According to NPD Group — among other industry research firms and analysts — restaurant operators are facing a decline in sales and in overall visits. In fact, Paul Westra, a senior research analyst with Stifel Financial Corp., said in a US News article that analysts are forecasting a “restaurant recession,” which could indicate even worse news for the U.S. economy at large.
Westra said the catalysts for such an economic shift include politics, terrorism, social unrest and economic uncertainty. However, other factors are certainly contributors. While the news doesn’t bode well for in-store restaurant visits or sales, opportunity exists for restaurants especially in the delivery space.
“Places like Jimmy John’s are doing well because they are willing to deliver one sandwich at a time,” said Warren Solochek, president, Foodservice, The NPD Group, Inc. “However, as an operator you have to decide how you want to get involved.”
To start, this means understanding current economic conditions and the changing consumer demographics.
US Census Bureau numbers have shown a 2014 average household income of $52,789, only slightly above the average household income of $51,719 in 1995. This is also compared to an even higher average income of $54,674 in 2004. Overall, consumers spend about 10 percent of their income on food and of disposable income levels fail to rise, overall food spending will remain flat.
Consumers also are eating more meals prepared in their homes while consumer spending overall has only increased 1.8 percent when compared to the same time period in 2015, according to the latest NPD Group research.
On the rise as well are the number of single-person households as parties of one now account for 39 percent of all restaurant visits, according to NPD. The changing American family could also be a factor along with the number of Americans now working from home. According to US Census Bureau data, in 2010, 13.4 million Americans worked at least one day at home per week, up from 9.2 million Americans in 1997.
This begs the question, “does anyone leave the house anymore,” Solochek said.
Focus on delivery
These changing demographics seem to be a boon for delivery operations.
Consumers today are six times more likely to order via the Internet or mobile app and are twice more likely to choose a chain for the availability of delivery or drive thru. Further, delivery outside the pizza segment has been growing and experienced a 33 percent rise between 2012 and 2015, according to NPD data. Meanwhile, pizza delivery traffic decreased 3 percent in the same time period.
Delivery visits are also outpacing restaurant traffic overall, up 9 percent between 2012 and 2015 as compared to a 1 percent increase in restaurant traffic within the same three years.
“Restaurant delivery beyond traditional pizza delivery is a growing business. All types of restaurants are increasingly partnering with delivery services, such as DoorDash or PostMates, because of the availability of online ordering, particularly through mobile apps. I do think delivery can work if you get involved with the right kind of logistics or third-party company,” Solochek said.
However, restaurant operators need to consider the financial and operational pros of cons of getting into single-meal delivery services.
“There are companies out there who offer these services very seamlessly. They put the right systems in place so it can done online and easily integrated into a delivery or POS system. You will have to pay for that integration, but hopefully that incremental business will cover the cost of that integration. Or, you can do it with companies such as DoorDash or PostMates where you pay a set fee,” Solocheck said. “You just have to make sure you’re not losing money. You don’t want to be losing money on every order that you put out there.”