As one of the toughest economic years in decades comes to a close, restaurant operators have to take solace in having survived it. The recession meant scant profits, fewer customers, and constrained innovation. But the arrival of a new year is a time to look ahead. With that in mind, QSR asked several industry experts to look into the near future and describe what they saw—the good, the bad, and the ugly—on the horizon in 2010.
Obviously, the state of the economy will continue to determine the fortunes of the restaurant business. The unemployment rate, which is now above 10 percent, is one of the most important numbers to watch, experts say.
“The bottom line is that as people continue to be unemployed and don’t have discretionary money to spend, that’s going to affect the restaurant industry,” says consultant Bob Sandelman, who does not expect an uptick for at least the first half of 2010. “The main challenge for chains is to continue to find ways to attract customers by providing and communicating value without cheapening their image.”
Sandelman stresses the need for restaurants to stay true to themselves while finding innovative ways to lure cash-strapped consumers through the door.
“Restaurants need to not abandon what they stand for, what their key strategies are and what they’ve been known for over the years,” Sandelman says. “They need to stick with it.”
Quick serves can benefit from a certain level of unemployment, as customers who still want to eat out opt for cheaper meals. But, according to consultant Dennis Lombardi, double-digit joblessness surpassed that level.
“There’s a good rule of thumb,” Lombardi says. “When times get tough, you trade down. But when you lose your job, you trade out.”
Analyst Nicole Miller Regan says restaurants will have to wait for unemployment to drop later in the new year before benefiting from any trade-down effect.
“The point where we fall off below 9 percent again is actually going to be a benefit for quick serves,” says Miller Regan, who predicts breakfast will see the most gains.
Tough times notwithstanding, the experts say consumers in 2010 will still expect the restaurant industry to evolve. For one thing, says consultant Clark Wolf, restaurants must continue to heed demands for greater sustainability.
“The farm-to-table movement is stronger and stronger,” Wolf says. “We want the produce from the farm down the road. The new slogan’s going to be, ‘Slow food—fast.’”
Wolf also sees trends toward smaller portions with high-quality ingredients and meals on wheels.
“Quick service is now being really challenged by mobile,” he says.
With McDonald’s recent move to free Wi-Fi, Wolf says quick serves will strive to become hangouts.
“We could end up having a cocktail and part or all of an evening out in a quick-service place,” he says.
As usual, McDonald’s will set the pace on several fronts in the quick-service sector. As a result of the Golden Arches’ evolving menu, Christopher Muller expects more menu complexity across the board in 2010.
“McDonald’s has changed the entire ballgame,” says Muller, the director of the Center for Multi-Unit Restaurant Management at Orlando's University of Central Florida. “If you look at their menu complexity, they have something for everyone.”
Along with almost all the experts surveyed, Muller also says the emphasis on social media will continue in the new year.
“You’re going to have to be more involved with customer communication through Facebook, Web pages, Twitter, and apps on the iPhone,” Muller says. “The customers are moving in that direction, and the restaurants are going to have to move with them.”
The new year might also bring some completely new trends to the industry. According to Muller, meatless center portions may appear on more menus. Miller Regan suspects 2009’s frozen-yogurt/smoothie trend could prove to be a fad. Ron Paul, president of food consultancy Technomic, says casual restaurants may go “down market” and open quick-serve locations.
While there isn’t a consensus on the next big industry direction, the experts do all agree that 2010 will be another hard year.
“While we don’t think things are going to get significantly worse, we don’t see any hopeful signs for a recovery,” Paul says. “Given the fact that even McDonald’s showed negative same-store sales results for the last two months, one has to conclude that it’s even tougher out there now than it was early in ’09.
“I think this is a year of getting through it,” Paul says.