Here’s how competitive the restaurant industry really is

The annual Restaurant Leadership Conference in Phoenix provided confirmation for some things we already knew and perhaps a few we didn’t—like the inevitability of alcohol delivery.

The annual Restaurant Leadership Conference in Phoenix provided confirmation for some things we already knew, such as how competitive the restaurant industry really is, and perhaps a few things we didn’t—like the inevitability of alcohol delivery.

The annual gathering of industry executives and operators provided a wealth of information for attendees. Here are five things that we took away from the second day of the conference:

1. The restaurant industry is really tough.

There are more than 1 million restaurants in the U.S. right now, said Hudson Riehle, senior vice president of the National Restaurant Association's research and knowledge group. And more are added every day: The industry adds about 10,000 units a year, from a combination of 60,000 openings and 50,000 closures.

“People keep saying this industry is competitive,” Riehle said. “They’re absolutely right.”

How competitive? Let’s put it another way: There were 189.8 restaurants for every 100,000 Americans in 2016. In 2001, that number was 165.1.

2. A recession is coming. But when?

This is the second longest economic expansion in U.S. history, after the 10-year expansion between the savings and loan crisis of 1991 to the dot-com bubble of 2001. That means a recession is probably inevitable.

“We’re all waiting with bated breath [to find out] when the next cycle is,” said Nick Cole, head of the Restaurant Finance & Gaming Division for Wells Fargo Corporate Finance.

That probably won’t happen for a couple of years, said Riehle, because this has been a slow economic expansion. “Unless there’s some major externality which acts as a catalyst, it is still a couple of years off,” he said.

3. Casual dining is not yet dead

Full-service restaurant sales have been weak, and sales at casual-dining chain restaurants aren’t expected to improve much this year, either.

But that doesn’t make the sector dead. Aziz Hashim, whose NRD Capital bought Ruby Tuesday last year, believes there’s still growth to be found in the sector.

“The demise of casual dining is not imminent, it is greatly exaggerated,” Hashim said. “Has there been overbuilding? Absolutely. Has there been some genericism? Absolutely. But casual dining is part of Americana. It’s not going anywhere.”

4. Companies should take diversity seriously

Operators need to take diversity issues seriously, said Gerry Fernandez, president of the Multicultural Foodservice & Hospitality Alliance. A plan of action should include policy changes to minimize unconscious bias, engagement of communities of color to build the talent pipeline and metrics to track results. He called the #MeToo movement against sexual harassment “the civil rights moment for our industry.”

“The #MeToo movement is not going away,” Fernandez says. “Take this opportunity and embrace it. … Our industry is clearly in the crosshairs.”

Embracing diversity will also help operators develop and keep talent, he says.

5. Booze delivery is inevitable

On Tuesday, BJ’s Restaurants said it would start delivering $10 bottles of wine to consumers, and also offering them at takeout. It’s the latest in a slow but steady expansion of alcohol delivery.

Riehle believes it’s inevitable, and this is why: “Half of all 21- to 34-year-olds would use it,” he said. “What the consumer wants comes to fruition.”

Another reason, of course, is that casual-dining chains have plenty of incentives to deliver beverages, given that it can help recover some of their lost takeout and delivery profits. Many states and cities are now allowing alcohol to be delivered, meaning the trend is only going to grow.

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