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Sales and Traffic Roller Coaster Continues With No Signs of Easing

After a disappointing April, restaurant same-store sales returned to positive territory with a strong 1.1 percent growth, a 1.6 percentage point rebound compared with last month's year-over-year growth rate. These insights come from Black Box Intelligence™ data from TDn2K™, based on weekly sales from over 31,000 locations representing 170+ brands and nearly $72 billion in annual sales.


News provided by

TDn2K

Jun 07, 2019, 06:00 ET

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DALLAS, June 7, 2019 /PRNewswire-PRWeb/ -- The roller coaster the restaurant industry has been riding since the beginning of the year showed no signs of stopping in May. After a disappointing April, restaurant same-store sales returned to positive territory with a strong 1.1 percent growth. This represented a robust 1.6 percentage point rebound compared with last month's year-over-year growth rate. These insights come from Black Box Intelligence™ data from TDn2K™, based on weekly sales from over 31,000 locations representing 170+ brands and nearly $72 billion in annual sales.

"As we expected, May ratified that the relative strength continues for restaurants when it comes to sales momentum,'' said Victor Fernandez, vice president of insights and knowledge for TDn2K. "What is even more encouraging for the industry was that in a month relatively free of external factors, such as winter storms and holiday shifts which have muddied the results in recent months, restaurants were able to post some encouraging sales growth."

“As we expected, May ratified that the relative strength continues for restaurants when it comes to sales momentum,'' said Victor Fernandez, vice president of insights and knowledge for TDn2K.

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Furthermore, sales growth during May was positive compared with the same month two years ago. Two-year same-store sales growth has been positive during seven of the last eight months. The only exception was February, largely attributed to the negative effect of weather. This longer-term recovery is welcome news for an industry struggling with market oversaturation and increased competition.

Guest Counts Continue to Drop for Most Brands
However, there are still some concerns regarding the health of the industry. On one hand, same-store traffic continues to decline, as has been the trend since the recession. It is only through an acceleration of guest check growth that the industry continues to achieve positive sales. On the other hand, there are some concerns on the macroeconomic horizon that could put a halt to this momentum.

It should come as no surprise that the industry's year-over-year same-store guest counts dropped again. Same-store traffic during May was -2.1 percent. Although this represented a 1.5 percentage point jump from April's growth rate, it is far from where restaurants would like to be.

Concerns for Economic Slowdown Fueled by Trade War Fears
"After growing strongly for nearly a year, the economy has entered a period of significant uncertainty, created by the escalation of the use of tariffs to include not just China, but also Mexico," stated Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. "Our two largest trading partners are being pressured and that affects business and consumer costs. But the issues are not limited to trade. Business fears of a tariff-induced slowdown are restraining capital investment."

"Consumer spending growth has become inconsistent, in part because wage gains are moderating. And while job increases have been solid, it looks like that could be waning as well. Despite these factors, the economy is not faltering. There is, though, less certainty that growth will be sustained at the strong levels seen recently. Indeed, the outlook is for the expansion to continue at a more modest pace. That should be enough to keep consumers spending, but again, not nearly as solidly as we have experienced this year – unless the trade uncertainties are resolved quickly."

Industry Experiencing Record High Turnover Rates
Staffing continues as one of the primary challenges for restaurant operators. The current period of sustained job growth and low unemployment resulted in record high turnover rates across the industry. This high demand for workers is also leading to increased wage pressures, a further strain on labor-intensive, and often low margin, businesses such as restaurants.

According to the People Report Workforce Index™, a quarterly barometer of market pressures on employment in the restaurant industry, more than half of restaurant companies reported an increase in difficulty recruiting qualified employees in recent months. Vacancies also continue to be a heightened challenge, particularly at the hourly level. Additionally, there have been reports of locations closing due to the inability to adequately staff their locations.

So, What Do Successful Brands Do that is Different?
While undoubtedly facing challenges as everybody else, brands in the top quartile of sales growth performance typically achieve positive traffic growth. TDn2K research has shown growing guest counts is possible; but, it comes from a combination of staffing for excellent and consistent execution, a superior service experience at all levels, attention to detail and activating growth engines beyond traditional dine-in sales during lunch or dinner.

"This requires an investment in winning the staffing challenges for great talent, retention of the best general managers and a culture of collaboration and genuinely caring about the balance of the employee, the guest and all stakeholders. That is how best-in-class brands drive positive traffic. The employees want to come to work, the guests want to come back and investors want to invest for growth," concluded Wallace Doolin co-founder and chairman of TDn2K.

TDn2K (Transforming Data into Knowledge) is the leading insights & knowledge provider of restaurant industry human resources, financial performance and consumer insights data through their products People Report™, Black Box Intelligence™ and White Box Social Intelligence™. TDn2K allows organizations to leverage benchmarked data to achieve best-in-class performance results. TDn2K currently tracks, analyzes and benchmarks the largest database of real restaurant data in the US that includes 300 companies, 2.6 million employees and nearly $72 billion in annual revenue. TDn2K also produces the Global Best Practices Conference held annually each January in Dallas, Texas.

SOURCE TDn2K

Related Links

https://tdn2k.com/

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