Foodservice Equipment & Supplies

SEP 2018

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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Page 25 of 107

24 • FOODSERVICE EQUIPMENT & SUPPLIES • SEPTEMBER 2018 Steady State The oversupply of restaurants is as big a contributor as anything. Still lots of bars and restaurants. Granted, they are smaller, but there's still net positive openings each year. Until we see more closings, we will not see higher growth rates. I don't foresee a scenario where we will have more people spending more money to eat food away from home." 2019: NEW YEAR, SAME GROWTH RATE Looking ahead to 2019, we can expect more of the same. "There's nothing to indicate falling off the cliff in 2019," Riehle says. "Foodservice operators and equipment manufacturers and distributors should expect the same kind of growth environment in 2019 as they have in 2018. But history's clear that certain externalities can act as a catalyst in altering the country's economic growth." In other words, don't be surprised if the industry hits a few potholes along the way. "I think there's definitely things to be concerned with," Tristano says. "We are starting to get used to the political anxiety, and there are an increasing number of stress points that affect the U.S. It could be global relationships, for example. Certainly, the environment is a threat. Flooding, droughts and wild fires are all things that could affect the supply chain and the economy. And we have such an oversupply of restaurants. Some opera- tors are hanging on by a thread. It costs more to close than stay open." Traditional foodservice operators continue to face competition from new and different organizations seemingly on a daily basis. At the same time, convenience stores and grocery stores continue to up their prepared food game. Companies like Wawa in the c-store space and Whole Foods in the grocery space continue to draw the most attention, but the growth in pre- pared-food sales spreads well beyond these two leaders. "When you look at all of the different spaces, there's a ton of competition out there," Tristano says. In addition, the changing nature of corporate dining continues to impact the restaurant world. Tech giants like Google and Microsoft have long been the standard bearers for this segment, but in order to recruit and retain top talent many other compa- nies have upped their dining plans. "There's a lot of on-premise places that offer employees free food and that's killing the business for some of these restaurants," Tristano notes. Taken individually, none of these developments seem too dramatic. Collectively, though, they continue to contribute to the indus- try's meager growth rate. ROUTES TO SUCCESS There's only two ways for operators to influence their success: opening and closing stores and changing the menu, Tristano says. "If you are not doing either of those, it will be very difficult to grow." Fast-casual remains the darling of the chain restaurant segment and for good reason. Fast-casual restaurant units have grown at a compound annual growth rate of 7 percent over the past 5 years, per The NPD Group. Despite this growth, fast-casual remains sus- ceptible to periods of slower customer traffic. For the year ending May 2018, NPD reports total restaurant visits remained flat, while visits to fast-casual concepts were up 5 percent. While fast-casual enjoyed a 7 percent increase in traffic during the third quarter of 2017, NPD reports it trailed off to 4 percent growth for the quarters ending in December 2017 and March 2018. Looking at specific restaurant types, poke restaurants continue to enjoy a period of rapid growth. That said, Tristano compares their boom to that of frozen yogurt sites from a few years ago, meaning he anticipates that poke's growth will eventually level off. The bar business continues to boom as special- ized concepts focusing on craft beer and wine remain popular with consumers. "Adult beverage still has a very strong play in the world of the independent restaurant operator," Tristano says. Catering represents another seg- ment with significant growth poten- tial. "More people are deciding they want to have functions at their homes catered because they don't want to cook," Tristano notes. The same notion applies to de- livery. "We expect to see very strong growth in this area," Tristano says. The anticipated growth of catering and delivery sales represents a larger trend affecting the industry: Off- premise is the new dining out. "One hundred percent of the growth we expect this industry to have in the next five years will be from off-premise," Tristano notes. "Don't expect dining in restaurants to grow." Off-premise restaurant sales, meaning purchases made from restau- rants and other foodservice operators but consumed elsewhere, like a home or office, will account for 37 percent of industry sales in 2018, according to projections from CHD-Expert and Monkey Media. Takeout sales or pickup will total $124 billion in 2018, deliv- ery $32 billion, and delivery from a third-party provider such as GrubHub In a very labor-intensive industry, operators continue to struggle with employee recruitment, retention and even cost. Looking ahead to 2019, expect more of the same.

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