Recession Routs Restaurant Profits

Researchers have broken post-recession consumers into two groups: conservative spenders who do not believe a recovery is on the horizon, and optimistic spenders who are either unaffected by …

Researchers have broken post-recession consumers into two groups: conservative spenders who do not believe a recovery is on the horizon, and optimistic spenders who are either unaffected by the recession or are optimistic of a quick turnaround. Unfortunately for restaurants, the former outweighs the latter by two-thirds and are cutting back on discretionary spending, including eating out. For more on this continue reading the following article from BlueMauMau.

A leading market researcher says that the Great Recession has caused consumers to split into free spenders and cautious spenders.  Researcher NPD Group predicts that the dichotomy between these two mindsets will shape the restaurant industry now and into the future.

Seventy-six percent of consumers surveyed in a study the group conducted were cautious spenders. They skew toward the unemployed, less affluent, and retirees. These consumers are still reducing restaurant visits, trading down, and ordering fewer items. While these consumers anticipate that they will be less restrictive with their restaurant visits when the economy recovers, they do not expect the economy to recover any time soon.

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Twenty-four percent of respondents are relatively unaffected by the recession. They are optimistic in general and have been less inclined to moderate their restaurant visits, although this group did trade down in segment visits since 2007. They cross all demographic groups but are more likely to be employed and live in affluent households.

"There is considerable disparity between the views of optimists and controlled spenders regarding enticement to visit restaurants more often," says Bonnie Riggs, NPD restaurant industry analyst and author of the report. "Optimists place much more importance on service and a relaxing atmosphere than controlled spenders, who are more concerned with price and value."

According to NPD’s continual tracking of consumer use of food service outlets and restaurants, the restaurant industry is slowly recovering from two years of traffic declines. For the 12 months ending in February 2011, total industry traffic has been flat compared to a three percent decline in the industry the year before. NPD forecasts the industry to grow less than one percent a year through 2019.

This article was republished with permission from BlueMauMau.

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