Restaurant Industry's Growth May Help Credit Card Issuers

By Munro, Don | American Banker, January 28, 1986 | Go to article overview

Restaurant Industry's Growth May Help Credit Card Issuers


Munro, Don, American Banker


Big-league credit card players should be intrigued by a new study that finds the U.S. restaurant industry growing at a fast pace and becoming increasingly competitive for the patronage of American consumers.

The study, conducted by Dun & Bradstreet Credit Services and Donnelley Marketing Information Services, both subsidiaries of Dun & Bradstreet Corp., says the growth is due to the development of two-income households, the aging American population, and rising level of disposable income.

The report also says "competition is intensifying as restaurants focus their efforts on increasing market penetration and attracting new restaurant goers." Take-out services represent a new emphasis on convenience, the study says, and are responsible for the blurring of lines separating fast-food establishments from neighborhood restaurants.

Dun & Bradstreet says the growth is particularly noticeable in the Sunbelt. According to the National Restaurant Association, a Washington, D.C.-based trade group, the top 10 states ranked by projected sales growth ofr 1986 are Arizona, Texas, Alaska, Florida, Oklahoma, New Mexico, Colorado, Wyoming, South Carolina, and North Carolina.

Taking the lead, restaurants in Arizona expect to increase business by 9.5% in 1986. Last year, the state's restaurants grossed $1.6 billion.

A close second in terms of projected growth but a leader in terms of sales, Texas' restaurants grossed $9.6 billion in sales in 1985 and expect 1986 to see profits increase by 9.2%. Restaurants in Florida -- tied with Alaska for third place -- expect their $6.7 billion 1985 profits to jump by 9.1%.

On the whole, the most promising performers that are listed on the top 10 expect to rack up 1986 profits of $30.2 billion. Sunbelt states will account for $27 billion of that total.

That success obviously means increased revenue for companies and banks with credit card operations, like American Express Co., Visa USA Inc., and MasterCard International Inc.

Visa, whose restaurant receipts account for 6% to 7% of the total annual receipt volume, says increased sales in the establishments that accept the Visa card can mean nothing else but increased profits. Last year, the San Francisco-based company took in $5.2 billion in restaurant receipts earnings, an increase from 1984's figure of $3.6 billion.

But, because individual banks take on the job of recruiting new restaurants for their credit cards, Richard Rossi, Visa's manager of public relations, could not say whether merchant acceptance rates have gone up as a result of increased restaurant growth. However, Mr. Rossi said that "even if our penetration of the market did not increase, obviously it [growth] would contribute to higher volume."

Perhaps more than bank cards, American Express' card stands to gain by the growth of the restaurant industry. According to the January issue of The Nilson Report, a twice-monthly newsletter for credit card executives, American Express "has achieved a 92% share of the U. …

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