U.S. Restaurant Outlook · 4 The information in this Study reflects conditions and our views as of...

U.S. Restaurant Outlook

Spring Edition

April 2017

2

Agenda

• Executive Summary

• Environment

• Consumer Perspectives

• Key Trends

• Wrap-up

3

Agenda


• Environment


• Key Trends

• Wrap-up

4

Disclaimer Important information regarding this study

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This Study may be based, in whole or in part, on projections or forecasts of future events. A forecast, by its nature, is speculative and includes estimates and assumptions which may prove to be wrong. Actual results may, and frequently do, differ from those projected or forecast. Those differences may be material. Items which could impact actual results include, but are not limited to, unforeseen micro or macro economic developments and/or business or industry events.

The information in this Study reflects conditions and our views as of this date, all of which are subject to change. We undertake no obligation to update or provide any revisions to the Study to reflect events, circumstances or changes that occur after the date the Study was prepared. In preparing this Study, AlixPartners has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise provided to us. AlixPartners has not audited or verified the data reviewed in connection with the preparation of this report.

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5

Executive Summary

• GDP growth remains modest, although some positive signs include improved consumer confidence and higher projected restaurant spending in 2017

• Restaurants continue to benefit from lower commodities, many operators still have been forced to raise prices to address rising wages

• While price increases have helped increase revenue, offsets due to traffic declines continued • Overall, the number of restaurants declined for the third straight year with independents baring

the brunt of these right-sizing efforts

Environment

1 of 2

• Over the past 12 months, consumers reported declines in eating out; however, on average, they plan to dine out and spend slightly more over the next 12 months

• Consumers also report they plan to visit full service restaurants more(CDR +4%, Fine Dining +6%) but eat out less at limited service stores (QSR -6%, Fast Casual -3%)

• Millennials indicate they plan to dine out significantly more, but spend less; whereas Baby Boomers and Gen Xer’s will dine out and spend less

• Significant uptick in consumer interest in utilizing promotions, coupons, etc. to reduce dining out spend (48% this year vs. 39% last year)

• Health & Wellness - The influence of healthy menu options continues to grow with 35% saying these items are extremely/very important to their decision on where to dine vs. 27% last year

Consumer Habits

EXECUTIVE SUMMARY

6

Executive Summary

Technology

• Online ordering and free Wi-Fi are the most influential technologies when consumers are choosing where to eat

• Mobile applications trail digital menus and digital loyalty as far as influence, and appear slow to gain traction; however, younger consumers are leading the adoption of mobile technology

• Loyalty slowly gaining traction with 19% of consumers indicating that programs are very/extremely influential on decisions to dine vs. 14% in the prior year;

Delivery

• Consumers strongly prefer ordering from a restaurant directly vs. a 3rd party (e.g., 53% vs. 6%). With time however, this gap should erode

• Opportunity for channel expansion across multiple segments; consumers prefer casual dining (i.e. Olive Garden, etc.) as top segment that should offer more delivery options, followed closely by fast casual and fast food

• Consumers split on whether they prefer to order in advance or in the moment; however, younger consumers more strongly prefer to order in advance vs. older consumers who prefer to order in the moment

• Food quality is #1 influencer of delivery, followed by price and speed; renovated environment of restaurant does not significantly influence decision to order delivery

Growth

• Traditional casual dining, family dining and fast casual are top segments consumers would like to see grow units

• Millennials appear more interested in chain growth across a variety of segments and cuisine types

Trends

2 of 2

EXECUTIVE SUMMARY

7

Agenda


• Environment


• Key Trends

• Wrap-up

8

The U.S. economy remains sluggish…

2.8

0.8

3.1

4.0

(1.2)

4.0

5.0

2.3 2.0

2.6

2.0

0.9 0.8

1.4

3.5

1.9

Gross Domestic Product % Change at Annual Rate

Average

GDP

Source: US Department of Commerce, Bureau of Economic Analysis

9

…though consumer confidence and spending have both inched up

8,000

9,000

10,000

11,000

12,000

13,000

14,000

$ B

illio

ns

Personal Consumption Expenditures Source: US Bureau of Economic Analysis

6.7% 5.6% 5.0% 4.7%

13.1%

11.2% 9.9% 9.3%

0%2%4%6%8%

10%12%14%

Monthly Unemployment % U.S. Unemployment Rate U-6 (Total Unemployed)

0

20

40

60

80

100

120

Univ. of Michigan Consumer Sentiment Index Index Q1 1966 = 100

CONSUMER CONFIDENCE

Source: University of Michigan, US Bureau of Labor Statistics, Bureau of Economic Analysis

10

Source: US Census Bureau; Department of Commerce

…and actual restaurant spending has experienced moderate growth (though restaurants/capita down for third straight year)

1.6

1.7

1.8

1.9

2.0

2.1

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rest Spend/Person Restaurants/ thousand peopleRestaurant Spend Per Capita and Overall Restaurant Capacity

Res

tau

ran

t sp

end

ing

/p

erso

n/

mo

nth

# R

esta

ura

nts

per

th

ou

san

d p

eop

le

CONSUMER SPENDING

Even as number of restaurants per capita has declined for the third straight year

11

Source: NPD

Overall, the U.S. continues to see a shift towards chain restaurants…

Restaurant Unit Density (Units per million people)

1,132

860

1,002

922

Independent Units Chain Units

Fall 2007Fall 2016

-11%

7%

UNIT GROWTH

…with chain restaurants per capita growing

12

QSR is the only segment that has maintained sales growth as of Q4-2016

Source: Same Store Sales data from Public Restaurant Filings Note: 2015-Q4 through 2016-Q3 Fast Casual SSS impacted by Chipotle food safety issue

Traffic declines have caused comparable restaurant sales growth to decelerated gradually

Quarterly Same Store Sales Y-o-Y % Change By Segment

-4%

-2%

0%

2%

4%

6%

8%

10%

12% QSR Fast Casual Casual Dining Fine Dining

SSS GROWTH

Restaurants, worried about labor costs, have raised prices but recent guest count declines have more than offset the price increases

13

Food Away from Home and Food at Home (CPI)

Menu prices continue to be flat while grocery-store meal prices trend downward, contributing to restaurant traffic declines

Source: Bureau of Labor Statistics

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-

16

Aug

-16

Sep

-16

Oct

-16

Nov

-16

Dec

-16

Restaurant Menu and Grocery Store Prices Percent change from the same month in the previous year

Menu Prices Grocery Store Prices

CPI

The widening price gap has been a significant contributor to restaurant traffic declines

