Total Number of US Restaurants in Decline in 2016

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There have recently been reports out about consumers spending slightly less on their lunch tickets out at restaurants. Now it appears that the actual number of restaurants in America is in decline as well.

NPD Group is now showing that, as of the Spring of 2016, the total U.S. restaurant count was at 624,301 units — down 1% from the 632,572 count seen a year earlier. Restaurant chains, which would include franchises, ticked up ever so slightly. Sadly for the little guy on the street, the number of independent restaurants declined about 3% to 331,469 from 340.778.

NPD noted that the drop in independent restaurants was concentrated in the full service segment. This segment includes casual dining and the so-called midscale/family dining restaurants, and it also includes the fine dining segment. Full service independent units were down 3%, and the quick service independent units declined by 2% this spring.

There was an effort to explain the drop here. It was noted that the  overall decline in the restaurant count reflects the stalled traffic growth experienced by the foodservice industry over the past several years. These were shown as follows:

  • Total U.S. foodservice traffic was flat in the year ending June 2016 compared to year ago.
  • Visits to independent restaurants, a restaurant system type that is particularly challenged in a soft environment, were down 3%.
  • Major chains posted a 1% traffic gain.
  • Small chain visits were flat.
  • Quick service restaurant visits, which represent 80% of total industry traffic, were up 1%.
  • Family dining restaurant traffic declined by 4%.
  • Casual dining restaurant traffic declined by 3%.

The formal quote from NPD’s Foodservice group said:

The decline in U.S. restaurant units overall is a reflection of the industry’s stalled traffic growth. Our forecast finds that U.S. foodservice visit growth will be less than one percent in the coming years, which means there will not be significant unit expansion for a while.

This trend is one which may matter now for everyone. If restaurant spending trends in general are down, and the number of restaurants are in decline, that means there is no incremental growth in the restaurant segment of the foodservices sector. If a restaurant wants to open or expand, it is going to be stealing that business from another restaurant chain.

This may seem bad on the surface. The reality is that this is just one more instance of the death of growth in America (and elsewhere).