2014Foodservice

Industry Overview

March 2014 Updates

Polar Vortex Update• Weather affecting businesses across most of the U.S.

• Retail down 0.4% in Jan 2014 (projected to be flat)

• Flight cancellations – hurts restaurant travel/tourism spending

• Online shopping increased (foodservice delivery, however, did not increase as a result)

• FSR hit hardest along with B&I and K-12 (office and school closings)

• Across all segments, Technomic forecasted growth for 2014 is expected to decrease by a full percentage point

Source: Technomic, Inc.

Foodservice doesn’t have the benefit of a “catch up”(purchases not deferred

to a later time)

Fast Casual Quadrupled in a Decade• Food offerings competitive• Environments are pleasing and many facilities are new• No tipping at FC leads to increased overall value to customers• FC also has more control over experience (no servers)

• Customers also in control consumption and customization

The top 150 fast-casual concepts posted aggregate sales of nearly $26 billion in 2012, up 13.1% from 2011, and is expected to have maintained momentum through 2013.

Sources: Bellwether Food Group, Inc.; Technomic, Inc.

QSR

69.5%

FCR8.1%

CDR

17.6%

MSR4.8%

QSR

72.6%

FCR2.7%

CDR

17.8%

MSR6.9%

2012 TotalTop 100 Sales: $211 B

2002 TotalTop 100 Sales: $135 B 5.4%

FCRs

3.1%QSR

2.1%MSR

0.2%CDR

TechnologyTrends

Growth in Smartphone Usage

Source: Go-Globe.com

… with continuing growth in smartphone ownership worldwide.

Most of the world is already on mobile…

2O2OVISION

How Consumers Interact with Restaurants Today

Sources: National Restaurant Association, 2014 Restaurant Industry Forecast

All Adults

Children under 18 in household

Look up locations or directions 67% 80%

Order takeout or delivery 52% 67%

Use rewards or special deals 50% 65%

Make a reservation 46% 56%

Look up nutrition information 42% 54%

Pay for your meal 24% 32%

Consumers who say they would be likely to use a smartphone or tablet or restaurant-related activities

Smartphone Activities in Restaurant

All Adults

Children under 18 in household

Electronic payment system at the table 47% 55%

Electronic ordering system at the table 40% 52%

Menus on iPad/tablets 37% 48%

Self-service, touch-screen kiosk for ordering 43% 54%

Consumers who say they would be likely to use the following technology options in restaurants

Using Restaurant Technology

Investing in the Technology

21%

24%

9%

27%

18%

13%

23%

16%

22% 21%

4%

20122014

Source: NRN Restaurant Operator Survey (December 2013)

In 2014, my business plans to put more money behind:

Operators Willing to Invest in Technologies

Sources: National Restaurant Association, 2014 Restaurant Industry Forecast

Family Dining

Casual Dining

FineDining

Quick Service

FastCasual

ALL RESTAURANTSOnline ordering 57% 63% 48% 77% 89%Ordering via smartphone app 45% 49% 30% 73% 88%Wi-fi for customers 85% 93% 87% 87% 77%Mobile/wireless payment options 43% 58% 54% 75% 77%Nutrition information online or via smartphone/tablet app 46% 57% 48% 80% 80%FULL SERVICE RESTAURANTSElectronic ordering at the table 28% 48% 30%Electronic payment at the table 48% 65% 59%Menu of iPad/tablet at the table 36% 54% 50%Wine/beer/cocktail list on iPad/tablet at the table 31% 53% 56%LIMITED-SERVICE RESTAURANTSSelf-service, touch-screen ordering terminals 47% 57%Video menu boards 78% 68%

Restaurant operators who believe these technology options will become popular within their segments in the future

More Technology Options on the Horizon

At the Table• Guest self-ordering• Suggestive selling• Interactive feedback from

guests to the restaurant• Wireless networking• Some touch-screen devices

that make up the entire tabletop

2O2OVISION

At the Counter (F.O.H.)• Mobile point-of-sale• Digital wallets• Facial-recognition software

Immediate recognition of customers and their preferences

• Digital menu and marketing boards

2O2OVISION

Technology vs. Adoption• Technology is coming,

question is around adoption• Which chains will convert

first?• Will independents be able to

implement or afford?

Technology will certainly make operators’ jobs easier…

but it must also enhance the customer experience to drive value

REAL GROWTH (2014):

0.5%

PURCHASES (2013):

$10.0 billion

SALES (2013):

$18.2 billion

K-12 Schools

Sources: Technomic, Inc.; Food Management

What’s Trending?• Final requirements from Healthy Hunger-Free Kids Act

being implemented

• July 1 requirement that a full cup of fruit is served at breakfast comes into effect

• New regulations decreasing lunch program participation

• 1.8 million kids lost from program in 3 years

• Supper programs replacing after-school snack programs

• Unpaid meal charges remain an issue

• 2017 looms large because of sodium restrictions

Summary• Big Stable Market• Sluggish Growth Continues• Labor, Healthcare, Food Costs Remain a

Problem• Market Share Theft Plus Operational Efficiency• Big Winners Amongst the Flatness• Technology Adoption Soaring• Fast Casual Continues to Drive the Market