Frugal diners, higher costs could squeeze restaurants in 2013

Reuters News
Posted: Feb 13, 2013 9:02 AM

By Lisa Baertlein

(Reuters) - Penny-pinching diners plan to eat out more this year and spend less on each meal, according to a new forecast released by consulting firm AlixPartners on Wednesday.

Those intentions threaten to squeeze restaurant operators, who are grappling with rising costs for beef and other popular ingredients as they increase spending on advertising and special deals to stay ahead of rivals in a brutally competitive industry.

"There's going to be margin pressure, big time," said Adam Werner, co-leader of AlixPartners' restaurant practice.

Traffic to U.S. restaurants should rise about 3 percent in 2013. Expected average spending per meal should fall 4.7 percent to $12.85 as diners seek out coupons, discounts and other deals as a way to cope with the weak U.S. economic recovery.

Food quality is another top priority for diners, who are less interested in service than in previous years.

Those two trends are reflected in the popularity of chains like Chipotle Mexican Grill Inc, which allows diners to choose ingredients such as organic produce and antibiotic-free meats for the burritos, tacos and other dishes that are assembled before their eyes.

Competition will remain intense as grocery stores and convenience stores expand sales of prepared food. The lines between fast-food and full-service restaurants also are blurring.

As a result, AlixPartners predicted that advertising will get even more targeted this year - with deals customized by geography or individual preference.

"As consumers get more demanding, and as the fight for share of stomach continues to increase, everyone is looking for a competitive edge," Eric Dzwonczyk, who also is co-leader of AlixPartners' restaurant practice.

(Reporting By Lisa Baertlein in Los Angeles; Editing by Bob Burgdorfer)