Restaurants benefit from improving economy

By Siyuan Du

Restaurant sales are projected to rise nearly 4 percent to a record high in 2015, but gains continue to be subdued in the post-recession period.

The National Restaurant Association projects 2015 restaurant industry sales will hit a record $709.2 billion, up from $683.1 billion in 2014. Adjusted for inflation, sales are projected to increase just 1.5 percent.

The gains are a sign that Americans are feeling good enough about the economy to eat out, but remain below what would be expected during a normal post-recession period.

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“Sales were very weak in that sector during the recession, and they were a little bit slow to recover even post-recession,” said Neil Stern, senior partner of McMillanDoolittle LLP. “But this year we see the acceleration of food service sales. Customers are going back to their old habits of going to restaurants.”

According to the U.S. Census Bureau, April retail sales were flat as money-conscious American shoppers cut spending on furniture, autos, gasoline and electronics. But April sales for food services and drinking places rose 0.7 percent from the previous month and 8.5 percent from a year ago, the biggest improvement among all sectors.

One out of every three American adults reports they are patronizing restaurants more than they were a year ago, according to the May 2015 restaurant industry update by the restaurant association.

“An important tailwind for the industry’s sales over the past year has been the decrease in gasoline prices,” said Hudson Riehle, senior vice president of the association.

“The weather is a big factor,” said Krystal Velez, a student who stopped to talk as she and a friend were leaving Oysy Sushi on Chicago’s Near North Side. “And if there are things going on outside in the streets, I would probably be more willing to go out to a restaurant.”

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Kyle Calkins, manager of Rock Bottom Restaurant & Brewery in River North, said the long, cold spring hampered business, but he expects an improvement in July.

“Our comparable sales were down about $60,000 from where we were last year,” Calkins said. “Last year it was an early summer so more people were out. And I do see a lot of people are out this month, but it’s just slower than last year for sure.”

Calkins said weather, conventions, sports events and tours are the most important factors that influence restaurant sales in downtown Chicago.

Restaurants in the industry’s sweet spot are those that cater to the fast casual trend, according to Stern.

“Innovations and increasing fast casual restaurants like Chipotle, Panera and other new ideas are driving a lot of growth,” Stern said.

“People are not that into fancy, fine dining restaurants anymore, which are only for special occasions,” said Tom Vasilarakos, bar manager of Chef’s Burger Bistro in River East.

“And people are more money-conscious. They are always asking what are our special deals. For downtown restaurants, to compete you have to run specials.”

Vasilarakos said sales are projected to increase by 5.6 percent in the second half of 2015, compared with the first half.

Photo at top: Joy Yee’s Noodle Kitchen in Chinatown.(Siyuan Du/Medill)