Why Restaurants Are Eclipsing Grocery Stores

In 2014, restaurants have seen a healthy 3.8% revenue growth. That is a welcomed respite from the dismal results during the great recession. The great recession produced free-floating fears and palpably reduced incomes for many people. Their self-protective response was to defer large expenditures such as houses and automobiles and to economize even on essentials such as food.

Many chose home prepared meals over dining out because home cooking saves 66% compared with dining out. However, as the recession began to wane and more jobs became available, employment statistics created an increase in consumer confidence and the allure of restaurant dining persuaded many home-cooks to hang up their aprons.

The Bureau of Labor Statistics reported that the average consumer unit (i.e. household or family unit) spent $7,899 on food in the 12 months ending June 2014. In that same 12-month period, the average consumer unit spent $60,628 on all expenditures (lodging, transportation, food, health care, and other spending). Although food is a mere 13% of the consumer’s total spending, it seems to occupy a disproportionately larger part of our conversations.

Of an average consumer unit’s total spending on food, $3,120 or 39% was spent for dining out or for takeout food. Single person consumer units devoted $1,598 or 42% of their total food spending toward dining out and takeout, and as would be expected, consumer units with 5 or more people spent proportionately less for dining out and takeout, with just 35%.

The slowly retreating recession is not the only reason for restaurants’ recent success. Restaurants are trying to make improvements in the dining experience. Some offer digital technologies to improve the ordering and payment experience, i.e. improve accuracy and reducing await times. Such items include table-top mounted or Wi-Fi devices to accept orders, refill requests, and even conduct bill payment. They save wait time for the customer wanting service. That uptick in convenience can be fully offset by the yucky grease on some devices.

Many restaurants have partly broken free from their frozen and canned food habits. They are trying to inject authenticity and freshness into the meals they serve. They still have the 18-wheeler SYSCO trucks parked out back, but they now include exotic ingredients or truly local fresh produce, such as kale and fresh-made salsa. Many developed restaurant-made signature items such as fresh-baked bread, ice cream and beer.

Numerous restaurants now boast of their environmental sustainability and social consciousness. “Composting, recycling and donating are all tactics of food waste strategies tying into both sustainability and social responsibility.” Some have negotiated tie-ins with charitable causes, where specific purchases by the customer result in the restaurant making a donation to the charity (McDonalds is the top restaurant in donations).

The combined effects of the receding recession, technologies to increase diners’ convenience, menu items that are fresher, quasi-unique “signature” offerings, and reassurance that the restaurant is environmentally and socially responsible – each contribute to the appeal of dining out. As a result, by December 2014, restaurant sales had grown higher than grocery store sales. We believe that will continue unless interrupted by another deep recession. Consumers value the convenience and choice that restaurants offer.

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