In 2017, sales at full-service restaurants (FSR) slipped two per cent to a total of $21 billion — another decline in an industry that hasn’t seen any real growth in more than five years. During that time, traffic also fell four per cent to 1.3 billion visits. On the other end of the spectrum, sales at fast-food outlets rose three per cent to $27 billion and traffic picked up two per cent to 4.6 billion visits, according to data from The NPD Group, as consumers migrate to “dining alternatives.”
However, despite declining FSR sales, a small sub-segment called “premium casual” (think The Keg, Moxies, Cactus Club, Earls, et cetera) is experiencing strong growth. While it represents only a nine per cent share of casual-dining restaurant traffic in Canada, premium casual has increased traffic by seven per cent and increased sales by eight per cent — no small feat in an industry that has come to accept a “no-growth” reality. Restaurants in this category are a bright spot in the Canadian restaurant market. Boasting some of the strongest customer-loyalty scores of any restaurant chains in Canada and consistently increasing customer-traffic rates while steadily increasing sales.
This growth is especially relevant to full-service operators, since premium casual is one of the main sub-segments that is stealing share away from traditional full-service restaurants. Throw in increasing competition from QSR, prepared meals at grocery and new digital-delivery platforms, and you can quickly see why the future looks challenging for traditional FSRs.
Another driving force behind the declines is the fact families are seeking new alternatives to FSR. In fact, FSR traffic for “parties with kids” is down significantly since 2012, averaging a four-per-cent decline year-over-year. And, while families still comprise 23 per cent of overall visits at FSR, they are currently driving 39 per cent of declines.
Millennials are also contributing to declines at FSR, as the age demographic of 18 to 34 has seen ongoing annual traffic declines since 2012. Many of these individuals have been drawn to QSR offerings — a troubling trend for FSR operators since the share of millennials will increase in Canada over the next decade, while the share of Boomers (who are currently driving growth at FSR) will decline.
So what’s an FSR operator to do? We have seen traditional FSRs stepping up their game in an attempt to “premiumize” their offerings. The hope is to draw in the premium-casual crowd and to stave off the effects of traffic stagnation. While this strategy may prove to be successful for some, others will likely run into the difficulty of being categorized as a “me-too” brand, which is exactly the opposite of what the young millennial cohort craves.
Written by Robert Carter
