Though this year’s outlook for the restaurant industry is pretty dark, the Lone Star state’s future is looking bright. The National Restaurant Association (NRA) projects Texas will lead the country in restaurant sales growth, with a solid 4 percent increase in current dollars in 2009. Battered by an economy in recession, the industry as a whole is expected to post only a sluggish sales gain of 2.5 percent in current dollars and a second-straight year of real-sales decline.
“Texas remains a bright spot in this sea of challenges,” says Hudson Riehle, senior vice president of the NRA’s research and information services division.
Though the state’s restaurant sales growth will slow from its 2008 pace of 5.6 percent, it still bests the next state on the list, Nevada, by half a point and leads the national average by 1.5 points, according to the NRA’s 2009 Restaurant Industry Forecast.
“Are we performing in 2009 at the level we did in 2008 and 2007? No,” says Richie Jackson, executive vice president and CEO of the Texas Restaurant Association (tra). But Texas has so far fared better than other parts of the country in the economic downturn. As it turns out, the state has a few factors working in its favor.
It’s the Economy, Stupid
“We’re not saying we’re immune to the recession, but we’ve been able to weather it better,” says R.J. DeSilva, a spokesman with the Texas State Comptroller’s office.
Because the state never experienced a run up in property values, it has had a far lower foreclosure rate than states that were hit hardest when the housing bubble burst. At just 1.04 percent, its foreclosure rate was just more than half the national average for 2008 and far below the 7 percent seen in Nevada, which has the highest foreclosure rate among the states, according to California-based RealtyTrac, an online marketplace for foreclosure properties.
“It’s hard to say in a weak economy, but Texas has probably escaped the worst of the housing crisis,” says Rick Sharga, vice president of marketing for the company.
The state has also fared better than other states when it comes to unemployment. At 6 percent in December 2008 (the latest numbers available at time of press), Texas beat the national unemployment rate by more than a percentage point, according to the U.S. Bureau of Labor Statistics. By contrast, states such as Nevada and California had rates more than 9 percent. Though the state lost jobs in the first part of 2009, DeSilva expects it to recover later in the year and into 2010. The NRA expects Texas to be the only state to post total employment growth in 2009.
Some of the state’s ability to hold onto jobs last year can be attributed to its oil and gas industry, which, bolstered by record-high energy prices last summer, grew its workforce by 8.7 percent from September 2007 to September 2008, according to the Texas Workforce Commission. The oil boom also contributed to at least one restaurant company’s sales. Austin-based deli concept Schlotzsky’s posted sales gains in at least the high single digits for all of Texas, and the numbers were even better in areas where the state’s energy sector has a presence.
“We had high double-digit sales increases in all oil- and gas-producing areas,” says Schlotzsky’s president, Kelly Roddy.
Although energy prices have cooled off, Texas has proved its economy doesn’t run on oil alone. The diversity of its other industries—from defense, aerospace, and information technology to ranching, shipping, and renewable energy—has also kept it chugging. Texas boasts the country’s second-largest economy, the 12th-largest in the world, and is home to more Fortune 500 companies (58, as of 2008) than any other U.S. state.