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@WeRRestaurants
/RestaurantDotOrg
/NationalRestaurantAssociationwww.restaurant.org
Industry Outlook, Innovation & Careers
Phil Kafarakis
Foodservice Ashore SolutionsJune 8 – 11, 2015
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DEFINITION:
“Restaurant Industry”
All meals/snacks prepared away from home,
including all takeout meals and beverages.
3
The
Industry
Mosaic
Industrial plants Hospitals and nursing homes
Schools and universitiesAirlines
Recreation and sports centers
4Source: Who Works in the U.S. Restaurant Industry? A NationwideSurvey of the Restaurant Workforce, National Restaurant Association education Foundation Special Report 2014
Cornerstone of Career and Entrepreneurial Opportunities
7/10Employees
will stay until retire
5
9 in 10 = Proud!
8 in 10 = a place where people of all backgrounds can open their own business.
Cornerstone of Career and Entrepreneurial Opportunities
58% of first-line supervisors/managers of food preparation and
service workers in 2013 were women, 13% were black or African-
American and 19% were of Hispanic origin.
6
The
Supply
Chain
7
Employees 14 million
Restaurant Industry 2015
8
National Economy to Post Strongest Job Growth Since 1999
Total U.S. Employment – Historical and Projected Growth Rates
Source: Bureau of Labor Statistics; National Restaurant Association projections
1.8%
1.1%
-0.6%
-4.3%
-0.7%
1.2%
1.7% 1.7%
1.9%2.2%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Projected
9Source: Bureau of Labor Statistics
National Average: 2.0% More Jobs
Economy is Now 2.8 Million Jobs Above Pre-Recession Peak35 States Have More Jobs Than Before the Jobs Losses Started in Feb. 2008
3% or more
1% to 2.9%
0% to 0.9%
-0% to -1.9%
-2% or fewer
DC
9
+28%
-4%
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Restaurants Added More Than 360,000 Jobs During 2014Eating and Drinking Place Employment – Change from previous month
16,500
32,10030,100 28,500
33,500
28,600
9,500
30,80032,600
43,300
31,500
43,600
0
10,000
20,000
30,000
40,000
50,000
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Source: Bureau of Labor Statistic; figures are seasonally-adjusted
11
Top 5 States:Restaurant Job Growth 2015 to 2025
Arizona
Florida
Texas
Georgia
Utah
23.8 %
22.4
22.0
21.1
21.0
PERCENT CHANGE
Source: National Restaurant Association
12
Restaurants Are More Likely to Employ Part-Time WorkersDistribution of Employees by Work Schedule – Restaurants vs. Total U.S. Workforce
Full-Year /
Full-Time
43%
Full-Year /
Part-Time
27%
Part-Year /
Full-Time
7%
Part-Year /
Part-Time
23%
Full-Year /
Full-Time
69%
Full-Year /
Part-Time
12%
Part-Year /
Full-Time
9%
Part-Year /
Part-Time
10%
Restaurants Total U.S. Workforce
Full-Year = 50 or more weeks per year
Full-Time = 35 or more hours per week
Source: Bureau of Labor Statistics
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Overview
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Restaurant Industry 2015
Annual
Sales$709 billion
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Locations 1 million
Restaurant Industry 2015
16
45 Years of Restaurant Industry Sales (1971-2015)
Source: National Restaurant Association
6.4%Compound
annual
growth rate
17
17
ItemCompound Annual
Growth Rate
Restaurant Industry Sales 4.0%
Inflation
–General 2.3%
–Grocery 2.5%
–Menu Prices 2.9%
–Wholesale Food 3.6%
Employment
–Total 0.5%
–Eating & Drinking Places 1.9%
A Decade Perspective2004 - 2014
Source: Bureau of Labor Statistics, National Restaurant Association
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2014 2015
$683 billion$709 billion
+3.8%
Total Restaurant Industry Sales
Source: National Restaurant Association
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2014 2015
$213 billion
$220 billion
2.9%
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Tableservice Restaurant Sales
Source: National Restaurant Association
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2014 2015
$192 billion$201 billion
4.3%
Limited-Service Restaurant Sales
Source: National Restaurant Association
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Snack and Nonalcoholic Beverage Bar Sales
2014 2015
$31.2 billion$32.8 billion
5.2%
Source: National Restaurant Association
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RegionPopulation
GrowthEmployment
Growth
West South Central 1.3% 2.8%
Mountain 1.6 2.5
South Atlantic 1.3 2.4
Pacific 0.9 2.3
East South Central 0.6 2.0
Middle Atlantic 0.2 1.8
West North Central 0.5 1.7
New England 0.5 1.7
East North Central 0.2 1.7
U.S. Average 0.8 2.3