14

Sources: Piper Jaffray, Company Reports, AlixPartners analysis

Minimum wage increases and a tight labor market driving higher labor costs

Takeaways

• Restaurant industry is experiencing the toughest tightening of the labor market in the post-recession era

• Efforts to increase wages of low-end positions, coupled with numerous regulatory changes, are adding complexities

• Targeted menu price increases have helped mitigate labor cost increases until recently

• Best of class operators have focused on driving improved efficiencies through:

• investing in technology

• improving daypart scheduling

• reducing menu complexity

• Having suppliers perform some prep activities

After years of managing labor costs through menu price increases, restaurants have paused due to traffic weakness

28.1% 28.4%

29.6%

30.7%

32.2% 32.7%

26%

27%

28%

29%

30%

31%

32%

33%

34%

2011 2012 2013 2014 2015 LTM

QSR Fast Casual Casual Dining

Labor Costs as Percent of Revenues

LABOR COSTS

15

The Food Index has remained flat these past 12 months as rises in some commodity prices have been offset by declines in others

Commodity Last 12 months Last 3 months

3.4%

13.0%

-1.3%

2.3%

-0.2%

1.4%

4.8%

1.9%

-2.5%

0.8%

ECONOMIC OUTLOOK: January 2017

-22%

-16%

-12%

-10%

-3%

-2%

1%

17%

22%

41%

(40%) (30%) (20%) (10%) - 10% 20% 30% 40% 50%

Beef

Rice

Wheat

Pork

Corn

Poultry

Basket

Cheese

Milk

Diesel

COMMODITY COSTS

Note: Year-over-year comparison based on end of month pricing Poultry pricing as of 11/30/2016 Source: USDA, CME, National Agricultural Statistics Service (NASS), Agricultural Statistics Board

16

Restaurant industry profitability has benefited from the low food costs (EBITDA Margin and 5-Year CAGR)

Higher EBITDA %

Lower EBITDA %

Und

erpe

rfor

ms

Bot

h M

easu

res

Bea

ts M

edia

n EB

ITD

A %

of

Sal

es

Beats B

oth Measures

Beats M

edian EBITD

A

CAG

R

Lower CAGR

Higher CAGR

Company Name Five Year CAGR LTM EBITDA %

Brinker International 5.7% 14.5%

CEC Entertainment 1.3% 20.7%

Darden Restaurants -2.0% 13.3%

Denny's Corporation -3.5% 13.5%

DineEquity -2.0% 40.3%

Panera Bread Company 5.1% 14.0%

McDonald's Corp. -0.8% 37.9%

Papa Murphy's 4.1% 17.4%

The Wendy's Company 3.2% 27.1%

Yum! Brands -6.0% 30.4%


BJ's Restaurants 10.0% 13.3%

Buffalo Wild Wings 19.0% 15.0%

Chuy's Holdings 21.8% 12.6%

Cracker Barrel Old Country 10.4% 12.7%

Dave & Buster's 22.2% 23.7%

Texas Roadhouse 13.5% 13.4%

The Cheesecake Factory 6.2% 12.7%

Fiesta Restaurant Group 9.9% 13.2%

Starbucks Corporation 18.3% 22.9%

Del Frisco's Restaurant 8.3% 13.2%

Ruth's Hospitality Group 6.7% 15.3%

Domino's Pizza 10.6% 19.6%

Dunkin' Brands Group 11.0% 53.4%

Jack in the Box 12.7% 20.9%

Nathan's Famous 22.0% 28.4%

Papa John's International 10.1% 11.4%

Popeyes Louisiana Kitchen 13.8% 32.5%

Restaurant Brands Int’l 26.3% 44.2%

Sonic Corp. 5.8% 27.9%


Diversified Restaurant 23.4% 10.7%

Granite City Food & Brew 11.3% 6.9%

J. Alexander's Holdings 17.1% 9.6%

Red Robin Gourmet Burgers 10.2% 11.2%

Potbelly Corporation 11.2% 9.8%

The Habit Restaurants 40.6% 10.2%

Zoe's Kitchen 41.0% 8.8%

Carrols Restaurant Group 30.6% 9.6%

Good Times Restaurants 140.6% 4.0%

Pizza Limited 23.7% -4.3%


Biglari Holdings -7.0% 6.6% Bloomin' Brands 4.8% 10.0% Bob Evans Farms -9.6% 9.1% Bravo Brio Restaurant -9.0% 6.2% Famous Dave's of America -22.7% 4.2% Ignite Restaurant Group -10.4% 4.3% Keg Restaurants 4.9% 4.8% Kona Grill -4.7% 4.0% Luby's -10.2% 3.7% Ruby Tuesday -17.7% 4.7% Chipotle Mexican Grill -13.8% 5.2% Jamba -185.1% -4.4% Noodles & Company -2.3% 5.3% Ark Restaurants Corp. 1.9% 8.4% The ONE Group Hospitality -179.1% -2.4% Boston Pizza International -164.0% -0.3% NPC Restaurant Holdings 2.7% 9.9% RAVE Restaurant Group -213.0% -8.7%

Medians: EBITDA % = 11.4%

EBITDA CAGR = 5.8%

Sources: CapIQ, Company Reports, AlixPartners analysis

EBITDA

17

Overall, the industry’s balance sheets are fairly healthy…

Source: AlixPartners analysis of publicly availability company financials

Aggregate Debt/Equity Ratios 2011-Latest Measure

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014 2015 Latest

QSR Fast Casual Casual Fine Dining

Number of Companies by Distress Category Z-Score of 60 Companies, Latest Measure

9

6

12

3 2

3

9

1

7

1

6

1

0

2

4

6

8

10

12

14

QSR Fast Casual Casual Fine Dining

Healthy On Alert Watch

RISK

…however there has been an uptick in bankruptcy filings in the last year

18

Industry share price performance compared to major market indices

In terms of stock performance, restaurants have struggled to maintain their performance (aside from a post-election jump)

Value of $1 Invested on 12/31/2012 (Does not include IPOs)

