Income Difference: Fine Dining Upward; Fast Down Food

Eating outside is increasingly becoming a luxury for the rich, not the bad.

That’s according to a eye-opening industry analysis just from NPD Group, the research specialist, which demonstrates that as fast-food visits were down 1 percent to its 12-month period ending in June, visits to fine-dining restaurants were up 3% during precisely the exact same period.

Independent, white-tablecloth restaurants are enjoying a resurgence of company from people with greater incomes as restaurants such as McDonald’s are losing customers who are feeling the pinch of this market.

But is this great news or bad news for the restaurant industry? That depends on whom you ask. After all, higher-income households represent the majority of spending from the industry, notes Hudson Riehle, senior vice president of research at the National Restaurant Association.

Even then, almost 80% of all restaurant visits are to fast-food restaurants or eateries where average spending is Significantly Less than $10 per Test, while just 1% of all restaurant visits are to fine-dining Institutions where the Test averages are $40 or Greater, reports NPD

“That is real,” says Bonnie Riggs, restaurant industry analyst at NPD, in a telephone interview. “This is the type of thing that keeps restaurant executives up at night time. The middle class is shrinking.”

That shrinking middle course was documented earlier this season by a Pew Research Center study, which revealed that the proportion of individuals who categorized themselves as middle class had shrunk to 44 percent in 2014 from 53 percent in 2008. At precisely the exact same time, the study showed, those who classified themselves as lower- or lower-middle course has climbed to 40 percent in 2014 vs. 25 percent in 2008.

Consumers, who are heavier users of quick-service restaurants, have been affected by the downturn and also have discretionary income to spend on dining out. With low carb visit cutbacks and not enough fine-dining traffic to make up for visitors declines, restaurant operators will need to appeal to the middle class to fill the gap, says Riggs.

But executives in the restaurant trade team say there’s a ray of light in the amounts.

“Growing in the number of higher-income households might be a favorable sign for restaurants, as those families represent the majority of spending in the business,” states Riehle, in a email.

Based on data from the Bureau of Labor Statistics, families with incomes of $100,000 or greater are responsible for 36% of their entire spending on meals away from home, while families with incomes between $70,000 and $99,999 account for 18% of industry spending.

The outlook remains blended for restaurant operators, states Riehle — with 41% reporting an increase in customer traffic levels between July 2014 and July 2013. “Restaurateurs remain generally optimistic about sales growth in the months ahead,” he states.

But the majority of that growth is predicted to come from the surface of the food chain, not the bottom.

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