Technology, lifestyle food choices evolving trends in 2015

Technology is a rapidly evolving trend for 2015. According to the National Restaurant Association’s 2015 Restaurant Industry Forecast, roughly one-quarter of consumers say technology options are important features that factor into their decision to choose a restaurant.

This is up from the nearly one-fifth the prior year that said the same, underscoring that technology quickly is becoming an expectation rather than a novelty when dining out. 

“Consumers – especially younger generations – have come to expect certain connectivity attached to their dining experiences, be it the ability to order restaurant delivery with a smartphone app, access wi-fi in their favorite coffee shop, or review menus and make reservations online,” said Hudson Riehle, the NRA’s senior vice president of research.

“While restaurateurs understand their guests’ desire for technology options and more are adopting various forms thereof, the cost and integration into existing store systems can still pose challenges,” Riehle said.

A gap remains between what consumers want and what restaurants currently offer. That gap is narrowing, though, and it will close further over the next several years as restaurant technology evolves and more options enter the marketplace.

Despite increased consumer use of tech, machines may be an inadequate substitute for the personal service that many consider to be the hallmark of dining out. NRA research clearly shows that consumers still want humans as part of their restaurant experience, yet look to technology to increase service speed and convenience.

Lifestyle choices

Another developing trend for 2015 is related to how today’s consumers tend to make lifestyle choices in a “big picture” kind of way and apply those preferences to a wide range of situations – including dining out. As Americans lead ever-busier lives with little leisure time, they want and expect menu options that allow them to adhere to their chosen life philosophies.

“As restaurants have become part of our daily lives, consumers want to stay consistent in their purchases across broad spending categories,” said Annika Stensson, the NRA’s senior manager of research communications. “Food choices very much fit into that pattern.”

“People who buy electric cars and eco-friendly household cleaners also look for environmental sustainability when picking a restaurant. And consumers who adhere to healthy lifestyles want to find nutritious options no matter where they choose to go without sacrificing convenience,” Stensson said.

NRA research shows that nine in 10 consumers say food quality is an important factor for choosing a restaurant, and six in 10 consider themselves more food adventurous now than two years ago.

Sixty percent of consumers say they are more likely to pick a restaurant that offers menu items that were grown or raised in an organic or environmentally friendly way, up from 55 percent the previous year.

In addition, consumers are showing increasing interest in local sourcing, and more restaurateurs are taking notice. More than eight in 10 tableservice operators say their guests are more interested in locally sourced items this year, compared with seven in 10 who said the same a year earlier. And, 69 percent of consumers say they are more likely to visit a restaurant that offers locally produced food items. That’s up 5 percentage points from what consumers said a year earlier.

Meanwhile, eight in 10 of consumers say restaurants offer a wider variety of healthy menu options now compared to two years ago, and three-quarters say they are more likely to visit a restaurant that offers healthy options; seven in 10 say they also order more healthful options in restaurants than they did two years ago.

For additional information and to buy the 2015 Restaurant Industry Forecast, visit Restaurant.org/Forecast. 

Riehle: Food costs will remain a top challenge in 2015

The restaurant industry is set to post record sales and employ 10 percent of the total U.S. workforce in 1 million locations this year, according to the just-released 2015 Restaurant Industry Forecast. Food costs will remain a top challenge for restaurant operators this year, says Hudson Riehle, the National Restaurant Association's senior vice president of research. Watch him summarize additional key points from the report. 

Pork prices down, but chicken flies high

Restaurateurs can expect some relief in the price of pork as producers increase supply, but the cost of poultry should remain high due to increased demand, industry experts say.

“Pork prices are beginning to return to normal, thanks to the stabilization of the pig virus outbreak that plagued producers last year,” said restaurant commodities expert John Barone. “The virus still exists, but two things are happening right now: first, there are two vaccines that seem to be working to a degree. Second, it looks as though the sows that contracted the virus and passed it along to the piglets in their litters have developed antibodies that are fighting off the spread of the disease.”

