Restaurant Business Market update

INSIDE MARKETBRIEFING

MarketBriefing is produced by Technomic, Inc., the leading provider of consulting and consumer research to the restaurant industry. To find out about more American Express services to help you grow your business, go to www.americanexpress.com/restaurant.

Dinner Dining .................................p. 4Convenience-Store Foodservice ....................................p. 6

HEAVY RESTAURANT USAGE TREND BAROMETER

Editor’s note: Look for up-to-date metrics that shed light on key industry trends in each month’s MarketBriefing. For comparison, you can find past Trend Barometer metrics online at: www.technomic.com/MB.

1

The percentage of consumers who visit limited-service restaurants two times per week or more often has fallen by 11 percentage points from July to September and now stands at 24%. Although a much smaller percentage of consumers (9%) visit full-service restaurants two times a week or more, this level fell by only two percentage points in the same time span.

Until the economy fully recovers, restaurant usage in general will likely be in a state of flux, achieving some relative highs and lows that reflect the cycle of economic ups and downs.

The Lighter Side of the Menu

Over the course of the past year, many restaurants have added lower-calorie, more healthful options to their menus. In addition, many chains began to provide customers with suggestions as to how they can

construct meals that fall within a certain range of calories or that adhere to a specific diet plan. Such efforts differ from complete nutrition disclosure (which will soon be mandated by law for chains with more than 20 units); they are geared simply toward helping diners create a lighter, more wholesome meal.

With such programs underway, it makes sense to evaluate how helpful consumers find the lower-calorie options and recommendations to be. Also, are restaurants conveying the facts to consumers in an effective manner, and is the information that is being provided telling consumers what they really want to know?

MOST CONSUMERS APPRECIATE THE ADDITIONAL INFORMATION

In a September 2010 online survey of 500 consumers, more than three-fourths (77%) indicated that lower-calorie menu options and suggestions are or would be helpful. When a similar question was posed to 500 consumers in February 2010, 70% of consumers indicated the same. Interestingly, between these two time periods, the percentage of consumers who felt such information and outreach on the part of restaurants would be “very helpful” increased, while the percentage who felt such efforts would be “somewhat helpful” declined slightly.

The reasons why consumers like (or would like) the extra nutritional data provided by restaurants vary somewhat by gender, as shown on the next page. Of those who report that such information is helpful, nearly the same proportion of men (41%) as women (39%) indicate that its usefulness lies mainly in directing them to which foods are the healthiest, since they can’t necessarily figure that out on their own. Fewer men (28%) than women (35%), however, appreciate the facts and figures for helping them to stick to their diets when dining out. And again, fewer men (26%) than women (32%) report that they value the suggestions because they find that healthier, lighter food tastes better. An even wider gulf separates men (18%) from women (28%) when it comes to using the information as a crutch when placing an order quickly.

T r a c k i n g a n d i n t e r p r e t i n g r e s t a u r a n t t r e n d s

© 2010 American Express MarketBriefing

October 2010

Market Briefing

Heavy Restaurant Usage Two times a week or more

LSR FSR

Nov ‘09 May ‘10 Jul ‘10 Sep ‘10

18%

8%

36%

15%

35%

11%

24%

9%

A Growing Number of Consumers Feel Lower-Calorie Menu Options and Suggestions Are/Would Be Helpful

% of consumers selecting

Sep 2010

Feb 2010

38% 39%

40% 30%

77%

70%

% Overall

Somewhat helpful Very helpful

Market Briefing October 2010

WHERE HELP IS NEEDED MOST

A majority of consumers (54%) who are in favor of the lower-calorie options and meal recommendations report that they’d like to see such information at limited-service burger restaurants. Slightly fewer than one-third of these consumers (31%) indicate that they would like to see it at full-service varied-menu restaurants, and a quarter (25%) would like to see it at full-service Italian restaurants. Overall, it appears that consumers want to have these facts available in multiple contexts, as the list is nearly evenly split between limited-service and full-service restaurant types (though the limited-service burger category clearly leads the pack).

