Restaurant industry has long road to recovery

Product innovation, not rapid growth, vital to rebuildingtraffic, NPD says

The restaurant industry is well on its way to recovery, butit has yet to rebuild traffic to pre-recession levels, according to The NPDGroup, which said further gains will be spurred by product innovation, unitredesigns and a move away from discounting.

Despite improvement, per capital restaurant visits in 2010reached only the same levels seen in 2005 as consumers continue to spendcautiously, Warren Solochek, vice president of client development for The NPDGroup, said during a webinar presented Friday by Morgan Stanley restaurantanalyst John Glass.

“We are absolutely back at 2005 traffic levels because wedropped so many visits in 2008 and 2009,” Solochek said. “[The decrease] wasconsistent across high- and low-income groups. We asked people why they cutback on restaurant visits, and the vast majority say, … ‘What if I lose my job?I need to save for a rainy day.’ When we ask what it would take to bring themback [to dining out], a lot of them say an improvement in the economy.”

In order to get customers back, restaurants should focus ondeveloping new menu items and updating their locations, so that customers havedifferent reasons to visit restaurants and to perceive getting a good value forthe dollars they spend, Solochek said.

“Nobody should assume growth is going to come back at aquick rate in 2011 or 2012,” he said. “It’s all a share game. I would have saidat the end of 2010 that we’d be less dependent on value, but gas and groceryprices have gone up, so we all have less to spend. But people always want new,and they’re always willing to try new.”