NPD Data: QSR is Winning the Battle For Market Share
New data shows that the restaurant industry is still locked in an ongoing battle for market share, and independent restaurants aren't fairing well.
Traffic accelerated by 300 million visits in 2015, according to the market research company NPD Group. That’s a healthy increase from 2014 when restaurant traffic increased by 100 million visits, but it’s still down from pre-recession days.
“We’re almost there, but we haven’t totally recovered the 2.2 billion visits we lost since the time of the recession,” said Bonnie Riggs, the restaurant analyst at NPD Group. “We’re almost there, but overall, the market is not growing very strongly.”
Riggs said the one place visits are growing is the quick-service portion of the industry that includes QSR, fast-casual and retail locations such as convenience stores and grocery stores that offer prepared food items. That segment saw a 1% traffic increase and now accounts for the vast majority (79%) of all industry visits.
Midscale and family dining saw another year of declines with traffic sinking 3%. Casual dining visits shrank 2%, accelerating from the 1% decline in 2014. Fine dining slumped as well, sinking by 1%—the first traffic decline for the segment that saw low to mid single-digit growth for the last five years.
“A year ago, we thought the full-service side had stopped the bleeding,” said Riggs. “But this year, it's negative again.”
Less traffic and more competition from QSR has been especially hard on independent restaurants in competitive major markets like New York and Chicago. Chicago lost 255 restaurants, 1% of the independent restaurants in the city. New York lost more than 1,400 restaurants, a -3% a unit decline as restaurateurs fought competition, high rent and anemic consumers.
"I would say in the New York market, it’s other factors because it’s not as chain dominated," said Riggs. "You can’t even get a hotel room for $400 a night and meals are very expensive; it’s an expensive city to visit and consumers in that market can only go out so many times. There were just too many restaurants."
While New York had its own issues, many other markets are being inundated with chain growth.
“The industry is very dependent on independent restaurants, but it’s those—especially on the full-service side—that are really having the greatest challenges because it’s difficult for them to compete with the marketing clout and economies of scale that the major chains have,” said Riggs. “It’s really hard for these folks, especially independent operators, to drive traffic.”
There are some strong markets for growth. Los Angeles saw a 1% unit increase and both the Dallas and Houston markets saw 2% increase in units. Overall, the number of restaurants declined by 0.6% to 629,488, driven down by the large number of independent closures.
The trend shouldn’t be a surprise, as a volatile stock market and a slew of frightening political possibilities has the consumer worried. According to the inaugural McKinsey & Company consumer sentiment survey, consumers surveyed are saving their money but will splurge when they see high value.
“You keep hearing that we’re going into another recession, but consumers behave like and also believe that we never came out of the last one. So whether we’re in a recession or we’re in or out or going in, consumers are behaving in a manner that is very cautious and controlled in their spending,” said Riggs, noting that the estimated $700 in gas savings is going in the bank. “They learned their lesson and they learned it well.”
QSR players are capitalizing on value promotions and cheap commodities in a big way. While it’s hard for independents to market value or take as much advantage of commodity prices, independent restaurateurs may want to brainstorm some marketing efforts or get caught in the trend.
Data courtesy of the Fall 2015 NPD ReCount report.