CHD Expert reports that traditional restaurants fared better than the competition during the first half of 2012

Based on its tracking of U.S. restaurant openings, closings and changes in ownership, CHD Expert finds plenty of evidence that traditional restaurants offering value-oriented foods fared better than others during the first six months of 2012.

 Among 12 different types of restaurants tracked by CHD Expert full service family-style restaurants, cafes and diners experienced the most net growth with 3 percent more units, followed by delivery and take-away (only) limited-service restaurants (2.5 percent) and fast casual restaurants (2.4 percent).  Therefore, if slow economic times tend to put a damper on risk-taking, then new data on restaurant units confirms that consumers and restaurant operators are staying in the ‘comfort zone.’

“While we’re certainly encouraged to see more restaurant segments growing than declining, it does appear that consumers remain frugal about their spending, looking for safe economical solutions without compromising on quality,” said Cathy Kearns, General Manager at CHD Expert.

Based on the type of menu served, 2012 restaurant openings also reflected the appeal of familiar favorites. The best growth from January to June occurred in the American/Traditional category, with 5 percent more units, followed by Mexican restaurants (up 3.1 percent).

In contrast, the declines were seen in frozen desserts, with units down 1.1 percent. Kearns noted that since the data only reflects the first six months of 2012 it is difficult to determine whether declines in frozen desserts reflect seasonal patterns or consumers’ efforts to eliminate unnecessary spending. While the number of traditional ice cream units declined, frozen yogurt is still performing well, largely due to consumer interest in healthier snack options.

Notable geographic differences were also apparent, with the three highest-growth states all located in the East. West Virginia topped the list with a 3.6 percent net increase in restaurant units, followed by New York (2.6 percent) and Connecticut (2.2 percent). Interestingly, the biggest declines also came from this region with Delaware losing 2.6 percent of its restaurant units in the first six months of 2012.

The new unit data is derived from one of several U.S. and international foodservice databases managed by CHD Expert, which also provides market research, marketing and sales tools and data management services for the foodservice industry.

CHD Expert is the worldwide leader in collecting, managing and analyzing data for the Away-from-Home Global Foodservice Market. For more than 10 years CHD Expert has been dedicated to support Foodservice channel members in providing a global vision and an in-depth understanding of the industry (in Europe, North America and Asia Pacific).

Our objective is to support food service providers in their sales and marketing strategies by providing the most comprehensive and accurate foodservice census, housing operator intelligence for more than 4 million operators worldwide.

For more information please contact Catherine Kearns – Tel: (312) 768 6916 – ckearns@chd-expert.com

Burger and a Beer – The Chicago Way of Life is More Than Just Pizza

When one thinks of the Chicago dining scene, pizza comes to mind. After all, Chicago is proclaimed the pizza capitol of the nation.

While Chicago has more than its share of pizza places, the fact is that the predominant full service restaurant in the metropolitan area is the local bar and grill. Nearly 12% of all full service Chicago area restaurants are classified as a “bar and grill”, meaning that they generate a significant portion of their revenue from the sale of alcoholic beverages. The Chicago area is dotted with sports bars, microbreweries, and pubs; boasting a much higher percentage of them than New York or LA (3.5% and 2.5%, respectively). Chicagoans spent almost $550 million in bar and grill establishments last year .

These establishments, as a rule, are quite small. About 78% of Chicago area bars and grills have annual revenues of less than $500,000. But being small hasn’t meant much to their survival. Nearly 80% of Chicago’s area bar and grills have been in business for more than five years.

Why Chicagoans prefer their local pub n’ grub to other restaurant types is subject to speculation.  Certainly, the allure of a bar and grill establishment is probably more about the beverages than the food. It is likely that many patrons’ frequent places that are close to home or work. The atmosphere of your local pub can definitely be more relaxing than other establishments. In many cases, a bond with a particular employee or the owner of an establishment results in frequent visits due to camaraderie and loyalty. It is not at all unusual for patrons to stop in virtually every day.

At any rate, what better way to watch the game or enjoy times with friends than having a beverage and a sandwich on your favorite bar stool? In the Chicago area, it is the thing to do.

Because of the preponderance and diversity of the bar and grill market in the Chicago area, marketing to them can be challenging. Cathy Kearns of CHD Expert, a Chicago based food service marketing firm, noted “Our clients are always looking for ways to reach the Chicago area sports bars and pubs. They are spread out and usually small in size but they represent a large part of the Chicago market, so you really need to get to them somehow”.

Independent Full Service Restaurants: Signs of Resiliency Through Tough Economic Times

According to CHD Expert Independent Full Service Restaurants in the USA Out number Major Chains Eight to One. Independently owned FSR restaurants on average bring in less revenue than chains, but their sheer volume makes them a big player in the restaurant industry.

If you think that Chili’s, IHOP and Applebee’s are taking over the full service restaurant (FSR) industry, think again. Independent FSR locations across the United States outnumber the major chains by eight to one.1 This is a bit surprising, as our streets and highways are seemingly lined with major chain restaurants. Still the independently owned FSR operators are holding their own during the worst of economic conditions and increased encroachment from the major chains.

How are they doing it? Consumers seem to enjoy the independent experience. This could be due to long-term loyalty the consumer has to their local neighborhood restaurant. Independent restaurants have a tendency to understand the regional cuisine and local tastes as well as preparation methods that consumers prefer. They also have the flexibility of changing their menu, offering more variety, whereas the chains do not. There is also a strong attraction by the consumer for the local décor and ambiance their local independent restaurants give them offering a strong level of comfort. With a high level of intimacy offered, service qualities extend to knowing the consumer’s name as well as their ordering history. The local Pub N’ Grub isn’t going away anytime soon. And there are many more of them to choose from.