The Critical Role of Demographics in 2015
Source: National Restaurant Association
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Projected Growth in Total State Population: 2012 to 2022
15% or more
10 to 14.9%
5 to 9.9%
Less than 5%
Source: Moody’s Analytics
24
International Travel and Tourism Continues to RiseInternational arrivals to the United States (in millions)
Source: U.S. Department of Commerce, Office of Travel and Tourism Industries *Projected
25
Restaurant Sales Growth in 2015 (Projected)
Source: National Restaurant Association
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Current Restaurant Sales Remain Above 2014 LevelsSeasonally-adjusted Monthly Sales at Eating and Drinking Places (in billions)
Source: U.S. Census Bureau
$25
$30
$35
$40
$45
$50
$55
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Mo
nth
ly S
ale
s (
in b
illio
ns
)
20082007
2006
2004
2002
2001
2003
2005
200920102011
2012
2013
20142015
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Restaurant Operators Top Challenges
Top Challenges Facing Restaurant Operators: April 2013, April 2014, and April 2015
APRIL 2015
Government 18%
Food Costs 17
The Economy 13
Labor Costs 13
Recruiting Employees 12
APRIL 2013
The Economy 26%
Government 20
Food Costs 15
Sales Volume 15
Recruiting Employees 4
APRIL 2014
Food Costs 27%
Government 27
The Economy 21
Sales Volume 9
Recruiting Employees 4
Source: National Restaurant Association, Restaurant Industry Tracking Survey
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Wholesale Food Prices Post Sustained GrowthAnnual Growth in Producer Price Index – All Foods
Source: Bureau of Labor Statistics *Year-to-date growth through March
7.6% 7.7%
-3.8%
4.9%
8.1%
2.2% 2.2%
5.5%
1.4%
-6%
-3%
0%
3%
6%
9%
2007 2008 2009 2010 2011 2012 2013 2014 2015*
29Source: U.S. Drought Monitor
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Summer
2015
Temperature
Outlook
Above Normal
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2014 Individual Commodities Posting Strong Growth
Pork
Eggs
+ 20%
+18%
Butter +37%
Beef and Veal + 19%
Source: Bureau of Labor Statistics, National Restaurant Association
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Menu Price Growth Remains ModerateAnnual Growth in Consumer Price Index – Food Away From Home
Source: Bureau of Labor Statistics *Year-to-date growth through March
3.6%
4.4%
3.5%
1.3%
2.3%
2.8%
2.1%
2.4%
3.0%
0%
1%
2%
3%
4%
5%
2007 2008 2009 2010 2011 2012 2013 2014 2015*
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Above 102 in 6th Consecutive MonthsValues Above 100 = Expansion, Values Below 100 = Contraction
Source: National Restaurant Association
96
97
98
99
100
101
102
103
104
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Restaurant Performance Index (RPI)
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$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real Household Income Remains Down 8% From its Recent High in 2007
Real Median Household Income (adjusted for inflation in 2013 dollars)
2013: $51,939 = Only 0.4% Above 1995 Level
Source: U.S. Census Bureau
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Disposable Income on Pace for Strongest Gain Since 2006
Real Disposable Personal Income – Historical and Projected Growth Rates
Source: Bureau of Economic Analysis; National Restaurant Association projections
4.0%
2.1%
1.5%
-0.4%
1.0%
2.5%
3.0%
-0.2%
2.5%
3.6%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Projected
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0%
10%
20%
30%
40%
50%
60%
70%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Pe
rce
nt
in L
ab
or
Fo
rce
Female Labor Force Participation at Lowest Level Since 1988Female Labor Force Participation Rate
Record High:1999 = 60%
Source: Bureau of Labor Statistics
2014=
57%
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$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-14
Pri
ce p
er
gallo
n
Gas Prices Fell Sharply in the Last Half of 2014 Average price per gallon for regular gasoline
Down $1.49 Since End of June
Jan-15
Source: U.S. Department of Energy, Energy Information Administration
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Gas and Diesel Prices Will Remain $1 Below 2014 Levels
Historical and Projected Prices for Regular Gasoline and Diesel Fuel
Source: U.S. Department of Energy, Energy Information Administration
$3.63 $3.51$3.36
$2.40
$3.97 $3.92 $3.83
$2.86
$0.00
$1.50
$3.00
$4.50
Regular Gasoline Diesel Fuel
2012 2013 2014 2015
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Where Do Consumers Spend?
