Sit-down restaurants expected to struggle
• Canada’s restaurant sector is expected to remain flat in 2017 after a tepid 2016, and that doesn’t bode well for full-service dining establishments, who continue to lose ground to their fast-food counterparts.
Overall restaurant customer traffic will stay stagnant this year, says market research firm NPD Group, following a flat 2016. Quick-service restaurants, characterized by players such as Tim Hortons and McDonald’s, will see a one per cent rise in customer visits, while traffic in the lagging full-service sector will fall two per cent.
“The full- service, casualdining segment is still getting hammered in Canada,” said Robert Carter, executive director of foodservice at NPD Group. “Consumers continue to spend a little bit when they go out, but all of (the growth) is taking place in that quickservice segment.”
While traffic was also flat in 2016, overall dollar sales at restaurants rose two per cent to $51-billion. In 2015, dollar sales were $50-billion, a one per cent increase over 2014.
The biggest full- service casualties came at independent restaurants, with a record 2,047 restaurant units closing in 2016, according to NPD.
But big, full- service restaurant operators did not fare much better: Cara Operations Ltd., owner of multiple chains including Swiss Chalet, St. Hubert and Milestones, said sales at its restaurants open for more than a year fell 1.2 per cent in the 39 weeks ended Sept. 25, 2016 compared with the same period a year earlier.
At Boston Pizza, year- todate same- restaurant sales as of Sept. 30 grew just 0.7 per cent. Both restaurant companies noted an impact from weak sales in Western Canada, hit by an economic downturn.
By category, quick- serve restaurants accounted for 51 per cent of restaurant dollar sales in 2016, and full-service restaurants accounted for 42 per cent of dollar sales.
Before the 2008 recession, full-service restaurants had a share above 50 per cent. The remaining seven per cent of dollar sales in 2016 were in the growing “home meal replacement” category, as grocery stores and convenience stores continue to expand their take-out meal options.
“At full-service restaurants we are not seeing the menu innovation that we are seeing in quick-service restaurants,” Carter said, noting smaller restaurant chains such as Cactus Club, Browns Socialhouse, Moxie’s, Joey’s, had been outperforming the rest of the full- service segment. “But even their traffic gains are not comparable to the quick-service segment.”
While consumers eschew full- service family restaurants for quick- service options, the biggest growth in the latter is coming in the breakfast category.
The analyst also noted quick-serve chains have been more forward-thinking than full- service establishments when it comes to digital options, allowing customers to order and accrue loyalty points through mobile apps. “We know that when consumers order through an app they tend to spend more money,” Carter said.
THE FULL-SERVICE, CASUAL-DINING SEGMENT IS STILL GETTING HAMMERED IN CANADA. — ROBERT CARTER