BOULDER, Colo. (RestaurantNews.com) The food service industry went into 2011 with high hopes. After two years of declining sales and visits, it looked like the entire industry was set for a modest gain as the country began to pull out of the Great Recession.
When the National Restaurant Association (NRA) released its annual forecast numbers in February, the picture looked much improved, with 3.4% growth projected year-over-year.
Those positive predictions haven’t come to pass. A recent NPD Group report revealed that restaurant foot traffic declined in the second quarter of 2011. Even worse, the NRA’s own Restaurant Performance Index (RPI) sank to its lowest level in 13 months in August.
The revelation that food service traffic wasn’t as strong as had been hoped earlier in the year is consistent with the sharp decline in consumer confidence that has plagued the American economy throughout the summer.
Tundra Specialties, a national restaurant supplies and equipment distributor, conducted a survey of customers in the food service industry to get a better feel for how the persistent weakness in confidence was affecting their business. Click here to view a full screen version of the infographic “The Economic Factors Killing Restaurant Growth“.
58% of respondents felt consumer confidence is negatively affecting their business, which falls in line with the general perception that the American economy is faltering.
One survey respondent – who asked that his name not be used – has experienced the symptoms of low economic confidence firsthand. His ice cream business declined 35% this summer – a particularly devastating hit for this seasonal food service operation.
“People aren’t spending money because they fear the unknown. Will they be unemployed or homeless?” the respondent says. He’s extended his operating hours and added menu items in order to attract more business.
As consumer confidence continues to wane consumer expectations have put increasing pressure on restaurants to keep prices as low as possible. The combined pressure of rising costs, declining traffic, and lower tolerance for price changes have all contributed to record numbers of restaurant closings in the past two years.
Independent operations have been particularly hard hit. This spring the NPD Group reported that of the 9,450 restaurants that closed between April 1, 2010 and March 31, 2011 8,650 (92%) of them were independently run.
76% of respondents to Tundra’s survey said rising food costs were also having a negative effect on business, and 33% said food costs were having a very negative effect on business.
Aggressive pricing from large national chains, who can negotiate better deals and have a higher tolerance for lower margins, and daily discount sites like Groupon have only made the plight of independents worse.
Yet even in such difficult conditions some independents have found a way to thrive. The Niwot Tavern in Niwot, CO is one such independent that is not only surviving but succeeding.
The Niwot Tavern is a comfortable restaurant and bar located just north of Boulder featuring a diverse selection of home-style cooking selections including build-your-own Certified Angus Beef burgers.
“We are having our best year ever. I can attribute this to our competitive pricing coupled with our increased attention to customer service,” says manager Dave Gray.
Gray tackles the two headed monster of rising costs and competitive pricing by constantly managing food suppliers and using food cost software to keep a firm handle on costs. “If there’s one piece of advice I can give restaurateurs it’s to do the costing work,” he says. “Guessing or just getting close on pricing is one of the worst mistakes an operator can make.”
On the customer service side, the Niwot Tavern has focused on hiring, training, and retaining top-notch staff who “naturally possess good customer service skills.” Gray also uses a comment card system to constantly monitor feedback from customers. This feedback is publicly shared at staff meetings and used to improve customer service in a transparent and consistent way.
While independent restaurants have borne the brunt of the difficult economic conditions currently gripping the food service industry, that doesn’t mean there are not also some advantages for mom-and-pop operations. Personalized service and competitive prices in a welcoming atmosphere are keys to attracting customers who are looking for the most value for their money.
Media Contact:
Greg McGuire
Tundra Specialties
800-447-4941 ext. 7141
gmcguire@etundra.com