Casual Dining, 1.358

Fast Casual, 1.465

QSR, 2.178

S&P 500, 1.657

DJIA, 1.585

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

12/3

1/20

12

1/31

/201

32/

28/2

013

3/31

/201

3

4/30

/201

3

5/31

/201

3

6/30

/201

3

7/31

/201

3

8/31

/201

3

9/30

/201

3

10/3

1/20

13

11/3

0/20

13

12/3

1/20

13

1/31

/201

42/

28/2

014

3/31

/201

4

4/30

/201

4

5/31

/201

4

6/30

/201

4

7/31

/201

4

8/31

/201

4

9/30

/201

4

10/3

1/20

14

11/3

0/20

14

12/3

1/20

14

1/31

/201

52/

28/2

015

3/31

/201

5

4/30

/201

5

5/31

/201

5

6/30

/201

5

7/31

/201

5

8/31

/201

5

9/30

/201

5

10/3

1/20

15

11/3

0/20

15

12/3

1/20

15

1/31

/201

6

2/29

/201

6

3/31

/201

6

4/30

/201

6

5/31

/201

6

6/30

/201

6

7/31

/201

6

8/31

/201

6

9/30

/201

6

10/3

1/20

16

11/3

0/20

16

12/3

1/20

16

1/31

/201

7

Casual Dining Fast Casual QSR S&P 500 DJIA

STOCK PERFORMANCE

Source: CapIQ, AlixPartners analysis of publicly availability stock prices

19

Highlights • Notable M&A deals in 2016 included JAB Beech’s acquisition of Krispy Kreme Doughnuts ($1.35 Bn), Roark Capital

Group acquisition of Jimmy John’s (terms not disclosed), and CenterOak Partners acquisition of Wetzel’s Pretzels (terms not disclosed)

• Recently announced JAB’s pending purchase of PNRA for $7+B would be the second largest restaurant deal in history (QSR/3G’s 2014 purchase of Tim Horton’s, $12.6B)

• Activist shareholder groups ramped up restaurant industry activity in late 2016 and early 2017 targeting restaurants like Fiesta Restaurant Group, Buffalo Wild Wings and Bravo Brio Restaurant Group

Source: CapIQ; limited to transactions that closed in period and where deal terms were announced

M&A market activity for restaurants remains strong for both restaurant companies and franchisees

25

50

67

58 59

49 50

$8,280

$1,612

$5,339

$631

$19,585

$1,786 $3,270

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0

10

20

30

40

50

60

70

80

2010 2011 2012 2013 2014 2015 2016

# of Transactions Transaction Value $

US Restaurant M&A Activity – Closed Deals with Terms Announced

M&A

20

Agenda


• Environment


• Key Trends

• Wrap-up

21

Consumer Research Overview

Date: February 2017 Population: 1,008 adults nationwide, age 18+ Survey Focus: • Current and Planned frequency of dining occasions across

Convenience, Restaurants and Ready-to-Eat (RTE) Grocery • Expected spending on meals outside the home • Preferred type of restaurants • Key criteria for consumer preference in restaurant selection • Preferred type of restaurants

• Key criteria for consumer preference in restaurant selection

• Consumer feedback on selective topics like:

o Health and Wellness o Marketing tactics o Innovation

22

Frequency down slightly from year-ago survey, with 57% saying they dined out at least weekly over the last 12 months

On average, how often did you eat outside the home in the last 12 months at any of the restaurant types previously described?

57%

43%

59%

41%

61%

39%

57%

43%

Dined out at least weekly Dined out less than weekly

Overall Dining Frequency Q1-2014 Q1-2015 Q1-2016 Q1-2017

FREQUENCY

23

Casual dining dominates preference at dinner (51%), fast food is preferred for breakfast (37%) and fast casual (37%) for lunch

When you purchase meals in one of these restaurant types, which is your preferred type of location by meal type?

10%

3% 1%

15%

29%

10% 8%

5%

12%

20%

37%

30%

12%

39%

27%

21%

37%

14% 14% 15%

21% 22%

51%

16%

7%

1% 1%

16%

5%

1.0%

Breakfast Lunch Dinner Late Night Snack

Conv. Grocery Fast Food Fast Casual Casual Fine Dining

FREQUENCY

24

Diners plan to trade up in the year ahead, saying they plan to visit casual & fine dining more, and limited-service outlets less

On average, how often did you dine/purchase a meal outside the home at any of the following types of restaurants in the LAST 12 MONTHS and how often do you plan to in the NEXT 12 MONTHS?

3.71

3.16

4.37

3.01

2.51

1.29

3.65

2.98

4.11

2.93

2.61

1.37

Conv. Grocery Fast Food Fast Casual Casual Fine Dining

Avg. Monthly Visits Last 12 Months Next 12 Months

FREQUENCY

25

Full Service: Anticipated increases predominantly driven by increased visits across infrequent users


13% 18%

43%

25%

6% 15%

52%

26%

0%

11%

55%

34%

11%

22%

46%

22%

8% 16%

49%

28%

2%

12%

57%

29%

At leasttwo timesper week

Once perweek/2-3times per

month

Once permonth orless often

None At leasttwo timesper week


month




month


None

Millennials Generation X Baby Boomers

14%

40% 37%

9% 11%

35% 48%

6% 5%

38%

49%

8% 14%

40% 38%

8% 13%

32%

47%

7% 5%

35%

53%

7%



month




month




month


None


Fine Dining:

Casual Dining: Last 12 Months Next 12 Months

FREQUENCY

26

Limited Service: Anticipated cut-backs driven by reductions in visits by heavy Millennial users


27% 35%

28%

9%

19%

30% 37%

14% 6%

26%

45%

23% 24%

35% 32%

9% 17%

33% 39%

11% 5%

29%

47%

19%



month




month




month


None


Fast Casual:

39% 42%

17%

2%

28%

43%

26%

3% 11%

39% 41%

8%

34% 41%

22%

3%

25%

45%

25%

6% 12%

39% 37%

11%



month




month




month


None


Fast Food: Last 12 Months Next 12 Months

FREQUENCY

27

But they will make it up by dining out slightly more (but spend the same) over the next 12 months

Compared to the last 12 months, do you expect to…

15%

24%

61%

18%

26%

57%

24%

19%

57%

Dine out more Dine out less Dine out same

Planned Dining Occasions Next 12 Months

Q1-2015 Q1-2016 Q1-2017

20% 23%

57%

22%

28%

50%

22% 23%

55%

Spend more Spend less Spend same

Planned Consumer Spending Next 12 Months

Q1-2015 Q1-2016 Q1-2017

Q1 ‘15 Q1 ‘16 Q1 ‘17

Occasions 76% 75% 81%

Spending 77% 72% 77%

Responses of Same or More:

PRICE

28

However, intended traffic and spending patterns vary between the generations…


35%

25%

40%

24% 19%

58%

15% 16%

70%



Millennials Gen X Baby Boomers

26% 30%

44%

22% 22%

56%

21% 18%

60%




Overall Generational Trends:

Occasions Spending

Millennials

Generation X

Baby Boomers

PRICE

29

… as well as geographic region of the consumer


24% 19%

57%

18% 25%

58%

27%

17%

56%

24% 17%

59%



Northeast Mid West South West

22% 23%

55%

20% 25%

55%

27% 21%

51%

17% 23%

60%




Overall Regional Trends:

Occasions Spending

Northeast

Mid West

South

West

PRICE

30

With overall spending per meal expected to remain relatively flat

$15.38 $15.43

Average Spend Reported/Expected

Expected Average Spend per Meal Last 12 months vs. Next 12 months

Last 12 Months Spend Next 12 Months Spend

0.3%

PRICE

31

$15.38 $15.43


Q1-2017 Last 12 Months Spend Next 12 Months Spend

$14.91 $13.55



$13.99 $14.25



When you dined out for a meal in the LAST 12 MONTHS and NEXT 12 MONTHS, how much did you spend on average per meal (per person)?