According to Barone, resistance to the virus is resulting in bigger herds and lower prices.

“The numbers are going in the right direction,” he said. “We’re expecting a good amount of pork supplies by the second half of the year and prices are forecast to be down double digits percentagewise.”

Barone added that U.S. Department of Agriculture estimates indicate pork prices have already decreased nearly 18 percent over 2014 levels.

Hudson Riehle, the National Restaurant Association’s senior vice president of research, said higher wholesale food prices last year put pressure on operators and relief this year would be welcomed.

“The intensity of the pressure related to higher wholesale food prices has been easing for some operators as prices on certain commodities seem to be moderating,” he said. “But, because overall food costs have increased for several years, prices in general remain elevated. The impact on operators can vary depending on what’s on their menus. For example, beef prices are expected to advance, but pork costs are likely to drop. That will give operators something of a break for now.”

Barone noted that poultry production is on the rise and prices are reflecting the increase. That could change, however, if demand grows.

“Chicken could result in a bit of a tug of war this year,” he said. “There will be a lot more supply, but also a lot more demand. Because of the high cost of beef, anybody who can use chicken for every [limited time offer] out there is going to. Operators last year couldn’t get enough given the increased demand resulting from the shortages in beef and pork supplies. They couldn’t even plan LTOs that required additional chicken volume, especially on breasts or wings. This year, there’s going to be extra availability and more demand, but the price ‑ because of that demand ‑ is going to be close to year-ago levels.”

In 2014, poultry prices averaged around $1.12 per pound, according to USDA estimates.

NRA releases new report on consumer spending

The National Restaurant Association this week released a new edition of its Consumer Spending in Restaurants report – an analysis of spending on food away from home by demographic groups. Last published in 2009, the report can help restaurant operators strategically plan their menus, services and marketing programs to build and maintain sales.

“Looking at demographics is extremely important for restaurant operators. One primary influencer on spending is income, in that the more cash-on-hand consumers have, the more they are likely to spend dining out,” said Hudson Riehle, senior vice president of the Research & Knowledge Group for the National Restaurant Association. “Our report breaks down income levels and other important factors to show how spending on food away from home can vary significantly according to household traits and composition.”

“For example, households with annual income above $70,000 comprise a third of all households but account for 56 percent of total spending on food away from home. And, young adults who have not yet reached their peak earning years spend less dining out when counting dollars, but a higher proportion of their total food budget compared with families with children,” Riehle said. 

According to the report, average household spending in restaurants was $2,678 in 2012 (or $1,071 per person), an increase of 2.2 percent over the previous year. Broken down by region, the Northeast and the West outspent the Midwest and the South. Breaking it down further by major U.S. city, Washington, D.C. led the nation both in levels of spending and proportion of total food budget spent in restaurants.

Based on 2012 Bureau of Labor Statistics data, Consumer Spending in Restaurantsbreaks down spending patterns by household income, age of household head, household size and composition, ethnicity, number of household earners and occupation. In addition, it breaks the information down by region, as well as Metropolitan Statistical Areas (MSAs) in each region.

As with all the NRA’s research publications, NRA members receive a 50 percent discount. For details, visit Restaurant.org/Research.

National Restaurant Association releases consumer spending in restaurants report

The National Restaurant Association (NRA) this week released a new edition of its Consumer Spending in Restaurants report – an analysis of spending on food away from home by demographic groups. Last published in 2009, the report can help restaurant operators strategically plan their menus, services and marketing programs to build and maintain sales.

“Looking at demographics is extremely important for restaurant operators. One primary influencer on spending is income, in that the more cash-on-hand consumers have, the more they are likely to spend dining out,” said Hudson Riehle, senior vice president of the Research & Knowledge Group for the NRA. “Our report breaks down income levels and other important factors to show how spending on food away from home can vary significantly according to household traits and composition.”

“For example, households with annual income above $70,000 comprise a third of all households but account for 56 percent of total spending on food away from home. And, young adults who have not yet reached their peak earning years spend less dining out when counting dollars, but a higher proportion of their total food budget compared with families with children,” Riehle said. 