CATEGORY
PERCENT OF
TOTAL
Housing 34%
Transportation 18
Food 13
Insurance/pensions 11
Health care 7
Entertainment 5
Contributions 4
Clothing 3
Other 5
Total 100%
Source: Bureau of Labor Statistics, Consumer Expenditure Survey – 2013, National Restaurant Association
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Auto Sales Totaled 16.5 Million Units in 2014 – Strongest Pace Since 2006U.S. Monthly Auto Sales (Seasonally-adjusted annual rates)
0
2
4
6
8
10
12
14
16
18
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Millio
ns
Cash for
Clunkers
Source: Auto Data
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Higher-Income Households are Prime Restaurant CustomersShare of Total Restaurant Spending by Household Income Level
Less than $30,000
16%
$30,000 - $49,999
15%
$50,000 - $69,999
15% $70,000 - $99,999
18%
$100,000 or more
36%
Source: Bureau of Labor Statistics 2013 data
4343Source: National Restaurant Association
Restaurant Industry’s Share
of the Food Dollar
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Percentage of adults NOT eating on-premises at restaurants as often as
they would like
Pent-Up Demand for Restaurants Remains High
Source: National Restaurant Association
September
2013
October
2007
May
2015
47%31% 38%All Adults
Percentage
Point Change
2007 vs 2015
+7
45
A Growing Restaurant Opportunity
30% of consumers regularly shop for groceries at four or more stores
Source: Ipsos, 2015
4646Source: National Restaurant Association, National Household Survey
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Consumer
Trends
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Americans Love RestaurantsConsumers who say they enjoy going to:
Restaurants Grocery stores
90% 66%
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
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Unfilled Demand for Restaurant ServicesRemains Elevated
Approximately two out of five adults are NOT dining on-premises or using take-out as often as they would like
Source: National Restaurant Association, 2014
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Quality Time
Consumers who say dining out is a better
use of time than cooking and cleaning up.
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
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Consumers who say restaurants provide tastes
and flavors that aren’t easily duplicated at home.
Unique Experiences
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
52
Top Attributes for Choosing
a Restaurant
Good service
Food quality
Good value
Favorite items on the menu
Convenient location to home or work
Healthy menu items
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
53
Noticing Healthful Options
Consumers who say there are more healthful
options on restaurant menus now than two
years ago.
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
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Choosing Healthy Options
Consumers who say they are more likely to
choose a restaurant that offers healthy menu
options. Source: National Restaurant Association, 2015 Restaurant Industry Forecast
55
Actually Choosing Healthy Options
Consumers who say they are ordering more
healthful options in restaurants now than two
years ago.
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
56
Opting for Local Sourcing
Consumers who say they are more likely to
visit a restaurant that offers locally sourced
food items.
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
57
Eco-Friendly Matters
Consumers who say they are more
likely to visit a restaurant that offers
organic or environmentally friendly food.Source: National Restaurant Association, 2015 Restaurant Industry Forecast
58
Adventurous Palates
Consumers who say they are more
adventurous in their restaurant food
choices now than two years ago.Source: National Restaurant Association, 2015 Restaurant Industry Forecast
5959Source: National Restaurant Association, 2015 Restaurant Industry Forecast
Breakfast for DinnerConsumers who wish restaurants served breakfast items all day
60
Food
Trends
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What’s Hot in 2015
1) Locally sourced meats and
seafood
2) Locally grown produce
3) Environmental sustainability
4) Healthful kids’ meals
5) Natural ingredients
TABLESERVICE RESTAURANTS
Source: National Restaurant Association, What’s Hot in 2015 chef survey
62Source: National Restaurant Association, What’s Hot in 2015 chef survey
6) New cuts of meat
7) Hyper-local sourcing
8) Sustainable seafood
9) Food waste reduction