The constant-spending sentiment is relatively in-line with last year

1.9%

$14.91 $13.99



-6.2% -9.1%

0.3%

PRICE

32

An uptick in the $5-or-less per meal category (trade down) may be balanced out by a 2-point lift in the $20+ category (trade up)

4%

31%

45%

12%

5% 2% 1%

5%

30%

43%

14%

5% 2% 1%

$5 or less perperson

$5.01 to $10 perperson

$10.01 to $20per person




More than $50per person

Expected Average Spend per Meal Last 12 Months Next 12 Months

When you dined out for a meal in the LAST 12 MONTHS and NEXT 12 MONTHS, how much did you spend on average per meal (per person)?

PRICE

33

For those planning to dine out less, saving money (50%) to be re-allocated elsewhere & eating healthier (44%) are the top reasons

Why do you expect to dine out less often in the next 12 months?

6%

1%

3%

4%

4%

5%

5%

8%

8%

9%

12%

16%

26%

29%

44%

50%

Other

Plan to purchase more restaurant meals delivered to my…

Do not enjoy the experience

Plan to purchase more home delivered meals in lieu of…

Do not like the atmosphere

Poor or unfriendly service

Restaurant food is poor quality

Too far to drive

Plan to purchase ready to eat meals from grocery stores in…

Restaurant food is too predictable

Uncertainty about newly elected U.S. government makes…

Concern over future financial situation

Current finances / need to cut back

Restaurant meals are too expensive

Want to eat healthier

Saving money that would have been spent on restaurant…

VALUE

34

54%

47%

23%

15% 12%

9% 14%

9% 4%

1%

48% 53%

35% 30%

8% 12%

6% 2%

10% 12%

48%

34% 30%

36%

27%

19%

6% 11%

3% 4%

Savingmoney thatwould havebeen spent

onrestaurantvisits to re-

allocatetowardsother

expenses,purchases

and/orneeds

I want to eathealthier

Restaurantmeals are

tooexpensive

My currentfinancial

situation hasgotten

worse/needto reduceexpenses

I amconcernedabout the

futureeconomy

and how itmay impact

me longterm

Uncertaintyabout newlyelected U.S.governmentmakes me

want tospend lesson eating

out

Restaurantfood is toopredictable

(lack ofvariety

and/or newmenu items)

Too far todrive

Poor orunfriendly

service

Restaurantfood is poor

quality

Millennials

Gen X

Baby Boomers

Baby Boomers appear more affected with finances, while Millennials are cutting back by re-allocating money towards other expenses

Why do you expect to dine out less often in the next 12 months?

VALUE

Generation X consumers are most interested in cutting back to due health and seem more affected by restaurant service and quality

35

Across generations: Travel, personal services, & retirement top where consumers say funds will be re-allocated

You indicated that you plan to save money that would have been spent on restaurant visits to re-allocate towards other expenses, purchases and/or needs. What are the other uses of the money that you intend?

16%

17%

22%

25%

26%

30%

31%

32%

Other

Education for myself and/or my family (i.e. privateschool, college, tutoring, music and/or sports classes,

etc.)

Larger lifestyle purchases (i.e. home, car, boat,construction, etc.)

Entertainment experiences (i.e. concert tickets,gaming, bowling, theme parks, etc.)

Non-food retail purchases (i.e. Amazon purchases,apparel purchases, electronics, etc.)

Retirement

Personal services for myself and/or my family (i.e.personal chef, nail services, hair services, dry cleaning,

childcare, housekeeping, landscaping, pool service,…

Travel experiences (i.e. airfare, hotel, car rental, cruiseship, etc.)

VALUE

36

29%

46%

15%

31% 32%

27% 26%

15%

32%

21%

34% 31%

16% 20%

12% 15%

32%

14%

47%

13% 15%

17%

9%

16%

Travelexperiences (i.e.airfare, hotel, car

rental, cruiseship, etc.)

Personal servicesfor myself and/ormy family (i.e.

personal chef, nailservices, hairservices, dry

cleaning,childcare,

housekeeping,landscaping, pool

service, etc.)

Retirement Non-food retailpurchases (i.e.

Amazonpurchases,

apparelpurchases,

electronics, etc.)

Entertainmentexperiences (i.e.concert tickets,

gaming, bowling,theme parks,

etc.)

Larger lifestylepurchases (i.e.

home, car, boat,construction, etc.)

Education formyself and/or my

family (i.e.private school,

college, tutoring,music and/or

sports classes,etc.)

Other

Millennials

Gen X

Baby Boomers

Millennials want to beef up personal services while Boomers are trying to catch up on retirement savings…

You indicated that you plan to save money that would have been spent on restaurant visits to re-allocate towards other expenses, purchases and/or needs. What are the other uses of the money that you intend?

VALUE

… and travel is popular across the board

37

Overall U.S. travel spending continues to rise, while air fare prices are the lowest they have been since the recession…

$- $100 $200 $300 $400 $500 $600 $700 $800 $900

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

All tourism goods and services spending ($000) Average Fare ($) - Constant Dollars

Source: BEA, US Dept. of Commerce; US Dept. of Transportation

U.S. Travel & Tourism Spending

-10.1

6.5 4.9 0.9 0.5 0.9

-3.9 -8.3

2009 2010 2011 2012 2013 2014 2015 2016 (thru3Q)

% Change in Average Air Fare from Prior Year

VALUE

… experiencing a significant drop in 2016

38

Among non-restaurant establishments, consumers feel that hotels have the biggest opportunity for food and/or dining upgrades

On average, which of the following types of establishments do you feel has the biggest opportunity to upgrade their dining options and/or food quality?

