November, 2014Restaurant Industry SnapshotTM
1.5%Comp Sales
2.1%Rolling 3 Months
-1.1%Comp Traffic
-0.3%Rolling 3 Months
2.5%Per Person Average/PTA
2.4%Rolling 3 Months
FoodComp Sales
Nov
Rolling 3 Months
AlcoholComp Sales
Nov
Rolling 3 Months
CaliforniaBest Region
Sales 3.3% Traffic -0.1%
NY-NJWorst Region
Sales -0.1% Traffic -1.8%
146Markets
Sales
76%
46Markets
Sales
24%
4.3%Year/Year Job Growth*
4.3%September
ManagementTurnover*
Q4 '14
Roll 12
Oct
YTD
HourlyTurnover*
Q4 '14
Roll 12
Oct
YTD
*People Report, Human Capital Intelligence, October, 2014 Release
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Restaurant Sales and Traffic Slow During November; Optimism Still Persists for Positive Q4

Published December 3, 2014

Restaurant same-store sales slowed down during November but still showed signs of relative strength, suggesting a positive 4th quarter for 2014. Same-store sales growth was 1.5% for November, a 1.3% slowdown from the growth rate reported for October, however still represents the fifth consecutive month in which the industry’s same-store sales have achieved positive growth. The last time the industry posted five consecutive months of positive sales growth was almost three years ago in the period ending February 2012. This insight comes from data reported by TDn2K’s Black Box Intelligence through The Restaurant Industry Snapshot for November, based on weekly sales from over 20,000 restaurant units representing over 45 billion dollars in annual revenue.

“With the results for the 4th quarter through the end of November + 2.1%, we are projecting 4th quarter growing same-store sales in the 1.5%-2.0% range, making us very optimistic about being able to report on three consecutive quarters of positive sales growth in 2014,” said Victor Fernandez, Executive Director of Insight and Knowledge for TDn2K, parent company of Black Box Intelligence and People Report. “This would be the first time since 3rd quarter 2012 that the industry has experienced three quarters of positive same-store sales growth. Underlying this optimism is the fact that during December 2013, sales were very soft primarily due to bad weather; at -2.6% same-store sales. That month posted the second worst results of any month in over two years. Last year’s extreme weather had a very negative impact on the restaurant industry. As long as this year’s weather impact is no worse, we are facing relatively easy hurdles for our very important end-of-year same-store sales calculations.” For many operators, and retailers, this is a make or break time for those very important profitable sales.

Despite the good news for the quarter, restaurants did experience same-store traffic decline and again fell into negative growth territory. Same-store traffic was -1.1% for November, a 1.5% drop from the growth rate posted in October. “On a quarter-to-date basis, at the end of November, same-store traffic growth is -0.4% for 4th quarter, which means that achieving positive traffic growth in comparable stores for the quarter might finally be within our reach. We take into account current economic conditions including reduced gas prices and the relatively easy comparisons for December based on last year’s abysmal traffic results during that month,” continued Fernandez.

The drop in traffic reported during November is congruent with the decline in consumer sentiment as measured by The Conference Board’s Consumer Confidence Index, which underperformed based on its expectations for November and fell to the its lowest value since June of this year.

While both same-store sales and traffic growth rates declined during November when compared with the previous month, the drop in traffic was larger, indicating that average guest checks increased during the month. This reflects consumers spending more through a combination of higher prices, a reduction in the use of promotions, and a shift in sales mix towards higher ticket items on the menu. One other interesting factor may be the continuing shift of online shopping versus mall shopping impacting traffic year over year.

From a regional perspective, restaurants once again reported positive same-store sales growth in all regions of the country with just one exception: the New York/New Jersey region. This comes on the heels of all regions of the country reporting positive growth during the previous three months. New York/New Jersey has now been the worst performing region based on same-store sales for the last six months. The best performing region was California for the second consecutive month. At the market level, November was also a relatively strong month for the industry with 146 of the 192 DMAs tracked by Black Box Intelligence posting positive same-store sales.

Regarding the restaurant industry’s workforce, the competition for restaurant employees and managers continues to heat up as the industry carries on opening new restaurants as the primary way of fueling sales growth. According to People Report’s latest published results, restaurant job growth in October is a strong 4.3% year-over-year increase. Job creation has been trending at over 3.0% for over a year. In addition to the challenges of staffing those new restaurants, the industry continues to experience replacement challenges from rising turnover levels for both hourly employees and restaurant managers. The industry now has to face a shrinking number of available potential employees in the form of unemployed population, more positions to fill in new restaurants and an increasing number of vacancies to fill in existing restaurants due to turnover. Expectations from restaurant HR practitioners, as reported in the People Report Workforce Index are for increased labor related pressures during first quarter of 2015.

In addition to these challenges, pressures on wage increases continue and are expected to intensify as the labor markets continue to tighten. Labor costs are also projected to increase within the next month as companies start the actual implementation of their new and enhanced health benefit offerings to comply with the Affordable Care Act legislation, as well as minimum wage increases passed into law in several state elections.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from over 190 DMAs representing 110+ restaurant brands and over 20,000 restaurant units that are clients of Black Box Intelligence, a TDn2K company. Data is reported in five distinct segments: casual dining, upscale/fine-dining, fast casual, family dining and quick service. Black Box Intelligence is a sister company to People Report, which tracks the workforce analytics of one million restaurant employees. TDn2K reports on over 30,000 restaurant units, one million employees and 45 billion dollars in sales. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, a monthly household survey of more than 2,500 consumers.

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