News

Technomic downgrades restaurant growth projections

The company said its May results released for the two-year period were overly optimistic and that declining traffic across food service has prompted the company to modify its restaurant industry growth projections through 2017.

November 29, 2016

Technomic this afternoon released an update on its restaurant industry forecast for the next two years, and the news is not good. The company said its May results released for the two-year period were overly optimistic and that declining traffic across food service has prompted the company to modify its restaurant industry growth projections through 2017. 

The slowdown in the fast casual segment is behind Technoimc'sdowngrade in projections for the overall limited service restaurant sector, according to Technomic, which reduced its nominal growth projections down to 4.5 percent for 2016 and 4.9 percent for 2017. The new figures are more than 1 percent lower ( 5.5 percent in 2016 and 5.7 percent 2017) when the original May growth projections were released. 

"Menu prices at some fast casual restaurants have risen to a level where the perceived value for a typical consumer has eroded," Technomic Principal Erik Thoresen, said in news release. "Add to that the struggles of Chipotle, which represents a sizeable share of the fast casual industry, and it was evident that forecast revisions in for 2016 and 2017 were necessary."  

No other information was provided regarding quick-service growth changes, if any, by the company, which concentrated its update on a predicted fast casual industry slowdown as well as the substantial cooling of traffic to casual restaurants this year and next. 

For instance, full-service restaurant growth was downgraded 1.4 points for 2016, and 0.8 points for 2017. Technomic said total segment nominal growth for each year is now at 3.5 percent. In fact, with inflation expected to be 2.7 percent for both years, real growth will only be a paltry 0.8 percent, according to a news release.

"Major full service chains, especially in the casual dining sector of the market, are really struggling," said Technomic Managing Principal Joe Pawlak, in the release.  "Consumer economic uncertainty, value issues, and undifferentiated positions are putting strains on many full service chains. However, independents seem to be holding their own as consumers are gravitating to these establishments due to their unique offerings, local orientation and strong value propositions."