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Thriving in the Mid-Atlantic Region:

Research and Knowledge Group. Mid-Atlantic Food, Beverage and Lodging ... Wholesale Food Prices Historical and Projected Growth Rates. Source: ...

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Thriving in the Mid-Atlantic Region:

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    Mid-Atlantic Food, Beverage and Lodging EXPO Baltimore, Maryland October 7, 2009

    Slide 2:Thriving in the Mid-Atlantic Region: Challenging Times Create Innovative New Strategies

    Paul Hartgen President Restaurant Association of Maryland A crisis is a terrible thing to waste. A crisis is a terrible thing to waste.

    Slide 3:This program is sponsored by: AdvantEdge Services

    Herb Heiserman Principal, Heiserman Group Visit us at Booth #513

    Slide 4:Restaurant Industry 2009 and Beyond

    Hudson Riehle Senior Vice President Research and Knowledge Group Mid-Atlantic Food, Beverage and Lodging EXPO Baltimore, Maryland October 7, 2009

    Slide 5:Agenda

    Overview Economic Backdrop Industry Segments Industry Imperatives Jobs and Careers Food and Healthy Living Sustainability and Social Responsibility Profitability and Entrepreneurship Regional Outlook Wrap-Up

    Slide 6:DEFINITION:

    “Restaurant Industry” All meals/snacks prepared away from home, including all takeout meals and beverages

    Slide 7:Restaurant Industry

    Commercial Restaurant Services Non-Commercial Restaurant Services Military Restaurant Services

    Slide 8:Overview: The Industry in 2009

    Slide 9:2008 + 2009 =

    Most Challenging Period for Restaurant Industry in Decades

    Slide 10:39 Years of Restaurant-Industry Sales

    Source: National Restaurant Association

    Slide 11:Annual Sales: $560+ billion

    Slide 12:Employees: 13 million

    Slide 13:Locations: 945,000

    Source: National Restaurant Association 1955: 25% Present: 48% Restaurant Industry’s Share of the Food Dollar The Industry Mosaic

    Slide 16:Economic Backdrop

    Slide 17:National Economy Expected to Improve in 2010

    U.S. Real Gross Domestic Product – Historical and Projected Growth Rates Source: Bureau of Economic Analysis; National Restaurant Association

    Slide 18:Recovery Expected to Be Slow and Modest

    U.S. Real Gross Domestic Product – Quarterly Annualized Growth Rates Source: Bureau of Economic Analysis; National Restaurant Association

    Slide 19:Income Growth Expected to Remain Modest in 2010

    Real Disposable Personal Income – Historical and Projected Growth Rates Source: Bureau of Economic Analysis; National Restaurant Association

    Slide 20:Home Equity Cashed Out Through Refinancing Each Quarter

    Includes refinancing of prime, first-lien conventional mortgages Source: Freddie Mac

    Slide 21:Personal Saving Rate Trending Upward

    Personal Saving as a Percentage of Disposable Personal Income Source: Bureau of Economic Analysis

    Slide 22:Gas Prices Remain Below 2008 Levels

    Average price per gallon for regular gasoline Source: U.S. Department of Energy, Energy Information Administration

    Slide 23:Tourism Drives Restaurant Sales

    Median proportion of restaurant sales represented by travelers and visitors Source: National Restaurant Association 25% 25% Family Dining Casual Dining 40% 15% Fine Dining Quickservice

    Slide 24:International Arrivals to the U.S. Down 10% in First Half of 2009

    Percent change in number of international arrivals to the U.S. Source: U.S. Department of Commerce; *Year-to-Date growth through June 2009

    Slide 25:Job Losses Likely to Continue into 2010

    Total U.S. Employment – Historical and Projected Growth Rates Source: Bureau of Labor Statistics; National Restaurant Association

    Slide 26:Consumer Confidence Edging Back Up from Record Lows

    U.S. Consumer Confidence Index Source: The Conference Board

    Slide 27:Wholesale Food Prices Down for First Time in Seven Years

    Wholesale Food Prices – Historical and Projected Growth Rates Source: Bureau of Labor Statistics; National Restaurant Association