HOW TO PRESENT THE FACTS

More than two-fifths of consumers (41%) report that they would prefer to see lower-calorie menu options at a full-service restaurant offered on a special section of the regular menu. About one-third of consumers (32%) indicate that they’d ideally opt for inclusion of such items on the regular menu, with some sort of denotation as to their more healthful status. Approximately one of eight consumers (13%) report that a special insert handed out with the regular menu is the way to go when explaining which lower-calorie dishes are on offer, while far fewer consumers are interested in a separate insert that is available only by special request (6%), a table tent with the listings (3%), hearing the information from a server by special request (3%) or reading about the options on blackboards or signs placed throughout the restaurant (2%).

2© 2010 American Express MarketBriefing

DINING DEAL TREND BAROMETER

Consumers are more likely to dine out for dinner without the prompt of a special deal on the weekend than during the week. That said, as the economic recovery has sputtered, consumers’ willingness to engage in deal-less dinner dining has declined over the course of the July to September period, from 87% to 82% during the weekend and 79% to 74% during the week.

Likelihood that Consumers will Dine at a Restaurant for Dinner if

No Deals are Offered % of consumers responding “very” or

“somewhat” likely

Jul ‘10 Sep ‘10

Weekend Weekday

87%

82%79%

74%

Top Reasons Why Lower-Calorie Options and Suggestions are Helpful% of consumers selecting, by gender

Base: 386 consumers who find lower-calorie menu options/suggestions to be very or somewhat helpfulNote: Multiple responses allowed

40%

32%

% Overall

30%

24%

Male Female

Don’t know what foods are healthiest; lower-calorie menus help me out

On a diet and like to be able to stay on it when dining out

Healthier, lighter food tastes better

Easy to decide when I have to order quickly

41%39%

28%35%

26%32%

18%28%

Types of Restaurants Where Lower-Calorie Menu Options/Suggestions Would be Most Helpful

% of consumers selecting

Base: 426 consumers who would like to see lower-calorie options/suggestions on menusNote: consumers selected up to three responses

LSR burger

FSR varied-menu

FSR Italian

FSR family-style

LSR sandwich

LSR chicken

LSR pizza

LSR Mexican

FSR steak

54%

31%

25%

19%

19%

19%

15%

15%

15%

3


© 2010 American Express MarketBriefing3

WHAT ELSE MATTERS TO DINERS

Beyond lower-calorie options and more healthful meal suggestions, what type of food-based choices do diners want most from restaurants? More than half of consumers (53%) indicate that it is somewhat or very important to them that menu items can be altered to accommodate allergies, while nearly as many feel the same about the inclusion of low-sodium items on the menu (52%) as well as the ability to learn precisely what ingredients go into each dish, if requested (51%). Relatively fewer consumers—but still a significant number—report that they’d like to see gluten-free (27%) or peanut/nut-free (22%) items on the menu.

Bottom Line: Restaurants that offer healthful, lower-calorie options and meal recommendations are providing a service that is welcomed by many of their customers. Although consumers express definite preferences for how such information should be conveyed and in what types of restaurants it is needed most, this trend will likely continue to grow in the coming years.

BUSINESS-BUILDING IMPLICATIONS:• If you are seeking success in your endeavors to push more healthful options, be careful to promote your establishment’s lower-calorie

meal suggestions in a way that does not convey the impression of a “diet plate.” At Corner Bakery Cafe, for example, the list of “100 Corner Combos Under 600 Calories” is full of mouth-watering, tasty, decidedly non-diet-sounding meal combinations.

• Menu transparency is of great importance to more than half of consumers surveyed. Whether because of allergies, dietary restrictions or just plain curiosity, a fair number of diners want the ability to know what goes into the food they are eating. It would be wise to keep ingredient lists for all of your operation’s dishes, so that diners who request such information can easily access it. Keep in mind that this is not the same as nutritional disclosure; providing a list of ingredients is far different than providing detailed calorie or sodium counts.

