The U.S. restaurant industry is in a funk. Blame it on lunch.
Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.
While that loss in traffic is a 2% decline from 2015, it is a significant one-year drop for an industry that has traditionally relied on lunch and has had little or no growth for a decade.
“I put [restaurant] lunch right up there with fax machines and pay phones,” said Jim Parks, a 55-year-old sales director who used to dine out for lunch nearly every day but found in recent years that he no longer had room for it in his schedule.
Like Mr. Parks, many U.S. workers now see stealing away for an hour at the neighborhood diner in the middle of the day as a luxury. Even the classic “power lunch” is falling out of favor among power brokers.
When he isn’t on the road for a Detroit-based building products company, Mr. Parks works from his home in Carlisle, Ohio, and eats there. When he meets clients at their offices, they have food delivered and work during what they call a “lunch and learn.”
Even some restaurant-company executives don’t go out for lunch. Employees at Texas Roadhouse Inc.’s Louisville, Ky., headquarters order in so often that they know the delivery drivers by name. “A lot of our folks are trying to be more efficient,” company President Scott Colosi said.
Cost is another factor working against eating out for lunch. While restaurants have raised their tabs over the past few years to cope with rising labor costs, the price of food at supermarkets has continued to drop, widening the cost gap between bringing in lunch and eating out.
Restaurants are adapting by offering delivery, faster service and smaller portions. But the shift signals trouble for the industry, which makes more money serving meals inside restaurants, where soft drinks, alcoholic beverages, appetizers and desserts boost margins. Maintaining nearly empty dining rooms is costly.
Among the hardest hit are casual sit-down restaurants—such as Dine Equity Inc.’s Applebee’s and Ruby Tuesday Inc. —because of the time it takes to order, get served and pay. Such establishments last year saw their steepest ever decline in lunch traffic, according to NPD.
Even fast-casual chains that cater more to harried customers with counter service instead of wait staff are experiencing slower growth. Lunchtime traffic at those restaurants—excluding Chipotle Mexican Grill Inc., which has suffered steep declines in the wake of disease outbreaks—grew 2% last year after posting growth of 5% or higher in each of the prior four years.
The pain is spreading to suppliers. Meat giantTyson Foods Inc. recently said a 29% drop in quarterly earnings was due partly to the decline in restaurant traffic.
“Consumers are buying fresh foods, from supermarkets, and eating them at home as a replacement for eating out,” Tyson Chief Executive Tom Hayes said.
The average price of a restaurant lunch has risen 19.5% to $7.59 since the recession, as rising labor costs pushed owners to raise menu prices—even as the cost of raw ingredients has fallen. According to the Bureau of Labor Statistics, the U.S. last year posted the longest stretch of falling grocery prices in more than 50 years.
“We believe significant food deflation was the primary culprit behind last year’s weakness, favoring food at home pricing over food away from home pricing to a degree not seen outside of the global financial crisis,” Sanford Bernstein analyst Sara Senatore said in a recent report on the restaurant industry.
https://www.wsj.com/articles/going-out-for-lunch-is-a-dying-tradition-1496155377?mod=e2fb