4%

6%

14%

16%

17%

24%

Cruise Ships

Train Stations

Professional Sports Parks andArenas

Airports

Theme Parks

Hotels

VALUE

39

Among those planning to purchase more meals from grocery or convenience stores, price is by far the biggest reason (56%)

You indicated that you plan to purchase ready to eat meals from grocery or convenience stores more often in lieu of restaurant meals. What is the NUMBER ONE reason for this?

8%

14%

22%

56%

These ready to eat meals have better food safetystandards

These ready to eat meals have better food quality

I am gas and/or grocery shopping already, and it iseasier to pick these up

These ready to eat meals are cheaper

VALUE

40

Consumers wanting to save money plan on using promotions significantly more, while also eating at less expensive restaurants

How will you reduce the amount you spend on dining out in the next 12 months?

6%

6%

19%

16%

17%

13%

20%

27%

36%

7%

12%

23%

16%

19%

20%

20%

35%

39%

14%

17%

18%

19%

21%

22%

22%

38%

48%

Skip meals occasionally

Take advantage of frequent dinerprograms

Eliminate drinks

Purchase ready to eat meals fromgrocery stores more often

Order cheaper food

Dine out less at national chains andmore often at local restaurants

Order fewer items overall each trip

Eat at less expensive restaurants

Utilize coupons, promotions, discounts

Q1-2017

Q1-2016

Q1-2015

VALUE

41

When consumers define value, “quality of ingredients for the price” expanded its position as top choice…

You indicated that OVERALL VALUE is one of the most important factors in choosing where to dine. For you, which two factors best defines value?

30%

32%

28%

68%

26%

33%

38%

68%

21%

36%

39%

74%

Lowest price

Large portion size for the price

Bundled offerings

Quality of ingredients for the price

Q1-2017 Q1-2016 Q1-2015

-30%

SELECTION CRITERIA

…while lowest price has steadily declined over the past 2 years, down 30% overall

42

…and “food quality” (60%) was by far the most important factor in selecting the restaurant consumers visit most often

What are the most important factors you consider in selecting the restaurant you visit most frequently?

4%

5%

7%

8%

9%

10%

11%

15%

15%

19%

26%

27%

29%

37%

60%

Accommodates special dietary needs (vegetarian, low…

Offers full table service (waiters, waitresses)

Drive thru order/pickup

Atmosphere (music, decor, etc.)

Time to get in and out

Portion size

Family friendly environment

Promotions, discounts, or coupons

Healthy food

Overall service

Overall value

Menu variety

Location

Overall price

Food quality

SELECTION CRITERIA

43

70%

13% 17%

69%

16% 15%

Yes No Indifferent

Q1-2016 Q1-2017

The number of consumers who agree with the battle for higher wages appears to be growing…

Recent labor movements are calling for higher wages. Do you agree with?

50%

27% 24%

58%

20% 23%

Yes No Indifferent

Q1-2016 Q1-2017

You indicated that that restaurant workers should get higher wages. Are you willing to pay more to help?

Would you prefer to eat at restaurants that do not ask for tips but instead include a set service charge?

19%

64%

17% 19%

64%

17%

Yes No, I like to controlhow much I tip

No preference

Q1-2016 Q1-2017

+16%

CONSUMER SENTIMENT – WORKER COMPENSATION

… But while ~7 out of 10 claim to be willing to pay more for it, the U.S. consumer is still reluctant to accept a set service charge (i.e., European Style)

44

The importance of healthy menu options continues to grow - 91% say they’re at least “somewhat” important, up from 86% last year

How important are healthy menu options to you when choosing where to dine out for meals?

20%

64%

17%

25%

57%

17%

27%

59%

15%

35%

55%

9%

Extremely/Very Important Important/Somewhat Important Not At All Important

Q1-2014 Q1-2015 Q1-2016 Q1-2017

75%

CONSUMER SENTIMENT – HEALTH AND WELLNESS

45

Agenda


• Environment


• Key Trends

• Wrap-up

46

Online ordering (40%) & free Wi-Fi (35%) are the most influential technologies in choosing a dining establishment

On a scale of 1 - 5 with 1 being non-influential and 5 being highly influential, how influential are the following technologies on your decision to dine at or order delivery from a dining establishment?

23%

25%

27%

27%

30%

32%

33%

35%

40%

Table-top tablets and/or kiosks

Mobile payment

Text message table waiting system

Mobile applications for phone

Mobile ordering

Digital loyalty program

Digital menus

Free Wi-Fi

Online ordering

% Selecting ‘4’ or ‘5’

TECHNOLOGY

47

Technologies overall influence Millennials across the board more than other age groups…

0%

5%

10%

15%

20%

25%

30%

35%

Free Wi-Fi Onlineordering

Digitalmenus

Mobileordering

Digitalloyalty

program

Mobileapplicationsfor phone

Textmessage

tablewaitingsystem

Mobilepayment

Table-toptabletsand/orkiosks

MillennialsGen XBaby Boomers

% Selecting ‘4’ or ‘5’

TECHNOLOGY

…and this is especially true as it relates to mobile applications

On a scale of 1 - 5 with 1 being non-influential and 5 being highly influential, how influential are the following technologies on your decision to dine at or order delivery from a dining establishment?

48

However, mobile technology appears to be slow to catch on in restaurants…

Have you used mobile technology (i.e. payment, ordering, reservations, application for phone, etc.) at any of the following eating locations?

8%

11%

13%

18%

20%

23%

Convenience Stores

Fine Dining

Grocery Stores

Fast Casual

Casual Dining

Fast Food

Percent of consumers responding “YES” to each segment

MOBILITY

…in fact, 42% reported that they’ve never used mobile technology at any segment listed above

49

• Digital ordering accounts for ~3% of all restaurant traffic, but grew 18% over the past year

• In fact, digital sales are growing by multiple digits in an overall flat market

• Above average users of digital ordering include: those under age 35, African-American consumers and those with higher household incomes

• Consumers ordering digitally are twice as likely to order on a deal

• Mobile payment improves customer satisfaction scores and encourages loyalty related guest visits

Source: NPD

But operators continue to invest in mobile ordering platforms despite slow traction

50% 35% 29%

% of digital orders comingfrom dinner

% of digital orders fromparties with kids

% of digital orders usingcoupons

Recent Roll-out of Mobile

Ordering Platform

Highlights

MOBILITY

Many operators are using new mobility platforms to enhance drive-thru experience with curbside or advance order features

50

Loyalty programs continue to show lackluster impact on restaurant selection overall

How influential are restaurant loyalty programs on your restaurant selection?

