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NRA Projects Year of Growth for Foodservice Industry

For the first time in four years, the restaurant industry will experience real growth, according to the National Restaurant Association's 2011 Forecast.

Sales in the foodservice industry will grow 3.6 percent to $604 billion for this year, according to the National Restaurant Association's 2011 Forecast. After accounting for menu price inflation of 2.4 percent, the NRA projects the industry will experience 1.1 percent real sales growth in 2011. This will be the first time in four years the industry will experience real growth, according to the NRA.

Quick-service restaurants are projected to post sales of $167.7 billion this year, a gain of 3.3 percent compared to 2010, according to the NRA. Sales at full-service restaurants are projected to reach $194.6 billion in 2011, an increase of 3.1 percent in current dollars over 2010.

The eating-and-drinking place segment expected to show the strongest growth in 2011 is social caterers, whose sales are expected to increase by 6.2 percent, according to the NRA. Other commercial foodservice segments expected to post solid sales growth in 2011 are hotel restaurants (+5.7 percent), hospitals and nursing homes (+5.5 percent), and primary and secondary schools (+4.8 percent).

Despite improved operating conditions compared to the previous three years, the foodservice industry still faces several significant challenges in the form of rising gas prices and shaky consumer confidence that's tied to volatile unemployment numbers. "Consumer confidence levels are not high based on historic levels but during the past eight months they have gotten better," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. "Once employment picks up, consumer confidence will get better." Because consumers' financial position is not as solid as it was four years ago, they will continue to place an emphasis on value when dining out, he added.

In addition, the NRA projects that foodservice operators will experience a 3.3 percent increase in wholesale food prices, which is lower than the 4.9 percent increase the industry realized in 2010. "These continued increases will put pressure on operator margins in the year to come," Riehle said. "Operator input costs will vary, though, based on their menu construction."