Foodservice Forecast 2017: Has Cutting Waste Become More Profitable Than Unit Growth?

Richard Young, Director of Education

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The Food Service Technology Center kicked off 2017 with our annual Foodservice Forecast seminar featuring presentations by Foodservice Equipment Reports‘ Robin Ashton, the California Restaurant Association‘s Jot Condie and Jessica Lynam, and myself. This year’s seminar touched on the size and shape of the foodservice industry, challenges faced by California restaurateurs, and national sustainability trends.

During his Size and Shape of the Industry presentation, Robin noted that in 2016 Americans made 61 billion visits to restaurants, or about 189 visits per capita. That may seem like a lot, but despite high consumer confidence and strong personal disposable income numbers, 189 visits per capita represents a decline from the historical high of 210 visits in 2001. That drop in traffic is reflected in the fact that there are about 10,000 fewer restaurant units than the historical high of 635,000 back in 2014.

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(Left to Right) FER’s Robin Ashton, CRA’s Jot Condie, the FSTC’s Richard Young, and CRA’s Jessica Lynam present the 2017 Foodservice Forecast at the FSTC in San Ramon, CA on January 10th, 2017.

In fact, much of the restaurant industry has been in contraction for the last few years with independents, mid-scale, and casual dining taking the biggest hits. Meanwhile, the overall commercial foodservice industry continues to expand with other commercial operators (e.g. supermarkets and lodging) and non-commercial operators (e.g. senior living facilities, universities, and hospitals) grabbing more consumer dollars. The bottom line for restaurant operators is that “…the U.S. restaurant market is the most mature and saturated in the world”* and “…sliding same-store sales have chains in all segments slowing unit growth.”* However, many of these operators are buying new equipment to replace the aging equipment they held onto during the industry down years after the “Great Recession”. As a result, the equipment and supplies market remains strong. In fact, operators are buying even more equipment than they predicted they would need.

Here’s why Robin’s message is so important: The restaurant industry is not going to be increasing profits based on unit growth in the coming years. This is a saturated market and most of the building is going to revolve around refurbishing and refreshing existing spaces. The real estate boom is over. However, there is still plenty of profit to be made by cutting energy waste. Every dollar saved on energy is a dollar in pure profit. You normally must sell about $20 of food to make a dollar of profit (5%), but a dollar saved on energy goes directly to the bottomline. If the entire commercial foodservice industry cut their energy bill by 1%, the resulting savings would amount to about $400 million in profit! The surprising conclusion is that cutting waste has become more profitable than unit growth. Therefore, during this time of stalled growth and heavy equipment purchases, it makes more sense than ever to pay attention to what you are buying and opt for the most energy efficient appliances.

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Richard Young presents the 2017 Foodservice Forecast at the FSTC in San Ramon, CA on January 10th, 2017.

The PG&E Food Service Technology Center is a great resource for identifying efficient equipment. The Center’s website (www.fishnick.com) hosts a library of research reports, lists of efficient equipment, and online calculators to help you quantify the potential savings of more efficient equipment. There is plenty of profit to be had by restaurants that learn to use energy as effectively as possible.

*Source: Robin Ashton, Publisher, Foodservice Equipment Reports magazine.The Foodservice Equipment & Supplies Market: 2017 FER Forecast Update.