Restaurant Industry Outlook Still Gloomy

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Restaurant Industry Outlook Still Gloomy

WASHINGTON -- Restaurant sales will continue to rise next year, but definitely not at the robust levels the trade has been accustomed to in the past few years.

Hudson Riehle, senior vice president of research and information services for the National Restaurant Association (NRA), recently offered some insights and projections at an Economic Outlook Breakfast hosted by the Rhode Island Hospitality and Tourism Association. Looking at 2008 and beyond, Riehle said there will be a modest industry growth at best, with weak economy fundamentals with energy and food cost challenges still remaining for operators, according to The Griffin Report.

Reacting to these challenges, Riehle said a typical restaurant operator will look to menu re-engineering, improved cost management, more productivity and targeted marketing efforts. Riehle also noted there are opportunities for value emphasis, fulfilling convenience demand and promotional opportunities for off-premises and online.

At best, growth in disposable personal income will grow 1 percent in 2009, compared to robust levels of 4.8 percent in 2000, 3.6 percent in 2004 and 2 percent in 2007. For the first time since 2003, U.S. total employment will not grow in 2009 and in fact, drop 0.5 percent. Already the U.S. economy has shed 760,000 jobs in the last nine months, and eating and drinking places have lost jobs in two of the last three months.

Wholesale food prices are on pace for the strongest gain in 29 years, set by individual commodity prices of milled rice (63 percent price gain); flour, fats and oils (55 percent); eggs (34 percent); cheese (14 percent); and milk (9 percent). As a result, menu prices (up 4.3 percent) are on a pace for the strongest growth since a 4.7 percent gain in 1990. This still is lower than a projected 6.2 percent increase in grocery store prices, the report stated.