1. 10 Things You Need to Know about the Restaurant Industry
Midwest Foodservice Expo
March 13, | Milwaukee, WI
Annika Stensson
Director, Research Communications
National Restaurant Association
@WeRRestaurants
/RestaurantDotOrg
Restaurant.org/Research
/NationalRestaurantAssociation

2. Agenda 1. The restaurant industry is big 6. Job growth ahead
2. Sales growth varies
7. Technology is gaining acceptance
3. Consumers are poised to spend
8. Consumers are more engaged
4. Tailwinds are offset by headwinds
9. Trends are becoming idea-based
5. Recruitment is top challenge
10. Top menu trends include nutrition, sourcing, global flavors

3. The restaurant industry is big

4. DEFINITION: “Restaurant Industry” “Food Away from Home”
All meals/snacks prepared away from home, including all takeout meals and beverages.

5. $799 billion 14.7 million 1+ million
Restaurant Industry 2017
Sales:
Employees:
Locations:
$799
billion
14.7
million 1+
million
Source: National Restaurant Association

6. An Economic Powerhouse
Annual sales are larger than 90% of the world’s economies.
Sales projected to advance by $33 billion in 2017 – roughly double Hollywood’s annual domestic box office sales.

7. Sales growth varies

8. 47 Years of Restaurant Industry Sales (1971-2017)
Source: National Restaurant Association

9. Segment Sales Growth Tableservice restaurants
Quickservice and fast casual restaurants
Managed services
Snack and nonalcoholic beverage bars
Source: National Restaurant Association

10. The Critical Role of Demographics
in 2017
Region
Population Growth
Employment Growth
Mountain
1.6%
2.4%
South Atlantic
1.4
2.1
West South Central
1.3
Pacific
1.0
2.2
East South Central
0.7
1.8
New England
0.5
1.6
West North Central
East North Central
0.1
1.2
Middle Atlantic
U.S. Average
0.8
Source: National Restaurant Association

11. Dramatic Consumer Confidence Variations By Region Continue
January 2017
REGION
INDEX
West North Central
147.3
Mountain
124.1
Pacific
130.2
South Atlantic
128.2
East South Central
121.6
East North Central
115.3
West South Central
113.4
Middle Atlantic
111.0
New England
106.9
Source: The Conference Board

12. Projected Restaurant Sales Growth in 201712
Projected Restaurant Sales Growth in 2017
National Average: 4.3% DC
5.5% or more
5.0% to 5.4%
4.0% to 4.9%
3.5% to 3.9%
3.4% or less
Source: National Restaurant Association

13. The Midwest Restaurant sales 2017 (projected) $ Billion Illinois Ohio
Michigan
Indiana
Missouri
Minnesota
$25.2
$20.1
$15.9
$11.6
$10.5
$9.7
Wisconsin
Kansas
Iowa
Nebraska
South Dakota
North Dakota
$8.6
$4.8
$4.4
$3.0
$1.3
Source: National Restaurant Association

14. Consumers are poised to spend

15. Where Do Consumers Spend?
SPENDING CATEGORY
PERCENT OF TOTAL
Housing
33%
Transportation
17%
Food
13%
Insurance/pensions
11%
Health care 8%
Entertainment 5%
Contributions 3%
Clothing
Other 7%
Total
100%
Source: Bureau of Labor Statistics, 2015 Consumer Expenditure Survey; National Restaurant Association

16. Restaurant Industry’s Share of the Food Dollar
1955
Present
1955: 25%
Now: 48%
Source: National Restaurant Association

17. Consumers’ assessment of the national economy: 2010 – 2016
Are Consumers Finally Warming up to the Economy?
Consumers’ assessment of the national economy: 2010 – 2016
Source: National Restaurant Association, National Household Survey, 2010 – 2016

18. Consumer Confidence Trended Higher in Recent Months
U.S. Consumer Confidence Index
Source: The Conference Board

19. Pent-Up Demand for Restaurants Remains High 27% 45% 39% +12
Percentage of adults NOT using restaurant services
as often as they would like
2006
2013
2016
Percentage Point Change 2006 vs 2016
All Adults
27%
45%
39%
+12
Source: National Restaurant Association 19

20. Tailwinds are offset by headwinds

21. Wholesale Food Prices Declined for Second Straight Year
Annual growth in Producer Price Index – All foods
Source: Bureau of Labor Statistics

22. Rising Labor Costs Are Offsetting the Benefits from Lower Food Costs
Average Hourly Wages of Restaurant Employees vs. Average Wholesale Food Costs
Percent change vs. same month in previous year
+4.9%
-1.6%
Source: Bureau of Labor Statistics

23. Menu Price Growth Remains Moderate
Annual growth in Consumer Price Index – Food away from home
Source: Bureau of Labor Statistics; National Restaurant Association projections *Projected

