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Technomic Projects Industry Growth in 2014

Sales at limited service restaurants to grow by 4.5 percent next year.

The restaurant industry will grow at a nominal rate of 3.8 percent in 2013, according to data released by Technomic, a Chicago-based foodservice market research firm. While this represents a 1.4 percent decline in nominal growth from last year, Technomic forecasts sunnier days for the industry in 2014.

Technomic forecasts the industry will grow by 4.1 percent nominal (or 1 percent real) in 2014. This comes on the heels of a successful 2011, which saw the industry grow by 4.0 percent. In real terms, Technomic projects the industry will grow by 0.8 percent in 2013 and 1 percent in 2014.

"Our economist friends tell us that DPI (disposable personal income) and other economic indicators will be better in 2014," said Technomic founder Ron Paul during his firm's annual Trends and Directions Conference.

Taking a closer look at specific industry segments, Technomic projects that nominal sales at limited-service restaurants will grow by 4 percent in 2013 and 4.5 percent in 2014; sales at full-service restaurants will grow by 3.5 percent in both 2013 and 2014 and bar/tavern sales will increase by 4.5 percent in 2013 and 5 percent in 2014.

Despite this growth, however, industry growth continues to lag behind pre-recession levels, Paul added. For example, in 2007 the restaurant industry grew by 13.5 percent, compared to only 3.8 percent last year. Part of the reason the industry continues to show moderate improvement is the fact that overall economic outlook remains varied by geography.

Along those lines, consumer sentiment, as tracked by the Conference Board, took a big hit during the recession but continues to gradually improve. In May, consumer sentiment reached 76.2 percent, a dramatic improvement from its all-time low of 25.3 in February 2009 but still a far cry from its all-time high of 111.9 in July 2007.

In other words, the mood among consumers is good but not great, Paul said. "What keeps this industry going is the fact that the desire to go out to eat is so strong that consumers will make tradeoffs to go out to eat," Paul said. He was quick to add that lower-income consumers are an exception to this.

Consumers top concerns include gas prices, grocery prices, their own financial health, healthcare costs and their job security, Paul sad. "If you just put all of your money into the gas tank you are not going to be able to go to dinner," Paul said.

Menu price increases have been at a moderate level this year, which is better than expected, as the concepts of discounting and value orientation remain prevalent in the industry, Paul said.