31%

25%

33%

9%

3%

32%

29%

25%

8% 6%

28% 26%

27%

11%

8%

Not at all influential Slightly influential Somewhat influential Very influential Extremely influential

Q1-2015 Q1-2016 Q1-2017

LOYALTY

There may be light at the end of the tunnel: 19% respond that loyalty programs are “very” or “extremely” influential, a 35% increase over last year

51

49%

22%

12% 7%

4% 2% 3%

45%

19% 15%

10% 5% 3% 3%

0 1 2 3 4 5 6 ormore

Q1-2016 Q1-2017

Still, 40% of consumers say they have not joined any restaurant loyalty program; but with slight lift in 2+ programs used regularly

How many restaurant loyalty programs have you joined?

42%

20% 15%

12%

5% 3% 3%

40%

18% 15%

11% 7%

4% 5%

0 1 2 3 4 5 6 ormore

Q1-2016 Q1-2017

How many restaurant loyalty programs do you use regularly?

LOYALTY

Recent Operator Loyalty Offerings

Data suggests limited consumer interest; however, as more companies roll-out advanced loyalty programs, the adoption rate continues to increase

52

Clearly, Millennials are users of loyalty programs more than X-ers and Boomers

How influential are restaurant loyalty programs on your restaurant selection?

How many restaurant loyalty programs do you use regularly?

26%

53%

21% 19%

55%

26%

15%

52%

33%

Millennials

Gen X

Baby Boomers

0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 ormore

Millennials

Gen X

Baby Boomers

LOYALTY

But loyalty programs are considered “table stakes” for most brands

53

The U.S. delivery market is huge, with significant consumer interest…

• 61% of consumer have ordered delivery from a full-service restaurant directly to home or office

• 54% of consumers have ordered curbside take-out from a full service restaurant

• Nearly half of consumers enjoy using food delivery services “very much” or “quite a lot”

Highlights:

180

30

0%10%20%30%40%50%60%70%80%90%

100%

Total Delivery Sales

Total Take-out Sales

US Spending on Take-out and Delivery ($B USD):

3% 7% 10% 12% 12%

56%

Daily Several times perweek

Once per week Several times permonth

Once per month Less often

Frequency of using delivery services in the U.S.:

Source: Statista

DELIVERY

… but frequency of ordering continues to be rather low

54

In fact, nearly 75% of consumers say they order delivery from the same place routinely…

When ordering delivery, do you tend to order from the same place routinely, and if so, why?

74%

26%

Yes No

82% 71% 67%

18% 29% 33%


Yes No

0% 10% 20% 30% 40% 50%

Yes, while I havemultiple good delivery

options available, I orderfrom the restaurant with

the easier ordering system


options available, I orderfrom the restaurant with

generally the fastestdelivery time


options available, I like toorder the same thing all

the time

Yes, because I do nothave many good delivery

options near me

Baby Boomers

Gen X

Millennials

Overall:

Age View:

DELIVERY

…with most (~40%) suggesting due to lack of options

55

To that end, consumers feel that multiple restaurant segments should offer more delivery options…

Which of the following types of RESTAURANT CHAINS AND DINING ESTABLISHMENTS do you feel should OFFER MORE DELIVERY OPTIONS than what's currently available?

12%

18%

22%

25%

25%

34%

37%

38%

Fine Dining (i.e. Ruth Chris, Morton's, etc.)

Ice Cream and Yogurt Focused Chains (i.e.Menchie's, Baskin Robins, Ben & Jerrys, etc.)

Polished Casual Dining (i.e. Cheesecake Factory, P.F. Changs, Grand Lux CafΘ, Bonefish,

etc.)

Coffee and Breakfast Focused Chains (i.e.Starbucks, Dunkin Donuts, Einstein Bagels, etc.)

Family Casual Dining (i.e. Bob Evans, CrackerBarrel, etc.)

Fast Food (i.e. McDonald's Burger King, TacoBell, etc.)

Fast Casual (i.e. Chipotle, Panera, etc.)

Traditional Casual Dining (i.e. Applebee's,Chili's, Olive Garden, Red Lobster, etc.)

DELIVERY

…with Traditional Casual Dining, Fast Casual and Fast Food having the most opportunity

56

Companies across formats continue to test and roll-out new and/or enhanced delivery offerings

Company Recent Initiatives • Plans to rapidly roll-out delivery in US, with effort

focused on third parties • Traditionally the company has operated its own

McDelivery services

• Testing both 3rd party delivery providers and company-operated network

• Partnering with DoorDash • Full roll-out of new online ordering and delivery

platform slated for 2017 • Testing delivery packaging

• Delivery available in 15% of system-wide units, with plans to increase to 30-40% in 2017

• Digital sales account for 25% of revenue

• Delivery via Apple Watch and Amazon Echo ordering

• Increasing fleet of DXP delivery vehicles, outfitted with warming ovens and 80-pizza capacity

• Partnered with Tapingo and DoorDash to bring on-demand delivery

• Significant emphasis on partnering/piloting with third party delivery services

• Strong focus on maintaining integrity of quality of delivered product via enhanced packaging, innovative delivery offerings, etc.

• General coordination with enhanced mobility platform

• Some chain reporting larger orders and increased off peak hour business via delivery channel

Common Themes:

DELIVERY

57

Despite many reliable third party companies active in the restaurant food delivery market…

Source: CB InSights

• Exists in 200 cities • Relies on 25,000

couriers to make 1.3million deliveries a month

• Flat delivery fee of $3.99 for “preferred merchants”, that is merchants who agree to cover a portion of delivery fee in exchange for prominent screen placement whenever user opened up the app

• Also introduced an Amazon Prime like subscription fee that for $9.99 a month will make as many deliveries as you like from Plus merchants for orders greater than $30

• Counts Chipotle as one of their key customers

• Exists in 250 cities • Relies on 75,000+

couriers to make food deliveries

• Backed by some of the biggest VC’s – Sequoia, Kleiner Perkins, others

• Test robot delivery of food in the San Francisco area

• Working with partners regionally (Oren’s Hummus, witchcraft) and nationally (Taco Bell, Dunkin’ Donuts)

• Delivery charges to customer is between $5-$8 per order + commission % of each and every delivery from restaurant

• They also charge restaurants for marketing and advertising on their app

• Exists in over 1,100 cities

• Partnered with 50,000+ restaurants to make food deliveries

• GrubHub charges a commission of 5%-15% on each and every order delivered. In addition they have advertising and marketing plans for restaurants where they list that particular restaurant on the top for a limited time (and GrubHub charges customers for this)

• In addition GrubHub also charges restaurants a fee for “paid inclusion” in which they charge restaurant for being included in their search results