• Some restaurant chains have been called out in the press for providing inaccurate calorie counts for dishes that were promoted on a lighter or more healthful menu. If you’re going to enter this arena of more healthful dining options, make sure to invest in precise caloric analyses so that you can be truthful about the facts you’re endorsing. And remember, if you tweak a recipe, you’ll need to account for it with an updated analysis.

Best Way to Show Lower-Calorie Menu Options at an FSR

Method Consumers SelectingIn a special section of regular menu 41%

On regular menu with special notation that they are healthier options 32

Listed on a separate insert that is handed out with the menu 13

Listed on a separate insert that is available by special request 6

Listed on a table tent 3

Server provides information only when requested by diners 3

Options listed on blackboards/signs placed throughout restaurant 2

TOTAL 100%

Somewhat important Very important

Menu items can be altered to accommodate allergies

Low-sodium items are on the menu

Each ingredient in each dish can be disclosed, upon request

Gluten-free items are on the menu

Peanut/nut-free items are on the menu

Overall

53%

52%

51%

27%

22%

Relative Importance of Various Food-based Factors When Selecting a Restaurant% selecting top two box responses (“very” or “somewhat” important)

26%

31%

30%

18%

11%

27%

21%

21%

9%

11%

Respondents indicated their opinion on a scale of 1-5 where 1 = very important and 5 = not important at allNote: Repondents were asked to consider dine-in and to-go orders



Dinner Dining

In the past few years, many restaurants’ dinner business has taken a hit as consumers have reined in their dining expenses. Whether it’s a matter of fewer appetizers and desserts being ordered, cutting back on alcoholic beverages or simply not dining out at all, most operators have

had to contend with some flux in their dinner business, at the very least. Still, there is a sizeable contingent of diners who still manage to enjoy dinner from a restaurant, either on-premise or at home with takeout/delivery service. Below are some insights as to where they’re choosing to dine and what is driving their decisions to do so.

WEEKNIGHT DINING…

When dining out for dinner during the work week, almost half of consumers report that they typically visit quick-service chains (49%), followed somewhat closely by casual-dining chains (45%). Fewer than one-third of consumers indicate that they tend to visit a family-style chain (29%), an independent ethnic restaurant (28%) or an American-style or pizzeria restaurant (23%) when dining out during the week.

Takeout/delivery preferences during the work week are slightly different. More than half (56%) of consumers who order dinner from a restaurant for takeout or delivery during the work week report that they look to a quick-service chain to do so, while far fewer (24%) report that they order from a casual-dining chain. Orders placed to go during the week from family-style chains (16%) and independent ethnic restaurants (20%) are eclipsed by those placed at independent American-style restaurants or pizzerias (23%).

…AND WEEKEND DINING

On the weekend, consumers indicate that they are most likely to dine out for dinner at a casual-dining chain (53%). One-third of consumers report that they frequent a family-style chain (33%), while slightly fewer are inclined towards a quick-service chain (29%), an independent ethnic restaurant (28%), an independent American-style restaurant or pizzeria (22%).

4

Types of Restaurants Most Popular for Weeknight Dinners, Dine-in and Takeout/Delivery% of consumers selecting

Dine-in Takeout/deliveryNote: Multiple responses allowed

Quick-service chain

Casual-dining chain

Family-style chain

Independent ethnic

Independent American style or pizzeria

49%56%

23%

24%

29%16%

28%20%

23%

45%

Types of Restaurants Most Popular for Weekend Dinners, Dine-in and Takeout/Delivery% of consumers selecting

Dine-in Takeout/deliveryNote: Multiple responses allowed

Casual-dining chain

Family-style chain

Quick-service chain

Independent ethnic

Independent American style or pizzeria

53%26%

25%

18%

29%47%

28%25%

24%

33%



5

When ordering dinner for takeout/delivery on the weekend, consumers indicate that they are most likely to do so from a quick-service chain (47%). About one-quarter of consumers report that they might order from a casual-dining chain (26%), an independent ethnic restaurant (25%) or an independent American-style restaurant or pizzeria (25%). Fewer than one-fifth of consumers (18%) indicate that they typically order takeout or delivery from a family-style chain for dinner on the weekend.

