Visits Down and Units Closing: Is this a Restaurant Recession?

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Wall Street may be booming, but Eat Street is still in distress. The number of independent restaurants is decreasing. Total US restaurant visits dipped slightly in 2016, according to NPD’s ongoing foodservice market research, CREST. Quick service restaurant traffic, which represents 80% of total industry traffic, was flat last year. Visits to independent restaurants declined by 2%, and chain restaurant visits were up one percent.

The total number of US restaurants decreased by 2% from a year ago to 620,807 units, according to a count of US commercial restaurant locations compiled each spring and fall by NPD Group. With the decline in restaurant units, restaurant density (units per million population) is at its lowest level in 10 years, dropping from 1,992 units per million in the fall of 2007 to 1,924 units per million last fall, based on NPD’s study.

Independent restaurant units decreased by 4% and density declined from 1,132 units per million a decade ago to 1,002 units per million in fall 2016, reports NPD. On the flip side, chain restaurant unit counts grew by 1% in fall 2016, increasing to 297,351 units. Density of chain restaurants grew from 860 units per million in fall 2007 to 922 in fall 2016.

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The decline in independent restaurant units was found in both the quick service and full service segments. The higher concentration of independent units, however, is in the full service segment, which includes casual dining, midscale/family dining, and fine dining. The fast casual quick service segment (which includes selected chains identified by NPD as “fast casual”) continues to expand, increasing units by 7% to 23,798. Density of fast casual restaurants is 74 units per million in fall 2016, up by more than 75% since fall 2007.

“This is the most significant drop in total US restaurant counts since the recession,” says Greg Starzynski, director, product management, NPD Foodservice. “If consumers continue to reduce their restaurant visits, we expect the number and density of restaurant units will continue to decline in response to the lower demand.”

Previous studies have indicated that traffic, check averages, and spending on beverages, particularly on formerly reliable non-alcohol standards like soft drinks, have been soft or down for some time. Tied to news of closures (recent chains shutting units include Lone Star, My Fit Foods, and this week Bloomin’ Brands announced 40 “underperforming” Carrabba’s, Outback, Bonefish Grill and Fleming’s restaurants will be closing by the end of the year), the news of the shrinking market drives a concern whether a further imbalance exists between the supply of restaurant locations and the demand of the average consumer today. And if so, how many more units need to close before the other indicators start heading back up.

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