• Exists in 70+ cities globally

• Leverages Uber driver partners to deliver food

• Partner with favorite local restaurants to bring food to customer's home

• Uber Eats charges restaurants anyway from 20%-30% for food delivery + delivery fee to customer

• Exists in 20 cities • Only available through

Amazon’s one hour merchandise delivery service

• Available for free to customers who have the $99 Prime membership service

• Like other delivery providers Amazon works with top local restaurants from where customers can order their food

DELIVERY

58

… U.S. delivery order market share of these third party services is very low

Source: Statista

9%

0%

0%

1%

2%

2%

2%

4%

14%

19%

23%

24%

Other online platforms

UberEats

Delivery.com

Caviar

Eat24

Postmates

DoorDash

Jimmy John's

Papa John's

Pizza Hut

Grubhub/Seamless

Domino's

Order market share of online restaurant delivery services in the United States:

DELIVERY

The delivery market continues to be dominated by pizza chains

59

In fact, consumers would prefer to order delivery directly from the restaurant

Would you rather order restaurant delivery from a third party service (i.e. UberEats, Postmates, Seamless, Grubhub, etc.) or directly from the restaurant?

6%

53%

16%

26%

Third-Party Restaurant Indifferent I don't orderdelivery

11%

22%

57%

10%

20%

16%

58%

7%

37%

11%

51%

1%

I do not order delivery

Indifferent

I prefer to orderdelivery directly from

the restaurant

I prefer to orderdelivery from a third

party service

Baby Boomers

Gen X

Millennials

Overall: By Generation Demographic:

DELIVERY

This even runs true for the more “tech-savvy” Millennial generation

60

Half of consumers will not wait more than a half hour for delivery, while 95% will not wait more than an hour…

On average, how long are you willing to wait for delivery from your favorite restaurant (i.e. time from placed order to when it arrives)?

10%

41%

26%

18%

2% 1% 0% 2%

15 min. 30 min. 45 min. 1 hour 1.25 hours 1.5 hours Greaterthan 1.5

hours

Indifferent

39%

37%

24%

Yes, I would prefer to scheduledelivery in advance

No, I prefer to order in thetraditional delivery format

Indifferent

If you were able to schedule restaurant delivery in advance would you prefer this?

DELIVERY

… 39% of consumers would be interested in being able to schedule delivery in advance

61

Millennials are more interested in scheduling advance delivery…

If you were able to schedule restaurant delivery in advance and schedule delivery for a certain time, would you prefer this versus traditional delivery?

50% 41%

25%

31% 35%

46%

20% 24% 29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Indifferent

No, I prefer to order in the traditionaldelivery format

Yes, I would prefer to schedule deliveryin advance

DELIVERY

… verses Baby Boomers who prefer a more “in the moment” approach

62

The top two factors affecting the decision to order delivery, food quality & food price, are restaurant-controlled factors

What are the most important attributes affecting your decision to order delivery from a restaurant?

8%

9%

11%

12%

15%

17%

25%

28%

30%

49%

51%

57%

63%

Saved credit card payment system

Modern/renovated environment of restaurant

Saved previous orders

Text message updates on order status

Mobile application for delivery available (i.e. mobile payment, mobile ordering,etc.)

Selection of healthy offerings

Order tracking/estimated delivery time

Restaurant appears clean

Ordering over the phone

Menu variety

Speed of delivery

Price of food

Food quality

DELIVERY

“Renovated look” of restaurant environment ranks relatively low, perhaps suggesting opportunity to drive incremental sales even in dated/underperforming locations

63

Baby boomers tend to value food quality and menu variety more than other generations…

What are the most important attributes affecting your decision to order delivery from a restaurant?

0%

10%

20%

30%

40%

50%

60%

70%

80%Millennials

Gen X

Baby Boomers

DELIVERY

…while Millennials are more interested in technological offerings than older consumers

64

Consumers would like to see more casual dining, family dining, & fast casual chain locations open in the coming years

Which of the following types of RESTAURANT CHAINS AND DINING ESTABLISHMENTS would you like to see OPEN MORE LOCATIONS in the United States?

13%

16%

19%

20%

20%

24%

24%

30%

34%

34%

37%

Any chain offering drive-thru and/or delivery

Specialty Craft Brewery & Pub

Pizza Delivery Chains (i.e. Domino's, Pizza Hut, PapaJohn's, etc.)

Fine Dining (i.e. Ruth Chris, Morton's, etc.)

Fast Food (i.e. McDonald's Burger King, Taco Bell, etc.)

Coffee and Breakfast Focused Chains (i.e. Starbucks,Dunkin Donuts, Einstein Bagels, etc.)

Ice Cream and Yogurt Focused Chains (i.e. Menchie's,Baskin Robins, Ben & Jerrys, etc.)

Polished Casual Dining (i.e. Cheesecake Factory, P.F. Changs, Grand Lux CafΘ, Bonefish, etc.)

Fast Casual (i.e. Chipotle, Panera, etc.)

Family Casual Dining (i.e. Bob Evans, Cracker Barrel, etc.)

Traditional Casual Dining (i.e. Applebee's, Chili's, OliveGarden, Red Lobster, etc.)

GROWTH

65

Source: NPD

Which is in conflict with recent performance of the traditional casual dining segment

Q4 2016 Same Store Sales Performance (Publically Traded):

-3.5%

-1.5%

-0.7%

Casual Dining Bar & Grill Avg SSS

Casual Dining Avg SSS

Total Industry Avg SSS

Recent Issues Companies

Bankruptcy

Shareholder Pressures

and/or Delisting

Exec Team Departures

Footprint Closures

GROWTH

66

-20%

-10%

Sector Change in Performance from2007-2015

Sales Unit Count

Casual Dining sales decline has been vastly outpacing unit closures

• Sector could be oversupplied by as much as 4,500 restaurants in the U.S. given sales decline

• Many leadership teams are predominantly focused on growing both sales and locations

• Franchisees less likely to close under-performing locations

• Shift in real estate strategy from owner-owned to leased has made closures more difficult

• Continued interest in space from institutional investors limits some right-sizing

Challenges:

GROWTH

67

But despite challenges, many casual dining operators continue to focus on alternate channels to drive sales

Company Catering Lunch Take-out Delivery Large Party/Event

GROWTH

68

Millennials are the least interested in seeing traditional Casual Dining expansion…

Which of the following types of RESTAURANT CHAINS AND DINING ESTABLISHMENTS would you like to see OPEN MORE LOCATIONS in the United States?

