Restaurant Traffic to Recover at End of 2010

CHICAGO - After five consecutive quarters of traffic declines through September 2009, restaurant visits will remain weak at least through the first half of 2010, according to a forecast by The NPD Group, a marketing research firm. NPD forecasts that the rate of visit declines will slow in the first half of the year and turn slightly positive in the second half of 2010.

"Historically, the restaurant industry neither leads the economy into or out of periods of economic downturns," says Bonnie Riggs, NPD's restaurant industry analyst and author of the report Restaurant Industry: What To Expect When Economic Recovery Begins. "This recession is generally believed to be more severe than those in recent history, and this time the industry not only realized traffic losses, consumer spending declined as well.  This is first time since NPD began tracking that the industry realized a falloff in dollars spent at restaurants."

High unemployment, low consumer confidence, tightened credit, lower grocery store prices, and other factors have taken their toll on consumers and their ability to increase spending, resulting in fewer visits to restaurants and related dollar growth.  According to NPD, which tracks consumer usage in the foodservice industry, traffic declined across all restaurant segments for the quarter ending September 2009. Total industry traffic declined by 4 percent during the quarter compared to same time a year ago. Visits to quick service/fast food restaurants (QSR), which represents the largest share of the industry, declined by 4 percent. Casual dining was down 5 percent. Midscale visits were down 4 percent. And consumer spending for total restaurants declined by 2 percent.

The non-commercial foodservice sector has also experienced declines. For the year ending September 2009, non-commercial foodservice traffic experienced declines in sectors most affected by high unemployment, such as business and industry, vending, and lodging. Business and industry posted a 16 percent traffic decline for the year ending September 2009 versus a year ago.

Still there are signs of improvement. While consumers may be worried about the future of their jobs and falling incomes, their attitudes about the economy are slowly changing, NPD found. According to a recent NPD foodservice survey, consumers believe the economy is beginning to improve or, at the very least, is not going to get any worse.

Kim McLynn, a spokesperson for NPD, says this about the firm's projection of an uptick in restaurant demand in the second half of 2010: "The forecast is based on an analytic model built on NPD's 30-plus years of tracking consumer usage of the food service industry, and takes into consideration a series of macroeconomic and industry factors such as consumer confidence, unemployment, etc."

"Consumers have been hurt worse financially in this recession," says Riggs.  "It's just going to take a while before they feel comfortable spending again."