Foodservice Equipment & Supplies

SEP 2017

Foodservice Equipment & Supplies magazines is an industry resource connecting foodservice operators, equipment and supplies manufacturers and dealers, and facility design consultants.

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30 • FOODSERVICE EQUIPMENT & SUPPLIES • SEPTEMBER 2017 points, Veidenheimer says. In contrast, some independent operators and regional chains continue to outperform the industry, with some growing at a rate of 4 percent to 5 percent. "We've seen independents and smaller chains growing at a rate that's double that of larger chains," Veiden- heimer notes. "Independents have picked up momentum, driven by their engagement of consumers." In these in- stances, engagement takes the form of food quality and social elements related to the business and service. Despite showing some signs of life, the independent restaurant market remains complicated. Visits to inde- pendent restaurants declined 3 percent in the first quarter of this year from a year ago, and consumer spending was flat reports market research firm The NPD Group. Despite these results, NPD reports some signs of life among independent restaurants in the U.S. The decline in customer visits to independents is largely a reflection of the fact that independent restaurant unit count dropped by 4 percent, according to NPD. A 4 percent decline in unit count but only a 3 percent decline in visits suggests some of the 323,456 remaining independent restaurants in the U.S. are growing. Further, independent operators doing well enough to order from broad- line foodservice distributors increased their dollar spend by 2 percent, and cases ordered from these distributors were up slightly in the first quarter com- pared to a year ago, reports NPD. Some inde- pendents added units and now operate between 3 and 19 locations; NPD refers to these operators as microchains. They tend to favor major metro areas, and they increased their case orders from broadline food- service distributors by 3 percent in the first quarter compared to a year ago. The evolution of these microchains is worth monitoring in the coming year, as they could represent an industry growth vehicle. Because these opera- tions are smaller in size, they should remain nimble, which should serve them well in engaging customers. And engaging customers remains the key to every operator's success. "Even in this challenging environment there are many examples of major chains, microchains and independents that are thriving because they have a differentiated experience, superior quality and excellence in execution," says David Portalatin, NPD's vice president, industry analysis. "These fundamentals are key to restaurant success at every segment of the industry and in any macro-economic environment." While independents will remain a source of intrigue, restaurant chains still represent a key indicator of overall restaurant industry performance for one big reason: they account for most of the industry's transactions. In fact, restaurant chains account for 64 percent of industry traffic, accord- ing to The NPD Group. Independent operators, those with 1 to 2 locations, account for 22 percent of restaurant visits, according to NPD Group. SALES GROWTH Given that the foodservice industry's moderate growth environment is expected to continue, expect most operators to increase their focus on two aspects of their businesses: sales growth and cost management. "This being the eighth year of moderate growth, the ability of operators to grow sales has taken on heightened importance," Riehle says. "Because there are a host of other competing demands for the consumer's money, it's important to get them to spend money on food prepared outside of the home." Operators seem to have somewhat realistic sales expectations heading into 2018. In fact, 58 percent of operators project their sales will increase in 2018, that's down 10 percent from last year's projections, according to FE&S' 2018 Industry Forecast Study. And 33 percent of operators project their sales levels will remain the same in 2018. Among those operators projecting an increase in sales, the average anticipated growth rate is slightly more than 2 percent. For operators looking to increase sales, they will look to tap into consum- ers' desire for convenience when using foodservice. "Convenience remains a very important driver of growth in the industry, and it is one of the main reasons that the quick-serve segment has posted growth rates higher than the industry average in recent years," Riehle says. Convenience remains a critical fac- tor for all segments of the foodservice industry, not just quick-serve opera- tions. "When you look at the growth rates by segment, the continued focus on convenience by the consumer will only continue to grow in importance," Riehle says. "When you look at restau- rant industry performance, 60 percent of sales is for food consumed off prem- ise. The majority of restaurant industry growth has come from that off-premise segment of the market." In other words, operators from all segments will continue to embrace delivery more and more. "From the consumer's perspective, there's Increase 39% Decrease 7% Stay the Same 54% Operators' Foodservice Equipment and Supplies Budgets for 2018 STEADY AS THE FOODSERVICE INDUSTRY GROWS

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