10) Farm-/estate-branded items
TABLESERVICE RESTAURANTS
What’s Hot in 2015
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1) Gluten-free items
2) Sustainable food items
3) Locally sourced produce
4) Fruit/veggie kids’ sides
5) Mini-desserts/dessert bites
LIMITED-SERVICE RESTAURANTS
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
What’s Hot in 2015
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6) Gourmet grilled cheese
7) Build-your-own items
8) Healthful kids’ meals
9) Locally sourced meat/seafood
10) Milk/juice in kids’ meals
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
What’s Hot in 2015LIMITED-SERVICE RESTAURANTS
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ALCOHOL
Source: National Restaurant Association, What’s Hot in 2015 chef survey
What’s Hot in 2015
1) Artisan spirits
2) Local beer/wine/spirits
3) Onsite barrel-aged drinks
4) Regional signature cocktails
5) Culinary cocktails
66
Movers & Shakers in 2015
Underutilized fish
Ethnic condiments
Ramen
Southeast Asian cuisine
Gourmet grilled cheese (QSR)
Mini-desserts (QSR)
WARMING TRENDS
Source: National Restaurant Association
67
What’s Hot in 2015
Local sourcing
Environmental sustainability
Nutrition/Kids’ nutrition
Ethnic cuisines and flavors
UMBRELLA TRENDS
Source: National Restaurant Association
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Perennial Favorites in 2015
1) Barbecue 6) Oatmeal
2) Italian cuisine 7) Comfort foods
3) Fried chicken 8) Fruit desserts
4) French toast 9) Pulled pork
5) Frying 10) Chicken wings
TABLESERVICE RESTAURANTS
Source: National Restaurant Association, What’s Hot in 2015 chef survey
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Perennial Favorites in 2015
1) French fries 6) Hamburgers
2) Poultry items 7) Side salads
3) Bacon 8) Onion rings
4) Bottled water 9) Soft drinks
5) Beef items 10) Pizza
LIMITED-SERVICE RESTAURANTS
Source: National Restaurant Association, 2015 Restaurant Industry Forecast
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Yesterday’s News in 2015
1) Insects
2) Foam/froth
3) Gazpacho
4) Bacon-flavored chocolate
5) Popovers
TABLESERVICE RESTAURANTS
Source: National Restaurant Association, What’s Hot in 2015 chef survey
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1) Energy drinks
2) Veggie burgers
3) Bagels
4) Sweet potato fries
5) Pretzel bread
LIMITED-SERVICE RESTAURANTS
Source: National Restaurant Association
Yesterday’s News in 2015
72
Movers & Shakers in 2015
Kale salads
Greek yogurt
Gluten-free cuisine
Hybrid desserts
Pretzel bread (QSR)
COOLING TRENDS
Source: National Restaurant Association
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Ethnic Cuisines 2015
Most known and frequently eaten = Italian, Mexican and
Chinese
Least known and frequently eaten = Ethiopian,
Brazilian/Argentinian and Korean
Most common dining out = Sushi/sashimi, Thai,
Vietnamese, Brazilian/Argentinian, Greek, Southeast Asian
and Mexican
Most common takeout = Chinese, ethnic condiments,
Ethiopian, Mexican, Italian, ethnic non-alcoholic drinks and
sushi/sashimi
Source: National Restaurant Association, 2015
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Ethnic Cuisines 2015 85% = prefer to eat ethnic cuisine in a restaurant focused on that
cuisine.
75% = like it when restaurants with mainstream menus also serve
ethnic cuisine.
66% = eat a wider variety of ethnic cuisines now than five years
ago.
29% = tried a new ethnic cuisine in the last year.
25% = like trying unconventional ingredients.
1/3 = like many dishes. 1/3 = like one or two dishes. 1/3= like the
general flavor profile.
56% = customize ethnic cuisine dishes to fit their taste.
Source: National Restaurant Association, 2015
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Future Trends
Source: National Restaurant Association, Restaurant Industry 2020
TOP Developments : Food & Menu
There will be significant upgrades in product quality and
emphasis on “fresh.”
Local sourcing will become more prevalent.
Healthy eating will continue to grow.
There will be a greater demand for authentic items and
flavor profiles.
Fresh produce options will become more plentiful.
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Average Americans are turning into adventurous
“foodies.”
Local sourcing, environmental sustainability, and
nutrition are key menu trends.
Ethnic cuisines are becoming more mainstream.
Today’s trends will very likely also be tomorrow’s
trends.
Key Takeaways
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Pop-Up produce stands go mainstream….
