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Restaurants should expect moderate growth on economic optimism, off-premises: report

2020 State of Restaurant Industry report reviews outlook, pathways to growth

The National Restaurant Association published its 2020 State of the Restaurant Industry Report, which has forecasted sales in the industry to reach $899B this year. The Association applied a moderate 4 percent growth rate over 2019 to arrive at that number. Consumer optimism is still robust, and has been since 2010, according to the report. In 2020, 18 percent of Americans assess the economy as excellent, growing from the 8 percent who did so in 2017. Also, consumers are seeking to use restaurants more often, which will continue to generate demand for new business.

In 2020, 45 percent of consumers said they would like to eat at restaurants more often, which is a full 3 percentage points higher than 2019. Moreover, the spread between consumers who are looking to dine out more and those looking for takeout or delivery is minimal—a signal to restaurants that off-premises dining is here to stay. A total of 43 percent of Millennials are looking to dine out more, but 41 percent are looking to do takeout/delivery more often.

For GenXers and Baby Boomers, that spread is even smaller. But both groups have a higher percentage of respondents saying they do not order in from restaurants as much as desired versus ordering out. For GenXers, 47 percent say they are not ordering in often enough, while 46 percent say they are not dining out as much as they would like. Baby Boomers stats are similar: 49 percent for not ordering in, and 48 percent for not dining out.

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Gen Z has the highest spread between not ordering in as much as desired and not dining out. This is also the group that is using the restaurant dine out experience more often. For starters, 44 percent of Gen Z say they don’t dine out as much as they would like, and 34 percent say they do not order in as much as they would like. The 8.2 restaurant occasions Gen Z consumers generate per week, whether off- or on-premises, is nearly 55 percent greater than the 5.3 average number of dining occasions for all generational demographic groups.

Consumers are looking to use restaurants more often, but not always by dining out. Photo by Kelly Sikkema.
Consumers are looking to use restaurants more often, but not always by dining out. Photo by Kelly Sikkema.

Dining demand, frequency

Consumers are racking up 5.3 average consumers occasions during the week, but when you add occasions from food retailers, including prepared foods, this increases to 6.4 foodservice occasions. Baby Boomers have the least number of restaurant occasions per week at 3.7, and 4.2 foodservice occasions. Millennials total 6.0 restaurant occasions and 7.4 total foodservice occasions. GenXers produce 5.9 restaurant occasions and 6.9 total foodservice occasions. Gen Z’s 8.2 restaurant occasions increases to 10.1 total foodservice occasions after adding in their food retailer visits.

Food retailers have been able to increase their share of total food occasions over time. However, the experience of a restaurant is much more desirable than that of a grocery store. A total of 87 percent of consumers prefer a restaurant to a grocery store, indicating that when the price, convenience and format fit the occasion and demand, restaurants are a preferred choice.

Economic outlook to boost demand for restaurant occasions

The job outlook will help boost demand for restaurant occasions. According to the 2020 State of the Restaurant Industry Report, the U.S. will add an average of 140,000 jobs each month during 2020. Under that scenario, unemployment should remain lower than 4 percent, the Association noted. Household net worth continues to increase, reaching $1.1T in 2019. Savings as a percent of total disposable income is about 8 percent, about 2-percentage points higher than it was just a decade ago.

Restaurant operators also feel fairly confident in the economic outlook. While 22 percent feel that business conditions would improve, only 16 percent thought they would worsen. About 6 in 10 operators think business conditions will remain the same.

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Off-premises biz a key sales driver

79 percent of restaurant operators from casual dining say off-premises is their best growth opportunity. Photo by Ross Sneddon.
79 percent of restaurant operators from casual dining say off-premises is their best growth opportunity. Photo by Ross Sneddon.

Off-premises will be a pathway to future business growth. More than 70 percent of restaurant operators in all segments say that off-premises is their best growth opportunity. The highest percentage comes from fast food and fast casual at 80 percent. The lowest percentage, naturally, comes from fine dining at 54 percent. Noteworthy is the 79 percent of restaurant operators from casual dining that say off-premises is their best growth opportunity.

Only about half of restaurants offer delivery, but 58 percent of consumers say they are ordering more delivery than they were two years ago. That’s a big disconnect, but a profound opportunity for many restaurants that have not jumped into the delivery game. For those in the game, about 7 in 10 overall have increased their delivery sales. The highest percentage reporting an increase comes from the casual dining segment at 80 percent. The lowest comes from fast casual, at 67 percent.

With an increased use of technology to improve operational efficiencies and reduce costs, and a growing appetite for restaurant food (not necessarily out of the home), restaurants can capitalize on many growing trends. The 2020 State of the Restaurant Industry Report provides some valuable insights into many operational facets and 2020 trends that can help shape increased business this year. To download the report, navigate here.

Photo credit: Lefteris Kallergis

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