Restaurant industry sees slow recovery

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The restaurant industry appears on the road to recovery, but it will remain a slow, bumpy ride, according to the NPD Group, which expects restaurants will continue to offer deals to lure customers.

Traffic to restaurants was basically flat last year, NPD said, but visits to restaurants fell from 62 billion in 2007, the year the Great Recession began, to 59 billion in 2010.

“We bottomed out last year,” NPD industry analyst Bonnie Riggs said, noting the latest recession was the worst since NPD began tracking the industry in 1976. “Never before have we seen weakness of this magnitude for this prolonged period of time. Through 2010, the rate of decline slowed. It was still negative, but not as weak. But in the fourth quarter, the decline stopped.”

The total number of restaurants in the Chicago metropolitan area dipped 0.5 percent in the third quarter of last year, or by 95 restaurants, to 18,303. Nationally, 5,551 restaurants closed, a dip of just under 1 percent, NPD said. The number of chain and quick service restaurants lost no ground locally. But nationally, quick service restaurants declined 0.7 percent. The number of full-service restaurants dipped 1 percent both locally and nationally.

The hardest hit segment both locally and nationally was independent restaurants, down 1 percent in the Chicago area and down 1.7 percent nationally.

“The independents got hit really hard, the small guys that don’t have a lot of marketing clout, the ones that weren’t able to get financial support to stay in business,” said Riggs.

Among Chicago area restaurants that closed last year were Eve in the Gold Coast and Cafe Matou in Bucktown.

John Meyer, owner of Chicago-based BJ’s Market & Bakery, an independent restaurant with three locations in Chicago, including a site at O’Hare airport, said 2010 was a challenging year. Sales fell 2 to 3 percent from 2009, but business picked up in December and is up this month over last January, he said.

What has been key to his persevering through recession when other independents have fallen?

“You have to pay attention to what’s going on,” he said. “You’ve got to watch your numbers. You’ve got to watch what customers are ordering. We had to take some things off the menu. If we weren’t selling a certain amount of one item, we had to take it off and concentrate on the items that were selling. The customers spoke with their pocketbook.”

He added a focus on staff training and avoiding waste also have been key. His staff cooks less, but more often, “so we don’t have a lot of food left over,” he said.

Meyer is projecting sales growth of at least 5 percent at his business this year if current trends continue. That would exceed NPD’s expectations for the industry. NPD forecasts sales growth of 2.3 percent industry wide this year. Traffic is forecast to eke up 0.1 percent.

“Until the employment situation improves, the restaurant industry is not going to grow strongly,” Riggs said. “We have a change in consumer mindset when it comes to how they spend their money. They’re going to be looking for the best value that they can find for their dollar.”

That doesn’t mean the cheapest prices. Consumers are looking for fresh ingredients, quality and good tasting food at reasonable and affordable prices, Riggs said, adding “deal-related” traffic, which includes coupons, manager’s specials and buy one, get one free deals, will continue. The deals have kept the industry from experiencing bigger traffic declines.

“Operators can’t just abruptly pull back on deals,” she said. “They’re going to have to gradually wean consumers off of them.”