Breaking Down Canada’s Anemic FSR Market

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It’s no secret the restaurant industry in Canada is undergoing a period of mediocre growth. Today’s operators are navigating a challenging environment whereby stealing share is the only real way to achieve growth. And while total foodservice has experienced anemic growth over the last five-plus years, it’s been a particularly challenging few years for full-service restaurants in Canada. Overall, traffic at FSR continues to decline year-over-year, down 141 million visits compared to 2012. Dollars are also down on the year and have been relatively flat since 2012.

While the mid- to long-term trend has been negative, the short-term trend has also been lacklustre. Traffic is down three per cent year-over-year in 2016 and dollar growth is failing to keep pace with inflation (a decrease of two per cent compared to last year). Further compounding this challenging marketing is the fact that Average Daily Penetration is the lowest it’s been in recent years at 10.5 compared to 11 in 2014 and 11.9 in 2012. So what’s driving the declines? Research by The NPD Group suggests FSR-traffic declines are being driven by independents, with only a few top chains in that space driving good growth. This is significant when you consider that independents represent 62 per cent of FSR visits and have driven 76 per cent of FSR declines since 2012 — down 107 million visits. Overall, independent restaurants declined by 2,000 units in 2015 and by 6,000 units since 2012. But, there is a bright spot when it comes to independent restaurant traffic — the Atlantic Provinces. In fact, the Atlantic Provinces grew by seven per cent compared to last year, while other major regions, including Ontario and Quebec, experienced significant declines on the year.

Another driving force behind the declines is the fact that families are seeking new alternatives to FSR. In fact, FSR traffic for parties with kids is down by 55 million since 2012, averaging a four-per-cent decline year-over-year. And while families still make up 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 an annual traffic decrease of 27 million 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 share of Boomers (who are currently driving growth at FSR) will decline.

While this data may cast a dim picture of the FSR market, there are key growth areas that — if executed properly — can allow savvy operators to buck the current trend. For example, both premium-casual and delivery have continued to see growth despite the challenging environment. Furthermore, FSR operators can learn a thing or two from the QSR and fast-casual segments, which have done a great job of winning over millennials by focusing on bold and unique flavours, aggressive innovation, LTOs and dealing, convenience, social-media engagement and digital platforms/advertising, as well as modern/trendy atmospheres.

Volume 49, Number 9 
Written by Robert Carter

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