A Look At What's Ahead In 2012

Looking ahead to 2012, the restaurant industry is sure to face a still-struggling economy, increased scrutiny from regulatory organizations and the always-changing preferences of consumers. Ever optimistic, however, restaurant operators have said they are looking forward to 2012, expecting sales to improve in the months ahead and getting ready to meet challenges head on, whether by tapping menu trends or working new marketing angles.

The editors at Nation's Restaurant News have picked their top predictions for the restaurant industry in 2012. Tell us what you expect in the year ahead by taking the NRN Restaurant Operator Survey.

Robin Lee Allen, Executive editor
Economy. The economy is expected to plod along in 2012 much like it did in 2011. Moderate growth is anticipated, with all eyes on — and a lot of people holding their breath over — the unemployment rate, the housing market and the stability of Europe.

The consumer. The customer experience will grow increasingly important as a differentiator between brands, as more operators upgrade restaurants, menus and service in the race for market share.

Tailor-made. In the same vein, customization will rule. Not only will guests want to have food and drink the way they want it, but they'll want it when they want it in an atmosphere that allows them to linger with friends, work or eat quickly depending on their whims.

Mark Brandau, Midwest bureau chief
Daily deals become a chain game. In 2011, more nationwide chain restaurants waded into the daily-deal space, some with partners — Qdoba was a test partner for Groupon; McDonald's has teamed up with Living Social — and some on their own. Chili's "Holi-Deals" offer through its email club may be a template for competitors looking to make a big one-time gain in traffic.

Going mobile. Best practices have been established over the past few years for mobile marketing, where any restaurant can see the efficiency of simple text offers or the potential return on investment for smartphone apps and location-based social media. When technologies like near-field communications improve, look for restaurants to be enthusiastic adopters.

Yum! Brands turns around domestic system. Confidence in the prospect for renewal at its brands in the United States permeated Yum's investor conference at the end of 2011. With breakthrough products at Taco Bell, improved relations with KFC franchisees and modest unit-growth prospects at Pizza Hut, that optimism could prove well founded. All three brands face negative same-store sales from 2011 that could provide favorable bases for comparisons.

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Paul Frumkin, Managing editor
Health care. We can expect to hear a lot of superheated rhetoric about President Obama's health care law and the Patient Protection and Affordable Care Act during 2012, an election year. While no action will be taken this year on the law, which passed in 2010, its future most certainly hangs in the balance as voters head to the polls to vote in November. Also, the U.S. Supreme Court has said it will examine several areas of the law in 2012.

Menu labeling. The provision was passed as part of the health care law in 2010, and the industry has been waiting for the U.S. Food and Drug Administration to promulgate the official rules and regulations governing it. Those are expected presently, and chains with 20 units or more probably should plan on having to implement them sometime in 2012.

Paid sick leave. Proponents of paid sick leave have been heard loud and clear in 2011, as they gained traction at the state and local levels, managing to push through high-visibility initiatives in Connecticut and Seattle. And while pro-paid sick leave legislation encountered pushback in New York, Philadelphia and Denver, we should expect to see the issue pop up in other areas around the nation in 2012.

Lisa Jennings, West Coast bureau chief
Dining out versus dining in. Restaurants will trade on rising grocery costs with marketing that focuses on how it's cheaper to dine out than cook at home. Boston Market already did it during Thanksgiving, and we'll see more.

Menu price increases. With commodity costs still rising into next year, a big issue for restaurant operators will be whether they can exercise their pricing power and by how much. Many of the largest chains are predicting a wide variety of small to significant price increases. What's worth watching is how that may affect the consumer and traffic.

Breakfast will move beyond sandwiches. As the breakfast daypart continues to grow — we're expecting more moves from Taco Bell and Wendy's in 2012 — limited-service operators will look for portable options that differentiate from the increasing crowd of breakfast sandwiches.

Alan J. Liddle, Managing editor, special reports
Design 2.0. Beyond maximizing the efficiency of capital, labor and energy, restaurant facility designers will increasingly consider the positive payback — in terms of brand feelings and patronage — among consumers and employees from the use of reused, renewable, recycled and sustainably managed building materials and practices.

Digital dichotomy. More operators will test or deploy digital signage and marketing boards, guest self-ordering and payment devices, and in-restaurant social media displays to enhance convenience, security, entertainment and community building. Others will instead look to offer more people-to-people interaction for consumers weary of 24/7 technology.

Menu labeling fallout. The national implementation of menu labeling requirements for chain restaurants — a logistical headache for some operators and no substitute for personal dietary responsibility among consumers — will make it clear which chains have the imagination and resources to create the better-for-you, craveable foods of tomorrow.

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Sarah Lockyer, Executive editor, NRN.com
Lending lull continues. When it comes to access to growth capital, sources at major banks and lending institutions have said 2012 will be more of the same — meaning money won't come easy. Restaurant operators will have to explore alternative ways to access cash, and franchisors will have to look for ways to help franchisees gain capital to grow.

Commodity pressures remain. Most public restaurant companies that have offered projections on 2012 commodity outlooks have pegged increases in the low-to-mid single digits. Coming off of a 2011 that also included commodity cost pressure means restaurants will need to look to manage the menu and potentially raise prices, a tricky move with a still-struggling consumer.

Private equity gets picky. We saw major deal making in 2010 and 2011, including leveraged buyouts of large players including Burger King, CKE Enterprises, California Pizza Kitchen and Arby's. The deals mean a lot of the industry's low-hanging fruit has already been picked. Transactions that do get done in 2012 will involve brands stealing market share and management teams that investors believe in.

Ron Ruggless, Southwest bureau chief
Source code. More restaurant chains will highlight where food products come from. Chipotle was an early leader, but chains like Red Lobster, with its "Sea Food Differently" campaign, and Five Guys, which includes fry-source marker boards in each unit, are doing so now. Even McDonald's plans to include local farmers and producers in ads next year.

Allergic reaction. An increasing number of consumers are concerned about food allergies, especially gluten. Expect more chains to highlight sections of menus to assist the allergy conscious and the allergy aware.

Wait not, want not. More fast-casual, counter-service restaurant concepts will arise as companies work to reduce labor costs. Even the already spare Pei Wei Asian Diner, which now has counter-ordering and food delivered to tables, will reduce its service model even more with the full-counter-service opening of Pei Wei Asian Market.

Bret Thorn, Senior food editor
Pistachios. The same people who made pomegranates a household word are now working on pistachios. Their marketing will play on the results of recent studies indicating that they improve erectile function.

Shake shots. Too logical not to happen: four-ounce milk shakes at about 200 calories each. Charge around $2 and you have an easy, low-guilt, semi-indulgent menu item, perfect for an upsell. It can be a mid-morning snack or a 4 p.m. pick-me-up. It's a play on the mini-desserts that have swept the chain world, but they're more portable and also play the retro card.

More local than you. Lots of restaurants have their own garden, some have their own farms and at least one has its own herd of cattle. Keep an eye out for proprietary oyster beds and other hyper-local specialties that will set operators apart.

Tell us what you're expecting in 2012. Comment below and take the Restaurant Operator Survey.

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