    Menu Prices Expected to Post Moderate Growth in 2009 Menu Prices – Historical and Projected Growth Rates Source: Bureau of Labor Statistics; National Restaurant Association Projected

    Slide 29:Economy Remains the Top Challenge Facing Operators

    Top Challenges Facing Restaurant Operators: Sep. 2007, Sep. 2008, Sep. 2009 Source: National Restaurant Association, Restaurant Industry Tracking Survey

    Slide 30:Total Monthly Sales Just Slightly Above 2008 Levels

    Seasonally-adjusted Monthly Sales at Eating and Drinking Places (in billions) Source: U.S. Census Bureau

    Slide 31:Restaurant Performance Index Below 100 for 22nd Consecutive Month

    Source: National Restaurant Association

    Slide 32:Expectations Index Rising as Operators Grow More Optimistic

    Source: National Restaurant Association

    Slide 33:Restaurant Operators Continue to Plan for Capital Expenditures

    Proportion of operators that made a capital expenditure for equipment, expansion or remodeling in last 3 months and plan to in the next 6 months Source: National Restaurant Association

    Slide 34:Industry Segments

    Fullservice Restaurant Sales 2008 2009 $181 billion $183 billion Source: National Restaurant Association

    Slide 36:Pent-Up Demand for Restaurants Percent of adults NOT eating on-premises at restaurants as often as they would like

    Percentage 2007 2008 Point Change All Adults 31% 33% +2 Household Income: $50,000 - $74,999 23% 29% +6 $75,000 or more 17% 24% +7 Source: National Restaurant Association

    Slide 37: Percent of adults NOT eating on-premises at restaurants as often as they would like

    Source: National Restaurant Association Pent-Up Demand for Restaurants Continues to Grow

    Limited-Service Restaurant Sales 2008 2009 $157 billion $164 billion Source: National Restaurant Association Managed Services Sales Source: National Restaurant Association 2008 2009 $38.3 billion $40.1 billion

    Slide 40:Jobs and Careers

    Slide 41:Over two out of five American adults have worked in the restaurant industry.

    Source: National Restaurant Association

    Source: Bureau of Labor Statistics; National Restaurant Association projections * Projected 1999 10.9 million 2009* 2019* 13.0 million 14.8 million Total Restaurant-Industry Employment

    Slide 43:Restaurants Down 119,500 Jobs from Pre-Recession Peak (-1.2%)

    Net Change in Eating and Drinking Place Employment (seasonally-adjusted) Source: Bureau of Labor Statistics

    Slide 44:National Economy Down 7.2 Million Jobs (5.2% of Workforce)

    Net Change in Total U.S. Employment (seasonally-adjusted) Source: Bureau of Labor Statistics

    Slide 45:Food and Healthy Living

    Slide 46:Locally grown produce Bite size desserts Organic produce Nutritionally-balanced children’s dishes New/fabricated cuts of meat (e.g. Denver steak, pork flat iron, bone-in Tuscan veal chop)

    Source: National Restaurant Association; American Culinary Federation, 2008 Hot/Trendy Food Offerings Fullservice Restaurants

    Slide 47:Healthy options in kids meals Organic items Locally-sourced items Spicy items Wraps/pitas/tortillas

    Source: National Restaurant Association, Quickservice Restaurant Survey 2008 Hot/Trendy Food Offerings Quickservice Restaurants

    Slide 48:Micro-distilled/artisan liquor Culinary cocktails (e.g. savory, customized to specific dishes) Organic wine Craft beer/microbrews Specialty beer (e.g. seasonal, fruit)

    Source: National Restaurant Association; American Culinary Federation, 2008 Hot/Trendy Alcoholic Beverage Offerings Fullservice Restaurants

    Slide 49:Specialty iced tea (e.g. Thai-style, Southern/ sweet, flavored) Organic coffee Flavored/enhanced water Green tea Espresso/specialty coffee

    Source: National Restaurant Association; American Culinary Federation, 2008 Hot/Trendy Non-Alcoholic Beverage Offerings Fullservice Restaurants

    Slide 50:Energy drinks Flavored/enhanced water Espresso/specialty coffees Sports drinks Iced tea

    Source: National Restaurant Association, Quickservice Restaurant Survey 2008 Hot/Trendy Non-Alcoholic Beverage Offerings Quickservice Restaurants

    Slide 51:Three out of four adults (76 percent) said they are trying to eat healthier now at restaurants than they did two years ago.

