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Pricing, Innovation and Customer Traffic for 2011 and 2012 Examined By Analysts

As the year is ending, restaurants are gearing up for the coming of 2012, ready for the expected recovery that has been stalled this year. And as they gear up, analysts say that yes, there are ways to regain market share in 2012.

Vice president for client development of the NPD Group Warren Solochek talked about the restaurant industry’s state in a webinar that was held early last month, “A Look Back at 2011 and a Look Ahead to 2012.” The event, which was hosted by Morgan Stanley & Co.’s restaurant industry analyst John Glass, highlighted that restaurants should focus on innovation and pricing to regain momentum.

Consumers are expected to continue being price-conscious, which means that restaurants should remain cautious of their pricing points despite the ongoing commodity inflation. “The industry was very successful at getting the American diners to become sensitive to price, and we were able to do that through heavy advertising and promotion of products that gave focus to pricing,” said Solochek. “Those moves will hold back any opportunities that restaurateurs may have to implement across-the-board pricing in their menus in superior restaurant menu covers.”

“As restaurants expect some progress to happen on the nation’s employment, it can’t expect much in terms of industry growth, thus making the business now a game of market share stealing,” Solochek added. “New visits need to be encouraged—and in this, menu innovation and pricing strategies continue to become crucial factors.”

Innovation is the thing that will catch the consumers’ attention, according to Solochek. Customers will want to visit a restaurant because they want to try something new. Consider the performance of fast casual, as they are predicted to continue to lead stronger sales. “The extended effect of fast-casual restaurants’ offerings to their diners truly leaves an impact—they’re not just mainly concerned with the price, but the price-value relationship,” he noted.

Solochek was candid with his analysis. “Let’s face it—as long as our economy remains to be not so strong, the market will always look for less-expensive alternatives,” he said. This year, customer traffic did not increase, but check averages did. Restaurant operators cautiously increased the menu prices in their menus in leather restaurant menu covers, resulting to modest growth in average checks. The last six quarters, which started in the period beginning March 2010, was quite bright, where total industry sales improved.

Full-service units still face considerable declines in customer visits, while traffic in quick-service restaurants, particularly the bakery concepts, increased. Hamburger chains also showed slightly higher customer traffic this year, as well as the casual-chains. And analysts are optimistic about more improvements.

“When the economy grew weak in 2008 and 2009, we all saw a gripping reduction in visits of adults with kids. Now, we are greatly encouraged of the slow but steady stream of families with children coming back to eat at restaurants.”