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Restaurant Design Business Outlook

March 24, 2009

-By AnnMarie Marano


Apparently there is still one area that Americans are trying NOT to cut corners with -- dining out. According to the National Restaurant Association (NRA), disposable personal income, which is the key factor in restaurant sales growth, is projected to increase by 0.2 percent in 2009 -- and nearly half of consumers' food budgets will be spent in restaurants.

Even with the NRA's Restaurant Peformance Index (RPI) below 100 for 15 consecutive months (as of January 2009), according to its 2009 Restaurant Industry Forecast, sales are expected to reach $566 billion this year, with the industry employing 13 million individuals in 945,000 restaurant and foodservice outlets nationwide. While overall restaurant industry sales are projected to increase in current dollars by 2.5 percent over 2008 figures, the numbers translate to an inflation-adjusted decline of 1 percent. But despite the downturn, the industry still represents 4 percent of the U.S. gross domestic product and employs 9 percent of the U.S. workforce.

According to the NRA, consumers feel pulled in two directions. While they are certainly concerned with their finances, they still have a strong desire to utilize restaurants. Forty-five percent of adults say restaurants are an essential part of their lifestyle. Thirty-five percent say that on a weekly basis, they are not purchasing take-out foods to go or having it delivered as often as they would like, and one in three say they are not eating out as often as they wish. And in a recent NRA survey, nearly seven in 10 adults agreed that purchasing meals from restaurants makes it easier for families with children to manage their day-to-day lives. Nearly eight in 10 agreed that going out to a restaurant with family and/or friends gives them an opportunity to socialize and is a better use of their leisure time than cooking at home.

While intentions are good, this doesn't mean that the restaurant industry ­- and in turn the restaurant design industry ­- isn’t hurting. "We have definitely felt the squeeze of the economy and some delayed projects," says Robert Polacek, vice president and creative director of The Puccini Group in San Francisco. The Puccini Group designs and manages innovative restaurants and social spaces within hotels. "We discourage the use of the word 'economy' by giving each other the stink eye when anyone uses it. We know what is happening with the 'E' word, but we also know that there is still business to be had for those who are motivated enough to find it." The Puccini Group is offsetting its project delays with another side of its business that handles concepting, consulting, and operations management. "That side is really busy at the moment as hoteliers are figuring out how to maximize their revenues and stay relevant on a budget," Polacek says.

The NRA's RPI is a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry. It stood at 97.4 in January, up 1 percent from a record low in December of 96.4. The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction. As of January 2009, it had been below 100 for 15 consecutive months. "Forty-five percent of restaurant operators said the economy is the top challenge facing their business, while 24 percent said the same about building-and-maintaining sales volume," says Hudson Riehle, senior vice president of research and information services for the NRA.

Capital expenditure for equipment, expansion, or remodeling is also low, but slightly promising. Thirty-four percent of operators said they did some sort of capital spending during the last three months (as of the end of February 2009), and 41 percent plan to make a capital expenditure in the next six months. This is up slightly from 37 percent in January.

"A downturn in the economy doesn't affect the long-term viability of a concept or the future of restaurants we design. However, during a downturn it is important to do an operational overhaul, such as with creating a more affordable menu or discounted drinks," Polacek says.

But consumers won't just be seeking value. They want healthier options. "This has been a good test for if this is a trend or not," states Michael Oshman, founder of the Green Restaurant Association, of the movement towards greener, more sustainable solutions. "This is the biggest recession in 80 years and it's surviving. So it's moving forward now and it will be a major surge coming out of the recession. All the investors who've been sitting out on the sidelines will now realize its relevance."

According to a chef survey that contributes to the forecast, the number one trend for 2009 is local produce. Eighty-nine percent of fine dining operators serve locally sourced items and nine in 10 believe demand for it will grow. About four in 10 full service restaurant operations and nearly three in 10 quick service operators say they plan to devote more of their 2009 budgets to green initiatives – and restaurant patrons are responding gratefully. Forty-four percent surveyed said they are likely to make a restaurant choice based on an operator's practices in the areas of energy and water conservation.

"It's one of the easiest, most legitimate things a consumer can do – go to a green restaurant," Oshman says. "As a designer or architect you want your client to survive for the next 10-15 years plus, and in order to do that you have to understand that environmental pressures will only continue to increase, prices will go up and legislation will increase. As a designer or architect, I need to help their bottom line."

Oshman says restaurants will be positioning themselves well for the future by greening all aspects from building and design to menus and recycling. He's seen one restaurant brand switch from plastic to bamboo packaging and save 30 percent. With recycling and composting services, a business can reduce its garbage and waste pickups by 20 to 30 percent. And although the cost bulb-per-bulb of compact fluorescents might be more, the pay back is often in less than one year thanks to energy efficiency.

"You want to built as cheaply as possible, but you also want your clients to call you in a few years time and say 'Thank you for pushing me to do this, because my bills are now 20 percent lower.'" Oshman explains. And the proof is in the pudding as Oshman says he hasn't seen many of his client's projects being put on hold or canceled. "People building green restaurants have a vision beyond a month or two," he says. The bottom line seems to be to look toward the future, and that future is blindingly green.


