Viewpoint February 2008
Predictions for 2008 for the Restaurant Industry
by Orrick Nepomuceno,
CPC – Vice President, Dick Wray Executive Search
1. Sluggish Sales Growth Will Continue For 2008. The restaurant industry overall will see
very conservative growth across all segments (casual, quick casual, quick service and
fine dining). According to NRA estimations, the industry will see only a 0.9% sales growth
for 2008. Although more Americans are spending a higher percentage of their
disposable income allocated for food then ever before, most households will be less likely
to eat out several times a week. Most likely, they will eat at home and save instead.
Even if the President's economic stimulus package does pass and Americans see a few
extra spending dollars, most economists believe that most households are barely making
ends meet. Bottom Line: Americans will have more disposable income in their wallets,
but will probably consider saving instead of spending.
2. Increased Energy And Wholesale Food Costs Will Have A Negative Effect. With the
price fluctuations in crude oil, lower and mid level-income households will feel a tighter
pinch on spending disposable income on dining out as they will be inevitably hit hard with
increased gasoline prices. Studies have shown a direct correlation to slumping
restaurant sales and the increase in gasoline prices. Additionally, 2007 saw a nearly 8%
increase in wholesale products. Much of this cost was eventually passed on to the
consumer in higher menu prices. Most estimations see wholesale food costs to remain
high for 2008 as well. Bottom Line: Households will get a double hit with transportation
and dining expenses.
3. Technology Will Continue To Advance Even More Rapidly Than In Previous Years. Companies will look to the Internet for connecting with customers in more ways than
before. Traditional print and television mediums will drive consumers to websites for
offerings and coupons. Online ordering will become more robust as mobile handheld
devices such as the iPhone have web browsing capabilities similar to their desktop
versions. Also, a “Facebook” and “MySpace” type of social networking will become more
prevalent with company sites where consumers can create online profiles. Bottom Line:
The restaurant industry has a long way to go before it catches up with other industries in
terms of technology.
4. Recruitment And Retention Will Be Of A Lesser Concern. The restaurant industry has
always been a labor-intensive industry with recruitment and retention being typically the
biggest concern among most hiring manager. But for 2008, according to NRA
predictions, the industry will see a relatively small increase (0.9%) in the employment
rate. Coupled with a slowing economy, job creation will be less than in 2007. Bottom
Line: Many operators' concerns will be moving towards cost reduction in order to stay
competitive.
5. Bullish On Coffee Bars. On segment, although relatively small, the Snack & Non-
Alcoholic Beverage Bars (Coffee and Dessert bars) will see higher than normal growth
compared to other segments. Bottom Line: Companies will look to find niche segments
where there is little or no saturation.
6. Global Cuisine. At a recent conference of Executive Chefs across America, most
commented on smaller sized portions and introduction of ingredients from different parts
of the world. Ethnic cuisines moved away from the traditional one found in the US to
regions such as Latin America, the Mediterranean, Middle East and Southeast Asia.
These chefs also commented on utilizing more local produce, sustainable seafood and
grass fed beef and poultry. Bottom Line: American diners are becoming more savvy and
demanding more exotic flavors when they go out.
7. Fat Is Not In. Americans are demanding healthier foods. Look for menu offerings at
current concepts to reflect this trend, but also expect new concepts such as Seasons 52
to emerge and fully embrace this. With obesity in America on the verge of becoming an
epidemic and local municipalities looking to stiff arm the industry into removing trans-fats
and other harmful foods, look for the restaurant industry to try and get ahead of the curve
on the food it serves. Bottom Line: Expect local municipalities to continue to embark
campaigns to reduce the consumption of trans-fats.
The start of 2008 has already set an unsettling tone.
The real estate market continues to be a drain on the economy as the valuation of homes
decrease and the mortgage lender fiasco unravels. Earlier this week the Fed cut rates in hopes
of slowing down an inevitable recession.
Although I firmly believe that the restaurant industry is strong and has been through this before,
there are external factors that will ultimately effect the foodservice and restaurant industries.
After you have read my predictions, I would enjoy if you would share your thoughts. I can be
contacted at Orrick@dickwray.com
Orrick Nepomuceno, CPC is Vice President of Development at Dick Wray Executive Search and author of “Hitchhiker In The Corner Office: Avoid The Hiring Potholes So Your Employees Don’t Hit The Road!” He is also a featured expert author at EzineArticles.com.