24. Gap Between Growth in Menu Prices and Grocery Store Prices Continues
Menu Prices vs. Grocery Store Prices
Percent change vs. same month in previous year
+2.4%
-1.9%
Source: Bureau of Labor Statistics

25. Potential for stronger growth ahead
U.S Economic Outlook
Potential for stronger growth ahead
INDICATOR
2016
2017
Real Gross Domestic Product
1.6%
2.6%
Real Disposable Personal Income
2.7%
2.2%
Consumer Price Index
1.2%
Total U.S. Employment
1.7%
1.5%
2018
2.8%
2.5%
1.5%
Source: National Restaurant Association projections as of February 2017

26. Headwinds Continue Into 2017
Disposable income growth slowed in 2016.
Real household income is rising but remains below pre-recession levels.
Gas and diesel prices projected to rise in 2017.

27. Recruiting is top challenge

28. Top Challenges Facing Operators
JANUARY 2016
Recruiting Employees %
Labor Costs %
Sales Volume %
The Economy %
Government %
JANUARY 2014
Food Costs %
Government %
Sales Volume %
Labor Costs %
Recruiting Employees %
JANUARY 2015
Government %
The Economy %
Recruiting Employees %
Labor Costs %
Sales Volume %
Source: National Restaurant Association, Restaurant Industry Tracking Survey

29. Economy is Now 7.1 Million Jobs Above Pre-Recession Peak29
Economy is Now 7.1 Million Jobs Above Pre-Recession Peak
43 States Have More Jobs Than Before the Jobs Losses Started in Feb. 2008
+20%
-6% DC
5% or more
2% to 4.9%
0% to 1.9%
-0% to -1.9%
-2% or fewer
+15%
National Average: 5.1% More Jobs
Source: Bureau of Labor Statistics

30. Job growth ahead

31. Restaurant Industry Employment
(in millions)
Source: National Restaurant Association *projected

32. Projected Change in U.S. Labor Force by Age
2014 to 2024 (in millions)
Source: Bureau of Labor Statistics

33. Technology is gaining acceptance

34. Tech Influences
Consumers who say availability of technology makes them choose one restaurant over another.
Source: National Restaurant Association, 2016

35. In-Store Tech Usage Have used Willing to use Free Wi-Fi 55% 69%
Consumers who have used these options in the last year; consumers who would be willing to use these options in the future when available
Have used
Willing to use
Free Wi-Fi
55%
69%
Tableside payment
43%
64%
Electronic ordering station (tableservice)
33%
54%
Touch-screen ordering kiosk (QSR)
32%
59%
None
29%
18%
Source: National Restaurant Association, 2016

36. Restaurant Smartphone Tech
Consumers who use smartphones or tablets for these activities occasionally
Percent of adults
Look up restaurant locations, directions and hours
88%
Look at menus
72%
Order takeout or delivery
63%
Read online reviews
58%
Use loyalty programs and rewards
56%
Make reservations
46%
Look up restaurant nutrition information
44%
Pay for meals
34%
Source: National Restaurant Association, 2016 – Base own/use smartphone/tablet

37. Technology Is Growing
66% of consumers say tech options increase convenience
61% say tech options speed up service
56% say tech options increase order accuracy
37% of consumers report technology makes restaurant visits and
ordering more complicated
Source: National Restaurant Association, 2016

38. What’s In It for Restaurateurs?
35% of consumers say tech options make dining out more fun
30% say tech options make them dine out or order takeout/delivery more often
26% say tech options make them choose one restaurant over another
Source: National Restaurant Association, 2016

39. Consumers are more engaged

40. Quality Time
Consumers who say dining out is a better use of time than cooking and cleaning up.
Source: National Restaurant Association, 2016

41. Unique Experiences
Consumers who say restaurants provide tastes and flavors that aren’t easily duplicated at home.
Source: National Restaurant Association, 2016

42. Food Knowledge
Restaurant operators who say their customers have higher expectations for the following than they did two years ago
Source: National Restaurant Association, 2016

43. More Menu Diversity
Restaurant operators who say their restaurant offers a wider variety of menu items now than it did two years ago
Source: National Restaurant Association, 2016

44. Trends are becoming idea-based

45. Options Consumers Say Make Them Choose One Restaurant Over Another
Healthy menu items %
Locally sourced food %
Environmentally friendly food %
Diet-specific food %
Source: National Restaurant Association, 2016

46. Noticing Healthful Options
Consumers who say there are more healthful options on restaurant menus now than two years ago.
Source: National Restaurant Association, 2016

47. Healthy Options = Important Factor
Consumers who say they are ordering more healthful options in restaurants now than two years ago.
Source: National Restaurant Association, 2016

