MidAtlantic Food, Beverage and Lodging EXPO

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Mid-Atlantic Food, Beverage and Lodging
EXPO Baltimore, Maryland October 7, 2009
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Thriving in the Mid-Atlantic RegionChallenging
Times Create Innovative New Strategies
Paul Hartgen President Restaurant Association of
Maryland
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This program is sponsored by AdvantEdge
Services

• Herb Heiserman
• Principal, Heiserman Group

Visit us at Booth 513
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Restaurant Industry 2009 and Beyond
Hudson Riehle Senior Vice President Research and
Knowledge Group
Mid-Atlantic Food, Beverage and Lodging
EXPO Baltimore, Maryland October 7, 2009
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Agenda

• Overview
• Economic Backdrop
• Industry Segments
• Industry Imperatives
• Jobs and Careers
• Food and Healthy Living
• Sustainability and Social Responsibility
• Profitability and Entrepreneurship
• Regional Outlook
• Wrap-Up

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DEFINITION

• Restaurant Industry
• All meals/snacks prepared away from home,
  including all takeout meals and beverages

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• Restaurant Industry

Commercial Restaurant Services
Non-Commercial Restaurant Services
Military Restaurant Services
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OverviewThe Industry in 2009
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2008 2009
Most Challenging Period for Restaurant Industry
in Decades
10

• 39 Years of Restaurant-Industry Sales

Source National Restaurant Association
11

• Annual Sales
• 560 billion

12

• Employees
• 13 million

13

• Locations
• 945,000

14
Restaurant Industrys Share of the Food Dollar
1955 25
Present 48
Source National Restaurant Association
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The Industry Mosaic

• Fullservice
• Quickservice
• Cafeterias and buffets
• Caterers
• Snack and nonalcoholic beverage bars
• Managed services/contractors at
• Industrial plants
• Hospital/nursing homes
• Schools and universities
• Airlines
• Recreation and sports centers

• Lodging places
• Retail hosts
• Book stores
• Service stations
• Convenience stores
• Self-operated restaurant services
• Military restaurant services

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• Economic Backdrop

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National Economy Expected to Improve in 2010
U.S. Real Gross Domestic Product Historical and
Projected Growth Rates
Source Bureau of Economic Analysis National
Restaurant Association
18
Recovery Expected to Be Slow and Modest
U.S. Real Gross Domestic Product Quarterly
Annualized Growth Rates
Source Bureau of Economic Analysis National
Restaurant Association
19
Income Growth Expected to Remain Modest in 2010
Real Disposable Personal Income Historical and
Projected Growth Rates
Source Bureau of Economic Analysis National
Restaurant Association
20
Home Equity Cashed Out Through Refinancing Each
Quarter
Includes refinancing of prime, first-lien
conventional mortgages
Source Freddie Mac
21
Personal Saving Rate Trending Upward
Personal Saving as a Percentage of Disposable
Personal Income
Source Bureau of Economic Analysis
22
Gas Prices Remain Below 2008 Levels
Average price per gallon for regular gasoline
Source U.S. Department of Energy, Energy
Information Administration
23
Tourism Drives Restaurant Sales
Median proportion of restaurant sales represented
by travelers and visitors
40
25
25
15
Family Dining
Casual Dining
Fine Dining
Quickservice
Source National Restaurant Association
24
International Arrivals to the U.S. Down 10 in
First Half of 2009
Percent change in number of international
arrivals to the U.S.
Source U.S. Department of Commerce
Year-to-Date growth through June 2009
25
Job Losses Likely to Continue into 2010
Total U.S. Employment Historical and Projected
Growth Rates
Source Bureau of Labor Statistics National
Restaurant Association
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Consumer Confidence Edging Back Up from Record
Lows
U.S. Consumer Confidence Index
Source The Conference Board
27
Wholesale Food Prices Down for First Time in
Seven Years
Wholesale Food Prices Historical and Projected
Growth Rates
Source Bureau of Labor Statistics National
Restaurant Association
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Menu Prices Expected to Post Moderate Growth in
2009 Menu Prices Historical and Projected
Growth Rates
Projected
Source Bureau of Labor Statistics National
Restaurant Association
29
Economy Remains the Top Challenge Facing
Operators
Top Challenges Facing Restaurant Operators Sep.
2007, Sep. 2008, Sep. 2009
Source National Restaurant Association,
Restaurant Industry Tracking Survey
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Total Monthly Sales Just Slightly Above 2008
Levels
Seasonally-adjusted Monthly Sales at Eating and
Drinking Places (in billions)
Source U.S. Census Bureau
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Restaurant Performance Index Below 100 for 22nd
Consecutive Month
Source National Restaurant Association
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Expectations Index Rising as Operators Grow More
Optimistic
Source National Restaurant Association
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Restaurant Operators Continue to Plan for Capital
Expenditures
Proportion of operators that made a capital
expenditure for equipment, expansion or
remodeling in last 3 months and plan to in the
next 6 months
Source National Restaurant Association
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• Industry Segments