According to the report, average household spending in restaurants was $2,678 in 2012 (or $1,071 per person), an increase of 2.2 percent over the previous year. Broken down by region, the Northeast and the West outspent the Midwest and the South. Breaking it down further by major U.S. city, Washington, D.C. led the nation both in levels of spending and proportion of total food budget spent in restaurants.

Based on 2012 Bureau of Labor Statistics data, Consumer Spending in Restaurants breaks down spending patterns by household income, age of household head, household size and composition, ethnicity, number of household earners and occupation. In addition, it breaks the information down by region, as well as Metropolitan Statistical Areas (MSAs) in each region.

As with all the NRA’s research publications, NRA members receive a 50 percent discount. For details, visit Restaurant.org/Research.

Tech use is trending up

New research from the National Restaurant Association found that more than a third of consumers say they are more likely to use technology-related options in restaurants now than two years ago. A significant number use their smartphones to interact with restaurants on a regular basis, such as ordering delivery, redeeming rewards and paying for meals.

“While overall usage of restaurant technology options is still more common among diners in the Millennial generation compared with Baby Boomers, the age gap generally levels out when it comes to frequent users,” said Hudson Riehle, senior vice president of research for the NRA. “As restaurants integrate more customer-facing technology, usage among consumers is growing. When done right, it can help a restaurant’s productivity and the customer experience.”

“However, it’s important to note that a substantial number of consumers say they still prefer to deal with restaurant staff, underscoring that this is still an industry of hospitality where the human factor will always be paramount,” Riehle added.

Riehle presented this new research, as well as additional current NRA research, at a breakfast keynote at the Restaurant Innovation Summit in Atlanta. 

The NRA asked the consumers who said they are not using technology options more often why they aren’t using them more. Half of them say it is simply because they prefer dealing with human beings. This is particularly notable among younger consumers, where 61 percent of 18-34-year-olds gave this as a reason, while only 42 percent of those 65+ agreed.

For restaurants, the high cost of doing business is food

The rising costs of coffee and protein-based foods, including bacon, eggs, ham and beef, are creating concern among industry experts and chains specializing in the breakfast day part who say the prices, historically, are higher than ever before.

Food cost pressures are building, said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Operators have watched carefully what’s going on with staple breakfast items like eggs, bacon and coffee. Some will consider operational adjustments as cost pressures are sustained.”

According to the NRA’s monthly Restaurant Industry Tracking Survey, operators once again cite food costs as their top challenge. Last month eight in 10 operators said their average food costs are higher now than a year ago. Among family-dining restaurants, many of whom focus on breakfast, nine in 10 operators report higher food costs.

“Price fluctuations of commodities can have a significant impact on the operator’s bottom line, especially if the items in question are essential to a specific concept or menu. Breakfast has been a growing day part over the last several years, as restaurant operators explore new avenues to build business and more consumers live life ‘on the go’,” Riehle said.

John Barone, commodities analyst and CEO of MarketVision Inc., says prices eased over the summer but remain high, almost across the board.  A drought in Brazil this spring continues to drive up coffee costs, he noted.

“Coffee prices dropped 20 percent between April and July, but have regained most of that drop and look to be headed higher over the long term,” he said. “Brazil has a multi-year coffee problem. The bottom line is breakfast chains are really feeling the heat.”

Some larger restaurant companies were able to negotiate contracts before costs started climbing. Corner Bakery Cafe, right now is in a good position on its coffee contract, although that could end sometime next year, said Ric Scicchitano, senior vice president of food and beverage.

“We did a lot of forecasting and booking on the contract side to manage risk for all of 2014 and into 2015 as much as possible,” he said.  He said the company locked in a good coffee contract when it saw favorable prices in the last half of 2013, but will have to reset that contract for 2015. “We haven’t been exposed to the spike in prices, but I’ve been telling everyone that headwinds are brewing for next year because we don’t have positions to carry us all the way through 2015.”