Source: Fortune June 1, 2015 Anne VanderMey
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Technology
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Restaurants are Extremely Labor IntensiveAverage Sales per Full-Time Equivalent Non-Supervisory Employee, 2013
Source: National Restaurant Association, based on Bureau of Labor Statistics and US Census Bureau data
Eating and Drinking Places $84,000
Grocery Stores $304,000
Auto Dealers $823,000
Gasoline Service Stations $855,000
80
Labor Productivity in Restaurants Remained Flat in Recent Years
Average Annual Percent Change in Output per Labor Hour: 2003 to 2013
-0.1%
-0.3%
0.3%
1.7%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Eating and
Drinking Places
Fullservice
Restaurants
Limited-Service
Eating Places
Total Nonfarm
Businesses
Source: Bureau of Labor Statistics
81
Smart Phone / Tablet Ownership or Usage
All Adults 70%
18-34 90%
35-44 89%
45-54 62%
55-64 60%
65+ 34%
Source: National Restaurant Association, October 2014
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Consumers More Likely
to Use Restaurant TechnologyCompared to Two Years Ago
More Likely35%
Same40%
Less Likely13%
Don't Use12%
Source: National Restaurant Association, October 2014
83Source: National Restaurant Association, 2015 Restaurant Industry Forecast
84Source: National Restaurant Association, 2015 Restaurant Industry Forecast
85Source: National Restaurant Association, 2015 Restaurant Industry Forecast
86Source: National Restaurant Association, 2015 Restaurant Industry Forecast
87
Restaurant Technology UsagePercent of
Adults
Look up restaurant locations, directions
and hours of operation88%
Look at menus 70%
Read reviews from apps or sites like Yelp
and TripAdvisor57%
Use rewards or special deals 54%
Order takeout or delivery directly from a
restaurant’s website or branded app54%
Source: National Restaurant Association, October 2014 – Base own/use smartphone/tablet
88
Restaurant Technology Usage
Percent of
Adults
Look up restaurant nutrition information 49%
Make reservations 43%
Pay for your meal 26%
Order takeout or delivery via an aggregate
service like Seamless or GrubHub22%
Source: National Restaurant Association, October 2014 – Base own/use smartphone/tablet
89Source: National Restaurant Association, National Household Surveys
A Growing Opportunity: Mobile FoodservicePercent of adults likely to visit a food truck if offered by a favorite restaurant
59%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2011 2014
90
Consumers Want Mobile Foodservice Options
Source: National Restaurant Association, National Household Survey 2014
91
Technology = Another Tool, Not Ultimate Solution
37% of consumers report technology makes restaurant visits and ordering more complicated
Source: National Restaurant Association, 2014
92
Sensors
Data
Devices Screens
Creating Demand &
Serving Convenience
Productivity & Supply-
Chain Efficiency
Restaurateurs & Technology
93
Legislative
Update
94
2015 U.S. Economic OutlookGradual Improvement Continues
INDICATOR 2014 2015
Real Gross Domestic Product 2.4% 3.4%
Real Disposable Personal Income 2.4% 3.1%
Consumer Price Index 1.7% 2.0%
Total U.S. Employment 1.9% 2.2%
Source: National Restaurant Association, projections as of December 2014
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Issues
96
97
98
• Menu Labeling Regulations • Dietary Guidelines
• Trans Fats
99
Food & Healthy LivingImperative Committee
• Menu labelingregulations
• Dietary Guidelines• Trans Fats
Consumer transparency• Nutritional requirements
• Dietary guidelines
• Marketing
Supply-chain integrity• Food safety
• Raw material redundancies
• Country of origin
Regulatory oversight
• USDA, FDA, Health & Human Services
• Center for Science in Public Interest (consumer protection agencies)
100
“The secret sauce or too many cooks in the kitchen?”
101
Brisk SSS – 2014Q4 Best in 6 years across industry Stronger sector performance than in other retail Strong free cash flow across top 100 NRA RPI at 102.1 in November – over 100 last 14 months
Wall Street coming to the table…
102
Abundant assortment of companies with a large range of P/E and ROI Tremendous value in consolidation of the large = synergies producing fast return Emerging local concepts feeding fickle consumers and hungry for capital to grow More finance savvy than culinary leadership making decisions
Plenty on the menu…
103
Fast casual paying off BIG! Emerging local brands taking share from the “regulars” Prime real estate still available
A “foodie bubble” ?
104
Restaurant Operators Are More Optimistic about Sales GrowthOperators’ Outlook for Sales in Six Months vs. Same Period in Previous Year
49%
6%
46%
11%
50%
8%
44%
10%
47%
13%
45%
5%
40%
8%
52%
6%
57%
7%
0%
10%
20%
30%
40%
50%
60%
Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Higher Sales in Six Months Lower Sales in Six Months
Source: National Restaurant Association
105
Unpredictable factors that can
impact earnings... fast !
GovernmentRegulations that
are constantly changing!
Shifting consumer dynamics with pent up demand!!
Shrewd Entrepreneurs
able to capitalize!
Restaurants; the darlings of retail!
106
2015 = improving but moderate growth environment.
Real sales growth will occur for sixth consecutive year.
Job market and industry employment advances continue.
Food cost growth moderates.
More technology integration to aid productivity and boost
loyalty.
Consumers will still be managing their check and need
“nudging.”
Strong geographic variations sustained.
Over short and long term, a positive future despite
challenges.
Summary
107
NRA
Membership
108
Phil Kafarakis
Chief Innovation
&
Member Advancement Officer
@WeRRestaurants
/RestaurantDotOrg
/NationalRestaurantAssociation