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QSRs Show Signs of Recovery Globally

01 Apr 2010 - The restaurant industry is slowly showing signs of improvement in domestically and abroad, according to recent data.

The restaurant industry is slowly showing signs of improvement in domestically and abroad, according to recent data.

Market research company NPD Group has reported that foodservice across the globe experienced weak traffic and consumer spending for most of 2009, but saw some improvement in quick-service restaurant traffic in many countries in the last quarter of the year. And data from the National Restaurant Association shows that the domestic Restaurant Performance Index (RPI) rose in February to its highest level in slightly more than two years.

"No doubt 2009 was a very rough year for global foodservice, but we did see signs of improvement in the fourth quarter as the global economy and consumer confidence improved," said Bob O'Brien, senior vice president of global foodservice at NPD, in a news release. "We are still some way from a broadly healthy global foodservice industry."

According to NPD's CREST data, traffic at QSRs grew in Canada, Japan and Italy during the fourth quarter of 2009. According to O'Brien, a return to QSR, which historically leads the foodservice industry out of economic downturns, is both a sign of improvement and consumers "trading down" to a less expensive dining experience. Another area showing positive signs was traffic in the non-commercial segment, such as schools and business cafeterias, in Canada and Germany, indicating a sign of growth in employment and school enrollment.

"Consumer confidence in Canada has steadily increased over the past two quarters, up from the historical lows at the beginning of 2009," said Robert Carter, NPD's country manager for Canadian foodservice. "With increasingly positive economic conditions, Canadians are starting to feel as if the worst of the economic crises is behind them."

France also was among the countries showing some improvement in its foodservice traffic as a consequence of an improved economy.

"2009 marked the end of the recession in France, which started in the second quarter of '09," said Christine Tartanson, NPD's country manager for France foodservice. "Visits to QSR are improving, and families increased their restaurant visits and supported an increase in weekend traffic (up 4 percent in 2009 vs. 2008). However, lunch, the key daypart in the French industry, declined 8 percent for the year, and no other dayparts did well enough to make up for this weakness."

According to NPD's CREST foodservice market research, which tracks commercial foodservice usage in Canada, China, France, Germany, Italy, Japan, Spain, United Kingdom, and United States, all of the countries it tracks ended 2009 with restaurant traffic down compared to year ending December 2008. Spain, United Kingdom, and United States experienced the steepest traffic declines in 2009. In nearly every country, except the United States and Germany, customer checks fell as restaurants sought appealing price points and consumers managed their outlay on a case-by-case basis.

NPD began tracking foodservice in China in January 2009 and will have a year-to-year comparison beginning in the first quarter of 2010. According to NPD, the economy in China grew 8.7 percent in 2009 over 2008 due to government and business investment, although there was a shift to growth in consumer spending in the fourth quarter. China's improved economic environment resulted in a 3 percent increase in foodservice traffic in the fourth quarter versus the third quarter of last year.

NRA notes signs of industry optimism

Domestically, the improvement in the NRA's RPI was driven by a solid improvement in restaurant operators' outlook for sales growth, capital spending plans and staffing levels. The comprehensive index of restaurant activity stood at 99.0, up 0.7 percent from January and its strongest level since November 2007.

"The RPI's strong gain in February was the result of broad-based improvements among the forward-looking indicators," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the association. "Restaurant operators' optimism for sales growth stood at its strongest level in 29 months, with capital spending plans also rising to a two-year high.

"In addition, restaurant operators reported a positive outlook for staffing gains for the first time in more than two years. This bodes well for replacing the more than 280,000 eating and drinking place jobs lost during the recession."

Watch a video of Riehle's monthly industry update.

The RPI — a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry — remained below 100 for the 28th consecutive month. The index consists of two components, the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.7 in February – up 0.1 percent from January’s level of 96.6. February, however, represented the 30th consecutive month below 100, which signifies contraction in the current situation indicators.

Restaurant operators reported negative same-store sales for the 21st consecutive month in February, with the overall results similar to the January performance. Twenty-eight percent of restaurant operators reported a same-store sales gain between February 2009 and February 2010, compared with 27 percent of operators who reported higher sales in January. Fifty-seven percent of operators reported a same-store sales decline in February, matching the proportion who reported negative sales in January.

Other Current Situation Index scores include:

• Twenty-five percent of restaurant operators reported an increase in customer traffic between February 2009 and February 2010, down slightly from 26 percent who reported higher customer traffic in January.
• Fifty-five percent of operators reported a traffic decline in February, compared with 54 percent who reported lower traffic in January.
• Thirty percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the past three months, down from 32 percent last month and the lowest level on record.

In contrast to the trends in the current situation indicators, restaurant operators are increasingly optimistic about improving conditions in the months ahead.

Expectations Index still above 100

The Expectations Index, which measures restaurant operators' six-month outlook for same-store sales, employees, capital expenditures and business conditions, stood at 101.4 in February — up 1.2 percent from January and its strongest level in 29 months. In addition, the Expectations Index stood above the 100 level for the second consecutive month.

Restaurant operators are increasingly optimistic about sales growth in the months ahead. Forty-four percent of restaurant operators expect to have higher sales in six months (compared with the same period in the previous year), up from 33 percent who reported similarly last month and the strongest level in 29 months. In comparison, just 16 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 22 percent last month.

Other Expectations Index scores include:

• Thirty-eight percent of restaurant operators said they expect economic conditions to improve in six months, while just 13 percent expect economic conditions to worsen during the next six months.
• Last month, 29 percent of operators said they expected the economy to improve in six months, and 18 percent expected economic conditions to deteriorate.
• Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 43 percent who reported similarly last month and the strongest level in two years.

Another encouraging sign is operators' outlook on staffing. For the first time in more than two years, restaurant operators reported a positive outlook for staffing gains in the months ahead. Twenty-two percent of operators expect to increase staffing levels in six months (compared with the same period in the previous year), while just 16 percent plan to reduce staffing levels in six months.

Source: QSR Web - http://www.qsrweb.com/

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