Dunkin’ Brands, parent of Dunkin’ Donuts, indicated it is exploring the possibility of raising prices on its coffee beverages to offset the surging cost of coffee.

"We are currently holding conversations with our domestic franchisees about a modest increase in coffee prices,” spokeswoman Michelle King said. “We have not taken any significant price increases on coffee in the last several years and even with a modest increase, we continue to offer a great value to our guests every day."

Coffee isn’t the only commodity causing headaches.

Barone said prices on pork bellies, or bacon, are down about 20 percent from year-ago levels but remain historically high due to potential supply issues related to the outbreak of PEDv, or porcine epidemic diarrhea, which affects newborn piglets. Even after recent drops, the prices of ham and pork trimmings, or sausage, remain 30 percent higher than last year.

PEDv disease is expected to reemerge this fall, when the weather cools,  Barone says. “There’s really no end in sight because no one has any real information on when the virus will be under control or how much damage it will do to supplies.”

Dennis Lombardi, executive vice president of strategies for foodservice consultant WD Partners, says he expects more restaurants, especially small operations and independents, will update and re-engineer their menus to feature alternative items that aren’t as costly to serve.

“For independents, there really seem to be few choices available,” he said. “They basically can endure the higher food costs, change their menu prices accordingly, or update and re-engineer their menus, which they do three or four times a year anyway. A lot of the big chains are locked into supply contracts, which allow for more price sustainability.”

Scicchitano said his company is still in good shape regarding food costs, but 2015 could be another story.

“We took 95 percent of our risk off the table last December,” he said. “We’ve kind of been exposed to the cheese market a little bit, but for the most part we’ve been pretty insulated where pricing is concerned. I do think we have a little bit of a correction coming in some protein areas. I’m worried about that more than anything else ‑ and dried fruits and nuts. Those are the things that are going to keep me awake now for next year.”

New research shows restaurant technology plays part in dining decisions

New research from the National Restaurant Association underscores that technology is playing a larger role in the restaurant dining experience. Options like online reservations, smartphone ordering and in-store kiosks are becoming more commonplace, and consumers are recognizing the benefits.

“Technology is increasingly becoming part of our everyday lives, including interaction with restaurants both remotely and onsite,” said Hudson Riehle, senior vice president of research for the National Restaurant Association.

“The operator community still faces challenges to offering more customer-facing technology options, most notably cost of implementation and per-usage cost. However, there seems to be little doubt in the minds of both operators and consumers that these options will become more prevalent in the future,” Riehle said.

According to the NRA’s research, 36 percent of consumers say they are more likely to use technology options in restaurants now than they were two years ago, and 65 percent have noticed that restaurants offer more of these options in that same timeframe.

Further, eight in 10 consumers agree that restaurant-related technology enhances convenience, and seven in 10 say it speeds up service and increases order accuracy. Forty-five percent say that technology makes their restaurant interactions more fun. Operators will want to choose carefully which technology options to offer, however, as 37 percent of consumers also say technology makes ordering more complicated.

Integrating consumer-facing technology can pay off for restaurant operators, though, as about one-third of consumers say tech options make them choose one restaurant over another, as well as dine out or order takeout/delivery more often. 

The NRA commissioned ORC International to survey 1,006 American adults on May 1-4, 2014, for their attitudes toward restaurant-related technology options.

Previous NRA research shows that nearly half of restaurant operators across segments plan to devote more resources to customer-facing technology this year.

Study: Competition, technology to drive industry's future

Industry competition will continue to intensify in the years ahead, and operators will to have focus on offering elevated levels of food and service in tandem with technological enhancements, new research from the National Restaurant Association has found.

 

According to the report “Restaurant Industry 2020: A Snapshot of the Future,” NRA research found that operators also will have to continue to upgrade their concepts on an ongoing basis just to remain competitive. Other findings indicate that convenience stores and supermarkets will continue to expand their foodservice offerings; American restaurant operators will keep trying to expand their concepts into international markets, such as Asia, South America, Europe and Africa; and the off-premises segment, including takeout, drive-thru, delivery and mobile operations will continue to gain market share from on-premise restaurants.

