State of the Industry: How are Restaurants Doing?

By: Gina Lee De Freitas

The state of the restaurant industry today is a mixed bag, with units down over all but some areas of growth. We’ll take a look at two major trends to follow this year, along with one quirky growth strategy that could be worth checking out.

But first, the bad news: The industry’s units continue to decline after five years of slow or flat traffic growth. Nation’s Restaurant News reports that in the fall, unit count declined 2 percent – 10,962 units – compared to the same period in 2016. NPD’s ReCount report showed it was the steepest drop in units since 1998. Analysts say that some regional areas are seeing growth, but overall there were just too many restaurants. 

Now, the good news: Insights from more than 30,000 restaurant units showed same-store sales rebounded in March by 0.8 percent, a nice clip following a lackluster January and February. It was the second-best month for same-store sales over the last two years.

The data suggest that while there’s a lot of pressure on restaurateurs to keep the doors open, the ones that have survived are poised to do well. Diners are spending more and eateries are relying less on expensive promotions.

Going Upscale: As a category, fine dining establishments and upscale-casual are showing the strongest growth in same-store sales. With the economy projected to grow in 2018, this is a trend that is expected to continue as diners are optimistic about their incomes and employment prospects.

Weak Links in the Chains: The biggest weakness lies in restaurant chains. Red Robin hit the brakes on expansion in 2018 after struggling last year, Famous Dave’s is down 13 units and Papa Murphy's has seen a 4.1 percent decline in same-store sales. BJ’s Restaurants, Zoe’s Kitchen, Chipotle and Potbelly all have also announced plans to curtail development in 2018.

Growing Nontraditionally: An expansion worth watching is the outside-the-box strategy Dunkin’ Donuts has planned. The chain plans to open 1,000 new units over the next two years – taking an unusual approach – building 90 percent of them outside of the East Coast where it dominates. Last year alone, the donut and coffee shop opened 86 units in places such as resorts, airports, casinos and hospitals.

About Butts in Seats!

When it comes to restaurant trends and marketing, IMM knows what they are talking about. Gina Lee De Freiitas, President of IMM, and Corien de Jong, SVP Executive Creative Director, have more than 25 years of experience in the vertical. So when they talk about the tools, tips and resources your restaurant needs to succeed, rest assured they’ve got it covered.

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