Charting through the Economic Storm

CHICAGO (Blue MauMau) - Restaurant same-store sales growth has been trending down since 2004, says Ron Paul, president of restaurant research and consulting firm Technomic. According to the firm's November 2008 newsletter, the worst drop has been the quarter just passed, the third quarter, where aggregate comps were down 2.0%.

And food prices are still climbing, with September's price index for food away from home escalating 4.5% above 2007's level.

Paul thinks that the high prices have sparked a long-term change in consumer habits. "Consumers have had years to practice economizing," he observes. "They've discovered that ready-to-heat and ready-to-eat foods from supermarkets can be more convenient and less expensive than restaurant meals, and they've relearned the habit of eating at home just as overbuilding has left some restaurants half-empty."

All these market forces are converging to become one big storm for restaurants. Restaurants have been in a frenzy to offer better value and dining experience to attract more customers as well as to differentiate themselves from their competition.

Paul observes, "Companies that don't take measures to strengthen their business model risk being blown away in the storm."