“Because of this sustained competitive environment, operators will seek to more strongly differentiate themselves across a spectrum of operational characteristics, ranging from food and service to décor and technology,” said Hudson Riehle, senior vice president of the NRA’s research and knowledge group. “In addition, the industry will continue to be a breeding ground for entrepreneurialism and employment growth.”

The study, conducted using the Delphi approach, relies on a panel of industry experts to identify and analyze issues by subjective judgment.

Download the entire report here.

Customers still seek value when dining out

When dining out, budget-conscious consumers continue to expect the best value for their money, the National Restaurant Association's 2013 Restaurant Industry Forecast has found.

Among operators polled, nine out of 10 said their customers were more value-conscious today than they were two years ago.

Hudson Riehle, Sr. VP
of the NRA's Research
& Knowledge Center

Furthermore, 79 percent of consumers questioned for the report's 2012 National Household Survey said they would consider dining out more often if menu prices were lower during off-peak times. In addition, a slightly higher proportion of frequent quick-service users and takeout dinner customers also said they might go out more often if prices were lower during off-peak periods.

"Offering reduced prices during off-peak meal times is potentially a good way to offer additional value to existing and new customers," said Hudson Riehle, senior vice president of the NRA's Research & Knowledge Center. "The ability for restaurant operators to shift some current as well as new customers to slower times of the day and week is a well-established practice in other consumer driven industries. In the years ahead, and aided by new technologies, more restaurateurs will consider and offer enhanced value propositions at nontraditional times."

Still, the operators surveyed had mixed opinions regarding whether off-peak dining at lower prices would become a trend. Approximately 60 percent of full-service operators said they thought it would, while just 39 percent of fast-casual and 33 percent of quick-service operators thought the trend would gain in popularity.

Restaurant industry will grow, outpace national job growth in 2013 despite sustained challenges

While the operating environment will remain challenging, America’s 980,000 restaurants are expected to post record sales and continue to be a leading job creator in 2013, according to the National Restaurant Association’s (NRA) 2013 Restaurant Industry Forecast released today. Total restaurant industry sales are expected to exceed $660 billion in 2013 – a 3.8 percent increase over 2012, marking the fourth consecutive year of real sales growth for the industry.

In addition, 2013 will be the 14th straight year in which restaurant industry employment will outpace overall employment. Restaurants will employ 13.1 million individuals next year as the nation’s second-largest private-sector employer, representing 10 percent of the total U.S. workforce.

“Despite a continued challenging operating environment, the restaurant industry remains a strong driver in the nation’s economy,” said Dawn Sweeney, president and CEO of the National Restaurant Association. “Ours is a resilient and flexible industry that continually finds new ways to keep growing, relying on the creativity and innovation exhibited by the entrepreneurial spirit. In 2013, restaurant operators will continue to explore ways of navigating the rocky economic landscape to find the road to success.”

“The fact that the restaurant industry will continue to grow in an operating environment that presents substantial challenges is a testament to the essential role that restaurants play in our daily lives,” said Hudson Riehle, senior vice president, Research & Knowledge for the National Restaurant Association. “Restaurants are offering products and services that consumers actively seek out and enjoy; an activity in which consumers are selecting to engage despite cash-on-hand restraints because it is an important component of their lifestyle.”

Workforce Outlook
Total U.S. employment grew at a rate of 1.4 percent in 2012, while restaurants added jobs at a strong 3.0 percent rate – more than double the overall rate. In 2013, the NRA expects the restaurant industry to add jobs at a 2.4 percent rate, nearly a full percentage point above the projected 1.5 percent gain in total employment.

Looking ahead, the NRA expects restaurants to add 1.3 million new positions in the next decade, pushing industry employment to 14.4 million by 2023.

