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National Restaurant Association - Economist’s Notebook: Decline in higher-income households poses challenges for restaurants

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Economist’s Notebook: Decline in higher-income households poses challenges for restaurants

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy looks at the latest trends in household income.  In 2010, real median household income declined to its lowest level since 1996.  Even more critical for the restaurant industry, the number of households with incomes above $75,000 – prime restaurant customers – declined by nearly two million between 2007 and 2010.

The fallout from the Great Recession continues to be felt long after its “official” end, as the U.S. Census Bureau reported this week that household income declined for the third consecutive year in 2010.  Real median household income was $49,445 in 2010, down 6.4 percent from its recent cyclical high in 2007 and its lowest level since 1996. 

While the overall downward trend is a cause for concern, the sharp decline in the number of higher-income households poses additional challenges for the restaurant industry.

After jumping 74 percent between 1990 and 2007 – the strongest increase in any income category – the number of households with income over $100,000 declined 5 percent between 2007 and 2010.  During the same three-year period, the number of households with income between $75,000 and $99,999 also fell 5 percent.  In the end, there were two million fewer households with incomes above $75,000 in 2010 than there were in 2007. 

The potential implications for the restaurant industry are significant, as higher-income households represent the majority of spending in the industry.  According to analysis of data from the Bureau of Labor Statistics, households with incomes of $100,000 or higher are responsible for 37 percent of the total spending on food away from home, while households with incomes between $70,000 and $99,999 account for 19 percent of industry spending. 

As customer demographics vary across restaurants and segments, the recent shift in household income will potentially impact spending patterns within the industry.

Share of Total Restaurant Spending by Household Income LevelsShare of Total Spending.gifSource: National Restaurant Association analysis of Bureau of Labor Statistics data

For additional analysis of restaurant industry trends, log on to Restaurant TrendMapper (subscription required).

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