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Little Growth Seen for Fast-Food Sector

But the quick-casual segment, boosted by demand for healthier choices, probably will grow 20%, forecast says.

March 06, 2003|Karen Robinson-Jacobs | Times Staff Writer

Fast-food sales will stay flat in the year ahead, but the trendy quick-casual segment will see revenue grow by 20%, according to the author of an industry forecast released Wednesday.

Quick-casual, which includes chains such as Baja Fresh and Boston Market, should see its market share grow to $6 billion, said Andrew Barish, a restaurant analyst at Banc of America Securities.

Barish, who delivered his forecast at the annual UCLA California Restaurant Industry Conference, said the segment is getting a boost from baby boomers looking for healthier, more tasteful alternatives to fast-food staples such as burgers and fries.

Still, the sector is small compared with the $120-billion fast-food industry -- also known as quick-serve -- which includes California chains Jack in the Box Inc. and CKE Restaurants Inc., parent of Carl's Jr.

Barish sees a change in fast-food sales of plus or minus 1%, with growth prospects dimming as some major chains close restaurants to improve their bottom line.

"In mid-2002, quick-serve numbers fell off and have continued to be slightly negative," Barish added. "I don't think it's going to bounce back robustly. We could be entering a period where that business is flat for a long time."

Casual-dining restaurants, a niche that includes sit-down chains such as Los Angeles-based California Pizza Kitchen Inc., should see growth of 6% to 8%, he said.

Barish also said California restaurants, especially those in the Southland, may fare slightly better in 2003 than those in the rest of the country. California generally is a stronger restaurant market than the nation as a whole because it has a big population of affluent people and large numbers of young adults who frequent fast-food eateries.

"In general, when you look at the state, the trends are probably a little better than the overall national average," Barish said. "Northern California, because of the economy, will provide a bit of an offset to the growth in Southern California, but overall, California will show slightly better results than the nation."

Though 2002 brought continued woes for fast-food companies, the restaurant industry still saw growth of about 2% last year, Barish said.

"When you look at this industry compared to other sectors, it's remained fairly healthy," he said.

Some restaurant operators at the conference expressed concern that war could hurt sales heading into the busy spring and summer seasons.

"You have the economic uncertainty and people are going to want to be at home to watch smart bombs fall on TV," said Stuart Davis, president of City Wok Restaurants, which owns four quick-casual Asian eateries, including one in Studio City.

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