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Fullservice Restaurant Sales
183 billion
181 billion
2008
2009
Source National Restaurant Association
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Pent-Up Demand for Restaurants Percent of
adults NOT eating on-premises at restaurants as
often as they would like

• Percentage
• 2007 2008 Point Change
• All Adults 31 33 2
• Household Income
• 50,000 - 74,999 23 29 6
• 75,000 or more 17 24 7

Source National Restaurant Association
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Percent of adults NOT eating on-premises at
restaurants as often as they would like
Pent-Up Demand for Restaurants Continues to Grow
Source National Restaurant Association
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Limited-Service Restaurant Sales
164 billion
157 billion
2008
2009
Source National Restaurant Association
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Managed Services Sales
40.1 billion
38.3 billion
2008
2009
Source National Restaurant Association
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• Jobs and Careers

41
Over two out of five American adults have worked
in the restaurant industry.
Source National Restaurant Association
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Total Restaurant-Industry Employment
14.8 million
13.0 million
10.9 million
1999
2009
2019
Source Bureau of Labor Statistics National
Restaurant Association projections
Projected
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Restaurants Down 119,500 Jobs from Pre-Recession
Peak (-1.2)
Net Change in Eating and Drinking Place
Employment (seasonally-adjusted)
Source Bureau of Labor Statistics
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National Economy Down 7.2 Million Jobs (5.2 of
Workforce)
Net Change in Total U.S. Employment
(seasonally-adjusted)
Source Bureau of Labor Statistics
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• Food and Healthy Living

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Hot/Trendy Food Offerings Fullservice Restaurants

• Locally grown produce
• Bite size desserts
• Organic produce
• Nutritionally-balanced childrens dishes
• New/fabricated cuts of meat (e.g. Denver steak,
  pork flat iron, bone-in Tuscan veal chop)

Source National Restaurant Association American
Culinary Federation, 2008
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Hot/Trendy Food Offerings Quickservice Restaurants

• Healthy options in kids meals
• Organic items
• Locally-sourced items
• Spicy items
• Wraps/pitas/tortillas

Source National Restaurant Association,
Quickservice Restaurant Survey 2008
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Hot/Trendy Alcoholic Beverage Offerings Fullservic
e Restaurants

• Micro-distilled/artisan liquor
• Culinary cocktails (e.g. savory, customized to
  specific dishes)
• Organic wine
• Craft beer/microbrews
• Specialty beer (e.g. seasonal, fruit)

Source National Restaurant Association American
Culinary Federation, 2008
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Hot/Trendy Non-Alcoholic Beverage
Offerings Fullservice Restaurants

• Specialty iced tea (e.g. Thai-style,
  Southern/sweet, flavored)
• Organic coffee
• Flavored/enhanced water
• Green tea
• Espresso/specialty coffee

Source National Restaurant Association American
Culinary Federation, 2008
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Hot/Trendy Non-Alcoholic Beverage
Offerings Quickservice Restaurants

• Energy drinks
• Flavored/enhanced water
• Espresso/specialty coffees
• Sports drinks
• Iced tea