    Source: National Restaurant Association

    Slide 52:Nearly three out of ten adults (27 percent) said they have gone online to search for nutrition information about restaurant food.

    Source: National Restaurant Association

    Slide 53:Sustainability and Social Responsibility

    Going Green Percent of operators, by type of operation, who plan to devote more of their resources to green initiatives in 2009 Source: National Restaurant Association, 2008 Family dining Casual dining Fine dining Quickservice 43% 45% 50% 27%

    Slide 55:Forty-four percent of adults said they are likely to make a restaurant choice based on a restaurant’s practices in the areas of energy and water conservation.

    Source: National Restaurant Association

    Slide 56:Conservation Initiatives Percent of restaurant operators who took the following actions in 2008

    Family Casual Fine Quick Dining Dining Dining Service Purchase Energy-Saving Lighting Fixtures 64% 52% 63% 41% Purchase Energy-Saving Kitchen Equipment 44 40 36 36 Purchase Energy-Efficient Refrigeration, Air 40 40 41 30 Conditioning or Heating Systems Install Water-Saving Equipment and/or Fixtures 34 28 37 26 Source: National Restaurant Association

    Slide 57:Fifty-two percent of adults said they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community.

    Source: National Restaurant Association

    Slide 58:Profitability and Entrepreneurship

    Slide 59:The Restaurant Industry Dollar

    Source: Deloitte; National Restaurant Association

    Slide 60:Same-Store Sales and Customer Traffic Remain Soft

    Proportion of Restaurant Operators Reporting Higher/Lower Same-Store Sales Source: National Restaurant Association

    A New Generation Proportion of fullservice customers who said they would utilize the option of a touch-screen TV monitor at the table, which gave the options to view the menu, place the order, pay the bill, browse the Internet, watch TV and play video games, if it was offered by a fullservice restaurant Source: National Restaurant Association A New Generation Proportion of fullservice customers who said they would utilize the option of receiving cell phone text message notifications of daily specials, if it was offered by a fullservice restaurant Source: National Restaurant Association

    Slide 63:A New Perspective Seventy-five percent of adults would patronize fullservice restaurants more if they were offered discounts for dining on less busy days of the week.

    Source: National Restaurant Association

    Slide 64:Regional Outlook

    Slide 66:Dramatic Consumer Confidence Variations By Region

    Present Situation: September 2009 Source: The Conference Board

    Slide 67:Growth in Key Indicators

    Source: National Restaurant Association

    Slide 68:Wrap Up

    Slide 69:Unfulfilled Demand for Restaurant Services Remains High

    Source: National Restaurant Association Over one-third of adults are NOT dining on-premises or using take-out as often as they would like

    Slide 70:Americans Love Restaurants Percent of adults who said they enjoy going to: Restaurants 90% Grocery Stores 55%

    Source: National Restaurant Association

    Wrap-Up

    Slide 71:Modest real GDP growth resumes Patchy and prolonged recovery Job market remains weak With soft economic backdrop, value emphasis continues However, 2010 environment will be better than prior two years Menu — healthy kids’ meals, local produce, mini- desserts, artisan spirits Workforce — higher productivity through greater focus on technology Growing role of green initiatives Pent-up demand for restaurants + nudging / incenting consumer = positive future despite challenges

    Slide 72:Restaurant Industry 2009 and Beyond

    Hudson Riehle Senior Vice President Research and Knowledge Group Mid-Atlantic Food, Beverage and Lodging EXPO Baltimore, Maryland October 7, 2009

    Slide 73:Our Panelists:

    Michael Sternberg, Enovo Restaurant Ventures Bob Barry, The Greene Sports Bar & Grille Jim Wordsworth, J.R.’s Stockyards Inn

    Slide 74:Thank You

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