WHAT DOESN’T NECESSARILY DRAW DINERS

As one might expect, more than nine of 10 diners surveyed report that a high quality of food, a high quality of service, the taste of the food, freshness of the food, good overall value for the money spent and other such obvious factors are all somewhat or very important to them when selecting a restaurant for dinner (either for dine-in or takeout/delivery service). What is more interesting to examine are those factors that are least important to dinner diners, since operators who invest large efforts or expense in such areas might be better off applying their resources elsewhere.

When selecting a dinner destination during the work week, more than two-fifths of consumers (44%) indicate that the availability of alcoholic beverages is not very important or not important at all to them. On the weekend, that percentage drops (not surprisingly) to slightly fewer than two-fifths of consumers (38%). Many consumers prefer to dine out for dinner without their children, which may be why a separate kids’ menu is not reported as something that is of much importance to two of five consumers (40%) during the week or weekend when selecting where to go for dinner.

Approximately one-quarter of dinner diners indicate that free bread with a meal is not a significant factor in selecting a restaurant during the week (26%) or weekend (24%), and the acceptance of reservations matters little to 24% of consumers during the week and 20% during the weekend. Free refills on non-alcoholic drinks round out the higher end of the lower part of the spectrum; 14% of workweek dinner diners and 16% of weekend dinner diners note that such an offer is not impactful in their selection of a restaurant for dinner.

OCCASIONS WORTHY OF DINNER AT A RESTAURANT

There are certain occasions that, when they occur, motivate consumers to dine at a restaurant for dinner, provided that they have the funds to do so. These include the celebration of a birthday (71% of consumers report that they are likely to dine out for this), a date night with a spouse or significant other (47%) and the celebration of an anniversary (33%). Fewer than a quarter of consumers indicate that they are likely to go out for dinner to celebrate a holiday (23%) or a personal accomplishment (20%).

Least Important Considerations in Shaping Dinner Destination Decision % of consumers selecting bottom two box responses (not very important or not important at all)

Availability of alcoholic beverages

Separate kids’ menu

Availability of free bread with meals

Restaurant accepts reservations

Free refills on non-alcoholic drinks

44%38%

16%

40%26%

24%

24%20%

14%

40%

Weekday Weekend

Respondents indicated their opinion on a scale of 1-6 where 6 = very important and 1 = not important at all

Special Occasions Most likely to Merit a Dinner Out % of consumers selecting

Celebration of a birthday

Date night with spouse/significant other

Celebration of an anniversary

Celebration of a holiday

Celebration of a personal accomplishment

71%

47%

33%

23%

20%

Note: consumers selected up to three responses



DINNER PREFERENCES

Men and women have strong ideas of what foods ought to be served at dinner, how a restaurant should menu certain items at dinner, etc. And of course, men and women don’t always see eye to eye on these matters. For instance, three-quarters of men (75%) agree completely or somewhat that they prefer to have hot foods for dinner over items that are typically served cold, while two-thirds of women (66%) feel likewise. Getting a side dish of one’s own choosing is something that both genders support nearly equally; more than three-fifths of men (63%) and women (65%) indicate that they agree completely or somewhat that this is important to them when ordering diner from a restaurant.

Two-thirds of men (66%) agree that meals eaten at dinner should include some type of meat; half of women surveyed (50%) believe the same. Women, for their part, report that they are more interested than men in seeing smaller portions at lower price points on dinner menus; over half of women (52%) agree somewhat or completely with this idea, while fewer than two-fifths of men (38%) do. In the same vein, a much higher percentage of women (47%) than men (30%) agree that they sometimes make a meal out of appetizers when dining at a restaurant for dinner.

