CURRENT TRENDS IN CASUAL DINING

The current NPD data suggest that despite the gloomy economic situation, Casual Dining posted a 1% increase in traffic this quarter (The Knapp data suggest a 3.8% decline in traffic trends). Two key factors are driving the trends at casual dining.

First, the consumer environment looks bleak (consumer confidence hit a 16-year low) and consumers have very little disposable income in their pockets. Contributing to slightly better trends in the most recent quarter was the government’s stimulus package, which supported a +4.0% increase in Real Disposable Personal Income in Q2. Second, restaurant operators increased their promotional efforts and consumers took advantage of them.

  • According to NPD, customer deal traffic rose 6% while non-deal traffic was down slightly. Looking at Casual Dining, the segment was weak during its core business segments with no growth at the important dinner daypart. Lunch traffic grew significantly with 4% more customer visits this quarter. The increase at lunch included improvement on both the weekday and the weekend time periods.
  • Importantly, discounting and Combo Meal visits accounted for half of Casual Dining growth this quarter supported by promotions from major chains and increased visits with kids. The Bar and Grill category posted the largest gains this quarter. The casual dining “varied menu” lost traffic, which suggested a trade off to Bar and Grill. When consumers decided to go out to eat, side dish items were left off, while beverages posted solid growth supported by gains in healthier beverage options. Consumers are also cutting back on consumption of alcoholic beverages.
  • Some areas to consider looking forward: 1) it’s unlikely that another stimulus package will be passed by congress to help buoy consumer spending. Fortunately, gas prices have begun to ease up a little, which may help improve consumer confidence and free up some discretionary dollars. 2) Consumers will continue to look for promotions, a trend that was evident over the past three months. It’s critical that restaurant operators engineer promotions to provide attractive offers to consumers (possibly with new offerings) while trying to preserve margins.
  • My guess is that EAT’s quarter will look better than most in the casual dining space.