As 2011 gets underway, it’s clear that the slowly recovering economy continues to impact the restaurant industry as shown by sluggish sales and limited expansion. These economic conditions are reflected in the market measures that make up the Restaurant Growth Index.
This annual report, compiled by The Nielsen Company exclusively for Restaurant Business, is designed to rank markets by identifying restaurant sales and gaps in sales per capita compared to the national average. This information can be helpful to new restaurant concepts or chains considering expansion as it illustrates which markets may have growth opportunity.
Nielsen data shows a decline of 4,628 U.S. restaurant units since last year. Total restaurant sales figures for the U.S. are also down significantly for the second year in a row, off nearly $10 billion from a year ago. And, nationally, sales have fallen on a per unit basis, by almost $10,000 from $686,723 to $676,807 per foodservice establishment.
These factors have combined to affect the strength of the overall indices as the average of the index scores among the Top 10 RGI markets is down 17 points from the 2010 report.
It should be noted, though, that the decline in RGI scores among the Top 10 markets is not as steep as last year’s 40 point drop. Indeed, an improvement in market conditions appears to be ahead of us. The National Restaurant Association is predicting 2011 to show the first real sales growth in four years.
So, let’s look at this year’s RGI rankings. At the top of the list for the second year in a row is the Crestview, Florida, market, which includes the cities of Fort Walton Beach and Destin. Myrtle Beach, South Carolina, and Ocean City, New Jersey, are locked in a virtual tie at the #2 and #3 positions, also for the second year in a row. Jackson, Tennessee, and Barnstable Town, Massachusetts improve upon last year’s Top 10 performances by securing the #4 and #5 spots, respectively.
In fact, while there was a repositioning among the markets, the only new member of the Top 10 this year is Panama City, Florida, in at #7, as Springfield, Illinois, dropped to #15.
Among the country’s Top 50 most populous markets, New Orleans shows that it continues its comeback from the Hurricane Katrina catastrophe, climbing 13 spots in the overall rankings. Healthy population growth and increased tourism have led to an increase of $124 million in restaurant sales for the market.
New Orleans has also added 98 eating and drinking establishments and sales per capita have increased by $34 in the area. It ranks a strong #3 among the big markets behind Las Vegas and Orlando, which both saw decreases in restaurant sales. In fact, of the Top 50 markets by population, only 10 showed increases in total restaurant sales.
The RGI is calculated using restaurant sales figures based on the U.S. Census of Retail Trade and per capita income figures, both compiled by the U.S. Census Bureau and updated annually by Nielsen. Consideration should be given to market size as well as market rank when deciding which areas provide the most opportunity for specific restaurant concepts
In addition, the sales figures do not distinguish between residents of the market and visitors, thus sales generated by visitors increase the sales per capita and sales as a percentage of per capita income of the markets’ residents. For this reason, vacation destinations and markets with a high transient population tend to have high index scores.