33%

41%

34% 32%

34% 36%

24%

30% 31%

21%

16%

5%

35% 33% 32%

28%

24% 24% 21% 21% 20%

17%

13% 10%

41%

30%

34% 31%

16%

12%

16%

10% 9%

13% 11%

18%

TraditionalCasual

Dining (i.e.Applebee's,Chili's, OliveGarden, Red

Lobster,etc.)

FastCasual (i.e.Chipotle,Panera,

etc.)

FamilyCasual

Dining (i.e.Bob Evans,

CrackerBarrel, etc.)

Polished Casual

Dining (i.e. Cheesecake Factory, P.F.

Changs, Grand Lux

CafΘ, Bonefish,

etc.)

Coffee andBreakfastFocused

Chains (i.e.Starbucks,

DunkinDonuts,Einstein

Bagels, etc.)

Ice Creamand Yogurt

FocusedChains (i.e.Menchie's,

BaskinRobins, Ben

& Jerrys,etc.)

Fine Dining(i.e. Ruth

Chris,Morton's,

etc.)

Fast Food(i.e.

McDonald'sBurger King,

Taco Bell,etc.)

PizzaDelivery

Chains (i.e.Domino's,Pizza Hut,

Papa John's,etc.)

SpecialtyCraft

Brewery &Pub

Any chainoffering

drive-thruand/ordelivery

None ofthese

Millennials

Gen X

Baby Boomers

GROWTH

…but Millennials want more Fast Casual, Coffee, Fast Food, Ice Cream and Pizza units

69

Still, Millennials represent the most frequent consumers of Casual Dining


14%

40% 37%

9% 11%

35% 48%

6% 5%

38%

49%

8% 14%

40% 38%

8% 13%

32%

47%

7% 5%

35%

53%

7%



month




month




month


None


Casual Dining:

Last 12 Months Next 12 Months

GROWTH

70

Consumers hope to see more gourmet burger, Mexican food and barbeque fast casual locations open in the coming years

What type of specialty FAST CASUAL CHAINS would you like to see expand and OPEN MORE LOCATIONS across the United States?

14%

14%

19%

19%

21%

22%

24%

25%

26%

26%

29%

30%

35%

Vegetarian (Maoz Vegetarian, Veggie Grill, Beefsteak, ByChloe, etc.)

Indian (i.e. Curry Up Now, Taja Indian, Tava Kitchen, etc.)

Specialty chicken (i.e. Nando's, PDQ, etc.)

Sushi & Asian (i.e. Yo! Sushi, Pei Wei, etc.)

Mediterranean (i.e. Garbanzo Mediterranean Grill, CavaGrill, etc.)

CafΘ fare (i.e. Panera, Pret a Manger, Au Bon Pain, etc.)

Specialty salad & wrap (i.e. Freshii, Sweetgreen, TenderGreens, etc.)

Specialty sandwich (i.e. The Melt, 'Wichcraft, Which Wich,100 Montaditos, etc.)

Specialty pizza (i.e. Blaze, Mod Pizza, &pizza, etc.)

Farm-to-table American (i.e. Mendocino Farms, ModernMarket, etc.)

Barbeque (i.e. Dickey's, City Barbeque, etc.)

Mexican (i.e. Chipotle, Qdoba, California Tortilla, etc.)

Gourmet burger (i.e. Shake Shack, Smashburger,BurgerFi, etc.)

GROWTH

71

However, specialty fast casual chain preference varies by generational demographic


0%

5%

10%

15%

20%

25%

30%

35%

40%Millennials

Gen X

Baby Boomers

Millennials 1. Specialty pizza

2. Gourmet burger

3. Mexican

1. Gourmet burger

2. Barbeque

3. Farm-to-table American

1. Barbeque

2. Gourmet burger

3. Mexican

Gen X Baby Boomers

Top 3 by Age Demographic:

GROWTH

72

From a regional standpoint, consumers would like to see more Gourmet Burger fast casual chains across the board…


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


Gourmet burgerMexicanBarbequeSpecialty pizzaFarm-to-table AmericanSpecialty sandwichSpecialty salad & wrapCafΘ fare MediterraneanSpecialty chickenSushi & AsianVegetarianIndianOther

Top 3

1. Gourmet burger

2. Barbeque

3. Farm-to-table American

1. Gourmet burger

2. Mexican

3. Specialty Pizza

1. Gourmet burger

2. Specialty sandwich

3. Barbeque

1. Gourmet burger

2. Mexican

3. Barbeque

Top 3 Top 3 Top 3

GROWTH

…while other top chain preferences tend to vary by region

73

Roughly 60% of consumers dined at a restaurant that offers games & entertainment at least once in the last 12 months…

On average, how often did you eat outside the home in the LAST 12 MONTHS at a restaurant that OFFERS GAMES AND ENTERTAINMENT (i.e. bowling, video games, playground, pool, movies, etc.)? How often do you plan to in the NEXT 12 MONTHS?

17%

13% 13% 14%

43%

15% 14% 14% 16%

41%

Once per week ormore

1-3 times per month Once per quarter 1-2 times per year Not at all

Last 12 Months Next 12 Months

ALTERNATIVE DINING

…with frequency expected to remain largely unchanged over the next 12 months

74

Agenda


• Environment


• Key Trends

• Wrap-up

75

In conclusion

• Overall, 2017 spend and traffic predictions appear relatively flat compared to 2016

• While low fuel prices have eased industry pressures, resulting dips in travel-related prices are potentially hurting top-line restaurant sales

• Additionally, intended dining cutbacks appear more cantered around heavy users suggesting the need for operators to focus on increasing routine visits with lighter users

• Indulgence still a consumer priority: – Despite recent poor performance of casual dining sector, consumers are calling for

chain expansion within the CD segment as well as an intended shift towards full service visits

– Recent everyday occasion focus of the casual dining sector has proven challenging to compete against fast casual but subsequently eroded the special occasion experience; opportunity may exist to shift focus to lure the fine dining consumer

• Challenging Millennial consumer, potentially different than past younger consumers – more meals at home with parents, larger lifestyle expectations around travel and personal services as well as educational debt could be compromising restaurant visits

• Technology - near-term operator challenge will be around simultaneously accommodating 2 large consumer groups, those that are technologically focused (Millennials) and those that are slower to adopt (Boomers)

• Delivery – wait and see. Market remains huge and lower risk investment for operators to partner with 3rd party providers but consumers suggest adoption may be slow

Wrap-up

©2017 AlixPartners, LLP.

Date post:	07-May-2018
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U.S. Restaurant Outlook · 4 The information in this Study reflects conditions and our views as of...

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