Because of this strong growth in restaurant employment, labor challenges will start to reemerge next year. Recruitment and retention, which was a top challenge pre-recession, will make its way back onto restaurant operators’ radar as the U.S. labor pool is starting to become shallower; restaurant operators in all segments expect recruitment and retention to be more challenging in 2013 than in 2012.

Challenges and Opportunities
While the restaurant industry is expected to grow in 2013, operators will continue to face a range of challenges. The top challenges cited by restaurateurs vary by industry segment, and include food costs, the economy and health care reform.

After increasing steadily in the last three years, wholesale food costs will continue on an upward trajectory through 2013, putting significant pressure on restaurants’ bottom lines as about one-third of sales in a restaurant goes to food and beverage purchases. Because of these prolonged cost pressures, restaurant operators will continue to use creativity and innovation to drive out cost inefficiencies and increase productivity to not pass along the increases to consumers at the same rate.

The sluggish economic and employment recovery impacts consumers’ cash-on-hand situation, which in turn impacts restaurants as there is a strong correlation between consumers’ disposable income and restaurant sales. There is currently substantial pent-up demand for restaurant services, with 2 out of 5 consumers saying they are not using restaurant as often as they would like; with improving economic conditions that demand is likely to turn into sales.

Preparing for the implementation of health care reform will put additional cost pressure on some restaurant operators in the near future. One-third of a typical restaurant’s sales go toward labor costs, so significant increases in those costs will result in additional cost management measures to preserve the already slim pre-tax profit margins of 3-5 percent on which most restaurants operate.

Local & national restaurants weather lack of rainstorms

If you live in South Louisiana, you might not realize that other areas of Louisiana are in a drought. Many states and countries, including four parishes in Northeast Louisiana, have been designated natural disaster areas as a result of the severe lack of rain. This is the hottest summer on record globally.

“It’s unfortunate that our farmers need this type of assistance (low interest Farm Service Agency emergency loans), but we are grateful it exists,” said Mike Strain, Commissioner of Louisiana’s Dept. of Agriculture and Forestry. “You can’t control Mother Nature, but we are glad to see our farmers get the assistance they need to alleviate some of the hardship.”

The ongoing drought that is affecting crops in more than half of the United States will likely accelerate wholesale food price inflation, the National Restaurant Association says. According to Hudson Riehle, senior vice president of the NRA’s Research and Knowledge Group, one-third of a restaurant’s sales typically go toward food purchases, so wholesale food costs are a big concern for many operators. In fact, he noted, restaurateurs rank food costs as the second biggest business challenge.

“With food costs rising, restaurant owners are adjusting their cost management strategies while managing consumer expectations of value at the same time,” Riehle said. “With a typical restaurant averaging pretax profit margins of three to five percent, operators will have to manager their escalating input costs to ensure those margins remain viable.”

LRA Communications
Director Erica Papillion
says the drought is adding
insult to injury given the
rise of food costs
in recent years.

WWL Radio interviewed Louisiana Restaurant Association Director of Communications Erica Papillion in early August, where she said, “Food prices are at an all-time high and have been for a few years now, but the drought is adding insult to injury. Restaurants try to absorb as much of the costs as they can, raising prices only as a last resort. But at some point they have to make a profit.”

In the CityBusiness article, New Orleans restaurants wither under drought-driven higher costs, restaurants are split on their tactics to deal with the rising costs. On one hand, Chophouse, a downtown steakhouse, has raised their menu prices given the alternative of reducing sizes of prime steaks or substituting choice steaks instead of prime. They’ve chosen quality and passed on the cost to the consumer.

Ralph Brennan Restaurant Group takes an entirely different approach. Corporate Executive Chef Haley Bittermann said that the restaurants will retool menu items if an element of a dish’s price has increased too drastically.

In the article she said, “If for some reason asparagus goes from $28 a case to $48 a case, we will ask if it is really that important to have asparagus on this dish, “ she said. “And if the product is an integral part of the dish, we’ll just change the dish instead of raising prices.”

To overcome a price hike, she added, some restaurants will opt for what’s affordable. For example, instead of a filet mignon on the menu, you may see hanger or skirt steak.