48. DIY Health
Consumers who say they typically adhere to a specific diet, like vegetarian or gluten-free, when dining out.
Source: National Restaurant Association, 2016

49. Interest in Diet-Specific Food
Restaurant operators who say their guests are more interested in diet-specific food now than they were two years ago 49
Source: National Restaurant Association, 2016

50. Why Local Sourcing?
Consumers’ primary reason for preferring locally sourced items
Source: National Restaurant Association, 2016 – Base = consumers who say they would be more likely to choose one restaurant over another if it offered locally sourced food

51. Offering Locally Sourced Food
Restaurant operators who currently offer the following
Family dining
Casual dining
Fine dining
QSR
Fast casual
Locally sourced produce
51%
63%
84%
19%
59%
Locally sourced meat/seafood
47%
77%
13%
39%
Source: National Restaurant Association, 2016

52. Eco-Friendly Matters
Restaurant operators who currently offer food items that were grown or raised in an organic or environmentally sustainable way
Source: National Restaurant Association, 2016

53. Sourcing Matters
Restaurant operators who say their guests pay more attention to food sourcing and production than they did two years ago 53
Source: National Restaurant Association, 2016

54. International Flavors
Consumers who say they eat a wider variety of ethnic cuisines now than they did two years ago
Source: National Restaurant Association, 2016

55. Do You Want Eggrolls with That?
Restaurant operators who say the following about ethnic cuisine items outside of the main menu theme
Source: National Restaurant Association, 2016

56. Trends Becoming Ideas
Restaurant operators who agree food trends are becoming more concept-based than ingredient-based
Source: National Restaurant Association, 2016

57. Top menu trends include nutrition, sourcing and global flavors

58. What’s Hot in 2017 1. Hyper-local sourcing 6. Locally sourced meat
CONCEPT TRENDS
1. Hyper-local sourcing Locally sourced meat
2. Chef-driven fast casual 7. Food waste reduction
3. Clean menus Meal kits
4. Environmental sustainability 9. Simplicity
5. Locally sourced produce Nutrition
Source: National Restaurant Association, What’s Hot in 2017 chef survey

59. What’s Hot in 2017 1. New cuts of meat 6. Ethnic-inspired breakfast
FOOD TRENDS
1. New cuts of meat Ethnic-inspired breakfast
2. Street-food dishes House-made condiments
3. Healthful kids’ meals 8. Authentic ethnic cuisine
4. House-made charcuterie 9. Heirloom fruit/vegetables
5. Sustainable seafood African flavors
Source: National Restaurant Association, What’s Hot in 2017 chef survey

60. What’s Hot in 2016 1. Natural ingredients 6. Ethnic condiments
LIMITED-SERVICE Restaurants
1. Natural ingredients Ethnic condiments
2. Organic items Grass-fed beef
3. Gluten-free items Locally sourced produce
4. House-made items Local meat/seafood
5. Healthful kids’ meals Eco-friendly food
Source: National Restaurant Association, 2016

61. Movers & Shakers in 2017 Quinoa Poke Sodium-conscious cuisine
Trends COOLING DOWN
Trends HEATING UP
Quinoa
Sodium-conscious cuisine
Black rice
Vegetarian cuisine
Vegan cuisine
Poke
House-made charcuterie
Street food dishes
Food halls
Ramen
Source: National Restaurant Association, What’s Hot in 2016 chef survey

62. Trends to Watch 2017
Local as the new normal?: While still a hot trend, local sourcing is slowly moving toward perennial favorite.
Next generation global: Non-traditional ethnic cuisines and flavors becoming more mainstream.
Street food getting fancy: Tableservice restaurants are getting in the game of elevated tacos, bao and kebobs.
Fun with grains: Quinoa might be trending down, but other ancient grains are trending up.
Source: National Restaurant Association

63. Global Palates
80% of consumers eat at least one ethnic cuisine per month.
17% of consumers eat seven or more cuisines per month.
Restaurants are the primary point of access for trying new cuisines, and the source where frequent eaters typically get their ethnic food.
Source: Global Palates: Ethnic Cuisines and Flavors in America, National Restaurant Association, 2015

64. Global Palates
43% say the ethnic foods they like to eat are tied to their family’s ancestry or heritage. 82% typically start with traditional staple dishes when trying a new cuisine. 69% don’t really care if ethnic food is truly authentic as long as it tastes good.
Source: Global Palates: Ethnic Cuisines and Flavors in America, National Restaurant Association, 2015

65. 10 Things You Need to Know about the Restaurant Industry
The restaurant industry is big.
Sales growth varies.
Consumers are poised to spend.
Tailwinds are offset by headwinds.
Recruitment is top challenge.
Job growth ahead.
Technology is gaining acceptance.
Consumers are more engaged.
Trends are becoming idea-based.
Top menu trends include nutrition, sourcing and global flavors.