Having words with Hudson Riehle senior vp of research & information services, National Restaurant Association

Nation's Restaurant News, Sept 24, 2007 by Sarah E. Lockyer

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Economic forecasts have been peppered this month with predictions of an upcoming recession, as reports of negative indicators from jobs to spending have surfaced. While most restaurant operators and observers remain unconvinced that a true recession will hit the U.S. economy, the state of the consumer and his or her spending habits is top of mind.

At the National Restaurant Association, Hudson Riehle, senior vice president of research and information services, analyzes economic indicators with a fine-tooth comb to provide the foodservice industry with the projections and context needed to make various business decisions.

Riehle says he is not convinced a recession is looming, and he has tremendous faith in consumer spending habits, which have recently continued to grow despite weakening indicators. Still, in a period of slow economic growth, foodservice executives need to remember that "serious business planning is key."

What are you seeing right now in terms of the general economy and what restaurant operators should be watching?

Growth in real disposable income is in the low 3-percent range in August, and in July it was up 0.5 percent, which is a solid increase. So, overall income growth remains solid.

Plus, gas prices have trended downward, and that's a positive for the industry. July was a record-high sales volume month for the industry overall. Obviously, there are challenges in some segments, but the industry is doing well as a whole. Preliminary sales for August are looking similar to July.

There is no doubt that economic growth overall is moderating. We are in one of the lowest GDP [gross domestic product] growth ranges, at an annualized rate in the low 2-percent range.

It's important to point out that it's not anemic growth and not negative. But it is a slower growth environment.

If the economy does hit a recession, or even a recessionlike period, what can the foodservice industry expect?

Consumers overall continue to allocate a greater portion of the food dollar to away-from-home meals. The overall foodservice industry will grow because of consumers' unrelenting demand for the industry's products and services.

If there is substantial weakness in the underlying economy, the restaurant industry will face challenges, obviously.

But the industry as a whole is much more ingrained in a typical American's life today, and that fact becomes more present in softer economic-growth times.

Have menu prices increased more than you had initially expected, and is that a danger to sustaining traffic?

Menu prices so far this year through July are running up 3.4 percent, which is the highest increase since at least the early-to-mid 1990s.

[The National Restaurant Association] had predicted an annual 2.9-percent increase in menu prices. It shows how challenging it is on the cost side.

But it is important to note the gap that is occurring between grocery store price inflation and restaurant price inflation.

Grocery store pricing is at a higher rate than restaurants, with a 4.6-percent clip, so there is room in the restaurant industry.

* FAST FACTS

AGE: 53

EDUCATION: bachelor of arts degree from Skidmore College in Saratoga, N.Y.; master of business administration from the University of Pennsylvania's Wharton School

HOMETOWN: Cincinnati

ADDITIONAL EXPERIENCE: appointed to the Bureau of Labor Statistics Business Research Advisory Council

FUN FACT: included in the current edition of "Who's Who in America"