• by Karlene Lukovitz  @KLmarketdaily, February 4, 2010

The total number of restaurant industry units in operation as of last fall were virtually flat with the same prior-year period, according to The NPD Group market research company.

The total count was down by 1,652 units, or just 0.3%, per NPD's latest ReCount, a census of U.S. commercial restaurant locations conducted in the spring and fall of each year.

Given the recession's impact on the industry over the last two years, those numbers sound fairly positive -- at least on the surface.

"I think the perception was that there would be a greater decline in the number of units," NPD director, product development-foodservice Greg Starzynski tells Marketing Daily. However, he points out that at some key chains, total chain units were up despite the shutting down of large numbers of existing units, because new units planned some time ago and already under construction will generally be completed/opened despite changing economics.

Further, stresses Starzynski, "the number of outlets is obviously just one of many factors that go into assessing industry performance." Other critical indicators such as traffic and sales have continued to show declines.

NPD data show total restaurant industry traffic for the year ending last November down 3.3% versus the year ending November 2008. "If you build [new units], they will not necessarily come," observes Starzynski.

The traffic fall-off would explain why NPD's data show total restaurant dollar sales declining by 2.1% during the year ending in November 2009, even though check size (average amount spent per meal) grew by 1.2% during the same period.

Looking more closely at unit count trends, the fall '09 ReCount data confirm a slowdown in chain expansion, as well as the economy weeding out the poorest-performing restaurants and being hardest on independents and smaller regional chains that "don't have the same financial resources as national chains," says Starzynski.

The total unit count for all chains was flat with fall '08, while independents' total count was down 1%.

QSRs' overall units declined just 0.2%, and full-service restaurants' just 0.3%. However, QSRs, which generally have been performing better than FSRs due to diners' trading down, would have shown a slight decline in total units were it not for the unit growth within Yum Brands' WingStreet (most of which are co-located with Pizza Hut, which does home delivery for WingStreet orders), reports Starzynski.

Effects of scale were clear within both QSRs and FSRs (the latter includes casual dining, midscale and fine dining formats).

The unit count across all QSR chains remained stable, but while major chains (those with 500+ units) showed 1% growth, mid-size chains (100-499 units), minor chains (50-99 units) and independent QSRs each saw their units decline by 2%. (Small QSR chains with three to 49 units had a stable overall unit count.)

FSR chains' total unit count was also flat. But looking deeper, large chains grew 1%, while mid-size and minor chains declined by 2% and 1%, respectively. The smallest chains and the independents held their own on units within the FSR sector, however (units for both were flat).

Looking at counts by geography, the data show the Central U.S. Census Bureau Region (including Michigan, Ohio and Illinois) as being hardest-hit, with total restaurant units down 1.2%. Total restaurant units in the Northeast census region declined 0.6%.