Bottom Line: For many operators, the dinner daypart is the most competitive and lucrative meal of the day. Being able to anticipate when customers might drop in and what they’re likely to be seeking (or not) can make for a better promotional approach and dining experience, which in turn should help to draw in repeat (and new) business.

BUSINESS-BUILDING IMPLICATIONS: • Operators need to anticipate as best as possible when and why consumers may be coming to their restaurants for dinner, and cater

to those who do appear. If you collect email addresses and birthday and anniversary information from your loyal clientele, make sure to make note of these dates and entice them to celebrate at your establishment with a special coupon or offer.

• If you’re spending a lot of time and money on maintaining an alcoholic beverage service and are not seeing an adequate return on your investment, consider going to a BYOB plan. You may find that the loss in alcohol-generated income is more than made up for by an increase in dining sales, as guests feel free to spend more money on their food when they spend less on their alcoholic beverages.

• Side dishes appear to be a very personal matter for many diners. The Cracker Barrel chain offers a selection of 14 sides with its dinner entrées, and Denny’s offers 15. This is the type of variety that diners love when sourcing their dinner from a restaurant. Another benefit of multiple side dishes is that it makes it simple for guests to make a meal out of small plates, another option that rates highly with consumers.

Convenience-Store Foodservice

Foodservice has become a key area of opportunity for convenience stores across the country. As revenues from gasoline and tobacco products fall, foodservice sales increasingly are becoming convenience stores’ most profitable category. As more convenience stores increase their

focus on providing a wider variety of fresh, high-quality food offerings, competition is heating up within the market—and the foodservice industry as a whole. There is no question that these stores are striving to gain a greater share of stomach and to compete with restaurants.

To help operators stay on top of current trends and evolving consumer needs, Technomic developed the Convenience Store Foodservice Consumer Trend Report. This includes findings from an online survey of more than 1,500 consumers, conducted in July 2010, which revealed much about convenience-store foodservice patronage and consumption behavior, attitudes and preferences.

Consumers’ Thoughts on Dinner % of consumers selecting top two box responses (agree completely or agree somewhat), by gender

I prefer to have “hot” foods for dinner versus items typically served cold

It is important to me that I am able to substitute or choose which side dish to have with my dinner

Meals eaten at dinner should include some type of meat

I would like to see smaller portions at lower price points on dinner menus

When dining at a restaurant for dinner, I sometimes make a meal out of appetizers

75%66%

63%65%

66%50%

38%52%

30%47%

Men Women

Respondents indicated their opinion on a scale of 1-5 where 6 = agree completely and 1 = disagree completely

Overall

70%

64%

57%

45%

39%

© 2010 American Express MarketBriefing


PURCHASE FREQUENCY

In many cases, foodservice drives convenience-store visits. Of those consumers who visit convenience stores at least once every six months, nearly half (47%) indicate that they visit these locations for foodservice purchases at least once a week. Within this group, about a quarter (24%) visit two to three times each week and 8% visit daily for foodservice items.

Convenience stores are not top of mind, however, for many consumers as a place to source meals or snacks. About a fifth of consumers polled (18%) report that they rarely or never visit convenience stores specifically to purchase items from the foodservice area. Because Technomic wanted to gauge the usage and preferences of consumers who purchase foodservice items from convenience stores, these consumers were disqualified from the survey after this point.

SHARE OF CONVENIENCE-STORE PURCHASES

Technomic asked consumers to estimate what percentage of all foodservice items typically purchased at convenience stores are for breakfast, lunch, dinner and for snacks. The results reiterate the extent to which convenience stores are primarily visited for snacks rather than for meals.

Consumers say that about 48% of the items they purchase at convenience stores are intended as snacks. About a quarter (23%) of the prepared food and beverages consumers purchase at convenience stores are for breakfast and a fifth (20%) are for lunch. Showing foodservice purchases by daypart also reinforces how low patronage is at dinner in comparison to other occasions. Only about 10% of consumers’ total convenience-store foodservice purchases are for dinner.

