convenience, and value, she said.

Consumers aged 50 and over are also helping to drive industry traffic growth, according to Riggs. She said there has also been a renewed focus on beef, bacon and steak, after chicken features in recent years. Riggs said Arby’s, Carl’s Jr., Wendy’s, Taco Bell and Applebee’s all unveiled beef entrees this past year.

She said spicy foods are the most requested foods from Millennials and Generation Z.

Technomic projects sales at limited-service restaurants, including quick-serve, will increase by 2.2%, full-service by 2.5% and bars and taverns by 1% in 2016. Among the subsegments, fast-casual will remain the superstar with a projected sales increase of 8%, followed by supermarket prepared foods at 6.5%. The convenience store segment is expected to grow at a rate of 1% percent in real terms.

“We have heard a lot of positive sales and comparable store growth,” said Darren Tristano, executive vice president at Technomic. “The long-struggling midscale dining segment represents one example of the industry’s solid, if unspectacular performance. The often-maligned segment is expected to experience a 1.5% increase in sales this year in real terms and grow by another 1% next year. Since Labor Day of last year this segment is getting more traffic and traction.”

The National Restaurant Association stands by its initial projection of 1.5% inflation-adjusted industry sales growth in 2015. This will translate into sales of $709.2 billion for the year, and will be up 3.8% in non-inflation adjusted sales compared to 2014.

And while 2015 is shaping up to be the sixth year of growth in restaurant sales, the rate of growth remains below pre-recession levels.

“Total restaurant industry sales are expected to advance at a 3.8 percent rate this year. That’s lower than the compound, pre-recession annual sales growth rate the industry experienced, but still a positive sign that the industry is in a better place now than six years ago,” noted Hudson Riehle, senior vice president, research and knowledge group, National Restaurant Association.

Restaurant sales are up almost 6% in 17 Arkansas cities measured by Talk Business & Politics for the Arkansas Tourism Ticker. Restaurant (prepared food tax) tax collections among the 17 cities totaled $21.438 million in January and August, up 5.92% compared to the $20.239 million in January-August 2014.

Some of the spending is also shifting to convenience foods prepared in the home. Tyson Foods CEO Donnie Smith recently said consumers are spending more on foods they eat out or prepared foods they take home and consume right away. He said the biggest winners in the recent recovery are quick-serve chicken and Mexican eateries as well as casual dining.

Smith said Tyson Foods is working to take advantage of changing consumer trends and plans to grow its foodservice business in 2016. In fiscal 2015, Tyson’s foodservice sales revenue totaled $12.58 billion, or 31% of the meat giant’s total annual revenue.