• by Karlene Lukovitz  @KLmarketdaily, December 22, 2008

Total U.S. restaurant sales are expected to grow at a modest 2.5% to $566 billion next year--and when the effects of 3.6% menu pricing inflation are backed out, this translates to a decline of 1%, according to the National Restaurant Association's 2009 industry forecast. 

This will come on top of a difficult 2008. While the association estimates 3.3% nominal sales growth for this year, its revised numbers put inflation-adjusted sales at $566 billion, a decline of 1%.

2009 sales for full-service restaurants are projected to gain just 1% to reach $182.9 billion. However, quick-serves will continue their relative advantage in attracting financially challenged consumers, seeing growth of 4% to reach $163.8 billion.

While the industry is "experiencing unprecedented challenges due to the economic recession and elevated food prices," association President/CEO Dawn Sweeney stressed its innovation and responsiveness to the needs of budget-conscious consumers--who are expected to spend nearly half of their food budgets in restaurants in 2009.

Restaurant operators are already swiftly adjusting their strategies and practices to reflect the now more "risk-averse" mentality of U.S. consumers, and they will continue to evolve rapidly, said SVP of research and information services Hudson Riehle during a Q&A at Friday's 2009 Outlook press conference.

While the association expects consumers to revert to some degree to pre-recession restaurant behaviors when the economy improves, he acknowledged that this recession is very likely to result in fundamental, long-term changes in behaviors and attitudes that will be reflected in restaurant patronage patterns.

As for the present, consumers are torn between wanting to eat out more and the need to stretch budgets. The association's recent surveys show adults buying meals or snacks from restaurants 5.8 times per week, on average. Nearly half (45%) indicate that restaurants are an "essential" part of their lifestyles; one-third say they're not eating out as often as they'd like; and 35% say that they're not buying take-out or having restaurant food delivered as often as they'd like on a weekly basis.

Furthermore, nearly seven in 10 agree that in-restaurant meals and take-out/deliveries make life easier for families with children, and eight in 10 say eating out enables socializing and is a better use of their leisure time than cooking at home.

At the same time, "nearly all" adults surveyed also confirmed that they are more worried about the economy than they were a year ago. And as Riehle noted, while the recent drop in gas prices is obviously a positive factor for the industry because it frees up some dollars for restaurant spending, "jobs are even more important."

No surprise, then, that 36% of quick-serve restaurant operators and 16% of casual-dining operators surveyed cited an expanded focus on delivering value as a top priority for 2009. Maintaining competitive pricing and menu/service offerings in the now hyper-competitive climate is paramount, so operators must achieve needed operational cost savings in ways that do not detract from consumers' "dining experience."

Individual restaurant performance will continue to vary widely in 20090--reflecting not only format, but operating models, costs, menus and geographic location. While the overall economy now appears to be heading in a deflationary direction, restaurants will continue to experience some wholesale food pricing pressure, and the degree will depend on which types of foods are emphasized in their menus, Riehle pointed out.

Varying economic and demographic trends within regions, states and metro areas always play a critical role in restaurant performance variations, and that impact is intensified in a recession.

On a state basis as ranked by rate of sales growth, the leaders in 2009 will be Texas (4% to $35.0 billion), Nevada (3.5% to $5.2 billion), Colorado (3.4% to $8.4 billion), New Mexico (3.3% to $2.7 billion) and Arizona (3.2% to $8.7 billion). By sales volume, the leaders will be California ($56.2 billion), Texas ($35.0 billion), New York ($27.8 billion), Florida ($27 billion) and Illinois ($18.8 billion).

In terms of restaurant job expansion, Texas, Nevada and Florida are expected to grow the most rapidly, showing a 23% workforce increase between 2009 and 2019 compared to projected growth of 14% for the industry nationwide.

That 14% growth exceeds projected growth for the U.S. population, and will represent 1.8 million new jobs over the next 10 years, bringing the industry's total workforce to 14.8 million by 2019.

In 2008, the industry's employment growth "far outpaced" that of the overall economy (for the ninth consecutive year) despite "several months of modest industry job losses," according to the association. The 2009 total industry workforce estimate of 13 million will represent 9% of total U.S. jobs.

However, the industry faces a growing challenge in meeting its workforce needs because of the slowing growth in the population of U.S. teens and young adults who have been restaurants' dominant waitstaff workforce pool.