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Slow Food: The Restaurant Biz Is Floundering

More bad news for the nation’s diners, drive-thrus, and dives. Can they innovate their way out of this mess?

family at dinner table

“Hey Mom, what’s for dinner?”

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“Whatever we have in the house.”

“Again?”

According
to the latest numbers coming from the restaurant industry, some version
of this one-act play is taking place all over the country. Total
traffic declined 2.6% this past spring versus the same quarter last
year, the biggest decline in 28 years, says the NPD Group. And it’s
households with kids who are beating the hasty retreat from eating out.
One-third of dining traffic is groups with children, and this marks the
third quarter in a row families are cutting back. (Adult households
with no kids were stable this spring.)

Even fast food, usually
up in a recession, has fallen 2%–in fact, fast-foodie traffic has been
Super Down Sized seven of the last nine months. The only player who’s
lovin’ it is McDonald’s, which Research Edge predicts will report 2.7% same-store sales growth in June (perhaps because that chain did not confuse size with success).

Casual dining (think Olive Garden
or Chili’s) is faring worse than fast food, down 4%, and
midscale/family restaurants (industry jargon for joints like IHOP) are
faring worst of all, down 6%. Breakfast is down an apocalyptic 9% at
these restaurants–bad news for those new Hawaiian pancakes at IHOP or
the Denny’s Grand Slam–as many of their one-time patrons are likely
trading down to fast food, where breakfast is down just 2%.

The
only time of day that picked up traffic was afternoon snack at
fast food and casual dining restaurants, which was up 1% in both.
Perhaps Taco Bell’s fourthmeal is finally taking hold? And we suspect
McD’s snack wraps are a key driver in it holding strong against this
mass exodus from the national food court.

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empty mcdonald's

So what does this mean
for consumers? Most likely, more menu innovation to try to woo you
in–Kentucky Grilled Chicken, anyone?–and more deals. Although look
closely at that register receipt: Individual spending at restaurants is
up 2%. That could be a “splurge effect,” subtle price increases, or
clever upselling, getting you to buy a drink or a cookie when you might
not have done so otherwise. Either way, it hasn’t been enough increase
to offset the decline in traffic.

With still-rising
unemployment and general budget-consciousness, spenders are opting to
eat and entertain at home. A separate NPD report also forecasts that
restaurant meals eaten in-home will rise 20% over the next decade, and
when people get take-out, they don’t partake in spontaneous add-ons
like appetizers, desserts, and drinks. All of which is making many
restaurateurs say, “Check please!” About 4,000 restaurants have closed
in this bleak climate.

Related:
Who’s Winning–and Losing–in the Food Recession
Why America Is Addicted to Olive Garden
Top 100 Restaurants Fare Better Than Expected in 2008