Whatever the reason, the resilience of the local independent restaurant is unmistakable. But despite having many more locations, independents are dwarfed by the chains in dollar volume. Almost 62% of the independent FSR restaurateurs have less than $500,000 in annual sales; only 3% of chains are at or below this sales level. Over 46% of the full service restaurant chain units are netting $1-$2.5 million per year in annual sales.

Of particular interest on this note is the northeastern U.S. The northeastern states (Washington DC and north, including Pennsylvania) account for 10 out of the top 11 states with the highest density of independent FSR restaurants by percentage in the country. Only Alaska breaks into the top eleven.  In total, over 93% of FSR locations in this region are independently owned.1 

Chains versus Independent #Units

 

 One might argue that the ethnic diversity of the northeastern states results in numerous specialty restaurants to service the various cultures here. By overlaying consumer demographics with independent restaurant footprints, we can get a clear understanding of the affect ethnicity has in the market. Certainly, this part of America is historically the oldest, and many of the independents in the region might have been handed down from generation to generation. One might also speculate that Manhattan and other major cities have skewed the numbers; as local ordinances, zoning laws and/or costly real estate have subdued the expansion of the conglomerates in this market.

It appears there are some markets that have the ability to keep the chain restaurants at bay and win the battle for market share with their experience of being both flexible and nimble to adapt and evolve in the foodservice market.

A better understanding of the independent market conditions will benefit both restaurant operators and suppliers/distributors who partner with them. The ability for food service providers to reach the independent operators has and continues to be a challenge. With the large number of independents in the food service industry, it will be critical for food service providers to leverage this information and increase their market share in the industry through direct independent operator outreach.

According to Cathy Kearns, General Manager at CHD Expert, a Chicago-based database marketing firm, “Many of our customers like to focus on the major restaurant chains in their marketing efforts, but there is actually more potential in the independent restaurant market. Prudent marketing strategy should not preclude the little guys… en masse they are a very powerful customer basis”.

For more information on the foodservice industry please send an email to

brad@chd-expert.com or visit CHD-Expert.com.

[1]Source: CHD Expert, Internal Data, April 2012

The US Restaurant Trends On Openings and Closings In 2011 and The Effect on the Foodservice Industry

What impact has the economic down turn had on Full Service Restaurants & Limited Service Restaurants? CHD Expert provides an update on the status of the US restaurant industry and how it is affecting consumers. This is the “Hungrier Games.”

Every year CHD Expert reveals the annual United States restaurant openings and closings, as it is a fiercely competitive industry. The name of the game is convincing consumers that your restaurant offers more than your competition. Last year the game left behind a large number of casualties. In 2011 the number of restaurants in the marketplace declined by 2.5% in the U.S., which represented a net change of 16,000 less restaurants nationwide. The final three months of 2011 saw more restaurants close than any other quarter of the year. Full service restaurants (FSR) suffered more than limited restaurants (LSR) with almost three times the amount of market decline last year.

The full service restaurant market declined by 12,000 operators, or 3.8%, in 2011. Consumers were not as frugal with their dining dollars as the previous 2 years, but fine dining restaurants still struggled shrinking by 4.6% last year. The hardest hit cuisine, in the fine dining segment, was the “steak, seafood & fish” menu type. Fear not diners. Do not reach for that pint of “sadness” ice cream yet; things are not as bad as what we’ve seen in some previous years in fine dining. Chains such as Capital Grill, Morton’s and Ruth’s Chris are holding their own, but have a long road to recovery to be back to where they were in 2008.

Limited service restaurants were not immune to the downturn either, as they declined by 4,000 operators, or 1.3%, in 2011. It will come as no surprise to those in the industry that the independent restaurants were hurt the most. Limited service chains actually increased in 2011 by nearly 1%. Fast casual chains that boast a more fresh, and diverse menu continued to thrive. The news was not so joyful for fast casual’s frozen LSR brethren; the smoothie, juice and frozen dessert menu types, had the largest decline at over 7.3% in 2011.

On the brighter side:

It is not all doom and gloom. Things are not as bleak as they were for poor old Oliver Twist. There are some restaurants that diners got “some more” from in 2011. Meat and potatoes reigned supreme as “American traditional”, and “American regional” menu types increased by more than 7.5% throughout the year. Bars & grills and Asian restaurants also were on the rise in 2011 with over a 2% increase in the market.

Results by State

The 2011 national restaurant executioner did not wield its deadly sword in a democratic fashion. Instead, Alaska’s foodservice market was hit with haymakers decreasing by 7.9% during 2011, while several states such as North Dakota and New Hampshire seemed to bob and weave deftly enough to even see an increase in their own foodservice markets. Oddly enough, the great state of Nevada, the nation’s leader in unemployment, had the highest percentage increase for a state’s foodservice market increasing by almost 5.5% in 2011.

According to Cathy Kearns, General Manager at CHD Expert, “Even with a declining market, consumers still want their food good, and fast. Fast Casual chains are becoming more attractive to consumers, offering a higher quality food than quick service with a perception of being the healthier option. So they’re getting food at a fair price without giving up an hour of their time.”

For more information on the foodservice industry please send an email to
brad@chd-expert.com