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ChetanRestaurant Design Business Outlook

March 24, 2009

-By AnnMarie Marano


Apparently there is still one area that Americans are trying NOT to cut corners with -- dining out. According to the National Restaurant Association (NRA), disposable personal income, which is the key factor in restaurant sales growth, is projected to increase by 0.2 percent in 2009 -- and nearly half of consumers' food budgets will be spent in restaurants.

Even with the NRA's Restaurant Peformance Index (RPI) below 100 for 15 consecutive months (as of January 2009), according to its 2009 Restaurant Industry Forecast, sales are expected to reach $566 billion this year, with the industry employing 13 million individuals in 945,000 restaurant and foodservice outlets nationwide. While overall restaurant industry sales are projected to increase in current dollars by 2.5 percent over 2008 figures, the numbers translate to an inflation-adjusted decline of 1 percent. But despite the downturn, the industry still represents 4 percent of the U.S. gross domestic product and employs 9 percent of the U.S. workforce.

According to the NRA, consumers feel pulled in two directions. While they are certainly concerned with their finances, they still have a strong desire to utilize restaurants. Forty-five percent of adults say restaurants are an essential part of their lifestyle. Thirty-five percent say that on a weekly basis, they are not purchasing take-out foods to go or having it delivered as often as they would like, and one in three say they are not eating out as often as they wish. And in a recent NRA survey, nearly seven in 10 adults agreed that purchasing meals from restaurants makes it easier for families with children to manage their day-to-day lives. Nearly eight in 10 agreed that going out to a restaurant with family and/or friends gives them an opportunity to socialize and is a better use of their leisure time than cooking at home.

While intentions are good, this doesn't mean that the restaurant industry ­- and in turn the restaurant design industry ­- isn’t hurting. "We have definitely felt the squeeze of the economy and some delayed projects," says Robert Polacek, vice president and creative director of The Puccini Group in San Francisco. The Puccini Group designs and manages innovative restaurants and social spaces within hotels. "We discourage the use of the word 'economy' by giving each other the stink eye when anyone uses it. We know what is happening with the 'E' word, but we also know that there is still business to be had for those who are motivated enough to find it." The Puccini Group is offsetting its project delays with another side of its business that handles concepting, consulting, and operations management. "That side is really busy at the moment as hoteliers are figuring out how to maximize their revenues and stay relevant on a budget," Polacek says.

The NRA's RPI is a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry. It stood at 97.4 in January, up 1 percent from a record low in December of 96.4. The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction. As of January 2009, it had been below 100 for 15 consecutive months. "Forty-five percent of restaurant operators said the economy is the top challenge facing their business, while 24 percent said the same about building-and-maintaining sales volume," says Hudson Riehle, senior vice president of research and information services for the NRA.

Capital expenditure for equipment, expansion, or remodeling is also low, but slightly promising. Thirty-four percent of operators said they did some sort of capital spending during the last three months (as of the end of February 2009), and 41 percent plan to make a capital expenditure in the next six months. This is up slightly from 37 percent in January.

"A downturn in the economy doesn't affect the long-term viability of a concept or the future of restaurants we design. However, during a downturn it is important to do an operational overhaul, such as with creating a more affordable menu or discounted drinks," Polacek says.

But consumers won't just be seeking value. They want healthier options. "This has been a good test for if this is a trend or not," states Michael Oshman, founder of the Green Restaurant Association, of the movement towards greener, more sustainable solutions. "This is the biggest recession in 80 years and it's surviving. So it's moving forward now and it will be a major surge coming out of the recession. All the investors who've been sitting out on the sidelines will now realize its relevance."

According to a chef survey that contributes to the forecast, the number one trend for 2009 is local produce. Eighty-nine percent of fine dining operators serve locally sourced items and nine in 10 believe demand for it will grow. About four in 10 full service restaurant operations and nearly three in 10 quick service operators say they plan to devote more of their 2009 budgets to green initiatives – and restaurant patrons are responding gratefully. Forty-four percent surveyed said they are likely to make a restaurant choice based on an operator's practices in the areas of energy and water conservation.

"It's one of the easiest, most legitimate things a consumer can do – go to a green restaurant," Oshman says. "As a designer or architect you want your client to survive for the next 10-15 years plus, and in order to do that you have to understand that environmental pressures will only continue to increase, prices will go up and legislation will increase. As a designer or architect, I need to help their bottom line."

Oshman says restaurants will be positioning themselves well for the future by greening all aspects from building and design to menus and recycling. He's seen one restaurant brand switch from plastic to bamboo packaging and save 30 percent. With recycling and composting services, a business can reduce its garbage and waste pickups by 20 to 30 percent. And although the cost bulb-per-bulb of compact fluorescents might be more, the pay back is often in less than one year thanks to energy efficiency.

"You want to built as cheaply as possible, but you also want your clients to call you in a few years time and say 'Thank you for pushing me to do this, because my bills are now 20 percent lower.'" Oshman explains. And the proof is in the pudding as Oshman says he hasn't seen many of his client's projects being put on hold or canceled. "People building green restaurants have a vision beyond a month or two," he says. The bottom line seems to be to look toward the future, and that future is blindingly green.
 


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