CONSUMPTION DYNAMICS: FOOD

A large proportion of the food that consumers order at convenience stores is eaten in the car or en route to someplace. Options purchased for breakfast are most likely to be consumed in the car (72%), while walking or biking (26%) or on public transportation (21%). Although lunch from a convenience store is primarily eaten in the car (55%) or at work (49%), two-fifths of consumers polled (40%) take items to eat at home or someone else’s house.

7

Every day

15%

8%

13%

24%

Frequency of Foodservice-Specific Visits to Convenience Stores

2-3 times per week

Once a week

2-3 times per month

Once a month

Once every 2-5 months

Every 6 months or less often

10%13%

18%

Base: 2,261 consumers aged 18+; base includes some terminated respondentsTotal does not = 100% due to rounding

Snacks are the Most Popular Meal Part Purchased at Convenience Stores

Lunch20%

Snacks48%

Breakfast23%

Dinner10%

Base: 1,500 consumers aged 18+Note: mean values shownTotal does not = 100% due to rounding



Editor’s note: Except where otherwise noted, source of data is a periodic overnight survey of 500 consumers representative of the U.S. population, conducted via the Internet by Technomic, Inc. in September 2010. Margin of error ± 4.4%. The 2010 Convenience Store Foodservice Consumer Trend Report is based on an online survey of 1,500 U.S. consumers conducted in July 2010. Margin of error ± 2.5%.

About MarketBriefing Through MarketBriefing, American Express provides restaurants with research-based analysis of key industry developments. Data is collected and analyzed by Technomic, Inc. To subscribe or find past issues of MarketBriefing go to: www.technomic.com/MB. If you have questions, comments or topic suggestions, please contact Kimberly Perman at [email protected] or directly at (312) 506-3831.

To find out about more American Express services to help you grow your business, go to www.americanexpress.com/restaurantresources.

Dinner, when sourced from a convenience store, is most frequently eaten at home or someone else’s home (65%), followed by in the car (45%). More often than breakfast or lunch, dinner is also eaten at the convenience store (33%). Perhaps this is because stores are less busy at dinnertime hours and there is more seating available. For snacking occasions, consumption in the car (57%), at home or someone else’s home (55%) or at work (33%) is most common.

Bottom Line: Convenience-store customers say that they purchase some type of food or beverage on about half of their convenience-store visits, indicating that while foodservice is an important category for these stores, opportunities for growth still exist. However, while location is key to getting consumers in the door, restaurants still have the upper hand when it comes to perceptions of high-quality food and dine-in ambiance.

BUSINESS-BUILDING IMPLICATIONS:• Although convenience stores are already recognized as locations that excel when it comes to offering fast service, look for them to

increasingly add features, like drive-thru service and call-ahead ordering, to further expedite transactions and compete with quick-service restaurants.

• In order to encourage more lunch and dinner purchases and in-store dining, it’s likely that convenience stores will expand their seating areas in years to come and offer free Wi-Fi access, television screens and updated décor to compete with restaurants. This suggests that restaurant operators will need to further define what makes their establishments unique (better food, better prices, etc.) and carve out their own niche.

• More so than at restaurants, where food made from scratch is expected, convenience stores may be able to boost foodservice sales by offering highly recognizable, name-brand prepared foods that consumers are already familiar with and perceive to be high in quality.

Breakfast Dinner Snacks

In the car

At work

At home/someone else’s home

At the store

55%72%

45%

49%53%

29%

42%

33%

27%

33%29%

26%

Where Food Purchased at Convenience Stores is Typically Consumed% of consumers selecting, by meal part

Base: 422 (breakfast), 409 (lunch), 377 (dinner), 642 (snacks) consumers aged 18+ who purchased food from c-stores for these occasions

While walking/biking

On public transportation

57%

40%

55%65%

20%

18%21%

15%

21%14%

18%13%

Lunch



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