Restaurants Challenged by Food Costs, Other Channels

Increasing competition from convenience and grocery stores will force restaurant operators to deploy more targeted advertising, with deals customized by geography and personal preference.

February 14, 2013

NEW YORK - According to a new forecast by AlixPartners, restaurant operators face dwindling margins in 2013 as frugal diners tighten their meal spending and food costs continue to rise, Reuters reports.

"There's going to be margin pressure, big time," said Adam Werner, co-leader of AlixPartners' restaurant practice.

While traffic to U.S. restaurants is expected to increase 3% this year, average per-meal spending will drop 4.7% to $12.85, as diners seek meal deals as a way to cope with a strained U.S. economy while also placing an increasing emphasis on food quality.

Competition will also increase from other channels, as grocery stores and convenience stores expand their prepared food offerings.

As a result, AlixPartners predicted that restaurants will unveil more targeted advertising this year, with deals customized by geography and personal preference.

"As consumers get more demanding, and as the fight for share of stomach continues to increase, everyone is looking for a competitive edge," said Eric Dzwonczyk of AlixPartners' restaurant practice.

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