Friday, December 19, 2008

National Restaurant Association's 2009 business forecast - live

I'm writing this as I watch the live internet broadcast of the National Restaurant Association's Industry Forecast for 2009. If you're not familiar with the association, this is a high point of its year. The group's annual sales prediction is widely regarded as the best prognostication of what restaurateurs can expect in the year ahead. This year, interest is particularly high because an industry that took it in the bread basket in 2008 is wondering what it can expect in the 12 months ahead. Can it hope for any glimmers of recovery? Or will there be more darkness before the dawn?

Here's what the experts have to say. It's best to read this from the bottom up.

Did I miss the projection of restaurant openings for 2009? That's a key metric. If the net tally of restaurants drop, and fewer places are splitting what consumers spend in the aggregate on dining out, conditions could actually be better even if that overall sales figure declines. It's a matter of how much the universe retracts.

John Gay, the association's top lobbyist, has taken the podium to offer his preview of what the industry can expect from the Obama Administration.

"The initial reviews are quite positive," said Gay, who indicated that the President-elect's advisors had sought the NRA's input on small-business matters.

The economy, Gay continued, "will certainly be the Number One priority" for Washington.

"The restaurant industry will be working with Congress and the Administration as [the recover plan] takes focus, to put money in the hands in consumers wherever it can," he said.

Overall, he observed, Obama's agenda "is a mixed list" for the restaurant industry.

The positives:

--Obama is looking at a zero capital-gains tax for small businesses.

--He's also looking at a tax incentive to create jobs.

--The Administration might seek earlier mailings of tax refund checks, which would put more money in consumers' hands.

--Included in any stimulus bill could be an increase in spending for tourism promotion.

--One of the matters that could come under scrutiny are "interchange fees," or the charges restaurateurs and other merchants pay on credit card functions.

The negatives possibilities:

--Higher minimum wage.

--Paid sick leave.

--Tax increases, which, though aimed at wealthy individuals, could also apply to small business people, given the possible thresholds.

--Energy or food policies that could affect wholesale food prices.

--Problems in pushing through federal immigration reform, which could lead to further crackdowns on the state level.

I'm surprised he didn't mention card check?? Isn't that the real danger for the business? Is this a sign that maybe Obama is reconsidering that pro-labor/decidedly anti-restaurant legislation?

Riehle just made an interesting observation: Younger generations are not only seeking different menu options, but changes in restaurant operations as well. He cited the example of touch-screen-style menus, an ordering set-up that two out of three young people said they'd use. Also, he noted that a younger generation would be more accepting of text-message alerts of specials. Indeed, he seemed to suggest, they might expect it.

He noted that 75% of all consumers, regardless of age, would visit restaurants more if the places offered discounts on their slowest nights. Hello, Monday specials.

"Nearly three out of 10 adults have gone online to search for information" about the healthfulness of menu offerings, according to Riehle. That's powerful ammunition in the industry's battle to convince lawmakers that information doesn't have to be posted on menus and menu boards to provide consumers with data to make healthful choices.

Whew: "Food safety remains a top concern of restaurant operators," Riehle observed.

Despite the downturn, "nine out of 10 restaurateurs remain involved with charitable activities," he noted.

Now Riehle is giving the employment figures: Five consecutive months of declining industry employment. I never thought I'd live to see the day when restaurant employment would decline. Nothing has been a more dramatic indication of just how difficult conditions are right now for the business.

Yet, looking longer term, "there's still a labor shortage looming for the industry," Riehle said. Earlier, he noted that finding personnel has dropped precipitously on the current list of restaurateurs' concerns.

Now Riehle is looking at specific segments of the business. As expected, he notes that the outlook for full-service restaurants is particularly dismaying, with table service places expected to be walloped with a 2.5% drop in real sales.

Some good news, sort of: "There continues to be this build-up of consumers who do not use restaurants as much as they would like." That's important, he explained, because they'll be coming back once they have the cash in their wallets to do so.

"it's a very compelling number to monitor," he said.

Youch! He just cited a likely 4.4% decline in real sales for the "snack and non-alcoholic drink" segment, which is statistical jargon for the market space that Starbucks occupies. Hand Howard Schultz some tissues, quick. And keep him away from the ledge.

Riehle just observed that the nation's gross domestic product will decrease by a "hefty" 4.9% during the current quarter. Wow.

He said it's the second of what will be four consecutive quarters of GDP, the first time that's happened since the nation started to report the metric in 1947.

Riehle flashed some graphics that proved consumers were greatly dependent on home equity as a source of disposable dollars. As prices collapsed, he explained, spending tanked.

"This year we're forecasting wholesale food prices to reach a record 8%." That's a Godzilla-like figure. Next year, Riehle said, the rate will likely decelerate to 3%. Restaurant bookkeepers everywhere are likely exchanging high fives.

Dawn Sweeney, who opened the media event, set the scene with this comment: "Restaurateurs are gearing up for a year where every move matters."

She's passed the microphone to Hudson Riehle, the NRA's head of research. His job is to look deeper into the factors that yielded the fairly bleak forecast reported in the entry below.

Riehle: The industry's real growth will be negative, and "it is substantially more negative than it has been over any of the other recessionary periods during the last four decades." Ugh.

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