The Michigan restaurants business is growing — but slower than last year.
A survey of Michigan restaurants found restaurants sales grew 2.6 percent statewide in the first quarter of 2017, down from 2016’s 3.6 percent growth.
Following a demand for more state-specific information, the Michigan Restaurant Association (MRA) partnered with market research firm Cleveland Research to conduct a quarterly survey of Michigan restaurants to find demographic and economic trends.
It’s the first time a statewide survey has been made public for restaurants, said Justin Winslow, president and CEO of the association.
“We have heard consistently from our membership, particularly our independent operators, that they want better and more Michigan-specific data on their industry,” Winslow said. “We support our membership and their needs, so we are proud to bring a new level of business insight to our nearly 4,600 member locations across the state.”
The survey represents almost 700 member restaurants and $676 million in annual revenue. Michigan’s restaurant industry employs more than 435,000 people with annual sales of $15.9 billion across 4,500 establishments.
Despite an overall growth earlier this year, just 21 percent of restaurants reported sales above their expectations, with a third reporting they were below.
Traffic also increased, by 2.2 percent, still a slower rate than last year’s 2.7 percent increase in customer traffic.
While a healthy economy is linked to the growth, the sub-5 percent unemployment numbers also are linked to restaurant owners’ concerns about finding talent; one-third of restaurants are expected to increase staffing levels this year. The labor worries resulted in a 0.6 percent increase in labor costs since last year. Those costs could result in a 1 percent increase in menu prices.
A near majority, 44 percent, of the state’s restaurant industry does believe conditions will improve in the next few months, while 12 percent expect conditions to worsen. Overall, the expected growth in 2017 is 4.1 percent.
The National Restaurant Association (NRA) projects a nationwide increase of 1.7 percent in sales, but the eighth straight year of growth is on the lower end of gains.
“Rising labor costs and a complex legislative and regulatory landscape on federal, state and local levels add pressure on business performance and bottom lines,” the NRA 2017 Outlook Report stated.
The NRA also listed restaurant talent recruitment and retention as a top concern. Rounding out the five trends: “elevated pent-up demand, technology gains ground, and food and menu trends lean toward concepts.”
The NRA reported restaurant and food service jobs in Michigan make up 10 percent of the state’s employment and predicts that number will climb by 8.6 percent by 2027, equating a gain of more than 37,400 employees.
Grand Rapids is in a particularly fickle spot, as restaurants continue to open on a regular basis, which already provided a labor challenge as the Business Journal reported last year. The new openings could add to challenges facing existing operators, Winslow said.
“Grand Rapids has developed a mature and highly regarded restaurant community with a sizeable consumer base always looking for the next great thing,” he said. “That inspires many a new and exciting concept, but it also puts inordinate pressure on existing operators to remain fresh and innovative.”
To stay at the front of competition, the NRA reported the hot trends of 2017 to be items such as new cuts of meat, street-food inspired dishes, house-made charcuterie, sustainable seafood, ethnic-inspired breakfast foods, African flavors and heirloom fruits and vegetables.
Cleveland Research will do surveys on a quarterly basis to help restaurateurs stay relevant and informed.
“Traditionally, independent restaurants have had to rely on national trend data, which may or may not be a good benchmark for their business,” said Ross Walthall, director of food service at Cleveland Research. “Our aim is to bring our analytical rigor and insights to trends in the state of Michigan.”