Market Snapshot: US restaurant trends

05 July 2006
Market Snapshot: US restaurant trends

Takeaway sandwiches have overtaken burgers and pizza restaurants as the fastest-growing outlets in the USA, according to a new study from research consultancy Horizons.

Its managing director, Peter Backman, looks at what is hot and what is not in US foodservice.

Europe is catching up fast on the US market in many areas, notably in enhancing the efficiency of training processes, ordering practices, supply chain and other systems.

But it still has quite a bit to learn from the USA about the creation of large chains that develop their own growth momentum through economies of marketing scale.

This is particularly relevant right now when, according to US trade body the National Restaurant Association (NRA), growth in US foodservice is expected to advance by over 5% in non-inflation adjusted terms this year.

This growth is in spite of rising minimum wage levels in the US labour market, the creep of government legislation and the difficulty of finding suitably qualified, committed staff at all levels.

The market has been growing year-on-year for the best part of 20 years. It's this consistent dynamism which has begun to fuel the launching of new chains and the re-invigoration of established brands.

In Europe, restaurant chains still have not managed to repeat the US pattern of consistent growth and, consequently, the European chain restaurant sector continues to move in stops and starts.

The challenge for European foodservice is how to emulate the US dynamics where burgers gave way to pizzas, which in turn were overtaken by coffee chains, and now subs (the US term for long baguette-type sandwiches that are filled to order for takeaway) are leading the way.

US subs chains have grown noticeably in the USA in the past 12 months, with the Subway brand currently way out in front with more than 20,000 units and annual sales in excess of $7b (£3.8b).

The growth in takeaway sandwiches stems from changing US consumer lifestyles, dawning awareness that burgers and fries do not fit with a healthy lifestyle, public perception that subs are fresh and healthy, and the determination by sandwich operators to catch this changing consumer tide through aggressive new store openings and creative product development.

Food is becoming more fashion driven

Horizons studies global trends in out-of-home eating and it is increasingly apparent that food is becoming a fashion market where constant reinvention is necessary. While European foodservice chains are aware of this fashion element, it's the US chains which are currently leading the way in recognising the speed at which food fashions evolve and reacting quickly to them.

Once a fashion has been established by foodservice innovators, it is being quickly replicated by other companies, including established competitors and new ones.

The result in the US is that a wide choice of a similar offer can be found in the same location. This coincides with a decline in the value of the offer as newer players seek to increase their market share on a lower, price-driven platform.

While organic food and environmental awareness in the whole business of food is an issue in Europe, it has not been one that has concerned the US restaurant chains or its customers.

Obesity seems to be losing its ability to shock the US audience. This is possibly a sign that the obesity warning message is getting through and the foodservice sector is doing something to address the overweight issue. Or perhaps the consumer is less bothered about healthy food choices in out-of-home eating.

US views on Europe

Europe is seen by US foodservice chains as a source of ideas for good food and flavours. But Asia remains the place for totally new ideas - Indian, Chinese, Thai, Japanese and other oriental cuisines are being played with at the moment in the US. Foodservice analysts in the US suspect a breakthrough could come in the next 24 months and the US foodservice sector will take on a distinct Asian aspect.

The majority of US foodservice chains are not currently looking to Europe as a route for expansion.

Europe is perceived as closed and difficult to enter. That's why there are only 12 US-foodservice chains in Europe with more than five outlets. Between them they operate fewer than 14,000 stores (out of 1.5 million popular eating places) with McDonald's accounting for over half of those units.

What lies ahead in the USA?

One continuing US development is the growth of a restaurant category named "fast casual". Most commentators and operators agree that this sector exists, but the problem is that no-one seems to be able to agree what it is.

Some US foodservice analysts are now saying it is upscale fast food of better quality. A different view is that it is down-traded restaurant offers where the customer places the order at the counter from a restricted menu range, there are no tablecloths, but the restaurant has lower prices.

The conclusion

Foodservice continues to be a growing and a global market. Where differences exist between developed economies, they are small or can be explained by cultural preferences and different consumer expectations

The US foodservice market is expanding, but Europe appears to be closing the commercial gap. Some in the US feel that US operators and suppliers can learn from Europe - the UK especially which is seen by some as a source of new menu ideas as well as holding some ideas on operational efficiencies.

For a free copy of the full Horizons US 2006 foodservice report, contact Horizons.

  • Horizons is one of Europe's leading research consultancies specialising in foodservice. Part of the client services of Horizons is to watch trends in the US foodservice market as many aspects of the US today is Europe tomorrow.
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