Tag Archives: Restaurant Industry

Restaurants, which have been a bulwark of employment and growth, are hitting the skids. From Wolf Richter at wolfstreet.com:

Foot traffic at chain restaurants fell 3% in June year-over-year. Same-store sales fell 1%, the 16th month in a row of year-over-year declines, completing the sixth quarter in a row of sales declines, the longest downturn since 2009.

Food sales were down, alcohol sales were down. The only thing that was up was prices, but it wasn’t enough to make up for the decline in guest count: the average amount per check rose just 2% in June.

“Brands seem to be reluctant to implement significant price increases given the current environment. Price promotions have been widely utilized, especially by struggling brands and segments to drive traffic,” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K, whose Restaurant Industry Snapshot tracks sales at 27,000 restaurant units from 155 brands, generating about $67 billion in annual revenue.

Sales rose in 45 markets and fell in 150 markets. California was the least bad region, with same-store sales up 1.4% and foot traffic down 1.1%. Texas was the “worst region” for the second month in a row, with sales down 2.2% and foot traffic down 4.1%.

How bad is the problem for chain restaurants? So bad that this decline was in fact “good news,” after all the even worse declines in prior quarters. Q2 was the least bad quarter since Q2 2016!

But for the wrong reasons, according to Fernandez: “The reality is that we are also lapping over some weak results in 2016 which make the comparisons much easier for the industry in 2017.”

As always, there are glimmers of hope, but not really, according to Joel Naroff, president of Naroff Economic Advisors and TDn2K economist:

“The summer season should be solid as people have money to spend. Unfortunately, until wage gains improve, which so far continue to be disappointing, no major acceleration in spending at restaurants should be expected.”

The high end – fine dining – was the top performing segment, according to the report, as “affluent restaurant consumers continue to respond positively to those brands that provide a more experience-driven dining occasion.” The upscale casual segment was the second best performer.

To continue reading: Reasons Emerge for Worst Chain-Restaurant Slump since 2009

Chain-restaurants are integral to the American way of life, but perhaps not for long. From Wolf Richter at wolfstreet.com:

A 15-month downturn, longest since 2009, and no end in sight.

There’s simply no respite for chain restaurants. Industry-wide, same-store sales fell again in May. The last time, same-store sales actually rose year-over-year was in February 2016. On that basis, the chain-restaurant recession is now in its 15th month, the longest downturn since the Financial Crisis.

In May, same store sales fell 1.1% year-over-year. Same-store foot traffic fell 3.0%. Food sales were down, and alcohol sales were down, according to TDn2K’s Restaurant Industry Snapshot, tracking sales at 27,000 restaurant units from 155 brands, generating about $67 billion in annual revenue. But the average amount of the check per person increased by 2%, and not because they ordered more food and booze, but because prices rose.

Florida was the least bad region, with same-store sales up 0.1% and foot traffic down “only” 1.9%. Texas was the worst region with sales down 2.4% and foot traffic down 4.3%. Of the 196 markets, 140 (71%) experienced sales declines.

The report – as the reports in prior months – is perplexed by the long downturn:

Recently, there has been an upturn in retail spending on most goods and services. That stands in stark contrast to the continued decline in sales growth at restaurants.

This change in consumer spending patterns was identified about a year ago, and how much longer it will continue is unclear.

Now the hope is that year-over-year sales comparisons this year will look less bad based on the “relatively soft sales” last year. That has been the hope for months, and it hasn’t happened yet.

But the pain is not evenly spread in this sector, according to the Restaurant Industry Snapshot:

Dine-in sales have been negative year-to-date, but to-go is up 2.9%. Sales are also up in catering, delivery, and drive-thru.

Breakfast and mid-afternoon sales offer continued opportunities for growth, while lunch and, especially, dinner sales continue to stumble.

While sales in May were “weak across all segments,” the fine dining segment “was able to achieve very small positive same-store sales growth.” Until May, that sector had done well. Now it too is losing its edge.

To continue reading: Is the Chain-Restaurant Recession Becoming Structural?