Source National Restaurant Association,
Quickservice Restaurant Survey 2008
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Three out of four adults (76 percent) said they
are trying to eat healthier now at restaurants
than they did two years ago.
Source National Restaurant Association
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Nearly three out of ten adults (27 percent) said
they have gone online to search for nutrition
information about restaurant food.
Source National Restaurant Association
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• Sustainability and Social Responsibility

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Going Green Percent of operators, by type of
operation, who plan to devote more oftheir
resources to green initiatives in 2009
Family dining
Casual dining
Fine dining
Quickservice
43
45
50
27
Source National Restaurant Association, 2008
55
Forty-four percent of adults said they are likely
to make a restaurant choice based on a
restaurants practices in the areas of energy and
water conservation.
Source National Restaurant Association
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Conservation InitiativesPercent of restaurant
operators who took the following actions in 2008

• Family Casual Fine
  Quick
• Dining Dining Dining
  Service
• Purchase Energy-Saving Lighting
  Fixtures 64 52 63 41
• Purchase Energy-Saving Kitchen Equipment 44 40
  36 36
• Purchase Energy-Efficient Refrigeration,
  Air 40 40 41 30
• Conditioning or Heating Systems
• Install Water-Saving Equipment and/or
  Fixtures 34 28 37 26

Source National Restaurant Association
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Fifty-two percent of adults said they are likely
to make a restaurant choice based on how much a
restaurant supports charitable activities and the
local community.
Source National Restaurant Association
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• Profitability and Entrepreneurship

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The Restaurant Industry Dollar
Source Deloitte National Restaurant Association
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Same-Store Sales and Customer Traffic Remain Soft

Proportion of Restaurant Operators Reporting
Higher/Lower Same-Store Sales
Source National Restaurant Association
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A New Generation Proportion of fullservice
customers who said they would utilize the option
of a touch-screen TV monitor at the table, which
gave the options to view the menu, place the
order, pay the bill, browse the Internet, watch
TV and play video games, if it was offered by a
fullservice restaurant
Source National Restaurant Association
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A New Generation Proportion of fullservice
customers who said they would utilize the option
of receiving cell phone text message
notifications of daily specials, if it was
offered by a fullservice restaurant
Source National Restaurant Association
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A New PerspectiveSeventy-five percent of adults
would patronize fullservice restaurants more if
they were offered discounts for dining on less
busy days of the week.
Source National Restaurant Association
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• Regional Outlook

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U.S. Jobless Rate Stood at 9.8 in September
Seasonally-adjusted Unemployment Rates in August
2009
lt 7 7 to 8.9 9 to 10.9 11
Source Bureau of Labor Statistics
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Dramatic Consumer Confidence Variations By Region

Present Situation September 2009
Source The Conference Board
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Growth in Key Indicators
Source National Restaurant Association
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• Wrap Up

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Unfulfilled Demand for Restaurant Services
Remains High
Over one-third of adults are NOT dining
on-premises or using take-out as often as they
would like
Source National Restaurant Association
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Americans Love RestaurantsPercent of adults who
said they enjoy going to Restaurants 90
Grocery Stores 55
Source National Restaurant Association
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Wrap-Up

• Modest real GDP growth resumes
• Patchy and prolonged recovery
• Job market remains weak
• With soft economic backdrop, value emphasis
  continues
• However, 2010 environment will be better than
  prior two years
• Menu healthy kids meals, local produce, mini-
  desserts, artisan spirits
• Workforce higher productivity through greater
  focus on technology
• Growing role of green initiatives
• Pent-up demand for restaurants nudging /
  incenting consumer positive future despite
  challenges

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Restaurant Industry 2009 and Beyond
Hudson Riehle Senior Vice President Research and
Knowledge Group
Mid-Atlantic Food, Beverage and Lodging
EXPO Baltimore, Maryland October 7, 2009
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Our Panelists

• Michael Sternberg, Enovo Restaurant Ventures
• Bob Barry, The Greene Sports Bar Grille
• Jim Wordsworth, J.R.s Stockyards Inn

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Thank You