The Surprising Food Trend That’s Driving the Restaurant Recession
Business + Economy

The Surprising Food Trend That’s Driving the Restaurant Recession

© Jean Nouvel

One of the biggest factors affecting the restaurant industry right now is falling food prices. Surprisingly, the trend seems to be hurting many popular restaurant chains, and some analysts are talking about an ongoing ‘restaurant recession.’

Wholesale prices for meat, chicken, eggs and other basic ingredients have tumbled, but many restaurants aren’t seeing the benefits. Instead, lower food prices are giving supermarkets, which pass those savings directly on to customers, an edge as they compete with restaurants. At the same time, restaurants are facing higher costs for labor, rent and health care that far exceed any savings they get from lower food prices.

Slideshow: The 11 Hottest Food Trends for 2017

The problem is likely to last. The government predicts a 10-percent decline in beef and pork over the next 10 years. “The big danger?” asks Baum + Whiteman, food and restaurant consultants, in a 2017 trend report. “If food prices continue falling, restaurants will be compelled to lower menu prices precisely as costs spiral upwards.”

So far, more than a dozen restaurant chains have filed for Chapter 11 protection or Chapter 7 bankruptcy this year, while many others continue to struggle. Even the fast-casual segment, which had been booming, recorded a decline in customer counts in 2016. Only upscale restaurants with haute cuisine and effective marketing are blossoming.

The odd thing is that many Americans want to spend money in restaurants, but for a variety of reasons say they aren’t doing so. Almost half of consumers said they’re not eating out or getting takeout as much they would like, according to a survey from the National Restaurant Association. The result? Traffic at restaurants has fallen in 10 of the past 11 months.

Baum + Whiteman points out there are new, inventive ways to get prepared meals without stepping into a traditional restaurant — from home cooks to butchers to virtual restaurants. And that’s not all that’s happening in the restaurant world. The rise of veggies and lackluster demand for meat are also major driving forces behind the food trends it predicts for next year.

Click here to see the hottest food trends for 2017.